Monday, January 15, 2018

Due - Diligence: A must do exercise before investing in a property

Author: Sachin Gupta | Find me on Twitter
 
Sumit Sharma was ecstatic having done renting vs. owning and home loan analysis and was now all set and ready to go for his dream home. All of a sudden he got to know from various sources such as newspapers, radio and his colleagues about some cases where builders have failed to deliver the project on time, or there were litigation issues and deviations in homes from what was promised. That was a cause of concern and since, buying a home is a lifelong decision and therefore nothing should be left to luck. He decided to go for a comprehensive check with the help of a real estate agency. The agency adopted the L BID (Lets Break It Down) approach and came out with following verification:

Verification of the Project:

1. The agency got the copy of most important documents in verification of a new project such as Copy of intimation of disapproval (IOD) and commencement certificate (CC) from builders. Only after complete verification, they recommended the client.
2. They asked for and studied the copy of approved drawings of the project for an under construction project and recommendations were made accordingly.
3. Land title verification is crucial in a sense that land should be free of litigation and any kind of associated debt. The agency with a team of legal professionals verified the land documents.
4. They also checked the copy of functional water connection, electricity connection, and occupation certificate in order to make sure that deal was hassle free and transparent.
5. The agency also checked if the property to be bought is mortgaged with the lender (such as bank, or housing finance companies). If that was the case, they asked for a NOC (no objection certificate) from the lender.

Verification of the price of home:

1. In addition to the base selling price, there are other additional costs associated with the project. The agency hired by Sumit Sharma also verified the total cost of home in addition to project verification.
2. Stamp duty verification: to check if the rates quoted by builder are on the super built up area or carpet area.
3. Registration Fee: to check if the rates quoted by builder are on super built up area or carpet area.
4. Floor rise: to check for the prices with the builder
5. PLC charges: to check for the prices with the builder
6. Infrastructure development cost (IDC): to check for the prices with the builder
7. External development charges (EDC): to check for the prices with the builder
8. Car parking charges: to check for the prices with the builder
9. Society and club membership: to check for the prices with the builder
10.Electricity and water charges: to check for the prices with the builder
11.Power Backup charges: to check for the prices with the builder
12.Lease Rent one time: to check for the prices with the builder
13.Interest Free Maintenance Security (IFMS): to check for the prices with the builder
14.Fire Fighting Charges (FFC): to check for the prices with the builder
15.EEC: to check for the prices with the builder
16.Extra space in storage rooms and lawns: to check the prices with the builder

The agency verified all these charges with the builder and asked for them to be included in the builder buyer agreement in order to avoid future escalation of the price.

Verification of other important elements:

1. Monthly maintenance charges
2. Ratio of carpet area to super area
3. Delivery date and what are the penalties if project is delayed?
4. Penalties for deviation in size of the house
5. Who is the supervisory authority and legal dispute authority?
6. Possibility and ratio of loan availability.

The bottom-line is to carry out property & builder assessment, verify the charges, legal terms and get them included in the sale agreement.

So friends, have a look at this checklist and if need be take the services of a professional real estate agency or lending institutions in order to make sure that your lifelong savings are being invested in the right property.


Have any Questions?
 

Monday, January 8, 2018

Things to Avoid while Investing in Real Estate

If you were to believe the latest national news, consumer confidence is on decline and cash deficit on builders on incline. In Mumbai, Delhi-NCR, and other popular cities, the demand has come down to around 50% for new property launches.

But not everything in real estate is gloomy, the Reserve Bank of India has recently made a cut in policy interest rates. While this news may cause a haste in investing in the sector, say in buying luxury villas in Bangalore or any other metro cities, there are some things you need to consider before making an investment. These are mentioned below for your consideration:


  • Trading in real estate properties frequently


When you trade in real estate properties more frequently – that is, buy or sell your property in shorter duration – you may incur a loss in tax benefits.

To be precise, if you sell your property within 3 years of making your real estate acquisition, such acquisition would then be called short term capital gain, which entitles you to zero tax concession or exemption.

But, if you sell your real estate property after 3 years, it entitles you to long term capital gains and the taxation for this would be at a comparatively lower rate.

Be wary that if you trade in too many times even in long term capital gains as it could alarm your Income Tax officer, who may consider this dealing as your business income and withdraw the low rate on long term gains.


