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Majority of builders may disappear from the scene in three years, says Anarock

Of about 2,20,000 units of buildings constructed across the country there is hardly one unit per builder.

 

 

KOCHI: Almost eighty percent of the builders in the country will vanish from the scene in the next three years in the prevailing conditions, according to Anuj Puri, chairman of Anarock, Real Estate Services Company.

 

Of about 2,20,000 units of buildings constructed across the country there is hardly one unit per builder. Only trustworthy builders focusing on quality of construction will be able to survive in the future, he told mediapersons at the state conference of Kerala chapter of Real Estate Developers’ Conference of India (Credai) being held here on Friday

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In Kerala he said half of the real estate developers will disappear in three years. The small players in the industry will fold up unable to face the competition.

 

“The real estate sector in the state lacks proper marketing and promotion. High cost and non- availability of land, excessive levies are the major challenges faced by the industry,” he said,

 

The consumers are forced to rent out houses rather than buy a new one due to the diverse taxation. “Consumers are burdened with excessive rate of interest when they buy a house on loan, whereas staying in a rented house will cost less for them,” he pointed out.

 

Earlier inaugurating the conference Kerala Governor Arif Mohammad Khan said the demolition of flats at Maradu was really painful but was an eye opener to all to follow the laws and upkeep the environment.

 

Everyone has to adhere to the rules and regulations set by authorities and the incident has alerted the builders in general to be cautious while developing new projects,” he said.

 

Confusion in implementing the CRZ notification is the major challenge faced by real estate developers in Kerala, exclaimed Nagaraj Reddy, vice president, CREDAI South.

 

Source: https://economictimes.indiatimes.com/

A look at investment options in real estate in 2020

Investors can explore options such as warehousing, co-working spaces and even co-living.

 

 

With ready A-grade rent-yielding commercial assets becoming scarce and the residential market no longer offering the kind of returns it did a few years ago, investors are now turning to sunshine options such as warehousing, co-working spaces and co-living.

 

In 2019, commercial office real estate flourished and remained the top-ranking real estate asset class. The first REITS by Embassy Office Parks was launched in April.

 

The launch of Embassy REIT in 2019 opened up a new asset class for investment in country. Its success can be gauged from the fact that between 18 March and 30 November 2019, the price of a single REIT unit reached Rs 445.3 from a launch price of Rs 300, registering a significant 48 percent rise.

 

The country is expected to see the launch of more REITs in 2020.

 

esidential continued to struggle under the funding crunch and slow annual sales growth. In fact, affordable housing remained upbeat in 2019 thanks to multiple government sops throughout the year. First-time homebuyers were given further tax deductions (now amounting to Rs 3.5 lakh in a year) on interest amount of home loans below Rs 45 lakh availed within the financial year 2020 end. Luxury and ultra-luxury segments remained limited to end-user interest, with no serious investor activity.

 

Rs 25,000 crore stressed asset fund expected to play key role in 2020

For the housing sector, the only light at the end of the dark financial black hole in 2019 was the announcement of the alternative investment fund (AIF) of Rs 25,000 crore to facilitate the completion of stuck affordable and mid-segment homes.

In 2020, the government’s stressed asset fund is expected to play key role in fulfilling last-mile funding for liquidity-hit stalled projects, according to an assessment by CARE Ratings.

 

According to experts, residential growth in 2020 will mainly depend on the swift on-ground implementation of some of the previously-announced sops. If not, it may negatively impact the sector with buyer sentiments derailing even further. And if done timely, these measures will yield positive impact on the Indian real estate in 2020. A major part of the residential growth will most likely unfold in the second half of 2020. And, the financially stronger players will stay ahead in the game.”

 

The year 2020 is also expected to witness multiple IBC-led resolutions of large real estate companies. This in-turn is expected to improve buyer sentiment and also revive some of the key markets in NCR and Mumbai-MMR in terms of demand for housing units.

 

Co-working, co-living and student housing to rule

Activities in rent-yielding commercial asset segment and construction across new segments like warehousing, as interest from foreign investors will continue to be elevated in 2020.

 

Asset classes like co-working, logistics and warehousing, co-living and student housing gained traction in 2019, attracting slow but steady investments (collectively 210 mn dollars).

 

There is a major shift from investors putting in their money into small office spaces to co-working spaces. There’s also been a trend wherein investors are buying into large floor plates and handing them over to co-working players to manage such spaces on a revenue share model with their gains often working out to be around 13-14 percent IRR, said real estate experts.

 

Student housing is yet another option as it is a resilient and a risk averse segment.

