July 2017 Vol 02
Realty Market gets a boost as Foreign, Domestic Institutions infuse big money
In the backdrop of an ongoing transformation in business environment, Indian real estate is witnessing a robust rise in investment as both foreign and domestic institutional investors are infusing more funds into the sector. The Indian property market has posted a 40% on-year jump in inflow since the beginning of this year. Institutional investors, including private equity, pension funds, sovereign funds, domestic investors, and non-banking finance companies have pumped in $3.1 billion in the sector between January and June-end, showed a Knight Frank India study.
I-T dept seeks data of property deals worth Rs 1 cr or more
The income tax (I-T) department has asked all sub-registrars and tehsildars under its jurisdiction in Mumbai to send it details of property deals worth Rs 1 crore or more in the past 10 years. This is aimed at nabbing those who stash unaccounted money in benami property. According to estimates of experts dealing in property registrations in Mumbai, there would be at least 500,000 agreements worth Rs.1 crore or more from the past 10 years.
The letters from the I-T department, seeking information of property registrations between April 2007 and June 2017, were issued under Section 21(1) of the Prohibition of Benami Property Transactions Act, 1988. The Central Board of Direct Taxes altered this law significantly through a notification on October 25 last year.
Singapore’s Ascendas buys over 16-acre land in Pune’s Kharadi for Rs 200 crore
Singapore-based business space solutions provider Ascendas-Singbridge Group has bought an over 16-acre land parcel in Pune’s Kharadi locality for about Rs.200 crore from a local developer, said two persons familiar with the development. The vacant land parcel is estimated to have a develop ment potential of over 3 million sq ft commercial space. Ascendas-Singbridge Group, jo intly owned by Te intly owned by Temasek Holdings and JTC Corporation through a 51:49 partnership, is planning to develop an IT park on this land parcel.
The group already has over 12 million sq ft of assets under management in India valued at about $2 billion. “The deal has been concluded recently. Given the existing development in and around the location, an IT SEZ (special economic zone) is likely to be developed here,“ said one of the persons mentioned above. “In line with our growth strategy in India, we continuously explore new development and acquisition opportunities and announce any development at an appropriate juncture.
Indians 5th largest buyers of residential property in US
By purchasing residential property worth $7.8 billion during the 12-month period ending March 2017, Indians emerged as the fifth largest investor in real estate in the US. Backed by mortgage finance, these properties were largely acquired for use as primary residence or for use by a child studying in the US. Chinese nationals were the biggest buyers, purchasing residential property worth $31.7 billion in the same period. They were followed by the Canadians, British, Mexicans and, lastly, Indians.
Between April 2015 and March 2016, Indians had invested $6.1 billion and occupied third place on the list of biggest buyers. However, a surge of investments from other nationalities resulted in Indians slipping to fifth position in 2016-17. The bulk of buyers from China, India, and Mexico were working and residing in the US, while most buyers from Canada and the UK were non-resident buyers, adds the report, “2017 Profile of international activity in US residential real estate“, released recently by the National Association of Realtors (NAR).
NAINA investors, keep your eyes open for fraud
Those investing in real estate around the Navi Mumbai airport have been warned. As the much awaited Navi Mumbai airport inches towards becoming a reality, construction projects are also mushrooming in the area. But as a report in this paper pointed out, most of these construction activities are illegal, as the builders have not adhered to the mandatory NAINA compliance.
The authorities have warned the public to be cautious before making any investment in such projects, and first verify their compliance status on the NAINA website linked through the CIDCO portal. NAINA was created on the condition that Navi Mumbai’s development plan be revised to avoid haphazard growth around the airport. However, this seems have borne no fruit, with illegal projects littered across the area.
Ready to Move?
There has been a constant debate around the subject of what to opt for: a ready-to-move-in home or an under-construction house? With more time being spent on completing under-construction projects; the growing demand for compact homes (and most importantly, GST not being applicable for ready-to-move-in homes), there has suddenly been a huge push that has been given to this segment of housing. Experts believe that ready-to-move-in apartments are less risky and hence, more and more buyers are opting for the same. Also, given the current market scenario, where launches have decreased and developers too are focusing on completing their existing projects completed projects are an ideal bet.
“Ready-to-move-in homes have climbed the ladder of priority, especially among young home-buyers, as they wish to move into their homes immediately after the purchase. Also, one of the biggest advantages of a ready-to-move-in house is you get what you see and ultimately you live in it as well. You don’t have to spend on rent while your property is being constructed, thus making it rather hassle-free for one and all,“ mentions Sushil Raheja, CEO, Raheja Homes Builders & Developers.
GST: Work in Progress
So, after the big-ticket initiatives such as RERA and demonetisation the government introduced the Goods and Services Tax (GST) (which is considered to be one of the biggest tax reforms the country has seen, post-liberalisation era) from July 1, 2017. What is GST?: The Goods and Services Tax (GST) is an indirect tax being levied by the government of India, which will put an end to multiple taxation that were being collected in the form of excise duty; VAT; service tax; etc. It will replace nearly a dozen central and state levies into a single national sales tax.
Will the Real Estate sector benefit from it?: Experts believe that the implementation of policy initiatives like RERA and GST has led to a revival in confidence of the end-users
REITs, soaring capital values shift developer focus to office space
For many years, most Indian developers’ portfolios were dominated by residential projects, and many dedicated only a miniscule percentage to the office asset class. Reasons for this preference included: The larger investments needed in office projects for as long as the developer wanted to lease them out compared to residential projects, where regular sales generated the required cash flow and the relatively easy availability of funding for residential projects.
However, in the past few years as the economy picked up pace and companies went bullish on their commercial real estate demand as well as expansion plans, capital values of commercial spaces appreciated faster than residential. As the Real Estate Regulation & Development Act (RERA) kicks in, many developers are now shifting their strategy towards building more office projects. Also, with real estate investment trusts (REITs) set to launch in India this year, developers realise that this asset class can also continue to give them better dividends in the future, and that they can capitalise on capital value appreciation when they exit.
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