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Modi’s mantra of hope for real estate market

For the common man of India, the dream to own a house will soon turn into reality with the Narendra Modi-led NDA government taking charge. Issues such as affordability of real estate, delayed construction projects, delays due to litigations surrounding real estate projects, etc. impacted developers as well as consumers.

The new government promises to aggressively promote affordable housing. Property is once again going to become the most popular investment option, as there will be significant appreciation in real estate prices on the heels of higher demand in the coming years. With the easing of regulations, developers are expected to speed up the construction process, providing relief to buyers who have already invested.

The big names of the Indian industry have welcomed the new government with a hope that it will bring the economy back on track and raise the currently plummeting GDP to 8-9% in the coming fiscal. The new government at the centre is expected to infuse life in the existing policy paralysis in the country by removing the major bottlenecks that are deterring growth.

Revitalised funding flow:

FDI in the Indian real estate sector is expected to get a lift, resulting in amplification of fund flows and strengthening of the battered Indian rupee. With a clear majority triumph, the incumbent government will enjoy unwavering stability at the centre, which will in turn encourage investors’ sentiments with regards to the real estate market. Global investors are now markedly optimistic about the Indian economy, which is expected to witness more than 100% increase in foreign investment inflows, both via FDIs and FIIs, to above $60 billion in the current financial year, as compared to $29 billion during FY 2013-14.

The urban development ministry is expected to repeal the existing restrictions on real estate firms by allowing foreign investment up to 49%, free of all conditions. This will help the real estate sector to raise foreign capital at competitive rates and reduce stakeholder dependency on the beleaguered local financial institutions. Foreign capital for urban renewal and slum redevelopment projects is also expected to see major relaxations.

Boost to the retail sector:

The retail sector is also expecting significantly enhanced domestic as well as foreign investments. India’s large but capital-constrained retailers have welcomed the liberalised rules that are expected to bring funding and new technologies into the sector. As a result, demand for retail space is going to increase enormously as more and more domestic retailers plunge in to reap the benefits of the new policies.

Fast-tracked infrastructure:

The completion of large infrastructure projects like the DMIC (Delhi Mumbai Industrial Corridor) and the DFC (Dedicated Freight Corridor) will be expedited. This, in turn, would mean development of many new cities across the belt of these projects. These massive on-going infrastructure projects will lead to a huge demand for warehouses, thereby giving a significant boost to warehousing and logistics-related real estate demand. Once completed, the growth of real estate at India’s hinterlands that will be connected by these corridors will be exponential.

In terms of real estate, some of the urgent steps that the NDA government needs to take with immediate effect are:

– Reversal of the land acquisition act
– Clearance of pending receivables to the private sector via fast-tracked bureaucratic decision-making
– Provision of fiscal stimuli to improve industrial growth
– Creation of investment-friendly real estate market via lowered interest rates and increased employment generation.

Further, the real estate market expects the government and the RBI to be on the same page with respect to checking inflation and curtailing of interest rates, so as to revive the tumbling demand for property in India.

Developers’ hopes:

India’s developers are hoping that:

– The new government will expedite the process of granting regulatory approvals. The chronic lag in this regard has been a major obstacle for most of their projects
– The Real Estate Development Regulation & Development bill, which has been lingering for quite some time now, will be passed
– The new government will ease land acquisition parameters so that availability of land is no longer a major constraint. Difficulties in acquiring land due to the current policies have led to vastly escalated real estate cost.

With the slowdown in home sales, developers have been battling a severe liquidity crunch and a rise in their inventory levels. Many prospective buyers have abstained from investing in property because of market negativity, an unstable government at the centre, high inflation, high interest rates on home loans, etc.

Now, with the stock market rocketing and the Indian rupee appreciating, these buyers are expected to snap into action. Increased sales, along with availability of funds from both domestic and foreign investors, will bring significant respite to developers and finally bring an end to the liquidity crunch that they have been facing.

The hope mantra:

The three major promises made by the NDA in their manifesto that have direct pertinence to the real estate sector are:

1. The development of 100 new cities
2. Putting a new land use policy in place
3. Planning for low-cost housing

Modi’s pledge to implement an affordable housing policy and thereby provide homes to every Indian family presents a $150 billion business opportunity to the sector. The real estate industry now also has real hopes of being granted the coveted industry status, which will further ease fund flows.

