Demand pattern in residential real estate changed in 2017: Sunil Agarwal, RICS | etrealty year Ender 2017 | ET RealEstate

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Demand pattern in residential real estate changed in 2017: Sunil Agarwal, RICS

BY: Sunil Agarwal, FRICS, Associate Dean and Director, School of Real Estate, RICS School of Built Environment, Amity University

It has been an action packed year for the real estate sector. The year 2017, saw the implementation of two historic legislations, the Real Estate (Regulation and Development) Act, 2016 and Goods and Services Tax (GST), which will alter the course of the sector. This came at a time, when the sector was still reeling under the shock of demonetisation-a policy measure announced by the government in 2016 to flush out black money from the economy. Demonetisation squeezed liquidity out of developers, forcing them to change their business models. For instance, developers now prefer to enter into joint development agreement with land owners over outright purchase of land. The year also saw India's apex court come to the rescue of distraught home buyers in multiple cases filed against developers. RERA is expected to take care of all future buyer grievances.

In the office space, strong economic growth continued to generate demand. The last two years 2015 and 2016 have been quite good for this segment with pan India office vacancy at its lowest in 5 years. Vacancy levels in some cities such as Bengaluru, Chennai, Hyderabad and Pune is around 5-10%, while pan India vacancy is at around 14-15%. On the supply side, there is a shortage of grade A office space. It is less than half of the current office stock across top eight cities at 280 million sq. ft. The gap between demand and supply of good quality office space is keeping office rentals strong. In comparison, retail properties saw significantly less rental value appreciation, especially in the National Capital Region. Mumbai and Bengaluru fared better. While occupier demand continues to rise in the office sector, there was no change in demand in the retail segment.

It was not the best of years for the residential property market. Businesses had to be realigned to comply with the stringent rules of RERA and GST. New project launches have slowed down and home prices seem to be under pressure. RERA has increased both the compliance level and cost for developers. Demand for luxury homes has taken a hit, while affordable homes continue to attract buyers.

GST, the other landmark legislation, has changed the demand pattern in the residential market. The tax does not apply to completed or ready to move in apartments. It only applies to under construction properties, which will be charged at 12 per cent (this does not include stamp duty and registration charges). This has caused a shift in buyer preference to ready to move in homes to avoid payment of GST. It is difficult to quantify the exact impact of GST on property prices. While developers will be able to avail input credit on goods and services bought and used during the construction process, we will have to see if they will pass this benefit to home buyers. GST is nevertheless expected to benefit affordable housing. The new tax regime is expected to keep real estate costs low for the affordable housing segment, thereby making it cheaper.
The positive impact of demonetisation from a home buyer's point of view is a fall in home prices. Land prices are however expected to remain the same. The other positive effect of this reform measure is an increase in regulation and tax compliance, though how much of this would translate into an increase in tax collection will have to be seen.

Arun Gupta

India on Hyperloop

 Who doesn't know about Hyperloop, right? Elon Musk's breakthrough super fast transportation system that can help people cover enormous distances in a matter of minutes is finally building its tracks around the world through Hyperloop One. And India's going to get a taste of it very soon!

HYPERLOOP ONE'S VISION FOR INDIA

In an event in Delhi, earlier today, Hyperloop One put forth its strategy to connect India's biggest cities and largest towns in a phased manner, providing commuters with a state-of-the-art alternative means of transport that's unrivalled in the world. Hyperloop One proposes to slingshot people in travel pods at 1,200 kmph through a tube propped up on concrete pillars. The pod or train is able to achieve the speed because it floats in a vacuum inside the tunnel.

In the presence of India's Railway Minister, Mr Suresh Prabhu, Hyperloop One's CEO Rob Lloyd revealed the fact that the company was accelerating its plan to unveil the system in India very soon, and that the company was conducting initial talks with the central government and other private companies to arrive at some sort of partnership to co-build and operate the Hyperloop One system across different routes in the country.

And there are some exciting routes planned. Take Bengaluru to Chennai, for instance, which is promising a journey time of just 21 minutes through Hyperloop. Similarly, Delhi to Mumbai would take approximately 80 minutes, with stops at Indore and Jaipur along the way -- the fastest available journey option currently is a flight that takes at least 2 hours from takeoff to landing. There are routes being planned from Bengaluru to Trivandrum, and an ambitious 220 min Hyperloop journey from Mumbai to Kolkata from the west coast to the east of India, with a big loop snaking southward along the track.

