Budget 2016 will boost demand for affordable homes

Homes up to 30 sq metres in metro cities and 60 sq metres in other cities which fall in the affordable segment make up for 90% of the demand for houses in India. Several announcements in the Budget 2016 are likely to stimulate growth in demand for affordable housing.

Real estate experts say the exemption for affordable housing would bring in a 15-20 per cent upside on profits after paying the MAT tax for a developer constructing such a project, making it easier for the developer to attract foreign and domestic investment for housing projects.

“100 per cent deduction for profits to an undertaking in housing project for flats up to 30 sq. metres in four metro cities and 60 sq. metres in other cities approved during June 2016 to March 2019 and completed in three years.  MAT to apply,” finance minister Arun Jaitley announced in the budget, adding that “construction of affordable houses up to 60 square metres under any scheme of the Central or State Government including PPP Schemes will be exempt from service tax.”

First time home buyers will get deduction for additional interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned in 2016-17, where the cost of the property does not exceed Rs 50 lakh. This will encourage developers to reorganize funds into building more houses in the affordable segment.

Further, Jaitley has addressed one of the painpoints of the real estate industry by extending excise duty exemption, presently available to concrete mix manufactured at site for use in construction work, to ready mix concrete as well.

Shishir Baijal, managing director of property consultancy Knight Frank India says the realty sector will get a push from both supply and demand side. The FM has announced steps to address concerns from the supply side in housing to spur construction activity and employment connected to it.

To provide relief to persons living in rented homes, this budget has increased the limit of deduction of rent paid under section 80GG from Rs 24,000 per annum to Rs 60,000.

Lutyens Delhi bungalow

According to reports, Assam Company, which is located at Kolkata is contemplating to sell a bungalow in Delhi which is situated at Bhagwan Das Road and comes under the Lutyens’ Bungalow Zone of central Delhi.

About Assam Company:

Assam Company is basically from the business of tea plantation and oil & gas and it is expecting Rs 1,100 from the sale of property.  According to real estate experts, it could be the best and biggest real estate deal in recent years.

Property Details:

Property is strategically located near the India Gate¸ Supreme Court and other high-street shops which are in the Connaught Place. However; property is spread over an area of 13,723 square metres or 3.4 acres or 13,723 square metres. According to sources, the property will be sold through auction and all the potential buyers have to submit their bids.

This time it is JLL Indian, property consultant who is handling the transaction of Assam Company. According to property expert, “The expectation of Assam Company is very high and in this subdued market, conditions are not so positive. However; the company could get Rs 700-800 crore from the sale”. The more he added that property markets are dull and demand for large properties are too weak, but still it depends on the auction and the response of the buyers.

Some big property transactions in Mumbai:

Last year, it was billionaire Cyrus Poonawala, who bought Lincoln House from the US Consultate in Mumbai and the cost of deal was about Rs. 750 crore with the tag of largest property deal. However; there were hurdle from defense ministry as they were asking the local collector to register the property only after getting approval. According to reports, the company could repay the high value loan from ICIC Bank with the help of property sale. But the staffs of the property are not aware about any sale. Last year, it was the Subhash Chandra, promoter of Essel group who bought a bungalow in same area after paying Rs 304 crore from realty firm Anant Raj Group.

Some big property transactions in Delhi:

We all know that in past two to three years, Delhi has witness many great deals in Lutyens’ Delhi. As last year, V C Burman, Chairman Emeritus of Dabur Group bought a bungalow in the tony Golf Links area and the cost of deal was about Rs 160 crore.

Apart from that earlier, Rajiv Rattan, Co-Founder of Indiabulls Group, bought a bungalow of 2,920-sq yard on Amrita Shergill Marg in Lutyens’ Bungalow Zone at an amount of Rs 220 crore.

In 2015, the Delhi based real estate builder Kabul Chawla of BPTP sold a bungalow of 575 sq yard in Golf Links for Rs 65 crore.

2016 will see more PE investment in real estate

After the government eased foreign direct investment norms for the sector in 2015, Real estate companies are expected to raise more money from private equity funds this year. An estimated $4.8-billion was pumped into the realty sector via the PE route last year and according to experts, fund infusion in 2016 will well surpass this figure.

