Rohit Sharma buys a villa worth 5 cr in Suniel Shetty’s project

Cricketer Rohit Sharma who not so long ago purchased a flat in Prabhadevi area of Mumbai for Rs. 30 crore, recently indulged onto a villa in Khandala. According to sources from the real estate industry, Sharma bought a bungalow in a residential project named ‘Discovery’, which is owned by actor Suniel Shetty’s company S2 Realty.

The bungalow, which is a 5 BHK villa with a lawn and a swimming pool, is presently under construction.  The plot covers a total area of about 10,000 square feet and realtors claim that the deal has been closed for Rs. 5 crore.

The project Discovery in Khandala is spread across seven acres and has more than 21 bungalows. Every villa sports a private terrace. The project attracts a lot of the city’s elite, who wish to stay in a gated community.

Increasing Demand in real estate

According to report of Bain, real estate consulting firm, “The demand in Indian real estate market for organized segment can reach up to 1.35 billion sq ft by 2020, however; currently, it is around 880 million sq ft and out of this 85 percent is for the residential real estate”.

As per report of Bain which was titled with “Residential Real Estate in India: A new paradigm for success” finds that in present the sales of home is slow because of low consumer demand and high price. However; while going to forward, the business of Indian real estate sector will have to things very differently in an order to be successful with positive growth.  As per the statement of Parijat Jain, who work for Principal Infrastructure and Real Estate Practice at Bain and Co-author of the report, “The current business model of real estate is changing and it will continue to change more rapidly over the next few years. All the value that was attributable to a real estate firm was in land acquisition, agglomeration and managing approvals”.  The more he added that now people are building concrete businesses with sustainable and value addition inputs very good process and very good execution skills to manage real estate market.

In present, the real estate industry is seeing shift because of dynamics and competitive forces, which are giving rise to different business models in the market and regulatory environment are becoming more complex and apart from that the shift in profit is increasing and awareness among consumers are also increasing. However; the inventory level is increasing due to slow growth in real estate market, but still its challenges to sale the older inventory in market. Apart from that the newer projects are doing well in the market. According to Gopal Sarma, the Head Real Estate and Infrastructure at Bain for India Unit and lead Author of the Report, “It is combination where come part of sector are doing very well whereas; other segment is facing rough response from customers”. The more he added that there has never been value attached to discipline in the process to provide quality and best price to customer.

To be successful in the real estate market, real estate builder should keep themselves on three key aspects in mind; first, the real estate builder needs to select the business model with right processes in an order to deliver best service because with well defined processes and valuable chain from the pre-construction through the construction cycle, handover and beyond, can create alignment and increased ROI for companies. Second; real estate builder should decide that in which market they want to play in terms of geography and market segment because real estate is the business of local market, it is not the business of national and regional scale. Third; In most of the real estate market, customers are neither on front nor on centre, which means now onwards builders should think for customers.

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.

National Green Tribunal

Recently, the NGT (National Green Tribunal) has imposed stay on the permissions of all new building construction which comes in the vicinity of the Sanjay Gandhi National Park and it is expected that this move can leave negative impact on the several proposed real estate projects which are in the western and eastern suburbs of Mumbai and Thane district. But still it’s not specified that exact how much area around the national park comes under this decision and due to that according to reports NGT stay on new construction which is around the Sanjay Gandhi Park.
The National Green Tribunal has directed the municipal authorities of Mumbai to not to grant any permission for further construction until National Board of Wild Life or Union Ministry of Environment and Forests  both notify a proposal of the state government to declare that all area around the national park are an eco-sensitive zone. However; there is chaos because tribunal has not specified the range of area around the national park where new construction project permissions need to be held back.

When social activist Santosh Daundkar filled petition, so while hearing the case NGT gave the order by stating that a real estate project of Omkar Realtors and Developers at Malad is located very close to the Sanjay Gandhi National Park. However; advocate Aditya Pratap, who was representing the petitioner stated that in the year 2003, the SC had given a judgement to restrict the mining activity in the rnage of 10-km radius which comes under the national parks and if anyone needs to the mining activity so they have to take the clearance from NBWL. We all know that building construction involves escalation of sand and minor minerals, so the real estate project of Omkar Realtors and Developers at Malad could not have received a green clearance from the standing committee of the NBWL”.

According to the spokesperson of Omkar Realtors and Developers¸ “The National Green Tribunal order has no impact on any ongoing real estate project within the Mumbai because all future projects within 10 km of the Sanjay Gandhi National Park will need no-objection certificate from NBWL, and it is nothing than the another permission which will delay the launch of the real estate projects, and it will also increase the cost of project, whereas; on the other side real estate industry will suffer from low supply of goo apartments in short run. The more he added that in the present project, the previous order which was dated on the February 2, 2015 to inform the prospective buyers about the pendency of the litigation in this tribunal be abide by scrupulously.

