Real Estate sector up for a positive transition in 2015
The year 2014 brought in positive sentiment around Indian real estate and among Indian as well as international investors in recent times, mostly due to the formation of new government as it enthused the investor and business confidence in the Indian economy. There were numerous positive policy announcements which helped in generating a favourable mood for the real estate market. During the past few years, the Indian real estate sector had to confront tough times; difficult economic and business environment and high inflation affected all stakeholders such as occupiers, investors, developers and home buyers. As a result, significant unsold inventory and execution delays were prevalent in almost all real estate classes during the past couple of years. In the last few months, policy makers have taken several initiatives to revive the real estate sector and improve investor and buyer confidence.
The following are possible growth drivers which can help orchestrate a speedy revival of the sector in 2015.
Economic Growth Drivers: Real Estate is regarded as the backbone of the Indian economy as it contributes to about 5-6% of the nation’s GDP and is the 2nd highest employer in the country (after agriculture). Nowadays with the changing mindset of consumers and their shift of focus from living on rent towards owning their own property, the real estate sector has witnessed huge demand in the residential segment. The demand for commercial development is also growing at a fast pace due to a paradigm shift from unorganized towards organized retail coupled with increase in MNC’s interest in establishing offices here in India. The real estate and infrastructure sector may benefit a lot from the slide in oil prices which is up at almost 25 per cent over the past few months. Unlike many other Asian countries, India provides automotive fuel at fixed prices to the consumers, thus ushering some months of budgetary saving for the government exchequer. Add to that, the high possibility of interest rate reduction by RBI in the first quarter of 2015 will be a boost for the realty sector.
Government Policies/Regulations- Although real estate sector has been on top of the priority of the government but it still lacks clear laws to be guided, apart from various other challenges like lack of clear land titles, absence of industry status and rising manpower and material costs that have been restricting its growth. The Government of India has taken several initiatives to encourage the development in the sector. Some of them include relaxation of FDI rules, establishment of REIT, redefining affordable housing, Housing for all by 2022, tax incentive on home loans, Smart City projects and set up of National Industrial Corridor Authority. All these give a clear picture that 2015 can be a very positive year for the real estate sector as well as for Indian economy.It is also likely that the government will amend the Land Acquisition Act. which might give impetus to investment in infrastructure development.
The author is Chairman & Managing Director, Posiview Consulting Pvt. Ltd.
Shriram Properties - Real Estate Scenario in 2015
In many ways, the Indian Real estate industry will be ending ‘the year 2014’ on a more solid note than when we began the year. Formation of the new government with solid majority and with a clear vision & mission is a big boon to the industry. Encouragingly, India’s economic conditions are moving forward as policy makers are vigorous in strengthening the economic pillars of the country to augment the GDP growth. This has several positive effects, more so, for the property markets paving way for a still better 2015 for Indian Real Estates.
Much head way has been made in several policy reforms during the second of 2014. SEBI codified REITS norms and the Government announced the tax pass thro. FDI norms were relaxed for investments in real estates, Real Estate Regulation Bill getting its final shape so also on land acquisition. “Housing for all” is accorded its due importance. Smart city concept is gaining momentum.
Welcome Tax reforms and GST may happen at any time. With one single levy, GST will replace the several indirect taxes — excise, sales tax, service tax, entry tax and other local levies. Thus bringing in this critical tax reform measure which is pending for more than 5 years may bring in a sea-change. Erasing tax barriers between states and bringing in a single tax will enable a common national market for goods and delivery of services –especially to the Real Estate Industry. Estimates say GST could add as much as two percentage points to GDP
With another three months to go, the 2014 - 15 real estate investment forecast for India, indicate an improvement, largely due to government stimulus efforts. Institutional investments and capital market transactions in the India realty market during the first nine months of the year hover over $4 billion. Out of this, land and development stage transactions attracted the highest quantum of investments -nearly 60%- from domestic as well as foreign entities. There had been significant investment in greenfield and brownfield development projects.The commercial office segment too attracted more than 20% of this total investment.
Don’t beat yourself up for not leveraging your under-Construction Property
In times of good liquidity, many homebuyers decide to buy a property without a mortgage. This may seem like a fantastic move, as the homebuyer remains debt-free, but just like in business, we all have our cycles of good and bad liquidity. For an under-construction property, a buyer may be confident of paying the payment demands themselves as they are raised by the developer, but there may unforeseen expenses and the financial situation of the buyer may change over time. Often, these situations can cause much regret and anguish over the wrong decision to not opt for a home loan at the time of purchase. But no need to fret over your past decisions! There is still time for you to opt for a home loan.
