A Fresh Start with a Reflection of the Last Year

The Beginning of the New Year is an occasion for us to reflect upon the passage of time. It is an opportunity for us to sit, reflect and take some firm decisions. The Year 2014 was filled with variety of opportunities, challenges and achievements. It is neither a peekaboo nor a sneak peek but it’s time to reflect and honor the past. Here are some major events listed in chronological order that happened in 2014.

Major Indian Events in 2014

8 Jan 2014 - Asia Business Responsibility Summit 2014

28 February 2014 – Union Budget of India 2014

March 13-16, 2014 – World Living Heritage Festival in Rajasthan

29th April 2014 – Indian Golfer Anirban Lahiri ranked 67 in World Golf Ranking

31st May 2014 - 8 Indian Soldiers posthumously awarded with prestigious Dag Hammarskjold Medal of UN

30th June 2014 - PSLV C23, carrying five satellites, launched successfully from Sriharikota

30th July 2014 - NASA’s Mars Exploration Rover Opportunity set off-Earth roving distance record

29th August 2014 - National Sports Day 

29th September 2014 - PM Narendra Modi addressed 69th session of UNGA in Hindi

31st October 2014 - Foundation for World's tallest statue of Sardar Vallabhbhai Patel laid in Gujarat

29th November 2014 - Delhi government set up helpline for information on Ebola

24th December 2014 - Global Arms Trade Treaty came into force

Nobel Prizes

Peace – Kailash Satyarthi and Malala Yousafzai

Literature – Patrick Modiano

Physics – Shuji Nakamura, Hiroshi Amano and Isamu Akasaki

Physiology – Edvard Moser, May-Britt Moser, John O’Keefe

Chemistry – William E. Moerner, Eric Betzig and Stefan Hell

Economics – Jean Tirole

Major World Events in 2014

5th Jan - Record Cold Weather Roars Across US 

6th Jan - Sochi Winter Olympics 

18th Feb - Ukraine Crisis 

19th Feb - Facebook Buys WhatsApp for 19 Billion US Dollars

5th March - Malaysia Air Plane Missing with Over 200 Passengers Onboard

16th April - South Korea Ferry Sinks, Hundreds Missing

29th April - Nigerian School Girls Abduction

13th May - Turkey Mine Accident, Hundreds Dead

10th June - ISIS Seized Large Regions 

3rd July - Israel Conflicts with Hamas in Gaza

17th July - Airplane with 298 Onboard was Shot Down over Ukraine 

30th July - Ebola Virus Outbreak

12th Nov - European Spacecraft Rosetta Landed on Comet 

17th Nov - World Oil Price Plunges to Historical Low  

17th Dec - Russia Ruble Tumbles 

18th Dec - US Cuba Relations Breakthrough

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Real estate firms may raise funds via IPO route

After a long time, real estate companies could hit the fund-raising trail. The reason is improvement in investor sentiment.

According to Pankaj Jaju, group head, strategic corporate group, Axis Bank, some that wanted to float public issues in 2011-12 but did not proceed might look at tapping the equity markets in six to nine months. The Mumbai-based Lodha group, Delhi-based Emaar MGF, Neptune group and Hindustan Construction’s Lavasa Corp were among those planning to float Initial Public Offerings (IPOs) three to four years earlier but did not.

“Around Rs 20,000 crore of IPOs were planned in 2011-12. Some will want to tap the markets now,” Jaju said at a real estate conclave organised here on Friday by the Confederation of Indian Industry. “In six months, realty stocks have gone up 60 per cent.”

According to Bloomberg, Lavasa Corp plans to float an IPO this financial year. Axis Bank and Kotak Mahindra Capital are working on it, the agency said, adding the company planned to file a draft prospectus next month to the capital markets regulator Securities and Exchange Board of India. Lavasa had planned to raise Rs 2,000 crore in 2010, Bloomberg said.

Nayan Bheda, managing director, Neptune group, said: “Not now. We will look at an IPO in some time. The gestation period in real estate is taking longer and it could pose a challenge in declaring quarterly results.”

According to sources, listed companies DLF, Phoenix Mills and others such as the Embassy-Blackstone combine could come out with real estate investment trusts and list these if the government gives them tax concessions.

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India a favorite of US firms for investment: Citi

India remains a consensus favourite investment destination for companies in the United States, largely on the back of a 'Modi-Rajan-Commodities trinity', global financial major Citigroup said in a report on Monday.

While India is not totally insulated from the adverse global cues emanating from slumping crude oil prices and depreciation in the Russian currency, "it is relatively better-off", economists at Citi said.

In its report, the American financial services firm said, "Unsurprisingly, India remains a consensus favourite both as an absolute and relative play due to a trinity of factors - business-friendly Modi government; pro-active RBI Governor Raghuram Rajan and commodity tailwinds."

Listing out factors in favour of the country, Citi's economists said in the report that the country is a net importer of crude, its macro fundamentals are improving and rising foreign exchange (or forex) reserves are giving a further boost.

"Following a strong market performance in 2014, most investors were of the view that the on-going cyclical and structural upturn could result in India continuing to outperform in 2015, albeit at a modest pace," the report added.

However, the global banking firm said that despite high expectations, memories of the 2013 taper tantrums have resulted in investors remaining on guard and watching out for potential risks.

Among major concerns for investors are NPA issues in the banking sector, stand-offs in Parliament denting the reform momentum and limited space on the fiscal side.

"Many feel that the first full budget of the BJP government in February 2015 will provide useful insights on the path ahead," the report said.

