Find Projects

Find any real estate project across India. Read & write reviews. Track construction status. Read news & get tips for home buyers.

Friday, April 18, 2014

Urban development authorities in India

Real estate development within a city is an organized process wherein development authorities play an important role. The authority prepares the master plan for the city keeping in mind the population growth, employment opportunities, industrial growth, and educational activities.

At the same time, development authorities provide housing for middle income and low income strata of the society. DDA has developed many housing societies in Delhi. The development authority also acquires land from land-owners for the purposes of housing, industrial set-up, recreational set-up, and educational institutes. The whole idea is to prepare the urban map of the city keeping in mind future projections.

In recent times, development authorities across India have launched various housing, plotted, industrial plot schemes. People from all walks of the society participate in these schemes for their housing or business needs. In order to make sure that you do not miss on these schemes by development authorities, we have put together a comprehensive list of development authorities across Indian cities.

Visit the websites of these development authorities to keep an eye on new schemes.

Find below.

Tuesday, April 15, 2014

Don’t blame the ‘Babus’ of town planning departments and city development authorities

Another one bites the dust! Well, we are talking about the latest scam or scandal or irregularity or blunder or whatever you may call it in real estate sector in India. This time, it’s the Supertech’s Emerald Court project in Sector 93-A Noida on Noida – Greater Noida expressway.

What happened? The project was started in 2006 and permission for 15 towers of 11 storeys each was given. However, in 2009, 2 towers namely ‘Apex Tower’ and ‘Ceyane Tower’ of 40 storeys each were added to the project. That means addition of 857 new apartments.

So what? It all looks fine, where is the irregularity? Well, these two new towers violate the UP government’s 2010 apartment act. The 2010 apartment act which was being designed by ‘Babus’ says that builder should take permission from existing buyers before construction, and should also follow the maximum density norm (maximum number of people in one acre), FSI norm, minimum distance between two towers, etc.

So, were these guidelines of the ‘Apartment Act’ flouted? Yes, that seems to be the case and therefore Allahabad High Court has ordered to demolish these 2 towers of 40 storeys each.

So, whose fault is it primarily? Builder says, we will appeal in the Supreme Court against the judgment because project is legal and has all the necessary approvals from the Noida Authority? Whose fault is it then? Is it the fault of ‘Babus’ of Noida Authority? Nah….it can’t be, they work hard to make sure that whatever they design (2010 Apartment Act) is implemented by hook or crook. Then whose fault is it? It’s the customer’s fault you stupid…why did they buy these apartments? They should have done their due-diligence….isn't it? Hmm…..

Well, on a serious note, time has come for Courts to look at the role of the ‘Babus’, and if necessary spank them at their back side severely for allowing illegal construction.

Customers can not be taken for a ride by colluding builders and authorities. The babus who are supposed to protect the interests of home buyers are busy amassing tens or hundreds of crores of illegal property for themselves by taking advantage of their positions.

Since, 2011, these scams have been a common phenomenon:

In 2011, DLF’s Belaire project in Gurgaon met the same fate wherein charges of project delay, illegal construction of additional floors were raised by the Resident welfare association of the project.

In 2012, Noida Extension fiasco came to limelight wherein farmers agitated against the authorities for acquiring land at throw away prices and also changing the land use from industrial to residential. The matter was resolved after courts intervened in and farmers were compensated adequately.

In 2013, we had Campa Cola fiasco in Mumbai wherein illegal floors were built in late 1980s and were ordered to be demolished in 2013.

And now in 2014, we have the Supertech Emerald Court matter in Noida wherein again the court has ordered demolition of illegal towers.

So, will this continue in coming years? Will the ‘Babus’ pay attention to the sufferings of home buyers? Will the ‘Babus’ stand up and implement the laws and acts in all fairness? We will see….But, thankfully for the common man; all is not lost as long as Courts discharge their duties.

Greed on the part of the property developer is ubiquitous, but what explains greed of these Babus who in reality are supposed to keep a check on the greed of developers???

Friday, April 11, 2014

Foreign Direct Investment (FDI) Flows in real estate and housing sector in India

Foreign Direct Investment (FDI) is a good indicator of a country’s attractiveness to global investors. India has been able to attract substantial amount of FDI into various sectors such as services, construction development, telecommunications, computer hardware & software, drugs & pharmaceuticals, chemicals, automobile, power, metallurgy, hotel & tourism. Significance of Foreign Direct Investment can hardly be underestimated and therefore government of India has devised policies which have attracted FDI into various sectors mentioned above. Here is a quick look at the flow of FDI into India since April 2000.

It can be noted from above chart that FDI flows into India jumped from financial year 2006-2007 on account of policy initiative by the government which permits FDI under the following forms:

  1. Financial collaborations.
  2. Joint ventures and technical collaborations.
  3. Capital markets via Euro issues.
  4. Private placements or preferential allotments.


The FDI Equity flow in housing and real estate sector was 8.9% in financial year 2008-2009, 11% in financial year 2009-2010, 5.3% in financial year 2010-2011, 8.9% in financial year 2011-2012, 5.9% in financial year 2012-2013 of total FDI equity flows into India. Overall, the sector has attracted a total of 23046.61 US $ Million from April 2000 to January 2014. The total FDI equity flows into India during this same period has been 212153 US $ Million. In other words, from April 2000 to January 2014, the construction development sector including of townships, housing, built-up infrastructure has attracted about 11% of total FDI equity inflows.

In 2005, India relaxed the norms for FDI inflows into real estate and housing sector by allowing Foreign Direct Investment under the automatic route which means no prior permission is required for approval either from Government of India or the from the RBI. The policy permits FDI up to 100 per cent under the automatic route in townships, housing and construction development projects and hospitality sectors such as residential complexes, shopping centers, malls, multiplexes, Cineplex, commercial offices, hotels/service apartments, resorts, hospitals, educational institutions.

Here are the detailed guidelines for FDI in Real Estate:

Guidelines for fdi in real estate in india from Green Realtech Projects Pvt. Ltd

Can the sector see increased FDI in near future?

Tuesday, April 8, 2014

Will real estate stocks recover after elections?

Real estate S&P BSE realty Index was introduced in July 2007 at the height of real estate boom in India. The S&P BSE realty Index was hovering at 7019.88 on 17th August 2007, whereas the S&P BSE Index was 14141.52 on the same day. However, by the end of 2007, the S&P BSE realty Index grew by whopping 81% to reach at 12727.42, while S&P BSE Index grew by 43% to reach at 20286.99.

And after growing in initial few months of 2008, the indices fell sharply in 2008. Realty index fell by 82%, whereas BSE Index fell by 52% in 2008 because of global financial crisis which was triggered by US sub-prime crisis.

