Is Real Estate Dead ? – Property For Sale Magazine 

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The Eternal Story of Real Estate

Everyone has a strong view on India’s residential real estate market. Currently, most people expect prices to crash. I disagree. I believe that while prices will – at worst – continue falling. I don’t think they will ever crash overnight to a panic-led collapse. Real estate is going through a painful business down-cycle, which will also end at some point of time. Those expecting an overnight crash any time soon will be disappointed.

  
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Here’s Why: An Outlook

• The real estate sector is expected to touch US $ 180 billion by 2020 in India.

• The Construction development sector of India has received FDI equity inflows of US $ 24.1 billion in the period April 2000- June 2015.

• In August 2015, the Union Cabinet approved 100 Smart City projects in India.

• Government has raised FDI limits for townships and settlements development projects to 100%

• Real estate projects under SEZs are also permitted to 100 per cent FDI.

• Under the Union budget 2015-16 government allocated US $ 3.72 billion for housing and urban development.

• Government has also released draft guidelines for investments by REITs in non- residential segment.

1. Too Big to Fail !

There are simply too many vested interests in real estate to allow it to slip into panic-led chaos. Politicians, real-estate developers, banks, NBFCs– all of them have too much at stake. Then there are hard-working, salaried employees paying EMIs. This is an industry which reaches a majority of India’s population. Like Wall Street in the USA, India’s real estate industry is too big to fail. At worst, it might see a Lehman-like moment. A few builders will vanish but, as Wall Street figured out, a few casualties – like a Lehman or an AIG – are acceptable collateral damage in the overall scheme of things. But the Government will cobble together a bail-out of sorts. Builders will be rescued, homes will be saved.

 

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 2. Today vs Tomorrow ! 

There are two facets to every situation if today there are uncertainties then tomorrow there would be opportunities to overcome them. Today if the current sentiment in real estate is inert because of uncertainty of security of capital invested in context of capital appreciation then tomorrow stands with the realty sector because of its buoyant nature which would certainly overcome this momentary phase. There have been positive signals in terms of Inflation which has been falling for the past one to two months and the RBI has hinted on cutting interest rates further if the situation is maintained. The economy is recovering and government too has taken steps to support the real estate industry. The seeds have been sown in terms of key policies by government so that Indian realty can stand tall like a global real estate powerhouse of tomorrow.

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3. Evergreen Sector

The demand for homes is something which is here to stay. It is eternal! One always needs a space to dwell. Looking at the current scenario where a segment of second time buyers are cropping up one can’t say that there would be slack in the sector in the long run. The demand for homes is ever growing giving a boost to the supply of property in the sector.

Every business sector witnesses uncertainties on the sidelines of unique and integral economic complexities to which Indian real estate is not an exception. Real estate is an essential ingredient in formation and growth of any economy. There is a direct relationship between growth of businesses and economy which stands in a limbo without Real Estate sector.

  

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 4. The Pertinent Question

Owning a house is one of the ultimate dream of a person. The investors, end users and buyers often face the pertinent question as to where to invest their hard earned money.

Here is an excerpt from the Jones Lang LaSalle (JLL) report on real estate that lists the locations that illustrate the answer in context of individual cities and specific localities.

•​Noida & Greater Noida – National Capital Region (NCR)

•​Thane- Mumbai Metropolitan Region (MMR)

•​Navi Mumbai- Mumbai Metropolitan Region (MMR)

•​Whitefield- Bangalore

•​Southern Suburbs- Chennai

•​Viman Nagar and Nagar Road- Pune

•​Gachibowli- Hyderabad

•​Rajarhat- Kolkata

There are many factors that contribute to the all-round development of a location to make it a hotspot with sustained price growth over a span of time. As per JLL assessment, these locations offer a humungous spray of investing options in real estate with their relatively lower price levels that provides for a stimulus for future capital appreciation and healthy returns.

 

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These hotspots offer good investment options with property price appreciation likely to vary depending upon the rampant risks associated with the respective location and their environs.

The discounts on property prices in these hotspot locations depend upon developer profile, asset class and construction status of the project.

  

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5. The Rewarded Risk

In realty there is a reward attached to every risk. Therefore, every minute is a correct time to decide and invest in real estate because there is reward of appreciation of capital with it. The real estate sector might undergo a sluggish period but ultimately it follows the upward trajectory. The sector might witness idleness for a while but it is Phoenix like – the emblem of immortality.

