Thursday, November 12, 2009

Real estate sales picking up in India with warning against price hikes

Low interest rates, a resurgent stock market and growing confidence in the economy is boosting the real estate market in India but analysts are warning that a sharp increase in prices could put investors off.

‘The residential market, including the premium segment, has rebounded quicker than expected.

We are seeing 2007 level prices again and a robust demand for houses in the $1 million range,’ said Anuj Puri, chairman of Jones Lang LaSalle Meghraj.

According to property consultant Ashok Narang the demand is coming from both investors who want to let out their properties and people who want them as homes.

‘Projects in the suburbs are doing very well and buyers have started flocking to even under-construction projects where bookings are taking place. Earlier, banks were reluctant to lend to buyers for incomplete projects,’ he said.

However, he warned that if prices spurted too fast, the market would slow down once again.

Aditi Vijayakar, executive director of Residential Services at Cushman & Wakefield, agreed.

‘The ideal graph should be gradual,’ she said.

Many major developers have already put up their prices this year and the rest of the industry is concerned.

‘If residential realty rates rise at this juncture it will take the market back to a scenario of stalled sales, similar to what was prevalent during the end of 2008,’ warned Pankaj Kapoor, CEO of real estate research firm, Liases Foras.

And realtor Ramprasad Padhi feels that there is not yet a significant revival in the market that could warrant price increases.

‘The marginal improvement in sales has been mistaken by some builders as signs of the next wave.

In reality, it has been a combination of pent-up demand and accumulated stock being disposed off at lower prices,’ he said.

Potential buyers, he says, will and do find the new increased prices unjustified.

’ But developers seem determined to test the market.

‘At present price increases seem to be limited to certain mid to high end projects, in preferred locations.

If the trend percolates down to a wider spectrum of market segments and locations, we may see prospective buyers once again display circumspection and hesitation to buy,’ said Pawan Swamy, MD (west India) at consultants Jones Lang LaSalle Meghraj.

India is at least a year away from the next real estate upswing, according to Chaitanya Parekh of the Soham Group.

‘In the second half of 2008, several developers started reducing the sizes of the units they offered, aiming for a different customer profile.

Now, if there is any increase in the price, the whole objective will be lost,’ he said.

DLF owners to buy out DE Shaw in arm Assetventures

The founding family of India’s largest real estate company has reached a deal with DE Shaw to buy out the hedge fund’s stake in DLF
Asset (DAL), an important step presaging transactions that could lead to a Singapore listing for the DLF affiliate in the first quarter of 2010.

DE Shaw will get a little less than $500 million from KP Singh and his family and privately-held DAL will most likely become a majority-owned subsidiary of listed property developer DLF, two persons directly involved in the transaction said.

DAL, which buys completed commercial assets from DLF, was set up as a Real Estate Investment Trust (REIT) controlled by the Singh family. A Singapore listing for DAL, which was to have happened in 2008, was shelved following the crash in the global equity markets.

The integration of DAL with DLF, which is expected to be completed by December, is being done to give the property developer access to the former’s revenue stream.

KP Singh and his family have bought DE Shaw’s minority stake for around Rs 2,300 crore ($500 million). The hedge fund had invested $400 million, equivalent to Rs 1,600 crore, in early 2006.

Cash-strapped DLF, whose sales fell by over 50% to Rs 1,810 crore during the quarter ended September, has set itself a target of nearly halving debt to Rs 6,500 crore this fiscal year. Revenue from DAL, which at one time accounted for over a third of DLF's sales, has dried up.

DLF expects to get Rs 4,500 crore through the sale of non-core assets and has already raised Rs 1,064 crore in the first half of the current fiscal.

DLF has been working on the integration of DAL with itself for some time, a person with knowledge of the development said, adding the valuation will depend on the report of a panel of independent directors.

A DLF spokesman said the company "does not comment on market speculations."

Since 2006, DAL had acquired commercial assets valued at over Rs 11,000 crore from DLF. It has raised some Rs 5,000 crore ($1.05 billion) from hedge funds and owes DLF around Rs 2,000 crore.

In May, the Singh family mopped up Rs 3,800 crore by divesting a 9.9% stake in DLF to buy out the investment by DE Shaw. But the deal got
delayed due to a tax hitch: since DAL was not a listed entity, the hedge fund was required to pay capital gain tax on the profit. This issue has now been resolved.

