by admin | May 25, 2021 | Business, Economy, Emerging Businesses, Investing, Markets, News, Property
By Rituraj Baruah,
New Delhi : After four consecutive years of slump and low demand in the real estate sector, market participants believe 2018 will be a year of revival as the sector has finally shed the impact of demonetisation, Goods and Services Tax (GST) and the implementation of the Real Estate Regulatory Act (RERA).
Business stakeholders say the government could do its bit to push the real estate sector forward by giving it an industry or infrastructure status, which would help lower the cost of funds for developers and reduce prices for consumers.
Although demand is not bullish, the sector is rising from its trough, with unsold inventory slowly finding consumers, they say.
“Earlier there were around 600,000 units unsold. Now that’s down to about 450,000 units in the country,” said Narasimha Jayakumar, Chief Business Officer at 99acres.com , a property advisory website.
“We are quite optimistic about the whole sector in the next 12 months. I think it’s going to increase…it’s going to grow,” Jayakumar told IANS.
Amit Modi, Vice President, Credai Western Uttar Pradesh, said: “In 2017-2018, according to reports from markets such as Mumbai, Delhi and Bengaluru, there is an increment of 30 per cent in sales compared with 2016-2017.” Credai is the apex body representing real estate developers.
Modi, who is also the Director of the real estate company ABA Corp, said there are instances of rise in prices.
“In one of my projects, which is in the premium segment, we started selling at Rs 3,500-Rs 4,000 per square foot four years back, but (now) the price in our project is more than Rs 6,500 per square foot. In some units we have touched the price of Rs 7,000,” he added.
Online search for properties are also on the rise, said Jayakumar. “There are several examples we are seeing… there is 50 per cent growth in searches. There has been a 45-50 per cent growth in queries for buying,” he said.
However, although searches and research regarding properties have risen from September onwards, the process of concluding a sale was still slow, said Jayashree Kurup, Head of Content and Advice at magicbricks.com .
“In January this year, the market was fairly active from the end-user side before a marginal slowdown in mid-February,” Kurup told IANS.
“In the last two-three weeks we have seen an uptick again and I think it is a very slow and steady market.”
Talking about the demand for apartments, the stakeholders said the trend is changing from buying by investors to end-users. “Investors used to earlier buy 50-60 per cent, that number is now down to 8-10 per cent,” Jayakumar said.
“In many cases the difference between the rent and EMI (equated monthly installment) is only 15-20 per cent, particularly with the credit-linked subsidy scheme, depending on the prices of property and the loan tenure, making it very attractive for the youth to buy,” he added.
Real estate players felt, apart from the market dynamics, the sector is also seeing structural changes and consolidation among small players, largely after the implementation of the RERA and its mandate to establish state units.
Although the introduction of RERA disturbed the status quo in the market, which was largely unorganised and unregulated, its proper and complete implementation would clear up the sector of unscrupulous players and bring about confidence among buyers, they say.
Stakeholders, however, expressed concern about not getting industry status for the sector.
“Industry status means that you can get access to lower-cost bank financing. You don’t have to go to an NBFC (non-banking financial company), other private financing or private equity, which are much more expensive,” Jayakumar said.
Modi emphasised that to reach the target of housing for all, industry status was required.
“(With industry status) the sector will be more organised, one window clearance will be there, and cheap finance will be there, which will definitely stabilise this business and also fulfil the Prime Minister’s dream of housing for all by 2022,” he said.
Although the government provided the industry or infrastructure status to affordable housing projects in Budget 2017-18, it does not seem to be budging on the demand of real estate players for the status to be extended to the whole real estate sector.
Going ahead in the year, the market players also believe the rental housing policy will play a significant role in the sector.
The policy, which is currently at consultation stage and will be sent for cabinet approval after due diligence, is aimed at alleviating the housing shortage in urban areas by encouraging renting of homes.
(Rituraj Baruah can be contacted at rituraj.b@ians.in )
—IANS
by admin | May 25, 2021 | Investing, Opinions, Property
By Ankur Dhawan,
The “Housing for All by 2022” mission has set the stage for a robust recovery in the residential property market. In the past two years, we have seen an unprecedented focus on reforms channelised through the Benami Transactions (Prohibition) Amendment Act 2016, demonetisation, Real Estate Regulatory Act (RERA) and the Goods and Services Tax (GST) regime. So, this time, the Budget for FY2018-19 will be much more critical than ever. The provisions, if moved in positive directions, will have the power to continue the momentum and cement home buyers’ confidence.
