Budget 2017: 3 key hopes of the realty market | Housing News

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Budget 2017: 3 key hopes of the realty market

With the union budget on the verge of being announced, the real estate sector has come up with a host of views and demands. We look at 3 key expectations of the realty market, from Budget 2017

By Amit Sethi•January 23, 2017

1. More clarity on REITs

Easing the guidelines for real estate investment trusts (REITs), will open the way for the realty sector to get easy funding and ensure timely completion of projects, say developers.

"Tax clarity on REITs, needs to be worked upon. A simpler structure with fewer hurdles, shall certainly help investors and buyers, by encouraging hassle-free transactions. One of the major reasons for lack of adequate funds, is the high borrowing cost, which also results in delays in completion of projects," explains Sushil Raheja – CEO, Raheja Homes Builders & Developers.

2. GST-related benefit for the real estate sector

The sector is eagerly awaiting clarity on the slabs slotted for the real estate and the construction market, in the Goods and Services Tax (GST) structure. Experts believe that taxes should be reduced, especially for the affordable housing segment.

See also: Can budget 2017 compensate for demonetisation's impact on realty?

"Given the introduction of GST, homes will also now attract a tariff. From our perspective, it would be beneficial, if home buyers can come under the lowest possible slab of the GST, thereby, enabling greater affordability for potential home buyers," says PNC Menon, founder chairman of the Sobha Group.

Analysts point out that service tax exemptions for affordable housing, are not a part of the model GST law and add that affordable housing should be exempt from service tax under the GST, to encourage the government's scheme for 'Housing for All by 2022'.

3. Tax benefits for home buyers

We would like to see some tax benefits for home buyers, through greater exemption in the interest paid and principal repayment on housing loans, says Raheja.

"If direct taxes are brought down, it will also act as a major boost to the industry. A deduction in income tax rates and stamp duty, will also be great measures," adds Raheja.

Another way to boost demand, is to provide tax benefits for NRIs who invests in Indian properties, say analysts. The central government can also reduce the stamp duty in the states/union territories where they are in power. Such a move, could encourage other states to follow suit.

Other key demands

The real estate fraternity is optimistic that the government would take note of the following demands:

• Imparting industry status to the realty sector – a demand that has been lingering for many years.
• The affordable housing segment should be completely exempt from service tax.
• Promoting single-window clearances, for ease of doing business.
• Immediate hike in HRA exemption limit.
• Further clarity on the Pradhan Mantri Awas Yojana (PMAY) and guidelines to apply for the same.
• Skill and training support to the realty sector and incentives to the organisations involved in skill development.

Www.arundevelopers.com

nri investments in housing set to almost double to $11.5 billion in 2017: report, Real Estate News, ET RealEstate

http://realty.economictimes.indiatimes.com/news/regulatory/nri-investments-in-housing-set-to-almost-double-to-11-5-billion-in-2017-report/56734260

NRI investments in housing set to almost double to $11.5 billion this year from 2013 level: Report

NEW DELHI: The Narendra Modi-led government has given a significant boost to the confidence of the non-resident Indians (NRIs), with their investment into the primary residential real estate market expected to almost double this year.

About $11.5 billion of investment by NRIs is expected to come in the new home or primary residential market across top 8 major cities in 2017, against $6 billion in 2013, according to a report by real estate transaction platform Square Yards.

"It is believed that the new change in government has infused new sense of confidence about the prospects of Indian economy," said Kanika Gupta Shori, COO and co-founder, Square Yards.

Over 20% of NRI investment in Indian real estate comes from the United Arab Emirates (UAE), followed by other major NRI populated countries such as the USA and the Kingdom of Saudi Arabia. Other countries such as Canada, the UK, Singapore & Australia also source of substantial NRI capital inflow in Indian realty.

"A depreciating Rupee against the dollar and other currencies have added further impetus to the rise of momentum of NRI investment into the Indian real estate," she said.

The first two months of January and February generally witness the largest volume of NRI investments, shows the report. "There are vacations in Europe & North Africa during November & December, many NRIs prefer visiting India during this time. This is also the time when they prefer site visits. Once back, they finally zero down on making the final purchase," it said.

The demonetisation drive by the government along with the real estate regulatory Act (RERA) can entail positive impact on Indian real estate, according to Shori. "They will enable Indian real estate to usher in an era of unparalleled transparency and attract domestic & international institutional investment," she added.

