Tuesday, 28 February 2017

Top carmakers in India develop own real estate, invest in own properties

The country’s largest carmaker Maruti Suzuki has already set up a real estate subsidiary that is looking to acquire land at key strategic locations across the country for dealership expansion.

MUMBAI: Rising rentals in most Indian cities are making big auto companies tweak their real estate strategy and start investing in own properties — be it for the company headquarters, sales offices, or even dealerships.

The country’s largest carmaker Maruti Suzuki has already set up a real estate subsidiary that is looking to acquire land at key strategic locations across the country for dealership expansion. It has identified 200-300 strategic locations where the company plans to acquire land and lease it out to its dealers at a reasonable prices.

“Rising rental has been one of the biggest operational risk for our dealers. If we lose a dealer in an important location to a fashion house or other industry, it is a big loss to us,” said RC Bhargava, chairman of Maruti Suzuki. Hence the decision to invest in own property. “Under the new structure, we derisk ourselves and our dealer too," he said.

Maruti Suzuki plans to invest over Rs 14,000 in acquiring land across premium location in major cities and tier-I and tier II over the next 4-5 years, with plans of doubling the network footprint to 5,000 outlets. According to Bhargava, with little to differentiate on technology in automobile, the real strength of a company in a vast country like India will be in its distribution network.

While its rivals have not yet come up with such grand plans, increasing rentals in metros as well as tier I and tier II cities are forcing them to invest in own properties or move to more affordable locations.

Maruti’s closest rival Hyundai late last year acquired 1.99 acres for Rs 205 crore in Gurgaon after having spent almost two decades in the country without a corporate HQ of its own.

The company plans to consolidate its various offices and functional arms under one roof when the building comes up in 2019, improving efficiencies and doing away with exorbitant rentals, said Rakesh Srivastava, senior VP, sales and marketing, at Hyundai Motor India. “Companies with strong cash flows are creating their own asset base,” he said.

Tata Motors would soon be moving its Mumbai sales office from Lower Parel's Indiabulls Centre to company-owned Ahura Centre in Andheri East. The move is part of “a company-wide drive towards cost optimisation and better utilisation of our assets”, a Tata Motors spokesperson said.

In the past, vehicle majors like Volkswagen have shifted its office in Mumbai from the expensive Bandra Kurla Complex to Andheri's Silver Utopia to reduce the impact of rising rentals.

Lease rentals have witnessed cumulative growth of up to 15% in several micro markets of Mumbai, National Capital Region, Pune and Bengaluru over the last three years, said Raja Seetharaman, director at Propstack, a firm specialising in commercial realty data information and analytics. Rents across all major commercial hubs in Tier I and Tier II cities have either been steady or increased during this period, he said.

“This inflationary trend in rentals essentially negates the point whereby corporates are able to take advantage of scaling down operations or renegotiating rentals in case of renting office premises. In fact it just strengthens the argument to buy office premises to take advantage of tax concessions, for providing operational flexibility and potential capital appreciation,” said Seetharaman.

According to real estate experts, buying properties particularly works for corporates that have cash reserves or established sources of financing.

Buying provides better control on the property including remodelling of office spaces and usage of common areas. Also, owning properties provides potential capital appreciation to the buyer, they said. Also, while only occupancy costs are fully tax deductible for renting offices, in the case of outright ownership, operating expenditures, depreciation and interest are tax deductible.

Saturday, 25 February 2017

10 hottest trends in real estate marketing

Ten hottest trends in real estate marketing
With multitude of projects being launched by hundreds of developers across all segments, a real estate buyer often feels lost, ignored and confused. Such scenarios are not uncommon but soon this is all going to be passe and thing of past. Developers are starting to recognise the needs of their prospects and are looking at ways and means to address their needs, engage them and lead them towards making the buying decision using new-age experiential marketing techniques and installation-based experiences. We bring to you ten hottest trends in real estate marketing.

Aerial Masterplan 3D View
Bird's eye or the aerial views of a yet-to-be-constructed property gives your prospects a clear understanding of the designing intent, usage of exterior spaces, landscape elements, road network, surroundings and most importantly connectivity. These are created using advanced 3D design tools and are to the scale representation of a development. To create interest a lot of graphically generated special effects can be given on these in various lighting moods. Primarily used in most forms of communication material.

