Dussehra and Diwali aren’t just the season for Durga pooja, laddoos, and Ram Lila. Its also the time when the maximum number of new real estate projects get launched.
Developers use this season to their advantage because they know that you will be most keen to make a real estate investment during these auspicious days.
But don’t rush in blindly just because you want to buy something before this holy time period finishes. Here are 5 tips that you must keep in mind before you buy property this festive season.
But first, here is a preface to the current environment in real estate. Many developers are still in a financially weak condition. The situation in the market is still a little fragile.
Just because the stock market is going up does not mean that normal conditions have returned to the real estate sector as well. So, please keep this background in mind as you think about the following 5 tips.
1) Choose your builder wisely: The real estate sector, globally and in India, is notorious for developers who take investors’ money and then run away. Make sure that you go with a reputed builder who has been developing properties for a while and has had an operating history.
Don’t just go with any builder, it might be worth paying a premium to go with someone who has built their reputation over a few decades.
If you have not heard of your developer, always ask your developer what properties they have developed, and if possible speak to customers who bought properties at these developments to learn from their experience.
2) Ask for a construction-linked payment plan: As discussed, the financial conditions of various developers are still not totally safe. So, rather than give them money at their will, ask for a construction-linked payment plan.
This way you know that your installments are actually going towards financing the development, rather than being used for other unknown purposes. Beware of time-linked payment plans, and if you have the option stay away from such plans.
3) Penalties for delays: As it happens, many if not most of the projects launched last Diwali have not even seen construction begin. Yet, many customers have paid their installments on time with nothing to show for.
Understand what rights you have in case of delays. Ask for a definitive date for when construction should begin.
If you are dealing with a small builder, that does not have a long operating history, make sure that the contract gives you adequate protection against the builder just sitting on your money and delaying the project’s completion.
4) Location: Don’t be in a rush to buy property just because the price looks tempting, and its an auspicious time to buy property during the festive season. Recognize that the single most important factor in buying real estate is usually the location of the property.
Can you see yourself living there, or someone renting this property? Is it close to civic amenities and is the planned connectivity convenient?
5) Don’t buy to flip: Don’t assume that you will easily be able to flip your property to another buyer for a premium just on the back of paying your booking amount and some installments.
In the near-term, there could be an over supply of apartments. Also, keep in mind that there are 1000s of other people who are already sitting on apartments where they want to sell them.
Buy a property if it makes economic sense for you as an investment, or as a residential home. Don’t gamble.
Thursday, September 24, 2009
Wednesday, September 23, 2009
Real estate firms back in hiring mode Assetventures
NEW DELHI: Some of the country’s largest real estate developers such as DLF, Unitech and HDIL have started hiring again, as they look to launch new projects and speed up execution of existing ones to cash in on a pickup in home demand.
“We are launching new projects and plan to hire in large numbers,” said a spokesman for DLF, India’s largest real estate firm that fired more than 300 people during the downturn.
He said the company hired people with specific skills such as mall management even during the crisis. DLF on Tuesday launched a project in Delhi and sold the entire stock of 1,250 apartments in two hours, he said.
The companies expect high demand in the coming fiscal quarters with the economy showing clear signs of a revival in the fiscal year started April 2009. The financial year ended March 2009 recorded 6.7% growth after two bad quarters pulled down annual growth rate from 9% plus levels seen in the previous three years.
Unitech, India’s second-largest property firm that struggled for months to avoid bankruptcy, is back in action with two rounds of share sale and a revamped business model.
The company, which has 1,200 people on its rolls, has added 300 employees at different levels in the past few months. Its project sites, where construction had stopped for lack of funds last year, are again humming with activity, a company spokesman said. Unitech had raised $900 million through two rounds of stake sale to qualified institutional buyers to bring down its debt level, which was hovering around Rs 10,000 crore last year. The company also changed its business model and launched homes in the ‘affordable’ category and hired more people to sell directly to customers.
A revival in demand has prompted more firms such as Omaxe, Lodha, Ansal and Gera Developers to launch new projects, while some others like Parsvnath Developers and Prestige group are still playing it safe. Rohtas Goel, chairman of Delhi-based Omaxe, said he hired around 70 people, almost the same number the company had fired last year.
“Much of the hiring will happen at mid-level and in sales and project management. These are the categories where maximum jobs were lost,” said Vivek Gandhi, senior vice-president with Delhi-based Ansal Properties and Infrastructure (API), which plans to hire at least 200 people in three months. He expects salaries to remain at levels marginally lower than those during the peak of boom in 2007.
The years between 2004 and 2007 saw Indian property market booming with hundreds of new projects being launched and property prices going up several fold. The boom and the resultant scramble for talent saw salaries in the sector shooting up.
But a property slump, which started as a result of extremely high property prices and high interest rates early last year, deepened due to the impact of the global recession. This saw companies shelving several projects resulting in mass job losses at several property firms.
“We offered an average 10% salary hike to our staff. The new people too are joining us on a scale similar to our old staff,” said Abhisheck Lodha, director with Lodha group that has hired 80 employees since August. The company, which has a 1300-strong workforce, plans to add 350 more in a year.
Another leading Mumbai-based developer HDIL is also hiring. “We require additional manpower as we are speeding up on execution of existing projects and planning to launch more,” said Sarang Wadhawan, managing director of the company. However, a few other players such as Delhi-based Parsvnath Developers and Bangalore-based Prestige group are still cautious. “We didn’t fire people in the first place and so don’t immediately need to hire new people,” said Prestige group director Uzma Irfan.
Saturday, September 19, 2009
Realtors must tell buyers about banks' claim on property: RBI
MUMBAI: Prospective home buyers will now know if the land on which their building stands is free of outside claims after a recent Reserve Bank of Greatest ceilings
India (RBI) circular mandating builders mortgaging the land to raise money to disclose it in all advertisements and brochures.
RBI has asked lenders to ensure that all publicity material relating to the sale of real estate make a mention of the bank’s lien on the property so that home buyers are not kept in the dark about this legal claim or ‘hold’.
RBI aims to prevent prospective buyers from being lulled into the belief that the flats they own are on ‘free-hold’ land through this move.
Says Anuj Puri, country head of real estate consultant Jones Lang LaSalle Meghraj, “The RBI circular will bring transparency and accountability on the part of developers. It would also give a chance to buyers to see the viability of projects especially when the loan amount is very high.”
In cities such as Mumbai, a flatowner gets rights over his house through membership of a cooperative housing society, which owns the building. The land is not owned by the society unless it is transferred through a conveyance.
According to senior advocate R N Shetty, who specialises in real estate matters, property where a bank has a charge does not have a clear title and therefore cannot be transferred to the society through a conveyance. He added that the bank could also attach and auction the property in the event of a default by the builder.
RBI has said banks should as a pre-condition to lending insist that builders disclose complete details of the charge on the property. This should include the name of the bank that has a lien on the property which a builder is seeking to develop and for which it has sought a loan from the lender.
The builder or developer will have to add as an appendix information relating to the mortgage while advertising a particular scheme. Besides this, it will have to provide a No Objection Certificate of the mortgagee bank for sale of flats/property, if required.
India (RBI) circular mandating builders mortgaging the land to raise money to disclose it in all advertisements and brochures.
RBI has asked lenders to ensure that all publicity material relating to the sale of real estate make a mention of the bank’s lien on the property so that home buyers are not kept in the dark about this legal claim or ‘hold’.
RBI aims to prevent prospective buyers from being lulled into the belief that the flats they own are on ‘free-hold’ land through this move.
Says Anuj Puri, country head of real estate consultant Jones Lang LaSalle Meghraj, “The RBI circular will bring transparency and accountability on the part of developers. It would also give a chance to buyers to see the viability of projects especially when the loan amount is very high.”
In cities such as Mumbai, a flatowner gets rights over his house through membership of a cooperative housing society, which owns the building. The land is not owned by the society unless it is transferred through a conveyance.
According to senior advocate R N Shetty, who specialises in real estate matters, property where a bank has a charge does not have a clear title and therefore cannot be transferred to the society through a conveyance. He added that the bank could also attach and auction the property in the event of a default by the builder.
RBI has said banks should as a pre-condition to lending insist that builders disclose complete details of the charge on the property. This should include the name of the bank that has a lien on the property which a builder is seeking to develop and for which it has sought a loan from the lender.
The builder or developer will have to add as an appendix information relating to the mortgage while advertising a particular scheme. Besides this, it will have to provide a No Objection Certificate of the mortgagee bank for sale of flats/property, if required.
Indian real estate sector to witness recovery from end-2009
The Indian real estate is expected to enter the recovery phase by end-this year and macro-economic and sector-specific factors will act as catalysts in this recovery, a leading real estate consultancy said
Economic recovery during CY 2010-11 is likely to reinvigorate the interest of foreign investors in India's real estate market. We expect enhanced capital inflow in the real estate sector in the medium-to-long-term," Jones Lang LaSalle said in its report.
Initial yield is expected to show compression during CY 2010-11 and capital values are likely to decline during 2010 before recovering in 2011, the company said in the report.
"Initial yield has already started to show a declining trend during 2009 which is likely to be the case in the near-term. Yield on 10-year Indian Government Bonds is likely to harden due to higher fiscal deficit," it said.
The report said although the high fiscal deficit is likely to harden interest rates in the economy, all other macro-economic variables are expected to improve during CY 2010-11 which is likely to induce real estate market recovery after the slowdown of CY 2008-09.
According to the World Economic Outlook Report by IMF, the world economy is likely to contract by 1.4 per cent during 2009.
While advanced economies are expected to contract by 3.8 per cent by the end of this year, emerging and developing economies are likely to grow by 1.5 per cent. India and China are expected to grow by 5.4 per cent.
"India and China are expected to witness a robust recovery with increase in real GDP growth from CY 2008-09 levels and Indian economy is expected to grow at 5.4 per cent during 2009 (the second highest in the world after China, which is likely to grow at 7.5 per cent)," the report said.
Fiscal deficit in India leaped from 3.1 per cent in 2007 to 6.1 per cent in 2008 and is further expected to inch up to 6.4 per cent during 2009, it said.
Economic recovery during CY 2010-11 is likely to reinvigorate the interest of foreign investors in India's real estate market. We expect enhanced capital inflow in the real estate sector in the medium-to-long-term," Jones Lang LaSalle said in its report.
Initial yield is expected to show compression during CY 2010-11 and capital values are likely to decline during 2010 before recovering in 2011, the company said in the report.
"Initial yield has already started to show a declining trend during 2009 which is likely to be the case in the near-term. Yield on 10-year Indian Government Bonds is likely to harden due to higher fiscal deficit," it said.
The report said although the high fiscal deficit is likely to harden interest rates in the economy, all other macro-economic variables are expected to improve during CY 2010-11 which is likely to induce real estate market recovery after the slowdown of CY 2008-09.
According to the World Economic Outlook Report by IMF, the world economy is likely to contract by 1.4 per cent during 2009.
While advanced economies are expected to contract by 3.8 per cent by the end of this year, emerging and developing economies are likely to grow by 1.5 per cent. India and China are expected to grow by 5.4 per cent.
"India and China are expected to witness a robust recovery with increase in real GDP growth from CY 2008-09 levels and Indian economy is expected to grow at 5.4 per cent during 2009 (the second highest in the world after China, which is likely to grow at 7.5 per cent)," the report said.
Fiscal deficit in India leaped from 3.1 per cent in 2007 to 6.1 per cent in 2008 and is further expected to inch up to 6.4 per cent during 2009, it said.
Govt plans regulatory reform for housing sector Assetventures
The central government is working on a model real estate regulation bill to provide guidelines to facilitate growth and promotion of healthy and transparent efficient and competitive real estate sector in the country, said the housing and urban poverty alleviation minister Kumari Selja.
This is a welcome move and will help the sector in becoming efficient and competitive. However, developers feel the government should form a separate regulator on the lines of Securities and Exchange Board of India (SEBI) to regulate the sector.
Addressing a conference on real estate, the minister said Indian real estate market is unorganised and fragmented and that most of property transactions are based on certain perceptions and not necessarily on sound business principles. In this, customer satisfaction is low and redressal procedure is long and cumbersome. This has created problems for both buyers and developers. As end users are not sure of delivery of a house by builders on time, they dont want to risk a purchase by taking a loan from the bank.
Apart from this, many buyers are not even sure of the specifications, which developers promise while selling them the houses/flats. Worse still, when developers do not deliver on time or stick to the promised specifications while selling, buyers do not know where to for redressal.
Going to a court is not only time consuming but also expensive. This has forced buyers to either defer their purchase or to go for completed projects. But, this apprehension of end users has affected genuine developers as well, which have a plan and required finances to complete a project. However, in the last couple of months, end users have started showing interest in buying new projects. But, they want to buy in the projects of reputed developers alone. This has created problem for the new but good developers.
A senior developer says if the sector is well regulated, the role of brokers and investors can be reduced. In most of the cases, investors, who have better understanding of the sector and who can invest time and money to know about developers, invest at the early stage of implementation of a project and make easy money by selling them to end users at high prices when the project comes to a close. The end users, on the other hand, are comfortable in buying a house when projects are close to completion, hence making the sector over dependent on investors.
Consequently, in the last one year of market downturn, the entire real estate sector came to a screeching halt as investors disappeared from the market. But, had the sector been well regulated, end users would have been bold enough to buy at the early stage of project implementation. This would have helped developers also.