New technological tools such as google apps, virtual & augmented realities will also increasingly play a major role in bridging the geographical gap, according to the report. "They will help NRIs know more about properties in India, omitting the necessity of a physical presence," the report said.

Www.arundevelopers.com

housing finance companies beat note ban blues, report healthy growth, Real Estate News, ET RealEstate

http://realty.economictimes.indiatimes.com/news/allied-industries/housing-finance-companies-beat-note-ban-blues-report-healthy-growth/56725941

Housing finance companies beat note ban blues, report healthy growth

Banks have cut interest rates, which is a boon for housing finance companies as that reduced their cost of funds and led to higher margins.

MUMBAI: Loan disbursals by Can Fin Homes, Indiabulls Housing Finance and LIC Housing Finance in the past quarter suggest that the impact of demonetisation on the real estate industry wasn't as bad as feared. Although the rate of growth they posted was lower than in the past, given the uncertainty , it still appeared strong.

Can Fin Homes reported a 28% increase in its loan book in the December quarter, while Indiabulls Housing Finance posted 30% growth and LIC Housing Finance a 15% increase. Mortgage finance companies reported strong numbers on the back of lower cost of funds, robust growth in loans and stable asset quality.

Banks have cut interest rates, which is a boon for housing finance companies as that reduced their cost of funds and led to higher margins.Also, while banks were busy managing cash post demonetisation, HFCs focused on growing their portfolio.

"We did not see any impact of demonetisation as the number of loans sanctioned in December is more than the same month the previous year," said Sunita Sharma, chief executive of LIC HFL. With the cash situation improving in the market, housing finance companies have seen, as per CIBIL, home loan enquiries going back to where they were before demonetisation in October.

"Demonitisation is behind us, we are seeing enquiries coming back, and expect 18-20% growth by the end of financial year," said Kapil Wadhawan, chairman of DHFL.

Macro environment is extremely favourable for housing finance companies. Government incentives under the Pradhan Mantri Awas Yojana have also given an impetus to the sector. "Housing finance companies have a single product mindset, so they would continue to remain single product focused," said Gagan Banga, vice chairman of Indiabulls Housing Finance.

While there was initially a fear of deterioration in asset quality , post demonetisation the local collection levels were not as bad as feared.Also, all HFCs maintained stable levels of non-performing loans during the quarter.

www.arundevelopers.com

Pre-leased commercial properties: Compelling investment choice

Pre-leased commercial properties: Compelling investment choice -------------- 

Rubi Arya
Pre-leased Commercial Real Estate (CRE) has been increasingly becoming one of the attractive investment opportunities in India over the last 12-18 months. Large private equity funds both foreign and domestic, sovereign wealth funds, family offices, UHNIs have been very actively investing in this asset class. Especially in an era post the demonetization drive, where the returns on fixed income products like G-secs, bonds, bank deposits are witnessing a declining trend, CRE is an attractive investment opportunity that can provide stabilized returns with appreciation on exit.

Investment into pre-leased CRE are low to medium risk investments with debt-like returns during the investment holding period with an equity upside on exit from these investments. As CRE investments are income generating from day one, the owner enjoys debt-like returns during the asset holding period. These returns range between 8.5%-9.5% p.a. to begin with and gradually improve on account of rent escalations, which is typically 5% on year or 15% after 3 years. These are stabilized returns due to lease tenures typically in the range of 3-15 years.

On exit the owner of CRE would earn equity upside with capital appreciation being earned on the escalated rent as well as on yield compression in an interest falling scenario over the asset holding period. Hence the investors can make around 16-18% p.a. returns from such investment opportunity. These can be bettered further in case some of the asset acquisitions can be structured through a combination of leverage through lease rental discounting available from banks and financial institutions and equity investment by the asset owner.

Attractive opportunities within the CRE space are available for investment. In bigger cities like Mumbai, Bangalore where capital values are higher in CBD locations as compared to other micro markets, opportunities like part asset purchase are also available in addition to buying entire asset. In terms of tenant profile, a diversified tenant mix from sectors IT/ITES, BFSI, Pharma, Manufacturing, E Commerce etc which provide the owner portfolio balance and diversity. Also with positive macro economic factors along with regulatory initiatives by the Government of India, the demand from various sectors for additional space is bound to increase thereby having a positive impact in CRE valuations.