After the exit of DE Shaw, a DLF subsidiary will finalise the purchase of the promoters' entire holding in DAL through a complex share swap deal. The deal is being routed through a subsidiary as the promoter holding in DLF is above 75% and any issue of fresh shares to promoters is not allowed under listing norms. This effectively means that DLF will issue fresh shares of its subsidiary to the Singh family, said one of the officials.

A source said that the value of DAL would be around Rs 9,000 crore. After adjusting for DAL's liability to DLF, loans from banks and the investment by Symphony Capital in the form of preference shares, the net value would be around Rs 2500 crore against which the shares of a subsidiary company will be issued to the Singh family.

London-based hedge fund Symphony Capital has invested $650 million in DAL through convertible preference share in two phases.

The company has started discussions with overseas investment banks for DAL's Singapore listing, a banker said.

Commercial, residential realty picks up momentum in city

The price of real estate in the city, which was on a low for most of last year, has stabilised and in fact posted a bit of a rise in select
locations, if recent research by real estate advisory firms are any indication.

Importantly, commercial real estate including retail spaces which took a bigger hit in the wake of the economic slowdown, is also showing an upward trend as demonstrated by the plans of some major world bands to enter the city, the reports said.

The trend is in keeping with developments witnessed nationally. The realty scene in major cities in the country has seen higher levels of activity after the early signs of an economic recovery both in India and internationally, said the quarterly report of realty research and advisory firm Cushman & Wakefield (C&W).

The report for the third quarter of the year (July-September) observed that the market was characterised by a positive sentiment and increased activity was witnessed. "The city witnessed the launch of various residential projects in the third quarter across many micro markets in both mid- and high-end segments. Capital and rental values appreciated across the city in the third quarter," the report observed. However, values are still below their all-time highs by about 10-30 per cent in Pune, the report said.

Aditi Vijayakar, executive director of residential services at C&W said, "The price and the buyer's sentiment are critical in the current market as key parameters influencing sales. Capital values in select locations in Pune are likely to see growth in the coming months. However, if prices increase too much too soon, there is a likelihood of them correcting again shortly after; the ideal graph representing recovery should be gradual and in line with the demand that calls for a period of considerable stabilisation before the hike."

According to Vijaykar, the Pune residential market has started to regain momentum in the past quarter with all locations witnessing marginal increase in rental and capital values by September 2009. Demand has started to move upward largely driven by end users. Pune is highly price sensitive and the current upward trend is largely a result of the correction in values that was witnessed in the last few quarters which have made the values more affordable. Also noticeable is that the large part of the transactions are happening in the newly-launched projects which offer more competitive values.

According to the C&W report, high end areas such as Koregaon park or Bund Garden have shown an 8 per cent rise in prices while elsewhere the rise is 2-6 per cent.

Satish Magar, President of Credai Pune (Confederation of Real Estate Developers' Associations of India) and chairman and managing director of Magarpatta city Development Corporation, told TOI that the rise in residential prices is not very remarkable and in most cases it restricted to Rs 100 per sq ft. Commercial segment on the other hand, has been active again as enquiries from IT firms have gone up.

"IT firms are back in expansion mode and have started hiring, which has triggered the activity in this segment," Magar said, adding that the retail segment too is warming up again as consumer confidence returns and a new kind of leasee-lessor relationship evolves. "From a flat rental agreement, we are now on a fixed plus floating rental basis where a leasee pays a minimum guaranteed rental and shares revenues with the developer. This has reduced the initial burden on the retailers easing their liquidity problems."

"From a near flat level till June this year, we have leased over 4 lakh sq ft space in Magarpatta City till now," Magar said.

Anand Dutta, head (retail) Pune for real estate consultancy Jones Lang LaSalle Meghraj, said retail transactions have picked up noticeably, following a marked upsurge in shopper sentiments and a generalised correction in retail real estate rentals. "An increasing number of retail landlords in Pune's malls and on key high street locations have opened up to the minimum guarantee and revenue-sharing models. The general stance now is that if a retailer is making money, landlords are willing to offer reductions on rentals if the retailer is willing to share his topline.

Wednesday, November 4, 2009

MCD property tax amnesty scheme has few takers

Assetventures
The property tax amnesty scheme launched by the Municipal Corporation of Delhi (MCD) to encourage tax defaulters to pay up their dues

failed to people. Only 27,000 property owners came forward to pay their dues even as the civic agency was expecting at least 20 lakh people to turn up.

