Should You Buy A House Before Turning 30?

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Should You Buy A House Before Turning 30?

Many of you may have big dreams before you reach the age of 30, like clearing your debts, getting a promotion, getting married, owning a house, or start saving for an early retirement.
Take one step at a time to avoid getting flustered by the financial decisions you need to make before you turn 30.

A step forward in securing your future is to have a house of your own. To encourage people to invest in residential property, availing home loans is now easier, and the government also provides tax exemptions.

Here are 5 pointers that will help you make the decision of buying a house before you turn 30.
#1: Have clarity as to why you are buying a house
There could be many reasons why you want to buy a house, as a personal choice, as an investment, or out of social pressure.
Buying a house to live in – Most investors believe that you should, “own the house you stay in”. By the age of 30, if you are sure about the city you want to live in, your career path, your family plans, and your disposable income, buying a house is a possible option.
Here’s what you basically need to know to own the house you live in without getting into trouble:

• Affordability to pay at least 30% to 40% of the cost of the house as downpayment
• Clarity on the requirements based on your plans – where you want to live, how many years you wish to stay there and your future family plans
• Stable income to make repayments on the home loan

Buying a house as an investment – If you want to buy a house as an investment option, due diligence is required. You need to:

• Track the rate of price appreciation, and the worth of the property in the current market
• Consider additional costs of buying, owning and selling a house like interest, insurance and maintenance
• Your EMI should typically be not more than 40% of your take-home salary or income

Buying a house because of social pressure – Buying a house because of social pressure, because your parents, family or friends say so, is not a good idea. You need to be 100% certain on your intention to buy, and you should be clear on whether you can afford it. Without this conviction, you may have to compromise on your standard of living, lifestyle and be financially dependent.

#2: Buy a house based on your needs first, and then your budget
You are earning well and invest in a 1 BHK space that fits your budget. In the next 3 years, drastic changes happen; you get a promotion, get married and have a baby. You upgrade to a 2 BHK to accommodate changes. A few years later, your parents decide to live with you and you need to move closer to your child’s school. Moving to a 3 BHK is inevitable.

You realize that every time you moved, although you found a space at a good price, there were additional costs of 2% brokerage and 8% tax. This additional cost of 10% had created financial pressure and it could have been avoided had you planned ahead before closing on that 1 BHK.
When investing in a house, it is natural to check out the price first. While this is necessary, what is more important is to consider if the house meets your requirements. 

The house you choose should cater to your needs not only of today, but also of what you may require after 5 to 7 years. In this way you can avoid unnecessary costs, and benefit from eventually owning the house you live in.

#3: Take advantage of tax deductible options, on the interest of home loans
Under Section 80C of the Income Tax, here’s how you can save tax by claiming benefits on interest and principal repayment of your housing loan:

•  You can claim the entire amount up to Rs. 1,50,000 on interest paid on home loans
• Once you have paid your installments, you can claim deductions on principal repayments up to Rs. 1,00,000
• If you are married, take a joint home loan. This way, you and your spouse can claim deductions separately on interest paid and principal repayment. Which means, together both of you can claim Rs.3,00,000 in interest paid and Rs. 2,00,000 on principal repaid.

#4: Plan repayment with disciplined budgeting
It typically takes around 7 years for a person to repay a home loan in India. Assuming that your salary increases at around 12% per annum, and the EMI on your home loan is constant, only the first few years will be stretch. With disciplined budgeting it is possible to create a successful repayment plan.

• Best time to prepay home loan – In the first 2 to 3 years not only have you drawn on your savings to pay upfront for your home loan, your salary would not have increased and you have very little surplus for emergency needs. Prepayment is advised only after the 2nd or 3rd year when your cash flow pressures have reduced. You could open an Interest Saver’ account, where surplus can be kept while still being available during emergencies.
• Not so good time to prepay – Once your EMI / annual total interest is less than the tax benefit (INR 2 lakhs per year of interest and INR 1.5 lakhs per year for principal prepayment), then one can continue to maintain the loan for tax benefit. The surplus can be invested in financial assets if the expected return is greater than 10%.