However; NGT has not issued any stay on the construction activities at Omkar Realtors’ project which is coming at Malad, it has only directed the real estate developer to inform prospective buyers about the litigation.

Image Credits : DNA

In past few years, Pune and Mumbai have seen aggressive growth in term of property prices since year 2012 by 49.97 percent and 73.91 percent respectively, whereas; the second most pricey real estate market was Delhi/NCR as it was observed that in Delhi/NCR the marginal price rise was 9.13 percent since year 2014. According to reports, it’s clear that if you want to rent or buy an apartment, so Mumbai and Delhi-NCR are among the most expensive cities, especially than when you are from middle class, whereas; Hyderabad and Ahmadabad are still most affordable city to buy or rent house as per the reports of ArthaYantra, a Financial Life Management Advisory Firm.

According to reports, since 2012, Mumbai witness 73.91 percent, Pune witness 49.97 percent and real estate market of Delhi-NCR has observed the marginal price rise of 9.13 percent, whereas; reports showed that Bengaluru witnessed a price rise of 9.76 percent since 2012 and Chennai was with 5.55 percent  marginal price rise. However; when it comes to Ahmedabad and Hyderabad so they have a negative growth in price and it was -20.70 percent and -10.46 percent respectively. In terms of property prices the growth since 2014, Mumbai again led the pack with 16.04 percent rise in home prices and it was followed by the Kolkata with 11.27 percent, Chennai with 8.78 percent and Delhi-NCR with 6.37 percent. Whereas; Hyderabad, Ahmedabad and Bengaluru was among the cities which witnessed a negative rise in home prices since last year and it was -0.42 percent, -4.46 percent and of -2.55 percent respectively.

According to report of ArthaYantra, Ahmedabad has seen a negative growth since 2012 in terms of property rents and due to that to placing it on the top most position in affordability-to-rent city. Whereas; Hyderabad has seen reasonable increase in the rental values, but drop in the property price, so it’s sensible to place it on the top most position in the list of cities where property prices are affordable.  However; Bengaluru is more favorable towards renting in comparison of buying property as it has seen a drop in property prices due to its demand in real estate industry. When it comes to affordability, so survey showing that someone with the annual income of Rs 25 lakh cannot afford residential property in Mumbai, however; same person with same annual income can buy property in Delhi/NCR. Buying property in the city like Chennai is only suitable for those people who have annual income of over Rs 20 lakh, however; if you have annual income of above Rs 17 lakh, so you can attempt to buy property in Pune city too.

In present, Bengaluru is one of the most affordable buy destinations for people who have the annual income of over Rs 15 lakh, and people with the annual income of over Rs 15 lakh can also buy property in Kolkata. But when it comes to buy property in the city like; Ahmedabad and Hyderabad, so they are among the cheapest cities and due to that people with the annual income of over Rs 9 lakh can buy residential property.

Image Credits : DNA

This week, the Central Government is seems to intend the passage of Real Estate Bill in parliament, and the Cabinet is likely to approve the previous few changes that have been made after the recommendations of the select committee. According to sources, the housing ministry has incorporated approx. all the amendments which were recommended by the panel and due to that now there is no scope for political party to oppose this Real Estate Bill with an aim to protecting the interest of home buyers or other consumers in the real estate industry.

According to one of the Government official, “We are positively hopeful about the Real Estate Bill since there are many home buyers and other people in the real estate industry who are suffering from no mechanism or framework to get protect from any kind of unfair trade practice or exploitation by the real estate developers and real estate firms”. The more he added that the Cabinet has approved the changes which were mandatory as the revised bill is taken up for discussion. It is expected that new recommendations which have been accommodate in the bill will include the provision of parity in the interest payable by consumer and developer in case of any default by either.

In Presents, real estate developers only pay 2 to 3 percent interest in case of their default whereas; consumers are liable to pay about 16 to 18 percent for their default. However; on the same issue the Rajya Sabha panel had said that the interest rate payable by the promoters and the interest rate payable by the allottees should be the same in eventuality of any default by either of them. The panel was also recommended that 50 percent of payments made by the home buyers for a real estate project be kept in a separate account and it should be used for that specific project only.

However; in addition to the provision of imprisonment of up to three years proposed by the government, the committee had recommended that the clause of imprisonment for a realtor should be failing to abide by the orders of the appellate tribunal.

Diwali special offer

Almost every industry in the domestic circuit rakes in the moolah during the Diwali time because the sales go up. Every company looks forward to this festival in the country. Real estate however, has been an exception to this trend.