However, another problem in regulating the sector is that it comes under the state subject as well. Thus, a senior official says nothing much can be done unless state governments show interest. Haryana Government has already passed an act to regulate the sector. But, the results are not encouraging, thus far. It was assured all the stakeholders that the government will accord full cooperation and support to encourage affordable housing.
She said the housing sector in India holds tremendous potential and has positive impact on the social and economic development of the country. In
2006-07 the sector was about 4.5% of country's Gross Domestic Product and comprised approximately 7% of the total urban workforce. Housing is the largest component of the construction sector and central to economic growth.
However, provision of affordable housing for all is a complex problem with challenges emerging from many facets of urban sector. The minister said there are many impediments to the growth of affordable housing land and capital being the two key constraints.
To increase the stock for affordable housing the focus has to be on augmenting land supplies. Kumari Selja said the issue is a critical one and requires a number of measures such as alternative methods of land assembly, development and disposal to be pursued, check on prices of urban land, encouraging public-private partnership, promoting intense use of land-higher densities, revision in Floor Area Ratio or Floor Space Index and change of norms to suit local situations, discouraging speculation in land development, and allotment or disposal process to check rising prices of land.
This is a welcome move and will help the sector in becoming efficient and competitive. However, developers feel the government should form a separate regulator on the lines of Securities and Exchange Board of India (SEBI) to regulate the sector.
Addressing a conference on real estate, the minister said Indian real estate market is unorganised and fragmented and that most of property transactions are based on certain perceptions and not necessarily on sound business principles. In this, customer satisfaction is low and redressal procedure is long and cumbersome. This has created problems for both buyers and developers. As end users are not sure of delivery of a house by builders on time, they dont want to risk a purchase by taking a loan from the bank.
Apart from this, many buyers are not even sure of the specifications, which developers promise while selling them the houses/flats. Worse still, when developers do not deliver on time or stick to the promised specifications while selling, buyers do not know where to for redressal.
Going to a court is not only time consuming but also expensive. This has forced buyers to either defer their purchase or to go for completed projects. But, this apprehension of end users has affected genuine developers as well, which have a plan and required finances to complete a project. However, in the last couple of months, end users have started showing interest in buying new projects. But, they want to buy in the projects of reputed developers alone. This has created problem for the new but good developers.
A senior developer says if the sector is well regulated, the role of brokers and investors can be reduced. In most of the cases, investors, who have better understanding of the sector and who can invest time and money to know about developers, invest at the early stage of implementation of a project and make easy money by selling them to end users at high prices when the project comes to a close. The end users, on the other hand, are comfortable in buying a house when projects are close to completion, hence making the sector over dependent on investors.
Consequently, in the last one year of market downturn, the entire real estate sector came to a screeching halt as investors disappeared from the market. But, had the sector been well regulated, end users would have been bold enough to buy at the early stage of project implementation. This would have helped developers also.
However, another problem in regulating the sector is that it comes under the state subject as well. Thus, a senior official says nothing much can be done unless state governments show interest. Haryana Government has already passed an act to regulate the sector. But, the results are not encouraging, thus far. It was assured all the stakeholders that the government will accord full cooperation and support to encourage affordable housing.
She said the housing sector in India holds tremendous potential and has positive impact on the social and economic development of the country. In
2006-07 the sector was about 4.5% of country's Gross Domestic Product and comprised approximately 7% of the total urban workforce. Housing is the largest component of the construction sector and central to economic growth.
However, provision of affordable housing for all is a complex problem with challenges emerging from many facets of urban sector. The minister said there are many impediments to the growth of affordable housing land and capital being the two key constraints.
To increase the stock for affordable housing the focus has to be on augmenting land supplies. Kumari Selja said the issue is a critical one and requires a number of measures such as alternative methods of land assembly, development and disposal to be pursued, check on prices of urban land, encouraging public-private partnership, promoting intense use of land-higher densities, revision in Floor Area Ratio or Floor Space Index and change of norms to suit local situations, discouraging speculation in land development, and allotment or disposal process to check rising prices of land.
Housing sector is shining again Assetventures
Last August, Gurgaon real-estate broker S Karan was planning to move out of his tiny basement office in a small building to a fancy new one in one of the tall steel-and-glass buildings that have become the signature of this booming Delhi suburb.
Then, Lehman Brothers, one of the Big Four investment banks in the US, collapsed on September 15, sparking off a global recession, an Indian economic slowdown, and a slump in the once booming real-estate sector.
Karan (34) then thought his dreams would remain still-born — till the first signs of a recovery in the first quarter of 2009-10. “Usually, we seal 70 per cent of our deals around Diwali. Last year, that figure dropped to 30 per cent.”
There were many reasons for the death of his dream.
The global recession took the Indian stock markets down with it. The BSE Sensex fell from 14,001 on September 12, the last trading day before the Lehman collapse, to a low of 8,198 on March 5, this year.
So, the supply of speculative money that had mainly fuelled the 2005-08 real estate boom, in which house prices doubled and rentals soared more than 75 per cent, stopped.
Rising inflation also forced the Reserve Bank of India to hike interest rates. Result: interest rates on housing loans rose from 7-8 per cent levels at the end of 2007 to 12 per cent a year later.
Housing was no longer attractive for speculators, and out of reach of the middle class.
The bubble had burst.
Between October last year and March this year, housing sales dropped from 10,000-12,000 units per month in the National Capital Region to less than a third of that number.
“Earlier (prior to the Lehman collapse), I used to conduct two to three transactions in the resale category and three to four original bookings every month. After October, that number fell by half,” says Karan.
Transaction values also fell as realtors, who had got used to net profit margins of more than 50 per cent, cut prices to lure buyers back.
But the double whammy of lower prices and plunging sales took its toll. DLF, India’s largest real estate company, saw its January-March 2009 sales and profits plunge 96.6 per cent and 95.3 per cent, respectively, to Rs 55.5 crore and Rs 29.8 crore.
Unitech, India’s second-largest real estate developer, and a host of other biggies like Omaxe, Parasvnath, Prestige, Puravankara, etc., also suffered similar setbacks.
Then the tide began to turn in the first quarter of 2009-10. The global recession brought down crude oil and commodity prices worldwide.
The wholesale price-based inflation rate began to ease – and even entered negative territory for a while. Interest rates started falling once again.
Realtors cut prices, by up to 30 per cent, and launched a slew of affordable housing projects (priced at Rs 15-50 lakh per apartment).
And the release of arrears to government employees, following the Sixth Pay Commission Report, thus, putting massive sums of money in the hands of government employees, provided the icing on the cake.
Buyers returned to the market.
Unitech Managing Director Sanjay Chandra says the company booked nearly 4,000 housing units in the first two-and-a-half months of 2009-10.
The number of registration agreements signed has also seen a healthy improvement. In Mumbai and Pune, registrations increased 24 per cent and 21 per cent month on month, respectively, said a June 2009 report, On the road to recovery, by Religare, Hitchens Harrison.
“The residential property market has been driving this recovery,” says Aditi Vijayakar, director, residential services, Cushman & Wakefield India, a large real estate consultant. The commercial and retail segments, though, have not yet picked up.
“The worst is over,” says Kumar Gera, chairman of the Confederation of Real Estate Developers Association of India, the apex body of realtors in India.
So, Karan can probably breathe easier now, even though his dream office may still be out of reach.
Then, Lehman Brothers, one of the Big Four investment banks in the US, collapsed on September 15, sparking off a global recession, an Indian economic slowdown, and a slump in the once booming real-estate sector.
Karan (34) then thought his dreams would remain still-born — till the first signs of a recovery in the first quarter of 2009-10. “Usually, we seal 70 per cent of our deals around Diwali. Last year, that figure dropped to 30 per cent.”
There were many reasons for the death of his dream.
The global recession took the Indian stock markets down with it. The BSE Sensex fell from 14,001 on September 12, the last trading day before the Lehman collapse, to a low of 8,198 on March 5, this year.
So, the supply of speculative money that had mainly fuelled the 2005-08 real estate boom, in which house prices doubled and rentals soared more than 75 per cent, stopped.
Rising inflation also forced the Reserve Bank of India to hike interest rates. Result: interest rates on housing loans rose from 7-8 per cent levels at the end of 2007 to 12 per cent a year later.
Housing was no longer attractive for speculators, and out of reach of the middle class.
The bubble had burst.
Between October last year and March this year, housing sales dropped from 10,000-12,000 units per month in the National Capital Region to less than a third of that number.
“Earlier (prior to the Lehman collapse), I used to conduct two to three transactions in the resale category and three to four original bookings every month. After October, that number fell by half,” says Karan.
Transaction values also fell as realtors, who had got used to net profit margins of more than 50 per cent, cut prices to lure buyers back.
But the double whammy of lower prices and plunging sales took its toll. DLF, India’s largest real estate company, saw its January-March 2009 sales and profits plunge 96.6 per cent and 95.3 per cent, respectively, to Rs 55.5 crore and Rs 29.8 crore.
Unitech, India’s second-largest real estate developer, and a host of other biggies like Omaxe, Parasvnath, Prestige, Puravankara, etc., also suffered similar setbacks.
Then the tide began to turn in the first quarter of 2009-10. The global recession brought down crude oil and commodity prices worldwide.
The wholesale price-based inflation rate began to ease – and even entered negative territory for a while. Interest rates started falling once again.
Realtors cut prices, by up to 30 per cent, and launched a slew of affordable housing projects (priced at Rs 15-50 lakh per apartment).
And the release of arrears to government employees, following the Sixth Pay Commission Report, thus, putting massive sums of money in the hands of government employees, provided the icing on the cake.
Buyers returned to the market.
Unitech Managing Director Sanjay Chandra says the company booked nearly 4,000 housing units in the first two-and-a-half months of 2009-10.
The number of registration agreements signed has also seen a healthy improvement. In Mumbai and Pune, registrations increased 24 per cent and 21 per cent month on month, respectively, said a June 2009 report, On the road to recovery, by Religare, Hitchens Harrison.
“The residential property market has been driving this recovery,” says Aditi Vijayakar, director, residential services, Cushman & Wakefield India, a large real estate consultant. The commercial and retail segments, though, have not yet picked up.
“The worst is over,” says Kumar Gera, chairman of the Confederation of Real Estate Developers Association of India, the apex body of realtors in India.
So, Karan can probably breathe easier now, even though his dream office may still be out of reach.
Festive season, low loan rates... real estate sector scales north in tricity assetventures
Chandigarh As global economy shows signs of recovery, reasonable investment has been registered in the sector
With the festive season approaching and signs of global economic recovery visible, real estate business has picked up in the tricity.
Though it will take a few months to revive the sentiment, experts say, reasonable investment has recently been registered in the sector.
While the developers are offering festive discounts and schemes to clear the inventory, banks are also offering discounts on home loans.
“I was keeping a tab on projects in the tricity for over a year. Considering this the opportune time to invest in property, I have invested around Rs 50 lakh for a three-bedroom flat in Mohali,”Ankit Saini, a resident of Chandigarh, who works in Merchant Navy.
“I could also negotiate a discount of Rs 4 lakh on the apartment,” he added.
While banks are attracting the customers with lowered interest rates and no procession fee for a limited period on home loans, buyers are eager to cash in as rates are expected to increase by January-March.
To make the most of changing sentiments of buyers, developers are offering extra amenities in flats, lucky draw prizes and discounts to the early birds.
“Free parking and cupboards that amount to Rs 50,000 are offered to buyers who make purchase during navrataras. A lucky draw will also be conducted to offer full furnishing for flats,” said R S Bhullar, Vice president ATS Infrastructure Limited.
He claimed that the residential project in Dera Bassi had marked a sale of 30 units in three months. Real estate consultants said once the buyer started making the transactions, the investors responded.
“The real estate sector is recovering in the region. With the festive season starting from Saturday, the trend is expected to go up,” said Rajesh Kalra, a property consultant.
With the festive season approaching and signs of global economic recovery visible, real estate business has picked up in the tricity.
Though it will take a few months to revive the sentiment, experts say, reasonable investment has recently been registered in the sector.
While the developers are offering festive discounts and schemes to clear the inventory, banks are also offering discounts on home loans.
“I was keeping a tab on projects in the tricity for over a year. Considering this the opportune time to invest in property, I have invested around Rs 50 lakh for a three-bedroom flat in Mohali,”Ankit Saini, a resident of Chandigarh, who works in Merchant Navy.
“I could also negotiate a discount of Rs 4 lakh on the apartment,” he added.
While banks are attracting the customers with lowered interest rates and no procession fee for a limited period on home loans, buyers are eager to cash in as rates are expected to increase by January-March.
To make the most of changing sentiments of buyers, developers are offering extra amenities in flats, lucky draw prizes and discounts to the early birds.
“Free parking and cupboards that amount to Rs 50,000 are offered to buyers who make purchase during navrataras. A lucky draw will also be conducted to offer full furnishing for flats,” said R S Bhullar, Vice president ATS Infrastructure Limited.
He claimed that the residential project in Dera Bassi had marked a sale of 30 units in three months. Real estate consultants said once the buyer started making the transactions, the investors responded.
“The real estate sector is recovering in the region. With the festive season starting from Saturday, the trend is expected to go up,” said Rajesh Kalra, a property consultant.
Wednesday, September 9, 2009
Hospitality giant on land hunt for city address
Zuri Hotels & Resorts
a multinational conglomerate promoted by a consortium of investors from West Asia is scouting for
opportunities in Kolkata. The company is open to contract management opportunities as well as setting up its own hotel in the city. The Zuri Group is into real estate, floriculture and hospitality with resorts and hotels in Kenya, the UK and India.