For example, if you have a loan of INR 20 lakh, instead of pre-paying in the 1st year, it is better to pre-pay INR 1.5 lakhs each year (principal repayment, adjusted for principal portion of EMI) and take the tax benefit over a 3-4 year period. By pre-paying more than the principal repayment linked tax benefit you lose out on tax benefit.

#5: Be realistic about the returns you expect
Don’t get giddy when your friends say,” There is great wealth that can be made in property investment with the rate of appreciation.”

You need to understand that price appreciation depends on various factors such as location, quality of the construction, connectivity and upcoming infrastructure projects in the area.
The typical expected return on an apartment is about 10-12%, that’s around 8-10% on appreciation and 2-3% on rental. Keep in mind that, on a 12% rate of annual appreciation, if you change your house after the 3rd year, the impact cost will trim down nearly 1/3rd of your gain.

Remember, that you may not be able to have it all, but you need to start early, invest smart and work towards securing your future with proper financial planning.
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These 21 Images Of India Are Never Shown By Foreign Media

http://www.rajnikantvscidjokes.in/these-21-images-of-india-are-never-shown-by-foreign-media/

These 21 Images Of India Are Never Shown By Foreign Media

It’s no wonder that foreign media always puts allegations on India for being a poor country which has less signs of progress or improves very slowly due to corruption, poverty, violence and other issues. And this is what they show in their views about India. However, they must take a look at below 21 images which would surely give them a perfect counterblast in addition to displaying the India which is real but far above and beyond their imagination. What’s more, it’s so beautiful and elegant that they just can’t imagine even in dreams. Besides, once visited, these places will leave foreigners awestruck and mesmerized with their grace.
Let’s take a virtual tour around the marvelous sites:

1. Mumbai’s Chatrapati Shivaji International Airport

2. Ahmadabad’s Sabarmati Riverfront

3. Mumbai Skyline

4. Kerala – God’s Own Country

5. Bangalore – IT Capital of India

6. City of Dreams – Mumbai

7. Hyderabad’s Char Minar

8. Paradise on Earth – Kashmir 

9. City of Lakes – Udaipur

10. Lotus Temple – House Of Worship in New Delhi

11. Chennai’s Highways 

12. Pink City – Jaipur

13. Bandra-Worli Sea Link

14. Yamuna Express Way

15. Marina Beach in Chennai

16. Kolkata

17. Shimla – Summer Capital of British India

18. Republic Day Parade in New Delhi

19. Queen’s Necklace – Mumbai

20. Gangtok

21. Aizawl – Capital of Mizoram

Which of these places did you find most attractive? Don’t you think these images should be used to describe India in place of the one that demonstrate our country as the dwelling place of hungry and poor people? Aren’t these enough to shut the bloody mouth of foreign media which always puts a question mark on India with some issue or the other? Share your answers in your comments!
Source

Developing rental housing as a viable option in urban centers

http://realty.economictimes.indiatimes.com/realty-check/Developing-rental-housing-as-a-viable-option-in-urban-centers/599

Developing rental housing as a viable option in urban centers

Although India’s housing segment accounts for almost 80% of the real estate and construction sector in terms of volume, we continue to have a housing shortage of approximately 19 million units. According to the Ministry of Housing & Urban Poverty Alleviation (MoHUPA), Government of India, the 10 states of Uttar Pradesh, Maharashtra, West Bengal, Andhra Pradesh, Tamil Nadu, Bihar, Rajasthan, Madhya Pradesh, Karnataka and Gujarat constitute about 76% of this urban housing shortage. Around 56% of this shortage is among households from the Economically Weaker Section (EWS) with an average annual household income of upto Rs. 1 lakh, while approximately 40% is among households in the Lower Income Group (LIG) with an average annual household income of Rs. 1–2 lakh. Nearly 96% of this housing shortage, therefore, lies among the EWS and LIG categories of urban India.

