Friday, June 19, 2009

Punjab Govt announces slew of incentives for Real Estate sector

CHANDIGARH: Keeping in view the slowdown and recession in economy, the Punjab government has come out with an economic stimulus package to give boost to affordable housing and real estate sector.
Disclosing this here Thursday a spokesman of the Punjab government said that the Confederations of Real Estate Developers Association of India (CREDAI) and National Real Estate Development Council (NARDECO) had recently submitted a memorandum to the Punjab Chief Minister Parkash Singh Badal and Deputy Chief Minister Sukhbir Singh Badal separately urging them to immediately announce some incentives/concessions to real estate developers in order to put the real sectoral growth back on the track on one hand and to encourage group housing for weaker sections on the other.
The spokesman further said that the stimulus package included waiver of Change in Land Use (CLU) charges for industrial land use in entire Punjab, moratorium on payment of External Development Charges till December 31, 2009 and promoters who make prepayment of EDC installments would be entitled for discount of 5%. Reduction in penal interest on over due charges from 18% per annum to 3% per annum over and above the normal interest @10% compound per annum w.e.f. September 19, 2007. Wherever Zonal/Sector Plan have been notified, the minimum area for developing a colony would be 25 acres. In low potential zone, the minimum area for residential colony would be reduced from 25 acres to 10 acres. However, no minimum area norm would apply in case of the left over pocket, i.e. where on all the sides construction had already been taken place.
The spokesman further mentioned that to promote affordable housing, it was also decided that in the earmarked industrial land use zones in the master plans across Punjab, the affordable housing as envisaged under JNNURM mission of Government of India shall be permissible and it was decided to waive CLU charges, External Development Charges and license fee/permission fee for financially weaker section houses. Stamp duty / Registration fee / Social Security cess on purchase of land for such houses would also be exempted.
The stimulus package further stipulated if any promoter creates any infrastructure with prior permission of concerned Urban Development Authority outside his project that falls within the definition of external development and then he would be given credit at PWD rates. Phasing in the super mega projects has also been allowed as already permitted in other projects.
In case of Group Housing Projects outside GMADA (Greater Mohali Area Development Authority) area, the minimum area for projects would now have been reduced from 10 acres to 5 acres. In case of housing for financial weaker sections, as notified in the policy of Local Government in November, 2008, this minimum area would be 2.5 acres.
It was also decided that in case of commercial pockets within municipal committee/ Corporation limits (excluding GMADA), the norms for minimum area would be the same as notified by the Department of Local Government. However outside municipal committee/ Corporation limit (excluding GMADA region), the minimum area norms would be reduced from 2 acres to 1000 sq. meters. Such plots must have a front of at least 20 meters.
The state government also decided that in case of parking for commercial projects, having no multiplexes, the minimum parking norms would be 2 ECS/100 sq. meters area. In case of commercial projects having multiplexes/ cinemas/ theatres, the minimum parking required would be 3 ECS/100 sq meters of covered area in respect of multiplexes/ cinemas/theatres component + 30% of total covered area of that component and 2 ECS/100 sq meters of covered area in respect of the balance commercial component + circulation area. Parking norms within Municipal Committee limits shall be the same as notified by the Department of Local Government. Similarly parking norms in case of group housing shall be reduced to 1.5 ECS/ 100 Sq meters from existing 2.0 ECS / 100 Sq meters.
In case of any excess payment paid by any promoter to any Urban Development Authority, the authority would pay interest to the developer at the rate fixed by State Bank of India for Fixed Deposit of 180 days, as on 1st April of that financial year, the spokesman added.