Here is a history of S&P BSE realty Index compared with the S&P BSE Index:

Fall of real estate stocks
The BSE Realty Index stands at 1468.4 on 31st March 2014. The fall has been substantial and retail investors are shunning from buying the stocks of realty companies. Among 12 Indices such as BSE Realty, BSE Power, BSE Metal, etc, the BSE realty has been the worst performer. In 2013, the BSE Realty Indices fell by 32%. What could be reasons for under-performance of real estate stocks? We list down the reasons:

Reasons for fall

    • Rising debt levels
The debt on balance sheet of 11 listed firms in BSE Realty Index stood at Rs. 42000 crore till 31st December 2013. High debt levels erode the profitability of firms because major chunk of income generated goes in servicing of the debt. And which in turn, puts strain on sustainable growth of the firm.
    • Falling demand
Demand from home buyers has remained low on account of lack of job creation and high inflation. Companies have put off or slowed down their investment plans and therefore job creation has been low. At the same time, Inflation has put off the investment by home buyers due to falling savings rates. Unless, inflation moderates, the sector will continue to see weak demand from home buyers.
    • High interest rates
Interest rates have remained high for last 2 years resulting in high cost of borrowing for home buyers and it’s not surprising that transaction volumes have come down resulting in drop in sales of realty companies.

Recovery in last month (March 2014)
However, March 2014 witnessed some sort of recovery in real estate stocks.

Will the recovery continue? There is all the likelihood of it and post elections, economic recovery is expected. This in turn could result in revival of realty sector on account of the following:
    1. Improved GDP Growth
    2. Housing prices have corrected and it presents buyers an opportunity to buy the home now
    3. Moderation in inflation
    4. Reduction in interest rates

BSE Realty Index comprises of stocks of following companies:
Anant Raj, DB Realty, DLF, Godrej Prop, HDIL, Indiabulls Real, Mahindra Life, Oberoi Realty, Omaxe, Phoenix Mills, Prestige Estate, Sobha Developer, Unitech.

What do you think?

Friday, April 4, 2014

Why National Housing Bank’s move to allow lenders (banks and housing finance companies) to give 90% of property value as home loan can actually be detrimental?

Recently, country’s National Housing Bank floated a proposal that seeks to allow banks to lend 90% of property value to home buyers. According to the proposal, people seeking home loan above Rupees 20 Lacs can avail 90% of property value as home loan from banks and housing finance companies. However, these loans need to carry mortgage guarantee cover from companies registered with RBI. Lending institutions (Housing Finance Companies) need to enter into a contract with mortgage guarantee companies when the loan application is originated.

With mortgage guarantee companies coming into the picture, there is widespread belief that it will help in reducing the default risk. And at the same time, it can help in securitization of home loan portfolios. Now, isn't this what is practiced in USA? Where, one can avail 100% of property value as home loan and that loan is guaranteed by Federal Reserve supported fannie mae and freddie mac. When a loan is guaranteed by State’s agencies, investment bankers jump in and create a portfolio of home loans and securitize it and sell it to investors. These investors get returns on installments generated from home loan buyers.

The only difference it seems in Indian context is that 90% of property value is given as loan as against 100% of property value in USA. The other difference is that in US, person availing the loan is not personally liable to pay in case of a default, but in India, person will be liable to pay the amount in case default happens.

What happened in USA?
We all know what happened in sub-prime crisis in USA in 2008. When property prices began to fall people simply walked away by putting the house key on the bank’s table and that triggered a financial crisis. Read more about the US sub-prime crisis here. We in India do not want to repeat that mistake. What can happen? Let us think, you buy a property worth Rupees 1 crore and avail 90 Lacs in Home loan with about 90K installment every month for 20 years. Now, due to slowing down of economy as is the case today, you are not able to pay those EMIs. What will bank do? Take possession of your house and sell it to claim their investment in that house. We all know, Banks will be left with no choice but to sell the house in distress in tough economy thereby making a loss. However, banks have already sold this portfolio to investors and the home portfolio is already guaranteed by mortgage Guarantee Company, who is registered with RBI. So, who bears the brunt of slowing economy, yes, mortgage Guarantee Company, just like fannie mae and freddie mac did in USA. So, ultimately, the system will be saved with tax payer’s money.

One can argue that we are stretching the matter too far, yes, we are stretching the argument, but there is ever so slight possibility of such a scenario happening in near future. Hope, policy makers will consider that scenario before bringing in this new policy. As we see today, real estate sector is in doldrums and property prices in India have in fact fallen or remained stagnant. Will people who have bought the property stay invested when returns from property investment are actually less than what they will be paying to the banks against home loan? If the returns from property investment stay low for several years, then we might see the US sub-prime situation repeating in India with the implementation of new policy.

As a matter of fact, Indians banks were praised in 2008 for being conservative. Looking around the globe, Chinese banks have a limit to what they’ll lend for housing. Currently, buyers need to put between 20% and 30% down on the value of a house before securing a loan. While in Singapore it is 80% for first home and 60% for second home. Why are Indian policy makers raising it to 90% when we do not have huge scale infrastructure plans? Isn't the whole move going to put pressure on existing cities, further increasing the property prices?

OK, let’s think of the consequences of this new move

  • More people will be able to buy a house

Of course, the move is aimed at encouraging people who are sitting on the fence to buy the house. Till now, it took people some time to arrange for the 20% of the property value. But with this new move, all they need to do is arrange for Rupees 10 Lacs to buy a Rupees 1 Crore house.

  • Revival of real estate sector demand

With increased sales velocity of homes, the demand for overall real estate sector can pick up. The industries such as cement, steel will also see revival in demand. Overall, the move can boost the economy.

  • More speculators will come into the picture

With only 10% of property value to be paid by the investor, it will encourage property flippers to take advantage of the new policy. One would simply invest in an under construction project and exit as soon as the prices have risen substantially. Can government bring in measures wherein property speculation is controlled? Can government differentiate between first time home buyers and second time home buyers as is the case in Singapore? It seems unlikely. Who will suffer? The real property buyer will suffer due to higher property prices.

  • Without new cities or infrastructure, it might increase the property prices further

Do we have plans in place for city infrastructure development? Or build new cities? Unless, those plans are in place, the new move will actually put pressure on the existing cities and property prices will further increase with the new move. Simple because, more people including the speculators will purchase a house in the existing cities.

What we instead need?

  • Securitization
Surely, securitization is the need of the hour. But it can be brought in at existing 80% Loan to Property Value (LTV) ratio. More on, how securitization can help in housing finance in India?

  • REITs
Real Estate Investment Trusts are important and we need them in India. REITs will encourage retail investors to participate in property markets who till now cannot afford to invest in real estate. REITs can provide the necessary financing for realty sector which it needs today. Find more about REITs in India here.

  • Rent Laws
The government needs to reform the Rent act which is outdated. There are large numbers of people in India who own multiple properties and do not bring that stock into the market because of the fear of illegal possession of their properties by the tenants. Reforming the rent laws will revive the rental market and that will bring some sanity to the property prices.

  • Policies to differentiate between first time home buyers and second time home buyers

Government is right in encouraging home ownership. But differentiate between first time buyers and speculators. It should be quite simple to track at registrar’s office and by making it obligatory for real estate developers to disclose the details of their buyers to a central authority. If the 90% Loan to Value (LTV) policy has to be brought in, it should be for first time home buyers and not for property speculators.

what do you think??

Thursday, April 3, 2014

Why should we all rate and review real estate and housing projects? Your opinion matters!

