For investment professionals, demonetisation has thrown open the doors in terms of real estate opportunities. Demonetisation has reduced speculation around real estate assets for the time being and moving ahead given RERA regulation, this impact is here to stay. Real estate assets – not being speculative in nature and reflecting real fundamentals – are not only beneficial to the economy overall, but also create three opportunities for investors:

1) Lending Opportunity to Small to Medium-Sized Developers: While large-scale projects and developers have seen significant interest from private equity and real money investors, small to medium-sized developers have seen their traditional sources of funding dry up with demonetisation. The fact that most of these developers were struggling with high debt levels prior to demonetisation has only exacerbated the problem.

Additionally, RERA has ended the traditional practice of using home buyer’s advance payments to fund projects to a large extent. Demonetisation has reduced the access to cash. These changes are positive in the long run and have created a need to provide funding to the medium and small-sized developers. The investment opportunity specifically is in bridge loans to complete projects that are stuck at 50-80% of completion. The obvious question is that given the influx of funds into real estate in the last 3 years, why do these opportunities exist? The reasons are:

a. The relatively smaller size of the projects creates deal sizes not worth the time for some of the larger funds. Mind you, the due diligence required is the same as the larger ticket size deals.

b. Asymmetric information is another issue. However, working with local advisors to put together a portfolio of such assets to create dispersion around location of project, type of project and term structures of loans should create value.

c. Most of the focus in the last few years has been on high quality office space. However, a lot of residential projects are stuck as well. The ability to acquire these residential projects at a discount or to use structured finance transaction to get equity kickers can create significant value.

2) Sale and Leaseback Transactions: While a lot of lenders have seen a rise in NPAs in their loan books as high debt levels take a toll, foreign investors so far have been relatively reluctant to invest in distressed Indian opportunities. Demonetisation has started the process of making the real estate sector far more professional and institutionalized. Lenders should use the real estate sector with a revitalized image to shore up their balance sheets. There is tremendous demand for attractive brownfield real estate from yield hungry foreign investors.

Perhaps lenders such as banks can start monetising their real estate assets through a sale and lease back agreement with foreign investors and take advantage of the new image of a far “cleaner” real estate sector. A large bank owns significant property in prime areas of, say, Delhi, Mumbai, Kolkata and Bengaluru. The bank can work with an investor such as a pension fund or an insurance company to sell their office assets to the investor and lease it back for operations. This solves a twofold problem. The bank gets capital infusion that it so sorely requires and the investor gets access to attractive assets with a better credit borrower rather than investing in the distressed loans. The economy overall benefits tremendously since the capital infusion adds value. Demonetisation has created this opportunity with an enhanced image for the real estate sector.

3) Affordable Housing: Demonetisation has reduced the speculative nature of house buying to some extent. Hence demonetisation has made houses more affordable. This implies this is the right time to push ahead with the affordable housing scheme in full throttle. While the interest rate subsidies by the government are a step in the right direction, we feel additional regulations are required. Essentially demonetisation has provided us with a real estate sector that is ripe for new regulations such as:

a. Affordable Housing PPP – The Road project PPP model in India is a good template to learn from. The government should standardize documentation and take care of land acquisition. The government should acquire land that is relevant for affordable housing directly. This also assists distressed developers to monetize assets from their land banks.

2. Affordable Housing Authority – The government should create a central authority modelled on the lines of NHAI to take care of land acquisition, title deed issues, environmental clearances and viability analysis

3. Bidding Auction – The private sector should bid for projects all the way from grants on one end of the spectrum to revenue premium at the other, depending on the financial feasibility of the projects

Demonetisation has lent credibility to real estate. This is an opportunity to leverage the new-found credibility to provide a fillip to a core and much troubled sector of the economy to create not just economic value through the efficient use of capital, but also tremendous social capital as a nation.

(The author is CEO, Development Tracks)

Source : www.financialexpress.com

More than 50% of Indians are interested in buying an apartment as compared to villas or builder floor apartments, and 2BHK housing units are the most preferred choice for more than 40% of home buyers in Delhi, Bangalore, Chennai and Kolkata, said a research report by Housing.com today.

Housing.com, part of Elara Technologies Pvt Ltd, which also owns PropTiger.com and Makaan.com, today unveiled the findings of its research on top investment localities and preferred property type by Indian home buyers. Based on insights drawn from the traffic witnessed on Housing.com, this research helps to understand the buying trends of Indian home buyers across top 5 cities in India – Mumbai, Delhi-NCR, Bengaluru, Chennai and Kolkata.

While looking for a property, a buyer would normally prefer a perfect mix of a great social and civic infrastructure along with proximity to key locations. This research aims to assist home buyers to identify top localities for property investment in the five regions and presents preferred property type and configuration by home buyers in those regions.

Key highlights from the research:

Top localities for investment

# Mumbai’s property market is legendary and the hottest investment destinations in the city today include Thane West, Dombivli East, Mira Road East, Andheri West and Panvel.

# Delhi and the National Capital Region (NCR) region is bustling with a range of infrastructure development and top localities to invest in the region include Rohini, Uttam Nagar, Dwarka, Sector 16/Palam Vihar and Noida Extension.

# Bengaluru, popularly known as the ‘Silicon Valley of India’, is one of the upcoming residential markets in India and top 5 investment localities in the city are Hormavu, K R Puram, Whitefield, Electronic City and J P Nagar.

# On the back of infrastructural developments, Chennai has been transforming itself into a real estate hotspot. The top localities of the city preferred for investment are Perambur, Kolathur, Ambattur, Madipakkam and Chromepet.