A primary reason for this supply–demand mismatch is the paucity of formal housing options for India’s large low income population with low affordability levels. The lack of access to formal credit along with high priced home loans and debt, leave the bottom of the housing market pyramid with little more than squatter colonies, urban slums and unauthorized settlements by way of affordable accommodation options.

Rental housing
To tackle this enormous shortage that is expected to accelerate with rising migrant population movements to urban areas, MoHUPA has been focusing on an affordable housing policy that includes a rental housing interventions program. Despite a housing shortage of approximately 19 million units, around 10.2 million completed houses are also lying vacant across urban India, which may be absorbed within a formal rental housing program to address issues of urban accommodation. Although the larger focus has traditionally been on ownership of housing, the significance of rental housing cannot be emphasized enough. 

Vulnerable population groups either residing in or migrating to urban centers, in need of rental housing for employment or education, include:
• Single students
• Young, single executives
• Newly married couples
• Migrant families, and
• The elderly
Rental housing offers a convenient and cost effective option for all such migrant populations, who may not want to make long-term financial commitment in a city. While the higher and middle income members of these groups have the option of hiring apartments and bungalows in upmarket and middle class residential areas, the LIG and EWS groups are left with hiring rooms and/or jhuggi/jhopdis in unauthorized colonies and urban villages.

Legislative support
According to the Census 2011, around 69% of households in urban areas live in owned dwellings, while about 28% live in informal rented accommodation, and just about 3% in formal hired dwelling units. Taking cognizance of this scenario, a Task Force on Rental Housing was constituted by MoHUPA, whose objectives were to:

• Develop a strategic policy intervention to promote Rental Housing as a viable option;
• Create a legal and regulatory framework to enable Private Sector participation in rental housing; and to
• Improve the financial attractiveness of Rental Housing.

Based on the recommendations of the task force, a “National Rental Housing Policy” is currently under formulation. By way of legislative initiatives, this national policy also includes:
• The Draft National Urban Rental Housing Policy 2015,
• The Draft Model Tenancy Act 2015, and
• Rent Control Act 1992
The vision of the Draft National Urban Rental Housing Policy 2015 is to enable the growth of rental housing in a holistic manner. Its key objective is the promotion of:
• Basic shelter facilities (destitute, homeless and disabled)
• Social Rental Housing for the Urban Poor
• Affordable Rental Housing for specific target groups (migrant labors, students, women hostels, etc.)
• Rental Housing as a stop gap towards aspirant home buyers
• Institutional rental housing for the working class (Government, PSUs, corporate firms, industrial groups, NGOs, etc.)
• Formalization/regularization of Rental Housing on pan India basis
• Facilitate fund flows/incentives to Rental Housing
• Institution/organizations to construct, manage, maintain and operate Rental Housing (RMCs/housing companies, cooperative societies, RWAs, REITs, etc.)
The Draft Model Tenancy Act 2015, meanwhile, attempts to create a framework for the regulation of tenancy for commercial and residential properties. It tries to balance the rights and responsibilities of landlords and tenants alike through rental contracts; and aims for registration of rental contracts with Rent Authorities. The main objectives of the Act, however, will be to:
• Have rent fixed and revised by mutual agreement between landlord and tenant
• Unlock existing properties for renting out
• Address repossession issues in rental housing markets

The Rent Control Act 1992 is slightly skewed towards tenant protection, and is aimed at controlling rent. It tries to protect tenants from eviction and from having to pay more than a fair/standard rent amount. The Act may need to be revisited to make rental housing attractive enough for landlords as well.

The Government is currently working towards the promotion of rental housing stocks through such legislative support. A recommended strategy will lie in addressing issues related to institutional implementation to encourage adoption of the policy at central, state and municipal levels in a time bound manner.


DISCLAIMER: The views expressed are solely of the author and ETRealty.com do not necessarily subscribe to it. ETRealty.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.