Sumit is working in an IT company for the last 12 years. He got married 6 years ago and having been relocated to many parts of the country in these 12 years, he finally decided to settle down in Bangalore. With this in mind, he started hunting down for the house within his budget. After some 4 months of home hunting, he zeroed in for a developer project in an upcoming region within Bangalore. He signed in on the sale purchase agreement and made the booking amount. He booked an 1800 sq ft apartment in January 2008; he was looking forward to moving in by late 2011, as promised by the builder. But even after four years of paying the entire sum, the developer seems in no hurry to hand over the possession of Sumit’s house.

"I had aggregated mine as well as my wife’s savings to purchase this house. The company was to hand over the possession by December 2010, but even by January 2011, they had not begun any construction activity on the proposed site," he says.

Sumit is not alone. There are countless such cases where buyers are still waiting for their homes and have not received a single rupee as compensation from the builder. The wait has been particularly tough for those whose EMI clock has begun ticking.

There have been cases where cost of home has been unjustifiably escalated during the construction stage; possession has been delayed; short changing on carpet area and super area of the home; sub-standard amenities; and so on.

So what is it that is plaguing the industry?
Why does this happen? Why don’t builders deliver on their commitments as stated in the sale purchase agreement? There are many reasons ranging from lack of demand, paucity of funds for the developer, delay in getting regulatory approvals, unethical practices, greed, etc.

Steps taken to cure the problem (At Government and private sector level)
Can the situation be resolved? There have been efforts made by developer community. An industry body has come up with a code of conduct for its 6,000 members to 'maintain the honor and dignity of developers, promoters and builders'. The government has proposed to form an industry watchdog “Real Estate Regulatory Act”. However, will these steps solve the issues? There is cynicism among public and experts alike about these remedies.

What can we do as a community? Why should we rate and review the real estate and housing projects?

  • We seek advice of others when purchasing a smart phone, laptop, car, and many other commodities. For many buyers, buying a home is a lifelong commitment wherein one has to pay EMIs for several years. Therefore, it makes sense to share and discuss the details about a realty project before making a purchase.
  • Discussing at an organized online platform goes a long way in making an informed decision wherein people can express their opinions in form of reviews, ratings, common causes, and so on. The whole system would act as a preliminary home search tool wherein good developers are segregated from the bad ones.
  • People who have bought the property or have the knowledge of real estate sector can rate and review their housing project. This will not only help future buyers but also put a check on the current real estate practices.
  • Writing a review and rating a project on various parameters such as location, floor plan, amenities, etc. will clearly help in differentiating the good project.

How to rate and review real estate projects in India?

Step 1: Visit NirrtiGo

Step 2: Find your project by typing in builder name, or project name, or search by locality

Step 3: Click on ‘Rate this project’ button

And then simply write the “Title of the review” and “detailed review including your recommendation”. At the same time, rate the housing project on various parameters such as location, floor plan, amenities, specifications, value for money, ratio of carpet area to sale-able area, etc.

So, did you rate and review your project??

Monday, March 31, 2014

Looking to rent your house or lease your property? Follow these steps to make sure your property is safe and the tenant follows the lease agreement.

Leasing or renting out your property is a demanding job. Not only you need to maintain the property but at the same time you need to be careful in choosing the right tenant with good financials who can pay the monthly rent and other expenses on time.  There have been instances when tenant has refused to vacate the property even after the termination of rental agreement. Because of this, there is certain percentage of landlords who avoid renting out their property to prospective tenants. And it puts the pressure on housing market because on one hand there is demand for housing but rental market is not sufficiently catering to that demand. And therefore capital values of housing stock increases at a rapid rate. Had there been proper laws with respect to safeguarding the interest of landlords, the supply which would have then come into the market would have considerably eased the capital values.

The laws on landlord and tenants in India are outdated and needs complete reforms. However, the central government is encouraging local state governments to amend these laws to encourage investments in housing and construction sector. How fast will states in India will move to abolish its old system is still to be known.

In this environment, how can you as the landlord of residential property or commercial property such as office space, shops or warehouse lease/rent your property? We list down the steps which you should take before leasing or renting out your property:

  • Background checks

First thing first! Since you are renting your property to a prospective tenant, make sure to check his/her background by asking tenant to provide a reference certificate from a colleague/friend or co-worker. At the same time, find out about tenant’s previous landlords and talk to at least one of them. Ask for tenant’s permanent address as well and permanent address can be known by asking tenant to show 2 photo ID cards such as a passport and driving license or a voter card. In most cases, these 2 photo ID cards will have the same permanent address.

  • Police verification

As per the law, these days tenant verification at a local police station is required for landlords. Do not ignore this verification process before you rent out your property. This is a punishable offence under Section 188 of the Indian Penal Code.

  • Solid Lease agreement

Prepare a lease agreement which safeguards your interests and you should have the following in a typical lease agreement:
    • Basic clauses
A typical lease agreement must list the parties to the agreement at a specified date, namely you and the tenant, along with the address of the property which is being leased out. In the basic clause, you should also state the lease term including the time length for which agreement is being made, renewal option, and rent appreciation method. The expenses such as electricity, gas, water bill, maintenance charges should also be mentioned clearly in the basic clause of a lease agreement.

    • Security deposit clause
Your lease agreement should require the tenant to put up a security deposit equivalent to one month rent or more depending on the negotiation. The security deposits vary for commercial and residential properties. The security deposits also vary from state to state in India. For example, in Bangalore, for residential property, tenant pays 10 months’ rent as security deposit whereas in Delhi NCR the security deposit is about 2-3 months’ rent. For commercial property, the standard security deposit is around 6 months. Make sure that security deposits clause is clearly defined within the lease agreement.

    • Maintenance of the property
The lease should tell the tenant that he is required to properly maintain the property. If you are renting out a furnished property, make a check list of the items which are being provided as part of the property such as furniture, appliances, etc.  Include this checklist in the lease agreement as an appendix. Whatever, you want from your tenant as part of his/her responsibilities, make sure it is part of lease and is not just conveyed orally. The maintenance clause should be included in the lease agreement because if a tenant leaves the property in bad shape then leasing the property again might become difficult or else you would have to spend considerable amount of money to make the property rent-able again. The idea is to make sure that tenant gives you the property back in same shape as you handed over to him/her.

    • Concealed defects and responsibility for fixing it
If there is something that needs to be fixed in the property in coming 2-3 months, then clearly tell this to tenant. For example, if the roof of the property needs to be fixed in 6 months time, then it becomes your responsibility as an owner to include this fact in the agreement. A tenant will appreciate the fact that you have been forthcoming in your description of the property. If possible, try to fix all the things before letting it out.

    • Sub-leasing clause
Sub leasing clause is extremely important and you as the owner of the property should pay attention to it. We have seen in past how a tenant has sub leased the property to another tenant or in some cases have shared the property space with his/her colleagues or friends. To avoid this situation, clearly mark out the condition that prior to sub-leasing the property space, the tenant will take permission from you. But with our experience, we encourage landlords to rather cancel the current lease agreement and make a new lease with the new tenant. In a nutshell, you should not allow your tenant to sublease the property. And get that condition in the agreement.

    • Termination notice
The best practice is to know your jurisdiction’s rules on terminating a lease and include those details in your lease so your tenant will not be surprised. Clearly include the termination notice period as well in the lease agreement. For example, one month notice period is practiced in Delhi NCR for residential properties.

