Is it right time to take a home loan and a property?

Is it right time to take a home loan and a property?

New Delhi: Because of the on-going economic uncertainties, many aspiring home owners in Pune are still hesitant about taking a home loan and buying a residence. One of the questions that people, who seek to make this beautiful city their permanent home, ask is does it makes more sense to rent now and await a price correction.

For those who are thinking of renting a home in Pune, there are many aspects to consider. In the first place, the affordability of both rental and purchased property is highly location and project specific. To illustrate – someone in Pune who can afford to buy a home in Undri may not even be able to afford the rentals at Boat Club Road, Koregaon Park or Kalyaninagar.

Secondly, whether it makes more sense to rent rather than buy a property would also depend on one's future plans in a particular locality. Does one wish to settle down there, or is also open to other areas? It definitely makes sense to rent a home while someone is deciding upon a particular locality.

If an individual is certain of a locality in Pune and is committed to settling down there, the right time to buy a home is now. There are many projects available in the excellent new residential areas that have come up in Pune, and prices are still competitive. There will not be a correction in real estate prices in Pune, as demand for a movement of residential properties in the city is healthy.

The wait-and-watch policy is only valid if there are informed reasons for anticipating a correction in a certain locality. On the whole, property rates in Pune will either remain stable or appreciate, depending on the area. Also, there are no prospects of home loan interest rates rationalizing over the mid-term, and economic indicators suggest that inflation will continue to drive up costs.

Given that it is the right time to avail of a home loan and purchase a property in Pune, one still needs to consider the financial implications. As a thumb rule, an individual's home loan EMI should not exceed a rational percentage of his or her net monthly disposable income. Generally, EMIs can amount to 50 per cent of monthly income.

However, home loans are not the only cause of debt in the contemporary context. People take out personal loans and have pre-existing debts, too. In other words, even a 'fair' EMI percentage could prove unaffordable. The 'ideal' EMI component can only be calculated vis-à-vis a debt-free person's salary. This would be between Rs. 1000-1200 per lakh.

People availing of home loans sometimes forget that they are under legal obligation to repay. There are numerous cases where borrowers have neglected to undertake a due diligence with regards to their financial capabilities and the suitability of the loan of which they have availed. As a result, they find themselves in debt traps and sometimes default on their repayments. Borrowers should stretch themselves only to the extent that they realistically foresee their financial position improving in a given time frame.

No home loan strategy should ever be based on anticipated financial windfalls as a means to pay off the loan. It should be based on realistic factors such as reasonable salary hikes and maturing of insurance policies and investments. If one anticipates a salary hike, even if this amounts to only a certain annual increase, one can consider a 'step-up' option for the existing home loan. Here, the borrower pays a lower EMI initially and steps up the repayment of the home loan in proportion to the assumed percentage increase in income.

(Kishore Pate is CMD of Amit Enterprises Housing Ltd.)

How to build new cities

http://indianexpress.com/article/opinion/columns/how-to-build-new-cities/99/

How to build new cities
Resources are not the problem. We need to change controlling mindsets.

India’s rapidly urbanising population needs space to live in, and providing that space in the form of new cities is easily within reach, provided we change our mindsets. No fresh resources are needed other than what is available within India’s Plan budget. But in order to see those resources, we should desire what Harry Potter figured out in the Room of Requirement — the object alone, and not how to do it or what can be done with it. It is the desire to control all processes and be the prime mover that renders us unable to see what should otherwise be evident. Let’s see what it would take to create 200 new cities over the next five years. Four cities in the periphery of every large one, only at a distance of, say, 50 km, so that people need not live in Delhi, Mumbai, Pune, Chennai or Hyderabad; they can merely commute and still lead a life of dignity and better in quality. It would take an average investment of Rs 2,000 crore per new city, or say Rs 400 crore every year for five years. The total bill comes to about Rs 80,000 crore per year for 200 cities.

How would we acquire the land, given its astronomical costs? You would not acquire any land at all, but merely propose a business model in which every group of landholders able to provide 500 hectares of land would be given 50 per cent equity in the venture that is a new city. The other 50 per cent would belong to the government. That way, the farmer would get a real share of the return on investment and a steady yearly income. Once it is clear to the farmer that the government is not planning to take away his land at rock-bottom prices to gift it to a real estate major for a commission, there would be a queue of farmers lining up, asking the government to develop their spaces into a liveable city. This is the kind of model used by Magarpatta City, a township next to Pune, spread over 430 acres and owned by 120 farmers, each a shareholder in proportion to his landholding. In Magarpatta City, farmers came together on their own and did everything by themselves. With some help from the government, the experiment could be widely replicated. The rub is that there is no agency that would benefit from such a proposition: only the people. Perhaps this is why no one has so far proposed what should be otherwise evident.