Meanwhile, consumers are optimistic about the impact that the new government will have on real estate pricing, and expect a reduction in home loans, the implementation of the proposed GST framework and the implied tax benefits to buyers.

Source: For MoneyControl.Com By Santhosh Kumar, JLL India

Real estate company MD booked for alleged fraud

GURGAON: The managing director of real estate company Vigneshwara Group and two of his family members have been booked by Gurgaon Police in a multi-crore fraud case. Some estimates put the scale of the fraud at more than Rs 1,000 crore.

Despite taking money from around 700 investors for properties in and around Gurgaon in 2006-07, and promising assured returns till possession, the group allegedly didn’t begin construction of some projects and defaulted on payments to investors.

An FIR was filed at Sushant Lok police station against group MD Sunil Dahiya, his brother Sanjay and father Daryav Singh. Dahiya hasn’t been taken into custody yet because he complained of illness and was hospitalized.

Dahiya and the others have been accused of putting out misleading advertisements promising 12% returns on investment in under-construction properties at Gurgaon’s Sector 74 and IMT Manesar.

Geetha Venkatesan, one of the 38 investors in Vigneshwara projects who filed the complaint, alleged she had not received payments since last month and that cheques issued by the company had bounced. She also alleged that the project at IMT Manesar, which started in 2006-07, was just 20% complete while the one at Sector 74 was yet to take off.

“The three were booked under sections 420 (cheating), 406 (breach of trust), 120B (criminal conspiracy) and 34 (common intent) of the IPC,” Sushant Lok police station officer Naresh Kumar said. “We have served notices on all the accused to join investigations but the main accused said he was unwell and was admitted to hospital for treatment. Police will detain him soon.”

Ram Singh, another complainant, made similar accusations against Vigneshwara. Kiran Kumar, also an investor and a complainant, said, “We were assured that the money will be returned by May 20 but the promise was not fulfilled.”

The case was registered after investors protested at the realtor’s office in Sector 52.

Source: TOI

Real Estate Regulation Bill partly draconian: Anuj Puri, JLL India

If a stable government comes to power at the Centre, the sentiment will improve. However, for prices to come down, it must provide infrastructure on new land parcels, says Anuj Puri, in an interview with ET.

Do you expect the slowdown in real estate to end after the general elections?

Anuj Puri: If we have a stable and business-friendly government, the sentiment may improve very quickly. Subsequently, there will be growth in the residential segment. People have the money, but due to poor sentiments they are not willing to spend on home purchases. However, the sector’s fundamentals may take longer to change. I also see corporates taking up more office space on lease and private equity returning to the country due to a stable rupee and on the expectations of better governance.

High prices, high interest rates and slow salary growth have affected affordability. Will this issue be resolved soon?

Anuj Puri: This will remain a challenge. In tier I cities, land accounts for 50-60% of the total project cost. Unless the government provides infrastructure and opens up new land parcels for development, property prices will not come down. In cities such as Hyderabad, Ahmedabad and Greater Noida, where infrastructure is good, residential prices are reasonable. The prices remain high in cities like Mumbai, where infrastructure is poor.

What are the problems in the New Land Acquisition, Rehabilitation and Resettlement Act in its current shape?

Anuj Puri: Almost 70% of the legislation is okay. The trouble lies more with its implementation, which is painfully slow.

How will it affect land acquisition by private developers?

Anuj Puri: It will affect the price at which land is acquired. Consequently, it will also impact the pricing of the end product.

Will the new bill make land acquisition more time-consuming due to red tape?

Anuj Puri: This holds true for places where large land parcels have to be acquired and bureaucratic sanctions are needed. However, some cities like Bangalore and Kolkata, and some of the tier II towns like Patna are more progressive and it is easier to get approvals there. In other places, such as Mumbai, there is a lot of red tape and getting approvals takes longer.

Does the new bill require reforms?

Anuj Puri: The bill will make land acquisition more expensive. However, it will impact the real estate sector much less compared to the industry. Setting up a manufacturing unit in India will become more expensive and, as a result, it will affect its competitiveness vis-a-vis China. Real Estate Regulation Bill partly draconian: Anuj Puri, JLL India

Is it true that the provisions of the bill apply to developers, who are trying to build large townships?