While estimating that the domestic economy is likely to edge back to 7 per cent growth rate and lower inflation, Citigroup noted, "Unlike the 2013 taper tantrums, when India had a high current account deficit, elevated inflation and weak growth, India's fundamentals have improved".

"However, we re-iterate there is no room for complacency as generalised EM risk aversion could result in reversal in portfolio flows and external debt de-leveraging," Citi economists added.

Source: Business Today

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Cabinet defers approval to real estate bill

The Cabinet on Wednesday deferred the Real Estate (Regulation & Development) Bill, which seeks to ensure consumer protection, establishing regulatory bodies at Centre and states for ethical and transparent business practices in the real estate sector. Sources said the housing ministry has been asked to review the bill to explore how it can be made more consumer-friendly and to have better provisions for promotion of low-cost housing. 

Low-cost housing and roof to all have been identified as a focus area by the Narendra Modi government and it has promised shelter to all by 2022. TOI has learnt that there was also a suggestion during the Cabinet meeting that the provisions relating to Centre-state issues need to be made clearer in the bill. 

Government has included the bill as one of the legislations for passage during the current session of Parliament. The bill was introduced in the Rajya Sabha last August and referred to the parliamentary standing committee. Though the committee had made several recommendations particularly in favour of consumers and greater check on unscrupulous developers, the housing ministry has rejected most of them. 

These include checking the antecedents of project promoters before their registration is done, and ensuring that developers who have defaulted in two earlier cases be blacklisted. But the ministry rejected this arguing that such a provision will work as a deterrent for the sector. Similarly, the panel had suggested the promoters be made to enclose names of contractors, architects and structural engineers, which was also turned down. The panel had also recommended all real estate agents involved in sale of secondary market projects also need to be regulated. But this was not accepted. 

Nevertheless, there are also several provisions in the revised bill to protect the consumer's interest. This included the condition that prohibits a developer to change the plan in a project unless 2/3rd of the allottees have concurred for such change. This has reference to recent cases in Noida where a developer had changed plans and built towers to increase economic viability without taking buyers into confidence. 

Earlier the housing ministry's move to allow builders to divert up to 50% of buyers' investment for a specific project to other projects had come under criticism. The original bill had mandated the developer to put 70% of the buyers' investment to an escrow account to be used only for construction of that project. 

TOI on November 25 had reported how the real estate lobby was trying hard to push for this dilution.

Source: The Times of India

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Real Estate: Why India can build hope

The real estate sector may be hung over from a two-year downturn, but developers say that one thing never changes: The right product at the right ticket size always sells.

Real estate developers had hoped that the election of a stable government would boost their fortunes. It’s been six months since the Narendra Modi-led NDA has come to power, but there has been no noticeable change in demand. Unsold inventory continues to pile up across the country. High interest rates and a sluggish sub-5 percent GDP growth in FY14 have resulted in people holding on to their purse strings. The fallout is that real estate prices have barely budged over the last two years. But sentiment is picking up, and cities like Bangalore have developed a vibrant and healthy real estate market. 

As part of the fifth session of the ‘Forbes India CEO Dialogues: The Leadership Agenda’, industry leaders shared their views on the steps needed to revive the sector. Boman Irani, chairman and managing director of Rustomjee Group, Subodh Runwal, director, Runwal Group, Khushru Jijina, managing director of Piramal Fund Management, Ashish Puravankara, joint managing director of Puravankara Group and Sunil Kaushal, chief executive officer of India and South Asia at Standard Chartered, discussed a roadmap to get the sector growing again. 

Developers on the panel believed that there would be an uptick in prices within six months, once there is a correction of interest rates. Financiers, however, said that this is at least 12-18 months away. 

Excerpts from a discussion moderated by R Jagannathan, editor-in-chief, Forbes India.

R Jagannathan: We have certainly seen a turnaround in sentiment. Is that percolating down to the real estate sector?

Boman Irani: Yes. People have started noticing that there is a strong government, which has made all the right noises. The government started with something as simple as the ‘Swachh Bharat Abhiyan’ (Clean India Campaign) and then made a grand announcement promising homes for all by 2022. People feel good about these measures. Emotion is what drives purchase, and real estate is driven by a desire to improve one’s lifestyle. The fact that everyone is hoping that the GDP will improve and interest rates will come down is adding a lot of positivity on the ground.

The flipside is that our industry has a lot of pundits and they like to make tall statements, often crying foul about prices being too high. This brings down public sentiment. They have still not started making the right noises. For the end user, any time is the best time to buy, provided he finds what he is looking for in his budget. 

Jagannathan: Bangalore is driven more by fundamental demand and less by investors, unlike, say, Mumbai. Do you see any change in demand?

Ashish Puravankara: Bangalore has been quite stable for the last 2-3 years. One distinct change that we have noticed is that pre-sales have seen a very good response. Earlier, we would sell 10-15 percent when we launched a project. Now we are selling 40-50 percent in the first three months of a launch, and these are at good prices. The end-user demand is very strong. People who come to the city because of their jobs end up staying back. Hence, there is a lot of demand.

Jagannathan: Mumbai is a different market from Bangalore in that there are a lot of speculative investments. With that in mind, do you think Mumbai would take longer to revive than Bangalore or Chennai?

Subodh Runwal: If you look at Mumbai from a 30-year horizon, you’ll see that real estate has outperformed all asset classes. What we are witnessing now is a temporary blip, but if you look at a good developer, you will see that his projects are still selling out quickly. Recently we had people queuing up at 5.30 am for a project we launched.