Even if a homebuyer has bought an under-construction property a couple years ago, a home loan today is still possible. For example if anunder-construction property was purchased two years ago and until date 60% of the value of the house has already been paid, the homebuyer can still opt for a mortgage for the remaining 40% due on the property. And that’s not all! There is a unique re-finance home loan product offered by lenders that allows the bank to reimburse you the payments you have made over the last six months to the developer and take a larger home loan. There are a few lenders who even reimburse payments made to the developer for the past 9-12 months! Interestingly, this can be possible for time periods of two years and beyond as well.
This is a great product to reverse a decision you took years back. A borrower may even opt for this product during times when the interest rates are attractive, and a home loan may free up liquidity for other investment-led purposes. This product can be used for non-leveraged ready properties as well. Unfortunately, not many people are aware of this and even lenders often offer a Loan Against Property product for ready to occupy properties, but a regular home loan is still an option and should definitely be considered.
The author is Sukanya Kumar, Founder &Director, RetailLending.com
DLF explores options to monetize some commercial assets
DLF Ltd has explored options to monetize some commercial assets worth about $500 million or Rs 3,000 crore. Report said that GIC of Singapore, Blackstone and IT park developer Ascendas are among the investors who were approached as potential suitors for some of DLF's tenanted offices. DLF has a rent-yielding office portfolio of around 30 million sqft spread across cities, says report.
99acres.com partners with Puravankara Projects
99acres.com, India’s premier real estate portal has partnered with Puravankara Projects Ltd and its subsidiary- Provident Housing Ltd to offer online booking services for their homes. 99acres.com has entered into a strategic partnership for the first time to offer this service to potential buyers. The “Greatest Online Christmas Offer” is on from 21st Dec to 27th Dec, 2014.
Until recently, real estate portals were used by home buyers to research floor plans and prices of apartments but now they are moving towards the next level with online bookings of apartments. The partnership with Puravankara will allow customers to view property on 99acres.com’s 3D rendering platform to experience a virtual site visit and explore available units. Puravankara has listed two projects - Purva 270 and Provident Rays of Dawn, two of Bengaluru’s high-growth residential projects, for this offer.
“With growing internet penetration, builders have realized the potential of the online space in selling homes. About 70-80% of home search happens online which prompted us to take a step further and offer the option of selling homes online. Bookings can be done at the nominal amount. To sweeten the deal and attract first-time online consumers, Puravankara & Provident have offered attractive special prices on their homes and have made the booking amount refundable”, said Mr. Hitesh Oberoi, CEO Info Edge.
JLL Segregated Funds Group partly exits from Bangalore residential realty project
JLL India’s Segregated Funds Group (JLLSFG) partly exited from its first investment made through its maiden fund; Residential Opportunities Fund – I (ROF – I), clocking a 30% Internal Rate of Return (IRR).
The fund had invested Rs24 Cr. (US$ 4 million) with Bangalore based Assetz Property Group in a premium residential project spread over 6 acres, located near Marathahalli junction, East Bangalore, in February, this year.
“We are very happy to achieve this kind of momentum in our divestments for our investors. This is in line with our fund investment themes. This exit is demonstrative of the progress made in this project. It has seen steady sales and development”, said Mridul Upreti, Chief Executive Officer, JLL Segregated Funds Group.
Scheme ROF –I was amongst the first real estate funds to be registered with SEBI under the new Alternate Investment Funds (AIF) regulations, with the objective to invest in the residential sector in prominent locations across seven cities in India, namely Delhi NCR, Mumbai Metropolitan Region (MMR), Bengaluru, Chennai, Kolkata, Hyderabad and Pune.
BOP inks pact with Logix Group for tapping in to the Real Estate Sector
Arun Nanda receives Lifetime Achievement Award
Emaar MGF receives Industry honour for Outstanding Contribution in Green Building Project
Moody's: CCCG's acquisition of Greentown's shares is credit positive for Greentown
Moody's Investors Service says that the proposed acquisition of Greentown China Holdings Limited's (B1 stable) shares by China Communications Construction Group (Limited) (CCCG, unrated), subsequent to the termination of the sales of such shares to Sunac China Holdings Limited (Ba3 stable), is credit positive for Greentown. However, there is no immediate impact on Greentown's B1 corporate family and B2 senior unsecured debt ratings, or on Sunac's Ba3 corporate family rating and B1 senior unsecured debt rating.
On 23 December 2014, CCCG entered into an agreement with Greentown's Chairman Song Weiping, his wife Xia Yibo and CEO Shou Bainian to acquire their combined 24.3% equity stake in Greentown for HKD6 billion. The agreement follows the termination on 18 December of the sales of such shares for the similar amount to Sunac. The proposed acquisition is still subject to a number of conditions, including to the approval from the State-owned Assets Supervision and Administration Commission of the State Council and the Securities and Futures Commission of Hong Kong.
"The acquisition by CCCG, a large wholly state-owned enterprise in the infrastructure construction industry, will create more property development opportunities for Greentown, widen its financing channels and improve its corporate governance," says Franco Leung, a Moody's Vice President and Senior Analyst.