  • Registering the lease agreement

Now that lease agreement has the above mentioned clauses, it’s time to register the lease agreement. If you are leasing or renting your property for a short time period in India, a lease agreement is not mandatory, but the agreement is required if the property is being rented out for over 11 months. The agreement is registered with the local registrar office.

So, as a landlord, did you follow the above process of renting your property??

Friday, March 28, 2014

What is the role of municipal corporations in cities and how do they help for harmonious living?

Owning a home is a dream that most individuals and families cherish. Not only it provides for stable shelter, societal acceptance, financial well being, but it also enables easy access to the credit market by working as collateral comfort / security. As per the Census 2011, 31.16 per cent of the total population is in the urban areas. However, owning a home is just one piece of harmonious living in the city of your dream/choice. There are other pieces which provide for the true wholesome living experience in a city. Some of these pieces are civic amenities such as water supply, sewage, drainage, recreational parks, internal roads, maintenance of buildings, etc.

And all of these amenities are provided by the local municipal corporations. Without the proper functioning of these corporations, living in a city would hardly be enjoyable. Even though, private developers are coming up with self sustainable townships that can address some of these issues, but importance of municipal corporations cannot be underestimated. These are government official bodies that provide civic services and administer a city with a population of 200000 or more inhabitants.

Therefore, having the knowledge about these municipal corporations is important in order to make sure that above listed civic amenities are provided continually. In the following table, information about municipal corporations is provided for Indian states and union territories such as West Bengal, Uttar Pradesh, Uttarakhand, Tripura, Tamil Nadu, Sikkim, Rajasthan, Punjab, Puducherry, Orissa, Nagaland, Mizoram, Meghalaya, Manipur, Maharashtra, Madhya Pradesh, Lakshadweep, Kerala, Karnataka, Jharkhand, Jammu and Kashmir, Himachal Pradesh, Haryana, Gujarat, Goa, Delhi, Daman and Diu, Dadra and Nagar Haveli, Chattisgarh, Chandigarh, Bihar, Assam, Arunachal Pradesh, Andhra Pradesh, Andaman and Nicobar Islands.

Tuesday, March 25, 2014

What are the various payment plans currently being offered for real estate residential projects in India?

Booking an apartment with a real estate developer is not easy. While on one hand there is this question of finding the right property developer with sound track record and on another hand there is this nagging question about housing prices and payment plans. In last few years, real estate projects and in particular residential projects have been launched with attractive payment plans in order to attract end-users and investors to book an apartment. The creative and financial engineering skills of real estate developers and banks are showcased with every new type of payment plan.

At the end of the day each payment plan which is designed reflects the existing market sentiment. If market sentiment is good and there is growth in the sector, then existing payment plans can prove to be sufficient. However, in times of bad market sentiments, there is much more pressure on real estate developers and bankers to sit and devise new attractive payment plans. In recent months, some of the new payment plans which have been introduced in the market are 80-20 scheme, rent on home buy, etc.

In this section, we analyze the various payment plans on offer and their implications for customers.

Down payment plan
A typical down payment plan looks like this:

Down Payment Plan [(8 % Rebate on Base Selling Price (BSP)]
  • At the time of Registration / Booking - 10% of BSP
  • Within 45 Days From date of Registration / Booking - 85% of BSP + Car Parking + DC +Club Membership + PLC (if any)
  • On Possession - 5% of BSP + Other Additional Charges etc.

In a typical down payment plan, one can get a discount on market Base Selling Price. The discount offered can be negotiated with the developer and generally ranges between 8-10%. Now, the question to be asked is, why would a developer offer this 8-10% of discount? Well, if a developer borrows money from bank or other financial institutions, then in that case, the developer ends up paying 12-15% yearly interest. And in down payment plan, a customer is willing to pay the entire apartment cost within 2 months at a discount of 10%. It’s a plan which suits the real estate developer most. However, investors with large amount of cash do also take considerable interest in down payment plans. Because where else can they park their unreported income but for real estate.

For end-users, this plan can prove to be risky in case the project is delayed unexpectedly.

Construction linked plan
A typical construction linked plan looks like this:

Construction/Time Linked Installment Plan
  • At the time of Registration / Booking* Rs. 3.0 Lac
  • On Allotment of Unit / within 45 days of booking* Completion of 15% of BSP
  • On Start of excavation / within 90 days of booking* Completion of 25% of BSP
  • Completion of basement roof slab / within 120 days of booking* 7 . 5 % o f B S P + 50% of DC
  • Completion of 1st Floor roof slab / within 5 months of booking* 7 . 5 % of BSP + 50% of DC
  • Completion of 4th Floor roof slab / within 7 months of booking* 7 . 5 % o f BSP + Car Parking
  • Completion of 6th Floor roof slab / within 9 months of booking* 7 . 5 % o f BSP + PLC
  • Completion of 8th Floor roof slab / within 11 months of booking* 7 . 5 % o f BSP
  • Completion of 10th Floor roof slab / within 13 months of booking* 7 . 5 % o f BSP
  • Completion of 12th Floor roof slab / within 15 months of booking* 5 % o f B SP
  • Completion of 14th Floor roof slab / within 17 months of booking* 5 % o f B SP
  • Completion of Top Floor roof slab / within 18 months of booking* 5 % o f BSP
  • On Completion of Brick Work in Apartment 5 % o f BSP
  • On Completion of Plaster Work 5 % o f B SP
  • On Possession 5 % o f B S P + IFMS + Club Membership + Other Charges

In a typical construction linked payment plan, one pays a booking amount of 3 to 5 lacs and the apartment is booked. Thereafter, installments are paid as per the construction of the project. This plan safeguards buyer’s interest in case the project is delayed since installments are paid as per the construction schedule of the project. Most banks also offer home loan to individual home buyers on this payment plan in order to make sure that funds which are provided to developer as part of installment actually go in the development of the project. This is by far the most prevalent plan in the industry today.

Flexi payment plan
A typical flexi payment plan looks like this:

  • At the time of Registration / Booking 10% of BSP
  • Within 30 Days From date of Registration / Booking - 30% of BSP + Car Parking + DC +Club Membership + PLC (if any)
  • Within 90 days from date of registration/booking – 30% of BSP
  • Within 180 days from date of registration/booking – 25% of BSP
  • On Possession - 5% of BSP + Other Additional Charges etc.

Just like down payment plan, flexi plan offers discount on base selling price usually in the range of 5%. As the name suggests, this plan provides flexibility to investor in paying the apartment cost over a period of time. Again, it is not suited to end-users who normally opt for construction linked plan. Most banks also do not offer loan on flexi payment plan.

20-80 payment plans

20-80 schemes are a new phenomenon. What it means is that one can pay 20% now and remaining 80% at the time of possession. However, the price per square feet for 20-80 schemes is much higher than the usual construction linked plan. As a buyer, it might look attractive on the surface, but one must be careful in understanding the price differential between a 20-80 scheme and a construction linked plan scheme. 