Meanwhile, looking at the dismal response, the civic agency decided to extend the date for the amnesty scheme to December 31 the last date before this was October 31. According to MCD officials, all those who fail to pay their property tax by December 31 will be issued showcause notices. Defaulters will have to face harsh penalties like sealing of bank accounts, attachment or auctioning of property and even prison terms, the officials said.

"We were expecting more people to file their property tax as there are approximately 30 lakh properties in the city while only 7.5-9 lakh people pay their tax. We have data on property owners and will issue showcause notices to them. Their properties can be auctioned if they failed to pay up by December 31,'' said MCD commissioner K S Mehra.

The amnesty scheme was launched to get such owners in the tax-net. "We have received Rs 70 crore as property tax from 27,000 people. The Survey of India is also conducting a survey to determine all those property owners who are not in the tax net of the civic agency,'' said an MCD official. The survey was completed in northeast district recently and around 3.5 lakh properties for which tax was not paid were identified in the area, the official said.

"We received a large number of representations from resident welfare associations (RWAs) who said they could not avail of the scheme due to the festive season. They had requested us to extend the last date for paying the tax,'' said Ram Kishan Singhal, chairman of the standing committee.

The civic agency had said that all those who remained defaulters after December 31 would have to pay a penalty of 30%. In addition to this, 1% interest will be levied every month till the amount is finally paid.

Tuesday, November 3, 2009

DLF to develop affordable housing in India Assetventures

India’s leading real estate company DLF is said to be working on plans to build around 1 lakh houses that would cater to middle class in the country.

These houses would be build in all the major cities of the country and would be priced at around Rs. 20 lakhs.

These new housing solutions could be offered under a different brand name in the coming years.

DLF rival Unitech has already announced similar plans to build affordable houses around the country.

The company has officially declined to comment on these reports.

Rentals rose even as capital values of real estate dipped Assetventures

Software engineer Ravi Kumar took a loan from a leading private sector bank and invested in the property market in 2008, at the height of the
realty boom. Today with values lower than what he purchased the property for, selling-out and exiting the sale is not an option for him.

With a stiff EMI to be paid out, renting out the apartment seemed a good idea. Kumar did not complain when he found rental values rising as the property neared completion. Today with high occupancy, the rental values are almost 15-20% higher than in March 2009.

Many people are facing this situation across cities in India. A Brix Research survey over 30 Indian cities showed that while capital values, which fell during the Jan-Mar 2009 quarter, rose from Apr-Sept 2009 but remained either lower than the previous values or at the same level.

However, rental values have registered a sustained rally from April 2009 onwards. Today it is between 15% and 50% higher than the September 2008 levels. A fact that buyers like Ravi Kumar should be happy about.

Says Chintan Patel, senior professional, real estate practice, Ernst & Young, "Rental values in mid-segment properties across prominent cities have witnessed an upward trend. Mid segment properties in key residential micro-markets of Mumbai (western and central suburbs) and NCR (East and North Delhi, Gurgaon) have witnessed sustained rise in rental values, in the range of 15-20%, over the last 5-6 months. Constricted supply of apartments for rent, coupled with strategic location offering good connectivity to prominent business districts of the city, have been instrumental in rising rental trends of some key micro-markets in these cities."

So, what other factors have really triggered this change? Take textile entrepreneur, Sumit Bansal, who was planning to buy a house for himself. The fluctuation in the real estate market since September 2008 has left him confused and he decided to take a house on rent till the markets stabilised.

According to RV Verma, executive director, National Housing Bank, "The real estate market today has shifted from being demand-based to need-based." According to the market researchers and brokers, rental housing has become a popular choice of housing owing to high and unstable capital values.

The Brix Research Quarterly Real Estate Value Analysis Reports have shown that rental values rose since April 2009 across almost all Indian cities. During the Apr-Jun 2009 period, rental values stabilised in most of the cities and recorded an appreciation in values during the Jul-Sep 2009 period.

Rental values for a 2BHK apartment have registered an average growth of 10-15% in most localities in the Jul-Sep 2009 period compared to the previous quarter.

Explains property investment adviser, Ashok Narayan, "Property values dropped 15-35% during the slowdown. Large developers such as DLF and Unitech started by completing existing projects rather than launching new ones. This trend continued across the country and projects which had been sold off drawing-boards saw the light of day. As projects neared completion, values rose by 15-20%. In established city areas property values dropped 10-25% during the slowdown but rose back to the same level when the sentiment improved. In newly-developed properties, rental values are today at least 15-25% higher due to projects being completed and occupied. In the established city areas rental values have risen by about 10-20% over the peak values before September 2008."