Indians are shining

We Indians are eating more, buying more, and consuming more than ever.



http://m.timesofindia.com/budget-2014/union-budget-2014/Budget-2015-Union-Budget-2015/articleshow/46419746.cms

Union Budget 2015: The nuts and bolts of property tax

Do the daily advertisements of fancy residential projects tempt you to buy a house of your own? Home loans are available with suitable EMIs from various banks but do your research and opt for a loan package that suits you best.

TAKING A HOUSING LOAN:

Typically, the longer the loan tenure, the lower is the monthly EMI but higher is the interest outgo. The Reserve Bank of India (RBI) has prohibited banks from levying any foreclosure charges if you pay off the loan prior to its tenure. Once you have the loan in hand, you will be paying a periodical interest and also repaying the principal — in tranches. The I-T law provides for benefits in both instances.

Tax Benefits on interest paid:

Interest payable on 'self-occupied' property is subject to a maximum deduction of Rs 2 lakh under the head 'Income from house property'. Even a loan taken from an employer, friend or private lender is eligible for such a deduction. Booking an apartment which is under construction is sometimes cheaper. The I-T law permits you to claim the total interest paid during the pre-delivery period as a deduction in five equal instalments starting from the financial year in which the construction was completed or you acquired your apartment (generally this denotes the date of possession). Of course, the maximum you can claim as deduction per year continues to be Rs 2 lakh.

Caution point: A certifi cate from the lender is required to claim deduction on interest even if the lender is an employer or a friend. To claim deduction of Rs 2 lakh, it is essential that the acquisition or construction is completed within 3 years from the end of the fi nancial year in which the loan was taken; else the deduction allowed will be limited to Rs 30,000.

Union Budget 2015

Set off your interest payment:

As income from a 'self-occupied property' is nil, deduction of interest, in technical parlance, will mean a loss under the head 'Income from house property'. This "loss" can be set off against other income, which includes salary income, in the same year. This reduces your total tax liability. Any loss not set off within the same year can be carried forward and set off in the next 8 years. However, in the subsequent years, such set-off is possible only against 'Income from house property'. So even if you let out your property next year, this carry-forward of loss can bring a marginal relaxation in your tax liability.

Find all Budget-related stories here



Definition Of 'self-occupied' property: 

Here is some guidance on what exactly constitutes 'self-occupied' property. If you are suddenly transferred to another city (where you live in a rented apartment) your own property will be considered as 'self-occupied'. Also, if you have opted to purchase a new apartment in a tier-2 town where property is cheaper and continue to stay in a rented house, this new apartment would be regarded as 'self-occupied' entitling you to deduction of housing loan interest.

Hot tip: If you have bought the new apartment jointly — say with your spouse — then each of you is entitled to a deduction of Rs 2 lakh, as explained above. In case you have a working son or daughter and the bank is willing to split the loan three ways, all three can avail deduction up to Rs 2 lakh each. Repayment Of Your Housing Loan: The principal repayment of the housing loan made by you is allowed as a deduction from your gross total income (subject to an overall cap with other eligible investments of Rs 1.5 lakh). Please refer to the section on savings.

Caution point: Unlike deduction of interest, deduction of principal repayment will be allowed only if the loan is taken from specifi ed institutions like banks or LIC.

READ ALSO: Black money abroad? Be ready for jail, huge fines

Buying an apartment and your TDS obligations: 

As per the I-T law, the buyer of an immovable property worth Rs 50 lakh or more is required to deduct (and deposit) withholding tax at the rate of 1% from the consideration payable to the seller. In case of failure to comply with the provisions, interest and penalty are imposed on the buyer.

Thus, if the purchase price of your fl at is Rs 50 lakh or more, then you have to comply with the tax deduction at source (TDS) obligations. You will be required to furnish information about the tax deducted and deposited online on the Tax Information Network (TIN) website in Form 26QB (URL is https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp). Further, you will also have to download Form 16B, which is the TDS certificate from the website (URL is https://www.tdscpc.gov.in/app/login.xhtml) and issue it to the seller.