Real estate focussed funds propose to raise anywhere between $3 billion and $4 billion of private equity. However, the way these investments would be carried out in 2016 may differ from what has been happening in past few years. In 2015, a large part of the investment in real estate was debt or structured transactions. This is expected to continue in 2016, but it would be complemented by equity deals in the latter half of 2016.

According to Rajarshi Datta, asset management lead, Acquisory Consulting, “Taking an average investment cycle of eight years, these funds will have to deploy all the money in next four years, which means at least $1 billion will have to be invested in 2016.” Experts say the additional $1 billion that could be invested in the sector is over and above investments made by PE firms which are already sitting on funds.

Industry trackers say at least $1 billion will be raised in the first three months of 2016, which would be invested in the same year. Data obtained from venture intelligence notes that about $2.94 billion (Rs 19,420 crore) have already been raised by some real estate focussed funds.

Analysts say that both residential projects as well as corporate real estate will witness inundation of funds. While the residential segment will see consistent cash flows, the corporate sector will get an opportunity to optimise rentals for investors. However, prices of real estate may not get impacted across the spectrum; movement will be seen only in select pockets like NCR, Mumbai and Bangaluru.

L & T Realty is looking for the investors and partners in Navi Mumbai and Bengaluru

Larsen and Toubro Ltd’s real estate development arm L & T Realty Ltd is now seeking for the real estate investors and development partners for few projects which are about to come in the Bengaluru and Navi Mumbai as L & T Realty is planning to monetize its retail mall portfolio with an aim to use its land for the construction of offices. We all know that L & T Realty Ltd has huge real estate development portfolio and it is about 50 million sqft, and it includes both upcoming and ongoing real estate projects.

Projects of L & T Realty in Navi Mumbai and Bengaluru:

L & T Realty is the four year old firm from Larsen and Toubro and now its planning to bring developer partner for its Hebbal projects which is coming up in Bengaluru and in this project L & T Realty is developing residential apartments on the area of 45 acres, apart from that company is also planning to develop remaining 20 acre area with the help of joint venture partner. However; when it comes to Mumbai, so TOD (transit-oriented development) project which is coming up in Seawoods, Navi Mumbai, so here L & T Realty is looking for the strategic investor for the development of 1 million sqft retail space. However; the TOD project is coming around the railway station of Seawoods— Darave. Apart from that this developer is also coming up with 4 million sqft of office space as a part of 40 acre contiguous development under the Seawoods Grand Central project.

Recent transactions of L & T Realty:

Recently, L & T Realty has sold its commercial real estate project to Carnival Group in Rs.1, 785 crore and it was located in Chandigarh. This commercial real estate project includes a Hyatt hotel, office premises with a central courtyard and Elante mall. With the transaction of Chandigarh, L & T Realty exited from its real estate business in northern India and now its planning to focus on the projects which  are coming up in Chennai, Hyderabad, Mumbai, Bengaluru and Navi Mumbai. According to Shrikant Joshi, CEO of L & T Realty, “It’s not our policy to run malls and due to that we want to monetize them as we continue to build them in our projects. At this point of time in the Hebbal project, our company is planning to bring a joint venture partner for the development of office space. We are hoping to conclude all these transactions next year”. The more he added that In Seawoods, we are seeking for the investor partners, but we want someone who can be the worthy successor.

There are few developers which are showing their interest for Hebbal project and they are; Assetz Property Group, RMZ Corp. and some other developers and investors from Singapore. It is expected that by 2016, the L & T Realty will start to deliver the home in its projects which are in Seawoods and Powai in suburban Mumbai. Last year, the real estate market has under gone the number of challenges and due to that now buyers want to move with bigger and branded developers. According to Joshi, “Our strategy is to continue construct the projects which we have and on the same time we are looking for the joint venture partnerships with outstanding partners.

Due to brand value there are several branded developers such as; Godrej Properties, which have done well in the period when most of the developers where struggling. According to real estate experts, home buyers always shows a lot of faith in the larger brand association because they assure them with delivery capability, brand equity and goodwill.

Real Estate Sector

Real estate experts believe that the 2016 will start with the positive note for real estate sector and in coming year it may witness pickup in the sales with improvement in the number of unsold inventories. In simple words we can say that year 2015 was little bit good for realty sector as it has witness some  regulatory changes, which will do the big impact in year 2016 as regulatory changes have relaxed the foreign direct investment laws, after the direct approval of Union Cabinet and it was much awaited Real Estate Bill. On Real Estate Bill there were mixed reactions from real estate experts, but broadly everyone sees it as a positive move as currently real estate sector is in sluggish mood.