  • Investing in properties that are due completion


It’s easy for your agent or builder to make excuses for not completing their project on time and completing it at a much later date than promised. They may not have any hidden agenda behind this, except prolonging time. It means a little more number of EMIs for you than which were originally expected.

The second of the two-pronged effect of the delay is this: The tax benefits that you receive on your property investment are restrained on possession, which is direct effect of long delays.

Being alert on investing in incomplete or overdue properties is therefore very important, at least for your pockets.



  • Planning your budget before investing


We know that if a budget is unplanned or unsupervised before investing in real estate, it may deplete most of your saved resources, back-up money, or hamper your short-term investments. It may also affect your daily expenditure and can create dearth in your cherished small purchases every now and then.

Purchasing properties not just involves a down payment but also what seems as an endless array of EMIs – directly affecting your monthly salary.

Seek the professional advice of your financial consultant before buying a real estate property. A good recommendation would be saving at least 40% of your total income after you have made your investment.


  • Considering all the factors before making your investment


As again like planning your budget, it is equally important in knowing and fully understanding all factors involved with making your investment, because knowing the loan criteria, real estate details, and repaying capacity are not adequate. Consult a financial adviser for a complete financial plan on your investment.


  • Plenty of investment in properties may not result in profits always


The best idea would be to divide your finances into different types of investments, and not just stick to investing in real estate. First because transaction costs in real estate are much higher than say investing in gold, bank deposits, bond funds, equities, etc.

The prime reason that people choose to invest in lump sum in properties is because their prices increase at a faster rate compared to other most forms of investments. While this may not be true always, it’s wise to be aware of the current changes or trends in the market for accurate predictions.

If you are planning to make any investment such as buying villas in Bangalore or Chennai, etc., these above-mentioned points should hopefully help you in making the right investment.


This is a guest post by Dinesh Dhawde

Tuesday, January 2, 2018

10 things to check when booking an apartment in a builder project

Author: Sachin Gupta | Find me on Twitter

Call it practices or malpractices; real estate in India is riddled with cases where buyers have been taken in for a ride. And in this environment, buying an apartment is not as easy as it may sound. Whether you are an end-user or an investor, you should pay attention to the following 10 items when booking a flat. These 10 items are categorized into two principal checklists namely Project details and Apartment details:

Project Details

  • Land Titles
When making real estate investments, buyers of property typically want assurance that they will become the legal owner of the property and that the seller is lawfully possessed and has the right to convey title. When a real estate developer has “Title”, he is said to have all the elements, including the documents, records, and acts, which prove ownership. Therefore, a buyer should insist on documents that clearly demonstrate Land Titles.

Some of these builder projects are approved for home loans by banks or lending institutions. These lenders are also concerned about title assurance because the quality of title affects the collateral value of the property in which they have a secured interest. Therefore, if you as a buyer lack the capacity to verify Title certificates by yourself, you should at least check and verify with the list of banks that have approved the project for home loan grant.

  • License Grant
The Town and Country Planning (TCP) Department grants license to private developers owing land for converting it into a colony or a group housing society. The license is granted upon fulfillment of parameters laid down by the TCP Department.

Ask for the License number from your developer and verify it at the TCP website.

  • Intimation of Disapproval (IOD)
Check if the builder has received the IOD from relevant authorities (Town and County Planning Department). IOD lists out the conditions based on which the building should be constructed. It is usually valid for one year and has to be re-validated thereafter.

  • Master Plan
A master plan typically demarcates city or region’s future development including residential, commercial, industrial, and recreational facilities. Visit the City Development Authority website and verify the claims made by the developer while selling the project.

  • No Objection Certificates (NOC)
In addition to the License number granted by the TCP department, a builder should also possess NOC from environment, fire fighting, electricity, water, airport departments. Check these NOCs.


Apartment Details

  • Location
First thing first, location is the key differential in selecting or rejecting a project. Make sure, you book an apartment in a project which is well connected by road to city’s CBD (Central Business District). In addition to that, look around for the presence of social infrastructure such as schools, shopping malls, college, etc.

  • Floor Plan
You are going to live in this apartment. Therefore, pay attention to the floor and unit plan. In one particular project, we noticed there were about 14 apartments on one single floor and that was a big dampener in otherwise a good project. In an under construction project, it is very difficult to assess the floor plan and unit plan. Ask for the approved floor plan and unit plan from the developer and analyze these plans for open spaces, lobbies, lifts, etc.