Given that CRE investments need huge capital, investors prefer investing through a pooling vehicle like a private equity fund. With this, investors get benefits like diversification in terms of asset, developer and geography apart from better due diligence, low overhead costs, collective negotiation, lower entry cost, active control and asset management, which cannot be availed through direct investments.

Our experience with three such funds so far has been rewarding for investors and us because of these benefits of collective investment. Th e current market is even more conducive for such investments and that’s the reason our efforts to raise 4th private REIT-like fund focused on investing into pre-leased Commercial Real Estate in India’s top 6 cities is receiving good traction.

The key factors driving such investments into CRE are obvious as office space demand is growing at a robust pace, vacancy levels going down and rising rentals. In a falling interest rate environment, where other financial products show signs of volatility, investment in pre-leased commercial asset will provide stable returns in the form of regular quarterly returns and capital appreciation with yields compression.

With investment in completed Commercial Assets, there are no risks associated with Land, Project Approvals and Constructions delays. Regulatory initiatives including GST, RERA, REITs as well as demonetization will result into higher transparency that would further boost the commercial space demand and therefore makes a compelling investment choice.

(Rubi Arya is the executive vice chairman of Milestone Capital Advisors)

Key reforms to give leg-up to real estate, say experts

The moves related to RERA Act, Real Estate Investment Trusts, smart cities, GST and demonetisation will eventually boost the demand for real estate, feel industry participants. 
ref: http://realty.economictimes.indiatimes.com/news/industry/key-reforms-to-give-leg-up-to-real-estate-say-experts/56677815

 MUMBAI: The government’s various policy and reform initiatives over the past two and half years aimed at improving transparency and ease of doing business in the realty space will infuse the much-needed confidence and trust in the sector, said industry participants.

 The moves related to Real Estate Regulatory Act, Real Estate Investment Trusts, smart cities, Goods & Services Tax and the most recent demonetisation will eventually boost the demand for real estate, which has the maximum linkages to other industries after agriculture.

 In its mid-term performance analysis for the Modi government’s realty-specific initiatives, international property consultant JLL India rated the reforms at moderately successful level, expecting faster implementation of the same.

 “The recent demonetisation drive has definitely helped the government score well on regulations and transparency. We have taken a holistic view of the continued political will towards reforms in the real estate sector — and the very real challenges the government faces. Improved transparency will drive increased participation by institutional investors in India. With strong linkages between regulations, transparency and real estate, we assign it a high weightage,” said Ramesh Nair, COO — Business & International Director, JLL India.

 The most imminent change that will impact the sector in the years to come is the implementation of RERA that will increase transparency, which in turn will bring back homebuyers’ confidence.

 Given that investments are extremely crucial for a capital-intensive sector such as real estate, policy initiatives on Foreign Direct Investment liberalisation, interest rates, REITs and private equity flows, etc., have a strong bearing on the overall investment scenario.

 “The reforms such as RERA, demonetisation and steps to improve ease of doing business have ushered in higher transparency while discouraging a parallel economy. This will prompt developers to focus on completing their projects in a time-bound manner thereby increasing customer confidence,” said Rubi Arya, Executive Vice Chairman, Milestone Capital Advisors.

 According to her, as the property sector has been subdued for some time now, it offers for institutional investors an opportunity with better pricing and falling interest rates.

 The long term fundamentals are also looking intact due to increased transparency and governance thereby providing attractive returns on investments in real estate as an asset class.

 Realty developers agree that they will have to adjust to the new environment. However, they are also hopeful that in the long term, all of these factors will help strengthening the sector.

realty.economictimes.indiatimes.com

Hong Kong "mini" flats boom as govt fails to rein in record-high prices - ET RealEstate

By: Venus Wu

HONG KONG: For part-time furniture mover Kong Ngai-lam, 26, home is the bottom half of a bunk bed inside a tiny room that fits little else. Nearly 200,000 Hong Kong residents like him call a wire cage or bed in partitioned apartments their home.

 Making housing more affordable was among outgoing Hong Kong leader Leung Chun-ying's top priorities when he took office in 2012, but his administration has been unable to rein in skyrocketing prices that have added to discontent in the city.

 "Over the past four years, despite a number of measures by the current-term government which has successfully curbed external, investment and speculative demands, the difficulty in achieving home ownership remains an unresolved problem," Leung said in his swansong policy address on Wednesday.

