SEBI may outsource auction of 87 Sahara properties

As part of the long effort to recover money from the Sahara Group, the Securities and Exchange Board of India (SEBI) is planning to outsource the Sahara property auction job, which could be worth nearly Rs 40,000 crore. The market regulator is in talks with SBI CAP Trustee Co and UTI Infrastructure Technology and Services for potential sale of 87 properties owned by Sahara.

The Supreme Court had earlier granted SEBI, the permission to sell assets of Sahara Chief Subroto Roy to generate money required to bail out the latter from jail.

“The claims made by Sahara on the properties and the respective title deeds can be verified only when some third party is appointed for verification,” a SEBI source told reporters. A property advisor explained that outsourced agencies will require examining the documents of all the 87 properties and the status of the said lands. This could take several months.

This mammoth exercise involves 87 properties in 71 cities, covering 7,161 acres, of which only 47 title deeds seem clear as per submissions made by Sahara to the SC in 2013.

The 71 locations of Sahara properties include Pomgaon and Kumheri villages near its Aamby Valley project in Pune district while the other chunks are in Faridabad, Noida, Muzzafarnagar and Haridwar. These assets together account for nearly Rs 12,000 crore.

The hearing on SEBI’s application for appointing a receiver to auction Sahara’s properties is scheduled for April 27.

Union Budget 2015-16

It is the demand of real estate developers in upcoming Budget to revive the tax structures and lower interest rates for the home buyers as home is there ultimate need. Apart from to seek for better infrastructure status for housing, Getamber Anand, the Elected President of CREDAI stated in real estate press conference organized by RICS that “The government should provide some fiscal incentives to the real estate developers to build affordable housing.”  NAREDCO Chairman Naveen Raheja stated that: “There should be some real stimulus for the affordable home buyers in form of lower interest rates.” The more he added that we wish this budget will provide better infrastructure status to housing if not the entire real estate”. On the same occasion, CBRE South Asia Chairman and Managing Director Anshuman Magazine stated that infrastructure development and low cost funding should be key for the revival of the real estate sector.

CEO Embassy Office Parks, Michael Holland demanded that “Now it’s perfect time when central government should provide some clarification on tax treatment of Real Estate Investment Trusts (REITs), particularly on Dividend Distribution Tax (DDT) because we all know that real estate sales are down and it can put the realty market in worst post-global financial crisis. It means that we are at the bottom, it can only go up from here as sales are not happening so this is good opportunity for buyers to buy home”. Commenting on the need to incentivize the affordable housing segment, Sachin Sandhir RICS Global’s Managing Director – Emerging Business & MD – South Asia said: “Despite the inherent fundamentals of the realty market, things have slowed down in recent times and we must introspect as an industry the reasons why this has happened, and address the issues. The core issue of increasing affordability and supply of housing should be addressed.”

In September 2014, SEBI, which is market regulator, had notified that there are few norms for listing of new business trust structure under REITs and they would help to attract more funds in a transparent manner into the realty sector.These norms were notified when Finance Minister, had provided the REITs ‘pass through’ status for the purpose of taxation in the last year’s budget, Vineet Relia, MD of SARE Homes stated that in order to ‘Make housing for all a Reality’ central government should look into relaxation of taxes, and lower interest rates with easy process of financing for the developers and build adequate infrastructure”.

If you say that one would be able to buy a property with mere 2 Lakhs a couple of years back or say even months back, no one would be able to believe. This money is enough for a stock broker to submerge a person in tips of investment or a bank to probably lay some foundation stones but later on it could take ages for one to actually get their hands on the property.

Real estate investment trusts (REIT):

SEBI has issued some final guidelines for real estate investment trust which will help any investor having 2 Lakhs to get a piece in the real estate market. So, there are no more reasons to become a laughing stock in various Realtor’s offices.

These are similar to mutual funds, the only difference being, the money collected from investors goes into property rather than stock market and various bonds. There has been lot of brain storming being done on this trust but the current union budget seems to have taken a major hurdle out in the form of taxation of the REITs.

Scopes of REITs:

 Past few months have seen a substantial decline in the real estate market and there were lot of concerned raised by the people in this industry, through the new guidelines, SEBI has been able to put all these issues at rest. So this has come as a boon for both investors and the real estate industry as it will increase the cash flow in the drought hit market. As per the Chairman of JLL India, Mr. Anuj Puri, a cash flow of nearly Rs 60000 to Rs 70,000 crores can be expected through conversion of half of the Grade A office to REITs.

Market Entry Barrier:

When it comes to investment in Metropolitan or Tier 1 cities, the minimum investment could be upto- Lakhs and as now due to SEBI’s guidelines it has been considerably brought down to Rs 2 Lakhs, inviting more number of real estate investors in the market. Now, the minimum investment could be expected to be lowered to even Rs 1 Lakhs in some of the secondary markets.  As per the CEO of HDFC bank, Mr. Mistry, this has given a ray of hope even to the middle class income individuals as they can now hope to invest in real estate.

The only problem seems to be that the real estate has no space of can take lot space in form of investment in the portfolios. There are certain income groups who say that this might have come at the right time but it can negatively impact the real estate market in the form of high property price. The main idea is to resolve the financial issues faced by the developers and the banks funding them.