Thursday, 25 August 2016

2016 is the best year in this decade to invest in Real Estate

Here is why 2016 is the best year of this decade to invest in real estate for both investment
and home buying purposes.

With the downfall in the real estate market, most of the builders are smart enough to sense the losses.
While many builders have put a stay on their project with the hopes for revival of the market, others are reluctant to sell off the build projects. However, like said ‘one man’s tear is another man’s joy’, similarly, the downfall in the market has certainly become the golden opportunity for the home buyers and investors.

India is a nation which has a very high percentage of aspiring home buyers as owing a property is a matter of pride and a dream for everyone. However, owing to the annoying delays in the construction projects, the past few years had witnessed a slowdown in the home sales. The substantial delay was caused due to the bulk in demand vis-a-vis the stagnancy in supply, following the lack of any authority to look forward to. However, certain development and introduction of policies have worked together to turn as the best year of the decade to invest in real estate for investment and home buying
purposes.

The key development luring investments and home buyers are as below:

  • Announcement of Smart Cities Mission: With government announcing its ‘Smart Cities Mission’ in January 2016, it provided a list of 20 cities. The list further made it easy for the prospective investors or home buyers to select and choose from the cities for the investment. The list also hints at the upcoming development in the real estate sector and its subsequent growth. Therefore, with the list in place is becomes essential for the investors and home buyers to grab the opportunity to benefit the most.
  • Introduction of Real Estate Act: The long awaited reform was introduced at the time when there was a major need of regulation of transactions between the buyers and sellers. With the act laying some solid foundation for building and implementation of what the consumers want; it has also encouraged many home buyers to park their money in real estate. It has ultimatly paved the way towards matching the demand and the supply gap in the sector along with bringing back the lost confidence of the customer in real estate
  • Providing additional deduction for first home buyers: The introduction of additional deduction of Rs 50,000 for the first home buyers, in Union Budget 2016-17 by Finance Minister Arun Jaitley, further gave an added reason for investment in housing sector. The reform has been chiefly introduced for first home buyers and hence has been announced on interest for loan up to Rs 35 lakh, provided the house value doesn't exceed Rs 50 lakh.
  • Deduction in basis point by RBI: With the Reserve Bank of India reducing its benchmark interest rate by a higher-than-expected 50 basis points to a four-year low, it the step is further encouraging for home buyers who can avail a home loan at a much lower interest rate. Although, the banks have been slow is passing on the benefit to the home buyers, they have still deducted their home rates by 30 to 35 basis point.

All the above reforms and development have definitely blessed 2016 to become a boon for the all the investors and home buyers. The year has given numerous reasons and opportunities to leverage from, making 2016 a good year to invest real estate.

Monday, 22 August 2016

7th pay commission effect on real estate market


With the implementation of 7th pay commission, the realty sector in India is going to witness a rise in the home purchases especially by the government employees as it will increase their home loan eligibility.  The 7th Pay Commission recommendation will be effective from next year and the Cabinet will decide if the arrears for the six months have to be paid in one go or in installments. The developers are already planning schemes to attract the government employees to invest in their projects. The government’s decision to implement the recommendations of the 7th Pay Commission will benefit over one crore central government employees and pensioners. Also, the housing loan allowance has been hiked from Rs 7.5 lakh to Rs 25 lakh. Due to this hike, there will be more liquidity in the market as the purchasing power of a large chunk of central government employees will increase.  When the income of a person increases, he tends to spend more on things to fulfill his needs and to upgrade his status. Therefore, this will increase the demand of Houses in the market. In the last 2-3 years, the demand has been declining because of high-interest rates. Currently, the real estate sector is weak because of the low demand and high debt. But demand for residential property may show upwards trend because of the increase in the disposable income.


2016 as the best year in this decade to Invest in real estate for both investment and home buying purposes

2016 as the best year in this decade to Invest in real estate for both investment and home buying purposes

With the downfall in the real estate market, most of the builders are smart enough to sense the losses. Resultantly, while many builders have put a stay on their project with the hopes for revival of the market, others are reluctant to sell off the build projects. However, like said ‘one man’s tear is another man’s joy’, similarly, the downfall in the market has certainly become the golden opportunity for the home buyers and investors.

India is a nation which has a very high percentage of aspiring home buyers as owing a property is a matter of pride and a dream for everyone. However, owing to the annoying delays in the construction projects, the past few years had witnessed a slowdown in the home sales. The substantial delay was caused due to the bulk in demand vis-a-vis the stagnancy in supply, following the lack of any authority to look forward to. However, certain development and introduction of policies have worked together to turn as the best year of the decade to invest in real estate for investment and home buying purposes.

The key development luring investments and home buyers are as below:

Announcement of Smart Cities Mission: With government announcing its ‘Smart Cities Mission’ in January 2016, it provided a list of 20 cities. The list further made it easy for the prospective investors or home buyers to select and choose from the cities for the investment. The list also hints at the upcoming development in the real estate sector and its subsequent growth. Therefore, with the list in place is becomes essential for the investors and home buyers to grab the opportunity to benefit the most.