“A research on the demand for residential real estate during the past five years shows that, contrary to the common perception that a majority of sales happen in the second half of a year, the absorption is largely the same in both halves,” observes Akshit Shah, assistant vice president, Capital Markets Research, JLL India. “A weighted average of the past five years shows that the first quarter attracts the highest number of deals at 27%, while the fourth quarter i.e. the festive season, attracts 25%, which is at par with the average,” he adds.

Industry players attribute slow sales during the first two quarters to the fact that most part coincides with school exams, which negatively impacts the sales as family decision makers tend to steer clear of major disruptions in the schedule.

In the third Quarter, sales tend to be subdued because of the monsoon season and Pitru Paksh, which is considered an inauspicious period for new beginnings.

Therefore, real estate developers used to bet big on the festival season. However, this tendency has changed. The theory that sales boost during festival season was true till 2010, when the country’s economy grew at over 9 – 10%. Being an investment-intensive purchase, property-buying has slowed down considerably in the recent times.

Shah further notes that the average age of home buyers has come down from the mid-50s to the mid-20s. “The younger generation prefers to take informed decisions and focuses on better bargaining opportunities rather than auspicious days to purchase property,” he adds.

The service industry which is a major contributor to India’s GDP at 55%, announces salary hikes and bonuses in the second quarter whereas, the manufacturing and trading industry announces bonuses during Diwali that is fourth quarter. Also, people from the upper-middle and high-income groups plan their investments during the first quarter, for effective tax management purposes.

Despite RBI’s monitory policy review meeting held during end September to slash interest rates, this year too, the real estate industry does not expect to clock in a great sale during Diwali.

Stamp Duty for property transfer

Following representations received by the prime minister’s office (PMO) from both domestic and foreign private equity players in the past two months, Finance Minister Arun Jaitley is expected to consider the issues of scrapping stamp duty on transfer of properties by private individuals and firms to real estate investment trusts (Reits) and making dividend distribution tax (DDT) ‘pass through’ for Reits and investors in the trusts. Tax levies, including DDT and stamp duty issues, were flagged by top investment bankers and chief executives of companies like JP Morgan & Blackstone.

The real estate industry, equity investors and international trusts have represented to the government for granting “pass through status” for dividend payments by Reits. In effect, rental income from assets with the trusts would not be liable for tax as and when these assets or units are returned to the investors.

The demand for exemption from payment stamp duty and DDT was put forward after the government recently scrapped long-term capital gains tax on transfer of Reits units by their sponsors or investors. An exemption on payment of minimum alternate tax (MAT) when investors transfer shares to the Reit or on sale of Reits units was also granted by the Government recently.

Pending tax issues have been dissuading equity investors and real estate companies from making it big in real estate investment trusts (Reits) and infrastructure investment trusts (InvITs), rating agency CARE said in a note. In his last budget, finance minister Jaitley had given hope to real estate companies looking to list their rent-yielding real estate assets through Reits. Reports from various analysts suggest that the potential for Reits listing in India was about $ 20 billion since in May, the Union cabinet allowed foreign investors to take exposure in Reits to bring in capital and reduce the debt liability of domestic real estate companies.

As per estimates made by real estate firm Raheja Group, the top seven cities of India have more than 400 million square feet of operational office space; of which, over 150 million sq feet would be ready for Reits listing by April.

The largest realty developer, DLF has announced plans to start two Reits, with one exclusively for commercial office space. The company plans to monetize about 30 million sq feet office and retail space by the end of this financial year.

“The government may not wait till presentation of Budget in February next year, instead, it may shortly notify the exemption on payment of stamp duty on transfer of properties to Reits,” confirmed a PMO official. “Exempting Reits completely from payment of DDT might need further discussion,” he added.

Real estate TV channel launched by TimesGroup.

M K Anand, MD & CEO Times Network, the broadcast arm of Bennett Colman & Co.Ltd. announced launch of India’s first 24X7 property news channel ‘Property Now’ at the inaugural session of FICCI’s The Big 5 Construct India 2015 in Mumbai on Thursday. He also said that today the real estate industry contributes to the Indian economy in a substantial way and in view of the Government’s Smart city and housing-for-all projects this sector is expected to command investments from over 60 per cent of Indian Household Savings.

He felt that the industry needed an organized platform for the stakeholders to exchange views, talk to each other and persuade the policy makers to further upgrade the sector and improve the life of people.

This new channel will offer information on the property market to the prospective buyers. It will provide fair information, making the process of buying home simple and efficient. It will be a blend of news, discussions, guidance and analysis on real estate. It will focus on buying as well as improving the interiors and upgrading homes. Arnab Goswami, President – News Times Network will steer the new channel as also lead the editorial team.

Initially the channel plans to target more than 1 million markets. Gradually it will get to the markets at present served by ET Now.

It is anticipated that Property Now has good prospects to grow further as the matter is of importance to a wide range of people and will serve the interest of property buyers and investors, builders as well as the infrastructure industry.