While so many tough decisions have already been taken, it will be worthwhile to rationalise further the direct tax structures impacting home buyers. I believe that there is room for improvement in some of the prime income tax (IT) provisions meant to incentivise the home buyers.
Deduction on home loan interest: The IT Act has provisions under which a home buyer can claim a deduction on home loan interest paid towards an under-construction property, in five equal instalments for five financial years. But this deduction is included in the overall deduction amount of Rs 2 lakh that one can claim in a financial year.
Also, the condition of equal deduction during five years leaves limited room for home buyers to claim benefit of the current year’s interest paid. Buyers can claim the benefit only after receiving possession of the property and thus there is no benefit during the construction period. Given so many properties are delayed in possession, the interest component paid during construction can also become very high.
Sample this: A home buyer pays Rs 7.5 lakh over five years of construction period as interest towards home loan. In this case, he can claim Rs 1.5 lakh every year, but then this amount is included in the overall limit of Rs 2 lakh, thus making no significant impact on his taxable income.
To provide relief to home buyers as well as encourage investment in under-construction properties, the government should introduce a separate tax benefit for pre-EMI interest during the construction period.
Deduction on interest paid after completion for let-out properties: As budget 2017 has imposed a limit of Rs 2 Lakh on deduction of interest paid for non-self-occupied properties under Section 71 of Income Tax Act, investment in properties for rental have become less attractive. Rental housing is an important part of the housing industry as it provides a roof to people who cannot afford their own houses. To make rental housing more attractive, the government should increase the limit to Rs 3 lakh.
Section 80EE: Under Section 80EE of the IT Act, first-time home buyers are entitled to claim deductions of up to Rs 50,000 a year towards payment for home loan interest, in addition to the limit of Rs 2 lakh defined under Section 80C of the Act, although there are conditions attached to it. Firstly, the home loan should be taken in the period between April 1, 2016, and March 31, 2017. Secondly, the value of the property should be below Rs 50 lakh.
There is a need to review these two conditions. The threshold of property value as Rs 50 lakh deprives many home buyers in metro and Tier 1 cities to take benefit of this deduction. Even the Reserve Bank of India (RBI) defines properties under Rs 65 lakh as affordable properties in metros and Tier 1 cities. Therefore, this threshold should be raised to Rs 65 lakh.
Section 54 & 54F: Under these sections, a home buyer can claim an exemption for long-term capital gains if he/she invests the sale proceeds of one property to buy another within three years. However, the person can lose this benefit if the property is not completed within three years.
This condition penalises a home buyer for a reason which is out of his control. Residential projects take anywhere from 3-7 years and given the present scenario, the period of three years is not realistic. This period should be raised to five years.
The forthcoming Budget presents an opportunity to further build momentum to fulfil the core need of housing for millions and, given the kind of focus and push by the government, the Finance Ministry should leave no stone unturned in contributing towards the cause of “Housing for All by 2022”.
(Ankur Dhawan is Chief Investment Officer, PropTiger.com. The views expressed are personal. He can be contacted at ankur.dhawan@proptiger.com)
—IANS
by admin | May 25, 2021 | Business, Corporate, Corporate Buzz, Investing, Large Enterprise, Property
By Bappaditya Chatterjee,
Kolkata : The real estate sector, which witnessed a slew of policy measures through the year, experienced a market slowdown but the affordable segment emerged as its growth driver, say property consultants and developers.
The policy reforms, however, promise to make residential real estate dealings more transparent than ever before and the market is expected to see at least a partial recovery in 2018 on the back of revived confidence of homebuyers, fewer new launches, improving sales and declining unsold units.
The Centre’s surprise demonetisation announcement late last year was a “real shocker” for the sector. But, simultaneously, it helped the sector to resist unaccounted funds from finding their way into the secondary and even primary sales segments as well as the luxury housing section.
Meanwhile, the Real Estate (Regulation and Development) Act (RERA) was rolled out to improve financial discipline, boost market transparency and give consumers confidence and a clear legal choice for dealing with errant developers and brokers. The Goods and Services Tax (GST) was introduced to improve taxation transparency and the Benami Properties Act got further amended to make it more effective in curbing anonymous real estate transactions and ownership.