In a Bloomberg report, Hyperloop's CEO was quoted as saying, "India turns out to be a massive opportunity obviously for the concept of Hyperloop, which is why there's so much interest. We want to align the stakeholders to actually find a route that makes sense, to do the detailed engineering, do the work on financing that route, think about a public-private partnership."

It is no secret that India's growth is arrested by the fact that infrastructure hasn't grown at the same scale at which the country's population has exploded over the last twenty-thirty years, and this year's Annual Budget has tried to fix that by signalling investment in long-pending infrastructure projects, and making it a priority -- a move welcomed by several analysts and industrialists. While Hyperloop One may not solve the country's transportation woes completely, but it will at least alleviate the problem by a small amount -- that itself will be a huge win for not only Hyperloop One to grow in other global markets but also give Indians a state-of-the-art solution to their transportation woes. 

GST: Will GST make homes expensive?, Real Estate News, ET RealEstate

http://realty.economictimes.indiatimes.com/news/industry/will-gst-make-homes-expensive/59252316

Will GST make homes expensive?

The members of CREDAI (RNE) Raj Nagar Extension, believe that property prices will go up once the new tax regime kicks in

By: Ravi Kumar Diwaker (Magicbricks Bureau)

Come July 1, under-construction projects will attract a goods and services tax (GST) rate of 12%. Amid all the hullabaloo over the unified tax regime in the country, speculation is rife on would it lead to a hike in property prices?

The members of CREDAI (RNE) Raj Nagar Extension, believe that property prices will go up once the new tax regime kicks in. They feel RERA and GST will push price trends with a 10-20% spike in property prices.

"Taxes are being rationalised which will lead to increased transparency. There will be more clarity post-GST in terms of taxes. Under GST, the under-construction projects are going to attract 12% tax, where previously it was about 4.5%. This will push the market and we can expect an increase in prices. Steel will also attract 18% GST, which will further put stress on prices," says Manu Garg, Director, Carol Infrastructure Pvt Ltd, who was speaking at a press conference held by CREDAI, RNE chapter.

"Cement has seen both highs and lows in the past and it directly impacts the construction cost. Any increase in cement prices will directly influence the construction cost of a project. The government is also working on the correction of minimum wages. From here, the market will only move ahead so the best time to buy a house is now. Home loan rates are low and the market gives end-users and investors the right climate to buy," adds Garg.

General Secretary of CREDAI RNE, Gaurav Gupta says that the best time to buy property is now as prices are attractive and home loan rates are cheapest at this point in time. "The market offers attractive prices for home buyers. Home loan rates are the cheapest and affordable homes are getting subsidies from the government," explains Gupta.

The GST rate for steel has been finalised at 18% which is expected to be beneficial in the long run for other sectors as well. Cement prices are expected to go up marginally, as it has been put in the 28% tax slab from the earlier 23-24%.

Arun Gupta

Venkaiah Naidu: Modi govt approves over Rs 4.13 lakh crore for urban infra in 3 years: Venkaiah Naidu, Real Estate News, ET RealEstate

http://realty.economictimes.indiatimes.com/news/infrastructure/modi-govt-approves-over-rs-4-13-lakh-crore-for-urban-infra-in-3-years-venkaiah-naidu/59138697

Modi govt approves over Rs 4.13 lakh crore for urban infra in 3 years: Venkaiah Naidu

NEW DELHI: The Narendra Modi government has pumped in three and half times more investments than the previous UPA government to improve basic urban infrastructure, urban development minister M Venkaiah Naidu has said.

Along with investments, better per capital spending, central assistance and enhanced capacities of urban local bodies under new urban missions launched during the past three years are driving urban transformation, Naidu said. Comparing the urban development sector reforms during three years of the BJP-led government with 10 years under the UPA government, the minister said that per capita investment of Rs 15,475 has been approved during 2014-17 for a five-year period, more than three times the Rs 4,918 approved for 10 years under the UPA.

A total investment of Rs 4,13,475 crore has so far been approved for improving basic urban infrastructure, compared to Rs 1,18,034 crore approved under the Jawaharlal Nehru National Urban Renewal Mission, he said.

Addressing media persons on the urban sector initiatives, Naidu said, "A rule-based framework has been introduced to ensure objective selection of cities and allocation of central funds without any discretion and discrimination, and the same has been followed in getting unauthorised occupants of government houses evicted."