Source: Forbes India

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Global firms in talks to invest in Indian real estate

Property and equity firms from Malaysia, Singapore and other Asian countries are weighing the Indian real estate market, following the Centre’s move to relax foreign investment norms in the sector.

Recently, the government had relaxed norms for foreign direct investment (FDI) into the sector, including a cut in the minimum built-up area required to 20,000 sq m from 50,000 sq m; the initial capital required was halved to $5 million. According to norms, 100 per cent FDI is allowed in real estate projects.

Many developers have started discussions with foreign firms for possible ventures, according to two independent consultants tracking this segment. “But the deals are likely to be struck only after 6-12 months; FDI won’t start coming in immediately,” said one of the consultants.

The chief executive of a leading developer based in Gurgaon confirmed his company was talking to many foreign investors for launching few projects. “We have received a few proposals and we are evaluating those. Our only concern is foreign investors want fixed returns over a period of time, which might be difficult, considering the situation of the realty market,” he said, on condition of anonymity.

Experts say the real estate sector is sitting on a huge pile of inventory, adding with low sales and a cash crunch, the FDI relaxation has come at the right time. CBRE’s South Asia chairman and managing director, Anshuman Magazine, said, “The real estate and infrastructure sector is starved of funds. This announcement will widen the base of investors, especially mid-sized financial institutions. It will also encourage new development projects in prime areas of large cities and tier-II towns.” Anuj Puri, chairman and country head, real estate consultancy firm JLL, said, “The government’s decision to relax FDI rules in the construction sector comes in the nick of time for Indian real estate. Meanwhile, developers continue to reel under high levels of debt, even as the channels of funding have shrunk. The easier rules will aid the completion of projects, delayed by a squeeze on funds due to elevated debt levels.”

During 2000-2013, India’s realty sector had received FDI of about $22 billion, 11 per cent of the total FDI into the country during the period. But following a slowdown, foreign investment in the sector has slowed — from $3.1 billion in 2011-12 to $1.3 billion in 2012-13 and $1.2 billion in 2013-14. During April-August this year, $446 million has flowed into the sector. Projects that commit at least 30 per cent of the total cost for low-cost affordable housing will be exempted from the minimum built-up area and capitalization requirements, with a three-year lock-in period. According to the revised norms, projects with at least 60 per cent of the floor area ratio/floor space index for units of carpet area not exceeding 60 sq m will be considered affordable housing projects.

Also, 35 per cent of the total number of units should be constructed for the economically weaker sections, with a carpet area of 21-27 sq m.

Source: Business Standard

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Tips to Avoid Real Estate Regrets

There are some very common regrets experienced by real estate buyers and investors; and this is especially true for majority of the first time home buyers. However, the good news is that many of these mistakes are avoidable. The best part is that you don't need to be a real estate expert to avoid these regrets, you just need to plan and prepare in advance and of course avoid common mistakes. In fact, you just need to follow the suggestions and tips that are given below and you are sure to avoid the emotional turmoil created by a real estate regret.

Hire the services of a property lawyer
It is overwhelming to even imagine that the property that you bought is being claimed by someone else. Moreover, in India, legal hassles and property cases take decades to be resolved and it is the most unsolicited situation for any home buyer. That is the reason why the title deed of the property that you buy must have a clear title deed. To avoid this very detrimental real estate mistake, one must hire the services of a legal expert who can confirm the authenticity of the title deed. It may cost of you a small amount, but is certainly worth the peace of mind that you get in return.

Research and invest in a property with a good appreciation potential
The last thing that any real estate investor wants to do is to get stuck with a property that is hardly appreciating, or worse is depreciating; especially, as it is glum to sell a real estate property at a loss. To avoid this real estate regret, you must indulge in a thorough research, speak to reputable real estate brokers and weigh the pros and cons of investing in a property in that specific locality. More often than not, the appreciation of a property depends on a number of factors such as proximity to educational institutes, hospitals and shopping avenues, and hence these aspects must be considered carefully before investing in a property.

Compare property prices in the locality
One of the most known regrets of real estate buyers is that they paid too much for their property. Before buying a real estate property, you must ensure that you are purchasing the property at the lowest possible price. You must negotiate with the seller before buying, and more importantly you must know the property rates in that locality to negotiate efficiently. You do not want to be in a position where you know that someone bought a similar property in the same locality for much less, do you?

Do not buy property under peer pressure. Analyze your financial condition and buy a property only when you are in the position to bear the weight of monthly EMIs. Last but not the least; make a list of all that you want in your property and then determine on the purchase of a house that ticks all the boxes in the list. This is to ensure that you do not regret the purchase at a later stage, especially as buying a property is a costly affair and is simply not easy to buy a second property very soon.

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Massive real estate boom in AP

Andhra Pradesh is witnessing a real estate boom post bifurcation, with property registrations doubling in the 13 districts during the last few months as compared to the same period last year. Real estate speculation in the hope of capitalizing on the demand for land and frenzy over the construction of the new capital are said to have contributed to the massive spurt in land transactions.

Expectedly, Krishna and Guntur districts topped the list. According to sources, the 13 districts recorded a revenue of Rs 1,469.95 crore through land registrations between June-October 2014 as compared to Rs 624.83 crore during the same period last year. Krishna district, which was initially tipped to account for the major portion of the new capital region, recorded the highest revenue from land registrations post bifurcation. As against 44,281 registrations between June-October last year, the district reported 91,215 transactions worth Rs 236.5 crore this year.