The Brix Research report shows that Gurgaon real estate market saw an annual appreciation of 10-15% in rental values in most localities during the Apr-Sep 2009 period as compared to the Jan-Mar 2009 period. According to city broker RB Singh, "This reflects end user demand for rental housing."

Other areas of the National Capital Region (NCR) such as Ghaziabad and Faridabad also registered an increase in apartment rental values. In Ghaziabad, during the Jul-Sep 2009 period, rental values stabilised and increased by around 13% as compared to the Apr-Jun 2009 period. This was due to the increased demand for 2 and 3BHK ready-to-move-in apartments in the city.

In Mumbai, rental values of apartments have risen by around 2-20% during the Jul-Sep 2009 period as compared to the Apr-Jun 2009 period. There has been a corresponding drop in apartment capital values during the same period. In Chennai, the rental values were more or less stable and saw a 5-10% appreciation during the Jul-Sep 2009 period.

The positive trend in apartment rental values has been reflected in smaller cities as well. Chandigarh witnessed a significant fall in capital values of apartments and plots during the Apr-Sep 2009 period but registered a growth in apartment rental values.

In the Jul-Sep 2009 period, rental values increased by around 10-15% as compared to the Apr-Jun 2009 period. Brijesh Bhabsar, a Rajkot-based realtor, said, "The rental segment is showing positive trends and is a preferred housing option among end users."

In the southern region, Kochi registered an increase of 5-37% in rental values post March 2009, as most buyers restrained from making large investments in the property market. Coimbatore and Visakhapatnam experienced a similar trend of 10-20% rise in the rental values of the end user dominated 2BHK segment.

Local broker such as David Bose of Coimbatore maintained that this increased demand for rental homes reflects the end user expectation that capital values will fall further. This is corroborated by retired bank manager RC Gaur, who lives in rented accommodation in Faridabad, wishes to buy an apartment in Delhi, but prefers to wait for the right time to make his investment.

So is it a good time to take up rented property right now? Is there a demand being seen? "Demand for rental space has risen over the last few months. The improvement since April is between 12-15%, depending on the economic drivers of each city. This is generally a good time to rent homes, depending on location-based dynamics," feels Raminder Grover, CEO-Homebay Residential, Jones Lang LaSalle Meghraj (JLLM).

Today the market is driven by the need of end users who are still unsure about capital investment in real estate and are taking the rental option in an unstable market.

Real Estate finding a new track in Indian economy Assetventures

A big impact of recession is seen in the worldwide market, where many big companies posted big losses, asked for a bailout and even filed for the bankruptcy. The recession had such an impact on the world over economy that even a core business of a particular country went in loss with many citizens pulling their hands off from investment part.

Same happened with the Indian real estate market, the most bullish sector where not many hesitated before putting their money forward for an investment related to some plot, flat, office, shop etc.

In the month of September 2008, when recession captured the world with a full grip, the real estate of India suffered a big loss session. All the major real estate players like Jaypee Group, Unitech and DLF came up with the schemes and rebates on flats to attract as many buyers as they can and sell off the reserve as soon as possible.

The cities like Mumbai, Delhi, Bangalore, Kolkata and National Capital Region accounts for big real estate business of the country with many property owners earning big money from the rental income from homes and offices.

One can analyse the downfall of rental income in these cities as many fully constructed buildings are standing with a very less space occupied with them and that too on a small amount of rent in comparison with the rentals of 2007.

This downfall was not limited to the rental part of real estate industry but the pure buying and selling of properties also came to a halt after financial crises reached the Indian economy.

With the global economic crises on one side, leading players of real estate India like DLF and Unitech are focusing more on the repayment of debts as soon as possible.

This has resulted in big real estate players selling their personal office properties, shifting their focus from core property business to some other businesses like insurance and hospitality and selling off some part of the company by getting listed on the capital market.

However, according to the recent study conducted by several industry watchers, the real estate of India is coming back on profitable track with the demand for offices is increasing in major cities like Bangalore and Mumbai, however Delhi and NCR are still far from witnessing growth in demand as many are expecting further fall in rentals here.

Besides the growth factor in office and shop rentals, a slight growth is also seen in the buying and selling transactions of properties.

With the Indian economy coming on track again, the demand for flats are seen rising in past one month. The real estate developers like Amrapali, Parsvanath and Unitech are nor registering some potential bookings on their order books.

The recent festive season has also added some profits to the real estate industry when many were keen on buying a new home.