The minister said a major course correction has been launched during the past three years to improve quality of life in cities in an environment of inclusive, sustainable and accelerated urban development.

Giving an account of the positive outcomes of the initiatives of the government that are driving urban transformation, he said a total of 6,737 projects have so far been approved, more than double the 3,138 projects cleared under JNNURM.

"In an indication of the new language of governance and resource mobilisation, 322 AMRUT and smart cities have acquired credit ratings of which 147 have got investment grade," Naidu said. "For the first time, 500 AMRUT cities and 60 smart cities identified so far are pursuing five year comprehensive action plans for infrastructure development as against ad hoc approval of projects in the past."

Arun Gupta

licence: Why you must rent out your flat on licence not lease, Real Estate News, ET RealEstate

http://realty.economictimes.indiatimes.com/news/residential/why-you-must-rent-out-your-flat-on-licence-not-lease/59123116

Why you must rent out your flat on licence not lease

By: Shaveta Dua, Magicbricks Bureau

Squatters are every landlord's worst nightmare. As buying their own real estate is out of reach for a large number of people in the country, we often hear stories of tenants illegally occupying prime properties. If the squatter refuses to vacate your property, it normally translates into a protracted court battle or an out-of-court settlement arrived at on terms that may not necessarily be favourable to you. However, fret not as there is a way out: Leave and Licence Agreement.

A landlord can give his property either on 'Leave and Licence' or 'Lease'. Although these two terms are often used interchangeably in layman's parlance, they are inherently different.

While a licence, defined under Section 52 of the Indian Easements Act, 1882, gives permission to the licensee to use the property, Section 105 of the Transfer of Property Act, 1882, defines lease wherein a tenant has exclusive possession of the property for a specified time period to the exclusion of everyone, including the owner.

Under the Lease Agreement, a landlord gives full possession of his property for a certain period on a fixed amount to the lessee. The tenant can remain in possession of the property till the lease contract gets terminated but under the Leave and Licence Agreement the landlord has the right to enter and use the property and the licensee can't object to this.

"Mere labelling any such document as Lease or Licence does not make it so. There are certain characteristics that separate one from the other. In the case of a dispute, the court looks at the clauses in the contract and the intent of the parties concerned," says lawyer Akshat Pande of Noida-based law firm Alpha Partners.

"At the onset, it's important to label it as a 'Leave and Licence' Agreement and not 'Lease' Agreement. Instead of writing landlord and tenant in the Rent Agreement, it is advisable to write licensor and licensee, so it does not show an exclusive possession to the person who has taken the house on rent. Apart from that, there are other standard clauses which give full right to the property owner over his property," says Rani Wilfred, Managing Director of Pune-based property consultancy Prime Realty and Property Management Pvt Ltd and head of Real Estate Women's Association, India.

Although a licence is generally used to rent out commercial properties in the country, it is a popular way to rent out flats in Maharashtra, especially in cities like Mumbai, where space is at a premium.

Sudip Mullick, Partner, Khaitan and Co, adds: "A Leave and Licence principally does not create any right in the premises in favour of the tenant. The Agreement usually includes a clause to provide that no possession is being given and one set of keys will remain with the landlord. A landlord may not necessarily keep one set of the keys but such a clause is added to demonstrate that no interest or title is created in the premises or possession of the same is delivered to the licensee." In Maharashtra, the general practice is that the Stamp Duty and registration charges are borne by the licensee or shared equally by the parties.

Mullick adds that it is the best mechanism to encourage people to protect their premises from being usurped by tenants. "Tenants may act foul and deprive the landlord of the fair market price by squatting in the premises and claiming rights of a protected tenant. There is capital appreciation of properties but owing to the protected tenant laws in the country, courts often rule in favour of the tenant," maintains Mullick.

So, why is there less awareness about this type of agreement? "I think it is due to ignorance of the people. This system ought to be made popular in the rest of the country, including metros and Tier I cities, because many people don't give their properties on rent fearing unfair claim by the tenants and long drawn litigation," explains Mullick. . But Pande feels that owing to a high licence fee in many states of the country, property owners see a merit in Lease Agreements. "In many states licence is not subject to Stamp Duty but is as costly as Stamp Duty. This is a big deterrent," sums up Pande.

