Realtors bet on 7th pay commission

Ahmedabad

As the Centre is preparing to implement seventh pay commission recommendations, real estate sector is expected to get a major boost. The government employees may turn to investing in realty.

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Post revision in their salaries, the purchasing power and borrowing capacities of the government workforce are likely to increase, brightening the prospects for the real estate sector.

"Even before the seventh pay commission is implemented, we've started receiving inquiries for purchasing properties," said Shekhar Patel, managing director of Ganesh Housing.

The seventh pay commission has recommended around 23% rise in salaries of the central government employees. The government will have to shell out additional Rs 1 lakh crore on account of increase in salaries, allowances and pensions.

The real estate developers in the city estimate that there will be a minimum surge of Rs 8,000 to Rs 10,000 increase per month in salaries of various central government employees. As a result, the borrowing capacity may increase in the range of Rs 8 lakh to Rs 25 lakh depending upon the rise in salaries of various categories of employees.

"It will be a game changer for the real estate sector, especially when interest rates have come down and prices of the real estate have bottomed out," said Jaxay Shah, president-elect, Confederation of Real Estate Developers' Associations of India (CREDAI), National.

Source - TOI 

Realtors package deals with gifts to draw buyers; freebies, international holidays on offer

KOLKATA| MUMBAI: While thousands of residential units lie unsold across metros in the country , builders are quickly rustling up offers to make the most of the upcoming festive season. From freebies to home loan installment reliefs to international holidays, offers are coming in all shapes and sizes, depending on the ticket size of the apartment one chooses. 

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DLF, for instance, has launched down payment rebates and subvention schemes for some of its ready-to-move-in, or close-to-possession projects. 

Kolkata-based Jain Group is running a festive offer called `Appify your home', where if a buyer buys a unit in their Dream One project at New Town that costs above Rs 1 crore, the company will offer Apple accessories such as a phone, a laptop and others that come coordinated with the home's decor like a door, window and for which the company has spent nearly Rs 2 lakh per unit. "Though this doesn't guarantee a closing deal, it definitely pushes sale," said Rishi Jain, ED, Jain Group.

Experts are predicting more aggressive marketing in the days ahead, given the lull in sales of residential units across the nation. "Given the last two years' experience, developers have not waited for the festive season to offer discounts and incentives. But this festive season, they are expected to get more aggressive and innovative to get fence sitters into the market. In Gurgaon and Mumbai, some developers would get as innovative as offering ready-to-move-in apartment with a certain part of the price being allowed to be paid in 18-24 monthly installments," said Ashwinder Raj Singh, CEO, residential services, JLL India. 

The real estate market has been in the doldrums for nearly three years, as buyers have shied away in the hope of a price correction, if not a crash. High interest on loans and an indifferent job market made things worse. However, developers and brokers believe that improvement in business sentiment and better job prospects will revive the real estate market, and these offers can act as a catalyst to spur demand. 

So, builders have kicked off their offerings with Ganesh Chaturthi in Western India and Onam in Kerala, and are targeting Dussera, Durga Puja and Diwali later this year. 

Noida's SCC Builders is offering a three-night, four-day international holiday for booking a 3BHK apartment at projects in Ghaziabad along with a gold coin."Customers who book apartments in any of our projects across Noida, Greater Noida, Ghaziabad, Gurgaon or Meerut will get nine EMIs (equated monthly installments) free for the nine days of Navratra," said RK Arora, CMD, Supertech Group.

Another Kolkata-based builder Realtech Nirman has come up with an offer where buyers at its Rajarhat project will get a rent of . 8,000 and ` Rs 4,000 worth Big Bazaar vouchers for 24 months. 

Mumbai's Rustomjee Developers, however, has kept its offers limited to discounts. In one of its wings at its Thane's Urbania township, Rustomjee is offering units at discounted price of Rs 1.20 crore plus government taxes, with a guaranteed date of possession as against normal price of . 1.53 crore excluding govern` ment taxes. 

Source - ET

Realtors hope for turnaround after home loan rates cut

Ahmedabad

The recent cut in home loan rates has revived hopes of a turnaround in the realty market. Buoyed by the RBI cut in repo rate, city-based realtors expect demand to increase slowly by Diwali. 

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"Unlike other cities in the country, the property prices in Ahmedabad have remained stable over the last three years. No major projects were launched during the period. Now, new projects are being launched. Many existing projects currently have no unsold inventory," said Deepak Patel, president, Gujarat Institute of Housing and Estate Developers (GIHED), which is organizing a three-day GIHED property show in Ahmedabad starting from October 9.

Shekhar Patel, managing director of Ganesh Housing, said the industry is expecting another round of rate cuts before the next budget. "Our economy has started showing positive signs. The rate cuts will certainly help the realty market," he said.