Exterior CG Renderings
Exterior renderings are 3D views of your property from an eye level usually focusing on elevation facade and the landscape elements in the development. The detailing is done as per actual CAD files making sure that these look just same as the actual constructed building would. To top it all, even the facade material specifications, colors, glass type and plantation in the landscape elements is representation of the actual plan. Exterior renderings make sure that the towers look imposing and villa units warm and inviting to the prospects. Lighting moods can be decided basis what looks the best in a brochure, a hoarding, a newspaper advertisement or in online media

Interior CG Renderings
Interior renderings are the 3D views of various areas of the units you wish to sell. These views are complete with furniture, furnishings and light fittings etc. and give a true representation of the spaces and specifications of materials in terms of walls, ceilings and flooring. Primarily used in communication material like brochures and advertisements for the purpose of showcasing lifestyle.

Isometric Views
Isometric views are top-level perspectives of any typical unit in your development complete with interiors laid out as per the unit layout plan. To make these more meaningful the angle chosen is carefully decided to showcase the maximum utilisation of spaces inside any unit. The specifications of interiors in terms of flooring type in various rooms, wall cladding etc. are as per actual offering and similarly the layout is also actual representation of a 2D floor plan.

Curved Screen Theatres
Gigantic screens with curve from 100 degrees to 180 degrees for an immersive viewing experience are the next in thing to showcase your development animations and walkthroughs. Powered through high end multiprojection technology that gives a pixel perfect image combined with state-of-the-art 5.1 channel audio from the likes of Bose and JBL gives an absolute immersive and cinematic viewing experience. What's more is that one can even combine this with active 3D viewing technology to take the experience a notch above or use the power of 5D to tickle all senses of the prospect. The screens can be start at 20 ft and can go as huge as 50 ft.

Augmented Reality
Let the real interact with virtual and create an environment wherein both can be seen together. Augmented reality has endless applications in real estate. All you need is a smart phone a tab or even a PC with webcam to see the magic. The most common examples are conversion of 2D to 3D ideally suited to view floor plans and video & image overlays combined with interactive actions suited for newspaper ads, brochures and other printed communication material. Memoir zones wherein your prospects pictures gets clicked in virtual environs of your property or even standing right next to the celebrity brand ambassador is another application of augmented reality, which finds great acceptability in events to drive footfalls.

Holographic Imagery
Show the Magic in Thin Air. Holographic Projections create an impact with Volumetric Virtual Formations happening right in front of the prospect and come in form of small format Displays and extra‐large sizes. Using high definition video projection, near invisible holographic film coupled with some clever lighting and of course amazing 3D content companies can connect with their audience in a way never seen before. Show full 360-degree views of your product models be it buildings or interiors or simply your logo you are sure to grab the eyeballs you require.

Multitouch Experiences
The touch environments create a direct physical immersion into the brand and its offering. Be it your sales gallery, exhibitions, events, reception and waiting lounges these environments are bound to create an impact in both multi user as well as private engagement platforms. You can showcase your project in most interactive way through engaging apps and robust all in one hardware combining the power of i7 processors, 16GB ram and commercial grade screens varying from 32 inch to 84 inch in size. Spill proof, scratch proof and designed to work in all kinds of lighting conditions these can be packaged as kiosks, tables and wall units.

Smart Scale Models
Smart models are the in thing to showcase your development and its features in the best possible manner. Made with amazingly high accuracy and stunning lighting effects to accentuate architecture these models come powered with zone lighting to understand and experience the project USPs in a better fashion. The zone lighting is controlled through iPads or touch pads straight away. The USP of these smart models is their lighting, finesse and usability by the sales team.

Interior Unit Scale Models
Why spend millions on making all sorts of show flats when a to the scale model in 1:10 or 1:25 scale can do the magic for you. Interior unit models come with exact reproduction of finished and specifications of actual units and are completely furnished using actual fabric and material you desire. These models not just attract the prospect but also give him an exact idea of usage of spaces and space planning.

Image credit: pixelspoke.com

Thursday, 23 February 2017

Realtors - Taking charge of your finances in 2017

As realtors, all of us are keen to achieve financial stability in our professional and personal lives, if not complete financial freedom. Being independent business owners, our income is dependent on the hard-work we put in, market conditions and a bit of luck and therefore oscillates a lot like the pendulum swinging in the wall clock in front of you. It is necessary to take control of the reigns of your finances if you want 2017 to become a landmark year in your career as a realtor.