As per real estate experts, In September the rate cut of 50 basis points by the RBI under monetary policy review will also increase the demand and supply in the real estate sector as well as government panel is also planning to bring seventh pay commission. As per the reports of Financial Express, “Investment in the real estate sector in 2015 was about $ 8 billion or Rs 53,000 crore and it was even year high even when the sector is not in a good shape. However; BSE Real Estate index also plunged by more than 16 percent on a year to date basis at the December 18. According to reports of Cushman and Wakefield private equity players have invested about $ 2.8 billion or Rs 18,700 crore in the real estate market till end September 2015. Add to that estimation $ 4.5 billion, or Rs 30,500 crore was of NCDs till the end of November 2015 and due to that the overall tally was up by 74 percent in comparison of last year which was about Rs 17,600 crore.

As per the statement of Anuj Puri, Chairman and Country Head of JLL India, “In past two years the real estate market is seeing some improvement and it has been adjusted to new trends in terms of aligning supply for relevant demand. The more he added that now real estate developers are paying more attention to the requirements of buyers and they are developing more property as per need of middle class which is in the price range of Rs 75 lakhs to Rs 90 lakhs in tier-I cities”.  According to Vikas Malpani, co-founder and Head of CommonFloor Groups, “The real estate bill approval is positive sign for real sector, which along with other trends could shape the real estate sector in 2016”. There are many experts, who are giving thumps up to the recently approved Real Estate Regulatory Bill as it can be helpful to clear the unsold inventory. We all know that whenever any new bill or law comes in the existence, the real estate developers tend to adopt a wait and watch approach. And due to that in present, the completions of existing projects are the prime focus of developers for some more months.

On the other side at the positive note the developers are focusing more on completing their existing projects as well as clearing the inventories and according to JLL India listed that following regions as the best bet for real estate sector in 2016; Noida & Greater Noida, Thane – Mumbai Metropolitan Region (MMR), National Capital Region (NCR), Nagar Road – Pune, Whitefield – Bangalore, Navi Mumbai – Mumbai Metropolitan Region ( MMR), Viman Nagar and Kochi.

Image Credits: DNA

If you are the one who is cursing the Mumbai city due to lack of space, proper amenities and other shortcomings, so here are some heartening news for you; Mumbai is one among top five emerging world cities. According to the report of JLL, a global property consultant, “Mumbai is 4^th on the list of emerging world cities, however; the top three are Shanghai, Beijing and Dubai. Apart from Mumbai; New Delhi and Bengaluru were also in the report which titled “Globalization and Competition: The New World of Cities”.

In report, According to JLL emerging world cities are the business capitals of major economies as these cities are experiencing higher growth percentage, attention of governance and implementation of strategies to become more stable and establish regions. These cities often get support from the national government, as government is in the process of economic adjustment and busy in the restructuring and optimization of urban and metropolitan regions for the benefits of global engagement. The report explains that Mumbai is witnessing urban consumer demand between now and 2030, along with other regions such as; Jakarta and Istanbul. According to experts, this growth can help the retail sector as demand and supply ratio is different in these cities as per region preferences and requirements.

JLL Report Findings:

According to report, it is expected that 26 percent firms have the revenue of more than $ 1 billion and by the end f 2025 this share could reach 50 percent. However; report, also pointed out that in present real estate market of Mumbai is performing well as it is attracting real estate investment and outsourcing activities, but still at certain points its facing chronic infrastructure supply challenges and these challenges can be hurdle for transnational firms. Apart from that Manila and Jakarta also reported the same issue. In these cities transnational firms are performing well as they are able to expand their operations in South and South East Asia in very low cost with huge market opportunities, whereas; on certain pints they are also facing considerable urban infrastructure shortages.