During the last festive season, a very low rush was seen for the real estate buying but this year, the banks came up with some attractive home loan schemes with the help of rebate provided by Reserve Bank of India.

Anshuman is a professional real estate property consultant in India and investing in Indian real estate from years. To know more about real estate india, reality projects as sheth heights chembur, neelkanth greens thane, please visit: www.paisawaisa.com

Monday, October 26, 2009

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Guj builders plan permanent property show

Gujarat based builders are planning to replicate the Japanese model of permanent property show to display large number of real estate

at a single venue near Ahmedabad.
The idea of developing a facility for displaying built sample houses along with layouts has come from a recent study tour of Gujarat chapter of Confederation of Real Estate Developers’ Association of India (CREDAI) to Japan and South Korea. Around 120 real estate developers from across Gujarat visited the two countries earlier this month.

The permanent property show near Osaka drew attention of the entire delegation. “Most of us believe it would make sense to replicate the model somewhere near Ahmedabad instead of holding property shows periodically,” said Jaxay Shah, president CREDAI (Gujarat). Prospective buyers also don’t have to waste time by visiting different construction sites.

Mehsana-based builder Sandeep Sheth, who coordinated the study tour, said, “Under one roof, customers would get an idea about overall realty development across the state and developers will have the advantage of a large platform which would attract a broad base of prospective buyers.”

The Osaka model has excellent landscaping, gardens, restaurants and an entertainment zone for children where families spend considerable time before taking the crucial decision on which residential or commercial space to buy.

Suresh Patel, vice-president of Gujarat Institute of Housing and Estate Developers (GIHED), said if the state government supports the idea, it could generate good revenue out of rentals from developers who book space in the project.

There were other unique schemes which impressed the local realtors. Ahmedabad-based realtor Dushyant Pandya said he was eager to replicate a solar bungalow project. The one he saw had 120 dwelling units running only on solar energy. “Cost-wise, these would be expensive initially but they would be cheaper in the long run,” he said.

Among other projects they visited was one especially developed for artists like painters, sculptors, designers and creative people. The homes offer an ambience which helps creativity blossom

City realtors aim high Assetventures

mpressed by the infrastructure development and synergy between town planning and bylaws in Japan and South Korea, real estate players in the city now believe vertical growth is the solution to the crunch of land in Ahmedabad. Recently, a team of around 120 real estate developers of Gujarat had been on a 10-day tour to Japan and South Korea. The tour was organised by Gujarat chapter of Confederation of Real Estate Developers Association of India (Credai).

The developers were very much impressed by the city development projects undertaken by the governments of the two countries. Unlike the US, Japan and Korea feel severe crunch of land, so they prefer vertical development, said Dushyant Pandya of Vishwanath Group. He also said horizontal development would mean higher prices of land.

"At present, the land prices in the city are no longer affordable for citizens. Though, many say the prices here are still lower than that in Pune or Bangalore, one should not overlook the fact that even the average earning of people here is lower," he said. Suresh Patel, vice president of Gujarat Institute of Housing and Estate Developers (Gihed), said though Japan is under higher risk of earthquake, the government allows 100-storey buildings. "It makes us wonder why we are not allowed to build 20-25 storey residential complexes in the city," Patel said.

Almost half of the representatives of the delegations were from Ahmedabad. The delegation visited Osaka, Tokyo and Kyoto in Japan and Seoul in South Korea during the 10-day tour. It had business to business meeting along with having a look at various infrastructure projects there.

"Town planning is not only about building houses, it is also about traffic, law and order and civic amenities," said Jaxay Shah, president of Credai, Gujarat Chapter. He said there must be a perfect blending of development and services. He felt that since the government was about to prepare a plan of Ahmedabad's development for 10 years, the officials concerned should also visit these countries.

Shah said there was a need to create skilled human resource pool that for providing quality works. He said Credai is planning to set up centres for training of all levels of people involved in real estate sectors. However, the government should help the association with providing adequate land for setting up such centres, he said.

"We want to set up such training centres first in four major cities of the state - Ahmedabad, Vadodara, Surat and Rajkot, and then take it further to small towns," he said.

Shah also stressed the need to develop knowledge back up. "Though the government-run ITIs are running some courses, for real development public-private partnership is a must," he said.

Thursday, October 22, 2009

Pay less upfront to get a home loan Assetventures

Mr X (name changed), who works in the chemical industry, can now afford to buy his dream home, thanks to banks lowering down-payment for home loans.
When he first inquired with his bank, he learnt that to avail of a loan for a house worth Rs53-55 lakh, he needed to shell out Rs10.6 lakh (roughly 20% of the value of the house); the loan amount would be the remaining Rs42.4-44.4 lakh.