 

The industrial and warehousing sector has attracted Rs 254 billion worth of investments since 2017, with a growing demand for larger facilities among e-commerce companies and third-party logistics. The inflows are expected to touch Rs 495 billion by 2021, as existing participants expand their portfolios and new players enter the market, says the report by Colliers Research.

 

The concept of co-working spaces essentially involves groups of individual professionals and small and increasingly large-scale businesses who share workspaces. In an age when business cycles have dramatically reduced and companies need to constantly innovate to survive and remain competitive over the long term, a co-working workplace may provide the environment that fosters fresh thinking and innovation.

 

Besides companies, people such as business nomads, expats or those travelling to the country for a limited period are amongst those preferring to work out of plug-and-play co-working spaces. Another constituent is the growing volume of freelance workers (gig economy) who support corporate entities with specialised outsourced services in the advisory, consulting and designing domain such as recruiting and advertising, says a Knight Frank report.

 

Co-working spaces also enable the typical start-up to bypass the fixed rental cost with the additional capex requirements of fit outs and operational hassles of a traditional office space and opt for the flexibility of a co-working office. This not only allows the new business to occupy a contemporary workplace on a per seat basis but also the flexibility to increase, reduce or to exit the workplace.

 

Warehousing

Around Rs 22,100 crore of institutional capital has flown into this sector during this period. The actual size of capital movement would be higher, as these numbers only cover the major investments by organised players.

 

Going forward, demand for large warehousing spaces is likely to see steady increase as occupiers now to move out of their smaller warehouses and consolidate their activities in larger facilities, which are presently in short supply compared to the demand.

 

As more and more companies streamline their logistics networks,  unorganised players or smaller organised players would consolidate or sell their assets to larger ones. The industry is expected to witness a structural shift over the next 3–5 years.

 

The warehousing aspect in the logistics supply chain globally is going through a transformation. From being a mere storage space provider for goods, the segment is offering an array of value added services such as packaging, small scale manufacturing, cross docking, automation, algorithm based demand forecasting and distribution centres.

 

Who should invest?

Warehousing will be in demand regardless of REITs simply because of the push for logistics infrastructure in the country. GST rationalisation, and the growth of e-Commerce are additional drivers for large scale warehouses in various locations. Additionally, with India’s logistic industry being awarded the infrastructure status there is more interest in the sector for investments. Investments in Tier 2 cities and the outskirts of metros is a good bet by as they are perfect for a hub and spoke model and allow for easy transportation, say real estate experts.

 

Student housing

Student housing offers opportunities both to those who have the appetite to invest and developers who could bank on it as a lucrative rental yielding revenue stream. Currently, there are several players in the student housing space who have entered the market knowing fully well that there is huge demand but lack of supply. These include Your Space; Oxfordcaps which offers premium student housing facilities in Delhi-NCR and is headquartered in Singapore and Stanza Living.

 

The current demand for Purpose Built Student Accommodation (PBSA) across India is over 8 million bed spaces, a figure which is expected to grow at a rate of around 8 percent each year to touch 13 million beds by 2025, according to the Global Student Property 2019 report by Knight Frank.

 

Currently, the bulk of the student housing demand is serviced by the unorganized sector comprising rented accommodation and private hostelsThese properties are often below student expectationsThe demand supply gap coupled with strong fundamentals of the sector has led to an increase in investor interest to develop and operate welllocated, highquality purpose built accommodation.

 

Knight Frank estimates that there is currently a potential to deliver 6 million PBSA bed spaces on greenfield land located in close proximity to universities, while a further 2 million can be delivered through retrofitting and augmentation of existing oncampus hostels, said Saurabh Mehrotra National Director of Advisory Services, Knight Frank India.

 

Among the top hot spots for student housing are Bengaluru which has the highest concentration of university colleges in India.The current student population in professional courses is estimated at 6,60,000 out of which 3,06,377 require accommodation. Of this only 10 percent is covered by on-campus PBSA provision.

 

Co-living spaces

In India, the co-living spaces opportunity is here to stay as the millennial population currently accounts for 440 million. The growing interest for co-living spaces in cities such as Bengaluru, the National Capital Region (NCR) and Pune has been instrumental in many investors sitting up and taking notice of this emerging sector to diversify their portfolio and risk.

 

The demand for co-living spaces in terms of the number of beds is slated to grow from to 5.7 million, up from 4.19 million. The share of private beds shall rise from 15 percent to 30 percent of the total demand in the co-living segment, says a report by Cushman and Wakefield India titled Co-living – Redefining urban rental living.