In Delhi, Stamp Duty is a little steep at 2% of the total rent paid for a period of five years along with separate registration charges of Rs 1,100. But in Maharashtra, the Stamp Duty is nominal at 0.25% of the total rent paid and 10% of refundable security deposit per year for the 5-year period which is to be paid by the licensee. "After the 5-year period, the parties have the option to convert it into a Lease Agreement or renew the Leave and Licence Agreement for another five years," says Wilfred.

A regulation structure under the draft Model Tenancy Act has also been drafted by the government of India for residential and commercial properties in the country. The proposed law tries to balance the rights and duties of both landlord and the tenant under a rental contract.

The draft talks about setting up of rent courts, rent authorities and rent tribunals by the Centre, states and Union territories on the principle of "natural justice".

But if one wants to avoid any legal hassle related to overstaying tenants, Leave and Licence is the best bet. After all, it's better to be safe than sorry.

Arun Gupta

housing prices: 4 reasons why residential real estate prices will rise post RERA - The Economic Times

http://m.economictimes.com/wealth/real-estate/4-reasons-why-residential-real-estate-prices-will-rise-post-rera/articleshow/59014397.cms

4 reasons why residential real estate prices will rise post RERA

Jun 06, 2017, 03.49 PM IST

With a pulling-back of supply and a continuous robust demand from end-users, the residential market will soon witness a marginal uptrend in residential prices.

By Ramesh Nair

RERA has been implemented with the purpose of enhancing transparency, mitigating information asymmetry and applying a uniform 'code of conduct' for developers across various states. It seeks to reduce the volatility seen in the real estate sector in the past, and eliminate the trust deficit between the two primary industry stakeholders - builders and buyers. However, residential prices are likely to rise in the post-RERA world. Here are some reasons:

1. The Supply Side Story:
RERA will play a fundamental role in determining the economic framework of demand and supply in the real estate industry. Supply will reduce because developers will now launch only those projects which they are likely to complete within the promised timeframe. (Post RERA, the penalty for time over-runs by developers are huge.)

2. The Demand Side Story:
Demand will remain robust but witness a redistribution. Since risk on residential investments will be mitigated, so will reward. This is why we will witness the incidence of high risk-high returns investors thinning down on the ground. Investors will also be low-key because they need to see increase in prices accompanying increase in sales - something they have not witnessed of late.

Instead, there will be more end-users in the market, as consumers' confidence in developers is a critical component of market sentiment and these are the primary beneficiaries of greater transparency. These end users will largely hail from the middle-income and low-income categories who will look closely at affordable housing. With the Government's incentives for affordable housing and the easy availability of home loans, we expect end-user driven demand to pick up.

With a pulling-back of supply and a continuous robust demand from end-users, the residential market will soon witness a marginal uptrend in residential prices.

3. Costs for Developers:
Apart from the demand and supply dynamics, the holding cost for developers is likely to go up. Essentially, no new projects can now be launched before all approvals are in place. The window of price escalation between 'pre-launch' and 'official launch' which was earlier available to developers is now shut. This additional holding cost will potentially be passed on to buyers, adding to their overall cost of purchase.

4. Land Prices:
The cost of land will go up within city limits as post demonetisation, there will be no leeway for diversion of surplus cash from other businesses towards purchase of land. The force-fed transparency post RERA will further make it necessary for developers to use legal funds to purchase land. This will add to their overall input costs and therefore lead to increased end product prices.

On the positive side, end-user demand is stable and some recent reductions in home loan rates by banks will see that the trend continues. Overall, we anticipate a marginal upward increase in pricing for residential units in a market backed by genuine buyers and a lower yet predictable and good quality supply pipeline.

The author is CEO & Country Head, JLL India
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of economictimes.com)

Arun Gupta

http://realty.economictimes.indiatimes.com/news/industry/here-is-the-step-by-step-process-to-withdraw-90-of-your-pf-to-buy-home/58643004?action=profile_completion&utm_source=Mailer&utm_medium=ET_batch&utm_campaign=etrealty_news_2017-05-13

EPFO: Here is the step-by-step process to withdraw 90% of your PF to buy home, Real Estate News, ET RealEstate

The government it seems is pulling out all the stops in making 'Housing for All by 2022' a success. The initiative gets a shot in the arm by allowing members of EPFO i.e. the contributory employees, to dip into their retirement savings to own a home of their own.