  • Amenities
After a long and hard day at office, one would like to relax and rejuvenate. Buy an apartment in a project which offers state of the art amenities such as park, jogging track, swimming pool, clubhouse, etc.

  • Apartment specifications
Specifications comprise of kitchen fittings, bath fittings, flooring, electric work, walls, etc. Visit the sample flat prepared by the developer and assess the specifications first hand. Make sure that specifications provided in the brochure and shown in the sample flat are part of the builder buyer agreement.

  • Carpet Area/Sale-able Area Ratio
Most builders would charge you on the basis of sale-able area. Ask for the efficiency of the apartment or in other words carpet area of the apartment. In most cases, ratio of carpet area to sale-able area is 75 to 80%. If possible, get that included in the builder buyer agreement.

We are sure you will have your own stories to tell, your own issues with real estate projects, your own experiences of buying an apartment with a builder, and your own follow-ups? Share them here with the larger audience and let’s help each other.



Have any Questions?

Tuesday, December 26, 2017

Natural Disaster Preparedness: How to Stay Safe at Home

"Natural Disaster Preparedness: How to Stay Safe at Home" 

Find below some steps you can follow to make your home stand the toughest catastrophes like floods, storm, earthquake, and landslides.





This is a guest post by Keys90

Friday, December 15, 2017

Tips for landowners before they enter into a joint venture agreement with real estate developers

Author: Sachin Gupta | Find me on Twitter

Recently, our team was interacting with some of the landowners who have entered into a joint venture agreement with real estate developers in Delhi NCR region. Now, believe it or not, most of these landowners are inheritors of ancestral property and have no clue about the legalities of a joint venture. They go as per the words of their confidants and sometimes find themselves into trouble. Take this, a landowner who entered into a joint venture agreement with a real estate developer in 2006 still finds that his land has been locked by the developer and there are no signs of the proposed group housing project taking off. What can you as the owner of land do before entering into a joint venture with a property developer?

1. First of all, what is a joint venture between a landowner and a real estate developer?
Joint ventures are formed by at least two parties with the objective of achieving a specific investment return. Unlike many other business agreements, when the objective is achieved, the joint venture is usually terminated. Following are the attributes of a joint venture.

  • Risk sharing: A single investor may be unwilling to undertake a real estate venture because of its size, location, capital requirements, and/or duration. However, by sharing the risk, two or more parties may be willing to undertake the venture.
  • Combining expertise with capital: Joint ventures are frequently formed as a way to pool equity capital from one or more sources, as well as a means of bringing parties with different expertise to the venture. A joint venture could also involve purchasing existing properties and operating them. In this case, one of the parties may be responsible for acquisition, leasing, and management, and others may provide capital.
  • Speculative objectives


2. Organizational forms
Participants in joint ventures may include any combination of individual investors, partnerships, corporations, or trusts. However, a joint venture in and of itself is not a legal form of organization. In order to specify capital contributions, rights, duties, profit sharing, and the like, a joint venture agreement or a business entity must be created. The choice of organizational form used to accommodate those various groups of investors could be a partnership, corporation, Pvt. Ltd, or trust. Partnerships are frequently the vehicle of choice in real estate joint venture.


3. Profit sharing
Because the parties to a joint venture may contribute different things, and possibly in different proportions, a partnership must be structured such that it provides economic incentives for all parties. Differences in tax status of investors also may affect the way partnerships are structured.

A joint venture can take on a number of different partnership forms. The most common is the limited partnership. As is the case with all partnerships, there must be at least one general partner and any number of limited partners. Generally, in real estate, limited partners are the investors that provide most of the equity capital, while general partners are usually responsible for managing the partnership assets and may contribute a relatively small portion of the required equity capital.


4. Following factors are considered by potential investors for structuring a joint venture.
  • How much initial capital will the parties contribute and how will the parties contribute additional capital if needed in the future?
  • How will the parties share in the annual cash flows to be produced from operating the property?
  • How will the parties share in the cash flow received from sale of the property?
  • Will some of the parties receive a preferred return? Will the preferred return be paid from annual cash flows and/or from sale?
  • Will taxable income (or losses) and capital gain (or loss) be shared in the same proportion that operating cash flow to be distributed?
  • Who will have control over the operation of the property and decisions involving capital improvements, approving leases to tenants, financing and possibly refinancing the property, and when to sell the property?

