Realtors Suggest The Ways to Boost the Construction of Affordable Sector

Interestingly enough there is a paradox in building the affordable housing in India. It apparently seems that there is an acute shortage of the low cost and the affordable housing but there is an oversupply of high-end housing. The reason why the developers are not shifting their focus from the high-end housing to the affordable housing is mainly for the policy irregularities. It is estimated that in the next decade a number of people as large as 3 billion will shift to the urban areas and the cities in the next decade or so. If this happens there will be a huge shortage of housing in the time to come. Already the shortage of housing in India is estimated at a figure of 19 million units. Of these, a huge 95 percent is in the affordable and low-income housing groups.

There are few of bottlenecks in the building of affordable housing and low cost housing in the nation. The first hurdle is of course the low margins in the affordable housing construction along with the hurdle of multiple approvals and clearances which are the same from different authorities. Land issue is another concern which is the dearth of cheap land and the land plots that are available in remote locations but they are not so rich in infrastructure to cater to the demand.

The next major issue isthe financing of the affordable sector housing and the banks and financial institutions has a ceiling on real estate funding. The banking industry favours the high end projects from reputed builders with high margins which for obvious reasons gets more preference over the affordable housing projects.

The next problem is the tax rates that the real estate sector attracts at different points of the transactions of the real estate projects which amount to 25 percent of the property rate. This becomes too cumbersome for the developer.

Measures to boost affordable sector

The industry veterans and the trend watchers suggest few of the measures and recommendations which can help and create a solution for the higher supply of the affordable housing sector.

For easy availability of funding and direct tax benefits granting the infrastructure status to the affordable sector would be a feasible solution.

A reduced stamp duty clearance with a single taxation may be like that of GST can be a crucial step, suggests many. The 80 IB provision of Indian Income Tax Act which has provisions of liberal income taxes for real estate construction in the affordable sector is recommended to be reinstated.

A single window clearance is also a remedy which will be a short route to rounding off about 35 to 40 major approvals from varied departments, local authorities and agencies that a group housing project needs to obtain. The entire exercise as per the realtors takes about more than two years and eventually results in escalation of costs and delays in completion.

The cost of capital should also be lowered in case of affordable housing which many feel should be ideally excluded from the different RBI ceilings. It is even better if the RBI instructs the banks to include such funding in the Priority Sector Lending (PSL) as classified by all the banks.

The availability of land for the affordable sector is also a step that the state governments should implement and in that implementation of a zoning process can be a key in boosting the construction of affordable housing.The government should also designate areas where housing friendly rules for zoning would apply with higher norms of FSI and FAR with relaxed norms of density.

The government-led schemes for affordable housing like the AMRUT, Atal Mission for Rejuvenation and Urban Transformation, Pradhan MantriAwas Yojana (PMAY) and other such central and state government schemes should be helped to propagate with more resource mobilization with such policy measures and administrative structures.

According to the Reserve Bank of India statistics an investment of Rs. 70 trillion is needed for the construction of infrastructure development, affordable housing, construction of urban roads and modern transportation over the next couple of decades. A section of the trend watchers feel that when the New Real Estate Regulatory Bill is passed in the parliament the real estate regulator so constituted under the provisions of the bill will look into these issues and may inculcate few of the low-income customer friendly initiatives.


Rupee depreciation hurts infra returns, reviews suggest Equity exits painfull

The depreciating rupee may have helped improve property sales to NRI buyers, but it isn’t helping the saviour of real estate developers — private equity firms — which are not only stuck with their earlier investments, but can’t raise fresh funds either.

Indian currency’s record depreciation against the greenback and weak property market have restricted realty private equity offshore funds’ fresh fund raising efforts as well as trapped their earlier investments since FDI gates were opened in 2005. The rupee has depreciated nearly 27 per cent since April 1 to touch a record low of Rs 68.63 against the dollar on August 28. Over the past two years, when most of these exits were being planned, the currency has slipped 46 per cent to touch this level.

It has almost wiped out foreign private equity funds’ meager returns from real estate, and any exit now will lead to at least 25-30 per cent loss in dollar terms. “The environment for raising fund from overseas investors is not very conducive. Offshore funds that have invested during the last few years when the US dollar was quoting at Rs 42-52 will find it challenging to offer good returns now because of the fall of the rupee and weak underlying market,” says S Srinivasan, CEO at Kotak Realty Fund.