However, when it comes to the number of transactions, Guntur topped the list. The district, which entered the race after the state government identified Tulluru, Mangalagiri, Tadepalli and Guntur mandals as part of the proposed capital region, reported 99,310 land registrations with a revenue of Rs 202.59 crore during the June-October 2014 period. "Our officials in the districts are complaining that they need more staff to provide quick service to realtors. In Krishna and Guntur districts, there is heavy rush and people are being told to come back two to three days later to get their document registered. We are planning to send more computers, scanners and give orders to appoint more outsourcing personnel to meet the demand," explained senior officials in the AP government.

The sudden spurt in land registrations is attributed to the construction of the new capital city in Krishna and Guntur, as realtors in all 13 districts have shifted their focus to these two districts. They have opened their offices in either Vijayawada or Guntur and appointed local people as agents to get information about land for sale.

"Land on the outskirts of Guntur and Vijayawada has recorded the highest price hike during the last one year. For example, land near Vijayawada, which was available for Rs 10 lakh per acre a year ago, is now being quoted at Rs 6 to 10 crore. Land around Guntur city, which was purchased for Rs 10 lakh an acre just one year ago, is being sold for Rs 5 to 6 crore," said a realtor, who has shifted base from Visakhapatnam to Guntur.

The state government's decision to go for land pooling has jacked up the prices of even those land that will not fall in the capital region. Nuzividu, which is almost 50 km away from the proposed capital region, is also witnessing a spurt in real estate prices. According to sources, the prices of land between Gannavaram, Hanuman Junction and Nuzividu have shot up astronomically during the last six months. "We bought about 500 square yards of land in Nuzividu for Rs 15 lakh at the rate of Rs 3,000 per square yard six months ago. Now, we are seeing people offering Rs 50 lakh for the same 500 sq yards," said a Nuzividu resident.

A similar boom is being reported in Eluru, Tadepalliguem, Bhimavaram, Machilipatnam, Tenali, Bapatla, Narsaraopet, Chilakaluripet and Sattenapalli towns, all of which, like Nuzividu, are far away from the proposed capital region. "Vijayawada and Guntur are experiencing a rapid real estate boom as was witnessed in Hyderabad about a decade ago. And like it happened there, this region too might witness a bust, but at present, the land prices have shot up beyond the reach of the middle class," said an official.

Source: The Times of India

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Is India’s urban housing a bubble?

India's relaxed rules for foreign direct investment (FDI) in construction will make it easier for foreigners to invest in real estate. While the move has surely been cheered by the real estate sector, for it will bring in much needed capital for those steeped in debt, it could bring more pain for home buyers. Reason: more foreign money in realty means higher property prices. Simple demand-supply logic.

Current urban realty prices represent affordability for a microscopic few, while the average home buyer will have to exchange 20-30 years of future earnings to afford a house.

Under earlier rules, the government allowed 100 percent FDI in real estate development but with strict riders, including a lock-in period of three years during which the investment cannot be repatriated. Under the new rules, the minimum built area for projects in which foreign investment is allowed will be reduced to 20,000 square metres from 50,000, the government said in a statement late on Wednesday. For "serviced plots", there is no minimum land requirement now, compared to 10 hectares earlier, while the minimum capital investment by foreign companies has been cut to $5 million from $10 million.

"The announcement literally comes in the nick of time for Indian real estate. Construction, housing and real estate segment's share in total FDI had further slipped from 5 percent in the previous year to under 3 percent as of the current fiscal until August. In fact, its share has been consistently falling over the last six years since 2009-10, when it stood at over 20 percent. Meanwhile, developers continue to reel under high levels of debt, even as the channels of funding have shrunk. The easier rules will help faster completion of projects delayed by a squeeze on funds due to elevated debt levels," said Anuj Puri, chairman and country head at Jones Lang Lasalle India.

But a back-of-the-envelope calculation by Vallum Capital Advisors shows that an FDI-compliant project sale of $150 million requires a peak investment (except land and approval) of not more than $20 million, implying that private equity (PE) investment is not needed to support the project. It is possible to fuel prices by creating a stock of inventory, diverting  money to other projects and investing to build land banks for future projects. This essentially defeats the very purpose of allowing FDI in the real estate sector for making housing affordable. (Read the entire report here)

The reduction of minimum requirements for built areas and capital will now allow investment to flow into South Mumbai or central Delhi. Till now investment was going to the outskirts because it was tough to find large areas to develop or construct 50,000 square metres. So  the new rules will encourage the development of smaller projects, especially in urban areas, where the availability of land is limited.

More construction in prime areas does not imply that property prices here will come down. In fact, buyers are most likely to see more Rs 60 crore prices for 2 BHK flats in tony areas of south and central Mumbai areas like Worli or Peddar Road. This is because demand for houses in posh areas far exceeds supply and builders will cater to this snob requirement rather than construct 'affordable flats' in south Bombay or south Delhi.

The lower area requirement is also expected to result in more interest in smaller towns as the reform would now allow foreign investors to invest in smaller projects spread over land parcels of about three to four acres. This means that speculation in real estate is once again bound to rise and spread to smaller towns. "Allowing easier FDI in construction only spells bad news for home buyers because it is expensive capital seeking high returns," says Pankaj Kapoor, MD of real estate research firm Liases Foras.

Once the government allows more hot money to come in, investor expectations from returns on investment rise without any consideration for affordability. If builders have to ensure that investors get bang for the buck, they have no choice but to prop up realty prices. How else will they manage to deliver 25 percent RoI?