"The Zuri group sees tremendous potential in Kolkata and rest of the east. We are keen to be present in the hospitality sector here at the earliest. We are in talks with a couple of hotels on a possible management contract and use of the Zuri brand. If something does not work out within six months, we will look at a 1.5-2 acre plot in Kolkata proper to set up a 140-170 room business hotel. The investment will be around Rs 200-225 crore," said Aditya Mata, general manager of the Zuri group's flagship property in Kumarakom, Kerala. The group owns two other hotels in Goa and one in Bangalore.
The team currently camping in Kolkata to negotiate with potential partners is looking for a property with large banqueting facility to tap the marriage market. "Since marriages in Kolkata are elaborate, we want to get into the business. It's a good money-spinner as well," said Mata.
Incidentally, the company was looking for land in New Town and Rajarhat but developed cold feet after the Vedic land scam. "Land has become a hot potato. The thing that happened in Rajarhat was an eye-opener. We are now looking for a property in the central business district," company spokesperson Priti Chand said.
Apart from Kolkata, the group is eyeing properties in Ahmedabad, Pune, Chennai, Nagpur, Visakhapatnam and Mysore. While three of the four hotels that the group has in India are resorts, the company is now looking at business hotels that have a shorter return on investment.
Meanwhile, city-based Gama Hospitality (GHPL) on Tuesday signed a master franchisee agreement with Global Franchise Architects (GFA) to launch four international brands Coffee World, Pizza Corner, The Cream & Fudge Factory and The Donut Baker in the eastern region. With an investment of Rs 52 crore, GHPL will focus on Kolkata in the initial phase this year.
"We intend to open 35 outlets in this part of the country in the next 18 to 24 months using up a cumulative floor-space of about 42,000 square feet. All the four brands should be in Kolkata by the end of this year," Gama's director Gaurav Agarwala said.
a multinational conglomerate promoted by a consortium of investors from West Asia is scouting for
opportunities in Kolkata. The company is open to contract management opportunities as well as setting up its own hotel in the city. The Zuri Group is into real estate, floriculture and hospitality with resorts and hotels in Kenya, the UK and India.
"The Zuri group sees tremendous potential in Kolkata and rest of the east. We are keen to be present in the hospitality sector here at the earliest. We are in talks with a couple of hotels on a possible management contract and use of the Zuri brand. If something does not work out within six months, we will look at a 1.5-2 acre plot in Kolkata proper to set up a 140-170 room business hotel. The investment will be around Rs 200-225 crore," said Aditya Mata, general manager of the Zuri group's flagship property in Kumarakom, Kerala. The group owns two other hotels in Goa and one in Bangalore.
The team currently camping in Kolkata to negotiate with potential partners is looking for a property with large banqueting facility to tap the marriage market. "Since marriages in Kolkata are elaborate, we want to get into the business. It's a good money-spinner as well," said Mata.
Incidentally, the company was looking for land in New Town and Rajarhat but developed cold feet after the Vedic land scam. "Land has become a hot potato. The thing that happened in Rajarhat was an eye-opener. We are now looking for a property in the central business district," company spokesperson Priti Chand said.
Apart from Kolkata, the group is eyeing properties in Ahmedabad, Pune, Chennai, Nagpur, Visakhapatnam and Mysore. While three of the four hotels that the group has in India are resorts, the company is now looking at business hotels that have a shorter return on investment.
Meanwhile, city-based Gama Hospitality (GHPL) on Tuesday signed a master franchisee agreement with Global Franchise Architects (GFA) to launch four international brands Coffee World, Pizza Corner, The Cream & Fudge Factory and The Donut Baker in the eastern region. With an investment of Rs 52 crore, GHPL will focus on Kolkata in the initial phase this year.
"We intend to open 35 outlets in this part of the country in the next 18 to 24 months using up a cumulative floor-space of about 42,000 square feet. All the four brands should be in Kolkata by the end of this year," Gama's director Gaurav Agarwala said.
Thursday, September 3, 2009
India's biggest land deals
DLF, India’s largest real estate developer, has emerged as the sole bidder for the 350.71-acre land parcel in Gurgaon put up for auction by HSIIDC. With a reserve price of Rs 1,700 crore, it’s said to be one of the largest land deals in India in terms of value.
Mega land deals, however, are not new to the Indian real estate industry which has already witnessed many such deals in the past few years, particularly during the property boom of recent years. We take a look at some of them:
In March 2008, BPTP outbid DLF for a tract of land in Noida near Delhi with a Rs 5,000-crore offer.
BPTP quoted the highest sum for the site -- Sector 94 running along the Noida and Greater Noida Expressway -- bidding at Rs 1,30,207 per square metre, followed by the country’s largest realty company DLF which quoted Rs 1,17,000 per square metre and Omaxe at Rs 80,100 per square metre.
BPTP’s winning bid was nearly 70 per cent more than the reserve price of Rs 2960 crore for the land parcel. But the deal was called off after BPTP failed to arrange funds to complete the deal.
Unitech in 2007 acquired 1,750 acres of land in Visakhapatnam from APIIC at over Rs 3,300 crore. At Rs 52 lakh per acre, it was among the largest deals in the country in terms of the acreage from a single source in a single deal.
The Andhra Pradesh Industrial Infrastructure Corporation (APIIC) had invited bids to develop the land for the Integrated Vizag Knowledge City.
Dubai-based Al Hamra Real Estate Development LLC had also qualified for the bid, but dropped out in the final stage.
The Ahmedabad-based Adani Group in May 2006 finalised India’s one of the largest lands deal with Housing Development and Infrastructure (HDIL) for Rs 2,250 crore to develop a commercial and retail hub in Mumbai’s landmark commercial business district, the Bandra-Kurla Complex (BKC).
The deal involved the sale and development of over 2.1m sq ft of land (around 48 acres) at BKC.
DLF has emerged as the sole bidder for the 350.71-acre land parcel in Gurgaon put up for auction by a Haryana state corporation. With a reserve price of Rs 1,700 crore, it’s the fourth-largest land deal in India in terms of value.
The Haryana State Industrial and Infrastructure development Corporation (HSIIDC) had first invited bids in January for this project, which will have a golf course, sports, commercial and residential development. DLF, which was the sole bidder then, had sought changes in bid conditions seeking easier payment plan.
HSIIDC re-invited bids in July, giving bidders the facility of a staggered payment plan over seven years and an additional 20% FAR (Floor area ratio or the developable floor space over a piece of land). The reserve price for the site was Rs 11,978 per square meter or Rs 1700 crore.
Unitech had a couple of years back outbid rival DLF Universal to bag the 340-acre city development contract on Noida Expressway with an offer of Rs 1,583 crore.
For the project where 50 per cent land was to be used for open area development and greenery and the rest for residential accommodation, Unitech had bid at the rate of Rs 11,529 per square metre.
DLF had put up a bid of Rs 1,401.46 crore at the rate of Rs 10,200 per square metre, according to media reports.
Reliance Industries in 2006 bid for and won a 7.5-hectare plot at Bandra Kurla Complex, a prime location in Mumbai, for Rs 1,104 crore.
According to media reports, Reliance paid Rs 61 cr per acre to grab the crucial Bandra Kurla convention center deal.
The bid was 130-per cent higher than the reserve price of Rs 480 cr.
Mega land deals, however, are not new to the Indian real estate industry which has already witnessed many such deals in the past few years, particularly during the property boom of recent years. We take a look at some of them:
In March 2008, BPTP outbid DLF for a tract of land in Noida near Delhi with a Rs 5,000-crore offer.
BPTP quoted the highest sum for the site -- Sector 94 running along the Noida and Greater Noida Expressway -- bidding at Rs 1,30,207 per square metre, followed by the country’s largest realty company DLF which quoted Rs 1,17,000 per square metre and Omaxe at Rs 80,100 per square metre.
BPTP’s winning bid was nearly 70 per cent more than the reserve price of Rs 2960 crore for the land parcel. But the deal was called off after BPTP failed to arrange funds to complete the deal.
Unitech in 2007 acquired 1,750 acres of land in Visakhapatnam from APIIC at over Rs 3,300 crore. At Rs 52 lakh per acre, it was among the largest deals in the country in terms of the acreage from a single source in a single deal.
The Andhra Pradesh Industrial Infrastructure Corporation (APIIC) had invited bids to develop the land for the Integrated Vizag Knowledge City.
Dubai-based Al Hamra Real Estate Development LLC had also qualified for the bid, but dropped out in the final stage.
The Ahmedabad-based Adani Group in May 2006 finalised India’s one of the largest lands deal with Housing Development and Infrastructure (HDIL) for Rs 2,250 crore to develop a commercial and retail hub in Mumbai’s landmark commercial business district, the Bandra-Kurla Complex (BKC).
The deal involved the sale and development of over 2.1m sq ft of land (around 48 acres) at BKC.
DLF has emerged as the sole bidder for the 350.71-acre land parcel in Gurgaon put up for auction by a Haryana state corporation. With a reserve price of Rs 1,700 crore, it’s the fourth-largest land deal in India in terms of value.
The Haryana State Industrial and Infrastructure development Corporation (HSIIDC) had first invited bids in January for this project, which will have a golf course, sports, commercial and residential development. DLF, which was the sole bidder then, had sought changes in bid conditions seeking easier payment plan.
HSIIDC re-invited bids in July, giving bidders the facility of a staggered payment plan over seven years and an additional 20% FAR (Floor area ratio or the developable floor space over a piece of land). The reserve price for the site was Rs 11,978 per square meter or Rs 1700 crore.
Unitech had a couple of years back outbid rival DLF Universal to bag the 340-acre city development contract on Noida Expressway with an offer of Rs 1,583 crore.
For the project where 50 per cent land was to be used for open area development and greenery and the rest for residential accommodation, Unitech had bid at the rate of Rs 11,529 per square metre.
DLF had put up a bid of Rs 1,401.46 crore at the rate of Rs 10,200 per square metre, according to media reports.
Reliance Industries in 2006 bid for and won a 7.5-hectare plot at Bandra Kurla Complex, a prime location in Mumbai, for Rs 1,104 crore.
According to media reports, Reliance paid Rs 61 cr per acre to grab the crucial Bandra Kurla convention center deal.
The bid was 130-per cent higher than the reserve price of Rs 480 cr.
Real estate market is improving: Time to buy
The figures in US from the National Association of Realtors show that pending home sales for July increased by a 3.2 percent margin, bringing the organization's Pending Home Sales Index to 97.6. This is a 12 percent improvement over last July's figures, and the highest level for the index since June 2007.
There is strong new reports that the global real estate market is hitting the bottom and some impressive positive news is coming from real estate markets around the world.
In the U.S., the real estate market has yet to hit the bottom, but at least it is very close.
There are 2 factors that would determine recovering the real estate market: one is when job losses stop and new jobs are created and secondly when the real estate prices are realistic reflections of what people can afford to buy.
The news that the real estate market is recovering based on recent sales doesn't really reflect real recovery.
What is happening is that people are buying houses at bargain prices. The value of sales is up and this is a good sign but still the real estate market would probably start recovering by next spring.
Around the world there is positive news in India where there is a huge demand of the population for real estate that is the main factor for the real estate boom--and also in the Middle East where the population growth in 15-20 years is estimated to triple.
The European real estate market mirrors what is happening in the U.S. There are some signs of improvement in Africa and Latin America but not as strong as in Canada, India and China. The Canadian Real Estate Association reported that realtors sold 50,270 units sold via the multiple listing service last month. That's an 18.2 per cent jump from a year ago. It also marked the first time sales had topped 50,000 in July. Sales of existing single-family homes jumped 55 percent in the 2009 second quarter compared to the 2009 first quarter. Realtors sold 18,141 homes in the second quarter.
In China the strength of the property sector has been another big surprise. Property sales were up 53% in the first six months from a year earlier, according to a survey commissioned by the statistics bureau and published in the China Information News, while nationwide prices averaged across 70 cities climbed year on year in June. This masks the fact that in second and third cities prices have been strengthening much more. Property normally accounts for about 25% of fixed asset investment in China and is a key form of wealth holding for most Chinese. Optimism about housing prices will translate into greater consumer confidence.
Chinese commercial real estate sales have increased in the first half of the year, recording more sales that the US and UK markets combined. Global commercial real estate sales are expected to continue growing in the second half of the year, which analysts believe will be the first step to global economic recovery.
All about taking loan against property Assetventures
Want money for your child's marriage? Or to fund your business expansion? Well the money is already in your house! Read further...
Loans generally can be classified as secured or unsecured. Personal loans and credit cards come under the un-secured loans category because we are not pledging any of our assets (collateral) to get the loan. Housing loans, loan against property, loan against shares, and car loans come under the secured loan category as there are collaterals involved.
LAP
Loan against property can be taken against a self-occupied residence or a commercial building. The main requirement on the bank's (lender's) part is that there should not be any other encumbrance.
Lap is the most secure of loans hence the lending rate is generally very low compared to other loans. However, because of the structure of lending by banks, they tend to be slightly higher than housing loans.
The eligibility criteria for getting LAP is also liberal, as the property is available as collateral. The repayment term can also be long from 5 to 15 years.
When to look at LAP?