Even though, in 20-80 schemes, the pressure is on the developer to complete the project on time but there is all the likelihood that prices for 20-80 schemes will be much higher. The hidden point to understand is who is the paying the 80% of apartment cost during the construction period? It will certainly not be a bank, or the developer. Ultimately, the amount is passed on to the customer in the form of higher base selling price. Therefore, before, one jumps on to these schemes, check the price differential.
According to some media reports, Reserve Bank of India (RBI) has banned the 20-80 schemes.

Rent on home buy plan

Recently, some developers have launched rent on home buy. What it means is that if you book an apartment in the under-construction project with a particular developer, then developer agrees to pay the rent for your current accommodation if the project is delayed and in some cases the developer agrees to pay the rent for the entire construction period of the project. The idea is to ease the financial crunch a buyer faces when he/she pays equated monthly installments (EMIs) and rent during the period of construction.

Experts believe that such assurances come with a cost, but the builder is unlikely to disclose two sets of rate cards to potential customers — one that includes the rental offer and the other without it. Just like the 20-80 schemes, one must be careful in opting for these schemes as the pricing will be much higher than the usual construction linked plan.

At the same time, direct discount is far better as it is simpler to understand. Then, there is the time value of money you are committing over the period of construction.

Which payment plan one needs to choose?

For an investor with huge cash pile, it may make sense to go for down payment or flexi payment plans. But for, end-users, it is always advisable to stick to construction linked plans because of transparency and ease in availing home loans.

Friday, March 21, 2014

Looking to sell the house or your property? Pay attention to these tips!

In May 2012, one of our colleagues decided to sell his 250 square yard plot in Delhi NCR region. He has bought the plot in 2003 and therefore, the capital appreciation gains were substantial. He wanted to sell this piece of plot and buy another plot in different city. The idea was to build a house on this new plot and live there. Therefore, he has reasons to sell the plot. However, when looking to sell your property, the first question you should be asking is “do I really need to sell?”

  • Do you really need to sell?
There can be in-numerous reasons to sell the piece of property you own and these reasons can range from shifting to new city, family wedding, education, or building/buying a bigger property, etc. Analyze those reasons carefully and discuss within your family members before arriving at the decision to sell the current property you own. Because make no mistake, selling is no easy job, it takes time as well as it incurs unwanted expenses such as brokerage fee, advertising fee, paper work, no-due certificates fee, etc. One can also explore the possibilities of obtaining loan against property (LAP) in order to fulfill the current need for funds rather than selling the property. However, once, you have considered all the possible options and selling is the best bet, then pay attention to the following advice.

  • Verify the prevalent market sentiments

The true value of the property is what a buyer is willing to pay in a transparent and mature market. Therefore, once you have decided to sell, do the quick check of property valuation and this is how you do it:
    • Check the selling price of highly similar properties which have been sold in recent months/days within the same locality. As a seller, you would not like to sell at below market prices. If there is no data available for similar properties, then check the selling price of dissimilar properties and adjust for dissimilarities in the selling price. For more on, property valuation, visit Property Valuation in India
    • Check for the time-duration it took others to sell their property. If it takes longer to sell, then it can be safely concluded that market sentiment is low and you would have to wait for long time period before being able to sell your property. However, one can always 'sell in distress' at high discount. This is what happened to our colleague since market sentiments in 2012 were low and he had to wait for 6 months before selling the property at a substantially lower price.
    • Check for the rental values of the similar properties within your locality and city as a whole. Sometimes, property transactions (sale/purchase) might be slow but there is demand for the housing and therefore, rental values may be appreciating whereas capital values have remained stagnant. This is what is happening in the current real estate market across India. In this scenario, it will be advisable to stay invested in your property and earn decent monthly income by renting it out for some time and sell the property when market sentiment is strong.

  • Selling process
Finding the right buyer for your property is not easy. Because property transaction involves large amount of money, one needs to be careful in advertising the property, dealing with brokers, and prospective buyers. 
    • Online classifieds: list your property on online classifieds portals. Don’t just list the property blindly on all available classifieds portals. Rather select the ones which have high degree of trust among other sellers and buyers and at the most list your property on 2 online classified portals.
    • Brokers: approach the local area property brokers and enquire about current property market sentiments before listing your property with them. One should never list the property with multiple brokers. Rather list with 2-3 trustworthy brokers. "The best approach is to ask some brokers about buying the similar property and ask some brokers about selling the property. If there is substantial difference in the buying price and selling price as quoted by the brokers, then it indicates that there is demand for the property in the market but real estate brokers are downplaying that demand". In that scenario, it is better to wait and strike the deal when you get the best possible price for your property.
    • Agreement to Sell: once you have identified the buyer, check for his/her credential to pay the required amount in mutually agreeable time period. It is advisable to require the buyer to make reasonable advance payment (say 20% of the property value) with the condition that in case the buyer subsequently backs out from the deal or fails to make full payment and take possession of the property in accordance with the terms & conditions of the deal/agreement, such advance payment will stand forfeited and will not be paid back to the buyer. This is known as “option” and should be included in the “agreement to sell” paper. The time period between “agreement to sell” and “sale deed” can be mutually decided between the buyer and seller. The prevalent trend is about 45 days or 2 months.
    • Sale deed: after the “agreement to sell”, the next step is to formalize the “sale deed”. ‘Sale Deed’ should be signed and title documents handed over to the buyer only on the receipt of full and final payment. Once the deal is concluded, full payment is received and Sale Deed signed, insist on the registration of the property in the name of the buyer with the Sub-registrar of assurances under the provisions of the Indian Registration Act. Consulting and engaging a good lawyer before selling the property to a person or organization is a good and sensible idea.

  • What are the risks in property selling?
As explained in the article above, the property selling process is long and there are inherent risks and one should be careful with the following elements:
    1. Inappropriate valuation of the property
    2. Selling through too many real estate agents
    3. Dubious buyers

  • Taxes

In case of sale of house property, long-term capital gains are taxed at the rate of 20% after availing indexation benefit. The indexation rates are released by the Income Tax department each year, which can be applied to arrive at the indexed cost of acquisition of the property sold. Short terms capital gains on house property, on the other hand, are included in the gross total income and normal tax rate is applicable.

Exemptions from Tax

The Income Tax Act 1961 contains certain provisions that offer exemption from tax on long term capital gain arising on sale of house property, these are as under:
  • If capital gain is invested in new residential property: Section 54 of the Act protects capital gains arising out of sale (or transfer) of a residential house (original asset) in either of the following situations:
    1. One has purchased a new residential house either within a period of one year before the date of sale of the original asset or two years after the date of sale of the original asset.
    2. One has constructed a residential house (new asset) within three years after date of sale of the original asset.
  • If long term capital gain is invested in capital gain bonds issued by specified institutions:
Section 54EC, under various schemes (as listed below), provides exemption to capital gains arising from any long term capital asset (original asset), provided the capital gains are invested in long term specified assets covered by Section 54EC within 6 months from date of sale of the original asset. The said Section requires locking of the funds for 3 years. However, the investments made on or after 1 April 2007 in the long term specified assets during any financial year should not exceed Rs. 50 lakhs.

Section 54EC Schemes for Capital Gains Tax Savings
    1. NHAI Capital Gains Bonds issued by National Highways Authority Of India.
    2. REC Capital Gain Bonds issued by Rural Electrification Corporation Of India.

