Mumbai Witnesses A Rise In Property Price By 3% In Q3CY13

27 Friday Dec 2013

Posted by in India Real Estate News, Mumbai

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Although the country’s GDP dropped constantly in the last three quarters, the real estate industry in India sustained to grow. The increase in an average inflation rate on the basis of wholesale price index (WPI), which was 7percent, worsened the situation more.

The execution of buyer market in the real estate industry across the country was the same in this quarter and the previous quarter of 2013. With this, many cities were affected by a number of factors with the same extent.

Mumbai-Witnesses-Property-Rise-TGS-Property-Reviews

The National Capital Region (NCR) in the northern region largely failed to observe any growth with q-o-q analysis (third quarter of 2013 over second quarter of 2013), which indicated no change in capital appreciation, whereas the y-o-y analysis (third quarter of 20103 over third quarter of 2012) showed a growth of 8percent.
The Mumbai and Pune in the Western Region saw better growth both in q-o-q and y-o-y analysis when compared with the northern region, where the q-o-q analysis showed a growth of 3percent and the y-o-y analysis growth was in double digit.
While, in Southern Region Bangalore, Chennai, and Hyderabad alike NCR saw no change in capital appreciation in q-o-q analysis but the y-o-y analysis showed a rise in growth by 5 percent.

In the Eastern Region, which is considered as an outlier saw an increase of 4 percent in capital appreciation in q-o-q analysis and this was highest amongst all the seven cities, and whereas the y-o-y analysis (third quarter of 2013 to third quarter of 2012) also revealed an increase in growth by 11 percent in the Eastern region.

When talking about the rental market in the real estate sector, even it didn’t show no changes with either rising or decreasing rents in the third quarter (July-Aug-Sep) against the second quarter (April-May-June). With an eccentricity, Kolkata saw a drop in rental values in both q-o-q and y-o-y analysis, where the q-o-q analysis showed a drop by 15 percent and y-o-y analysis revealed a drop by 11 percent.

Critical Requirement for a Massive Investment in Indian Realt Estate Sector

29 Friday Nov 2013

Posted by in Delhi NCR, India Real Estate News, Mumbai

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The Indian real estate is on a recovery phase, but would require urgent investment of approximately 257billion$ within next three to four years. The residential sector alone calls for 29 billion dollars, by 2015. Though the amount seems to be huge, there would be no denial for the fact that by boosting the sector, the Indian economy is in for a massive change. With about 6.3 percent contribution to GDP and chances for about 7.6 million jobs being created, real estate improvement should be on the priority list of the Government. Also, with each year, there would be an increase in the number of available offers.

However, the amount involved is massive, therefore what is required now is out of the box thinking. There are plans to implement the REITs, the Real Estate Investment Trusts as an advanced financing option. This seems to a well-thought move, but chances for more options are prominent.

While talking about India’s real estate development, it is imperative to describe the DMIC (Delhi-Mumbai Industrial Corridor). This collaborative attempt to connect Delhi and Mumbai would pave way for large scale infrastructural development besides converting areas into city status and creating commercial centers. With the DMIC, areas on both the sides are likely to undergo immense development, leading to an overall infrastructure development.

The realty sector had to endure a challenging time, on account of weakening economy, significant employment concerns, depreciation in rupee value, lack of consumer’s interest, inventory pile-up across the nation, increasing labor costs and few others.

With probability for high-level growth across the nation and increasing demand, this is the proper time to bring in active changes into the realty sector in India for maximum benefits on related sectors as well as the Indian economy.

Mumbai Real Estate – Capital Gain Features

25 Monday Nov 2013

Posted by in India Real Estate News, Mumbai

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Few families across Mumbai are planning to redevelop their old tenanted property to get a chance of moving into larger apartment will all modern amenities. These properties are of higher floor space index due to which developers are rushing and have been attracted by high returns.

However these areas have some lacking features, in such cases it’s difficult for one to calculate the capital gains and the tax thereon. With the redevelopment of such properties planned to sell as a solution for rejuvenate urban spaces, this is an issue which could challenge huge number of families across the country.

According to property expert the capital asset is calculated in the case when the residential property is transferred. The shifting includes sale or exchange of the property. If the property is holded for less than three years, the profit is short-term and if it’s holded for more than three years than the profit is for long term.

Let us assume that a buyer purchased a flat at Rs 40 lakh in 2001. Later he sold the flat for Rs 86 lakh in 2011-12. In such case the capital profit is not 46 lakh, because the buyer has not factored in cost indexation.

The concept of Indexed cost is applied only for long term capital gain. In such cases the value of the property is Rs 12, 29,108 and not Rs 46 lakh, and the tax for capital gain is charged around 20 percent of this amount.