Recommendations of JLL:

It is recommended to these cities that now its need of time to focus on the other aspects such as; reducing complexity of preparation, assembling and project execution because it could prevent capital investment budgets on a year-by-year basis. However; there are substantial improvements in Mumbai as government has taken steps to improve transparency, reduce red-tapism, and strengthen governance with aim to reduce the complexity in execution of projects. For example; In Mumbai the civic corporation has cut building permissions from 150 to 70 and it also reduced the time limit to give such permissions. Apart from that state government is also working on a plan to digitize permissions which real estate developers need. It is suggested that there is need to address three major issues as it could be hurdle in the growth and success of the cities and these three issues are; how to build and sustain multiple sources of investment, how to attract talent and local skills and co-ordination in metropolitan space.

In the absence of strategies and systems of address these issues, the emerging world cities will struggle and find it difficult to manage their growth effectively in the ratio of economic development.

Real Estate Market in India

In past few years, real estate market of India has evolved from residential units at great location to luxury and vibrant concept of branded homes. These branded residential units or houses have make up this emerging luxury housing projects where the price of luxury houses are about $ 300,000 for 2000 square feet for the starter size for apartments and into bigger and larger sizes depending on the category of the residential projects. In last 10 years, our country has under gone rapid globalization and urbanization which paved the way for employment opportunities with high income trends. However; these high earning individuals are looking for the world-class amenities to reflect their lifestyle on how they want their homes to look like.

According to real estate experts, currently it is one of the fastest growing clusters in residential housing segment as it would take 1.5 million luxury residential units to cater the demand in the next 10 to 12 years, as per the reports of Business World. In present, most of the real estate developers are taking the advantage from the opportunity which needs to cater the housing needs while also getting high incentives. Now most of the real estate developers are targeting the uber rich of the city, who are willing to pay for property which is luxurious enough to reflect their social as well as financial place in the hierarchy. Apart from that there is also sudden influx for investments on bespoke properties because of the emerging trend of owning luxury as well as more than one property in same or different city in the upper segment of the society.

While making an investment in the premium properties, there are few uber rich individuals who prefer to diversify their assets that can be fueled by several reasons ranging from passionate and practicality inclination to investment opportunities. In present, the fastest growing real estate market of India, its common trend to own more than one property and it’s also the  aspiration for the higher class as more than 80 percent of them are investing in at least two properties while the balance 55 percent stake on three or even more. In Indian real estate market there are also few international developers who are ready to invest in the customized possessions to cater the luxury housing demand for the wealthy who want to be at par with their peers’ or surpass their luxury lifestyle.

Rising aspirations of the wealthy professionals are also in the target market of real estate developers for their premium constructions. Luxury residential units are definitely looking for promising trend in Indian real estate market to gain the momentum, which could even surpass the traditions of real estate market.

Festive season offers

If we will look the business of real estate market at the time of festive season, so we will find that developers and the consultants are on the same side because they are accepting that it will continues to go through a slow time. There are many real estate developers in country which have strong financial support and they tend to challenge or complete the convincing progress of real estate market with their under-construction projects. Unfortunately fact this has been overly hyped by the media and real estate developers that they have strong financial background and they are able to complete their projects on time. But still there is drop in the overall confidence of end buyers because they are worried that if they will commit their money into properties which will not be delivered on time, so it could be problem for them.

Price Correction in Projects:

In last one year, the prices of property in Mumbai has been increased by 3.7 per cent, in Chennai its increased by 15 per cent, but in Delhi or NCR no change recorded in the price of property. All this rise represents the more or less stable scenario and it is expected that it will continue for another 2 or 3 quarters as there are many fence-sitting buyers, who are waiting for the time when real estate prices get correct. But according to real estate experts price correction will be location specific as well as developer and will happen only if there will be nothing to attract the buyers. There are few cities where demand is still sufficient and prices are more or less affordable and in those cities there will be no price correction. Apart from that the regions where people looking for more affordable property certainly price correction will happen in those areas. However; there are much activity to make the real estate market more affordable because developers are actively re-configuring their projects as per market conditions in process to save the cost and pass the benefit to buyers. Much number of real estate projects are about to launch and they all have been at lower rates than those of earlier projects launched in the same locations in such category projects.

Economical Scenario:

In present, economy has not shown any type of perk for which real estate developers are waiting. However; market has definitely improved in comparison of last year. But market is still improving and recently, RBI as cut the interest rates to help the sentiment of buyers and it is expected that it will be factor to drive more sales in real estate market. With the cut in interest rate, the RBI has sent the signal to the real estate market that inflation is under control and buyers and developers can be more confident about economic growth. However; these kinds of signals are positive for buyers and developers as well. If you will show the actual pertinence on property purchase, so it could draw big impact on the savings because impact may not be very significant, in expensive regions such as; MMR, NCR, Delhi and more. If property prices will be expensive in any case, then marginal reduction in the cost of borrowing will not make any big impact. However; the reduction in interest rates will draw a bigger impact on the buying behavior in less expensive markets such as; peripheral locations of tier I and tier II cities.