“There were reforms galore which literally altered the DNA of the Indian real estate business, focusing on eliminating black money and improving market transparency so as to make the country’s residential real estate a better place for consumers and investors,” Anarock Property Consultants’ Chairman Anuj Puri told IANS.
National Real Estate Development Council Vice Chairman Parveen Jain said all stakeholders adopted a wait and watch policy following the note ban and introduction of RERA and GST.
“This resulted in a somewhat slowdown in the sector as everyone was trying to understand the after-effects of demonetisation and the effects of RERA and GST. No one is willing to venture into new deals until and unless things settle down,” Jain told IANS.
GST, applicable to the purchase of homes in under-construction projects, prompted home buyers to either buy completed projects or hold back their purchase decisions. Also, developers halted sales in projects not registered under RERA across major cities, JLL India CEO and Country Head Ramesh Nair said.
“These factors led to a quarterly sales decline in five of the top seven cities to an all-time low of 4.8 per cent in the third quarter of 2017,” Nair told IANS.
Residential launches up to the third quarter of 2017 saw a decline of 33 per cent compared to the same period in 2016. Simultaneously, affordable housing saw a rise of 27 per cent in the first three quarters, mostly by taking advantage of the new government regulations and incentives for homes in that category.
“Affordable housing is an attractive proposition both for developers and consumers as the demand is huge and largely unmet. The high focus of the central government has resulted in the availability of more funding options for the developers such as ECB, FDI and debt-financing from national financial institutions at highly competitive rates,” Cushman & Wakefield’s Senior Director, Research Services, Siddhart Goel told IANS.
However, the flip side is the implementation RERA by the states. As per the central government schedule, by the end of July 2017, all states should have implemented the RERA with full functionality.
“Many states are still either in the process or don’t have requisite infrastructure. Dilutions in a few RERA rules by a some states, has also hurt buyer confidence,” Knight Frank Chief Economist Samantak Das told IANS.
According to an ICRA study, by the close of third quarter of 2017, most of the major states had notified their real estate rules and set up real estate regulatory authorities as required under the RERA Act. While new project launches have remained subdued even after RERA implementation, the developers continue to push sales in ongoing projects, with expectations of improved customer confidence in those projects which are approved by the state RERA.
However, the inclusion of land and real estate (completed properties) under the ambit of GST has been a topic that has been debated significantly and will ultimately require a political solution since land is a state subject and any such move will require the concurrence of state governments.
“Any such move could bolster the transparency and compliance of real estate transactions (especially in the secondary market) since there would be an incentive to report transactions at market price to claim full tax benefit,” said Shubham Jain, Vice President and Sector Head-Corporate Ratings, ICRA Limited.
The industry is expected to somewhat stabilise in 2018 as both real estate developers and customers become attuned to the changed regulatory scenario.
Developers are likely to take a cautious approach as far as new project launches are concerned, given the over-supply situation in various markets, along with their own stressed balance sheet positions.
The focus is likely to remain on liquidation of existing stock and reduction of the debt overhang before new projects are launched. This is already visible from the trend of decreasing quantum of absolute stock of unsold inventory available with the developers.
(Bappaditya Chatterjee can be contacted at bappaditya.c@ians.in)
—IANS
by admin | May 25, 2021 | Opinions
By Vinod Behl,
The year 2017 could well go down as one of the most painful for the bruised real estate and housing sector, reeling under the short-term disruptive impact of a series of reforms. But then, riding high on these landmark reforms, the regulated and organised realty is set to ride out the rough terrain to emerge as a healthy and sustainable asset class in the medium to long run.
The agony of the real estate sector was particularly reflected in the worst-hit residential real estate. The long delays in completing projects and large-scale delivery defaults badly shattered the confidence and trust of home buyers, who were at war with developers and fighting it out in the courts — which saw a few developers landing in jail.
In the wake of all this, home buyers took a back seat, especially refraining from buying under-construction housing units and thereby badly hitting sales. According to industry statistics, there were about 685,000 unsold units across seven major cities till September this year. The high unsold inventory, together with the burden of complying with RERA (Real Estate Regulatory Act) led to a big slump in the launch of new units, though home buyers did pick up ready-to-move dwelling units as they were assured of the safety of their investment.