The next question is where the Rs 80,000 crore would come from. It would come from two sources. The first is the cost of food security for the nation and the second is the MGNREGA. Far be it from us to suggest that India does not need to feed its hungry or give them employment. It certainly does. If not for moral or ethical reasons, then for the reason that hungry and illiterate people can neither participate in nor contribute to a growing economy. But similar objectives can be achieved for one third their present cost, provided we scale down our desires somewhat and abandon age-old shibboleths. The basic proposition is that subsidies be limited to BPL families and small and marginal farmers. Here again, we repeat Harry Potter’s exercise. If we were to give the approximately six-seven crore BPL families an annual subsidy of Rs 5,000 to buy food, the bill would still be a third of the current cost of food security. What’s the balance being used for? To support organisations like the Food Corporation of India (FCI) and its operating costs.

The food subsidy bill is the operational deficit of the FCI, or the amount spent by it on market operations and buffer stocking over and above its sales realisation. This bill in the last budget was around Rs 90,000 crore. These operations serve dual objectives: to provide market support to farmers and also to subsidise consumers through the present public distribution system. If we were to provide cash subsidies for food to all BPL families, a similar objective could be achieved at Rs 35,000 crore, and if we were to further provide cash subsidies to all small farmers — even of Rs 2,000 per tonne for up to 30 million tonnes per annum as support against low market prices, it would take another Rs 6,000 crore. What you would not get would be the huge buffer stock India has been building for the last so many years.

This buffer stock, as also the FCI, is simply a relic of a time when the fear of famine dominated our mindset. The memory of PL 480 is bitter indeed, but surely we are long past that barrier now. Our cash reserves are no longer rock bottom. If needed, we can still engage in market operations to provide food. But leaving market operations to private traders does not mean abandoning all interest in the food market.

In return for dismantling the FCI, what the government would need to do is bring about transparency in food pricing and set about eliminating the hidden costs in food prices. The way is not difficult: set up internet-enabled markets in all cities for foodgrain and for fruits and vegetables, remove inter-state restrictions on movement of farm produce, impose checks on hoarding, abolish the agricultural produce market committees that function in the interests of traders and not farmers, and keep detailed records of transactions and markets. Removing all these hidden costs would bring down food prices far more effectively than any FCI or food security bill. These are the tasks the government seems unwilling to do. Surely, it is the government’s job to keep detailed records, conduct market regulation, pre-empt artificial scarcities and remove restrictions rather than be the prime mover.

As far as the MGNREGA is concerned, the recipe is even simpler. The scheme should be restricted to only the poorest districts. That’s the only way one can prevent it from interfering with the farm economy. A recent study shows that while Bihar, Uttar Pradesh, Madhya Pradesh and West Bengal — which account for 59 per cent of the rural BPL population — accounted for only 34 per cent of total employment generated by the scheme. Andhra Pradesh and Tamil Nadu, which account for only 8 per cent of the rural BPL population, provided 23 per cent of employment generated. Such anomalies can be sorted out only by restricting the MGNREGA to districts where it’s really needed. This would halve the MGNREGA bill of Rs 33,000 crore as per the last budget and free up scarce resources.

Doing these is not so difficult. This is far more a question of mindset than anything else. The great desire to control all decisions and the sneaking desire to make a private profit are the only obstacles that prevent us from building new cities, from making the investment in infrastructure that India really needs.
Views are personal

Brand vs budget: What is important while buying property?

http://www.moneycontrol.com/news/real-estate/brand-vs-budget-what-is-important-while-buying-property_1042959.html?page=1

Brand vs budget: What is important while buying property?

Arvind Jain
Pride Group

It is often assumed that Indian property buyers are more focused on budget than brand value. This is a glaring miscomprehension of the ground realities - in fact, few consumer classes are as attuned to the value of a brand than Indian homebuyers. Moreover, developers have been responding to this trend by making best practices in their offerings as well as business operations as an integral part of their manifesto.