EPFO has allowed members i.e. the contributory employees of the provident fund (PF) scheme to use 90 percent of EPF accumulations to make down payments to buy houses and use their accounts for paying EMIs of home loans.

Under the new rules, an essential requirement for a PF member to withdraw one's PF money to buy a real estate property is that he or she has to be a member of a registered housing society having at least 10 members. An employee who has been allotted a PF number is considered a PF member by the EPFO.

The new rules will be in addition to the existing rules for withdrawal of PF by the employees to fund their home buying. Neeti Sharma, Sr. Vice President, TeamLease Services informs, "This is an additional condition under which the PF member can avail loan apart from the conditions prevailed earlier. He can withdraw funds in his individual capacity if he does not want to be a member of a housing society, provided all the requisite documents are in place. Since the previous rules prevail, he can still withdraw funds for purchasing a house."

As a member, one can use the PF funds for an outright purchase, as a down payment for a home loan, for buying plots, for the construction of a house. The transactions can be made through central government, state government and even from a private builder, promoters or developers. Only those members who have completed 3 years as a PF member will be eligible for this scheme.

No secondary market deals
The rules, however, do not encourage secondary market or resale transactions of real estate properties. EPFO will be making the payments directly to the co-operative society, state government, central government, or any housing agency under any housing scheme, or any promoter or builder, in one or more instalments, as the case maybe.

How much lump sum can be withdrawn
The maximum amount that can be withdrawn is up to 90 percent of the balance in the PF account or the cost of acquisition of the property, whichever is less. The balance will include members own share of contribution plus interest and employer's share of contribution plus interest. In the case of construction of the house and if it happens at a lower cost or the member doesn't get an allotment of the house ( where it was applied for), the amount has to be refunded back to EPFO within 30 days.

Making EMI payment through PF
The new rules allow a PF member who is also a member of any housing society, to dip into the PF to pay full or part EMI for a loan in member's name, after furnishing the details in a prescribed format. Sharma says, "Apart from the non-refundable loan, additionally there is now an option to repay the pending instalments to society on a monthly basis from the future PF contribution of the member which was not available in the past." EMI will then be paid by EPFO to the government, housing agency or the bank, as the case maybe.

How to apply
Once a PF member has become a member of a housing society, he or she can apply individually or jointly through housing society in a prescribed format (Annexure-I) to get a certificate from the EPFO.

Annexure I


In the Annexure I form, the employees ask for the balance and the deposits made in the last three months before applying. This will help EPFO to determine how much EMI can be arrived at. Also, the employee has to mention the name and details of the bank or housing society to whom such certificate is to be issued.

The EPFO then issues a certificate in a prescribed format (Annexure-II) showing the outstanding balance and last three month's deposit in the account.

Annexure II


Alternatively, members can take printouts of passbook downloaded from EPFO website and submit to housing agencies or banks.

If a member wishes to use PF money to meet EMI's, then in addition to Annexure I, an authorisation by the member is to be filled in a prescribed format. (Annexure III).

Annexure III


It will carry details such as PF amount, PF and loan account number, lender name, address etc. One has to get this form authorised from the lender i.e. branch manager of the lender who has sanctioned the loan. Once approved, EPFO will start transferring EMI's online to the lender's account.

What if employee leaves the job
The EPFO has made it clear that under no circumstances will it be liable for any default of payments to the lender. EPFO will not stand party to any agreement between member and society or builder. If an employee leaves service, it will be the responsibility of the member to repay the loan. In case the PF funds get over, the employee will have to arrange funds from own sources to meet the future EMIs.

One can avail this new PF withdrawal scheme along with the benefit under the PMAY.

Existing rules for house purchase
As per the existing rules, for the purpose of purchase of a house from a promoter (Builder), membership period required is minimum 5 Years. The maximum that one may withdraw from the PF account is 36 month's basic wages or the total of employee and employer share with interest or total cost, whichever is least. One, however, need not be a member of a housing scheme to avail it.

Conclusion
Remember, EPF is meant to take care of your post-retirement needs. Depleting it may jeopardise your retirement. Therefore, utmost caution should be applied before dipping into it. For those looking for a down payment amount may still consider it. Also, those who have a backup plan to meet post-retirement needs through equity mutual funds or PPF may still consider this route of owning a home. After all, it's one own money and what's good if it doesn't help me get a roof over one's head.

Arun Gupta