Investments made in Indian real estate sector are cumulatively estimated to be around $15 billion since foreign direct investments were allowed in the sector. Around 20 per cent of this was expected to get an exit in the past two years, but seems a distinct possibility now. Private equity firms with offshore funds are in a state of flux not only because of their stuck investments and delay in project completions, but are also concerned about not being able to raise fresh funds in the current scenario.

“Most capital in Indian real estate was invested at the exchange rate of around Rs 40 to a dollar with the expectation of 25 per cent returns. The current phase of currency depreciation would impact the real estate sector adversely as foreign investors would wait for the full cycle to play out and exchange rate to settle down before taking any fresh investment calls,” says Rajeev Bairathi, executive director, capital transaction group and north India, Knight Frank India.

Most real estate funds that have invested at dollar rate of around Rs 40-45 are likely to get an exit after these seven years at more than Rs 60, which is a loss of around 30 per cent in the currency itself. Moreover, most assets, given the weak property market, have not seen any major appreciation.

“Although rupee has depreciated a lot since these funds invested in projects and is showing no signs of returning to 2006-07 levels. As funds are coming to an expiry and savvy investors are likely to press for exit even at a loss as they are aware that most currencies globally are also following a similar trend,” says Ramesh Jogani, Managing Partner of private equity realty firm Indian Property Advisors. According to him, several funds that have already tried to exit their investments in the past two years and have had little success, may not be able to hold on to their assets for long in anticipation of the dollar-rupee parity reverting to its Rs 45 level.

Private equity investment in Indian real estate nose-dived in the first half of 2013. For the first six months this year, real estate private equity investments were recorded at $276 million (Rs 1,638 crore), 46 per cent lower than a year ago. Private equity funds invested $514 million (Rs 3,050 crore) in the first half of 2012, says a recent report of Cushman & Wakefield, an international property consulting firm.

Bhairathi of Knight Frank does not expect significant foreign capital to flow into the country until the macro environment stabilizes. “This in our view would take at least another two to three quarters and the next general election might offer major triggers for the capital flow to resume. Till such time, it would be extremely difficult to raise fresh offshore funds. Further, the disbursement of capital on the already announced deals might be put on hold till stability returns,” Bhairathi says.

While many experts are concerned about the probable exits at losses and their impact on further fund raising activity, there are some who differ. “In rupee terms, returns are still good. A fund or fund manager cannot be held responsible for currency risk and most seasoned investors usually hedge their position on their own. As an after effect, the sharp depreciation in rupee is likely to result in increasing these hedging costs incurred by investors at their end,” says Shobhit Agarwal, MD, capital markets, Jones Lang LaSalle. Agarwal accepts that the rupee depreciation will impact the fund raising efforts as investors’ investment allocations will change hereon. But, he is also hopeful that it will not stop the capital flow completely.

Private equity deals, given their structure and longer tenure, are not covered through any hedges and this leaves room for sharp impact of currency risk on exits. “In the past five years, currency has depreciated by 3-4 per cent compounded annually depending on tenure of the fund. There will be cases where funds will put exits on hold and wait for rupee to appreciate for better returns,” says Amit Bhagat, CEO and MD, ASK Property Investment Advisers. The 2013 fall is not a sustainable phenomenon and is a matter of concern, but it is not a long term event, he says.


SEZs Infused growth on residential catchments – Bangalore

When the Special Economic Zone (SEZ) Act 2005, supported by the SEZ Rules was introduced in 2006, the idea was to make it easier to establish large, self-contained facilities with excellent infrastructure with the aim to promote exports. As per the guidelines, SEZs can be developed by public or private players or even jointly, by State governments, their agencies, or on the public-private partnership (PPP) model.

They feature large-scale work which in turn forces the require pertaining to real estate choices within the vicinity supplying a traction to help improvement connected with industrial spots in addition to societal commercial infrastructure.


Pushed pertaining to improvement

Girish k S, Local Director– strategic consultant, Jones Lang LaSalle India, makes clear precisely how its disturbed localities within the vicinity in addition to triggered the particular improvement connected with assistance commercial infrastructure. “In Bangalore, financial individuals well guided guidelines connected with improvement, since noticeable from your method micro-markets just like Whitefield, Electronic city, the particular Marathahalli-ORR belt, in addition to Hebbal formulated through the years. SEZs being significant financial hubs, the particular regions adjoining these formulated very rapidly, along with enlargement connected with assistance commercial infrastructure in addition to features just like residential, list, schools in addition to hospital wards, in most these types of micro-markets. ”

Drive pertaining to residential marketplace

The particular Outer ring road (ORR) granted the fillip to the industrial improvement close to these types of regions. Commercial spots inside these types of localities, in turn, are generally bringing about the particular multiplication connected with residential catchment purses plus the major improvement connected with excellent societal commercial infrastructure just like schools connected with overseas expectations, list improvement (malls together with principal streets) plus hospital wards.