Caution point: If you have booked a fl at and are paying the builder in instalments, but the value of the fl at as per the sale agreement is more than Rs 50 lakh, then tax has to be deducted against each instalment payment. You also need to comply with the timelines for deduction and deposit of TDS and fi ling of the information online and submission of the TDS certifi cate to the builder.

READ ALSO: What goes up, what down Budget 2015

Letting out your second house:

Investing in real estate has become attractive, but make sure not to keep your second house (which is not a self-occupied property — as explained above) unoccupied: it makes better sense from the I-T law perspective to rent it out. Your second house, if locked and empty (with no income accruing from it in the form of rent), will still attract tax on its 'deemed value'. In other words, tax is calculated at expected market rent.



Interestingly, if you let out the second house, you can deduct the entire amount of interest you are paying on it without any cap from the rent received. If there is a loss, you can deduct it from your taxable income. For example, if your interest outgo is Rs 10 lakh and the rent is Rs 6 lakh, you can get a tax benefi t on Rs 5.8 lakh (Rent Rs 6 lakh less: (a) Standard deduction of 30% of rent which is Rs 1.8 lakh and (b) Interest Rs 10 lakh). This is applicable for any number of houses and there is no cap on the amount of deduction you can claim.

SELLING YOUR APARTMENT:

If you sell your house, whether it is self-occupied or your second apartment, you will incur capital gains tax (given that there has been appreciation in property prices, it is unlikely that you will be making a loss).

Capital gains is the difference between the sale proceeds and the cost of acquisition of the apartment you are selling. Further, capital gains can be either short-term or longterm depending on the tenure for which the house was held. A short term capital gains will have a different tax impact than a long-term capital gains (LTCG).

If the house is held for not more than 36 months, on sale, you will incur a short-term capital gain, which is subject to income tax based on your applicable slab rate. If you fall in the lower tax bracket with a tax rate of 10.3%, short-term capital gains will not pinch you. Else you could end up with a 33.99% tax rate.

If the property is held for a longer period, LTCG arise. The cost of acquisition used for computing LTCG is the indexed cost of acquisition (in other words an adjustment is made for infl ation). Tax is levied on LTCGs at 20% (plus surcharge and cess).

Reinvesting in residential property or securities: 

To be able to save tax on capital gains, you must invest the entire LTCG from the sale of residential property in another (only one) residential property in India. Such investment can either be within one year before or two years after the date of sale. You could also construct another residential property in India within three years of the date of sale.

Also, you may deposit the amount of capital gains under capital gains account scheme with a bank in case investment in new property is not made before fi ling of I-T return (not later than the due date for fi ling your I-T return). If the entire amount is not reinvested or not deposited in capital gains account scheme, the remaining portion of the gain will be taxable.

Caution point: Exemption from LTCG will not be available in case the reinvestment is made in more than one fl at, even if the same are adjoining fl ats, or in a commercial property. Further, while the RBI permits you to invest in property overseas (a remittance of $250,000 or Rs 1.5 crore approx per year is permitted which can even be used for property acquisition), if LTCGs are reinvested in property overseas you will not get the tax exemption.

Exemption is also available on investments made in certain bonds within six months of sale. They include Rural Electrifi cation Corporation and NHAI. The maximum amount that can be so invested is Rs 50 lakh.

Hot tip: Such exemption is also available on sale of any other long term capital asset.

How to Pay Off Your Home Loan Faster

http://profit.ndtv.com/news/your-money/article-how-to-pay-off-your-home-loan-faster-680354

How to Pay Off Your Home Loan Faster Though it's a great feeling to be a homeowner, paying a fat portion of your salary towards the EMI payment is not the happiest feeling. And to to keep paying this sum of money for a period of 10-15 years (the tenure of your home loan) may feel exasperating, as the best part of your youth is over by then. Besides, the interest rate you pay the lender may actually end up making the repayment amount bigger than the principal amount you have borrowed. What then is the solution? The solution is prepayment of your mortgage in easy and simple steps to lighten your debt burden and save money in the long run.

