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
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.
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.
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.
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:
l Take natural lighting into consideration when designing the windows
l Think about the saleability of the property when you plan it
l Plan for extra electrical outlets all over the house
l Be actively involved in the entire process
l Thorough investigation while selecting the builder or contractor
l Be short-sighted about your family’s space and storage needs
l Miss out anything from the written agreement
l Put cost before quality. Good materials will stand the test of time
l Ignore the advice of professionals
l Rush into the building process
l Land title, land clearance and zonal clearance (from the State Revenue Department)
l Copy of the Building Plan Approval will be needed by many agencies like the land development office or electricity board, etc.
l The floor plan can be taken from the architect and engineer
l The local authority will provide a permission letter and commencement certificate
l 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.
l The electricity board will grant temporary electricity connection before metered connection is given after completion of the construction
l After inspection, you will get an occupancy certificate by the authority
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.
The writer is partner, construction and interiors, at Housejoy