NRI Investment:

If will take a step towards the domestic real estate consumption and analyze the demand and supply ratio in metro cities so you will understand that outlook looks very upbeat. In present, there are many non-resident Indians (NRIs) who are extremely active while investing in Indian real estate market. In India, NRIs are among top five investor communities who are investing in countries property sector. Apart from that there is natural affinity to India that NRI with high intrinsic value prefer to buy property in India than buying property anywhere else in world. However; sometimes due to weaker rupee value NRIs prefer to invest in India.

This festive season it is expected that buyers will see the mixed bag, but still question remains same, is it a good time to buy? Definitely yes, for end buyers because they have never been more spoiled for choice with bargaining power and lower interest rates. There are many real estate developers who are offering hard discounts registration charges and waive on stamp duty, VAT service tax and on other services such as; floor rise premium, free parking space and more. This festive season is an ideal time to make the best deal of your life and turned your dream home into a reality.

Housing sell will rise – festive season.

This Dewali, residential property sales may rise up to 15 per cent due to various offers and discounts by real estate developers as there are many real estate developers who are offering 15 to 20 per cent discount through various means. According to real estate experts, this festive season can holds out the hope of Indian real estate market as in major markets the demand from end users are increasing. Experts are estimating the growth of up to 15 per cent and more in residential property sales in comparison of previous year.

According to Chief Executive of one of the Mumbai-based real estate company, “From past one year there was no major price appreciation in real estate market, but this time real estate developers are offering 15 to 20 per cent discounts with an aim to make the net gain of 25 per cent in prices for buyers.” However; price reduction seems to be the most important primary reason for the consumer pull. In comparison of last year, growth in sales should be between 15 to 20 per cent, however; it also depends on the market and it is showing positive curve towards growth, as per the statement of experts, “It’s not time when we should expect the high growth number in comparison of previous boom. But still it’s expected that consecutive years of growth will help the market to recover from deep down phase. And due to that this year we are expecting good numbers”.

As per the statement of Sanjaya Gupta, MD of PNB Housing Finance, “Hyderabad, Pune, Bengaluru and the suburbs of Mumbai had seen increased activity in last few years. Last week were surprised to hear that transactions in south Delhi was high with ten high-end floors being sold. We can say that its harbinger of better sentiment”. Apart from new launches dwindling in major cities such as; Mumbai Metropolitan Region, Bengaluru, Delhi and NCR expecting are high time because most of the real estate developers focusing on clearing inventory with ready-to-move in houses in next 6 to 12 month. It will improve the confidence of buyers or end users accustomed to seeing delivery commitments being flouted. According to PropEquity, a real estate consultancy, the number of new launches in MMR, Bengaluru and Delhi-NCR has come down by over 61 per cent with 87,298 dwelling units during January to September from 227,211 in the same period of 2012.

According to statement of Pankaj Kapoor, MD of Liases Foras, “There would be a significant improvement in sales for this festive season because interest rates had come down and price had not gone up so much and developers are also offering the discounts”. The more he added that over the year’s income of working couples have raised by 10 to 15 per cent, which means affordability has improved in most markets such as; Delhi, Mumbai and NCR. In real estate market the inventory level for first quarter of 2015-2016 was rose by 24 per cent to 41 months in all major eight cities. However; NCR had the inventory of 68 months, MMR had the inventory of 45 months, and Bangalore had the inventory of 30 months, as per the reports of Liases Foras. An efficient housing market maintains 8-12 months of inventory.

It’s clear that Indian realty market has been hit economic slowdown, financial constraints of developers and low sales in last two years. According to Ashutosh Limaye, National Director, Research at JLL India, “This year will be better than the last year”. The plus point in this season is the price and it is attractive for buyers and end users. The more he added that still there is scope for negotiation. The festival season is started from October and it will continue till December, it is expected that 30-40 per cent of total house sales but in last two years very little activity has been recorded during the season.