Buy dream home in india

Having a house of one’s own is on everybody’s wish list, but while you are at it, ensure that it is not a hurried decision. Buying a property is a huge investment and involves a great deal of financial planning and strategy. If you are thinking of purchasing that dream home for yourself in 2016, we’ll help you make a smart choice.

Experts in the real estate industry believe that the government initiatives for enhancing infrastructure announced in 2015 will give a boost to the sector and restore investor confidence. The realty segment will certainly record an increase in sales thereby aiding reduction in unsold inventories across regions.

Promotion of 100 Smart Cities, AMRUT (Atal Mission for Rejuvenation and Urban Transformation), Housing for All by 2022 and infrastructure development projects are some of the steps that will benefit Indian economy. Moreover, reforms like easing of FDI policy, the apparent implementation of the Real Estate Bill and and the introduction of REITs(real estate investment trust) is set to bring in the much-needed  transparency into the real estate sector thus improving  investor confidence.

“The year 2016 is likely to begin on a positive note on the back of these reforms and increased investor confidence. Overall, the next few years may witness building of some strategic partnerships with select developers, private equity investors also looking at liquidating assets. Consolidation through joint ventures in development would unlock the potential of major cities,” opines Sanjay Dutt, Managing Director, Cushman & Wakefield.

If you are looking to buy a property in 2016, you need to be very careful with legal documents of the shortlisted projects as there are innumerable enticing deals in the market. We advise you to not get tempted with freebies and discounts rather conduct a detailed scrutiny on the project, the builder type, locality, etc to list a few.

We have attempted to enumerate some of the cities which may give you a good return on investment in the next five years.

 Thane:

This neighbourhood of India’s commercial capital is emerging as an attractive region for investment in the Mumbai Metropolitan Region in 2015 because of abundant options available here. The rapid growth in infrastructure such as the proposed extension of Mumbai metro is making Thane city a sought after residential destination.  Thane west saw considerable movement due to good connectivity and proximity to important commercial and industrial areas in the vicinity.

In terms of affordable areas, the Kalyan and Dombivli region ruled the roost. With the selection of Kalyan and Dombivli as smart cities, significant commercial as well as residential activity in these areas is anticipated.

 Mumbai:

Madh–Marve has been branded as a destination with an expected price appreciation of 94 per cent, emerging as a potential asset class for the next five years. Ulwe, scores second, with a 70 per cent price appreciation by 2020, while Majiwada– Kasarvadavali may experience an appreciation of 59 per cent during the same time period.

Ghaziabad:

With significant real estate activity seen across three prominent markets including NH -24, Raj

Nagar Extension and Krishna Vihar, Gaziabad has emerged as the dark horse of NCR. The Centre’s nod for road widening of NH -24 towards Ghaziabad coupled with the location advantage of the highway and the direct link with Delhi, Noida and other areas of Ghaziabad have driven growth here. The realty prospects in 2016 in this region look promising.

South and East Bangalore:

Abundant new supply and affordable prices, high consumer demand and wide range of options across segments have boosted buyers’ interest in these areas of Karnataka. Good connectivity and reasonable property prices will drive growth in areas like Whitefield, Panathur, Electronic City Phase 1, Begur Road, Kanakpura Road and Bannerghatta Road in 2016.

Bhiwadi:

An emerging industrial and real estate hub bordering Gurgaon, Bhiwadi is well connected with highways such as NH-8 and NH-71B. It falls along the Delhi-Mumbai Industrial Corridor, making it a potential destination for property investment. The proposed Neemrana airport in the vicinity is also expected to boost demand in the real estate sector.

 Hyderabad:

Low ticket prices and buoyant office space activity has boosted the realty prospects in the city in recent times. Post clearing of the political clout and division of the state, Hyderabad has emerged as one of the promising realty markets of India.

Knight Frank ((based on its report on Residential Investment Advisory 2016, has identified select locations in major Indian cities which will give good returns – New Airport Road in Viman Nagar and  Vishrantwadi in Pune, Thanisandra and Panathur in Bangaluru, Golf Course Extension Road and New Gurgaon in Delhi-NCR and Puppalaguda– Narsingi cluster  in Hyderabad. According to JLL India, Noida and Greater Noida (NCR), Thane, Navi Mumbai – MMR, Whitefield in Bangalore, Viman Nagar and Nagar Road in Pune and Kochi Are among top investment options in 2016.

Distressed Property

What is a distressed property?

Although rare, a distressed property is one where the owner has borrowed against property to acquire the asset and has not been able to repay his debt obligations. If the borrower fails to service the loan for 4-5 consecutive cycles, the property is seized by the bank as collateral. The lender bank then sells the property to recover its outstanding interest and unpaid principal amount. Such a property is sold through a bank auction and can be acquired at prices which are often well below market value.

However, less than 5% of Indian borrowers default on repayment of a loan for periods long enough to permit a bank auction. Moreover, there is limited scope for getting such properties at throwaway prices, as the base price for the auction is determined by the loan amount outstanding which means that if the owner is far ahead in the loan term, the lower the base price. Hence, owners who have only a few cycles left to settle off dues would prefer to restructure the loan rather than default on payment.

Sale of distressed property – how to know?

As a custom, banks release an advertisement in leading local newspapers when they propose to auction off a property or set of properties. So, this is the best source of information. A bank’s annual report always mentions a provision for bad debts, and the schedules/annexure reflect if and when any distressed properties will be coming up for auction.

You can also contact a property consultant with expertise in the location and enquire about distressed asset opportunities in the area. The property advisor can also represent investors in discussions with the original owner or directly with the bank.
Sale of distressed property – the process

When a property is positioned for auction, it is advisable to read the bid document vigilantly to understand the status of unpaid dues. The bid document is like a prospectus of an IPO where all the facts pertaining to legal, title and responsibility for pending dues are outlined. Most of the time, the property is sold on a ‘as is where is’ basis and till the date of auction, loan obligations are cleared.

Between purchasing a distressed asset through a real estate advisor or local enquiry and bank auction, the latter is a lengthier process as the bank will first release an advertisement, set a date for the auction, invite bids, collate the offers and then finalize whom to sell the property. It becomes more cumbersome if the buyer himself plans to acquire the property on loan. The bank conducts a thorough due diligence search on the incoming buyer and then draws up contracts to transfer the property along with a go-ahead from the owner and a society NOC making the process even more time-consuming.
The bank has to obtain an NOC from the society before conducting the auction. Many societies and their members have first right of refusal along with the right to match the highest bid to buy property. The society highlights any liabilities that the new owner will have to bear. These aspects are captured in the bid document by the legal council of the bank and the bidder can refer to them to assess the exact liability.

When the distressed property is being directly purchased from the owner, both parties (original owner & new owner) agree on the commercial terms, exchange a token deposit and then complete the bank process to proceed with the purchase. The entire process of releasing the property by the bank, granting the NOC and procuring NOC from the society in addition to clearing off the bank dues may take nearly 2–3 months. The price in this case is therefore usually higher than it would be in a bank auction, since the seller tries his best to recover as much of his initial investment.
To conclude, any buyer who wishes to purchase a distressed property must be fully aware of what he is getting in to. Exercise precaution by carefully reading the bid documents, understanding the history of the property under discussion and also get historical papers for title due diligence to avoid any legal challenges in future.