To reach this goal, you should know where all your hard-earned money is going. Are you splurging on unwanted personal effects or on an unnecessary office renovation project? Financial freedom is definitely an achievable goal if you can implement the below mentioned easy to use tips to get yourself on the expressway to financial freedom.
#1. Trace your expenses
As soon as the commission cheques begin to hit your account, do you get over the moon and spend for superfluous expenses and then wonder “Hey, where did my money go?” then it is time to sit down and track these expenses. Use any of the money tracking apps available and know where the cash leak is and take control of these spending. This way you can save more and put your earnings to better use.

#2. Create a separate budget for home and business…and stick to it
We all need a guide in our lives so that we take the right decisions in life at the right time and a spending budget can play a similar role in our financial life. As a full-time realtor, it is advisable to keep separate budgets for home and business finances and individual spending plans for both. Fixed expenses (Monthly bills, EMIs), irregular expenses (property taxes, water charges) and miscellaneous expenses should be listed separately. In case you have to reduce expenses, a detailed sheet will help you to make the right decision.
#3. Reduce home expenses before turning towards business
Making cuts on the home front is always advisable before reducing business expenses, though the latter may seem easier. At home too, make reductions on discretionary expenses first and then turn towards the others if necessary.

#4. Reduce Debt
It is commonly seen that loans and debts prevent people from achieving financial freedom and living a debt-free life. In 2017, make it a goal to pay off more towards credit card loans (the deadliest loan), mortgage EMIs and Car loans. Call your finance company and personally deliver the news that you are willing to pay more this year to get out of their clutches sooner than they thought.
#5. Reduce impulse purchases
Ever felt guilty after buying that expensive watch or the hottest mobile phone on a whim from a glitzy showroom? Such impulsive purchases are probable reasons why your finances are how they are. Make it a habit to ruminate over an object of desire for a minimum of 24 hours before you make the decision. This habit will keep you from spending your hard-earned money on things you actually do not need. Try it! It works.
Here is wishing you fulfilling 2017 ahead as you take massive action on your Financial Goals

Credit : Ramprasad Padhi

Tuesday, 21 February 2017

5 factors why RBI may go for a 25 bps cut but be ready to be surprised

A kneejerk reaction on Dalal Street cannot be ruled out in case the central bank decides to maintain status quo on rate this time again.

NEW DELHI: The stars are aligned for an interest rate cut by the Reserve Bank of India (RBI) on Wednesday, but the central bank is known for delivering surprises.

A kneejerk reaction on Dalal Street cannot be ruled out in case the central bank decides to maintain status quo on rate this time again.

More than 1,000 Twitteratis in an ETMarkets poll have voted in favour of a 25 bps rate cut by the Reserve Bank of India (RBI) on Wednesday. As many as 43 per cent of participants, who voted in the survey, said RBI could cut rates by 25 bps, while 40 per cent expect no rate cut and 17 per cent foresaw a rate cut of up to 50 bps.

The domestic macro-economic backdrop clearly calls for continuous monetary easing, especially because the fiscal impulse to growth remains modestly negative.

“The global scenario remains a tad uncertain, but we believe it does offer a window of opportunity to RBI to act. Overall, we expect a 25 bps rate cut by the central bank on February 8,” 
Edelweiss Securities said in a report.

Going by the buzz on Dalal Street as well as what economists are saying, we have collated a list of five factors that may make RBI go for a rate cut.

A supportive Budget: The Union Budget announced on February 1 had no surprises. The government remains committed to continued fiscal consolidation from 3.5 per cent of GDP in FY17 to 3.2 per cent in FY18.

“The assumptions underlying the 
fiscal deficit target were broadly realistic, barring a few ‘quibbles’, such as a rich disinvestment target, and there was an improvement in the quality of expenditure,” Pranjul Bhandari, Chief India Economist at HSBC Securities and Capital Markets (India) Private, said in a note.

“The fiscal impulse from the Budget alone is likely to be negative, leaving some space for RBI to remain accommodative,” she said.

“On interest rates, while it is a close call, we expect RBI to cut by 25 bp. We expect RBI to discuss its forecasts, but continue to hold on to its accommodative stance,” Bhandari said.

Benign inflation: The macro backdrop for the forthcoming 
monetary policy review is conducive for continued monetary easing. Inflation remains low and contained at 3.4 per cent, which is below RBI’s target.

Retail inflation is likely to be well below RBI’s target of 5 per cent this financial year, as 
demonetisation would discourage any headwind on the price front, the Economic Survey for 2016-17 said.

During April-December, retail inflation averaged 4.9 per cent and has displayed a downward trend since July. Retail inflation eased further to a near three-year low of 3.41 per cent in December, reflecting weak demand, as consumers grappled with cash crunch following demonetisation.