Indexation comes into picture when the time gap between sale and purchase is over three years. To adjust the original purchase or sale cost as per the inflation assumed in that year of purchase or sale, the government has declared a year-wise table of cost of inflation index. The cost of inflation index table is available with professionals like advocates, valuers, chartered accountants etc.

In the present scenario tenanted refers to the property which is taken on rent from the landlord and almost permanently. This is neither a log lease nor any license arrangement. The down payment is made in a lump sum called Paghadi. Even to this day in Mumbai lakhs of properties are tenanted. As per Bombay Rent Act it was not legal to pay or take Paghadi. But Paghadi has become legal as per Maharashtra Rent Control Act 1999.

As per some consultants as on April 1, 1981 the fair market value of the rooms should be calculated to determine the capital gain and the acquisition cost. A property valuer says that, the fair market value is calculated on the basis of Ready Reckoner rate of 1981. Let us assume that the room is on first floor without any lift facility, the value is of Rs 1,000 per sq.ft, which is of Rs 2 lakh. The share of the landlord is 33 percent and 67 percent of the tenant. So the indexed acquisition cost would be of Rs 1.34 lakh.

If the Paghadi transaction is prior to 1994, and if no money is paid officially than the acquisition cost will be zero. If the tenant wills to stay in the new house purchased as per section 54F of the Income Tax Act, then he is not liable to pay capital gain tax.

Punmiya guides the tenants to have all documents such, purchase deed, completion certificate, as agreements etc. to prove exemption to the tax authorities.

Development of Dharavi Project to Be Start

05 Tuesday Nov 2013

Posted by in India Real Estate News, Mumbai

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Dharavi is one of the biggest slums in Asia, could be in form of a change and competition between the various interest groups. The first phase of the slum redevelopment of Dharavi to be start by the yearend expected by the Maharashtra government. But the redevelopment of Mumbai airport project shows public private realty project runs the risk of getting untidy and confused in the city.

Dharavi slum located in central Mumbai which is of 240-hectare. The connecting areas such as Bandra, Sion, Mahim, Bandra-Kurla complex and others are profitable real estate hot spots.

The one of the biggest ticket size for real estate projects is the redevelopment of about 60,000 plus shanties. This location is more attractive due to closeness to various railway stations, highways and arterial roads, the hurdles are the asymmetric information and the financial power of the residents and the developers. The other main problem is that there is no such comprehensive solution for the development of the area.

Recent developments, last month one of the company won the bid for the project as management consultants. This will help in reconstructing the sector 1 to 4. One of the officials from Redevelopment authority says they will also conduct viability study which explores alternatives and suggest the tendering process.

The authorities have sub-divided 4 sectors into 13 sub –zones just to tackle the issue of size. The government is planning to invite bid through phase wise or sub zone wise. Dividing of sectors into phase wise will facilitate the bidding process due to which stakes would be lower and will be focused on the process.

One of the official states that, the outline and core norms will continue as a township. Many developers can pick up one phase each in sub sector or one developer can bid for all phases or group. The physical element will remain the same in the old sector. Through regulator the entire process will be monitored.

According to MHADA the first phase construction has been started with a high rise with three wings of 14 to 18 floors in each sector 5. In 300 sq.ft each there would be about 356 tenements, which is expected to be ready in 2014.

If the slum dwellers staying prior to January 1, 2000, as per eligibility criteria they are eligible for free housing. As per the survey by a Government and by an NGO only 20 to 35 of the slum dwellers are eligible. Still there is a confusion stating who is eligible a slum or owner or both. New list of eligibilities are created on every survey and later is told it’s wrong. Nobody knows who should be given free houses. Still many people residing of the shanties are demanding space.

The main struggle between the locals and the authorities about the size of the unit which the slum dwellers are going to get free of cost after redevelopment. But some political parties are demanding for 400 sq. ft. for all slum dwellers. Dharavi is known for its small scale manufacturing units such as leather, pottery, garments, oil, chemical recycling etc. With an annual turnover of Rs 200 crore. These spaces from 200 sq. ft. to 1000 sq. ft. These businesses are demanding more space which is not possible under present policies and regulations.

Many private landowners are rejecting to join the initiative. They are asking for more prices for their land or permission for self-development. Where both are not advisable.

Supreme Court Levies Vat for Property: Burden on Developers Or Buyers?

24 Thursday Oct 2013

Posted by in India Real Estate News

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The Supreme Court has endorsed VAT for property under construction in its recent judgment. While developers prepare themselves to pay, buyers should be ready to face the additional bill and ask questions seriously.

