September 2017 Vol 01
Next round of bad loans may be from Realty
Bankers have a new worry these days real estate after being laid low by infrastructure and steel for more than four years. With the collapse of new projects and many existing ones getting stuck after the introduction of Real Estate Regulation Act, or RERA, they fear the next round of bad loans may come from real estate, though banks claimed that have only 5% direct exposure to builders.
“We have a few developers in the North who have not been constructing property, or a slowdown in construction has triggered some movement in the NPA category . This is not a significant number, but you do see some stress when these changes happen,“ said PS Jayakumar, MD, Bank of Baroda. As per RBI data, loans to commercial real estate have fallen by over 3.3%. After demonetisation, the sharpest slowdown took place in the cash-intensive real estate sector with the situation worsening after RERA launch. The construction sector has suffered from relatively high leverage and high interest burden.
‘14,000 properties of over Rs 1 crore each under lens’
The Income Tax Department (ITD) on Thursday said that about 14,000 properties worth over Rs 1 crore each are under its scrutiny as their owners have not filed income returns. In a statement detailing the impact of demonetisation of old Rs 500 and Rs 1,000 notes on black money, it said ‘Operation Clean Money’ was launched on January 31 to analyse data of persons who deposited large sums of cash post note-ban, with no previous matching returns of income. While Rs 15,496 crore was admitted as undisclosed income, surveys resulted in seizure of Rs 13,920 crore. “The exercise has also unearthed large number of persons and clusters having suspect transactions. These include about 14,000 properties of more than Rs 1 crore each where persons have not even filed Income Tax Returns.
The realty gift hamper
REAL ESTATE IS MOSTLY CONCEDED on to family members or relatives either as a gift or under a will. A gift of immovable property, in legal parlance, is covered under Transfer of Property (TP) Act, 1883, Income Tax Act, Gift Act and Finance Act and, in some cases, also has income tax implications.
WHILE GIFTING IMMOVABLE PROPERTY, which is more than Rs.50,000 in terms of stamp duty, the transfer must be done through a registered instrument provided under the Registration Act by the donor and should be attested by at least two witnesses. The title of the ownership cannot be passed without a registered deed gift and donee cannot become a lawful owner.
Home Buyers: from Sappy to Happy
The introduction of buyer-friendly policies by the government has motivated home-buyers to purchase their dream home. The reduction of home loan interest rates, the Real Estate Regulation and Development (RERA) Act, 2016 in some states and the Goods and Services Act (GST) are helping buyers make an informed and a profitable purchase. Moreover, experts from the industry are now witnessing an upward growth in the realty graph. The number of property enquiries and consumer interests are growing steadily, thus increasing the demand for property in micro-markets such as Chembur, Matunga and Thane.
According to FICCI-NAREDCO-Knight Frank India, Real Estate Sentiment Index for Q2 2017 (AprilJune 2017), there is a striking recovery in the sentiments of residential launches in Q2 2017 with nearly 68 per cent of the respondents in Q2 2017 opining that launches will improve in the next six months. It is likely that these positive sentiments are triggered by the upcoming festive season and expected clarity on policy issues. Buyer confidence that was marred by project delays, non-deliveries, and litigations to name a few is likely to return on implementation of the policy reforms spearheaded by the government.
Investors bet on Office Realty in time of uncertainty
Several large domestic institutions, including private equity funds, are raising money from both local and oversea markets with an investment focus on commercial assets in India. While the appetite for completed and leased commercial assets continues to rise, many funds are even scouting for under-construction properties in prime locations as the outlook for rentals remain firm due to lower ready supply.
The segment is witnessing increased interest from private equity funds, with several large institutions focusing on completed and leased commercial assets for investment. Large domestic institution such as ICICI Prudential AMC, Indi abulls Asset Management and Milestone Capital Advisors are raising new funds of about Rs.1,000 crore each to invest in office properties.
Government will step in to rationalise ready reckoner rates, amend Act: CM Fadnavis
Chief Minister Devendra Fadnavis announced Monday the government would intervene in rationalising the ready reckoner rates to check the superficial hike in property prices in cities like Mumbai and Pune. The government would amend the existing Act to check the steep hike in ready reckoner rates, he said.Fadnavis said the government would bring a new comprehensive policy to make housing affordable for one and all across Maharashtra.
To facilitate redevelopment of old dilapidated buildings, the chief minister said, “If 51 per cent of the residents give consent for its redevelopment, it would be held valid. This will pave the way for evacuating the remaining 49 per cent residents and begin with redevelopment of the old structures.” Earlier, redevelopment projects mandated consent of
70 per cent residents.
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