So, buy now, invest now! The unending realty story begins with your home …

  

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No Stamp Duty Required for transfer of property to relatives – Property For Sale Magazine 

GOVT. WAIVES STAMP DUTY ON TRANSFER OF LAND / FLAT TO KIN or FAMILY MEMBERS
Hon’ble Revenu Minister Eknath Khadase announced in Assembly on 25-03–2015 that Govt. waives stamp duty on transfer of land or flat immovable property to Kin or family members. He announced that now immovable property such as land, house or flat can be transferred to Owner’s Children or even to blood relatives simply by executing transfer deed on Rs. 500/- stamp paper without paying stamp duty and registration fee. This announcement will give good relief to the families of transferors as they will not require to pay 5% stamp duty at market value as per ready Reckoner. Minister further clarified that in such an event it will be sufficient if transfer document is executed on Rs.. 500/- stamp-paper.

 

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He further clarified that the decision to waive stamp duty on property transferred to heirs is taken on account of large complaints received from farmers who were otherwise unable to transfer farming land to their family members due to heavy stamp duty for such transactions. H’ble Chief Minister on another issue of TDR clarified in the assembly that Govt. is framing a new policy by which TDR will be indexed to the Ready Reckoner rate in order to prevent developers earning buge income from use of TDR of one area to another. The Ready Reckoner rate of the area where it is being utilized will now apply. S.S. Mahajan. 

 

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®Property Fot Sale Magazine / 2015 / Published – Info Source Times of India dt. 26-3-2015

6 Key Changes in FDI For Real Estate – Property For Sale Magazine

Indian real estate sector has been facing a huge slowdown for last 2-3 years, the government today relaxed foreign direct investment (FDI) norms in the construction sector by removing two major conditions related to minimum built-up area as well as capital requirement.

 

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To boost foreign investment in the cash-starved realty sector, the government has eased rules for foreign investors to exit and repatriate their investments.

Below are the key changes in the real estate sector summarized below –
1. Minimum area (20,000 sqm) and minimum capitalisation (US$ 5 million) removed – Conditions of area restriction of floor area of 20,000 sq. mtrs in construction development projects and minimum capitalization of US $ 5 million to be brought in within the period of six months of the commencement of business, have been removed.
 

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2. Each phase is a different project – Each phase of the construction development project would be considered as a separate project for the purposes of FDI policy. Exit will therefore be linked to each phase.

3. Exit linked to 3-years of each FDI tranche (earlier exit possible before 3Y if trunk infra is completed before 3Y) – A foreign investor will be permitted to exit and repatriate foreign investment before the completion of project under automatic route, provided that a lock-in-period of three years, calculated with reference to each tranche of foreign investment has been completed.

 

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4. No lock-in of 3Y for NR – NR transfers – Transfer of stake from one non-resident to another non-resident, without repatriation of investment will neither be subject to any lock-in period nor to any government approval. Nonetheless, exit is permitted at any time if project or trunk infrastructure is completed before the lock-in period.

 

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5. Leasing is not “real estate business” (in which FDI is prohibited) – Earning of rent/ income on lease of the property, not amounting to “transfer”, will not amount to real estate business.  

100% FDI under automatic route is permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centres. Consequent to foreign investment, transfer of ownership and/or control of the investee company from residents to non-residents is also permitted. However, there would be a lock-in-period of three years, calculated with reference to each tranche of FDI, and transfer of immovable property or part thereof is not permitted during this period of 3 years.

“Transfer”, for the purposes of above includes,—

(a) the sale, exchange or relinquishment of the asset ; or

(b) the extinguishment of any rights therein ; or

(c) the compulsory acquisition thereof under any law ; or

(d) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or

(e) any transaction, by acquiring shares in a company or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of, any immovable property.

This means FDI is permitted in rent yielding assets. The earlier ambiguities on whether activity of renting amounts to “real estate business” (and therefore whether prohibited) is removed . FDI should therefore be now permitted in a company holding completed assets yielding rent.

6. FDI in LLPs now permitted under the Automatic Route: This is however for sectors in which 100% FDI is allowed under the automatic route and there are no FDI performance linked conditions.

 

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