"Take the case of the NRI investor battle against ICICI. Investors have sued them for not delivering 25 percent returns as promised from the investment in a property fund. This is the case with most investors and, by easing the investment norms for them, the government is in essence creating an investor's market rather than a buyer's market. FDI in construction will kill the property market and I am seriously thinking of filing a PIL against the new norms, “said Kapoor.

The real devil lies here: While an investor will be allowed to exit on completion of the project, or after three years, from the date of final investment, whichever is earlier, the government may also permit repatriation of FDI or transfer of stake by one non-resident investor to another non-resident investor, before the completion of the project. 

Such a move will not only make it easier for investors to repatriate profits, but also  increase speculation in the market since investors will once again trade in properties like they do in stocks, which in turn will make houses even more unaffordable for both middle class and masses.

And the permission to sell completed projects to foreign investors will help builders get much-needed liquidity to trim their debt and hoard more inventories for longer.

For the benefit of consumers, there is just once clause which makes it mandatory for developers with foreign funding to only sell "developed plots". This means tracts that have trunk infrastructure, including roads, water supply, street lighting, drainage and sewerage.  The fine print, otherwise says the real winners are the builders and investors once again.

In 2013, PE money started returning abroad as investors had stayed invested for seven to eight years. This marked the beginning of a slowdown in FDI in real estate. Builders increased prices to accommodate investors at every stage of the development, thereby creating a false sense of price appreciation. With a steep slowdown in genuine sales (both Delhi and MMR currently have the highest unsold inventory), they are stuck in a catch-22 situation. By opening the floodgates to investors once again, the government is doing the exact opposite of deflating the housing bubble.

Source: First Biz

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Weeding out black money from real estate

Slew of Reforms Needed

State governments have responded by reducing ready reckoner rates to almost the same level as market value but that alone hasn't been enough. If the government is serious about achieving its stated goal of housing for all by 2022, then it will have to make a few systemic changes. One, incentivize first-time buyers.

Two, make the process of getting approvals transparent. Make the process automated. Cut off all political discretions when it comes to granting approvals or buying land.

The Real Estate Regulation Bill is a first step towards that. But in its current form, there are some loosely defined terms in the draft and oversights which can be misused. For instance, approval authorities are not brought under the purview of the Bill. Most delays of housing projects happen because of delayed approvals.

India has a shortfall of 18.7 million homes — over 95% of this is in the economically weaker section. Only 1.4% of that demand is being met. If we want India's Real Estate sector to blossom again, this menace of black money needs to be weeded out. 

Source: The Economic Times

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India's first international real estate magazine launched

Smek India Group, who pioneered the innovative real estate news portal realtyfact.com in the past, recently launched its exclusive magazine "Realty Fact" on real estate and luxury real estate lifestyle at a grand and scintillating event held recently in New Delhi. This splendid publication was designed to enhance real estate social networking and extend business relations in the real estate industry.

According to the Editor-in-Chief Kumar Saurabh, “Realty Fact news portal was initiated 2 years back with the envision to bring out niche, relevant and quality publications for the real estate investors." He further added that this November, the magazine will also be launched in Dubai, US, and Europe.

In real estate industry, realty fact will be a reliable associate to provide public relations services, broaden the spectrum of advertising and other digital and social media marketing privileges to generate enough foot traffic for sensible and more profitable business.  

Realty fact magazine also emphasize on national and international real estate branding programs to create awareness and share global information about different types of real estate companies such as home builders, realtors, real estate companies, mortgage companies, etc.  

The primary goal of the realty fact magazine is to guide investors, promoters and buyers on the trends and latest developments pertaining to real estate firms as well as to update new advancement in the real estate industry. 

Furthermore Realty fact digital magazine is available on Magzter, Apple, Google play along with many more national as well as international digital magazine newsstands, e commerce websites and web portals.  

One can also choose from diverse platforms viz. iOS, Android, Windows 8, web, etc to buy, download and read Realty fact Magazines on your iPad, iPhone, Android, Tablets, Kindle Fire, Windows 8, Web, Mac and PCs.

  

Printed realty fact magazine hard copy is to be circulated amongst all Top Management CEO, President, Principal Managing Partner, Owner Executive Director, CFO, Executive Vice President, VP, AVP, General Manager.

Source: Indiablooms.com

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What to look-out for in a property for rent

A lot of investors buy property on the basis of back-of-the-envelope calculations of rental income. Unfortunately, many of the assumptions they use are not realistic. If you are also planning to buy property to rent out, make sure you do not make the same mistakes.

The first assumption is that the property will earn rent throughout the year. The calculation can go awry if you are not able to find a tenant. This is especially true if the property is in a far-flung and sparsely occupied locality. You might also have to shell out 15-30 days' rent as brokerage if you find a tenant through an estate agent.

To earn an attractive rental return, buy the apartment in a service or manufacturing hub. "You may buy the apartment at some distance from the employment hub, but it should be well-connected. You may then get the flat at a lower price and be able to earn a higher yield of 6-7%," says Ashutosh Limaye head, research & REIS, JLL India. He cites the example of Old Madras Road in Bangalore, which is well connected to Whitefield.

Another flawed assumption is that the rent received will be net return. Rental income is eligible for a 30% deduction but the balance 70% is added to the income of the owner and taxed as normal income. If you are in the highest 30% tax bracket and earn Rs 20,000 as rent from your property, the post-tax income will be only Rs 15,634 a month.