Though it may rise in the coming months, it will still undershoot RBI’s indicative trajectory

Stable global environment: In its December policy review, one of the reasons cited by RBI to hold policy rate was Fed’s tightening stance and the associated strength seen in the US dollar. Since then, the USD has stabilised and, in fact, weakened to some extent.

If RBI believes there is space for a rate cut, then it should move quickly. Inflation is low thanks to food prices, the Budget was disciplined and the dollar is steady.

“At the global level, though uncertainty persists, the situation still offers space as the US Fed is not in a hurry to raise interest rates immediately and the US dollar is showing a weakening bias,” Edelweiss Securities said in a report.

“Moreover, the rupee is overvalued. In our view, this backdrop warrants a 25 bps rate cut,” it said. The Fed is not in a hurry to raise rates. Perhaps, the next move by the US Fed could happen around mid-2017.

Comfortable fiscal math: The economy is certainly stabilising after the demonetisation shock, but still aggregate demand remains weak with private capex particularly anaemic.

The central government’s aggregate expenditure growth is going to moderate sharply to 6-7 per cent YoY in FY18 compared with 12-14 per cent in the past 2-3 years. “The fiscal math presented in the Budget is quite credible, which should also be comforting for RBI,” Edelweiss Securities said in a report.

Note ban has hurt growth: The Economic Survey released last week pointed out that demonetisation would have both short-term costs and long-term benefits, but growth will get hit in the short term.

To keep the momentum going, RBI might give a booster by cutting interest rates by 25 bps to facilitate further transition.

“Given the government’s intention to adhere to fiscal prudence despite the compulsions of supporting a slowing growth momentum, we expect RBI to deliver a 25 bps rate cut in the forthcoming monetary policy,” Kotak Institutional Equities said in a note.

“We continue to see scope for 50 bps rate cut through FY18,” it said.

The domestic economy should grow between 6.75 per cent and 7.5 per cent in the financial year beginning on April 1, 2017, said the Economic Survey for 2016-17 last week.

The survey’s GDP growth figure for this financial year is lower than 7.1 per cent the Central Statistics Office had forecast earlier this month.

Saturday, 18 February 2017

Gurgaon builders reduce apartment size to make them more affordable, revive demand

Traditionally, Gurgaon’s apartments range in area from 1,800 to 6,000 square feet, according to Surabhi Arora, a senior associate director at Colliers International India, a real estate consultancy.

GURGAON: The days of large, swanky flats in Gurgaon may be taking a back seat for a while. Real estate developers are reducing the size of apartments to make them more affordable and prop up the housing market in the satellite town, where slowing sales have been made worse by demonetisation.

Traditionally, Gurgaon’s apartments range in area from 1,800 to 6,000 square feet, according to Surabhi Arora, a senior associate director at Colliers International India, a real estate consultancy. “In the recently launched projects, the area of apartments is anywhere between 1,100 to 1,600 sq. ft.,” Arora said.

According to brokers, the prices of these smaller apartments vary from Rs 60 lakh to Rs 1 crore. Over the past year, developers have trimmed apartment sizes, claiming they’re launching a different category.

At Tata Housing’s Tata La Vida located off the Dwarka Expressway, there are two- and three-bedroom apartments with areas from 1,276 to 1,579 sq. ft. At Supertech Azalia in Sector 68 on Sohna Road, the flats come in two sizes: 1,020 and 1,225 sq. ft. M3M’s Sierra in Sector 68 offers seven types of flats, ranging from 1,197 to 1,545 sq. ft., and ILD’s GSR Drive in Sohna has units ranging from 985 to 1,335 sq. ft.

“Smaller-sized units have become popular due to affordability factor and changing profile of home buyers,” said RK Arora, chairman of Supertech Ltd. “The trend for smaller units is likely to continue as families become smaller and more single working individuals buy property. Further, it is much easier to maintain small-sized apartments even as builders offer a wide range of facilities even with such units, including parking space, clubhouse and swimming pools.”

The growing popularity of smaller apartments ties in with the government’s emphasis on affordable housing. The finance minister proposed in the budget earlier this month to grant infrastructure status to affordable housing, which will allow developers to borrow funds at a lower cost.

“The time ahead will be completely dominated by the affordable housing segment as the government has also stressed towards diminishing the shortage of over 2 crore housing units in the country,” said Pradeep Aggarwal, chairman of Signature Global Group, a Gurgaon-based developer. “New project launches have shifted mostly towards the affordable housing segment supporting the Housing for All mission.”