A week back, he visited his bank again and found that the down-payment requirement had come down to Rs7.95 lakh, or 15% of the value of the house.

Till sometime ago, banks were cautious about home loans as property prices had been falling. They wanted a higher cushion by way of higher down payment. The cushion is called margin in banking terms. On a property worth Rs20 lakh, a bank would extend a loan 15-30% lower than the value to ensure that in case the borrower defaulted, and the price of the property fell, the bank could sell the property and recover the dues.

"The situation is better now as property prices are reasonably stable. At most other places, except Mumbai, prices have not gone up beyond 10%. Because of the reasonable prices, LTV (loan to value, or the percentage of property value financed by a bank) has started slightly moving upward," said Kamlesh Rao, executive vice president and business head, personal finance, Kotak Mahindra Bank.

home loan down-payment requirements were increasing, sometimes as high as 30% of a property's value, as realty prices were coming down. But Rao said that down payment is decreasing only in cases of ready property or where a flat will be under possession in six-nine months. In a survey of 11 banks, nine banks would provide 80% of a property's value as loan and one 85% to first-time borrowers.

An agent from a leading private sector bank told that the bank would provide 85% of a property's value as loan. "But I can get it for you with stamp duty and registration cost. If you consider that, the amount will almost be 100% of your property value," he said.

It is learnt that public sector banks such as the State Bank of India, Indian Bank, Bank of India and the Punjab National Bank have lowered down-payment levels to 15-20% from up to 30% till recently.

This was not the case a few months ago, when nobody was sure when the fall in property prices would stall.

RR Nair, director and chief executive, LIC Housing Finance, said: "We are having it (down payment) at 15%. When property prices were down, we had not officially reduced the margin (the percentage to be paid by the borrower). But we were cautious about appraising the property. Depending upon the quality of the property and the project, there was a call taken (on the margin). So, right now we don't have to officially change the margin."

Some banks and non-banking finance companies are adopting a wait-and-watch strategy. Sanjay Shukla, business head (mortgage), Tata Capital Housing Finance, said: "Real estate firms were holding up the price and hence sales were not happening. After Dussehra, there have been some sales. The loan to value from the customer's point of view is 80-85%, depending on his or her credit profile."

But some bankers want to avoid a situation where home buyers overreach. CS Jain, executive director (head of personal banking), IDBI Bank, said: "We have retained the down payment at 20% (from 15% earlier). We haven't rolled it back and are not planning to reduce it yet."

The Housing Development Finance Corporation is one of the financers that did not change down payment amounts during the tough phase and so haven't changed now. Keki Mistry, vice president and managing director, HDFC, said: "Nothing was changed last year and nothing has been changed now."

British firm to host India property show Assetventures

With the global economy looking up, a London-based firm plans to host a property show to showcase residential projects in India to British investors.

The event, organised by real estate agent Hamptons International, will be held Oct 30-Nov 1 at the firm's head office in London.

"India has always been a major market for Hamptons International, given the UK's long and close ties with this country," said company international sales manager Dean Foley.

"We have certainly seen, over the last few months, an upturn in the amount of transactions completing by our UK NRI (non-resident Indian) clients due in part to long term growth plans and affordable real estate," Foley said.

The event has been organised in partnership with leading developers including Emaar MGF, Spire Edge, Ansal, ANR Infrastructure, Santa Fe Realty and Godrej.

Tuesday, October 20, 2009

Man can claim house bought in wife's name: HC Assetventures

More than 20 years after a Ratnagiri couple got divorced, the Bombay high court has given the man the right to claim the property he had bought for his former wife in happier times.

"The husband had purchased the property in the name of his wife with his own money and, therefore, she was only [the] benamidar, or the ostensible owner, while the husband is the real owner," justice JH Bhatia observed in his order last week. Since the husband bought the house in 1981, the transaction was not barred by the Benami Transactions (Prohibition) Act, which came into existence in 1988.

Family court advocate Kranti Sathe said the ruling would affect many couples who buy property jointly. "The court has tried to strike a balance -- the wife is entitled to maintenance after divorce, but even the husband has not been denied the property that he purchased with his hard-earned money," Sathe said.

This means if a spouse cannot prove to have bought the property with his or her own money, he or she may lose the right to claim it, Sathe said.