In most Indian cities, reputed developers have maintained consistency in these aspects and are even raising the bar on best practices in construction design, quality and business transparency. This focus is a natural consequence of the need to remain relevant in a highly competitive market. Even in smaller cities such as Pune, quality developers are known for the higher grade of their deliverables on the market. This explains why certain brands command a greater degree of trust among consumers than others.

The fact is that real estate as a business, from construction to marketing of the end product, is one of the strongest contributors to the country's GDP. Real estate fulfills a very necessary need, as is evidenced by the unrelenting demand for homes all across the country.

Brand loyalty is certainly not missing in Indian realty. This is amply evidenced by the fact that certain brands command instant attention while others do not even register on buyers' radars unless questionable marketing ploys such as marked-down rates in exchange for inferior quality and location come into play. In India, home buyers are very aware of the fact that some developers can be expected to deliver on their promises, while others represent a potentially costly gamble. This is also why the more reputed developers have no problems with obtaining domestic as well as international institutional financing for their projects.

Nevertheless, the image that has been created about the real estate sector in general is a persistent one. When it comes to changing public perception, the primary instrument of change will always be the media. Unfortunately, the Indian media has made it its business to portray the entire real estate domain in a negative and mercenary light.

Indian real estate is becoming a force that even global players are beginning to take very seriously. This change will become more pronounced as more and more serious players come to the fore-front of the sector. We are already witnessing a process of consolidation wherein smaller players are merging with or selling their stakes to bigger names, since these banners of repute are able to sustain their businesses as a result of their larger market share, higher credibility quotients and their superior funding options.

Not surprisingly, many people continue choosing real estate as a career because the business is based on the strongest possible fundamentals. With the rapidly improving transparency norms and considerable success of reputed developers despite the challenging economic environment, it makes a lot of sense for qualified people to choose top-rated real estate companies as their career partners and be part of the great Indian real estate movement.

Pune real estate's hottest growth corridor

http://www.moneycontrol.com/news/real-estate/pune-real-estates-hottest-growth-corridor_1036478.html

Pune real estate's hottest growth corridor

Anil Pharande
Pharande Spaces

The Pune residential real estate boom, initially kick-started by the IT/ITeS industry, has brought about a lot of unregulated development. While property prices in Pune rose unrealistically, the city’s traditional ease of living and pleasant climate, which were previously its USPs, suffered. Hills and trees have been razed to accommodate the rapidly expanding concrete jungle that all but defines central Pune today. The town planning commission found itself impotent in the face of the development mania, which soon transcended all reasonable, sustainable boundaries.
Real Estate Woes In Central Pune


In Pune, infrastructure challenges have been increasing because of the ever-increasing population. This has also put escalating pressure on available land, resulting in the forced extension of the city limits.

The pattern of development has been decidedly mercenary and unplanned, with the only criteria being accessibility to existing and upcoming IT hubs. While the rise of Hinjewadi created increasing demand for homes in its immediate vicinity, places like Aundh soon witnessed a slew of projects by property developers. Similarly, property prices in Baner and Wakad rose so steeply that they finally corrected.
New Focus On Pimpri Chinchwad Municipal Corporation (PCMC)

As things stand now, central Pune no longer has an iota of its previous quality and ambience in residential property offerings. It is therefore not surprising that homebuyers are beginning to focus on the Pimpri-Chinchwad Municipal Corporation. This area has, in fact, emerged as the last outpost Pune’s previous residential property comfort levels.

The Pimpri Chinchwad Municipal Corporation first came into the limelight as an industrial area. However, it also has an advantage that central Pune does not – planned development. The growth of the real estate sector in the Pimpri Chinchwad Municipal Corporation is closely regulated by the PCNTDA, which works together with the PCMC to ensure planned and realistic growth.

Central Pune continues to suffer from pollution, depleting greenery, traffic jams, water and power scarcity, lack of proper infrastructure and unrealistic residential property rates. Meanwhile, Pradhikaran (the location that defines the PCNTDA) has been benefiting from sensible real estate development.

If one studies the demographical development of Pune real estate growth, it is evident that Pradhikaran is precisely where the city’s growth is headed in the North/North-Western direction. This is extremely significant in terms of long-term residential property investment.
The Importance Of Pradhikaran

In years gone by, the PCNTDA began to acquire land in the PCMC area so that planned development could take place in the future. This planning included the allocation of specific areas for industrial activity, residential property development, public parks, unobstructed spaces, shopping centres, office buildings, roads and utilities.