# The top localities in Kolkata, the capital city of West Bengal are South Dum Dum, Dum Dum, Rajarhat, New Town and Garia.

Type of Houses

# More than 50% of Indians are interested in buying an apartment as compared to villas or builder floor apartments.

# Mumbai is fast emerging as the preferred destination for home buyers as 96% of home buyers choose apartments over villas and builder floor apartments.

# Surprisingly, demand for apartments in Delhi-NCR was recorded lowest at 54%.

# The preference for builder floor apartments is 37% in Delhi and extremely low in other cities (2% in Mumbai, 1% in Bangalore, 3% in Chennai and no preference at all in Kolkata).

The overwhelming preference for apartments shows the growing acceptance of this property type amongst the urban population who prefer a standard lifestyle with various amenities at a reasonable cost.

Preferred Configuration

# 2BHK housing units are the most preferred choice for more than 40% of home buyers in Delhi, Bangalore, Chennai and Kolkata. In Mumbai, 51% home buyers prefer 1 BHK owing to escalating property rates in the city.

# 3BHK is the next most preferred configuration in Delhi-NCR, Bangalore, Chennai and Kolkata (on an average 20% home buyers prefer 3BHK in these cities) as most of the buyers look for a balance between spacious homes, amenities, luxury and affordability. However, only 6% home buyers prefer 3BHK in Mumbai, stating affordability as the major concern in the region.

Source: www.financialexpress.com

With the announcement of the rates for taxation under the Goods and Services Tax (GST) for various goods, India is now one step closer to becoming a unified tax market. However, while the impact of GST on various sectors and goods is now known, industry experts are still divided over how GST will impact real estate going ahead as clarity on the tax slabs for services is still awaited.

According to industry experts, prima facie it looks like that there will be a neutral impact from cost perspective. Although the work contracts will attract around 12% and most of the construction material is under the 18% and 28% slab, the availability of input tax credit should neutralize the overall impact. A lot, therefore, will depend on the proper implementation and a proper system of claiming tax credits.

With the Real Estate Development and Regulation Act (RERA) also under implementation, developers may need to focus much more on streamlining their processes. We may expect initial teething issues, but implementation of GST should further enhance India’s attraction as an investment destination by encouraging greater transparency and ease of operation in all property deals, says Surabhi Arora, Senior Associate Director, Research, Colliers International India.

However, it is too early to say whether the implementation of GST will actually cool down the prices in the commercial and residential segments. “More clarity will come in the coming days as it is still not clear what would be the abatement available for land cost for calculating service tax on under-construction projects,” she says.

Anshuman Magazine, Chairman, India and South East Asia, CBRE, also says that several goods connected to the real estate industry are falling under the 18% and 28% slab. However, clarity on the tax slabs for services is still awaited. “In the long term, however, the successful implementation of GST in the country will be a game-changer for the market. The removal of various federal tax barriers and creation of a common market will improve supply chain efficiency and attract more FDI into the country,” he says.

Apart from attracting more FDI into the country, GST will also impart more transparency to the sector which currently faces a perception issue. “It will provide a thread for audit and checks for better control and monitoring of the sector. As a result, the home buyer will be empowered towards informed decision-making,” informs Amit Agarwal, co-founder, NoBroker.

GST will free end-consumers from the hassle of paying several state taxes at different levels, therefore removing the double taxation impact. Also, the implementation of GST will hugely benefit the NRI community towards investment in real estate through the formation of a seamless all-inclusive channel. The existing channels include issues of multiple taxation, amounting to indirect taxes and no uniformity.

In totality, “GST will add up as another factor among the government’s other schemes towards affordable housing, which is beneficial to the growth of the sector. Buying a home will now be easier as benefits will now be extended to both the developers and the end-consumers, says Agarwal.

Source: www.financialexpress.com

Planning to buy a property in Kolkata. The good news is that property prices are comparatively lower than in the rest of the metro cities of India. The ‘city of joy’ is a good ground for making a purchase without making much dent in the markets. Magicbricks brings some key pointers which will help you in making a correct investment decision.

The year started with a marginal rise (0.56%) in property prices. The top localities registering highest average price per sq ft are Ballygunje Circular Road (Rs 14,752); followed by Keyatala Road (Rs 10,263) and Ultadanga (Rs 7,829)

The year 2016 ended with a marginal 0.2 per cent increment. In the previous quarter (Jul-Sep 2016) the recorded gain was 0.57 per cent
East Kolkata should be surveyed as many upcoming projects are present here. Properties in this region start at Rs 2,000 per sq ft and reach Rs 6,000 per sq ft. The region accounts for almost half the city’s residential supply and grew by 0.5% over the previous quarter

North Kolkata caters to the budget segments with prices between Rs 2,000-4,000 per sq ft. Average prices here declined by a significant 3.4 per cent this quarter. Choose this region only if you have a long horizon

West Kolkata is the least significant residential destination of the city. This region provides properties in the range of Rs 3,000-4,000 per sq ft. It climbed by a significant 3.9% over the last quarter. Don’t miss this portion of the city!

South Kolkata, starting from the south of AC Bose Road, provides the widest range of options. Properties here start at Rs 2,000 per sq ft and go upto Rs 8,000 per sq ft. This region grew by just 0.1 per cent in the quarter. It provides the costliest properties of all regions in Kolkata, where properties costlier than Rs 6,000 per sq ft are almost exclusively found here

If you are facing trouble choosing between ready possession and Under Construction (UC) properties, then you should know that the former were 3.8 per cent more expensive than UC properties. The average percentage price difference in the UC versus Ready-to-Move-in (RM) properties remained more or less stagnant over the last quarter..

Source: realty.economictimes.indiatimes.com