Anuj Puri: Yes, it is true, but it is rare for real estate developers to pick up large land parcels from farmers. They usually buy land from corporates that want to relocate. The industry acquires land directly from farmers more than the real estate community. So, the impact will be more on manufacturing.

What changes are required in the foreign direct investment policy for India’s real estate sector to attract more FDI?

Anuj Puri: At present, foreign investors are allowed to buy only completed buildings in special economic zones (SEZs). Most of the foreign investors who want to come to India want to put their money in less risky investments. This will be possible only if they can buy completed and occupied assets. If the rules were to be liberalised, allowing foreign investors to buy such assets even in non-SEZ areas, say, retail malls and commercial buildings, we would see a lot of sovereign funds investing in India. Secondly, there is a lock-in period of three years for FDI investments. Each tranche of money that comes in cannot be taken out until it has completed three years. Finally, the FDI money can only be invested in developments that are at least 550,000 sq ft in size. Such large developments are usually not available within the city limits. Some of these rules need to be liberalised.

What are the advantages of the draft Real Estate Regulation and Development Bill?

Anuj Puri: It is a good bill. It will hit hard the fly-bynight operators, who follow unethical practices. However, some of its clauses are draconian. For instance, if a developer doesn’t comply with some rules, he could be put in jail. It would be more prudent to punish an economic offence with a penalty rather than treat it at par with a criminal offence. Clearly, the bill benefits the customer. It puts the onus on developers and financial institutions that give construction loans. However, the third stake-holder, the government authorities who give approvals for projects, has not been held liable for delays in giving approvals. The bill says that if the project gets delayed, the authorities can take its possession and hand it over to someone else to deliver the balance. If the government delays approvals, it would be unfair to punish the developer. It, too, should have been held accountable.

How will real estate investment trusts benefit the retail investor?

Anuj Puri: At present, the retail investor cannot put money in real estate with a small amount, say, Rs. 5 lakh. He needs to buy a house or a small office or shop, which costs quite a lot. He can invest in the shares of listed developers, but those haven’t been performing well for the past few years. The only way that he can play for the upside in real estate with a small sum is via REITs. These trusts are transparent as well as liquid.

How soon can one expect REITs in India?

Anuj Puri: A few tax advantages have to be given to REITs, which can only be done through a Budget session of the Parliament. I think the new government will take up REITs in Budget 2015.

Source: ET

Motilal Oswal Real Estate Fund invests with Ahuja Developers, Mahaveer Group

COIMBATORE: India Realty Excellence Fund II LLP (IREF II), managed by Motilal Oswal Real Estate Investment Advisors (MORE), has announced two investments worth Rs 100 crore — one in Mumbai with Ahuja Developers and another in Bangalore with Mahaveer Group. MORE has made its maiden investment from IREF II with Ahuja Developers in their upcoming residential project ‘Prasadam’ at Ambernath (East).

“Ambernath is one of the fastest growing extended suburbs in MMR (Mumbai Metropolitan Region) with excellent road & rail connectivity and good social infrastructure driving the demand,” MORE said. The project received an overwhelming response for its launch, it claimed. “Our association with Motilal Oswal Real Estate (MORE) for Prasadam in Ambernath stems from the company’s vision to partner with credible and long-term institutional investors,” said Gautam Ahuja, managing director (MD), Ahuja Developers.

The fund has invested with Mahaveer Group in two residential projects located in Yelahanka and Bommanahalli in Bangalore. Yelahanka, in north Bangalore, is an emerging location, which is rapidly expanding due to the international airport. The second project is located at Bommanahalli in south Bangalore, which is an established mid-income residential location with social infrastructure in place.

“We are looking forward to build a long-term relationship (with MORE),” said Praveen Kumbala, founder & MD, Mahaveer Group.

“Both the transactions are in line with the fund’s strategy of doing Mezzanine structures with developers having proven track record,” said Sharad Mittal, Director & Head Real Estate Investments, MORE.

“Real Estate is one of our focus areas, where we see good opportunity for generating alpha returns for our investors,” said Vishal Tulsyan, MD & CEO, MOPE Investment Advisors.