This week the Supreme Court sustained that state governments can charge the developers with a value added tax (VAT) on the cost of building a flat and also held that past purchases can be re-opened too.

The Court gave a clear explanation to the shocked developers, when developers construct a flat it involves construction activity too, which means works contract is executed and that is chargeable under the VAT rules.

Currently, only few states are levied with VAT for property.  In 2006, when Maharashtra government decided to charge a 5 per cent VAT on properties under construction, it had led to much confusion and finally the decision was upheld and the judgment was delivered in July 2012.

Aditya Tiwari, Partner of Prudentius Legal Advocates stated that this judgment should give relief to the developers as well as for the buyers. In many states, developers have doubt with respect to the decision of the VAT for property.  However, the judgment clearly states that the value that would be taxed would be the sum attributed to the supplies incorporated in works.

The laws also states that to levy VAT, the builder should provide the date of incorporation, which is crucial and the tax levied after incorporation will not impact if the flat or the building is transferred.

One of the BMR Advisors added that state governments would now forcefully chase developers to collect VAT and no amendments in state legislations to levy VAT are required. However, developers may not be able to recover VAT from purchasers for completed projects.

But Harishanker Subramaniam, Partner & National Leader of Indirect Tax, EY remarked that it will be interesting to see the buyers reaction to this and how the developers commercially overcome the extra burden of tax from the flat buyer.

Prashanth Bhat, Director-Indirect Tax, BMR Advisors said in a conference call with media that this will not impact most of the developers in the southern states as they have been already paying VAT on sale of flats under construction. But, the impact will be most in the northern and eastern states like Rajasthan, Delhi, Uttar Pradesh West Bengal, etc, where the developers are not levied VAT for properties.

Buyers, who will be charged additional sum towards this tax, should now be prepared to ask some critical questions to their developers and developers will face a critical challenge how to rise above this extra tax burden and to deal with the buyers.

Downcast of Mumbai Property Rates in Near Future Says ICRA

15 Tuesday Oct 2013

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Despite the fact that prosperity levels in Mumbai are highest, only 13% of Mumbai’s tax payers own a house, whereas in Bengaluru and Hyderabad 40% and 17% of tax payers own a house respectively, which shows a huge obscured possibility.

ICRA says that the main causes for the downcast of Mumbai property, which will be for medium term is the waning reasonable price and the uncertainty.

Although RBI lowered the burden of loans from 100% to 75% that was extended on the developers for residential projects could have provided some breather on interest rate front. But the increase in base rate and recent reduction in the liquidity did not give an impact to a large extent.

Besides, most of the banks have increased their base rates in the recent past, which in order would have lead to an increase in interest rate in acquisition cost for the property buyers thereby making the buyers to take slower decisions resulting in depressed property rates.

As on March 2013, the ratio of Commercial Real Estate (CRE) Loans to the Total Loan Book for the Banking sector is reduced to 2.4% compared to 2.9% two years back, which rose to 3.5% in June 2009. Difficulty in accessing bank funding is also one of the reasons that forced for the liquidity situation of real estate developers.

ICRA also added that previously the real estate market in Mumbai had come to a near idle in means of commencing new project launches, due to unexpected cease of approval process by the BMC, a regulatory authority.

ICRA also stated that even though Development Control Regulations (DCR) have been revised and project approvals have started flowing in the system after the cease, but it will take some time to acquire the same energy and character that was before cease that may induce the Mumbai property rate.

Academy for Construction Laborers Coming up by the State Government

15 Tuesday Oct 2013

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According to the Minister of the Labor Department of Maharashtra, the state government is slated to come up with an academy for the construction workers for the skill-set development. He further stated that they had asked the administrations of Nagpur, Pune, Kolhapur and Nasik to submit proposals for making available land of about 10 acres for the academy. He further stated that they were in the likelihood of receiving the proposals as early as possible. No sooner the proposals are received; the labor department would set foot into preparing the budget for setting up the novel academy.

Now, coming to what the focus of the academy would be is that it would take into account the skill-set development of the laborers. It would further undertake the task of training them in how to use the advanced technologies in the construction industry. The minister further stated that no sooner the academy was established, they would expand the facility from the unorganized sectors to the laborers.

He also added that there were recently some protests by construction laborers and domestic workers. With regard to those protests, for two unorganized sectors, the labor department had formed boards. Besides that, numerous schemes had been launched too to help out the laborers. However, there has been reported improper communication with the construction industry. It is believed that hardly around 1 lakh registrations were seen from the construction workers with the board. The minister also stated that they were putting into the efforts to increase the number of registrations with the board.

He pointed out that the workers were demanding for bonus. However, there seemed to be no provision in the law for that. He added that they would go ahead for a discussion with the leaders of the construction workers.