The sale of residential property in Gurgaon plunged to about half of the peak numbers in 2016, while new launches, too, declined. Only 6,700 units were launched last year, which is one-third the level in 2015, according to a report by Colliers International India.

Delays in completion of projects and lack of infrastructure development in emerging corridors such as the Dwarka Expressway – another road linking Gurgaon and New Delhi – adversely impacted demand. The central government’s demonetisation move, scrapping Rs 500 and Rs 1,000 notes in November, made the situation worse. Transactions almost came to a halt in the last two months of 2016.

Speculators who fuelled demand during the peak times have all but disappeared from the residential market due to the fall in the percentage of their profit in the resale market. Those remaining are end-users.

“Before demonetisation, we were looking at a 65:35 ratio between end-users and investors. That changed to 90:10 post-demonetisation,” said Avneesh Sood, a director at Eros Group.

In the past couple of years, slowing sales have brought drown prices by about 10% in Gurgaon. Even after discounts and incentives offered by developers, buyers have kept away. Traditionally known as a luxury real estate destination, Gurgaon has a high supply of units with a price tag of Rs 1 crore and above. End-users comprising middle-class and service-class home buyers find such high property prices out of their reach.

Thursday, 16 February 2017

Govt looks to ease construction permit norms, seeks architects' help to redesign system

In its report, World Bank said India has not managed to shift online its construction permits system which entails more than 29 sets of procedures.

NEW DELHI: The government is seeking help from architects to redesign its construction permits system after the World Bank in its latest ranking on ease of doing business placed India among the bottom five of the 190 countries on this count.

In its report, the multilateral lender said India has not managed to shift online its construction permits system which entails more than 29 sets of procedures.

The Department of Industrial Policy and Promotion (DIPP) has asked more than 100 architects to point out the problem areas and is informing them of the steps being taken by the government to ease processes, officials said. “We have taken a lot of steps to digitise but it does not seem to be reaching the ground,” a senior official said.

The ministry of urban development has said that it will bring down the number of procedures to eight for Delhi and Mumbai. The World Bank’s ranking takes into account the reforms done in these two cities only.

Besides construction permits India is ranked poorly at 172 for paying taxes and enforcing contracts, and 155 for starting a business.

DIPP has started collecting feedback on all the ten parameters of the World Bank study as part of efforts to improve India’s rank next year. India managed to move up just one spot in the ranking, compared to its performance last year, to 130. The government said many of the reforms done in the country were not counted by World Bank.

India is aiming for a quantum leap of 80 spots next year to rank among the world’s top 50 countries for ease of doing business.

The ten criteria for the ranking include getting electricity, enforcing contracts, starting business, registering property, resolving insolvency, construction permits, getting credit, protecting minority investors, paying taxes and trade across borders.

Meanwhile, DIPP has come up with a 294-point action agenda for the state ranks this year, focusing on specific sectoral reforms in areas including transport, state excise and licences for health, drug, pharma and fertilizer industry.

ET View
Need to Boost Transparency 
The Union Budget has proposed several measures to boost transparency in 
real estate. And in tandem what is required are concrete steps to remove opacity in the award of construction permits. We do need to put in place norms to shore up construction activity, by duly rationalising systems and procedures. It would better to coagulate funds on the ground and considerably improve the overall ease of doing business.

Tuesday, 14 February 2017

Realty, infra cos face higher tax outgo under new rule

The new rule will not allow companies to claim tax deduction for interest paid on foreign debt above 30% of their EBITDA.

MUMBAI: Real estate and infrastructure companies, already struggling with thin profit margins, could see a substantial fall in profits and a significant rise in tax liability next year due to the `thin capitalisation' concept unveiled in the Union Budget for 2017-18.

The new rule will not allow companies to claim tax deduction for interest paid on foreign debt above 30% of their EBITDA (earnings before interest, tax, depreciation and amortisation).

Experts say the most hit would be real estate and infrastructure companies that have large chunk of international debt at project level or in their special purpose vehicles (SPVs).

The government is expected to categorise investments through non-convertible debentures (NCDs) and the dividend paid on that also as debt.

Several real estate and infrastructure companies or SPVs that have high foreign debt could be hit by the new rule, said Amrish Shah, senior advisor, transaction tax, EY.

“However, some of the companies with high profit margins will recover this within a couple of years as they would carry forward the unabsorbed interest,“ he added.