Inside The World Of City’s Fabulous Five

1. Aralias

The end of the age of luxury in Gurgaon is neatly marked by the Aralias. This is the point where the age of ‘super luxury’ began. DLF’s flagship condominium, Aralias is the domestic equivalent of a luxury hotel. There are lobby attendants at the gates, and a 24/7 concierge service that can attend to a range of concerns the residents may want addressed – from ordering a birthday cake, to making last-minute arrangements for a party; from maintenance and housekeeping to getting someone to walk the pet. “I have lived here for around six years. And there’s no doubt that this is best place anywhere in India. My friends in Dubai, who have visited our place in Gurgaon, say that if they decide to move to India, they will live at the Aralias,” said Yogesh Agarwal, a resident.

No. of flats: 254

Occupancy rate: 87%

2. Hamilton Court

Above all, residents of Hamilton Court take pride in their community spirit. These towering condominiums are barely 15 years old, but with around 97% occupancy rate, this already a bustling community of people from various backgrounds. At times, even birthdays are celebrated as festivals here, and this, according to the RWA president Sanjay Bansal, defines the many ‘charms of living here.’

No. of flats: 265

Occupancy rate: 97%

3. The World Spa

Residents of this condominium complex call themselves the ‘Spartans’. Ashwani Singla, president of The World Spa Owners’ Association, is a long-time Spartan. “I think ours is the best community. We are all self-made professionals. The best thing about this place is its people,” he says. S K Bahari, a resident of over four years, calls this a “lively place”.

No. of flats: 367

Occupancy rate: 78%

4. Gurgaon One

The ambience within this complex is often compared to that of a high-end resort. Navneet Sahni, the president of the RWA, calls this place an ‘oasis.’ “Outside there’s chaos, and here you have the biggest greens in the whole city,” he says. Gurgaon One, Sahni adds, was ‘listed with distinction under sustainable projects’ at the Asia Pacific Real Estate Awards held in Shanghai in 2008.

No. of flats: 240

Occupancy rate: 75%

5. Raheja Atlantis

Rajesh Madan, executive director of a pharma firm, lived for 40 years in Delhi. In May 2010, when he chose to experience the condominium life in Gurgaon, he decided to move in at Raheja Atlantis. “After having spent a long time in Delhi, this was a welcome relief. Now I don’t want to go back. People are reluctant to move to Gurgaon because of water and power issues, but here there’s no such trouble,” he says.

No. of flats: 268

Occupancy rate: 80-90%

http://timesofindia.indiatimes.com/city/noida/Inside-The-World-Of-Citys-Fabulous-Five/articleshow/32322824.cms

Realty group investors allege fraud

CHANDIGARH: TDI Investors Association, which includes 70 member investors from Chandigarh, on Wednesday created a row, alleging that the owners had cheated them of Rs 150 crore.

The association, in a press conference, alleged that a legal agreement was signed between the company and the members in 2005 after which they paid 80% of the cost for showrooms in the mall and were promised possession by 2008. The members blamed the company of not giving them possession till date and neither paying them the returns.

The project includes 70 shops varying from 400 sq ft to 1,000 sq ft.

TDI chairman Ravinder Taneja, however, trashed the allegations, blaming the authorities for the delay in the work. “We have completed the construction work. There were few objections from the administration which have been removed. We would give them the possession within a month or two when we get the green signal by the administration to start the mall,” he said.

http://timesofindia.indiatimes.com/city/chandigarh/Realty-group-investors-allege-fraud/articleshow/32332209.cms

FIR against builder over water supply

GURGAON: Residents of an apartment complex on Sector 55-56 road staged a protest against the builder on Tuesday night for not providing adequate water despite charging high maintenance. Police have booked the authorities for misappropriation of maintenance funds.

Residents claim they did not get water for three days and it spoilt their Holi celebrations. They decided to protest when the builder did not respond. Police arrived at the spot soon and managed to convince the residents to call off the protest. The residents subsequently filed a complaint against the builder. The colony is near HVPL substation on the Sector 55-56 road, which runs parallel to Golf Course Road.

“This is one of the most upscale areas of the city but there is no water for the last three days. We pay between Rs 350 and Rs 1,750 as maintenance charges but there is no assurance of uninterrupted water supply,” said Ramesh Gupta, president of the RWA.

“According to the complaint, we have lodged an FIR against the manager, the vice-president and the management of the building under sections 406, 420 and 120b of the IPC,” said ASI Suresh Kumar.

http://timesofindia.indiatimes.com/city/gurgaon/FIR-against-builder-over-water-supply/articleshow/32322900.cms