 

The renting philosophy for co-living spaces is derived from millennial behaviour where such renters share less utilised areas such as living spaces, kitchen, balconies, etc. in order to make an economical rental decision and be part of a working community.

 

This trend is giving impetus to an organised rental market in cities such as Bengaluru, NCR and Pune in the same way as co-working spaces did for shared office spaces.

 

Co-living operators typically take properties on long-term lease from property owners, bear the makeover costs, load the properties with amenities and invest in creating a tech platform for residents. They also charge on per bed basis from renters for managing the properties.

 

According to Ashish R Puravankara, MD, Puravankara Ltd, close to 11 million square feet is in the pipeline for the next 4-5 upcoming quarters.

 

“We will be launching 4-5 projects with close to 8msft in the next 12- 18 months. Apart from our existing markets like Bengaluru, Chennai and Kochi, the brand will enter Mumbai and Pune market. We will be adding couple of more projects to our newly launched ultra-luxury residential line – WorldHome Collection– in the next couple of quarters. We are also focused on expanding commercial portfolio through warehousing, co-living and co-working spaces,” he told Moneycontrol.

Legalities of NRI property ownership

Shajai Jacob addresses six recurring queries to ease investing procedures in India

 

 

Though the Indian real estate environment has become very conducive for NRI investors yet again, there is often still hesitation to take the plunge because of uncertainty about the legal implications.

 

The doubts that many first-time NRI property investors have are often very pertinent, and finding answers to them is far from easy.

 

It is time to tackle some of the questions that NRIs often ask in Gulf countries which have, by far, the strongest complement of Indian expatriates anywhere in the world.

 

Often, these investors do not have access to a lawyer well-versed in Indian property laws and related fields of expertise, which is why many of their questions are legal in nature.

 

We answer recurring doubts that individual NRI property investors have:

 

1. Can an NRI use a Will to bequeath property in India to someone else — either another NRI or a resident Indian?

NRIs can certainly bequeath property to their legal heir/s or any one of their choice via a Will. An NRI can inherit any immovable property in India, whether it is residential or commercial — and even agricultural land or a farmhouse (which they are otherwise not entitled to purchase).

 

An NRI is also free to inherit property from another NRI or resident of India. However, the RBI’s permission is necessary if the property is inherited by a citizen of a foreign state and is a resident outside India.

 

2. Can a property be gifted, and what are the statutory charges levied on a gifted property?

An NRI can gift residential and commercial property to a person residing in India, or another NRI. However, if the property is agricultural land, plantation property or a farmhouse, it can only be gifted to a citizen of India residing in India.

 

Gifts received from relatives (as defined under the Income Tax Act) are not taxed — but at the time of registration, one has to pay the prevalent stamp duty and registration charges. Relatives include a spouse, brother or sister, brother or sister of the spouse, brother or sister of either of the parents and any lineal ascendant or descendant of self or spouse. If the gift is received on the occasion of marriage or from a registered trust, it is exempt from tax.

 

Some NRIs are more interested in investing in Indian real estate via companies they have formed on foreign soil, or they may work for a foreign company that is interested in establishing a footprint in India.

 

3. Can an overseas company or a subsidiary company outside India invest in Indian real estate?

The Indian realty sector is eligible for 100% FDI (Foreign Direct Investment) under the automatic route in the construction development segment, which includes townships, housing, built-up infrastructure. An overseas company or a subsidiary company outside India can invest in Indian real estate via this route, but not in finished buildings.

 

4. How to repatriate funds from real estate investment, both for rental income and proceeds on sale?

The laws are quite lenient but have some provisos.

There is no restriction on NRIs for repatriating rental income or even property sale proceeds (other than agricultural land, a farmhouse and plantation property) as long as the total proceeds are within the set limit of USD1 million in a fiscal year.

 

The conditions are:

The property being sold was acquired as per the foreign exchange regulations applicable during that period.

– The amount being repatriated cannot exceed the cost of the sale proceeds from the transaction.

– The sale proceeds from a maximum of two residential properties can be repatriated.

– The maximum amount of repatriated funds from a Non-Resident Ordinary (NRO) account is capped at $1 million per fiscal year.

– Funds can be repatriated only after settling all the applicable taxes and other charges.

 

If the property was purchased with money received from inward remittance or debit to NRE/FCNR/NRO account, the entire principal amount can be repatriated outside India immediately while the balance must be deposited in an NRO account.

 

To start the repatriation process, the NRI must get a certificate from a Chartered Accountant (CA) in India, issued in Form 15CB. The form can be downloaded easily from the Indian government tax website. This form verifies that the money acquired was via legal channels and all due taxes have been paid. The CA verifies and signs the form.