In this case, Jayant and Sonali (names changed) were married in 1979. In January 1981, Jayant said he bought the property worth Rs5,000 in Ratnagiri in Sonali's name out of "love and affection". He said he had paid for it after securing a bank loan of Rs1,500 and using savings from his salary, which was Rs350 per month at the time.

In 1984, after their relationship soured, Sonali moved out of Jayant's home and started living separately with her parents in Kolhapur. In 1993, the trial court held that Jayant had paid for the property and it was not bought for the benefit of his wife.

Sonali challenged the decision before the high court, claiming she had paid for the property from the money her "rich" father had given her and the scholarship she earned as a student of biochemistry.

Justice Bhatia, however, observed that there is "no material to show" that Sonali had received "any funds, either from her father or any scholarship", to purchase the property.
The court said it was "logical and reasonable" for Jayant to buy the property in Sonali's name when they were married and living cordially. But after their separation, when Jayant's first claim was allowed by the court in 1989, Sonali made no attempt to claim the property.

The court dismissed Sonali's appeal and permitted Jayant to claim the property that was rightfully his.

Neelofar Akhtar, member of the family court bar association, said the ruling assumes importance as there are not enough provisions in law to deal with property disputes arising out of divorces.

"The woman has the right to alimony after divorce but if she claims property also, what remains with the man?"

Family court lawyer said sometimes men may buy property in the wife's name for tax benefits and sometimes women may end marriages too soon to get a "back-door claim" to the man's property.

Sathe said the length of marriage is also crucial while deciding such cases.

But divorce cases are very delicate and tricky as they differ from couple to couple and it is difficult to apply anything as a blanket rule, Sathe added.

NRIs to get immediate property possession in Chandigarh Assetventures

Non Resident Indians (NRIs) having property in the union territory of Chandigarh can now gain immediate possession of both resedentian and non-residential property, officials said here Monday.

"We have received a notification from the union government regarding the extension of the East Punjab Urban Rent Restriction (Amendment) Act 2001 in the city. Now NRIs can have immediate possession of their property by just applying to the relevant authority," said the official spokesperson of the union territory here Monday.

He added: "Chandigarh administration had been for long urging the centre to make provisions or to devise a mechanism for safeguarding the properties of the NRIs having roots in Chandigarh."

Chandigarh already has an NRI cell, which was established Aug 15, to deal expeditiously with various representations and complaints received from NRIs.

Real estate payment plans Assetventures

Do you understand the nuances of your payment plan to your developer? When you buy property and pay by installments, soon after the initial payment you make at the time of booking, you will be expected to make recurring payments to the developer.

Here we explain the process of how this works and what you stand to gain or lose under each option.

Time-Linked Payment Plan

Time-linked plans require you to pay installments to the developer based on a pre-determined time schedule, independent of the rate at which the project’s construction progresses. This is a contractual commitment you are signing up for, and is non-negotiable.

If your payments are late or if you miss an installment, you can be liable for penalty interest or anything that you might have contractually agreed to as a penalty.

A typical time-linked plan conceptually looks like the following:

- 10% of basic selling price (BSP) at time of booking

- 10% of BSP every quarter thereafter for next 8 quarters

- 10% BSP at time of possession + other dues (such as club membership, development charges if any, parking fees)

The disadvantage with time-linked plans is that you are at the mercy of the developer - even if the project is delayed you are contractually bound to pay your installments.

So, effectively you are funding the developer for no noticeable progress, which clearly is not a fair deal to you. The question to ask is what the developer is doing with your money if it is not going towards the construction or related activities.

Construction-Linked Payment Plan

Construction-linked plans require you to pay installments to the developer based on a pre-determined rate of progress of the project, usually related to construction related milestones.

The advantage of such a payment plan is that you pay only when the milestones are being achieved – you can see visible signs of progress, and there is a noticeable correlation between what you are paying for and the development of the project.

Like in time-linked plans, if your payments are late or if you miss an installment, you can be liable for penalty interest or anything that you might have contractually agreed to as a penalty.

A typical construction-linked plan conceptually looks like the following:

- 10% of BSP at time of booking

- 10% of BSP at time of excavation

- 10% of BSP at casting of the ground floor slab….and so on

- Final installment at completion of the roof + other dues (such as club membership, development charges if any, parking fees)

The advantage of a construction-linked plan, as you might have guessed, is that you pay for progress, and are not uselessly funding the developer to do what it pleases with your money.

What if you choose the Down Payment Plan?