5. Points you as the owner of the land must keep in mind:
  • Check the credentials of the developer. His past record and success in achieving targets.
  • Before entering into a joint venture agreement with a builder, register your company and transfer the land on the book of this new entity. You can hold 100% of shares of this new entity or shares can be held by various promoters depending on their claim in the land. The new entity formed should ideally be registered as private limited company under the company’s law act of India.
  • Now, enter a joint venture agreement with a builder’s company. Therefore, the agreement is between two companies. One providing land for the development of the project and other providing capital and expertise to develop the project.
  • How do you decide on profit sharing? Well, we have defined it above. However, Recent trends in India indicates a 1/3rd – 2/3rd rule. 1/3rd of the project outflows going to the landowner and 2/3rd of the project outflows going to the real estate developer.
  • As a landowner, make sure that the number of housing units or the developed area of the project is assigned to you and is clearly mentioned in the joint venture agreement. For example, in case of housing project, you should have the housing unit number, size, and floor in the joint venture agreement.
  • As an example, a landowner enters into a joint venture agreement with a ABC real estate developer Pvt. Ltd. The plot of land measures 20 acres and about 600 housing units would be developed. As a thumb of rule, 200 units should be assigned to landowner and remaining 400 to the builder. For a landowner, this kind of agreement is safe and can result better returns for his/her land as opposed to the agreement wherein builder pays the 1/3rd of the cash inflows to the landowner on the sale of housing units.
  • Hire a professional legal company with expertise in real estate joint agreements, and due-diligence.


Have any Questions?

Friday, December 8, 2017

How will Real Estate Regulatory Bill (RERA) help home buyers in India?

Real Estate Regulatory Bill (RERA) has been passed and is now being implemented at state levels. How will Real Estate Regulatory Bill (RERA) help home buyers in India? Here is quick look:


Thursday, November 30, 2017

GST – Simplifying Taxation in India’s Complex Residential Real Estate Sector

“One Nation, One Market, One Tax” was the driving principle behind the passing of the GST bill. GST has become one of the most revolutionary tax-reform India has seen in decades. It will almost certainly have a profound effect on the Indian economy; making it easier for businesses and retailers to comply and moderate overall taxation levels that will inevitably increase the collection of taxes. The real estate sector contributes to 5% of India’s GDP and is the second-largest employer in the country. However, indirect tax levies, such as VAT, service tax, excise, stamp duty and registration fees have been a significant hurdle in this sector. GST will simplify tax hurdles and minimize the scope for double taxation. This transparent way of taxation will benefit both the customer, industry and the tax collectors.

Under the ambit of GST, under-construction properties will be charged at 12%; this won’t include stamp duty and registration charges. Today different states impose different property taxes; GST will ensure the buyer pays one uniform rate across all states. To better understand the impact of GST on the real estate sector, let’s take a look at the current tax structure of some of India’s tier-1 cities.


Bengaluru
Mumbai
Pune
Chennai
Gurugram
VAT
4.0%
1.0%
1.0%
2.0%
4.0%
Service Tax
4.5%
4.5%
4.5%
4.5%
4.5%
Stamp Duty
5.7%
5.0%
5.0%
7.0%
6.0%
Registration Charges
1.0%
1.0%
1.0%
1.0%
0.5%
Total Taxation
15.2%
11.5%
11.5%
14.5%
15.0%












The 12% rate on under-construction properties will likely bring down property rates. Developers will now be authorized to take input credits on the sale of property under construction against the taxes that are paid by the buyer. This will bring down the cost for the developers, and in-turn the developers will have to pass on this benefit to the customers. The anti-profiteering provision in the GST bill makes it mandatory for developers to pass on any tax benefits of GST to the customers.However, GST may not benefit luxury real estate. Top luxury apartments in Chennai, Mumbai, Bengaluru, Pune and other tier-1 cities are set to see a major increase in taxation as compared to affordable homes in the same locations because they aren’t given the full set-off in terms of the land component. As things stand, service tax is charged on 30% of the property value, but GST will be charged on the entire value of the property; making it increasingly taxing on luxury real estate. Notwithstanding the burden of taxation on premium furnishing, fittings, super quality of cement and other top-quality raw materials used in the luxury housing market will be significantly more than that used in the affordable housing segment.