In cities like Bangalore, Chennai, Kolkata, Pune, Mumbai and Delhi, owning a house has become a daunting task for the salaried class. However, as compared to these cities, in Ahmedabad property prices are comparatively cheaper. According to the data released by real estate rating and research firm Liases Foras, at an average cost of Rs 28 lakh, flats in Ahmedabad are still cheaper.

According to Manan Choksi, director of RE/MAX Gujarat, "The average ticket size of each transaction for the first half of 2015 (January to June) was over Rs 3 crore. During this period value of transactions recorded in all the 19 sub-registrar offices of Ahmedabad was Rs 12,500 crore."

During the sluggish period, consumers were in wait and watch mode. "The prices of real estate in Ahmedabad have bottomed out and there is no room for further correction. This is the right time to buy properties as home loan rates have come down now and further rate cuts by RBI are likely," said Ashish Patel, vice-president, GIHED. The excitement among the realty players is evident from the fact that as many 70 reputed builders with 500 projects are participating in the property show and more are likely to join. 

Source - TOI 

After RBI cuts rate, realtors want banks to cut home loan rates

MUMBAI: Real estate developers have welcomed the RBI's decision to cut repo rate by 50 basis points, but have also appealed to banks to pass on the benefits to consumers by easing the home loan rates. The reduction in the banks' lending rate is also expected to lower the borrowing cost of builders and ease the pressure on interest outgo.

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"The reduction will have a positive impact on developers' borrowing cost. However, operating performance of these companies should not deteriorate any further as credit ratings have already worsened and resulted in higher cost of borrowing," said Sandipan Pal, analyst, Motilal Oswal Securities. "To see improvement in operational performance of developers, we need more of price correction than interest rate reduction." Realty developers' debt levels have been mounting in the backdrop of low sales for some time now and a saving of 40-50 bps in interest cost would be significant, reckoned analysts. The total debt level of the top 15 listed realty developers stood at over Rs 54,567 crore as on FY15 end, against Rs 50,400 crore during 2012-13 end. Developers are also expecting the easing of cost burden to result in better prices for consumers. "It will be easier for developers launching new projects to pass on the savings on borrowing costs to consumers. These can be significant savings for both developers and homebuyers, given that a project usually takes about two years for launch after land acquisition," said Sandeep Runwal, director, Runwal Group.

 Prior to Tuesday's 50-bps cut, the central bank had earlier cut the repo rate by 75 basis points since January, but the net loan rate reduction by banks so far has not been more than 25-30 points. "This is a helpful move, but was long overdue. We now appeal to banks to pass on the rate reduction to consumers. They can now pass an entire 1% rate reduction to home loans," said Getamber Anand, president, CREDAI. "If that happens, this year's Diwali will see a revival in home sales momentum." Apart from the rate cut, the RBI has also announced that it will lower the risk weightage for lowcost home loans. 

With a view to improving "affordability of low-cost housing" for the economically weaker sections and low income groups and giving a fillip to "housing for all" initiative, the RBI has also proposed to reduce risk weights applicable to lower value but well collateralised individual housing loans, the RBI said in its policy statement. The central bank will separately issue detailed guidelines on this. "Risk weightage for home loans need to be halved to 25% from 50%. And not only for the economically weaker sections but across categories, because the NPA in home loan segment is less than 1% and it's justifiable to lower the risk weightage," said Niranjan Hiranandani, MD, Hiranandani Constructions. 
 

Source - ET

Unsold inventory may force realtors to cut prices in NCR

NEW DELHI: A slump in home sales has pushed builders' inventory to 'unsustainable levels' in the National Capital Region of Delhi, creating conditions for a real price correction that developers have so far avoided, experts say.

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Builders in the NCR had 175,000 unsold apartments in the three months to June, according to data from property consultancy JLL India. Most of these apartments though are under construction. While sales have been on a slide in most of the big cities, the problem in the NCR is peculiar. A mix of high prices and large sizes has pushed most of the on-sale apartments beyond the reach of average home buyers.

What has further compounded the problem is the fact that many of these apartments are located in far away areas that do not have much to boast in terms of infrastructure.

 "Unless prices come down, sales are likely to remain low in the NCR," said Rubi Arya, executive vice-chairman and director at private equity firm Milestone Capital Advisors. The NCR, she said, is now selling fewer homes in terms of volume than even a smaller market like Bengaluru. "Unless this unsold stock gets absorbed, it will be difficult for consumer confidence to come back in this market," she added.