The Down Payment Plan requires you to pay the entire price of the property at the time of booking. One possible advantage of this is that you can expect to get a 10%-12% discount on the property by paying the entire amount in full.

However, depending upon the project and the builder, you might be able to negotiate a higher discount.

The disadvantage of these plans is that once you have paid the entire money, you are at the mercy of the developer if the project is delayed or postponed.

What happens if you cancel your booking?

Irrespective of which payment plan you choose, the outcome depends upon how helpful the developer wants to be in dealing with your cancellation request. You will likely have to put in your request in writing and then just wait for the developer to respond.

However, don’t expect the developer to act quickly. It is not in their interest to do so, because now they have to find a new buyer for the unit that you are exiting.

As far as getting a refund is concerned, you must understand what contractual penalties you might be obligated to pay.

In any case, don’t expect the developer to pay the pending amount back to you immediately. Chances are you will be made to run around a lot to get anything back from the developer, and the process can take up to a few months.

Festive real estate and loan offers Assetventures

Festive real estate and loan offers

Diwali is a time for festive offers. But, real estate and housing loans aren’t consumer goods and the advertised festive offers are usually just a marketing gimmick.

There is very little similarity between buying a domestic items like a kettle, on which one can get genuine deals, and getting a big ticket item like a house or a housing loan. Here we tell you why you should not fall into the trap of a so-called festive offers on real estate and related loans.

Why the marketing spin?

Marketers recognize that during festive seasons, whether its Diwali in India or Christmas in the western world, consumers are looking for good deals.

In India, Diwali is also seen as an auspicious time to make financial decisions. So, marketers play on this pre-existing momentum in the minds of consumers looking to make a house purchase decision during the festive season.

However, the deals are usually no different than what you would get before Diwali, or just after the festival season.

Don’t rush the big decisions!

Buying a house and getting a housing loan against it are the probably the biggest financial decision that any family will make. We aren't talking of a toaster oven here, that costs just a few thousand rupees at most. We are talking of at least Rs 20-40 lakhs, and a loan that will likely keep you indebted for up to a decade.

Such decisions cannot be rushed, because you will have to live with its consequences for a long time. And, the risk of getting it wrong is very high if you rush through your decision.

What drives real estate and housing loans? The economic cycle

Real estate companies and housing lenders are at the mercy of the financial markets. The prevailing interest rates, that are set by the market or policy makers, are one of the key drivers of real estate and housing loan prices.

To stimulate demand, a company might offer what appears to be a discount, but realistically speaking the pricing criteria for these products is no different around Diwali from the weeks just before or after the festive season. If the economic situation is good or bad that has a bigger influence on the pricing of real estate and housing loans.

So what deals are genuine?

At best, you might be in position where the developer reduces a modest fee to stimulate demand, or a housing lender reduces their processing fee.

However, its unlikely that the monetary benefit of these reductions will be any more than say Rs 10,000 – Rs 20,000 maximum, and if you tried hard enough you could get these reductions at other times of the year as well.

For instance, some developers in North India were offering a Navratra discount of up to Rs 100 on the booking amount. However, this was no different from the inaugural discounts usually offered. Similarly, some lenders might waive the loan processing fee during the festive season. But such waivers are no different from what you can get during the rest of the year if you negotiate with your lender.

Monday, October 12, 2009

NRIs seek Tharoor's help to protect property in India

Seeking to protect their properties and investments back home, non residents Indians have asked minister of state for external affairs Shashi Tharoor to sponsor a new bill that will safeguard their interest.

Supporters of the proposal voiced their grievances at the gathering on how their properties were allegedly taken over by government, mafia and illegal occupants.

However, at the meeting organised by the Keralite community in New York, Tharoor expressed his inability to sponsor the proposal as the matter is not under the jurisdiction of his ministry.

"The truth of the matter is that when it comes to this issue, I cannot sponsor a bill because in our parliamentary system it is not permitted," Tharoor told the members of the Malayali community, at his first public appearance during his visit to New York.

Tharoor underlined that while he could not sponsor the proposal, he would take up the matter with the relevant authorities in India. "I will be very happy to speak to the overseas affairs minister and law minister because if the government takes on this bill and recommends it then the chances of passage are much greater," he noted.

They pointed out that the 25 million strong Indian Diaspora contributes $52 billion as remittances annually, which is four per cent of India's gross domestic product.

Commenting on the proposal to grant voting rights for NRIs, Tharoor said a bill to this effect may not get support back home.