Thin capitalisation concept would apply to all companies operating in India beginning April 2017, in line with the Base Erosion and Profit Shifting (BEPS) framework, a global agreement with 15 action points to check tax avoidance by multinationals. India has already adopted some of these points.

Until now Indian companies used to benefit from dividend distribution (or interest paid) to their investors or debtors located abroad. “Dividend has DDT (dividend distribution tax) and hence, paying interest was the most tax-efficient method to remit money outside India, since even tax withholding was eligible for tax credit unlike DDT. Hence, some companies may look at reworking their capital structure using convertible instruments or simply adjust their coupon rates,“ said Jeenendra Bhandari, partner, MGB and Co LLP.

Typically, EBITDA is profit before any deductions. Most real estate companies deduct interest paid on debt by subsidiaries or SPVs from their consolidated EBITDA. As per the new rule, the interest deduction cannot be more than 30% of EBITDA.

“Certain sectors, especially real estate and infrastructure, are highly leveraged, and significant funding is made by offshore-related parties. Since interest above 30% of EBITDA would not be allowed as deduction, these sectors would be most impacted,“ said Rajesh H Gandhi, partner, Deloitte Haskins & Sells.

Real estate and infrastructure sectors, which were suffering from thin profit margins, used to get most of their debt investments through Cyprus. With the government renegotiating the tax treaty with Cyprus in 2016, all investments coming through the country would attract additional tax from April 2017.

Friday, 10 February 2017

Top 10 expectations of real estate sector from Budget 2017

Real estate industry has high expectation from the upcoming budget 2016-17. Stakeholders are demanding that central government gives relaxation in income tax rate, provide clarity on GST, raise House Rent Allowance (HRA) deduction and announce policies to standardize construction materials in order to uplift the real estate industry.

Take a look at some of the major expectations that stakeholders have from the upcoming Budget 2016-17:

Industry status
Directly or indirectly, the real estate sector contributes to over 15% of India’s GDP. It has been asking for industry status for quite some time now. In its absence, developers are forced to borrow at high interest rates and comply with a stringent evaluation process. Unavailability of funds at a reasonable rate of interest delays the construction process and increases the final cost of homes, negatively impacting the end consumer. Giving industry status to the entire real estate sector, instead of granting infrastructure status only to the affordable housing segment, would help in pushing the housing demand in India.

Single window clearance
For the real estate sector to really grow and execute its projects on time, various government approvals should be given in a timely manner. Developers have for long been demanding single window clearance to remove bureaucratic delays, which in turn delay delivery of homes.

Clarity on beneficiaries under PMAY
The government recently announced that interest rates of 3% would be applicable on loans of up to Rs. 12 lakh and 4% on loans of up to Rs 9 lakh, under the Pradhan Mantri Awas Yojana (PMAY). Now, two new income categories can avail higher loans with interest subsidies. The Budget should give more clarity on the actual definition of beneficiaries who can avail of these benefits.

For example - would young urban professionals hoping to buy their own apartments but not belonging to either the EWS (Economically Weaker Section) or the LIG (Low Income Group) segments be allowed similar subventions? Also, affordable housing is largely available in the fringe areas of metros and tier-II, III cities. Would certain redevelopment projects within metros meeting the affordable housing definition be granted similar benefits?

Financial protection from project delays
The deduction on interest of self-occupied houses is capped at Rs 2 lakh. For under construction residential units, however, if the construction is completed after 3 years, then the deduction is just Rs 30,000. This 3-year period starts from the end of the year in which the loan was taken. Lately, there have been many delays in the completion of many housing projects beyond the 3-year period. This has caused hardships to property buyers. To provide them some relief, the government may consider allowing interest deduction in such cases without the cap of Rs. 30,000, and from the year in which the possession was due to the buyer as per the terms of the agreement.

I-T sops for first-time home buyers
Can a first-time home buyer looking at an affordable project get additional income tax incentives for at least five years? The Budget should throw more light on this. Any efforts in this direction would help the government move closer to its objective of delivering ‘Housing for All by 2022’.

Also, given the lack of institutionalized rental housing in Indian cities, such a move could spur many fence-sitters into moving out from their rented apartments to owned homes. It could also encourage more developers to come up with products suiting these segments.