Water supply to all sectors was ensured by the construction of several mammoth water tanks, each with capacities of several million litres, before development was permitted in each sector. Once this was done, the PCNTDA made the developed land parcels available to property developers.

The PCMC master plan also provides for generous road widths, the likes of which are impossible elsewhere in Pune. This goes a long way in preserving one of Pradhikaran’s natural splendour and hygiene.


Because of these factors, and also because of the growth in the PCMC industrial belt, the last two years have witnessed a huge increase in demand for residential property in the Pradhikaran area.


The fact that a number of large international companies are operating in nearby Chakan has, in fact, been a primary criterion for the area’s development profile. These companies regularly deliver thousands of jobs at all levels, which has had a telling effect on Pradhikaran’s general economic status. Specifically, there has been a huge surge in demand for residential property there.

Pradhikaran’s expansion, which has been inspired by the Chandigarh model of controlled development, began with a few hundred acres. Today, the area speaks for about 7000 acres. Pradhikaran is continually seeing infrastructural enhancements on all fronts – including roads, water and electricity supply and digital connectivity.

Pradhikaran now boasts of massive integrated township projects that offer all the hallmarks of ambient, sustainable living. Apart from the high lifestyle quotient, the investment potential of these townships benefits from a magic mix of real estate market drivers. The presence of Tata Motors , Talawade, Hinjewadi, Chakan and the Pimpri-Chinchwad industrial belt add to the value of these townships, while the Mumbai-Pune highway and Expressway make it advantageously accessible to the financial capital of Mumbai

When and how to buy your dream home

http://economictimes.indiatimes.com/markets/real-estate/realty-trends/when-and-how-to-buy-your-dream-home/articleshow/27011697.cms

When and how to buy your dream home
By ET Bureau | 9 Dec, 2013, 08.00AM IST

Buying a property involves a lot of subjectivity and is not just a factor of the property’s price or the interest rate on the home loan. Buyers are faced with several dilemmas when they purchase a house. Here are the answers to some of the key doubts:

Real estate, though a mainstream investment and probably a part of every financial portfolio, is also unique. It is the single largest financial commitment that most people make in their lifetimes. Buying a property also involves a lot of subjectivity and is not just a factor of the property's price or the interest rate on the home loan. Here are some questions you are likely to face in your quest for a good property:

Rent Or Buy?

Becoming a house owner means not having to deal with pushy landlords, poor maintenance and annual rental hikes. Plus, there's the feeling of having fulfilled one of life's most important financial goals. But owning a house comes with its own worries: you get tied to a location and moving becomes difficult; you get tied to an EMI; and selling the house is not easy in case you need cash at short notice. While paying rent may look like throwing money down a sink hole, it does offer you freedom from some of these worries.

Should You Invest?

If you are looking at a property purely as an investment, the current real estate market also becomes a factor in your decision. That will determine when you recover your investment, and when you begin to earn profits on it. Rental income is an important lure. Most people think it will help them pay the EMI. While that may be partly true in some cases, the equation changes if you have availed of a home loan to invest in a property.

New Or Resale?

The biggest benefit of buying in the resale market is that the construction is almost complete. This can be a big relief at a time when most projects are getting delayed. Also, not all resale properties in the market are old ones; most have probably never been lived in.
In some cases, such as properties that were lapped up by investors at the pre-launch stage, the price may be lower than the builder's tag. However, in the resale market, the down payment may be higher. The seller may also ask for a portion of the price to be paid in cash, which means that you will be able to take a smaller home loan. The home work and paperwork required in case of a resale project may also be more.

Hire A Broker?

If you do decide to buy a house, you will have to negotiate for discounts, choose between payment plans and also between locations. Will you need the help of a broker or a lawyer? In most cases, with a bit of research and running around, you can take the decisions on your own. But if you do not have the time, hiring these specialists may not be a bad idea.

Renovate Or Relocate?

After living in their houses for some time, homeowners often discover that they need more space. Migrating to a new location may not always be a costeffective option. In most cases, you may have to sacrifice moving from a centrally located area to the suburbs. Remodelling can sometimes help expand your current house. The decision to move or modify is a critical one, because a misstep could cost you a significant sum of money and a lot of time.