 

The next step is to fill Form 15CA which can also be downloaded from the same website. The form must be filled and submitted online, after which a system acknowledgement number is automatically generated and displayed. The NRI must print out the filled undertaking of Form 15CA displaying the system-generated acknowledgement number, and sign it.

 

The final step is to take the signed undertaking along with the CA certificate on Form 15CB to the bank where one has an NRO account. The concerned bank will check the forms and transfer the money abroad (up to $1 million in an FY). Apart from these forms, the bank will also ask for a copy of the sale document of the property. If the property has been inherited, the bank will ask for the Will copy, legal heir certificate, and death certificate of the person on whose death the property was inherited.

 

5. How does one verify whether an Indian property is legally compliant in all respects?

It is important for an NRI to pay attention to factors like the legitimacy of land, compliances to be followed during construction, environmental clearances, etc., at the time of a property purchase. As real estate is a state subject, laws may differ from state to state and there is, therefore, no one-size-fits-all response.

 

Before buying such a property, the NRI should ideally consult a lawyer to examine all the legal documents and verify their authenticity. They must also check whether the project is registered under the respective state RERA and whether or not it is fully RERA-compliant. However, many Indian states and Union Territories still do not have a functional RERA website, and this is where the services of a reputed real estate consultancy can be invaluable to save on time and effort, and ensure that all the boxes are ticked.

 

6. What is the jurisdiction of any dispute related to property investment in India?

It is not advisable for NRIs to file property dispute cases anywhere else other than the jurisdiction where the property is located. Only the court in that jurisdiction can try a property-related case.

 

Delays in the construction process beyond the extension period mentioned in the agreement fall under the purview of consumer courts under ‘deficiency in rendering of service’ in the Consumer Protection Act of 1986 if the project is not registered under state RERA.

 

If the project is registered under RERA, buyers can file a complaint under Section 31 of the regulation with the appointed regulatory authority within the respective state.

 

Interestingly, there may soon be a law in place in the state of Punjab to protect NRIs against property-related frauds. The State government is planning to bring the NRI Property Safeguards Act to resolve issues of NRI buyers effectively and transparently.

 

An ombudsman for resolving issues would also be set up under the law. If this happens, it would indeed be a worthy precedent for other states to follow.

 

Source: thehindu.com

The home building guide

Time consuming, but rewarding in the long run, says Sanchit Gaurav

 

 

When Bengaluru-based Preeti Kashyap approached Housejoy’s realty wing during her search for a house, she was particular she wanted a customised unit. “I wanted a home that met my family’s needs, and not something built and designed according to someone else’s choice.”

 

Kashyap is one among their many clients who prefer building a home from scratch rather than buying a flat in a complex or gated community. While the construction process is harder and time consuming, it’s rewarding in the long run.

 

Here is a list of important things to keep in mind when you decide to build your own home:

 

Do

Take natural lighting into consideration when designing the windows

Think about the saleability of the property when you plan it

Plan for extra electrical outlets all over the house

Be actively involved in the entire process

Thorough investigation while selecting the builder or contractor

 

Don’t

Be short-sighted about your family’s space and storage needs

Miss out anything from the written agreement

Put cost before quality. Good materials will stand the test of time

Ignore the advice of professionals

Rush into the building process

 

Documents needed

 

Land title, land clearance and zonal clearance (from the State Revenue Department)

Copy of the Building Plan Approval will be needed by many agencies like the land development office or electricity board, etc.

The floor plan can be taken from the architect and engineer

The local authority will provide a permission letter and commencement certificate

The local water supply and sewage board will have to be paid a certain fee and they will then inspect the premises before providing water and sanitary approval as well as sanctioning a new borewell for the house.

The electricity board will grant temporary electricity connection before metered connection is given after completion of the construction

After inspection, you will get an occupancy certificate by the authority

 

Building costs

 

The construction costs will depend on the location of the plot and the amenities nearby. That said, the current construction cost is anywhere between ₹1500 and ₹1700 per sq.ft. for building a budget home, ₹1800-₹2200 per sq.ft. for building a luxury home, and approximately ₹2600 per sq.ft. for a premium home.

 

When you decide to build instead of buying, pick the right team to help turn your dream home into a reality.

 

Source: thehindu.com

The writer is partner, construction and interiors, at Housejoy

Under-construction real estate now attractive. 9 things home buyers should check

Under-construction flats cost you much less than ready ones, but they are also riskier and more complicated.