For anyone who has a house or commercial property and is looking for a loan, LAP should be the first option. The only loan with better features could be the gold loan. But there could be a lot of sentiments attached to pledging gold, so it generally gets done as the last alternative. That leaves the LAP as the better choice.
Though a housing loan and the LAP are secured against the property, LAP is on the existing property and the value of the property is released for productive activity. For a businessman looking to expand business, a LAP comes in handy. As they do not have to look for costly sources and the processing is also much faster. A few banks may even give an overdraft facility against the property; this will help the business as interest will need to be paid only for the amount withdrawn.
Funding children's education can also be done using LAP; also their marriages. But as a general rule, one has to be a cautious when taking loans for expenses.
Advantages of LAP
* Value of the asset owned is released for productive use.
* Processing is faster than a housing loan as the property is already in our possession.
* Partial pre-closure is allowed without any penalties. This is an advantage as the overall interest burden or the tenure of the loan can be reduced by paying small additional amount (some banks permit a minimum part payment of Rs 5,000 most start at Rs 10,000).
* If the value of the property has risen over a period of time, a re-financing option can be used to increase the loan amount. This feature again is very useful for businessmen, who are on an expansion spree. They can use the same property to continuously build the business.
* The property continues to be in the ownership of the borrower. In case the borrowers are not able to pay the loan, they can sell the property and then settle the loan. This may leave surplus cash for the borrowers to restart their financial life.
Some disadvantages of LAP
* Banks generally do not give loans beyond 60 per cent of the value of a house property and 50 percent of a commercial property.
* New businesses generally cannot have access to LAP. They should have been in existence for at least 3 years. Salaried persons of course can get it if they are employed for over 1 year itself.
* There will be some processing charges usually in the range of 0.5 percent to 1 percent depending on the support given by the bank. Some banks may ask us to do the running around to get the encumbrance certificate and legal opinion ourselves and charge us lesser.
Points to be cautious about
Loan against property by itself is a very benign loan. So there is not much to be afraid about. However, there are a few points to be cautious about:
* Fixed vs floating loan conundrum:As in a housing loan, in LAP too a decision has to be taken related to this. In a low interest rate regime it is always better to take up a fixed interest rate. However clauses related to jacking the slabs up even in a fixed interest rate loan needs to be verified. For floating rates, the increase and decrease bands have to be checked.
* Inadvertent shift from overdraft to EMI: Some smart (unethical!!!) salesman may sell off a LAP in EMI format to businessmen seeking an overdraft. This causes unexpected high cash flows for the business.
* Assessment of property value: Support from the owners to give the deeds of recent sales in the neighborhood will help the underwriters of the bank in assessing the value of the property better. Generally they tread on the cautious side.
* Partnership business: In a partnership, LAP can raise some issues among the partners on - Whose property is to be pledged? This is particularly a problem if at a latter point in time one or some of the partners wish to leave the business.
Loans generally can be classified as secured or unsecured. Personal loans and credit cards come under the un-secured loans category because we are not pledging any of our assets (collateral) to get the loan. Housing loans, loan against property, loan against shares, and car loans come under the secured loan category as there are collaterals involved.
LAP
Loan against property can be taken against a self-occupied residence or a commercial building. The main requirement on the bank's (lender's) part is that there should not be any other encumbrance.
Lap is the most secure of loans hence the lending rate is generally very low compared to other loans. However, because of the structure of lending by banks, they tend to be slightly higher than housing loans.
The eligibility criteria for getting LAP is also liberal, as the property is available as collateral. The repayment term can also be long from 5 to 15 years.
When to look at LAP?
For anyone who has a house or commercial property and is looking for a loan, LAP should be the first option. The only loan with better features could be the gold loan. But there could be a lot of sentiments attached to pledging gold, so it generally gets done as the last alternative. That leaves the LAP as the better choice.
Though a housing loan and the LAP are secured against the property, LAP is on the existing property and the value of the property is released for productive activity. For a businessman looking to expand business, a LAP comes in handy. As they do not have to look for costly sources and the processing is also much faster. A few banks may even give an overdraft facility against the property; this will help the business as interest will need to be paid only for the amount withdrawn.
Funding children's education can also be done using LAP; also their marriages. But as a general rule, one has to be a cautious when taking loans for expenses.
Advantages of LAP
* Value of the asset owned is released for productive use.
* Processing is faster than a housing loan as the property is already in our possession.
* Partial pre-closure is allowed without any penalties. This is an advantage as the overall interest burden or the tenure of the loan can be reduced by paying small additional amount (some banks permit a minimum part payment of Rs 5,000 most start at Rs 10,000).
* If the value of the property has risen over a period of time, a re-financing option can be used to increase the loan amount. This feature again is very useful for businessmen, who are on an expansion spree. They can use the same property to continuously build the business.
* The property continues to be in the ownership of the borrower. In case the borrowers are not able to pay the loan, they can sell the property and then settle the loan. This may leave surplus cash for the borrowers to restart their financial life.
Some disadvantages of LAP
* Banks generally do not give loans beyond 60 per cent of the value of a house property and 50 percent of a commercial property.
* New businesses generally cannot have access to LAP. They should have been in existence for at least 3 years. Salaried persons of course can get it if they are employed for over 1 year itself.
* There will be some processing charges usually in the range of 0.5 percent to 1 percent depending on the support given by the bank. Some banks may ask us to do the running around to get the encumbrance certificate and legal opinion ourselves and charge us lesser.
Points to be cautious about
Loan against property by itself is a very benign loan. So there is not much to be afraid about. However, there are a few points to be cautious about:
* Fixed vs floating loan conundrum:As in a housing loan, in LAP too a decision has to be taken related to this. In a low interest rate regime it is always better to take up a fixed interest rate. However clauses related to jacking the slabs up even in a fixed interest rate loan needs to be verified. For floating rates, the increase and decrease bands have to be checked.
* Inadvertent shift from overdraft to EMI: Some smart (unethical!!!) salesman may sell off a LAP in EMI format to businessmen seeking an overdraft. This causes unexpected high cash flows for the business.
* Assessment of property value: Support from the owners to give the deeds of recent sales in the neighborhood will help the underwriters of the bank in assessing the value of the property better. Generally they tread on the cautious side.
* Partnership business: In a partnership, LAP can raise some issues among the partners on - Whose property is to be pledged? This is particularly a problem if at a latter point in time one or some of the partners wish to leave the business.
NRI meet to seek changes in Indian property laws
NEW YORK: The Global Organization of People of Indian Origin (GOPIO) will pressure the Indian government to amend property laws to protect the
interests of NRIs at its annual conference here this week.
The biggest and oldest body of the Indian diaspora will hold its two-day conference at the Crown Plaza Hotel near LaGuardia airport Aug 21-22.
It will be opened by Oversees Indian Affairs Minister Vayalar Ravi. The 20th annual conference will also be attended by Frank Wisner, former US ambassador to India.
"Though our main theme is 'People of Indian Origin: Strengthening Global Connections', our thrust this year is to put fresh pressure on the Indian government to change property ownership laws for NRIs," outgoing GOPIO president Inder Singh said.
"How can we wholeheartedly involve ourselves in India's development if someone steals our investments and properties in our absence? The current Indian laws are so outmoded that they are not even fit for Indians, let alone the diaspora," Singh said.
"We are 25 million in strength and pumping billions into India. And don't forget that it was the NRIs who ushered in the IT revolution in India to set it on the path to greatness.
"India should realise that we matter a lot in its aspirations to become a superpower," he said.
Apart from Vayalar Ravi and Frank Wisner, the conference will also be attended by Basdeo Pandey, former prime minister of Trinidad and Tobago, Logie Naidoo, mayor of Durban in South Africa, and Lord Daljit Rana from Britain.
GOPIO counts the institution of the Pravasi Bharatiya Divas and People of Indian Origin (PIO) and Overseas Citizenship of Indian (OCI) cards as its biggest achievements in its two-decade history.
"We mooted these proposals to the Indian government at our very first conference in 1989. Finally, when the Vajpayee government set up the L.M. Singhvi panel to discuss the issue, we worked with it. We also proposed that prominent Indians abroad be recognized each year for their services to India,'' said Singh.
He said GOPIO also worked with other Indian bodies in the US to put pressure on Congressmen and Senators to vote in favour of the nuclear deal bill last year.
Singh said their future agenda is to turn GOPIO into "the Rotary Club of the Indian diaspora at the local level in their adopted countries".
interests of NRIs at its annual conference here this week.
The biggest and oldest body of the Indian diaspora will hold its two-day conference at the Crown Plaza Hotel near LaGuardia airport Aug 21-22.
It will be opened by Oversees Indian Affairs Minister Vayalar Ravi. The 20th annual conference will also be attended by Frank Wisner, former US ambassador to India.
"Though our main theme is 'People of Indian Origin: Strengthening Global Connections', our thrust this year is to put fresh pressure on the Indian government to change property ownership laws for NRIs," outgoing GOPIO president Inder Singh said.
"How can we wholeheartedly involve ourselves in India's development if someone steals our investments and properties in our absence? The current Indian laws are so outmoded that they are not even fit for Indians, let alone the diaspora," Singh said.
"We are 25 million in strength and pumping billions into India. And don't forget that it was the NRIs who ushered in the IT revolution in India to set it on the path to greatness.
"India should realise that we matter a lot in its aspirations to become a superpower," he said.
Apart from Vayalar Ravi and Frank Wisner, the conference will also be attended by Basdeo Pandey, former prime minister of Trinidad and Tobago, Logie Naidoo, mayor of Durban in South Africa, and Lord Daljit Rana from Britain.
GOPIO counts the institution of the Pravasi Bharatiya Divas and People of Indian Origin (PIO) and Overseas Citizenship of Indian (OCI) cards as its biggest achievements in its two-decade history.
"We mooted these proposals to the Indian government at our very first conference in 1989. Finally, when the Vajpayee government set up the L.M. Singhvi panel to discuss the issue, we worked with it. We also proposed that prominent Indians abroad be recognized each year for their services to India,'' said Singh.
He said GOPIO also worked with other Indian bodies in the US to put pressure on Congressmen and Senators to vote in favour of the nuclear deal bill last year.
Singh said their future agenda is to turn GOPIO into "the Rotary Club of the Indian diaspora at the local level in their adopted countries".
Real estate buffeted by strong currents
Real estate in India has always been the playing field for entrepreneurs. This industry has witnessed unprecedented highs and frightening lows
over the years. One is often left dyspnoeic with the continuous shifts in this sector.
Market Dynamics
Due to rise in demand in the IT/ITeS sector and significant increase in FDI, the commercial and retail real estate markets experienced tremendous growth in the first quarter of 2008. Land deals accrued around Rs 23,000 crore with additional deals worth Rs 10,000-crore in the pipeline. The highest recorded land deal was Mumbai's Bandra-Kurla Complex.
However, it has not been an easy journey for all in the property market. Last year, the global property collapse exacerbated by the credit bubble burst resulted in reduced finance and business activity. Equity markets also remained lacklustre and raising money through IPOs proved to be difficult. Both real estate giants, Unitech and DLF, delayed the plans to raise money through REIT issues after witnessing unfavourable initial response.
Consequently, lack of funds forced developers into high interest loans. High credit amounts proved to be detrimental for property companies. Most companies borrowed a large portion of their land-development outlays up front and relied on advance sales to repay these loans. However, poor sales led to delays and massive cost overruns. According to industry estimates, around Rs 8,000 crore worth of projects had faced considerable delay by June 2008.
The Ripple Effect
The collapse of Lehman Brothers, in September 2008, was perhaps the most significant event that spiflicated an already floundering property market in India. It triggered a shockwave that rippled through the liquidity centric commercial and retail real estate markets leaving a trail of defaults, delays, and losses. Even though property prices have corrected by 22-42% in major cities over the last few months, 10-15% downside is further expected. Commercial real estate demand has languished as corporate firms deferred expansion plans to deal with the
credit situation.
Negative absorption rate aggravated by falling rentals led to decreasing margins. Companies like DLF, with 40% of its portfolio in the commercial and retail space, reported 29% y-o-y decline in 2009 revenues while its net profit plummeted by 43%. Similarly, the top line was also distorted for companies like Ansal (-26%), Parsvanath (-60%), etc.
Timely Measures
Timely and synchronised measures taken by central banks and governments around the world restored balance and prevented a total collapse of the financial system. Thus, markets saw a mild recovery. According to Rajeev Rai, vice-president of Corporate Assotech Ltd, “To counter decreasing demand and to gain confidence of all stakeholders of Indian real estate, associations like NAREDCO and CREDAI decided to bring down prices of various properties by reducing overheads and marketing costs. In some cases, ticket size of the property was reduced with reduction in size of apartment to make it more affordable for the masses.”
As per a report by Grant Thornton, the total number of PE deals announced during the first half of 2009 stood at 93 with a total announced value
of $2.89 billion with the highest proportion invested in real estate and infrastructure management worth $1.61 billion. Bhim Yadav, CEO, Falcon Realty Services Pvt Ltd, reckons, “A higher FAR not only brings in more supply to the market, it is also vital for creating room for more affordable housing and control the steep rise in prices, ultimately benefiting the common man.”
The Mumbai real estate saw a sharp price correction. Average peak rentals fell 40–60%. While there was a slight mismatch with excess supply, (supply of over 30mn sq ft over 2008–10E vs expected demand of 22mn sq ft), the demand in Mumbai has been healthy.