 This has stretched the balance sheets of builders across the NCR, hampering their ability to reduce debt or launch new projects. Ashutosh Limaye, national director, research, at JLL India, said builders will come under further pressure because of this unsold inventory.
"In the secondary market, investors who had picked up properties earlier are becoming restless as they don't see much appreciation in prices. They want to exit. When this supply comes in to the market at a discount, it will create further pressure on developers, especially for small and mid-sized builders," said Limaye.

Source - TOI 

Challenges to persist over next 12 months for realtors

Moody's Investors Service has said that India's bigger property developers will continue to face a challenging operating environment including weak cash flows, flat sales and stagnant prices over the next 12 months.

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Developers such as Indiabulls Real Estate, Lodha Developers, Unitech, DLF Limited and Oberoi Realty BSE 4.92 % will experience relatively more pressure on sales and cash flow than the smaller firms because they operate in Delhi and Mumbai, where prices are the highest, the United States-based rating agency said in a release. Acceleration in economic growth will, however, provide some support to housing sales and the likely gradual easing of lending rates will boost investor confidence and investment activity, said Vikas Halan, vice president and senior credit officer at Moody's.

"Cuts in interest rates by the Reserve Bank of India, if passed on by the banks, will filter down to the property market, reducing the cost of borrowing for developers as well as buyers, and supporting demand," said Halan. India's real estate sector has been witnessing weakness in sales momentum, rising inventory and debt levels for the past three years. As per the latest data, unsold housing stock across top eight property markets in the country rose 18% to over 1.1 billion sq ft as on June 30. Barring Hyderabad, all other cities have shown a rise in the unsold inventory, with Bengaluru showing maximum increase of 55% compared to a year ago.

Though the growth in unsold stock in the National Capital Region has been just 7%, the region tops the chart with 326 million sq ft, followed by Mumbai Metropolitan Region at 201 million sq ft. Developers in relatively affordable markets like Bengaluru, such as Brigade Enterprises, Prestige Estate Projects and Sobha Developers should fare better, owing to stable demand for housing. Moody's also highlighted that the ability of developers to execute projects across markets has been challenged in the past two three financial years owing to delayed approvals and stretched liquidity.

Such delays have slowed the flow of payments from homebuyers and reduced investor demand for new projects by locking up their capital and decreasing their expected returns.
Rather than reduce prices outright to drive sales volumes, though, developers are likely to continue to modify their products and offer promotions. Moody's is of view that consumer confidence will get a boost from the Real Estate (Regulations and Development) Bill, which seeks to set up a regulatory authority and introduce guidelines for commercial and residential development

Source - MB 

Kolkata based BGA Realtors plans cheap housing in 6 states

KOLKATA: Kolkata based BGA Realtors is looking to build 1.5 million sq ft of affordable housing space across Gujarat, Madhya Pradesh, Assam Jharkhand, Bihar and Andhra Pradesh said a top company of ficial. 

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The developer has built 2.5 million sq ft of which 2.2 million sq has been sold. The additional projects spread over 1.5 million sq ft will be launched by 2017 and delivered by 2019. "In 2010 we had launched and sold houses at Rs 2 lakh and delivered them by 2013 without any escalation in price. The buyers, however, enjoyed a 100% return on in vestment and at present the government is valuing the same unit at Rs 6 lakh when one goes for registration of the same," said Shampa Ghose, Managing Partner, BGA Realtors. 

The apartments sized between 200 sq ft and 1,200 sq ft would mostly be studio apartments for the low income group and three bedroom units in the middle income group category, priced between Rs 5 lakh and Rs 22 lakh. 

Source - ET

'Financing realtors to cut housing cost'

MUMBAI: HDFC chairman Deepak Parekh has called for an end to the ban on loans for acquiring property for development. According to Parekh, easing finance to developers would help bring down cost of houses. 

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"In 2006, the regulators prohibited banks and HFCs (housing finance companies) from funding land transactions. Such actions may be justifiable when there are fears of asset price bubbles. Over two years ago, the regulators reduced risk weights on exposures to commercial real estate-residential housing. This signalled that there were no fears of any speculative bubble. Then, logically, the regulators now need to relax this near decade-old restriction. The regulators should, within limits, permit banks and HFCs to fund land transactions — or at least land transactions that are acquired specifically for residential purposes," said Parekh in his address to shareholders in the institution's annual report. 

"This is a simple, doable solution. It will bring residential prices down, increase the stock of affordable housing and fulfill the aspirations of more Indians becoming homeowners. So the key question remains — will the regulators oblige?" Parekh asked. Commenting on the government scheme to have housing for all by 2022, Parekh said that HDFC understood that housing is a unique asset and would work tirelessly towards this goal. Given that 600 million Indians are expected to be living in urban India by 2030, Parekh said that one of the key issues in housing is affordability in cities. 