  • Stamp duty and registration charges:
Stamp duty and registration charges are borne by the buyer and these charges differ from state to state. Visit Stamp duty and registration charges in India for more.

Above all be patient in the entire property selling process!

Data Source For Tax considerations: National Housing Bank

Tuesday, March 18, 2014

An overview of Bangalore residential real estate market

When one thinks of Bangalore, the first picture that comes to mind is beautiful weather and the hub of information technology companies. Since past few decades, among all cities in India, Bangalore has grown the fastest. The driving industry in Bangalore is IT and ITES and this has had a positive impact on the supporting industries as well.  The revenues from IT-BPO sector has grown substantially over the last 5 years which has resulted in increased job opportunities for engineering talent from across the country.

India’s technology and BPM sector (including hardware) is estimated to have generated USD108 billion in revenue during FY13 compared to USD100.9 billion in FY12, implying a growth rate of 7.4 per cent. The IT-BPM sector in India is estimated to expand at a CAGR of 9.5 per cent to USD300 billion by 2020. The sector increased at a CAGR of 25 per cent over 2000–13. This whole economic activity generates employment opportunities and at the same time enables growth opportunities for other industries.

Real Estate in Bangalore has grown on account of job creation by IT/ITES industry. Multi-cultural population with good social infrastructure, excellent educational institutes and constantly upgrading physical infrastructure has presented real estate developers with the opportunity to develop quality real estate projects, particularly in the residential space.

Number of ongoing projects in respective regions

Approximately 672 residential projects till 2013 (high-end, mid segment, and affordable segment) are under various stages of construction in Bangalore. 

  • Here is a snapshot:
South Bangalore (Banashankari, Electronic City, Hosur Road, Gottigere, Chanda Pur, Bannerghatta Road, JP Nagar, Koramangala, Vijayanagar, BTM Layout, Kudlu Gate, Jayanagar, Bommanahalli, ChandaPura, Attibele, Kanakapura Road, Begur Road, Anekal, AnjanaPura, Ananth Nagar) – 168 residential projects out of which approximately 26 projects offer villas/row houses.

East Bangalore (Haralur, Sarjapur Road, Horamavu, Whitefield, HSR Layout, Sarjapur, Hoodi, Hosa Road, ITPL, CV Raman Nagar, Nagavara, Haralur Road, Banasvadi, Marathahalli, Mahadevapura, Old Airport Road, Indira Nagar, Bellandur, Brooke Field, Basava Nagar, Amrutahalli, Varthur, Outer Ring Rd, Old Madras Road, Ramamurthi Nagar, Kadugodi, Panathur Village, Doddanakkundi, TC Palya) – 255 residential project under various stages of construction out of which 55 are villas/ row houses project.

North Bangalore (Devanahalli, Doddaballapur Road, Yeshwanthpur, Malleswaram, Hebbal, Hebbal Flyover, Jakkur, Jalahalli, KR Puram, RT Nagar, Yelahanka, Airport Road, Bellary Road, HBR Layout, Hennur, Hennur Road, Rajaji Nagar, Sahakar Nagar, RMV Extension, Thanisandra, Tumkur Road, Vidyaranyapura) – 149 residential real estate projects under various stages of construction out of which 31 are villas / row houses project.

West Bangalore (Mysore Road, Rajarajeshwari Nagar, Kengeri, Sanjay Nagar, Magadi Road, Uttarahalli, Nagarbhavi) – 24 residential real estate projects under various stages of construction out of which 3 are villas / row houses project.

Other areas including Bangalore central – 76 residential real estate projects under various stages of construction out of which 19 are villas / row houses project.

Total number of apartments in each respective region till 2013

1.87 Lacs of housing units including the high-end, mid segment, and affordable segment are in the process of construction.

Types of apartments

Out of the total of 672 residential projects under various stages of construction, the proportion of projects offering 1BHK, 2BHK, 3BHK housing units are given below in a detailed graph. The graph signifies that more than 70% of all projects offer 2BHK, 3BHK housing units with about 10% of projects offering 1BHK, 5BHK units.

Housing Prices trend

Prices in Bangalore central have been stable over the last few quarters. However, in micro markets such as Madivala, Banaswadi , Jagjeevan Ram Nagar, Yeswanthapura, Mathikhere, BTM Layout, Sultanpalya, Lingarajpura, BCC Layout prices have fallen in last 2 quarters.

Recently launched projects

Following residential projects have been launched in the Oct-dec 2013 quarter.

Skylark Ithaca (Phase-I), SJR Blue Waters, Patel Smondo 4.0, Brigade Cosmopolis, Shriram Chirping Woods, Monarch Aqua, Sumadhura Silver Ripples, Prabhavati Daffodils, Goyal Orchid Woods, Nitesh British Columbia, Golden Panorama, Prestige Ivy Terraces, Adarsh Premia, Purva Skydale, Century Ethos, Ajmera Stonepark, Sterling Ascentia, Prestige Jade Pavillion, Mahaveer Amaze, Bren Paddington, Saroj Symphony, Concorde Epitome, Purvankara Purva Sunflower, Concorde Tech Turf, Mahaveer Oleander, Atlantis Liberty Square, Salarpuria Clarinet, Arge Helios, Zonasha Vista, Pranjape Wind Fields, Samruddhi North Square, Concorde Wind Rush, Shriram Chirping Woods, Radiant Elitaire, Salarpuria Aspire, Living Walls Another Sky, Pushpam Woods, JR Nexus, Eternity Ecstasy, Sarvana Esplanade, Vineyard Chrystolite, Nakshatra Celestia, Surya Shakti 80 Trees, Sipani Classic, Radiant Silver Oak, Chaitanya Sharan.

Data Source: In-house data collection, and National Housing Bank for price trends

Friday, March 14, 2014

7 Ways That Help to Save for a Home in 2014

How can I buy an apartment this year? How much should I save or plan to help myself achieve the goal? These were the questions from my friend, who got me to remember the steps, the research, and the planning before buying an apartment.

Stage – 1

For a buyer, the most critical factor is the investment. First, you must plan to save the money for the down payment. Saving should start early in the process, so that it makes it easier for you to pay as large an amount as possible.

The other advantage of paying a bigger amount upfront is a smaller future burden. Making a size-able upfront payment reduces the tenure and the equated monthly installment (EMI) amount.

Once you decide to buy an apartment, start with a good saving habit. Keep the goal of owning your apartment and start saving every buck. To realize the   goal of saving, here are some tips…

  1. Tighten your control on expenses
      • Eating out, frequent movies and random shopping pushes up your monthly bills and inevitably eat into your savings. 
        • Ask these questions:
          • Do I need to subscribe to all these channels?
          • Can I reduce eating out? Instead, can I make food and drinks at home?
          • Do I need to use that expensive club subscription?
          • Do I really need that outfit/smart phone/book?
        • Try to exercise restraint and that will slowly reflect in your monthly statements.

      1. Whittle down your credit card purchases
          • We all know the notorious interest rates charged by credit card companies, but most of us go weak in our knees when we see that lovely ring or a deal on Groupon! 
            • Simply put, being over-dependent on credit cards will hurt your finances.
              • Here’s a way to reduce credit card dues. Try to pay more than the minimum amount towards your credit card account. Consider using cash or even deferring certain purchases to a later date.