Loan EMIs

Are you among the people who have been waiting to get the key of their houses from past couple of years? Well Sachin Kala is indeed one such man waiting to start staying in the flat which he had booked nearly 4 years back. According to his builders, he was supposed to get his flat back in December 2013 however looks like the wait might be for more long time. He has already paid about 80% value for worth of the property and this property is nowhere close to completion. The only solace for his is that he is not the only one who is going through this. Most of buyers are going through the same problem across the country. With the builders facing financial problems, properties are not being completed on time leading to huge delay in the completion of the projects. Being cash strapped is causing problems in completing the projects. As per the review of the real estate analytics firm PropEquity, between the years 2011-2014, 3,753 projects were offered for possession in the Mumbai Metropolitan Region and out of these projects nearly 45% of them are still under construction. This problem is severe in the NCR region wherein 856 projects were up for possession and out of these projects, 78% are still incomplete and running behind the deadline. The company saw similar patterns in some of the other cities like Chennai, Bengaluru, Pune, Hyderabad, and Kolkata among others.

Reasons for the delay:

There are many reasons, which can be attributed to the delay in the completion of the housing projects. The reason being, there has been a considerable amount of decline in the demand for residential housing due to constant increasing prices of the property. During the boom period, the developers and builders have highlights so many new launches that they are now facing difficulty to complete these projects. Most of the developers are under financial problems as they have used all the money collected from the new projects towards the projects that are still not completed.

The new hope:

From the buyers’ perspective, they have a new hope in the form of the Real Estate Regulatory Bill. The bill has been targeted towards bringing out balance in the currently chaotic real estate industry and has many clauses favorable to the buyers. For example, the bill has proposed that builders and developers are required to deposit around 50% of the amount that they receive from the customer in a very different escrow account. By this way, they will be able to stop diversion of some of the funds. According to this bill, the buyer will have the complete control over their funds as they will be able to ask the developers to return the complete amount in case of the property not being completed in the promised time. At present approval has been given to the bill and it is ready to be presented in the Parliament.

Influences of delayed projects:

When it comes to a first time property buyer, any kind of delay in the completion of the project and them taking over the flat can cause them to undergo serious financial problems. Most of the times buyers will atleast anticipate a delay of about 10-12 months in the completion of the project however, none would have expected the same to go beyond 2 years. According to the reports on PropEquity, the Mumbai Metropolitan Region has seen an average delay of 25 months in the completion of the projects. The average delay in the NCR region is about 33 months. In simple, the bigger a residential project is, the buyer can anticipate a longer delay in possessing the property. Buyers who took loans to pay for the property and expected the EMIs paid to the bank to replace their monthly rents have now landed into a situation, that requires them to pay all these amounts. According to one of resident from Ghaziabad, it is very difficult to pay both the EMIs as well as monthly rental but they are left with no choice. When it comes to a double-income family, the problem remains the same. The same problem is also for the investors especially the ones who have put money towards their second or third houses. For them investment was about earning through the monthly rentals that would have easily covered up the EMIs they need to pay to the bank. Potential delay in the completion of the project can completely make the entire calculations go downslide. Even though everybody is paying EMIs to the bank, there is no sign on earning the monthly rentals.

Loss of tax benefits:

Any delay in the completion of the project means that you will not be able to avail any tax deductions until the project has been completed. Buyers look of tax deduction of about Rs1.5 lakh, which is towards the principal repayment, and a further saving of tax deduction of Rs2 lakh meant for interest on the payment. However, it is important for the buyers to have the possession on the property within 3 years of taking loan to avail benefits under Section 24. In case the buyer is unable to do the same in the span of 3 years they will end up paying tax for about Rs30,000 a year. The buyers however have one option; they can sell out the delayed property and always invest in ready to move in properties. However, they still have the roadblocks in terms of transfer fees and registration charges. People who have taken the property with the intend of renting it out have benefits as the complete interest is tax free even if the project has not been completed in the 3 years of time.

Avoid delayed projects:

Always have enough information pertaining to the construction project as well as the developers. This will avoid any problems later on. Attentiveness among the customers is the key to avoid many problems in the future. Customers can protect themselves from fraud developers and projects. Keeping a track on the record of accomplishment of the developers also avoid lots of problem in these kind of projects. Referring to online forums will help to learn about these developers and it is important to avoid investing and dealing with new groups and developers.

It is important to ensure that the developers have valid license and government’s approval to run the project. There are many instances where in developers have tried to sell out property even before they have ownership of the land. It is important to ensure that the payment of construction is linked with the stages of project completion. Customers need to ensure that they have clauses of delay in the contract and ensure that the developers do not hike the price of the property.  Never fall prey to lure or other offers which talks about big properties for lesser price.  Carefulness is everything today and especially when there is lot of money involved.