Superior connectivity with the Metro has been designed in order to be connected actually the particular peripheral regions of the city where SEZs are situated to the main in addition to suburban areas. The particular reputation connected with lots of industrial living space within the northern in addition to Far East has offered to the organizing from the Peripheral outer ring Path.

Naveen Nandwani – Director, south India, Cushman & Wakefield, elaborates, “SEZs have come way up typically within the Hebbal to help Sarjapur Path extend from the ORR, and thus enhanced the particular residential improvement within the northern, far east in addition to south-east regions of the city. Inside northern, regions for example Devanahalli, Hebbal, Bellary Path, Thanisandra, Hennur in addition to Horamavu get benefitted from distance to help SEZs. In the east, residential catchments cropped way up inside Whitefield, Hoodi, combined Varthur Path in addition to combined Old Madras Path a result of the establishment connected with SEZs. Inside south-eastern areas, Sarjapur Path in addition to HSR layout viewed a growth inside residential purses. ”

Girish adds, “Key micro-markets benefiting from your everyday living connected with SEZs and it developments within the town are generally Whitefield, electronic city, Marathahalli-ORR stretch, in addition to Hebbal. Moving forward, some of the catchments from the existing/upcoming SEZs for example Mysore Path in addition to Yelahanka may also be likely to be benefited. ”


Attributes of residing in these types of belts

Thinking about the hectic day-to-day lives in which specialists guide, his or her concern can be to attempt to cut-down on the travelling time. So, house owners prefer to purchase properties in the vicinity of his or her work locations.

Naveen explains, “The commercial infrastructure of those regions shows offer in addition to becomes focus from your government and even the particular exclusive people look to develop greater well connected with societal commercial infrastructure to help focus on the particular mushrooming residential regions. So, homogenous improvement can be more likely inside these types of belts since currently viewed within the Whitefield region. Because the requirement pertaining to flats, possibly in the marketplace or even pertaining to rent is always an excellent source for these types of belts, whilst a buyer, these types of regions hold offer connected with channel to help large profits.. ”


Possibility of thanks

The particular improvement in addition to enlargement connected with assistance commercial infrastructure in addition to features close to SEZs will always make dwelling comfortable, pertaining to house owners. The particular altering attributes of those regions are able to offer larger profits pertaining to investors inside property.

Girish highlights, “Most of those micro-markets will likely watch 9-10 percent compounded 12-monthly growth inside prices connected with residential spots within the channel to help long conditions. Regarding industrial in addition to list space leases, the particular hire expansion can be 5-6 per cent per annum as the present generate may well offer you 16-18 percent profits pertaining to long-term investors. ”


Future residential improvement

As outlined by Naveen, “Growth connected with residential catchments within the east, close to Old Madras Path to Hoskote, can be stimulated by means of establishment connected with new SEZs generally there. Whitefield in addition to Hoodi, growing residential regions, are generally inside 10 km with this place and will grow more in case far more SEZs are generally recognized within the vicinity. ”

Considering that Bangalore has evolved in the concentric way, growth has been happening all along the major corridors and micro-markets where large economic drivers such as SEZs and IT parks are located.

“From that perspective, micro-markets for example Whitefield, Gadgets Town, Marathahalli-ORR extend, in addition to Hebbal will likely go on watching expansion or even more enlargement. In the same manner, all Legitimate Small business Region locations – Bannerghatta Path, Kanakapura Path, Sarjapur Path, Mysore Path, Bellary Path, Tumkur Path in addition to Hosur Path – will likely go on watching expansion. Growth combined Bellary Path is likely to be major a result of the enlargement connected with city-level commercial infrastructure all down the route up to the airport. Growth combined Kanakapura Path, Tumkur Path in addition to Mysore Path is likely to be powered by phase 1 of the Metro, ” affirms Girish.