Simplified tax norms for REITs
We have not seen a single REIT listing till date because of the presence of multiple taxes. Until tax hurdles are removed for developers and asset holders, it is highly unlikely that we will see any REIT listing. The government should recognize the capacity of REITs to improve market conditions for the real estate sector and remove the policies constraining their growth. The government should look at:

• Reduced level of taxation of REIT income
• Waiver of capital gains for the developer at the time of transfer of property into REIT
• Removal of service tax on lease premises

Higher tax saving on home loan & home insurance premiums
The government should increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. The current limit of Rs 2 lakh is insignificant, given the ticket sizes in cities like Mumbai where most houses are priced at Rs 1 crore and above. Also, tax concessions on house insurance premiums could be introduced to encourage end-users to insure their homes. Similarly, the tax exemption limit should be increased by about Rs 1 lakh and be auto-set to match inflationary trends in a financial year.

Clarity on GST
While the goods and services tax (GST) tax structure has been announced, the real estate industry is waiting with bated breath to see which tax rate is applied to the real estate and construction industry. Clarification would also be needed on the abatement scheme, and whether credit for input tax would be allowed if the composition scheme has been availed by developers.

Raise house rent deduction limit
Salaried persons get house rent allowance (HRA) as a component of their total salary, and can therefore claim a deduction. This deduction can be substantial in cases where the salary and its HRA component are higher. However, self-employed persons and those who draw lump sum pays without an HRA component can only claim a maximum deduction of Rs 2,000 a month under Section 80GG. The Budget can and should address this anomaly.

Digitize all land records
Digitize all land records and registration process to make them easy to do and transparent.

Tuesday, 7 February 2017

How will Budget 2017-18 impact real estate sector?

The real estate sector, which was hit by the government’s demonetisation drive, got the much needed boost in the Union Budget 2017-18. Here are some of the key highlights pertaining to the real estate sector and their impact:

Infra status
The Affordable Housing sector has been granted the Infrastructure Status which has been a long time demand from the industry. This is in line with the Prime Minister 's vision of providing Housing for All by 2020. Giving an infrastructure tag to such projects would attract more investors. It would mean developers would have access to cheaper funding and thus addresses issues that private players in this segment face.

Loan refinance
National Housing Bank will refinance individual loans worth Rs 20,000 crore in 2017-18. This will give a major push to affordable housing companies.

Tax exemption
The Government has also proposed 1 year tax exemption from notional rental income from unsold inventory. This would help especially those holding real estate inventory/ stock. This is a great move to providing tax relief to developers in the residential sector where the sales have significantly dropped post demonetisation move.

Capital gains on JDA
Capital gains on Joint Development Agreement is to be taxed only when the project is completed. This would provide a great boost to unlocking land for development and reduce litigation.

Reduction in holding period
In case of Long term Capital Gains from Immovable properties, the holding period has been reduced from 3 years to 2 years to qualify for benefits of long term capital gains providing respite to investors.

Base year change
The base year for calculation of Indextation for long term capital gain shifted from 1981 to 2001. As a result of this resultant gain would reduce & in turn lower taxation.

PMAY get huge boost
The Government has allocated Rs 23,000 crore for the Pradhan Mantri Awas Yojna (PMAY) to propose to complete one crore houses by 2019 for those living in kachha houses.

Increase in size of affordable housing
In the last budget, the government provided 100% tax exemption on profits, for developers building homes with Built up area up to 30 sq meters in the four metros and up to 60 sq meters in other cities. The Government stated that instead of built up area, carpet area would be applicable.

Home loan rates
Rate of interest on housing loan to further come down.

Reduction in tax rate
For individuals, the income tax rate is reduced from 10% to 5% for tax slab between Rs 250,000 to Rs 500,000 which means any person whose income is up to Rs. 5 lacs, the tax liability will be halved. Any person whose income is above Rs. 5 lacs would have a net tax saving of Rs. 12,500.

Cash ban
It recommended a total ban on cash transactions of Rs 3 lakh and above.

Saturday, 4 February 2017

How Arun Jaitley's Budget will make you rich

Finance Minister Arun Jaitley in his populist Budget announcement for 2017-18 gave a lot of boost for the rural sector, real estate, small industries, individuals, etc. Here's how the recent Budget announcement would benefit people in different sectors:

If you are a salaried employee
*Government will slash the basic rate of income tax from 10 % to five percent.

* The basic rate applies to those with annual incomes of between Rs 2,50,000 rupees and Rs 5,00,000 rupees.

If you are into farming
* Farm sector will grow at 4.1% this fiscal and government will double income of farmers in five years.

* For imparting new skills to people in rural areas, mason training will be provided to five lakh persons by 2022.