Mumbai builds up its low-cost housing

They say it is easy to find everything in Mumbai except for a house.
For 35-year-old Agnelo Fernandez it could not have been truer.
Fernandez and his wife live in a small one room tenement which is less than 180 square feet.
It is in this cramped room that they cook, bathe, entertain and sleep.
They are not exactly poor but Fernandez's salary of $160 a month as a driver cannot get him anything better.
His neighbours - some of whom work as clerks, others run their own small business establishments - make similar money.
"I'd like to move to a better place but with my salary I won't get anything better," Fernandez says.
"I can't afford to buy anything within the city."
Crowded city
He is not the only one.
There are millions of people who live in houses like this across Mumbai.
Entire families live together, with little or no privacy as husbands, wives, grandparents and children all jostle for space.
And because the houses are crowded, the narrow alleyways serve as makeshift sinks, playgrounds and even bathrooms.
But while the thought of owning a home may seem a million miles away at present, that might be about to change.
Faced with a slowing housing market, several builders in the country are switching from premium homes to focusing on more affordable ones.
Earlier during the boom times of India's real estate market, almost all were building swanky apartments for the rich because of the big returns they generated.
But now the high rises with swimming pools, gyms and Italian marble floors are giving way to plain structures with basic amenities that people from lower and middle-class incomes can afford.
'Comfortable prices'
One construction firm, HDIL, has tied up with the government to build over 100,000 new homes.
"What we did over the last four years from 2004 to 2008 was that we made it highly unaffordable and drove nearly 85% of the market out," says the company's managing director Sarang Wadhawan.
He adds that aspiring homeowners in the lower-priced segment of the market were not buying property because they were saving money.
Today that means they have a good cash flow and, after a 25% to 30% drop in prices, are willing to start spending.
"What we have seen is that prices have come down to 2004 levels. At this price level they are very comfortable," Mr Wadhawan says.
Pluggable gap?
Estimates suggest that India has a shortfall of more than 25 million low-cost or affordable houses.That is why companies like HDIL and rivals such as Tata Housing are entering this market.
However, even if each company builds 100,000 houses every 5 years there will still be a massive shortfall.
And with demand outstripping supply to such an extent, some analysts wonder if the gap can ever be closed.
That is why the government is so keen for the real estate sector to focus on affordable housing.
The construction industry has cottoned on to this fact and is pushing to get tax breaks in the forthcoming budget in return for working on the cheap end of the housing market.
Signs of recovery
Anuj Puri, chairman of property consultancy JLL Meghraj, says there is plenty of demand in the sector.
"Even in the lowest times, I'll call it the dark nights, from October until March when there was a bad period, there was demand for affordable housing," he explains.
But while he is optimistic that builders will keep producing low-cost housing in the midst of the downturn, he is not sure if they will be so keen to carry on when the market picks up again.
Already there are signs of recovery in India and developers may switch back to premium housing because of the big gains involved.

That will not be a welcome development for the millions of people who live next to high rises, in small houses in cramped alleyways.
They have fixed jobs and earn regular salaries.
All of them want to move to a better house. A place that they can call home and live in comfortably.
But that could remain a dream if companies here are not serious about the shift from premium to affordable housing.

DLF won't sell core assets as credit begins to flow

NEW DELHI: India’s largest real estate company DLF has decided against selling core assets — residential, industrial and commercial plots — which it had put on the block.

The company will now sell only the hotel plots, which are non-core to its business. DLF executive director YK Tyagi told ET that the company has pulled back these assets from the market over the past 2-3 weeks, considering that banks lending to the real estate sector has started to ease.
A few prime properties in Gurgaon’s Cybercity and Udyog Vihar areas, which have been on the block for sometime now, have been pulled back. DLF had recently told ET that it planned to raise Rs 10,000 crore by selling land parcels, treasury investments and real estate projects in the next 2-3 years.
There has been a change of heart for DLF. “The decision to pull back these core assets from the market was taken considering the fact that banks have become more liberal in lending to real estate companies,” said Mr Tyagi. He also pointed out that after the recent stake sale by the promoters of the company, the company was in a comfortable position.
DLF promoters had sold a 9.9% stake in the past month to raise Rs 3,980 crore, which has put the company in a comfortable position. Capital Group picked up close to 5% in DLF, while HSBC, GIC and Fidelity bought smaller stakes. Following the open market transaction, the promoter group now holds a 78.6% stake in DLF.
Mr Tyagi pointed out that the company will continue to sell its non-core assets, including hotel plots and its wind power business, which would help them reduce their debt by half. DLF’s debt stands at around Rs 14,000 crore.
“We expect to sell all of the hotel plots by the end of the year,” he said. The company had said earlier that they do not want to exit the entire hotel business. “We expect to sell all of the hotel plots by the end of the year,” he said.
The company had said earlier that they do not want to exit the entire hotel business. While looking at hotel properties and plots just as an investment, DLF would like to retain the Aman brand. DLF has a number of hotel plots located in Mumbai, Kolkata, Bangalore, Gurgaon, Baroda, Lucknow, Kasauli (Himachal Pradesh) and Sikkim among others. According to sources, DLF has managed to sell hotel plots in Sikkim and Baroda.
A number of core assets—commercial, residential, industrial plots—were on sale by the developer, some of which it managed to sell over the last few months. The company recently sold its 66% stake in Hindoostan Spinning and Weaving Mill in central Mumbai for Rs 310 crore.