Introduction of Real Estate Act: The long awaited reform was introduced at the time when there was a major need of regulation of transactions between the buyers and sellers. With the act laying some solid foundation for building and implementation of what the consumers want; it has also encouraged many home buyers to park their money in real estate. It has ultimately paved the way towards matching the demand and the supply gap in the sector along with bringing back the lost confidence of the customer in real estate.

Providing additional deduction for first home buyers: The introduction of additional deduction of Rs 50,000 for the first home buyers, in Union Budget 2016-17 by Finance Minister Arun Jaitley, further gave an added reason for investment in housing sector. The reform has been chiefly introduced for first home buyers and hence has been announced on interest for loan up to Rs 35 lakh, provided the house value doesn't exceed Rs 50 lakh.

Deduction in basis point by RBI: With the Reserve Bank of India reducing its benchmark interest rate by a higher-than-expected 50 basis points to a four-year low, it the step is further encouraging for home buyers who can avail a home loan at a much lower interest rate. Although, the banks have been slow is passing on the benefit to the home buyers, they have still deducted their home rates by 30 to 35 basis point.

All the above reforms and development have definitely blessed 2016 to become a boon for the all the investors and home buyers. The year has given numerous reasons and opportunities to leverage from, making 2016 a good year to invest real estate.


Do you think monsoons are the optimal time for home purchase?



The monsoon season may not appear to be the best time to go house hunting. No one likes to drive around in pouring rain, not to mention infuriating traffic jams. Besides the heavy rain, most people avoid buying anything for two – three weeks during monsoon, as they believe it inauspicious because of the ceremonies of shraadh or pitrapaksh. Due to this, most developers are ready to give their unsold inventory on discount during this time. They sometimes also refer it as Monsoon Discount. Searching for house during monsoon season also helps you judge the situation of the locality you willing to live in as during this season, roads get water logged and other basic infrastructure is tested to its extreme conditions. Heavy traffic during this season also help you take a decision of short listing a locality and purchase the property. Looking for a house during monsoon saves you a lot of trouble as you know what you’ll be dealing with during the next monsoon.

In case of fully constructed properties, examining the house during monsoon will give the customer fair idea about its construction quality and other issues that may happen during this season. You can easily spot signs of dampness or leakage, and evade buying an ill-constructed house. Structural soundness of a building is an vital factor, as you may end up spending a huge amount on repairs if the house turns out to have water seeping troubles. Looking for such problems during the monsoon is important because these impact the life of the property as well as its resale value. 

RERA Bill Becoming Reality


A Real Estate investor ( may be a seller/buyer) has always been facing problems with the delays in the project launches, insufficient information, lack of transparency, fast track dispute resolution, fraud practices etc; but the features in the Real Estate (Regulation and Development) Bill has given utmost importance to resolving the problems faced by the Real Estate end – users and thus it will be helpful in making Real Estate transaction a smooth process in all aspects.

The Real Estate (Regulation and Development) Bill, 2016, became an act on May 1, initiating the entire process of establishing the guidelines to protect the interest of home buyers in India. With all due respect to the act being a positive step towards the development of this industry, government authorities should be made accountable for timely approvals. Its implementation rules have to be made by the state governments within 6 months- by 31 October, 2016 as per the section 84 of the act. Developers are obligatory for alot of policies and rules post the enactment of Real Estate Bill. Hurdles for Developers have increased to provide ease to buyers. From no pre-launches before approval to Builders to be liable for structural defects for five years as against two years, there are many such amendments that will become challenge for developers to work ahead whereas all these amendments in the act will bring smoothness in blocked process of buying a home for a buyer. 



Though the move is in the right direction, we still feel that a lot of critical elements are missing like single window clearance.

Friday, 22 July 2016

EMERGENCE OF NEW SMART CITIES

Urbanization goes hand in hand with the economic development of any region. The growth of a smart city can give way to massive opportunities, particularly from the real estate perspective. In the approach to the Smart Cities Mission, the objective is to promote cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment and application of 'Smart' Solutions.

The real estate market in the eastern regions of India has shown a sluggish growth that too limited in one or two cities in each state. With the inclusion in 100 Smart Cities, there will be renewed focus on Industrial investments. We can also expect an increased investment in the areas of - BPO, Automobile, Education and Healthcare. Cities like Bhubanehswar (Odisha) and Guwahati (Assam) are the cities from Eastern part of the country to be shortlisted in first 20 smart city project. Other cities in the list of 100 from eastern belt include Pasighat(Arunachal Pradesh), Muzaffarpur, Bhagalpur,  Biharsharif from Bihar, Raipur and Bilaspur from Chattisgarh, Ranchi(Jharkhand), Imphal (Manipur), Shiling (Meghalaya), Aizwal (Mizoram), Kohima( Nagaland), Bhubaneshwar and Raurkela from Orissa, Namchi (Sikkim), Agartala (Tripura), New town Kolkata, Bidhannagar , Durgapur and Haldi from West Bengal.