Comparative Analysis
UnlikeMumbai, commercial and retail space in NCR is expected to languish due to weaker absorption rate. As per Centrum, the average vacancy rate in malls across India was about 9% in Q408 and NCR had the highest vacancy rate of around 25%. According a study by Knight Frank India, average rentals in Gurgaon was down from Rs 120/sq ft to the Rs 51/sq ft while rents in Noida dropped from Rs 90/sq ft to Rs 44/sq ft.
In conclusion, as market conditions stabilise, the financial markets will slowly pick up resulting in an improved liquidity scenario, stable government, and affordable prices. This may well serve to bring back the shine to this lacklustre sector.
over the years. One is often left dyspnoeic with the continuous shifts in this sector.
Market Dynamics
Due to rise in demand in the IT/ITeS sector and significant increase in FDI, the commercial and retail real estate markets experienced tremendous growth in the first quarter of 2008. Land deals accrued around Rs 23,000 crore with additional deals worth Rs 10,000-crore in the pipeline. The highest recorded land deal was Mumbai's Bandra-Kurla Complex.
However, it has not been an easy journey for all in the property market. Last year, the global property collapse exacerbated by the credit bubble burst resulted in reduced finance and business activity. Equity markets also remained lacklustre and raising money through IPOs proved to be difficult. Both real estate giants, Unitech and DLF, delayed the plans to raise money through REIT issues after witnessing unfavourable initial response.
Consequently, lack of funds forced developers into high interest loans. High credit amounts proved to be detrimental for property companies. Most companies borrowed a large portion of their land-development outlays up front and relied on advance sales to repay these loans. However, poor sales led to delays and massive cost overruns. According to industry estimates, around Rs 8,000 crore worth of projects had faced considerable delay by June 2008.
The Ripple Effect
The collapse of Lehman Brothers, in September 2008, was perhaps the most significant event that spiflicated an already floundering property market in India. It triggered a shockwave that rippled through the liquidity centric commercial and retail real estate markets leaving a trail of defaults, delays, and losses. Even though property prices have corrected by 22-42% in major cities over the last few months, 10-15% downside is further expected. Commercial real estate demand has languished as corporate firms deferred expansion plans to deal with the
credit situation.
Negative absorption rate aggravated by falling rentals led to decreasing margins. Companies like DLF, with 40% of its portfolio in the commercial and retail space, reported 29% y-o-y decline in 2009 revenues while its net profit plummeted by 43%. Similarly, the top line was also distorted for companies like Ansal (-26%), Parsvanath (-60%), etc.
Timely Measures
Timely and synchronised measures taken by central banks and governments around the world restored balance and prevented a total collapse of the financial system. Thus, markets saw a mild recovery. According to Rajeev Rai, vice-president of Corporate Assotech Ltd, “To counter decreasing demand and to gain confidence of all stakeholders of Indian real estate, associations like NAREDCO and CREDAI decided to bring down prices of various properties by reducing overheads and marketing costs. In some cases, ticket size of the property was reduced with reduction in size of apartment to make it more affordable for the masses.”
As per a report by Grant Thornton, the total number of PE deals announced during the first half of 2009 stood at 93 with a total announced value
of $2.89 billion with the highest proportion invested in real estate and infrastructure management worth $1.61 billion. Bhim Yadav, CEO, Falcon Realty Services Pvt Ltd, reckons, “A higher FAR not only brings in more supply to the market, it is also vital for creating room for more affordable housing and control the steep rise in prices, ultimately benefiting the common man.”
The Mumbai real estate saw a sharp price correction. Average peak rentals fell 40–60%. While there was a slight mismatch with excess supply, (supply of over 30mn sq ft over 2008–10E vs expected demand of 22mn sq ft), the demand in Mumbai has been healthy.
Comparative Analysis
UnlikeMumbai, commercial and retail space in NCR is expected to languish due to weaker absorption rate. As per Centrum, the average vacancy rate in malls across India was about 9% in Q408 and NCR had the highest vacancy rate of around 25%. According a study by Knight Frank India, average rentals in Gurgaon was down from Rs 120/sq ft to the Rs 51/sq ft while rents in Noida dropped from Rs 90/sq ft to Rs 44/sq ft.
In conclusion, as market conditions stabilise, the financial markets will slowly pick up resulting in an improved liquidity scenario, stable government, and affordable prices. This may well serve to bring back the shine to this lacklustre sector.
Sukhbir orders checking of under valued registration of properties in Punjab
CHANDIGARH: Sukhbir Singh Badal, Deputy Chief Minister Punjab on Tuesday took a serious note of under valuation of properties being done by revenue authorities in the field for the purpose of paying stamp duty.
Badal flanked by Harsimrat Kaur Badal, Member Parliament from Bathinda , while reviewing the development programmes of four districts here today asked the Financial Commissioner Revenue Mrs. Romila Dubey to issue instructions to the Deputy Commissioners to ensure that the data with regard to the entire land/urban property along with the collector rates was fed in the software within one month so as to check the exercise of discretion in application of collector rates and the type of land/property. He instructed that all registries from October 1, 2009 onward be done only as per computers fed rates.
He said that due to non-feeding of collector's rates and property details in the computer, the exercise of discretion leads to under valuation and corruption. Badal said that some times registering authorities impound the properties leading to harassment to the concerned parties and also leaving scope for leakages of government revenue.
Dubey informed the Deputy Chief Minister that revenue department has created a new software PRISAM-4 to make provision for entry of every parcel of land (Khasra Numbers) or urban properties in the software. She informed that would take care before the registration of the documents that the value of the property being registered was at par with the collector rates already fed in the computers. She said that instructions have been issued that in respect of Urban properties, the Registering Officers would not register documents unless the same was accompanied by relevant revenue record if applicable, a map of the property and a valuation certificate issued by a registered architect.
Badal said that instructions should be issued to all Deputy Commissioners to ensure that registries were done by the Registering Officers in accordance with the collector rates and in the case of any doubt, the documents should be impounded and referred to the collector for determination of value of the property concerned.
Taking seriously the feedback regarding under valuation of some properties by registering authorities for a consideration causing loss to revenue of the state, Badal asked Deputy Commissioners to conduct cross audit of suspected registries and in the case of under valuation, take strict departmental as well as criminal action against the erring officials.
The Commissioners of the Divisions have been instructed to review the progress of data feeding in the computers and send a report to the government.
Badal flanked by Harsimrat Kaur Badal, Member Parliament from Bathinda , while reviewing the development programmes of four districts here today asked the Financial Commissioner Revenue Mrs. Romila Dubey to issue instructions to the Deputy Commissioners to ensure that the data with regard to the entire land/urban property along with the collector rates was fed in the software within one month so as to check the exercise of discretion in application of collector rates and the type of land/property. He instructed that all registries from October 1, 2009 onward be done only as per computers fed rates.
He said that due to non-feeding of collector's rates and property details in the computer, the exercise of discretion leads to under valuation and corruption. Badal said that some times registering authorities impound the properties leading to harassment to the concerned parties and also leaving scope for leakages of government revenue.
Dubey informed the Deputy Chief Minister that revenue department has created a new software PRISAM-4 to make provision for entry of every parcel of land (Khasra Numbers) or urban properties in the software. She informed that would take care before the registration of the documents that the value of the property being registered was at par with the collector rates already fed in the computers. She said that instructions have been issued that in respect of Urban properties, the Registering Officers would not register documents unless the same was accompanied by relevant revenue record if applicable, a map of the property and a valuation certificate issued by a registered architect.
Badal said that instructions should be issued to all Deputy Commissioners to ensure that registries were done by the Registering Officers in accordance with the collector rates and in the case of any doubt, the documents should be impounded and referred to the collector for determination of value of the property concerned.
Taking seriously the feedback regarding under valuation of some properties by registering authorities for a consideration causing loss to revenue of the state, Badal asked Deputy Commissioners to conduct cross audit of suspected registries and in the case of under valuation, take strict departmental as well as criminal action against the erring officials.
The Commissioners of the Divisions have been instructed to review the progress of data feeding in the computers and send a report to the government.
NRI cell goes beyond property issues Assetventures
CHANDIGARH: The NRI cell, a landmark initiative of UT administration to redress property disputes, will have to expand its ambit to take care of
many other concerns of those who may have left the country for greener pastures but still look back with hope for solutions to their problems. Ever since its doors were thrown open on August 15, the makeshift centre in the Estate Office has received over 35 complaints ranging from issues of land, finance and matrimony.
“The cell was primarily constituted to deal with property dispute cases but now, going by the complaints, it seems that NRIs want to seek help for all their problems, including financial and matrimonial ones,” said home secretary Ram Niwas
The brainchild of UT administrator Gen (retd) SF Rodrigues, the cell was set up after an NRI from Chandigarh alleged that his shop-cum-flat was sold out on a fake power of attorney. “Since it’s difficult to settle things by sitting far away in a different country, disputes linger on for years. The fact that the cell is overseen by top UT officials has assured NRIs that their matter will be pursued seriously. However, one key trigger for marriage-related problems is the delay in visa for brides as well as grooms,” said Niwas.
With all issues to be handled by a committee headed by retired justice Amar Dutt and consisting of the SSP, UT senior standing counsel, a representative of NRIs and a legal luminary to be co-opted by the committee, for the time being, the administration plans to hear out complaints at UT guest house.
“The objective of the cell is to protect rights of NRIs. The process of lodging a complaint with the cell is also simple as they can either send an email at nricell@chd.nic.in or call on 0172-2700218,” said an official.
many other concerns of those who may have left the country for greener pastures but still look back with hope for solutions to their problems. Ever since its doors were thrown open on August 15, the makeshift centre in the Estate Office has received over 35 complaints ranging from issues of land, finance and matrimony.
“The cell was primarily constituted to deal with property dispute cases but now, going by the complaints, it seems that NRIs want to seek help for all their problems, including financial and matrimonial ones,” said home secretary Ram Niwas
The brainchild of UT administrator Gen (retd) SF Rodrigues, the cell was set up after an NRI from Chandigarh alleged that his shop-cum-flat was sold out on a fake power of attorney. “Since it’s difficult to settle things by sitting far away in a different country, disputes linger on for years. The fact that the cell is overseen by top UT officials has assured NRIs that their matter will be pursued seriously. However, one key trigger for marriage-related problems is the delay in visa for brides as well as grooms,” said Niwas.
With all issues to be handled by a committee headed by retired justice Amar Dutt and consisting of the SSP, UT senior standing counsel, a representative of NRIs and a legal luminary to be co-opted by the committee, for the time being, the administration plans to hear out complaints at UT guest house.
“The objective of the cell is to protect rights of NRIs. The process of lodging a complaint with the cell is also simple as they can either send an email at nricell@chd.nic.in or call on 0172-2700218,” said an official.
MCD launches amnesty scheme for tax defaulters
NEW DELHI: Not paying your property tax can land you behind bars for a period of seven years now. The Municipal Corporation of Delhi (MCD) has
launched am amnesty scheme under which tax defaulters can clear their dues without having to pay a penalty or the interest amount. But those who fail to pay the tax by October will not only face penalties like sealing of bank accounts and attachment of property but may also be jailed for a period of seven years.
Said mayor Kanwar Sain: "The 30% penalty will be waived off for those paying property tax dues before October 31. In addition to this, 1% interest levied every month on unpaid amount will not be charged from them. The amnesty scheme will be open from Tuesday to October 31.'' For the scheme, the civic agency has constituted special teams in all the 12 zones and the property tax headquarter at Lajpat Nagar.
"Under the scheme, all the property tax payers in the city will get a special identification number similar to Permanent Account Number from the civic agency. In future, the facility will be extended to other property owners too,'' added Sain.
The agency said that in future, property owners who submit pay the tax will get benefit in getting the building plan sanctioned. The mayor said the MCD will collect tax from property owners in unauthorized colonies, about whose status there was some confusion till now.
Survey of India is currently determining the number of property owners who are not in the tax net of the civic agency. According to MCD, only nine lakh people pay property tax, while according to its estimate, there are more than 30 lakh properties in the city.
launched am amnesty scheme under which tax defaulters can clear their dues without having to pay a penalty or the interest amount. But those who fail to pay the tax by October will not only face penalties like sealing of bank accounts and attachment of property but may also be jailed for a period of seven years.
Said mayor Kanwar Sain: "The 30% penalty will be waived off for those paying property tax dues before October 31. In addition to this, 1% interest levied every month on unpaid amount will not be charged from them. The amnesty scheme will be open from Tuesday to October 31.'' For the scheme, the civic agency has constituted special teams in all the 12 zones and the property tax headquarter at Lajpat Nagar.
"Under the scheme, all the property tax payers in the city will get a special identification number similar to Permanent Account Number from the civic agency. In future, the facility will be extended to other property owners too,'' added Sain.
The agency said that in future, property owners who submit pay the tax will get benefit in getting the building plan sanctioned. The mayor said the MCD will collect tax from property owners in unauthorized colonies, about whose status there was some confusion till now.
Survey of India is currently determining the number of property owners who are not in the tax net of the civic agency. According to MCD, only nine lakh people pay property tax, while according to its estimate, there are more than 30 lakh properties in the city.
New property tax rule put on hold Assetventures
MUMBAI: With an eye on the upcoming assembly elections, public representatives in the BMC held back an important proposal to implement new
capital value-based system to calculate property tax.
The capital value-based system, which is fairer and easier to understand, will now be introduced in phases across the city only after the election code of conduct, which came into force from Monday, gets over. The proposal was held back by the civic standing committee after the corporators called it a `mystery'.