It's a bit easier if you have taken a loan, because under Section 24b, the interest paid on the loan can be deducted from your total income. It certainly brings down the cost of the loan. Here again, keep in mind that the interest portion of the EMI keeps coming down every month. So, the tax benefit will dwindle with every passing year.

Residential or commercial property?

Investors are also swayed by the greater demand for residential property. True, such property has a higher demand, but the prices push down the rental yields. "Rental yields from residential property are very low at 2.5-3%," says Limaye. On the other hand, commercial property offers rental yield of 6-9%. "However, buyers of residential property are compensated by higher capital appreciation," points out Sanjay Sharma, managing director, Qubrex, a Gurgaon-based real estate consultancy.

There are other advantages as well. It is easier to find tenants for a residential property. However, an investor must also take into account the legal implications if the tenant refuses to vacate the property.

Also consider the tax implications of owning a house. If the house is lying vacant, you have to pay tax on the deemed rental from it at marginal tax rate after 30% deduction. Owners of vacant residential properties also have to pay wealth tax at the rate of 1% of the amount by which the combined value of your assets exceeds Rs 30 lakh. Commercial property is not included in the computation of wealth tax.

Source: The Economic Times

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Six Up and Coming Real Estate Design Trends

What home-design trends will likely catch on in new construction? Builder Online recently spoke to Mollie Carmichael, principal at John Burns Real Estate Consulting, and Nick Lehnert, executive director at architecture firm KTGY, about the design trends that are gaining popularity in the new-home market this year:

 Private space 

Baby boomers, empty nesters, and Gen Yers are showing a preference for homes that have more private outdoor spaces, straying from the traditional “public” backyard, according to surveys. One way some builders are fulfilling this desire is by positioning the home’s architecture strategically around the outdoor space to enclose it more and allow it to be more open to the interior living spaces. They also are creating more covered outdoor spaces.

The “Super Kitchen” 

Besides being a place for cooking, the kitchen is also the entertainment/conversation area in a home. Open-kitchen layouts have continued to grow in popularity, putting kitchens more front-and-center and visibly exposed to other areas of the house. Kitchen islands are offering extra seating and prep space while larger pantries are offering greater storage. “As the hub, it becomes a consumer’s dream to design these elements together with function, practicality, and flair,” the designers say.

Bigger Media Hubs

More home owners are looking for a place for their large flat-screen television. Larger television sizes are prompting more builders to realize the need for greater wall space to hang the televisions and larger entertainment rooms to accommodate more seating. 

Larger Garage Spaces

If home owners had their way, garages wouldn’t be just for parking the cars. More home owners want spaces for hobbies and storage, and builders are taking notice by creating larger garages for multi-use purposes. 

Home Offices

An office and den space is becoming a bigger desire among home buyers, and the location of it in the home is becoming increasingly important. Placing the home office off the entry is no longer considered the most practical location for it, but builders are experimenting with moving it closer to the “living” area, such as off the kitchen or the family room.

Two Homes in One

As multigenerational living gains popularity, builders are responding by carving out more separate spaces for several generations to live together. For example, some builders are offering semi-independent suites with separate entries, bathrooms, and kitchenettes.

Source: Realty Biz News

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PM Modi's 100 days: India is now the world's best growth market - Maplecroft

As top ministers extol the government's 100-day performance, a leading international risk-rating firm has told global investors in a confidential report that India is now the world's best growth-market bet as the risks of doing business in the country have declined with the Narendra Modi government having completed its first quarter.

Modi-style governance bodes well for investors who can expect policy clarity and less red tape, said Maplecroft UK's risk analysts in a rating note sent last week to clients, which include the world's top 400 global corporates, apart from financial institutions and think tanks. ET has seen a copy of the report.

The firm has ranked India at No. 1 in terms of economic opportunities for investors, whose interest in the country has spiked dramatically since the general elections. Officials close to the development said India has now become the fifth most requested country in terms of risk and opportunity reports from rating agencies and risk-mapping firms such as Maplecroft.

Risks relating to India's complex regulatory framework, red tape and macroeconomic environment have begun decreasing already, along with several other critical risks such as regime stability and security, according to Maplecroft, which expects Modi to preside over improvements in job creation, the rule of law and anti-corruption measures during his five-year term.

"The government's stability means that investors will benefit from clarity of policy and a regulatory environment that is largely conducive to business. In the coming year, several sectors — including manufacturing and energy — are likely to see limits on foreign direct investment increased.

Furthermore, delays associated with approval of investment licences can be expected to shorten, given Prime Minister Modi's ongoing efforts to overhaul bureaucratic procedures," Arvind Ramakrishnan, head of India at Maplecroft, told ET when contacted about the report.

The change in the narrative is reflected in the Global Growth Opportunities Atlas, which ranks India has the hottest growth market, topping the world in terms of consumer potential, market potential and middle-class growth projections. Though India ranks among the low hundreds on key enabling factors to realise its growth potential such as physical infrastructure business environment and human capital development, Modi's explicit focus on these areas is expected to turn the tide in the medium term, the report noted.

According to the firm's analysis of the June-August period, threat perceptions for investors have declined in areas such as energy security (short term), labour-related supply chain risks, remittances and euro zone exposure. On Modi's ability to tackle the "endemic and institutionalised" corruption that Maplecroft said has hampered industrial production and the development of infrastructure and natural resources in the past five years, the firm is cautiously positive.

"Narendra Modi has promised to clean up governance by cracking down on corruption, and expedite approvals for investment projects. Modi is likely to achieve some success in this endeavour at the national level,' it said, only to add that nepotism, petty bribery and other forms of corruption in state governments remain a moderate risk.