Till about a couple of years back, one had reason to be worried about the prepayment of one's home loan because of the costs involved. But that does not hold true any longer, with the RBI having directed banks and financial institutions to do away with any penalties on floating rate home loans.

This directive from the apex bank came in the monetary policy announcement in June 2012.But if you still think that prepayment of your mortgage is an impossible feat given the fact that you are barely managing your other fixed expenses, read on to find out how it may not be such a far fetched possibility after all.

1. Take a look at your financial plan
Before you jump the gun and panic thinking that you must pay off your home loan as soon as you can or at least think about a refinance option for your home loan, take a closer look at your financial plan. See the number of investments you have and the returns they are yielding. Once you are assured that your investments are taking care of your short, medium and long term financial goals, you can direct the surplus you have towards the prepayment of your home loan. The thing to remember here is that you should not dip into your emergency fund or compromise with your financial goals to make this prepayment.

2. Tweak your EMI structure
The thought of part payment of EMI may seem intimidating to you, because it is not possible for you to make a full payment of an EMI altogether. But have you considered the possibility of making a slightly higher EMI payment? Even a small amount of Rs 1,000 to 2,000 will go towards towards the repayment of the principal amount of your loan. As your principal comes down, so does your interest amount and you end up reducing your tenure by at least 1-2 years.

3. Make partial payments whenever possible
Most large banks allow their home loan customers to make N-number of partial payments in a year (However some banks may have a limit of the number of partial payments one can make in a year, so make sure you check with your lender about this provision upfront) . So whenever you have a festival related bonus or a performance bonus coming in, use it for the part payment of your home loan, instead of buying that expensive LED television set or the latest iPhone in the market. While, you may have to make certain compromises, you will end up saving a lot of money in the long run.

4. Cut your costs and live below your means for the first few years Having a home loan to pay off is a great financial burden, but there is nothing that matches up to the satisfaction of having a roof over your head. Let this be your motivation to cut corners wherever you can and direct the money saved towards the prepayment of your home loan. You may have to let go off the annual vacation in a foreign location for the first few years of your mortgage tenure, but having the peace of mind will be a much bigger incentive.

5. Get the family involved
You may be the main breadwinner of the family and the onus may be on you to manage the finances, but when it comes to the mortgage, make your family as responsible as you are. Make them as involved in the prepayment process as you are. They may not be able to pitch in with the extra money, but they can sure think up some interesting means of spending quality time together. A vacation in a place that is closer to home or doing up the kid's room with their favourite furnishings could save money and give them as much joy!

By using these simple yet effective strategies you can actually end up saving a lot of money and having the full ownership of your home much before your tenure ends.

Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.

Why does everybody love to hate the Indian real estate sector?

http://m.indiatvnews.com/business/india/why-does-everybody-love-to-hate-the-indian-real-estate-sector--15644.html

  Why does everybody love to hate the Indian real estate sector?
New Delhi: Over the years, Indian real estate has been a seemingly limitless source of negative hype. Scams, controversies, rumblings about delayed projects, agitations by consumers and debates about the over/under-regulation of the real estate sector have all provided ready cannon fodder for countless publications, internet forums and assorted activists. In fact, the real estate sector has drawn more media flak and outrage than any other industry in India.

This tempts the question – why is Indian real estate a sector that everyone loves to hate? It is a valid question, and one that many corporate heads, industrialists and big-ticket investors have asked me during my business travels abroad. The question – or variants of it - is sometimes asked in an amused and otherwise unconcerned manner, but more often with real interest tinged with worry. After all, almost everyone with a healthy investor instinct has or intends to have a piece of the massive Indian growth story, and any kind of participation in it invariably involves real estate.

There is no easy answer to this question, which is in any case a rather unfair one to begin with. Nevertheless, the generalized negativity about the Indian real estate sector that has been created in the public mind is a reality.