Source: Times Property,The Times of India, Bangalore

Luxury properties segment growing leaps and bounds: Bangalore

Bangalore has been witnessing a huge demand and supply in the luxury housing segment category. The reason behind the splurge into this segment

Rapid urbanization, growing levels of income and population has stimulated the demand for luxury homes in India. Luxury residential property market has become the fastest growing real estate trend in the world. It is not only attracting domestic real estate developers but also foreign investors. Thus, it was only natural for major builders to get into the luxury segment.

What is the future of luxury in Bangalore? Also, what are the future trends for luxury in the city?

The fact that new, high-end residential projects are being announced across the country is a sign that the country’s appetite for luxury homes is growing. Bangalore is no different.

According to global real estate consultancy, Cushman and Wakefield, developers are planning to launch about 9,000 homes in the super luxury segment across major cities in India over the next 2-4 years. Demand for premium housing has witnessed a growth of 10 to 15 per cent in the last three months and prices have increased due to rising demand.

The outlook of people has changed drastically. There is a paradigm shift from a “necessary asset” item to a “branded product” and an “expression of one’s social status” as far as luxury projects is concerned. New-age luxury home buyers are now ready to spend a significant amount on the aesthetics of kitchens, bedrooms and bathrooms. We anticipate that the South Indian real estate market will continue to dazzle in terms of the luxury housing segment.

Are customization offered in these luxury projects?  What is the cost of customization?

Yes, customization’s are offered in these luxury projects. These largely include layout changes to a certain extent. The cost of customization varies depending upon the requirement of the client and construction status of the project.

Mainly Targeted to:

This soon is becoming a niche sector for the developers, as splurge in economic conditions also wont effect to that extent. Social status of an individual matters to most, Luxury homes are mainly targeted to the higher segment of the society. (Senior management, corporate houses, non-resident Indian businessmen and high net-worth individuals).

The middle class people are not left behind in all this fancy new homes with all the modern amenities to one’s disposal. There are many developers in Bangalore who work towards mid range apartments and flats. Where the quality and amenities are not compromised to the price difference.

One such name in Bangalore is Dreamz Infra Pvt Ltd, they have come up with many such properties in different parts of Bangalore. With staggering discounts and excellent review from customers have made the difference to stand out in this alley of property developers in Bangalore.

Source: The Times of India, Bangalore

Real estate regulator bill passed for buyers relief

The Union Cabinet on Tuesday cleared a legislation to set up a long-pending real estate regulator aiming to protect home buyers from unscrupulous developers and builders.

A real estate regulator — to be set up in every state — will ensure that private developers get all their projects registered with it before sale and only after obtaining all necessary clearances.

“It will be mandatory for developers under the law to get every project registered with the regulator before selling any immovable property,” an official said.

While the commercial real estate has been kept out of purview of the proposed bill, it will apply to residential buildings.

There is a provision for mandatory public disclosure of all project details like credentials of promoters, lay out plan, land status, carpet area and number of apartments booked and status of statutory approvals, addressing a major concern of buyers about incomplete or fraudulent land acquisition and pending clearances.

The consumer-friendly legislation will clearly define carpet area and private developers will not be allowed to sell houses or flats on the basis of ambiguous super area.

The builders won’t be allowed to publish misleading advertisements to lure buyers while advertising the project. “They will have to use the pictures reflecting the actual project that will be delivered to homebuyers,” an official said.

The developer will have to deposit 70% of funds received for a particular project in a separate bank account to cover the construction cost of the project. This provision was made to discourage developers from diverting funds of a particular project to another that often causes inordinate delay.

Punitive provisions ranging from a penalty which may be up to 10% of the project cost, de-registration of the project and imprisonment are being made in the bill.

The Real Estate (Regulation and Development) Bill 2013, which seeks to provide a uniform regulatory environment to the sector, was opposed by private developers in totality but housing minister Ajay Maken stuck to it, saying the basic tenet of the legislation is based on public disclosure that will infuse transparency.

Under the bill, there will be a model builder-buyer agreement which is expected to reduce ambiguities in real estate transactions that not many buyers are familiar with.

Real estate agents will also be asked to register with the regulator. Agents, an important link between the promoter and buyer, have been an unregulated lot till now. Once they are registered, it will help in curbing money laundering.

For fast tracking settlement of disputes, an adjudicating officer not below joint secretary in the state will be appointed by the authority. There will also be Real Estate Appellate Tribunal that will hear appeals from orders, decisions or directions of regulator and adjudicating officer.

Source: The Times of India, Bangalore