In view of RERA squeezing funds for residential properties, many developers took to commercial real estate, especially as investors preferred this segment due to better capital appreciation and good returns, particularly in pre-leased properties. Investors also showed keen interest in the retail sector, with national and international brands entering into newer destinations in search of organised mall space. Global PE fund Blackstone invested in a number of malls. Total retail supply, retailers’ expansion plans and investments indicate healthy retail growth in emerging cities.
Despite being a year of hardships, 2017 may well be termed as the year of reforms aimed at removing regulatory hurdles and paving the way for the sector’s growth. These progressive policies brought in transparency, which was reflected in the substantial improvement in India’s rankings in JLL’s Global Real Estate Transparency Index. Major structural reforms and changes in FDI norms made Indian real estate much more attractive to domestic and foreign investors, with a 70 per cent increase in FDI in construction as a percentage of the total FDI over last three years.
The landmark RERA reform empowered and protected consumers against cheating by unscrupulous property developers. Several of its stringent provisions are not only deterrent but punitive in nature to ensure a fair deal to consumers in terms of price, quality and timely delivery of property — besides fast-track redressal of their grievances.
Home buyers got a further protective umbrella with the Mumbai High Court ruling that RERA will be applicable to ongoing projects as envisaged in the model Central Act, nullifying the dilution of some provisions by a few states and in turn protecting the interests of home buyers.
Besides RERA, another big reform that was undertaken this year was the Goods and Services Tax (GST). Currently applicable to under-construction properties, it is aimed at doing away with multiple taxes and checking double taxation, resulting in the benefit of cost reduction which developers are required to pass on to consumers.
To give full benefit of GST to consumers, the government is now extending it beyond the construction stage to final constructed buildings.
The Benami Property Act, aided by demonetisation, together with restrictions on cash transactions, to a large extent rid real estate of black money (responsible for the artificial spurt in prices), making property more affordable. In fact, all the government’s policies — such as according infrastructure status to affordable housing and PPPs for affordable housing — were all directed at promoting this mass segment to achieve the aim of “Housing for All”.
The Housing and Urban Affairs Ministry approved the construction of 112,000 additional affordable houses for the urban poor over and above the 3,076,000 houses sanctioned earlier. That affordable housing was the flavour of the season was clearly evident from the fact that 62 per cent of all new launches in H1 2017 were in the affordable category (less than Rs 4 million price tag), with the trend of “compact homes” catching up.
This year’s budget further provided a booster to the sector. Granting infrastructure status to affordable housing and abolition of the FIPB requirement were significant policy initiatives to help the capital-starved sector.
The other notable measures included provision of additional refinance of Rs 20,000 crore (over $3 billion) for the National Housing Bank (NHB), hike in housing outlay from Rs 15,000 crore to Rs 23,000 crore and allocation of Rs 396,000 crore for infrastructure development.
The pro-consumer budget took several other far-reaching initiatives, including increase in personal income tax limit with additional benefit in tax slabs, long-term capital gains tax benefits on housing, enhancing the scope of the Credit-Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY) by extending the loan tenure from 15 to 20 years and replacing built-up area with carpet area as qualifying criteria for benefits of the PMAY scheme. This scheme has now been further extended beyond the EWS/LIG segment to include the MIG segment.
Spurred by the positive sentiment generated by continuous structural reforms, expected improvement in the economic and employment scenario and tapering off of the disruptive impact of RERA and GST, in the months ahead, the real estate and housing sector is headed for consolidation, with a new eco-system marked by transparency and corporate governance.
(Vinod Behl is editor, Realty Plus, a leading real estate monthly. The views expressed are personal. He can be reached at vbehl2008@gmail.com)
—IANS
by admin | May 25, 2021 | Investing, Opinions, Property
(Note Ban Series)
By Vinod Behl,
Though the government’s radical measure of demonetisation has disrupted the economy and has hit the real estate sector — already reeling under prolonged slowdown — it will turn out to be a blessing in disguise in the medium-to-long term.
As an asset class, real estate has been a big source of generating and consuming black money. The cash component in real estate has been there at various levels, beginning with land transactions where it amounts to 30-50 per cent. The cash payout is quite high in luxury housing too. The consumption of cash has been as high as 30 per cent in secondary market transactions.