The best possible advice for home-buyers and investors “is to wait”. Wait till the property rate on GST is finalized. Wait till the property rates on GST are finalized. At a time, when property prices are already not affordable in most suburbs, if the GST rate were to rise above 12%, the market will certainly take a hit. If you buy real estate when the markets are on the rise, it only benefits the builders. The right time to buy property is when the markets are down as this gives you the best rates, infinite choices, and loans with lower interest rates from banks.

This is a guest post by Dinesh Dhawde

Friday, November 24, 2017

How GST Implementation Would Be Helpful for Real Estate?

Why is the Goods and Services Tax (GST) a welcome change for realty? Read on if this topic piques your curiosity as a property developer or seller.

The Goods and Services Tax (GST) is an effort toward simplifying the process of taxation by bringing different types of taxes under one umbrella. As simple as it seems, the implementation of GST entails far-reaching effects across sectors. Real estate is indubitably part of this spectrum.

Real estate has evolved by leaps and bounds over the last 15 years and will continue this upward trend in the years to come. Properties have always been looked upon as a lucrative investment option. GST promises to reduce the cost of ownership if its rate is lower than the summation of all the existing taxes.

Tax management is a challenge in the dynamic domain of realty, as any property purchase transaction is governed by a number of indirect taxes such as Value Added Tax (VAT), stamp duty, and service tax. With GST, all indirect taxes pertaining to property deals would be absorbed into one large cover.

We are aware that the effects of GST implementation are not restricted to buyers; developers play a significant part in the story, as they are the ones who initiate projects. Be it procurement of land or a redevelopment project, taxes rule the roost at every stage of property development. In the current scenario, taxes are levied at two levels: center and state. The state taxes the goods and materials, and the center taxes the services. Such a taxation process adds to the complexity of real estate deals, and it is the end customer who bears the brunt of dual taxation. GST implementation promises to put an end to the woes faced by property buyers, as a uniform rate would make it easy for the buyers to interpret the nitty-gritty of property dealings. Even though buyers may need to pay a slightly higher price, GST is sure to simplify the process of compliance to a great extent.


What is the probable impact of GST on developers?


During the procurement of land, developers are required to pay a host of taxes, such as Central Sales Tax, Excise Duty, and Customs Duty. Developers’ expenditure on construction materials comes to be 20 to 25% higher owing to indirect taxes. If all these taxes were to be subsumed, the cost of procurement and development would drop. This would translate into reduced costs for the buyer, which would eventually lead to a boost in sales. However, the actual impact on property prices would be based on the final GST rate.

Given that interdependence is an industry norm, real estate has close relations with other sectors such as finance, IT, steel, and construction. Therefore, if any one industry was to benefit from GST implementation, all the related sectors would simultaneously reflect the positive impact.

Transparency is a major advantage of GST implementation; a unified tax structure makes tax calculation a more comprehensible process for not only the industry bigwigs but also the end customer. Tax evasion would reduce significantly after GST enforcement, as a unified structure leaves no room for manipulations.


How would GST influence the economy?


Considering the booming trend in realty, the contribution of this sector to India’s gross domestic product (GDP) would be 5%. GST itself is estimated to account for 2% of the country’s GDP. 

Is there any section that would not witness the impact of GST?

Indirect taxes are not levied on possession-ready property, so resale dealings would not be affected significantly by GST implementation. 

In conclusion, GST implementation would prove to be a boon for developers and buyers alike, provided the standard rate is low. Buying high-end luxury apartments in OMR, Chennai would no more be a distant dream, which is a good enough reason to cheer. 

This is a guest post by Pooja

Friday, November 17, 2017

Get the best revenue with real estate investment

We all wish to invest in avenues which give us better profit margins. But it is difficult to gauge them and finally invest. Investment is a matter of the right time you enter and the exact time to exit out as well. You need expertise for this kind of investment which comes only with experience. The best investment option available in the market today is the real estate. It is a booming industry and almost all the investors are pooling their money in this lobby. The developers keep on giving handsome returns to all the investors who help them in providing the investment to complete the projects.


  • How does the real estate work?