This is a good move by the government to strengthen the underdeveloped cities and build the regional economies. With the development of these cities various avenues of growth will open up for the locals within their state. Currently the focus of real estate is in metros and a few adjoining cities. Tier 2 and tier 3 cities haven’t seen any growth spurt. This ultimately will lead to a revival of demand in the real estate market. Moreover, with multiple work options that will originate in these smart cities, and increasing income levels, the demand for housing will increase and also the demand for commercial space as various work options would need the set up.

So it definitely is a good move towards developing these cities and making them self sufficient.






Challenges in Building affordable housing


Urbanization is generating a massive housing shortage and this growing concentration of people in urban areas has led to problems of land shortage, housing shortfall and congested transit and has also severely stressed the existing basic amenities such as water, power and open spaces of the towns and cities. This is primarily due to the skyrocketing prices of land and real estate in urban areas. Development of large-scale affordable housing is the greatest necessity of urban India today. The objective of creating affordable housing is to provide adequate Affordable Housing shelter to all. Creation of affordable housing should encompass both – enabling people to buy and to rent, for which there is a need to put an institutional structure in place. While the concept of affordable housing seems to be a simple solution to current housing woes, its execution remains complicated due to the unclear policy framework. To make affordable housing work in India, it would require “will” from all the stakeholders by slightly adjusting their interests towards a wider social cause.

Ever since the first National Housing Policy in 1988, the government has tried to reform the housing and real estate sector yet many affordable housing schemes have underachieved. With infrastructure and investment being two of the pillars to transform India, the RERA Bill has built a road for real estate development. 

Affordable housing is a sector that has stood of late the test of time when large scale housing projects have failed to attract buyers and investors. Today, realty majors who previously focused only on mid-income and high-end housing projects are seriously looking at building up their presence in affordable housing as well. According to estimates, around 600 million people are expected to make urban India their home by 2031, a whopping 59% growth over 2011.

As announced by Ministry of Finance in his recent budget speech, India faces an urban housing shortage of approximately 20 million units, of which housing for so-called Economically Weaker Sections (EWS) and Lower Income Groups (LIG) – families with a monthly income of up to Rs 16,000 – accounts for over 90% of the gap. A number of schemes were introduced by previous governments to address the issue of affordable housing, including the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Rajiv Gandhi Awas Yojana and Affordable Housing in Partnership (AHIP) scheme

With the growing demand for affordable housing come the various challenges in building them. The biggest challenge is the lack of a clear definition and separate class for affordable housing as it is a relative concept and could have several implied meanings in different contexts. For some developers in tier 1 Cities, a unit worth Rs. 50 Lac is also considered to be affordable. And on other hand, few developers who actually build the so called affordable houses are selling the units in the price band of Rs. 10 Lac – Rs. 20 Lac. Developing affordable housing in Indian cities faces significant challenges due to several economic, regulatory and urban issues. Whilst the lack of availability of urban land, rising threshold costs of construction and regulatory issues are supply side constraints, lack of access to home finance is a serious demand side constraint, which impacts the ability of low income groups to buy housing. ‘Affordable Housing’ is an idea whose time has come, and sooner rather than later, planned sustainable urbanization will have to be by default and not by choice.

The Current Modi government has big plans to provide housing for all Indians by 2022. It recently announced that 2,508 cities in 26 states have been selected under ‘Pradhan Mantri Awas Yojana’ for providing affordable houses to low income families.

Meanwhile the need will continue to expand with increased migration to urban areas and development of smart cities. The central government and state housing boards will continue to be major providers of affordable housing. But they cannot do so on their own given the enormous scale of the problem. They thus need to recognize the imminent need to bring in the private sector in the form of Public Private Partnership (PPP), which can only happen when regulations are streamlined and made more effective.  It is heartening to see that the issue of housing finally finding national resonance and being a major priority of the Prime Minister. The time has come for the affordable housing policy framework to become rationalized and for the government and private sector to work together to unlock the potential of this enormous market and achieve the promise of a decent house for every Indian.

Another challenge that works as a hindrance for the affordable housing by private players is the high cost of land. As a developer they prefer to build high priced apartments to cover their cost as the low cost properties does not provide easy returns for their land investments. Also due to this high priced land options and lack of financing for developers, the burden is shared onto the customer by increasing the prices. Also due to the lack of Single Window clearance for various approvals required by the builder, the delay in approvals lead to higher interests paid by developers that ultimately leads to price increase and the properties no more remains within the affordable housing price band.
As India’s population continues to grow and more people move to its cities, affordable housing is going to become ever more important. Only by getting the foundations right now can the country cope with future pressures of rapid urbanization