The firm downplayed concerns about communal tensions arising under Modi's watch, saying there is little sign he will resort to policies that alienate religious minorities, such as amending religion-based family laws or restricting quotas for minorities in jobs and education.

"Modi realises that pursuing divisive policies could result in a loss of public and investor confidence in his ability to maintain social harmony and a stable business environment," Ramakrishnan said.

Al-Qaeda's India expansion announced by Ayman al-Zawahiri last week is unlikely to raise terror threat levels for the country, Maplecroft told investors. "There is little evidence that groups like the LeT (Lashkar-e-Taiba) and IM (Indian Mujahideen) share the Al-Qaeda (AQ) vision of a global caliphate. LeT's primary raison d'etre continues to be the 'liberation' of the state of Jammu & Kashmir from Indian rule. IM does want Islamic rule for all of India but does not have global ambitions," the firm said in a separate advisory to clients issued last Thursday.

Source: The Economic Times

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How to invest in property with Rs 2 lakh

If you have Rs2 lakh to invest, your bank may roll out a red carpet, your stock broker may inundate you with hot tips and the neighbourhood jeweller may even offer a discount on making charges. However, you will probably get laughed out of the estate agent's office.

Not anymore. With Sebi issuing final guidelines for real estate investment trusts (REITs), you will soon be able to get a piece of the action in the property market with as little as `2 lakh.

REITs are just like mutual funds, but instead of using the money collected from investors to buy stocks and bonds, they invest in property.

Last month, the Union Budget removed an important hurdle by giving pass-through taxation status to REITs. Last fortnight, Sebi issued the guidelines, settling several of the concerns raised by the real estate industry. The launch of REITs will increase the flow of funds to the cashstarved real estate industry. "Even if half of the currently available Grade A office space gets converted to REIT and is listed in the next 2-3 years, it can mean an inflow of `60,000-72,000 crore," says Anuj Puri, chairman and country head, JLL India.

High entry barrier

Whether you invest in a residential property or commercial space in a metro or tier I city, the minimum investment is normally upwards of `30-40 lakh. Sebi's guidelines for REITs have pegged the minimum investment at `2 lakh, which will allow retail investors to participate in the real estate market. In the secondary market, the minimum holding could be even lower at `1 lakh. "REITs will allow even middle income individuals to invest in real estate. Without this, they can't participate because of the huge entry barrier," says Keki Mistry, vice-chairman and CEO, HDFC. The low ticket size means that investors can diversify their portfolios by including real estate without investing huge amounts in the asset class. The high entry barrier is not the only problem with investments in real estate.

With no real estate regulator in place, individual investors are at the mercy of politically connected builders in India. If, however, they invest in a REIT, they will be able to join hands and get bargaining power against the developers.

The other benefit is diversification. When one invests in a real estate project, the returns are dependent on how well that project is received in the market and the rental income it is able to command. On the other hand, REITs invest in several projects and, therefore, provide the benefit of diversification to the investor. With a low entry barrier of `1 lakh in the secondary market when units are listed, an investor can spread his investment across 3-4 REITs launched by different asset managers. The liquidity offered by REITs is another positive feature of this mode. While selling a property can take weeks, even months, REITs will inject liquidity into the investment by listing the units on the stock exchanges. The day is not far when one will be able to buy and sell property at the click of the mouse.

How attractive is the investment?

While Sebi has given the go-ahead to REITs, right now they can invest only in commercial real estate. This narrows the scope considerably because most of the action in the sector is in residential real estate. Even in commercial projects, 80% of the investment must be in rent-earning projects. The balance 20% can be in other assets, including projects under construction (restricted to 10% of the total REIT assets), listed or unlisted debt of real estate companies, equity shares of real estate companies having 75% income from realty activities, government securities and money market instruments.

Though some may see this as an unnecessary restriction, the straitjacket of rental yielding projects is actually a blessing in disguise. First, there is major difference between rental yield from commercial and residential properties in India now. "While rental yield on commercial property is slightly lower than the interest rate, the one on residential property is very low. So REITs will not work in the residential market now," says Mistry . If rental yield from commercial projects is less than the prevailing interest rate, why should one consider investing in REITs? "The rental yield is not very attractive now, but is expected to rise in the future," says Ujwala Rao, national director, capital markets, JLL.Besides, there is always the possibility of capital appreciation that will push up the NAV .

Bottom of the cycle

Bottom of the cycle Still, there are several factors that investors need to keep in mind. As of now, the commercial real estate market is in doldrums. "In several pockets, the price of commercial real estate is around 30% cheaper compared to residential real estate," says Kapoor. Though there is an escalation clause in most commercial real estate projects, it is a users' market and, therefore, they are able to renegotiate the rents downwards. This also means that commercial real estate is reasonably priced right now. There is a greater scope for appreciation. As the economy picks up momentum and commercial activity increases, things are likely to improve. "This is the time to get into commercial real estate because it is at the bottom of the cycle," says Kapoor. Other experts join the chorus of optimism. "For REIT to work, you need a buoyant real estate market. Nothing much had been happening in the past 3-4 years, but things have started picking up now," says Mistry . "Commercial real estate is linked to economic recovery . Rentals may remain under pressure for the next 12-18 months given the oversupply, but with the speed of supply moderating in the coming years, the situation should improve," says Mittal.