‘Property prices set to rise’ Assetventures

Mumbai, June 17 Property prices in India which have been on the decline for several months on account of the credit crunch, are set to rise, according to Mr R.R. Nair, Director and Chief Executive, LIC Housing Finance Ltd.
“People cannot expect a further fall in property prices. That stage is over. Builders had lowered prices when they were in trouble in the last few months. For builders, the liquidity position has eased and the cash flows have improved. They have also cleared off existing inventories. Therefore, there is no reason for them to lower prices,” he said.
As the demand picks up, property prices will go up. This could happen in the next five-six months, Mr Nair, head of the second largest housing finance company in India, said.
“By how much the price will increase, will depend on the builders. In some pockets, they have started quietly increasing prices. However, it has not happened universally,” Mr Nair said in an interview to Business Line.
Moreover, builders had not increased prices in the last 15-18 months. Because of all this, there is a “good possibility’ that property prices will rise, he said.
Citing reasons for renewed housing demand, Mr Nair said that with a stable government in place, people feel that the economy will improve, the liquidity situation would be better and the soft interest regime will continue. They also feel that property prices have bottomed out. This is precisely why there is a renewed interest in buying homes, he said.
The property prices had seen a correction in the last two quarters as demand for housing had dried up. Builders had been forced to lower prices as they were sitting on a large inventory. Some builders who had planned luxury projects had converted to standard projects.
“With the economy looking up, there is confidence among builders that they can raise funds either through loans or through equity or QIPs. That is why builders have regained enthusiasm and started working on the projects”, he said.Growth pick-up
The housing finance company has seen growth pick up from end- February. In March, the company had a 42-per cent growth. For April and May put together, there was a 120 per cent growth in approvals and a 50 per cent growth in disbursements.
Most of the growth for LIC Housing Finance has come from retail finance, Mr Nair said.
The company has revised its business growth target upward from the 25 per cent it set for itself at the beginning of this fiscal.
“With the first two months of this fiscal registering a 50-per cent growth in disbursements, the growth should be in the range of 30-40 per cent this fiscal”, Mr Nair said.

Pune Property tax: 1,000 locks to shut out defaulters

This is an open and shut case of a different kind. The tax collection department of the Pune Municipal Corporation has demanded that it be supplied with 1,000 locks so that it can seal those properties whose owners don’t pay their tax by June 30. It has issued tenders for the purchase of these locks.
Once the PMC gets the list of those who have not paid the bills by the month-end, stern action will be taken against them by sealing their properties, tax collection department chief Vilas Kanade told The Indian Express on Thursday.
The PMC had launched a scheme in April, wherein citizens have the opportunity to file their property tax by June 30 and avail themselves of a 10 per cent rebate. The rebate, however, is applicable to only those who have cleared all the tax arrears on their property so far. The rebate amount will be deducted from the tax for the next year.

This year, we rolled out the plan in the beginning of the financial year to provide people with an opportunity to clear their property tax dues by the June 30 deadline. So far, 2.5 lakh property owners have paid their tax, amounting to Rs 130 crore. The response to the scheme has been good and we expect to collect tax from three lakh properties out of a total of 6.4 lakh registered properties in the city,” Kanade said.
“However, those who still do not pay after the set deadline will face action in the remaining nine months of the current fiscal. As part of this, we have asked the civic administration to provide us with 1,000 locks to seal their properties. A tender to this effect has been issued and we will soon get these locks.

We are going to distribute the locks to our ward offices and provide them a list of tax defaulters. Accordingly, these officers will go and lock the properties,” he said.
This year, the PMC had dispatched the tax bills by March to enable early payment of taxes, so as to enable citizens get the 10 per cent rebate. The 10 per cent, thus saved, will be deducted from the next year’s property tax as it was not possible to do so this year owing to the election code of conduct.
Tax dues
* 6.4 lakh registered properties.
* Rs 130 cr property tax collected from March.
* June 30 last date of 10 per cent rebate scheme