I usually counter the question with another question – “What have you read or heard about it that makes you think so?” My intention is not to be evasive, but to understand whether the question comes from a real understanding of the Indian real estate industry and its complexities, or whether it just a knee-jerk reaction to yet another hyped-up media report. Very often, the questioner is genuinely informed and has been following media stories about the sector quite closely, but no longer knows what to believe.

This is understandable, and I invariably ask my questioners if they have enough time for a detailed answer. After all, this confusion is the result of a war of opinion that has been waged against the Indian real estate sector for quite a while. The controversy is made even more complex by the fact that it is being actively encouraged by people who have no interest in presenting a more realistic picture of the Indian real estate industry.

What lies beneath

Real estate is something that lives and breathes at the very core of every Indian’s being, not least of all because it is considered the most important manifestation of success, wealth and power. Unfortunately, the fact that real estate transmits such signals in India has made it an object of not only admiration and desire, but also of something close to fear. While fear is invariably the result of a lack of understanding, it is nonetheless a very real force on the ground.

Naturally, any environment involving fear also needs villains. It is almost axiomatic that Indian real estate developers are the designated ‘bad guys’ – the greedy perpetrators of crimes against the helpless common man, wielding their wealth and political clout with impunity, with the sole intention of turning a profit and furthering their own agenda.

Such a stage-setting lends itself rather well to a protracted public drama involving the tantalizing element of good battling evil; of victims versus perpetrators. The epic battle of the Mahabharata, as it were, translated into present-day brick and mortar. Such a drama is readily absorbed by Indians almost by default, but is more damaging is the fact that it is also exotically interesting to foreign palates.

Market watchers in countries that India has or is seeking to have economic ties cannot but notice the bad press that Indian real estate is getting. This is how the unfair and wildly inaccurate blacks and whites of the Indian condition as depicted by ‘Slumdog Millionaire’, become superimposed on an industry which is - if fact be told - the backbone of the country’s economy.

If we take a closer look at Indian real estate today, there is no escaping how important it is:

* The Indian real estate sector generates employment for about 7.6 million people across the country last year * Real estate is the most single-important consideration for any foreign company eyeing Indian shores to launch operations and create countless more jobs * Real estate’s overall contribution to India’s GDP was estimated at about 6% in 2013 * Real estate constantly cross-fertilizes other industries like cement, steel, paint, chemicals, tiles, fixtures and fittings

The scams that have so seriously impacted the image and credibility of Indian real estate in the past were not the result of a unified developer nexus, but the work of individual players whose crimes have now been attributed to the industry at large. Should we not also consider how some of India’s biggest real estate developers took incredible risks to open up entire new cities to add to the country’s growth?

The urbanization that is the focal point of India’s economic growth hinges on the growth of its cities, and therefore on the products that real estate developers deliver. Wherever we see new cities rise from obscurity into prominence, there are developers restructuring skylines, building homes for population and office spaces for them to work in.

No Indian’s heart can help but swell with pride as they perceive a city like Mumbai, Gurgaon or Bangalore from the air as their planes prepare to land there. What gorgeous evidence of progress is displayed in the tapestry of skyscrapers jostling each other for space, road networks spreading out to connect new areas to existing ones, and office and manufacturing complexes providing the economic nerve-centres.

This is the work of real estate developers, but their contributions towards weaving the very fabric of our cities is overshadowed by the specter of antipathy that has been generated against the entire real estate sector. We must try to understand the basis for this antipathy before we can explain it.

At the end of the day, real estate is a business like any other, and no industry can claim to be free of flaws and anomalies. Almost every day, we hear about delayed projects, deviations from project quality and configurations, and additional payments being charged for changes in apartment areas. We read about how real estate is the first port of call for politicians looking to off-load their unaccounted funds, about developers who have launched projects on land which has not been cleared for development, and how others have been pulled up for flouting FSI and environmental norms.