He added that one of the main reasons for the high cost of houses was that builders had to borrow at 18-24% through non-bank channels to fund land purchase.

Source - TOI

Fresh tax on unsold flats to force developers to release inventory

In a bid to arrest hoarding of residential flats by developers and increase supply across the country, the income-tax department has decided to tax realtors on estimated annual rentals.

The tax could be anywhere between 15% and 20%. The move is as per the central action plan for 2015-16, under which the I-T department can levy tax on any unsold flat by treating it as 'income from house property' under Section 43-CA of the I-T Act, 1961.

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According to tax authorities, real-estate companies should have to pay tax based on Annual Letting Value (ALV) on unsold flats as they are the owners of the flats and it does not matter whether the properties are rented out or not.

This means inventory of builders will be taxed on the basis of notional ALV -- a value on which tax has to be paid on the annual value of house property or the rent actually earned, whichever is higher.

A senior I-T officials said, "The builders' lobby has been creating artificial scarcity through hoarding of flats, only to sell them at higher prices later".

It has been noticed that this practice has been in vogue for over a decade and such flats or stocks are shown 'unsold' in the books of accounts while the main aim was to rig the prices upwards, said a tax official on condition of anonymity.

Taxing unsold stocks will help in two ways, according to a senior I-T official. One, this brings significant revenue, and second, it will force real-estate players to either sell their unsold flats at market-determined price. "Paying tax will further affect their bottomlines," the official, who did not wish to be named, told dna.

According to a recent report on the real-estate market in India by an international property consultant, unsold flats in six major cities hit the highest at 6.88 lakh units in the January-March quarter. According to the report, it will take 72 months for builders to clear the inventory in Delhi-NCR and 46 months in Mumbai.

So far, unsold projects of builders were exempted from income-tax under the 'stock-in-trade' category. The I-T department believes builders would release more flats into the market, if they have to pay tax on them.

"Real-estate companies show their finished apartments as stock-in-trade and income from these are shown as business income, as in most other businesses. In a rising market, several developers hold apartments to benefit from the price appreciation that will accrue a few years after the project is complete," said a real-estate consultant.

A few years ago, when there was an attempt to tax such unsold stock, builders had moved court. However, the court gave a judgment in favour of the department in 2012.

The court had validated the I-T department's argument that builders will have to pay tax based on the ALV method, irrespective of the fact that these flats were not rented out. The department has now decided to levy this tax uniformly across the country after the proposal was cleared by the finance ministry.

Source : DNA

DLF hits back at CCI; asks why no penalty on other realtors

NEW DELHI: Slapped with a fresh 'cease and desist' order byfair trade regulator CCI, realty major DLF has said it is "very surprising" that no penalty has been imposed on various other realtors operating in the same market with the same product line. 

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In a fresh order yesterday against DLF, the Competition Commission of India (CCI) ruled that the realty giant was guilty of indulging in "unfair and abusive" business practices in sale of apartments in a Gurgaon housing project. 

CCI asked DLF Gurgaon Home Developers Private Limited and its group companies to "cease and desist" from such unfair trade practices, but did not impose any fresh monetary penalty as Rs 630 crore fine has already been slapped on DLF for similar violation during the same period in a separate case. This is the latest in a series of orders passed by CCI against DLF, although it has also let off the company in some cases saying it did not find any violation of the competition laws. 

Reacting to the CCI order, DLF said in a statement -- a copy of which was also filed with the stock exchanges this morning -- that it has received the CCI order and would take the necessary steps as advised by the legal counsels. 

While stating that it was still studying the order, DLF said: "It is, however, very surprising that in Gurgaon there are tens of companies which offer flats in the same range of Rs 45-50 lakh. 

"It is also well-known that that tens of thousands of flats are offered in the area of Gurgaon within the same price range, with same amenities and in the same product line. We have also noticed that no penalty has been imposed. We are studying the order in details and go as advised by legal counsels." 

In its order, CCI had said, "... the Commission directs the Opposite Party and its group companies operating in the relevant market to cease and desist from indulging in the conduct which is found to be unfair and abusive." 

The order followed complaints filed with CCI against DLF Gurgaon Home Developers, wherein it was alleged that the company had lured home buyers to book apartments at "very attractive" rates in DLF New Town Heights project under a pre-launch scheme. 

Later, when the buyers sought cancellation of allotment and requested for refund of the amounts paid by them on grounds of delay in the project, the developer refused to do, saying that applications signed by buyers were irrevocable and the request for cancellation cannot be acceded to. 

The buyers were also told that the only option available with them was to sell the property in open market, as per the CCI order. 

Subsequently, the complainants approached CCI alleging abuse of dominant position by the company and the fair trade regulator ordered a probe by its investigative arm.

Source - Times Of India