 High property prices and rents posed "the gravest potential hazard to the Hong Kong community as many families have no choice but to live in subdivided units, even in industrial buildings," Leung added.

 Property prices have surged nearly 50 percent to historic highs since he took office, according to government data, and tiny living spaces have become increasingly common. About 100,000 people under the age of 35, including children, make up half of those occupying such partitioned units, a government report showed. Non-government organisations say the real numbers are higher.

 These units, measuring half the size of a standard carpark space at an average of 62.4 square feet (5.8 square meters), are getting more expensive too.

 Median rents surged 10.5 percent to HK$4,200 ($520) in 2015, official data showed. The figure is greater than the 8.4 percent rent increase in private homes over the same period.

 Kong now pays $250 monthly rent for his bed space in the cluttered apartment shared with 10 others. A handwritten note warns of eviction if rental payment is late: "We are not the Salvation Army," it says.

 There are no legal guidelines in Hong Kong restricting how small apartments can be, nor any on rent control. "The biggest issue in Hong Kong is we don't have any legal restrictions, so the landlords can do whatever they want," said Kong's social worker and community organiser at the Society for Community Organization, Sze Lai-shan. MOSQUITO-SIZED FLATS "Mini flats" or "mosquito flats" are a growing trend as developers target first-time buyers who have given up hope of ever owning a decent-sized home.

 Emperor International Holdings will build flats as small as 61.4 square feet (5.7 square metres), though the measurements exclude kitchen and bathroom; Chun Wo Development Holdings has plans for a residential building catering to young first-time buyers with 128 square feet (11.9 square metres) units. "Hong Kong's real estate has gone so expensive, that's why (developers) are making flats smaller and smaller to make them affordable," said Edina Wong, senior director of residential services at property consultancy Savills.

 Hong Kong's richest man Li Ka-shing recently said the trend made him feel "uneasy", even though a residential complex built by his Cheung Kong Property Holdings offers flats smaller than 200 square feet (18.6 square meters). One unit in September sold for HK$2.8 million ($360,000).

 Thomas Lam, senior director at Knight Frank, expects small flats to remain popular in the short run as long as prices remain high and tightening measures such as higher stamp duties stay in place. But a mini apartment is not for everyone. Freya Tseng, 27, who advises her family on property investments, has stayed away from mini flats.

 "If you buy it for yourself, the quality of life will be too low and you won't be happy living there. If you buy it for investment purposes, it doesn't have any reserve value," Tseng said. "It's a joke." (Editing by James Pomfret and Jacqueline Wong) www.arundevelopers.com   

Modi government mulls new housing scheme with just 6-7% home loan interest rate

Looking to boost the housing sector, the Modi government is mulling a new scheme that may use money from the demonetisation drive. According to an ET Now report, the government is keen to boost the housing sector via a new scheme and is already in discussion with the RBI. The new housing scheme may be announced as early as the Union Budget 2017, which is expected to be presented on February 1. The channel reported that the final contours of the housing scheme will be decided after the details of revenue earned from demonetisation emerge. The report went on to add that the government is eyeing an interest rate in the range of 6-7% for home loans up to Rs 50 lakh. This new lower interest rate option of 6-7% will be available to first time borrowers and is likely to provide a much needed impetus to the housing market.

The real estate sector has been under pressure for quite some time now, and with the government’s move to demonetise old Rs 500 and Rs 1000 notes, experts expect an initial slump in home sales. However, there are also chances that banks will find room to lower loan rates – a step that would encourage people to buy homes. ‘Housing For All’ is a dream project of the Modi government, and the new scheme that is being talked about appears to be a way to avoid demand for real estate from falling further. The proposed interest rate range of 6-7% for home loans up to Rs 50 lakh also suggests that the government is looking to make housing more affordable for all.

While rating agencies and analysts were skeptical of the impact of demonetisation on the real estate sector, some industry experts had welcomed the move, stating that it would benefit in the long-term. Nirmal Jain, Chairman of India Infoline had said that housing will no longer be a distant dream for people now. “This (demonetisation) is a very powerful measure to curb black money. PM Modi has kept his promise of taking stern measures against black money. It will have deflationary impact in general and more specifically on real estate prices and make homes affordable, and is indirectly a boon to honest tax payers,” he had said.

ref: http://tz.ucweb.com/11_1qqhY