The primary market transactions, however, are by far bereft of cash component as home purchases are financed through loans from banks and housing finance corporations. It is another matter that even in primary market deals, developers have been encouraging cash payouts by luring property buyers with good discounts on property price.
The speculative buying by investors through offerings like underwriting and pre-launches has also been involving cash payout, leading to artificial price hike and in turn making homes out of the reach of masses.
Demonetisation, coupled with the government’s move to check benami transactions through legislation and curbs on cash transactions, was meant to clean up the system.
This sudden ‘shake up’ was, however, not without its adverse impacts. Demonetisation badly affected the liquidity in the capital-intensive real estate sector, deepening the problem of massive fund shortage/cash crunch faced by developers reeling under delayed deliveries, which deterred buyers from purchasing property.
The impact was more evident in markets like NCR and Mumbai which were largely investor-driven, compared to southern markets of Bengaluru and Chennai and even Pune in the west, which have been end-user driven. The premium/luxury residential segment, in which the cash component was more in transactions, got impacted by demonetisation.
Real estate experts’ belief that the impact of demonetisation is only short-term and will not have long-term impact, stems from the fact that developers who have been following transparent and fair practices have not been affected by demonetisation and instead it worked out to their advantage.
This also turned out to be a positive development for big global real estate consultants like JLL India which doubled its profits in 2016 over 2014-15, with 60 per cent revenue growth.
One key positive impact of demonetisation and RERA (Real Estate Regulation Act) has been that speculative investors deserted real estate and end-users/genuine buyers, who were all these years pushed to the sidelines, came out in large numbers. Now, it is the property consumers who are driving the real estate market, especially residential market, aided by the government’s pro-industry and pro-consumer initiatives.
The step to promote affordable housing and according real estate industry status for the purpose of making easy and cheap funds available to the sector also helps.
Demonetisation has particularly boosted foreign funding. The transparency brought in by demonetisation, aided by RERA, GST reforms and liberalisation of FDI norms, has boosted the confidence of foreign investors, which is clearly evident from the spurt in foreign investments, particularly from pension funds.
This will inject much needed liquidity in the sector starved of funds. Targeting consumers, the government under the Pradhan Mantri Awas Yojana (PMAY), is providing substantial interest subsidy to home buyers. The clampdown on floating cash in the system has contributed significantly to curbing inflation which, in turn, helped RBI in cutting interest rates, thereby boosting home buying.
The proposed measures to liberalise FSI norms and rationalise stamp duty, will give further fillip to the residential sector, particularly affordable housing.
Demonetisation had a salutary impact on property prices by curbing cash transactions and checking speculative pricing, in turn increasing affordability, which is a key to achieve the government’s flagship mission of ‘Housing for All’. RERA & GST are further aiding demonetisation to control prices.
The key provisions in RERA, to speed up project completion, by checking diversion of funds through mandatory escrow account, stringent penalties to check project delays, together with the government’s move to make all building sanctions online, will go a long way in checking time and cost overruns of real estate projects, thereby controlling home prices.
The ban on pre-launching of projects under RERA will also check artificial spurt in pricing. GST has come to tackle the flow of cash in the purchase of building materials by introducing input credit tax. Further, the government’s plans to liberalise FSI norms, especially for affordable homes, and rationalising stamp duty will have a sobering effect on property prices.
But for some little lingering effect, economists and real estate experts believe that the overall downside impact of demonetisation has faded and its impact is not going to be there in the next quarter.
Says Ashwinder Singh, formerly CEO of JLL India & now CEO of leading real estate consultancy, Anarock Consultants: “Other than in terms of the initial confusion-induced decline in sentiment, the trend that is emerging now, points towards a recovery in buying sentiment with serious buyers already returning to primary markets.”
The entire demonetisation exercise undertaken by the government and aided by other reforms, like Benami Property Act, RERA and GST, is to be looked at in the backdrop of the government’s multi-pronged policy to create institutional and regulatory framework for speedy and steady growth of the economy. And at the centre of all these initiatives is real estate, which is a key contributor to GDP. Going forward, these policy initiatives will help make real estate more organised, transparent, credible and affordable, making the sector investor and consumer friendly.
(Vinod Behl is editor, Realty Plus, a leading real estate monthly. He can be reached at vbehl2008@gmail.com )
—IANS