            1. Set timelines for payments
              • Payment delays result in fines, service severance and last-minute hassles. Instead of finding yourself in that mess, create a schedule (time and date) to pay your bills. Following a regular routine makes it easier to meet all your financial commitments in time. A better way is to setup automatic online payments and that also works wonders for utility bills. 

            2. Invest wisely
              • Investing in a bank through a savings account is secure, but there’s very little growth. Instead of putting all your bucks into savings, you can distribute your money into other investment avenues like stocks, gold, term deposits, mutual funds, etc. The idea is to make your money generate higher returns and possibly save more.

            3. Check deals and get the best buy
              • When you’re planning to buy anything, check for the best deals before you sign your cheque. Compare various offers, and finalize on the most value-offering deal. 

            4. Stay within budget
              • Maintain more control over money by keeping track of funds and expenses. Cut costs to keep your expenses within budget.

            5. Finally, do thorough homework
              • Don’t just depend on what you hear from brokers or the hearsay on prices. Take an all-external advice and add your findings to it. While calculating the final price, add additional elements like stamp duty, legal fees, inspection fees, etc. 

            This is a blog post by Bharath Joshi a Marketing Executive for apartments in hebbal

            Monday, March 10, 2014

            Was 2013 really bad for real estate sector in India? Yes, there is data to prove that!

            There were indicators, there were informal chat with property brokers, there were unsold supply of housing inventory lying with the developers, and now there is concrete data to prove that “YES” real estate prices across the country didn't produce yields which one has associated with property sector in India.

            Compared with housing prices appreciation in Jan-Dec 2012, the price appreciation remained substantially low in Jan-Dec 2013 period. In fact, certain cities such as Kochi, Jaipur, Bhopal, Kolkata, Delhi, Ludhiana, Vijaywada, Indore, Chandigarh, Coimbatore, and Meerut registered housing price depreciation over the year 2013. Housing prices in Mumbai remained stagnant with no appreciation or depreciation in 2013. Cities such as Chennai, Pune, Surat, and Nagpur registered price appreciation in excess of 6% in 2013.

            However, within cities, there were micro markets which fared better when compared with the overall price appreciation in the city.

            Micro market price appreciation in 2013 in major cities across India:

            Delhi with NCR: Housing Prices in Micro markets such as Yamuna Vihar, Inderpuri & Rohini, Vasant Kunj, Punjabi Bagh & Shalimar Extension depreciated sharply in 2013. Whereas prices in Govind Puri, Raghubir Nagar, Tri Nagar, Dilshad Garden, Karampura, Nirankari Colony, Pandav Nagar, Dakshinpuri, Hari Nagar, Jahangir Puri, Jhilmil Colony, Sangam Vihar, Mangol Puri, Ghazipur Dairy, Khyala(I-III), Sriniwas Puri, Sultan Puri appreciated handsomely.

            Bangalore: Housing prices in most micro markets of Bangalore remained stagnant for the year 2013 with marginal appreciation in Jaya Nagar, Rajaji Nagar, Koramangala, Air Port Road, Basveshwar Nagar, Malleshwaram, J P Nagar, Banashankari, R.T Nagar, and Vijay Nagar.

            Chennai: Housing prices in Chennai’s micro markets such as Tondiarpet; Narayanappa Garden, Perambur; Choolai; Edapalayam, Virugambakkam; Anna Nagar; Kilpauk; Nungambakkam, Mylapore; Adyar; Velachery; Thriuvanmiyur appreciated in 2013. Whereas micro markets such as Ayanavaram; Purasawalkam; Kolathur, Ashok Nagar; Thyagaraya Nagar; Saligramam, Kodambakkam; Guindy; Chromepet witnessed a downward trend in 2013.

            Mumbai: Kurla East, Tungwa/ Chadivali, Chembur, Malad, Borivali/ Kandivali, Dahisar, Goregaon, Bhandup, Mulund, and Mira Road are some of the micro markets of Mumbai where housing prices actually appreciated in 2013. However, prices in Cuffe Parade, Malabar Hill, Bandra West, Andheri East, Oshivara, Vashi, Khar Garh Road, Pokaran Road 1 & 2, Virar, Nala Sopara, Badlapur fell in 2013.

            Hyderabad: Housing prices in Kanchanbagh, Begumbazaar, Rajendra Nagar, Qutubullapur, Alwal, Malkajgiri, Begumpet, Marredpally, Tarnaka, Mehdipatnam, Abids, Kachiguda, Narayanguda, Himayathnagar, Tolichowki, Khairatabad(West), Panjagutta, Ameerpet, Srinagar Colony, Somajiguda, Jubilee Hills increased slightly in 2013. While micro markets such as Shamshabad, Kapra, Uppal Kalan, L.B.Nagar witnessed significant price fall.

            Pune: Micro markets such as Kharadi, Parvati; Bibvewadi; Dhankawadi; Katraj; Hadapsari; Ghorpadi; Kondwa Khudra; Wanowarie; Undari; Kodwa, Hinjewadi; Thergaon; Chinchwad; Baner; Yerwada; Wakad; Pimple Saudagar; Chakan saw price appreciation in 2013. Whereas Erandawana; Aundh; Pashar; Kothrud; Bopadi; Vadgoaon Bhudruk witnessed price fall in 2013.

            Kolkata: Bhawanipur, Jadavpur, Rajpur Sonarpur witnessed significant housing prices appreciation in 2013. While Jodhpur Park, Dhakuria, Santoshpur, EM Byepass, Behala, Madhyam Gram, Rajarhat witnessed price fall in 2013.


            Housing Price trends across Indian cities till December 2013.

            Data Source:
            National Housing Bank

            Friday, March 7, 2014

            Grab a slice of the property pie at Gachibowli

            In 2013, Hyderabad witnessed fall of housing sales by 4% to 16500 housing units and the overall residential market remained stagnant during the entire last year. With absorption rate slowing down and sales volume dropping, property developers had no choice but to postpone the new launches and it is no surprise that new launches in 2013 dropped by 15% compared to year 2012.

            However, with the government finally passing the Telangana bill, real estate developers and trade bodies across the two states have heaved a sigh of relief. Hyderabad is under the scanner again, as the prolonged phase of uncertainty is finally ending. Many experts believe that the Telangana bill will greatly benefit Hyderabad real estate where prices of residential units have been stagnant since 2009.

            Gachibowli- a major IT suburb in Hyderabad is one such locality that is expected to benefit from the real estate resurgence. According to a real estate survey done in 2013, Gachibowli has been listed as the next popular IT/ITES destination of the city after HITEC City in Hyderabad. This IT node has grown into a software hub for companies operating from Hyderabad. It is home to some of the top IT companies like Microsoft, Amazon, Accenture, TCS, WIPRO, Capgemini, Polaris and DLF Cyber City.

            With such a high concentration of software companies and being close to HITEC city, majority of the population is composed of cosmopolitan IT professionals, many of who have migrated from other parts of the country. Due to the employment generation potential of this locality, many working professional prefer staying in and around Gachibowli where they can also enjoy the benefits of the walk-to-work concept.