Taxation of REIT income

This was the biggest bone of contention for REITs. The recent budget offered some relief when the finance minister announced that REITs will be a pass-through vehicle. In the earlier structure, both the trust as well as the investors had to pay tax. Now, the trust will not pay tax on income. Only the investor will be taxed when he gets the income or sells the units. However, experts warn that this pass-through benefit is not applicable to all types of incomes from the REIT (see table) "The pass-through benefit is only for interest income earned by the REIT from its special purpose vehicle (SPV). As of now, there is no pass-through for rent or other income received by the REIT from property directly held by it," says Sriram Govind, core member of the international tax team, Nishith Desai Associates. He says the REIT has to pay corporate tax on such income earned by the SPV. Similarly, the REIT will also have to pay capital gains tax on sale of shares of the SPV. There is also no relaxation on the dividend distribution tax on payouts by the SPV to the REIT," says Govind.

Though the dividend received from SPVs is taxfree for REIT as well as investors, the SPV would have already paid corporate tax and dividend distribution tax on such income. Factor this tax into the calculation of returns from REITs.

Though the dividend distribution tax is a prickly problem, what more than makes up for it is the treatment of capital gains from the REIT.

Since there is a securities transaction tax (STT) on the listed REITs, the long-term capital gains will be tax-free while short-term capital gains will be taxed at a concessional rate of 15%.

However, you need to hold the REIT units for at least three years to qualify for long-term capital gains. In addition, the investor has to pay tax on part of the income received during the period. "The listed pass-through vehicles are at a tax disadvantage," says Feroze Azeez, director, Investment Products, Anand Rathi Private Wealth Management.

Since some of the income from the REIT will be tax-free and some other will be taxable, the big question is, how will investors know the difference? "There will be some reporting mechanism and the break-up will come at the time of income distribution from the REIT," says Rao of JLL.

Interestingly, REITs offer a better deal to NRIs on the tax front. The withholding tax for them is only 5% compared to 10% for resident Indians.

And the amount received may be tax-free for them, at least in most countries, while the Indian investors have to pay tax based on their slab rates. If the NRI has to pay tax on the income in the country of residence, he can claim this 5% as a rebate. What are the risks?

The biggest risk can come in the form of developers keeping their prime rent-earning properties and dumping their not-so-good assets on REITs. Though there will be professional valuers, the real estate market is notorious for its opacity. It is still a builder's market and the investors don't have any access to the valuation process. Though the introduction of REITs is expected to improve the situation, the lack of transparency and the black money component in the real estate deals is another possible risk.

Finally, there may be stable regular income, but the capital appreciation or depreciation depends on the market price of commercial real estate and, therefore, will be volatile.

Sebi's guidelines for REITs is only the first step. There are bound to be teething problems when the market starts functioning. However, this has paved the way for a more vibrant market for real estate. If you want to invest in real estate but don't have deep pockets, you can consider REITs as the vehicle that can take you there.

Source: TOI

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Grand Launch of Iconic Project Sikka Kimaya Greens

With the burgeoning demand in Real Estate sector in India, coupled with the rising exposure and aspirations of Indian consumers. On 24 August 2014, Sunday, Sikka Launched another Iconic Project Sikka Kimaya Greens at SIDCUL IT Park, Sahastradhara Road, Dehradun, Uttrakhand, the organization strengthens its footprint in North India having successfully launched another project in its feather. 

The Foundation stone was laid by the Honorable Chief Minister of Uttrakhand, who was there as a Chief Guest for the Inaugural Function. The Cultural pregame was organised in which artist from famous TV Show Indian Ideal gave their performance. There were Dance and Sufi Song recital performances by famous TV artists. Well renowned Hindi film and television famous actress Ms. Monica Bedi was also present, who graced the Event by her Presence. 

About the Project:Mr. Gurinder Singh Sikka-Chairman, commented on the occasion, “Over the last three decades, our constant endeavour has been to provide quality solutions to our esteemed customers. The Sikka Kimaya Greens will be yet another accomplishment by the organisation , which will give people an unparalleled Quality, which is not only luxurious but will also empower them to lead richer and fuller satisfaction”.“I am extremely excited and equally delighted to see our dream, which started over three decades back, turned into reality with The Downtown”, he further added.

Mr. Piyush Sharma-Vice President (Sikka) said “We have very aggressive plan to expand our Business in the City because Dehradun being in the Himalayan foothills close to the hill station of Mussoorie and being having premier educational and institutional centre with its peaceful vicinity, has always been a favourite destination of people. And, after attaining the status of the capital, the city is experiencing rapid Industrial Growth and Dehradun is witnessing growth in tourism as well. As a responsible Real Estate Developer we foresee lots of opportunity to contribute in the development of the State uttrakhand”.

About SikkaThe Sikka was established in the year 1986 by the Chairman & Managing Director Mr. Gurinder Singh Sikka. It is one of the diversified Business conglomerate having interest in Real Estate, Automobile, Hospitality & the Outdoor Media industry. “Real Estate business arm is recognized as one of the leading Real Estate Brand known as “Sikka”, currently developing in excess of 7 million Sq.ft. of prime real estate, with over 12 projects in Northern Part of the Country in different cities. Sikka has recently launched the “Sikka Kimaya Greens” in Dehradun, which is an exceptional Project that resonates with sleek modernity and indulgent amenities. It is the newest address where the life gets balanced, connected and fulfilled. Sikka Kimaya Greens affluence offers you 2/3/4 bhk apartments & penthouses. Designed by Broadway Malyan (among world's top 10 architects), this lavish project is sure to exude a quiet sense of luxury in perfect harmony with nature.

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