"The civic administration has still not clarified how this system will benefit the middle and lower-middle class. There is still very little understanding on the calculations and why it can be so skewed for different properties," said Yogesh Sagar, member, standing committee.
The new system, starting from April 1, 2010, will be will be based on the actual property value. The figure will be mostly based on the stamp duty ready reckoner, which the government brings out every year. Older buildings will get a concession for depreciation.
As of now, Mumbai follows the rateable value-based system, which was introduced in 1888 by the BMC Act. According to this system, property tax is calculated on the basis of the rent a property is likely to earn. Going by the book, residential properties are charged at 83.5% of the rent they are likely to earn and commercial properties at an even more absurd 112.5%. With rents frozen for buildings built before 1940, and the BMC levying increased tax rates for newer buildings, the existing system has led to lot of disparities.
Additional civic commissioner, Anil Diggikar, said doubts of committee members will be cleared. "We have assured them that explanations will be soon given," he said.
capital value-based system to calculate property tax.
The capital value-based system, which is fairer and easier to understand, will now be introduced in phases across the city only after the election code of conduct, which came into force from Monday, gets over. The proposal was held back by the civic standing committee after the corporators called it a `mystery'.
"The civic administration has still not clarified how this system will benefit the middle and lower-middle class. There is still very little understanding on the calculations and why it can be so skewed for different properties," said Yogesh Sagar, member, standing committee.
The new system, starting from April 1, 2010, will be will be based on the actual property value. The figure will be mostly based on the stamp duty ready reckoner, which the government brings out every year. Older buildings will get a concession for depreciation.
As of now, Mumbai follows the rateable value-based system, which was introduced in 1888 by the BMC Act. According to this system, property tax is calculated on the basis of the rent a property is likely to earn. Going by the book, residential properties are charged at 83.5% of the rent they are likely to earn and commercial properties at an even more absurd 112.5%. With rents frozen for buildings built before 1940, and the BMC levying increased tax rates for newer buildings, the existing system has led to lot of disparities.
Additional civic commissioner, Anil Diggikar, said doubts of committee members will be cleared. "We have assured them that explanations will be soon given," he said.
Thursday, August 27, 2009
Commercial property market may revive post-Diwali: Assetventures
"We have seen a strong demand in the residential property market from December-January and now we may see buying activity in the commercial property market
post-Diwali," Religare Securities' Associate Vice-President, Suman Memani, told reporters here today.
Banks and financial services would be seen buying office spaces, but IT and ITeS sectors are yet to enter realty market as they are still passing through degrowth.
"We still remain negative on retail segments and expect sentiments to improve only 15-18 months from now as the economy gradually gets back on track," Memani said.
"We believe that there has been a significant rental correction happening in the commercial segment in Tier I and Tier II cities. However, there has not been any erosion of capital value of commercial properties," Memani said.
Lower home loan rates, property price cuts, apartment downsizing, and a recovery in the job market are translating to a pick-up in demand for residential projects as evidenced by an increase in property registration in major cities.
With the improvement in macro-economic conditions as well as buyer affordability, developers witnessed a stronger response to new launches across cities over the past quarter.
Now that property prices have climbed down and the risk of job lay-offs has diminished, the service class is likely to participate actively in property absorption, leading to a strong recovery in residential demand in Q2 FY 10, he said.
Commenting on realty prices, Memani said, "after going into a severe tailspin from January 08 onwards on account of weakening economic dynamics, we believe realty prices have started to bottom out and have already troughed in a few locations. With the return of liquidity to the sector in the form of FDI, QIPs and bank loans in recent months, the balance-sheet position of realty players has started to improve, in turn changing the risk dynamics of the business."
Listed real estate stocks were in the danger zone, a key risk measure for bankruptcy-but with equity infusion, the chances of bankruptcy have diminished, he added.
Most developers are looking to enhance their execution capabilities in this space. If 60 per cent of the planned development is executed, it will improve the balance-sheet of realty players and also enhance buyer affordability, he said.
Realty stock prices corrected 85-95 per cent over January 08-March 09, but have bounced back significantly thereafter. Still, they remain 25-30 per cent of their peaks. With positives like liquidity infusion, stronger balance-sheet positions, a stable reform-oriented Government and an improved employment outlook, "we expect the sectors' fundamentals to improve," he said.
post-Diwali," Religare Securities' Associate Vice-President, Suman Memani, told reporters here today.
Banks and financial services would be seen buying office spaces, but IT and ITeS sectors are yet to enter realty market as they are still passing through degrowth.
"We still remain negative on retail segments and expect sentiments to improve only 15-18 months from now as the economy gradually gets back on track," Memani said.
"We believe that there has been a significant rental correction happening in the commercial segment in Tier I and Tier II cities. However, there has not been any erosion of capital value of commercial properties," Memani said.
Lower home loan rates, property price cuts, apartment downsizing, and a recovery in the job market are translating to a pick-up in demand for residential projects as evidenced by an increase in property registration in major cities.
With the improvement in macro-economic conditions as well as buyer affordability, developers witnessed a stronger response to new launches across cities over the past quarter.
Now that property prices have climbed down and the risk of job lay-offs has diminished, the service class is likely to participate actively in property absorption, leading to a strong recovery in residential demand in Q2 FY 10, he said.
Commenting on realty prices, Memani said, "after going into a severe tailspin from January 08 onwards on account of weakening economic dynamics, we believe realty prices have started to bottom out and have already troughed in a few locations. With the return of liquidity to the sector in the form of FDI, QIPs and bank loans in recent months, the balance-sheet position of realty players has started to improve, in turn changing the risk dynamics of the business."
Listed real estate stocks were in the danger zone, a key risk measure for bankruptcy-but with equity infusion, the chances of bankruptcy have diminished, he added.
Most developers are looking to enhance their execution capabilities in this space. If 60 per cent of the planned development is executed, it will improve the balance-sheet of realty players and also enhance buyer affordability, he said.
Realty stock prices corrected 85-95 per cent over January 08-March 09, but have bounced back significantly thereafter. Still, they remain 25-30 per cent of their peaks. With positives like liquidity infusion, stronger balance-sheet positions, a stable reform-oriented Government and an improved employment outlook, "we expect the sectors' fundamentals to improve," he said.
North East's biggest real estate project
Shillong , Aug 24 Emaar MGF Land, one of the largest real estate developers in the country, would set up a residential complex here at an initial investment of Rs 400 crore.
The 84-acre Windermere Estate at Umpling, Shillong , once completed, would have villas, community retail centre, clubhouse and a hotel, a company statement said today.
It added that the development of Windermere Estate would have a multiplier effect on the local economy and provide employment, which will directly and indirectly benefit over 1,000 people.
" With Emaar MGF&aposs expertise in developing Commonwealth Games Village in New Delhi, the company would bring in similar expertise to develop Windermere Estate," Meghalaya Assembly Speaker and a partner of the project Charles Pyngrope said.
Emaar MGF CEO (East) Sanjay Choudhary said, Shillong offered value-proposition as well-travelled tourist destination. PTI RTJ AMD
The 84-acre Windermere Estate at Umpling, Shillong , once completed, would have villas, community retail centre, clubhouse and a hotel, a company statement said today.
It added that the development of Windermere Estate would have a multiplier effect on the local economy and provide employment, which will directly and indirectly benefit over 1,000 people.
" With Emaar MGF&aposs expertise in developing Commonwealth Games Village in New Delhi, the company would bring in similar expertise to develop Windermere Estate," Meghalaya Assembly Speaker and a partner of the project Charles Pyngrope said.
Emaar MGF CEO (East) Sanjay Choudhary said, Shillong offered value-proposition as well-travelled tourist destination. PTI RTJ AMD
Bandra-Worli Sea Link to drive prices of real estate
It’s a classic case of infrastructural development boosting real estate prices.The Bandra-Worli Sea Link seems to be doing more than just easing the traffic flow from north and south Mumbai. Experts in the country's financial capital say that there could be an increase of 10-15 per cent in property rates in surrounding areas. “The Bandra-Worli Sea Link will not only provide relief from the agonising traffic, but will also trigger a major crowd influx, which will affect real estate prices. South Mumbai will have high demand .There are indications of a 10-15 per cent hike in property prices and this may effect connecting areas. Builders who are already selling flats in the area would go for a price correction immediately, says Rajesh Vardhan, managing director, Vardhaman Group, a Mumbai-based real estate development company. In the same breath, he says it is time for a Nariman Point-Worli sea link as well.
Bandra-Worli Sea Link is a Maharashtra state road development corporation project, constructed by HCC, India's largest engineering contracting company. The road hangs in between cable-stayed bridges on the two ends namely, the Bandra and Worli Cable-stayed bridges of 500 and 150-metre spans, respectively – with the highest towers soaring to a height of 126 metres, equivalent to the height of a 43-storeyed building. The sea link was opened for general public on June 29.
Not everyone, however, shares the same optimism. Shreegopal Maheshwari, broker attached to Mumbai-based Maheshwari & Maheshwari, feels that it is too early to see an impact on property prices. “It is just over a month since the link was inaugurated. We may see the real impact in six months. Worli Sea face has, however, seen a drop of 10 per cent property prices due to increased traffic in the area,” he said. While the office properties in Mumbai generally continued to fall.
“Mumbai continued to remain volatile in terms of rental values. Bandra–Kurla Complex (BKC) corrected by another 20 per cent over the previous quarter to settle at Rs 225 per sq ft/month. The location has also witnessed over 40 per cent correction over June, 2008. This has triggered increased interest in the location from corporate occupiers and approximately 1.41 million sq.ft was leased within this location. With the growing demand for this location, the rentals are expected to remain stable in short to medium term,” said a recent report by Cushman & Wakefield.
Bandra-Worli Sea Link is a Maharashtra state road development corporation project, constructed by HCC, India's largest engineering contracting company. The road hangs in between cable-stayed bridges on the two ends namely, the Bandra and Worli Cable-stayed bridges of 500 and 150-metre spans, respectively – with the highest towers soaring to a height of 126 metres, equivalent to the height of a 43-storeyed building. The sea link was opened for general public on June 29.
Not everyone, however, shares the same optimism. Shreegopal Maheshwari, broker attached to Mumbai-based Maheshwari & Maheshwari, feels that it is too early to see an impact on property prices. “It is just over a month since the link was inaugurated. We may see the real impact in six months. Worli Sea face has, however, seen a drop of 10 per cent property prices due to increased traffic in the area,” he said. While the office properties in Mumbai generally continued to fall.
“Mumbai continued to remain volatile in terms of rental values. Bandra–Kurla Complex (BKC) corrected by another 20 per cent over the previous quarter to settle at Rs 225 per sq ft/month. The location has also witnessed over 40 per cent correction over June, 2008. This has triggered increased interest in the location from corporate occupiers and approximately 1.41 million sq.ft was leased within this location. With the growing demand for this location, the rentals are expected to remain stable in short to medium term,” said a recent report by Cushman & Wakefield.
Commercial real estate rentals seem to be bottoming out
Mumbai continues to be the second costliest city in Asia Pacific in terms of prime rental rates. With rent of about USD 800 per sq metre per
annum, Mumbai is ahead of the likes of Tokyo (USD 750 per sq metre p.a.) and Singapore (USD 625 per sq metre p.a.) as per the latest report of real estate
consultancy firm Jones Lang LaSalle. This is despite a 40% drop in rentals from its peak values. Delhi comes fourth in the ranking with USD 725 per sq metre per annum.
With GDP growth expected to bounce back in 2010, India and China would outperform the global markets with a 7-10% growth rate. The early signs of recovery are visible in Delhi and Mumbai markets. Having dropped by 24% in March’09 quarter over the preceding quarter, Mumbai’s decline in June’09 was well below 10%. Delhi followed with an 8% decline, which was half of what it was in the quarter before.
The average decline for India in June’09 was 8.3% as against 19% in the quarter prior to that. This showed that the rate of decline in rentals has also slowed down in the June’09 quarter as compared to March’09 quarter. It is believed that rents in these cities have bottomed out. Pune outperformed with just about a 4% decline.
This trend is likely to improve by 2011 when the absorption rate would overcome the supply. With 57 million sq feet of office space expected to be operational by the end of 2009, vacancy rate would continue to be high at 27% in 2010 till it comes down to a little above 20% in 2011.
Talking city wise position, Bangalore is expected to relatively outperform other cities with a low vacancy rate as it has received good response for pre leasing properties.
Companies form telecom and pharma sector seem to be fast taking advantage of the low rentals and expanding their geographic reach. For example recently Aircel and Telenor Unitech wireless signed more than 50000 sq feet of real estate space. As rents become more affordable, we could see more companies scaling up their expansion plans.
annum, Mumbai is ahead of the likes of Tokyo (USD 750 per sq metre p.a.) and Singapore (USD 625 per sq metre p.a.) as per the latest report of real estate
consultancy firm Jones Lang LaSalle. This is despite a 40% drop in rentals from its peak values. Delhi comes fourth in the ranking with USD 725 per sq metre per annum.
With GDP growth expected to bounce back in 2010, India and China would outperform the global markets with a 7-10% growth rate. The early signs of recovery are visible in Delhi and Mumbai markets. Having dropped by 24% in March’09 quarter over the preceding quarter, Mumbai’s decline in June’09 was well below 10%. Delhi followed with an 8% decline, which was half of what it was in the quarter before.