State Government Comes Up With a New Cluster Redevelopment Policy in Mumbai

http://www.bharatestates.com/blog/27380-state-government-comes-up-with-a-new-cluster-redevelopment-policy-in-mumbai/

State Government Comes Up With a New Cluster Redevelopment Policy in Mumbai

The government which failed to cut back the unauthorized constructions has decided to come up with new cluster redevelopment policy for the residents of the unauthorized flats and occupants of the illegal shops in Mumbai. These set of people will now be legally rehabilitated as a part of this new policy.

According to the sources, the state government will be offering rehabilitation space of around 250 sq ft to 700 sq ft area to all these unauthorized occupants. However, the cost of construction has to be borne by the dwellers and no incentives will be given to the developer for rehabilitating them.

The government had launched a similar redevelopment policy in 2009 but there were not much takers at that time hence the government has decided to come up with a fresh policy now which would replace the earlier. The sources further added that the urban development department has sent the new policy plan to the Chief Minister for the approval. The Chief Minister would very soon be sending the approval.

If the cluster rehabilitation is restricted to one acre then the incentives among the residents is rehab flat of around 323 sq ft or 30 sq m. The incentives may go up by 10 to 15% or even by 25% depending upon the plot size, if it is a mega cluster. The government is also planning to relax condition of the property tenure of the redevelopment to 70% from 100%. 70% of the occupants may have to give the consent.

As BMC is the planning authority, it will draw the limitations of each cluster to ensure that the city gets its infrastructure and public amenities. After the approval of the Mumbai plan, the government will be coming up with a similar policy in Thane to curb the illegal cluster growth.

If you enjoyed this article, Get email updates (It’s Free) Updated On Nov 26 2013, Posted by divya , Listed in Realty News

The harsh realty of regulation - The Hindu Business Line

http://m.thehindubusinessline.com/opinion/the-harsh-realty-of-regulation/article5405517.ece/

approval process

Granting infrastructure status to the real estate sector will help it get off the ground.

In recent times, the clamour to grant infrastructure status to the real estate sector has been on the rise. Once the government accords industry or infrastructure status to the sector, it will lead to a simplification of procedures and speedier approvals for projects.

, A developer of a project is required to comply with a long list of regulations. These include getting approval of development plans and building plans, and ensuring compliance with fire, pollution control, electricity, environment, water and so on.

As per World Bank’s statistics on Dealing with Construction Permits, a developer in India has to procure 34 different approvals before a residential project can get off the ground. This is a massive procedural burden when compared with developed economies, where not more than 15-16 approvals are needed. In fact, it is high even by emerging markets standards — in Brazil it only takes 17 permits, in South Africa 13 and in China 28. There is a need to define at what stage of approval the developer can start marketing his project to consumers.

As per CREDAI-Jones Lang Lasalle Real Estate Transparency Survey 2011, getting regulatory approval for the construction process takes two to two-and-a-half years in India. The financing cost increases as well — and is passed on to the buyer.

Fast approval of all such clearances would become a distinct possibility if the sector is granted industry status. It would ensure that projects can get a single-window clearance for regulatory requirements instead of getting them independently from various agencies, wasting time. Industry status would also lead to relaxation of lending norms to the sector.

Access to capital is the biggest need for many developers today as banks are reluctant to offer a credit line to many projects currently under development. Such constraints force developers to borrow from non-banking institutions at exorbitant rates of interest. It is not uncommon for builders to borrow at 18-24 per cent.

This aggravates their cash flow and makes it onerous for them to service those debts. Industry status will facilitate real estate loans at a lower rate, boosting the confidence of the sector.

Beneficial effects

Given the contribution of the real estate sector to the health of the overall economy, the demand for grant of industry status is justified. The industry is known to contribute approximately 6 per cent to our GDP and is known to be the next biggest employer after agriculture. A host of ancillary industries such as steel, cement, paint, brick, building materials, consumer durables and so on are known to be dependent on it.

A study by credit rating agency ICRA shows that the construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the Indian economy.

A unit increase in expenditure in the real estate sector can generate a fivefold increase in income.

In view of the contribution of the real estate sector, the sooner it is granted industry status the better it will be for the health of our economy.

The author is Vice-Chairman, Lotus Greens Developers.