Such things do occur, and the developers who practice business in such a manner must be held responsible and brought to book. However, these developers do not represent the industry as a whole – they are anomalies that must be eradicated, not symptoms of an industry-spanning pandemic of manipulation and wrongdoing.

A closer look at project delays

Most of the extensively-reported incidents of delayed project completion are often not the result of malpractice, but of a flawed regulatory environment. It is true that some unscrupulous smaller developers intentionally undertake a slower pace of construction if sales in the project are sluggish or a larger part of the project is unsold. However, in most of the cases being touted as evidence of a corrupt industry, delays have happened because the authorities have not granted timely approvals, and the morass of bureaucratic red tape that developers have to navigate for every project.

Before a project is officially launched on the market and offered to buyers, there are myriad permissions that a developer needs to obtain from the state and central agencies and ministries. This does not only lead to delays, but also cost escalations.

Like in any other business, the longer raw material is held, the higher is the holding cost – which, in addition to interest costs in case of borrowed funds, causes an increase in the overall price of the finished product. In real estate, land is the basic raw material for development, with construction materials being the variable costs. The longer a developer has to hold his land without getting any receipts through the sale of proposed apartments, the higher his project costs escalate.

The time consumed in obtaining all approvals adds to the total time expended in completing and delivering the project as per the promised times. Obtaining the 57-odd permissions to begin construction of a project can take as much as two years. During this time, the cost of acquisition or even just holding the land for a project rises. Builders already have to cover external and internal development charges, license costs and often charges for change of land use from various departments, which have also risen. Cost of construction has gone up by more than 35%, as well.

Again, if we consider changes in the apartment area or unexpected price increases after consumers have purchased properties from a developer, these too often occur because changes in project plans were required by the authorities before they issue an approval. There are many examples of how abrupt changes in regulations governing real estate development have worked against both developers and real estate buyers.

To cite just one – a couple of years ago, there were revisions made in the DCR regulations for the Mumbai Metropolitan Region which simultaneously road-blocked innumerable projects and added to overall development costs by about 15%, including the fungible premium builders had to pay for the additional 35% FSI option. The fact that this resulted in a cumulative 20% hike in construction cost and led to price increases across most projects in MMR is just one aspect of the story.

The other fallout was that developers had to re-work the specifications of their upcoming as well as on-going unapproved projects, which led to significant project delays. Apart from an exacerbated cash-crunch, developers also had to contend with the ire of their buyers.

Likewise, while certain instances of faulty land acquisition or title disputes are endemic to fly-by-night operators, it is also true that cases such as in the Noida Extension, land acquisition issues have been legally established to be the fault of the involved authorities. But as always, the blame has been conveniently laid at the feet of a vaguely-defined builder nexus.

The Indian real estate sector is changing

The ugly caricature of Indian real estate as an industry controlled by corrupt despots is naive, hopelessly outdated and extremely damaging to the country’s global image as a thriving economic dynamo. The fly-by-night players who were responsible for this image are still around, but their ranks are rapidly decreasing. In the meantime, it makes absolutely no sense to paint every real estate developer with the same brush. Most large listed real estate developers in India today have wholeheartedly embraced the mantra of complete transparency.

They are selling their products on the basis of declared carpet area, firmly refuse any hint of black money monies as part of their sales transactions, and do everything in their power to deliver their products on time. They are also fighting hard to correct the structural deficiencies of the overall regulatory system – not only because their businesses are suffering on account of conflicting rules and regulations, but because they are being held accountable for factors which are beyond their control. They take their roles as industry stakeholders very seriously, and are among the loudest voices in the outcry for positive change at a policy and regulatory level.

Common to all these players is a vision of Indian real estate as a level playing field in which the business of real estate development and consumption can be carried out in a rational, transparent and uniformly beneficial manner.

This is a long and detailed counter-argument to offer to a simple question – why does everyone love to hate Indian real estate? And for this reason, I only answer it if the question comes from someone who is willing to accept a balanced response, no matter how long it takes to give. (Anuj Puri is Chairman & Country Head at JLL India