            Additionally infrastructure projects like Hyderabad Metro and Outer Ring Road that connect Gachibowli to the international airport have contributed to the demand for residential apartments in Gachibowli and apartments in Hyderabad.

            Gachibowli also offers top educational institutions for residents such as Oakridge International School, Kendriya Vidyalaya, Delhi Public School, Indian School of Business (ISB), International Institute of Information Technology (IIIT) and the soon to be opened Indus International Junior school. With projects like the Lanko Mega Mall planned in the future, Gachibowli will also grow into a recreational hub boosting the social infrastructure in the locality.

            Several builders in Hyderabad are offering 2BHK, 3BHK and 4 BHK apartments and villas in Gachibowli, most of them are ready for possession. Popular residential projects in Gachibowli include Aparna Sarovar Grande by Aparna Constructions, The Botanika which overlooks the picturesque Botanical Gardens by Universal Realtor, Mayfair villas spread across 27 acres of land by Pranit Projects etc. According to a recent reports, prices of homes range from Rs.3,700 to Rs.6,000 per sq. ft. while commercial properties are available from Rs.6,000 to Rs.14,000 per sq. ft. Property prices are likely to go up by about 20 per cent over the next few months.

            With political stability in place, growing economic opportunities and rising property prices, it is the right time to grab a share of the property pie in the upcoming locality of Gachibowli.

            Monday, March 3, 2014

            Will falling Rupee lead to investment in real estate sector in India by Non Resident Indians? How can property developers tap this?

            Data Source: Reserve Bank of India, Ministry of overseas affairs

            The Indian Rupee has fallen substantially against US dollar, and other international currencies. The value of one US dollar was Rupees 53.289 in Jan-2013, whereas in Jan-2014 it stood at 62.4768. It’s a fall of whooping 17.24% in one year, reaching a low of Rs. 69 odd.

            During the course of this one year, at one point of time in August 2013, the rupee stood at 66.5742 against 1 US $. If not for the measures taken by RBI and finance ministry, the free fall of rupee would have continued. Exporters were happy but importers were crying and this had an adverse impact on current account deficit because of India being a net importer country.

            Here is the sharp fall of rupee against US dollar in last 6 years.

            Now, the question to be asked is if the fall of rupee results in increase in NRI remittances to India? And the answer is resounding ‘YES’. According to World Bank report, in 2013 international migrants (NRIs) will remit $71 billion of their earnings back to India, highest among all developing countries. "With the weakening of the Indian rupee, a surge in remittances is expected as nonresident Indians take advantage of the cheaper goods, services and assets back home.

            Here is a look at what NRIs are remitting back to India on a yearly basis:

            Now, the second question to be asked is, where is all this money going to? Is it going in purchase of real estate, or investment in NRE/NRO accounts, or investment in capital markets, or bond market, or in entrepreneurial activities? Although, there is little segmented data with regards to the share of each asset class, a quick look at the RBI database highlights that NRE/NRO accounts are the preferred choice by Non Resident Indians.

            As per the RBI definition, Non-Resident Ordinary Rupee Account (NRO Account) may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. NRI/PIO may remit from the balances held in NRO account an amount not exceeding USD one million per financial year, subject to payment of applicable taxes. The limit of USD 1 million per financial year includes sale proceeds of immovable properties held by NRIs/PIOs. NRO (current/savings) account can also be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by sale of foreign exchange brought by him to India. Whereas Non-Resident (External) Rupee Account (NRE Account) may be in the form of savings, current, recurring or fixed deposit accounts. Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney. Accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively.

            Whereas as per RBI definition; Foreign Currency Non Resident (Bank) Account – FCNR (B) Accounts are only in the form of term deposits of 1 to 5 years. All debits / credits permissible in respect of NRE accounts, including credit of sale proceeds of FDI investments, are permissible in FCNR (B) accounts also. Account can be in any freely convertible currency. Loans up to Rs.100 lakh can be extended against security of funds held in FCNR (B) deposit either to the depositors or third parties. The interest rates are stipulated by the Department of Banking Operations and Development, Reserve Bank of India. When an account holder becomes a person resident in India, deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by him.

            There could be various reasons for preference of NRE/NRO accounts by NRIs ranging from volatility in stock markets, risks involved with entrepreneurial activities, low yield on bond market, relative safe nature of NRE/NRO accounts, and poor execution by real estate developers of their projects.

            Why is real estate market in India not being able to attract NRI money to ease the current liquidity pressure? Our team debated on this issue and came out with 4Cs.

            Cost - No Escalations – costs escalations during the course of the project construction has been a key detriment for NRIs wherein it has been noted that real estate developers escalate the cost of the project arbitrarily on account on various parameters such as rising labor cost, regulatory cost, and raw material cost. Why do we still observe a builder asking for additional funds from buyers for parking slots, development charges, and so on when those were not included in the builder buyer agreement at the time of selling of the project inventory? Why can’t there be transparency as far as project pricing is concerned? There needs to be more transparency in builder-buyer agreements.

            Commitment to timeline – It is a common practice that developers sell their projects by claiming that they will deliver the housing units in 36 months at the time of agreement between them and the buyer. And yet, we have noticed umpteen numbers of cases where projects have been delayed by not just by 1 year but by more than 2-3 years. And in some cases, project delays have stretched to 4 years. Why can’t developers stick to their promise which they had made at the time of agreement? Or else, simply state the time it will take to develop the project (say 5 years). This matter needs to be addressed directly in contractual terms or through legislation.

            Construction quality – With NRIs living in different parts of the world, it becomes difficult for them to verify the construction quality of the project? What are the construction materials being used? Will the specifications and amenities be as per the builder buyer agreement? To overcome this, a 3rd party periodic construction quality check can be brought in.

            Carpet area to sale-able area ratios – maintain a transparent mechanism to calculate carpet area and sale-able area. This is a regulatory function, that authorities need to address. 

            It is widely believed that if real estate developers can focus on these 4Cs, then there is absolute certainty that NRI money will flow in property sector in India at a scale unprecedented in real estate history of India and eventually it can ease the pressure of liquidity on real estate developers, and for that matter speculators, investors, banks, and other financial institutions that finance this huge economic activity.

            Are the developers listening??? Real estate developers can reach our team of professionals for advisory at

            Data Source: Reserve Bank of India, Ministry of overseas affairs

            Create your free online surveys with SurveyMonkey , the world's leading questionnaire tool.

            Appendix – I
            As per the May 2012 estimates by Ministry of Overseas Indian Affairs, the population of Indians living abroad is 21.91 million. However, more than 50% of them live in high income countries and have been the major contributor to NRI money flowing in India. We present below the overall break-up of population of Indians living in high income countries:

            • United States of America (USA) – 2.25 million
            • United Kingdom (UK) – 1.5 million
            • United Arab Emirates (UAE) – 1.75 million
            • Singapore – 0.67 million
            • Saudi Arabia – 1.79 million
            • Malaysia – 2.05 million
            • Canada – 1 million
            • Australia – 0.45 million
            • And in other countries across the globe – 10.45 million

            Total Population of Indians living abroad– 21.91 million