The average decline for India in June’09 was 8.3% as against 19% in the quarter prior to that. This showed that the rate of decline in rentals has also slowed down in the June’09 quarter as compared to March’09 quarter. It is believed that rents in these cities have bottomed out. Pune outperformed with just about a 4% decline.
This trend is likely to improve by 2011 when the absorption rate would overcome the supply. With 57 million sq feet of office space expected to be operational by the end of 2009, vacancy rate would continue to be high at 27% in 2010 till it comes down to a little above 20% in 2011.
Talking city wise position, Bangalore is expected to relatively outperform other cities with a low vacancy rate as it has received good response for pre leasing properties.
Companies form telecom and pharma sector seem to be fast taking advantage of the low rentals and expanding their geographic reach. For example recently Aircel and Telenor Unitech wireless signed more than 50000 sq feet of real estate space. As rents become more affordable, we could see more companies scaling up their expansion plans.
Rich, powerful flouting laws for real estate construction
New Delhi: The Supreme Court today came down heavily on economically affluent people, bureaucrary and civic body officials for mushrooming illegal real estate construction in the country and ruled file notings by ministers or officials do not have any legal validity.
"Economically affluent people and those having support of the political and executive apparatus of the state have constructed buildings, commercial complexes, multiplexes, malls etc. in blatant violation of the municipal and town planning laws, master plans, zonal development plans and even sanctioned building plans", said a bench of Justices B N Aggarwal and G S Singhvi in a judgement.
"In most of the cases of illegal or unauthorized constructions, the officers of the municipal and other regulatory bodies turn blind eye either due to the influence of higher functionaries of the State or other extraneous reasons, the bench observed.
"In most of the cases of illegal or unauthorized constructions, the officers of the municipal and other regulatory bodies turn a blind eye either due to the influence of higher functionaries of the state or other extraneous reasons, it said.
The apex court also said file notings ministers or officials do not have any legal validity.
Its ruling came while dismissing an appeal filed by Sathish Khosla, President of Shanti Sports Club of India which claimed to run a cricket academy at a village in Delhi.
One of the pleas of the club was that its illegally constructed sports club should not be demolished as the then Minister for Urban Development in 1999 had noted in his file that the construction be regularised.
"Economically affluent people and those having support of the political and executive apparatus of the state have constructed buildings, commercial complexes, multiplexes, malls etc. in blatant violation of the municipal and town planning laws, master plans, zonal development plans and even sanctioned building plans", said a bench of Justices B N Aggarwal and G S Singhvi in a judgement.
"In most of the cases of illegal or unauthorized constructions, the officers of the municipal and other regulatory bodies turn blind eye either due to the influence of higher functionaries of the State or other extraneous reasons, the bench observed.
"In most of the cases of illegal or unauthorized constructions, the officers of the municipal and other regulatory bodies turn a blind eye either due to the influence of higher functionaries of the state or other extraneous reasons, it said.
The apex court also said file notings ministers or officials do not have any legal validity.
Its ruling came while dismissing an appeal filed by Sathish Khosla, President of Shanti Sports Club of India which claimed to run a cricket academy at a village in Delhi.
One of the pleas of the club was that its illegally constructed sports club should not be demolished as the then Minister for Urban Development in 1999 had noted in his file that the construction be regularised.
Tuesday, August 11, 2009
Real estate looking up, people start buying once again
"Today flats are being sold, but the pace could be better. Generally things have reversed. In Mumbai also, rightly priced projects have been sold. The major contributor to this is the government policy to generate demand. It brought in stimulus packages, ensured availability of liquidity to the home buyers, interest rates softened," he said.
Another real estate player Indrajit De, chairman of Eden, also said housing loan lending rates cut may attract a few more buyers into the market.
"If the lending rate falls further by 50 basis points, the sales figure will climb up," he said, adding, "Certainly the market is looking up now. Sales have also improved.
"We are selling around 25-30 units (flats) per month. But it was much higher in the range of 55-60 units per month before the recession actually hit India."
Harshavardhan Neotia, chairman, Ambuja Realty Group, told IANS: "Sales have picked up in the last two-three months. There is more offtake now than what it was six months back. But now the buyers are genuine users and not just investors. These are the people who really need housing. They are lot more quality conscious and they look for the right products."
He said there was a drop of 10-15 per cent in the price during the recession period. In the last two-three months the company has sold around 200 flats, he said.
Reacting to the recent announcement by union Finance Minister Pranab Mukherjee on interest subsidy on new home loans and extension of deadline in tax holidays on projects approved by March 2008 if they are completed by March 2012, Rungta said: "One must understand that extending the tax holiday under 80 I B (10) for a mere one year to projects approved by March 2008 will fail to create a significant positive impact on the real estate market. It will only benefit a few micro markets with a handful of projects."
CREDAI has suggested the centre consider extending the dateline to March 2012 for providing tax holidays to projects irrespective of the date of approval. "This will be of greater benefit to the sector and encourage developers to take up new projects and expedite ongoing projects as well."
Rungta further said: "Even the proposed interest subsidy of one per cent to home loan borrowers for loan taken for houses costing up to Rs 20 lakh is also not justified."
CREDAI has proposed that the centre increase the subsidy to home loan interest rates by another one per cent to two per cent and extend the scheme for houses costing upto Rs 30 lakh from the currently proposed valuation of Rs 20 lakh.
DLF revives commercial plans
DLF revives commercial plans
DLF, India's biggest real estate company, seems to have forgotten its recent troubles. With some funding available to it, it has now decided to stay in some of the business that it had considered peripheral -- hospitality included.
DLF is gearing up for a second innings in the commercial space, thanks to an eased liquidity situation that has pumped some confidence in the real estate sector.
The company has now revived its commercial projects, which were on hold for the last one year or so.
NDTV learnt from sources that DLF's commercial expansion will be mainly centered around hospitality and retail, with an investment
of Rs 4,000 crore to be funded through long term debt. Stake sale, if any, would be at project specific only.
The company will initially focus on Delhi and plans to launch about 3 hotels and 7 malls in Delhi over the next couple of quarters.
An office project is in the offing in West Delhi, adjacent to its proposed housing complex at Swatantra Bharat Mills.
Anshuman Magazine, chairman of CBRE India, said, “The rental market has shown some recovery in the last few months. Things have somewhat started to look up. The country's largest realtor earmarking expansion plans in the commercial space will further help boost sentiment.”
Experts opine that DLF's approach seems to be much more subdued this time on. So, instead of the mega plans of 25,000 keys by 2010, it is now talking about a mere 350 keys across 3 properties in Delhi.
D K Agarwal, MD of SMC Global, said, “We will still be more cautious on our outlook for commercial and hospitality. The past experience has not been very positive.”
Although DLF has decided to revisit commercial projects, the company insiders say that residential projects, mainly affordable housing will continue to be the key growth driver, at least for the next few quarters.
DLF, India's biggest real estate company, seems to have forgotten its recent troubles. With some funding available to it, it has now decided to stay in some of the business that it had considered peripheral -- hospitality included.
DLF is gearing up for a second innings in the commercial space, thanks to an eased liquidity situation that has pumped some confidence in the real estate sector.
The company has now revived its commercial projects, which were on hold for the last one year or so.
NDTV learnt from sources that DLF's commercial expansion will be mainly centered around hospitality and retail, with an investment
of Rs 4,000 crore to be funded through long term debt. Stake sale, if any, would be at project specific only.
The company will initially focus on Delhi and plans to launch about 3 hotels and 7 malls in Delhi over the next couple of quarters.
An office project is in the offing in West Delhi, adjacent to its proposed housing complex at Swatantra Bharat Mills.
Anshuman Magazine, chairman of CBRE India, said, “The rental market has shown some recovery in the last few months. Things have somewhat started to look up. The country's largest realtor earmarking expansion plans in the commercial space will further help boost sentiment.”
Experts opine that DLF's approach seems to be much more subdued this time on. So, instead of the mega plans of 25,000 keys by 2010, it is now talking about a mere 350 keys across 3 properties in Delhi.
D K Agarwal, MD of SMC Global, said, “We will still be more cautious on our outlook for commercial and hospitality. The past experience has not been very positive.”
Although DLF has decided to revisit commercial projects, the company insiders say that residential projects, mainly affordable housing will continue to be the key growth driver, at least for the next few quarters.
QIPs save the day for real estate players
year has seen just one private equity deal in the real estate sector. In May, Sun Apollo India Real Estate fund made an investment of Rs 300 crore in Mumbai-based Keystone Realtors. According to Kamal Khetan, MD of Sunteck Realty, another Mumbai-based realty company, it makes better sense to go to the capital market than looking for a PE investor. “It is difficult to get in the right kind of investor. We are looking at a Rs 500-crore QIP to expand our operations.”
Understandably, the large number of companies in the real estate sector, which have taken the QIP route, are the trigger for others in the sector. Said Amber Maheshwari, director, investments, DTZ, an international property consultant: “In the present situation, companies in the sector have had a good experience with QIPs and will now look at the capital markets as well. With PE money not easily available, options are limited.”
Industry trackers point out that stringent rules for investments have been the reason for a lack of common ground between PE investors and the real estate companies. “Now, most of the PE funds demand that the investment in an SPV be made in tranches and be directly proportional to the developers’ capacity to finish projects in time,” said Biren Parekh, partner, (Real Estate), Ernst & Young.
It is gathered that in some instances, the option of bringing in PE investors as well as going public is also being considered. According to a senior official at Bangalore-based Nitesh Estates, which is looking to raise Rs 1,200 crore, half of the amount will come through IPO, while the rest through potential PE investors.
Investors may have lost one-third investment in real estate
Investors may have lost one-third investment in real estate
"We are seeing some variations of teaser type housing loans being offered. The lure of low interest rate at the start of taking a housing loan is enticing. But are customers being made aware of future implications," he asked.
Parekh noted that the genesis of the US housing crisis lay in loans that offered artificially low interest rates in the initial years but once the rate normalised, many found themselves unable to service the loan. These are the lessons one should learn from, he said.
However, the HDFC Chairman pointed out the same disturbing trend being seen in India where some variation of teaser type housing loans are being offered in the market. "Are these lending institutions providing "what if" scenarios to their customers, he asked.
Parekh noted that the genesis of the US housing crisis lay in loans that offered artificially low interest rates in the initial years but once the rate normalised, many found themselves unable to service the loan. These are the lessons one should learn from, he said.
However, the HDFC Chairman pointed out the same disturbing trend being seen in India where some variation of teaser type housing loans are being offered in the market. "Are these lending institutions providing "what if" scenarios to their customers, he asked.
DDA given clean chit in housing scam
MCD for survey to track property tax evaders
MCD for survey to track property tax evaders
Suggesting ways for increasing collections, leader of the House Subhash Arya proposed that commercial properties like malls, five star hotels, guesthouses etc should be levied higher rates of taxes by bringing them under a separate category.
According to MCD's own estimates, it is losing out on property tax from almost two-third of property owners in the capital. There are 25 lakh properties in the city but only 8.5 lakh are paying property tax. Municipal councillors also said in most cases, the executive agency has failed to maintain and update the records of property tax collected.
Moreover, according to leader of opposition J K Sharma, some Rs 800 crore in tax was due from government and other agencies including PWD, DMRC and DJB. Sharma said: "The Municipal Taxation Tribunal was set up by the civic body last year to take up property tax cases and hear appeals on dispute in this regard. But that has not been of any help and instead turned out to be a financial burden for the civic body.''
Thursday, July 30, 2009
Court asks neighbour to pay for property damage
If you are aggrieved at the damage to your property by your neighbour’s reckless constructions, then a recent court ruling holds out hope.
“It pays to be a good neighbour,” Additional District Judge (ADJ) Kamini Lau ruled some days ago, before awarding a compensation of Rs 2 lakh to complainant H N Kukreja. Kukreja had hauled to court his neighbour at Lajpat Nagar’s B-block, Uma Dhawan, and her builder Vishal Chopra, arguing that the renovation carried out at Dhawan’s home had spoilt the walls and woodwork in his basement.
The order stated: “It pays to be a good neighbour and conversely a person oblivious and unconcerned about the life and property of his immediate neighbour can be made to compensate.”
The judgment also sounded a note of caution on the irresponsible and break-neck manner in which constructions march on these days, and said a neighbour cannot escape duty towards adjoining houses.
Kukreja claimed the slipshod work next door had severely damaged his basement floor. The walls were damp, the plaster was peeling at places, the floor had developed cracks, and the doors and windows were damaged, Kukreja said in his petition.
Challenging it, Dhawan and Chopra denied the remodelling had harmed the neighbour’s property.
In their defence, they also argued that Kukreja had illegally constructed certain structures in the basement. However, a report by an executive engineer on Kukreja’s property disproved Dhawan’s claims, prompting the court to dismiss the argument.
ADJ Lau said: “In civilised society, every person owes a duty of exercising due care and caution towards the life and property of his neighbour. He is under an obligation to ensure that his individual right to enjoy his own property does not come into conflict with a similar right of his neighbour to enjoy his property as well.”
The court then asked Dhawan and Chopra to equally share the monetary penalty of Rs 2 lakh and pay it as damages to Kukreja so that he could repair his house.
NRI property: Vigilance to issue notices
As UT vigilance department has failed to arrest any of the four persons accused in the case pertaining to a fake deal with regard to
NRI Tara Singh’s property, the investigating agency has now decided to issue notices to all of them, asking them to join the probe.