 

 

Checklist for buyers
Since under-construction flats are more complicated and riskier, here’s a checklist for buyers. Use this to know if you are doing the right thing by booking in a new project.


Is project RERA registered?
Go only for projects registered with RERA, because it is the first stamp of approval. RERA approves a project only if it has all approvals (from municipal corporation, electricity and water department) in place. However, these approvals are only for starting construction.
Are all details available?

Another advantage of a RERA registered project is that all relevant information will be available on the RERA website. Since housing is a state subject, implementation quality of RERA varies across states. Maharashtra has implemented RERA in letter and spirit, but many other states have not. In many cases, the data on the RERA website is not updated because builders are not urnishing details. “It is better to avoid projects if full data is not available on the RERA website,” says Abhinav Joshi, Head of Research, CBRE India.

 

Is builder financially strong?
Don’t be under the impression that the house will be delivered smoothly just because it is a RERA registered project. As mentioned earlier, RERA approval is only to start a project. The builder must be financially sound too. “In addition to checking financial situation of the situation of the builder, buyers should also check about other ongoing projects,” says Prasad. “Completed projects give an idea about the track record of the builder. Check whether they have delivered other projects on time,” says Joshi. Avoid builders that got into trouble with other projects. “Also, avoid builders embroiled in NCLT cases, if their borrowing is high and if there are a large number of consumer complaints,” says Kapoor.

 

Have you seen the locality?

Facilities available inside the projects (swimming pool, gym, etc) are mentioned by builders. However, buyers must do their own legwork. “Visit the site to make sure that the physical infrastructure matches your need. Don’t just sign in the agreement after visiting the builder’s office,” says Joshi. In addition to this, buyers must also see the social infrastructure surrounding the project. Irrespective of whether you buy the property for self-use or investment, find out about upcoming projects and hospitals, malls, educational institutes and entertainment options in the vicinity.

 

Is the timeline reasonable?
The approved completion date is mentioned on the RERA website. RERA imposes a stiff penalty for violating the deadline. To be on the safe side, many builders give a very long completion deadline and tell buyers that the project will be completed ahead of the deadline. Don’t take this bait. Go only by the deadlines given on the RERA website. “If you don’t find the official timeline feasible, don’t go for that deal. The long duration timelines given by builders is one reason why people are going for ready possession apartments now,” says Baijal.

 

Have you seen any progress?
Buyers also need to check the progress on the project before buying. “Check the construction speed of the project for 2-3 months before committing,” says Das. You can do this by asking the builder about the progress plan for the next few months and then check whether they have met the timeline. This should not be for one flat alone, but for the entire complex.

 

Is the price reasonable?
Make sure that the price you pay in the area is reasonable. Only a few metrics are available here. The most commonly used ones are the rental yield and EMI to rent ratio. “The rental yield is down now, but the price can be treated as reasonable if rental yield is around 3.5%,” says Kapoor. Similarly, the EMI to rent ratio is placed above four times (EMI is more than four times the rent in same place) compared to its value close to two during 2002-4 when the market was roaring. An EMI to rent ratio of close to two may not happen in the near future but it makes sense to insist that it should be close to three.

 

Have you asked for discounts?
The above-mentioned ratios (rental yield and EMI to rent ratio) are to check whether the rates are reasonable for ready possession flats in an area. It is reasonable to expect a discount because you are taking higher risk when buying an under-construction flat. “We are in a buyer’s market now and developers are ready to sell unsold inventory at a discount. So, bargain hard for a good deal,” says Das. Though it is difficult to fix how much should be this discount, experts advise you expect around 10% from leading developers and around 20% from middle level developers. This discount range is for projects that are nearing completion (more than 75% work has been completed). You can get a higher discount if the project has a lower completion rate.

 

Is your adviser independent?
Since the investment involved is very high (homes in some cities can cost upwards of Rs 1 crore), it always better to engage an independent property adviser and a legal expert. “In addition to checking documents with a good lawyer, it also makes sense to check the structure of the project with the help of a structural engineer,” says Das.

 

Do you see the future plans?
“Irrespective of whether you are going to buy the property for self-use or for investment, you should look out for future developments coming up in your area because that will increase your property’s prospects,” says Thakkur. These future developments may be a metro connection, a new airport or an upcoming IT park or shopping mall. Builders may highlight all the positive future development plans, but what about the negative ones like a land fill near the location. “To get a full picture about future development plans, home buyers should check with development authorities like DDA in Delhi,” says Joshi.

 

Source: https://economictimes.indiatimes.com/