* Farm credit target for next fiscal at Rs 10 lakh crore.

* Fasal Bima yojana increased to 40% of crop area; raised to Rs 1.41 lakh crore in Kharif 2017 season.

* Infrastructure investment pegged at Rs 3.96 lakh crore.

* Dairy processing fund with Rs 2000cr corpus to be set up.

* To double irrigation fund corpus to Rs 40,000 crore.

If you are a business person
* Scope of domestic transfer pricing restricted to only if one of the entities involved in related party transaction enjoys specified profit-linked deduction.

* Threshold limit for audit of business entities who opt for presumptive income scheme increased from Rs 1 crore to Rs 2 crore. Similarly, the threshold for maintenance of books for individuals and HUF increased from turnover of Rs 10 lakhs to Rs 25 lakhs or income from Rs 1.2 lakh to Rs 2.5 lakh.

If you live in rural India
* The government aims to bring 1 crore households out of poverty by 2019.

* Will take steps to ensure participation of women in MGNREGA up to 55%.

* For imparting new skills to people in rural areas, mason training will be provided to five lakh persons by 2022.

* The government proposes to complete 1 crore houses for those without homes.

* Will allocate Rs 19,000 crore for Pradhan Mantri Gram Sadak Yojana in 2017-18.

* The country is set to achieve 100% rural electrification by March 2018.

* With a progress of Swachh Bharat mission, sanitation coverage has gone up from 42% in Oct 13 to 60% now.

If you are into real estate
Finance Minister Arun Jaitley has granted infrastructure status to affordable housing, a long-time demand from the industry. Owing to surplus liquidity, banks have started reducing lending rates for housing.

If you own a start-up
* The three year tax holiday available to start-ups has been extended from the existing period of first 5 years of operation to 7 years.

* Removal of embargo on carry forward of losses if there's a change in share holding beyond 51% of promoter share.

If you are a student
Government has proposed to introduce a system of measuring annual learning; Science to be given focus; Quality education will energize our youth. Skill centres will be set up across the country to help youth seeking opportunities outside the country.

Thursday, 2 February 2017

PNB Housing Finance IPO anchor book fully subscribed at top end of price band

Demand was seen from a combination of investors including domestic banks, mutual funds, long only funds and even private equity investors.

NEW DELHI: The second largest public issue of shares this year by home financier PNB Housing Finance received bids for as much as thirty times the value of the anchor book on offer, people briefed on the matter said.

The offering by the part-state owned and part-privately-owned issuer was fully subscribed at the top end of the price band of Rs. 750-775 per share, according to these people.

The value of the anchor book on offer is Rs 900 crore.

Demand was seen from a combination of investors including domestic banks, mutual funds, long only funds and even private equity investors.

PNB Housing Finance is raising Rs 3,000 crore through a primary issue of shares, making it the second largest initial public offering this year after ICICI Prudential Life Insurance raised about Rs 6,000 crore in through its public issue in September.

The offering will lead to a 23 per cent dilution for existing shareholders, said Sanjaya Gupta, Managing Director, PNB Housing Finance at a press meet on October 19, in Delhi.

Punjab National Bank and US private equity fund Carlyle are the shareholders of PNB Housing Finance and own 51 per cent and 49 per cent of the company, respectively.

Post the issue, 
Punjab National Bank’s stake in the home financier will reduce to around 38.8-39.1 per cent and it will cease to be a subsidiary of the state-run lender, Gupta said at the press meet.

Carlyle’s holdings in the company will reduce to between 37-37.5 per cent.

PNB Housing Finance is the fifth largest 
home loan provider in India. Its loan portfolio grew at a CAGR of 61.76 per cent from about Rs 4,000 crore as of March 31, 2012 to about Rs 27000 crore as of March 31, 2016.

Banks are said to control about 60 per cent of India’s housing finance market which is pegged at Rs 3 lakh crore according to an investor presentation by PNB Housing Finance.

Non-banking finance companies have a 38 per cent share of the market.

The company will issue between 37.8–40 crore shares as part of the offering.

PNB Housing Finance provides loans against property and corporate real estate loans as well, though the mainstay of its business is housing loans for purchase, construction, extension or improvement of residential properties or for purchase of residential plots. Loans against property are said to constitute 18 per cent of its portfolio.

As of June 30, 2016, its gross non-performing asset (NPAs), as a percentage of its total loan portfolio, were 0.27 percent and net NPAs, as a percentage of total loan portfolio, were 0.1 per cent.