Preliminary investigation suggested that England-based advocate JB Singh, who is running a firm named Chess International abroad, is the mastermind of the plot as the name of culprit Harnek Singh, who had forged the original general power of attorney of the NRI, was referred to complainant Tara Singh by JB Singh.
A VB official said Chess International had claimed it solved property disputes of NRIs in India and Tara Singh had approached JB Singh through an advertisement in England. A branch of the company is in Jalandhar and staff there was also questioned. Accused Harnek Singh was a munshi with a city-based lawyer and JB Singh, also an NRI, had advised the complainant that he appoint Harnek Singh as the holder of his general power of attorney (GPA).
However, the investigation has also established the negligence of the superintendent Sant Parkash and dealing assistant Virender Verma of the estate office and assistant estate officer (AEO) Ashwani Kumar. A senior vigilance official said Verma and superintendent Sant Parkash had overlooked the copy of original GPA stating Harnek Singh was entitled to sale and purchase of the property when assistant estate officer (AEO) Ashwani Kumar had passed a no-objection certificate (NOC) to Harnek Singh.
Questionable records
The official website of UT administration still shows accused Harnek Singh as 50% shareholder of Tara Singh’s property in Sector 20. A visit to estate office revealed that half of the share of the NRI’s property is registered in the name of Harnek, who is absconding.
NRI Tara Singh’s property, the investigating agency has now decided to issue notices to all of them, asking them to join the probe.
Preliminary investigation suggested that England-based advocate JB Singh, who is running a firm named Chess International abroad, is the mastermind of the plot as the name of culprit Harnek Singh, who had forged the original general power of attorney of the NRI, was referred to complainant Tara Singh by JB Singh.
A VB official said Chess International had claimed it solved property disputes of NRIs in India and Tara Singh had approached JB Singh through an advertisement in England. A branch of the company is in Jalandhar and staff there was also questioned. Accused Harnek Singh was a munshi with a city-based lawyer and JB Singh, also an NRI, had advised the complainant that he appoint Harnek Singh as the holder of his general power of attorney (GPA).
However, the investigation has also established the negligence of the superintendent Sant Parkash and dealing assistant Virender Verma of the estate office and assistant estate officer (AEO) Ashwani Kumar. A senior vigilance official said Verma and superintendent Sant Parkash had overlooked the copy of original GPA stating Harnek Singh was entitled to sale and purchase of the property when assistant estate officer (AEO) Ashwani Kumar had passed a no-objection certificate (NOC) to Harnek Singh.
Questionable records
The official website of UT administration still shows accused Harnek Singh as 50% shareholder of Tara Singh’s property in Sector 20. A visit to estate office revealed that half of the share of the NRI’s property is registered in the name of Harnek, who is absconding.
Rs 1 crore looted from Noida property dealer
Armed car-borne miscreants shot at and looted Rs 1 crore from a property dealer in Noida on Tuesday afternoon in supposedly the biggest
on-road loot from an individual in the state. The victim has been admitted to Kailash Hospital in Noida where his condition is stated to be stable.
Till now all the robberies of over Rs 1 crore had either taken place within a premises like that of a bank or an office or the money was collected from a number of people. This is the first time that the money belonged to an individual moving on the road.
The police, however, suspected that the victim was infact carrying Rs 1 crore and even questioned him and the six persons accompanying him. Later, the victim showed them documents of the bank from where the money was withdrawn on Monday to buttress his claim.
The incident took place around 1 pm on Tuesday when a property dealer, Chatar Singh, of Vilaspur locality in Noida was on way to the office of the district registrar with six others for a land deal. Those accompanying him included the party whose property was to be purchased by Chatar.
Chatar’s Scorpio had barely reached Usmanpur village when an Esteem intercepted his SUV and even before he could understand what was happening, a group of armed men jumped out of the car. While two of them covered the occupants of the SUV from two sides, two others walked up to the seat where Chatar was sitting and tried to snatch the bag containing the money. When Chatar resisted, one of them opened fire at point blank range.
Chatar took the bullet on his hand and loosened the grip on the bag. The miscreants then took the bag and sped away in their car. The whole operation lasted barely a minute.
Chatar later told the police that those accompanying him in the SUV included his brother and some distant relatives who had offered to sell their property to him.
on-road loot from an individual in the state. The victim has been admitted to Kailash Hospital in Noida where his condition is stated to be stable.
Till now all the robberies of over Rs 1 crore had either taken place within a premises like that of a bank or an office or the money was collected from a number of people. This is the first time that the money belonged to an individual moving on the road.
The police, however, suspected that the victim was infact carrying Rs 1 crore and even questioned him and the six persons accompanying him. Later, the victim showed them documents of the bank from where the money was withdrawn on Monday to buttress his claim.
The incident took place around 1 pm on Tuesday when a property dealer, Chatar Singh, of Vilaspur locality in Noida was on way to the office of the district registrar with six others for a land deal. Those accompanying him included the party whose property was to be purchased by Chatar.
Chatar’s Scorpio had barely reached Usmanpur village when an Esteem intercepted his SUV and even before he could understand what was happening, a group of armed men jumped out of the car. While two of them covered the occupants of the SUV from two sides, two others walked up to the seat where Chatar was sitting and tried to snatch the bag containing the money. When Chatar resisted, one of them opened fire at point blank range.
Chatar took the bullet on his hand and loosened the grip on the bag. The miscreants then took the bag and sped away in their car. The whole operation lasted barely a minute.
Chatar later told the police that those accompanying him in the SUV included his brother and some distant relatives who had offered to sell their property to him.
Tonic to builders and buyers Assetventures
Middle and lower-income subscribers to new home loans stand to save as much as Rs 1.5 lakh on interest payment under concessions announced by the Centre today while wrapping up discussions on the budget.
Finance minister Pranab Mukherjee, replying to the debate on the Finance Bill that was later passed in the Lok Sabha, also offered some concessions aimed at easing the burden of the downturn-hit industry. (See chart)
The measure that will help middle-income earners most is the 1 per cent interest subsidy on home loans up to Rs 10 lakh to buy houses worth up to Rs 20 lakh. The subsidy will translate into a total saving of Rs 28,920 on interest payment during the tenure of a 5-year loan and Rs 1.51 lakh over a 20-year period.
As many as 70 per cent of home loan borrowers fall in the Rs 10-lakh bracket, industry sources said. The government’s offer to underwrite 1 per cent of interest is expected to cost it about Rs 1,000 crore, according to the finance ministry.
“It (the subsidy) is a welcome step as it will improve affordability. Any such step tends to improve activity in the real estate and construction sectors, which are among the largest employment generators,” said Renu Sud Karnad, joint managing director of HDFC.
The subsidy announcement came a day ahead of the RBI’s credit policy which analysts do not expect to offer interest rate cuts.
Mukherjee did not confine the incentives to real estate to the subsidy alone. He also offered a tax holiday to projects that more or less got off the ground at the start of the downturn if they finish construction by March 2012.
Builders of projects that got approval between April 1, 2007, and March 31, 2008, need not pay tax on profits if they are completed on or before March 31, 2012. Given the euphoria of 2007, builders had rushed to launch a slew of projects that ran into rough weather when the tide turned in the latter half of 2008. Realtors have been pleading for relief after housing prices fell by as much as 15 to 25 per cent in many cities.
“The incentive is expected to help more big developers who are stuck with high leverage and low sales but the impact could be felt by all,” Pradip Chopra, director of Calcutta-based developer PS Group, said.
Rajiv Talwar, the executive director of developer DLF, agreed: “These measures will help to a large extent to sell stocks of affordable housing and boost overall demand.”
However, all real estate players were not enthused. Arun Puri, chairman of property consultant firm Jones Lang La-Salle Meghraj, said: “Such tokenism may not really perk up the market… larger gestures like reduction in interest rates and incentives for developers are needed to rescue the market.”
Mukherjee also addressed an accounting concern of industry, clarifying that changes in service tax would be implemented only from September 1. Industry associations had requested the government for time to make changes in their tax software.
Industrial growth had shrunk in December and January, but Mukherjee asserted today that the measures already announced in the budget and earlier as part of two stimulus packages could push the growth in gross domestic product to 8 to 9 per cent by end-2010.
Mukherjee said he would stick to his promise of placing a draft direct tax code within 45 days of taking over as finance minister and it would be tabled in the winter session of Parliament. “We will make some major changes in the tax administration and related laws in the country,” he said.
The minister promised to push through a nationwide goods and services tax by April 1, 2010, “with cooperation from states….”
The measure is expected to reduce taxes on goods and services and make taxation uniform throughout the country.
Mukherjee had a message for those disappointed by the lack of reforms in the budget. “Reforms will be very much on our agenda. It is a continuing process... it will not be a mantra to be chanted occasionally,” he said.
Govt to provide 1% home loan subsidy Assetventures
Finance Minister Pranab Mukherjee today announced an interest subsidy of 1 per cent for one year on housing loans of up to Rs 10 lakh for properties worth less than Rs 20 lakh, a move that has been widely welcomed by realtors and home loan companies. The measure is expected to cost the exchequer Rs 1,000 crore.
Pranab MukherjeeMukherjee also allowed developers of housing projects a tax holiday under section 80 IB(10) of the Income Tax Act on profits from projects approved between April 1, 2007 and March 31, 2008, provided the projects are completed on or before March 31, 2012. Mukherjee asked developers to pass on the benefits of this tax break to consumers.
Mukherjee made these announcements in the Lok Sabha today as part of his reply to the discussion on the Finance Bill. Both houses of Parliament passed the Finance Bill 2009-10, which included a raft other concessions.
Assuming a monthly saving of Rs 60 per lakh, today’s announcement implies that a borrower saves about Rs 7,200 on a 15-year loan of Rs 10 lakh. The interest rate subvention will be routed through the scheduled commercial banks and the housing finance companies registered with the National Housing Bank.
Banks to offer subsidy on home loans, says FM. Assetventures
Finance
minister Pranab Mukherjee said that the interest rate subsidy for mid-segment housing would be routed to customers through
commercial banks and housing companies registered with the National Housing Bank. He said to further provide stimulus to the housing sector, it will be allowed a tax holiday in respect of profits derived from projects approved between April 1, 2007 and March 31, 2008, if such projects are completed on or before March 31, 2012.
‘‘I expect the developers to pass on the benefit of tax holiday to home buyers by appropriately reducing their prices. I am sure that both the expenditure and tax-foregone initiatives would provide relief to a large segment of prospective home owners and help revive the real estate sector,’’ he added.
The interest subsidy is aimed at mid-segment housing loan borrowers from the lower middle to middle-income groups. Even on Monday, Congress MP from Mumbai (North) Sanjay Nirupam, while speaking on the finance bill, said 42.4% of Maharashtra’s population was urbanized and trends pointed to increasing migration to cities. With home loan rates climbing steeply, there was a case for providing relief to borrowers. Providing an interest subsidy and a targeted tax break also answers in part the demand that the becalmed real estate sector needs a leg up.
The government’s message to the real estate developers is to lower prices and make housing more affordable for the aam aadmi.
The housing loan subsidy came with a slew of other concessions such as exempting road repairs and maintenance from the ambit of service tax while extending the sunset clause for tax holidays for industrial parks by a further two years up to March 2011 to boost growth in infrastructure. The FM clarified that service tax on new services and any alteration in the existing services as announced in the Budget would be effective from September 1, 2009.
‘‘It’s a welcome step from the government. The decision is sure to improve loan eligibility and affordability of a large section of the Indian middle class. It will also lead to increased activity with regard to real estate in the affordable housing segment which in turn will create employment,’’ said Renu Sud Karnad, Joint MD, HDFC Ltd.
minister Pranab Mukherjee said that the interest rate subsidy for mid-segment housing would be routed to customers through
commercial banks and housing companies registered with the National Housing Bank. He said to further provide stimulus to the housing sector, it will be allowed a tax holiday in respect of profits derived from projects approved between April 1, 2007 and March 31, 2008, if such projects are completed on or before March 31, 2012.
‘‘I expect the developers to pass on the benefit of tax holiday to home buyers by appropriately reducing their prices. I am sure that both the expenditure and tax-foregone initiatives would provide relief to a large segment of prospective home owners and help revive the real estate sector,’’ he added.
The interest subsidy is aimed at mid-segment housing loan borrowers from the lower middle to middle-income groups. Even on Monday, Congress MP from Mumbai (North) Sanjay Nirupam, while speaking on the finance bill, said 42.4% of Maharashtra’s population was urbanized and trends pointed to increasing migration to cities. With home loan rates climbing steeply, there was a case for providing relief to borrowers. Providing an interest subsidy and a targeted tax break also answers in part the demand that the becalmed real estate sector needs a leg up.
The government’s message to the real estate developers is to lower prices and make housing more affordable for the aam aadmi.
The housing loan subsidy came with a slew of other concessions such as exempting road repairs and maintenance from the ambit of service tax while extending the sunset clause for tax holidays for industrial parks by a further two years up to March 2011 to boost growth in infrastructure. The FM clarified that service tax on new services and any alteration in the existing services as announced in the Budget would be effective from September 1, 2009.
‘‘It’s a welcome step from the government. The decision is sure to improve loan eligibility and affordability of a large section of the Indian middle class. It will also lead to increased activity with regard to real estate in the affordable housing segment which in turn will create employment,’’ said Renu Sud Karnad, Joint MD, HDFC Ltd.
Subscribe to:
Posts (Atom)
Posts