Real estate is a business of constructing properties for the end users. Since real estate is at a boom and is in the demand by every individual, it is a huge money-making business. But not all investors buy it for self-consumption. They invest when the project has just started or in the initial phase and get out of it when it nears completion or is completed. This way the holding period of the construction gives them humongous profits which is the fruit of investing while you can hold it for a while. The profits are just unimaginable. But do you need a huge investment for such a profit. Well it completely depends on the kind of investment you would like to do and the budget you have.


  • What you need to be careful of?

If you wish to invest for a goal then you need to be calculative. But if you need to do it just for investment purposes then a small amount of profit would also excite you. But you need to be very careful while dealing with real estate developers. There are many loop holes that need to be known by the investor. The basic thing to be done by you is to be sure on the paper work. Check on the property and the land it is built upon. The titles should be clear and the paperwork should be accurate. Also, if you are investing in a property then ensure you get all the rent agreement formats seriously and keep them updated as and when needed. Many times, your property needs to be sold to someone who wishes to use it for self-consumption.

All such things help you to be safe from any legal formalities or complications. It is a way to protect your property and investment amount. You would find many fraudsters who dupe you of the money and sell your property to multiple people to make more profits but in an illegal manner. This can be evaded if you are smart enough and know all the loop holes of the game. It is not easy to get into the act completely as it is just a side income you wish to generate for your better future. But if you wish to make it big in this game then I suggest you know all that is required.

You can get in touch with many real estate brokers who has immense knowledge about the property and the business to help you to take the right decision. These brokers should be registered with the real estate lobby and should have a good background. If they are not the right people then you would face challenges and losses as well if not paid much attention. Real estate is a huge pool of investors and you would need to be smart on all your actions to make a good profit out of your investment. So, ensure you have all that would make your investment profitable.


This is a guest post by Mukul Malik

Monday, November 13, 2017

Odd even rule has drawn public attention to the alarming pollution levels in Delhi. Now, we need a long term sustainable solution for curbing vehicular pollution and jams. Here is one – an App based public transport system.

By: Sachin Gupta | Find me on Twitter

1. The Problem

Last few months have seen heated debates among environmentalists, activists, policy makers, and public at large about the deteriorating air quality in national capital Delhi. Aam Aadmi Party Government in Delhi led by Arvind Kejriwal has announced some measures to curb the rising pollution levels. Notably among them has been the animatedly debated ‘odd-even formula’.  We wish them best and hope pollution levels reduce drastically in Delhi.

So, what contributes to Delhi’s Pollution? Let’s have a look:




Transport contributes 22.7% to overall pollution levels in Delhi. Out of which Heavy and light trucks contribute about 14.2%. Private vehicles that include cars (4 wheeler) & 2 wheeler contribute 6.6%. Public transport that includes buses and 3 wheeler contribute 1.9%.

Government of Delhi has announced variety of measures to curb pollution at all levels. One among them is ‘Odd-Even’ formula which intends to target 4 wheeler. Will it succeed? We will have to wait for the 15 day trial run.

 

2. Existing situation

But what is the existing situation as far as transport is concerned? With growing GDP, more and more people are able to afford their own private vehicles to commute in the city. According to Delhi Economic Survey, the vehicular population in Delhi registered a 135.59 % jump between 1999-2000 and 2011-12 to touch 74.53 lakh. As things stand today, Delhi adds 1400 cars a day on its roads. About 50% of these cars sold run on diesel. Despite the world class Metro Rail, the public transport has not been able to keep pace with growing demand.

Sumit Sachdeva, Who lives in Faridabad drives a petrol CNG car, says, “I have to go to my office on Lodhi Road from my home in Sector 21C in Faridabad. There is no door to door public transport facility. If I want to take Metro Rail, then, first I have to take an auto from home to Metro station and then another auto from Metro station to office. It’s too time consuming and at the same time expensive”.

Manish Sharma, who lives in Greater Kailash II drives a diesel car, says, “I am in a sales job and there is no way I can use the existing Metro Rail or other Public Transport systems. I have 3-4 meetings a day and all these public transport systems don’t connect me at all”.

Everyday there are Lakhs of such cases where people use their own private vehicles rather than using the public transport. This not only raises the pollution levels but at the same time chokes city roads leading to massive traffic jams.



 

3. Proposed Solution

It is clearly evident that unless government provides high quality public transport system with last mile connectivity, citizens will continue to use private vehicles.

It is in this context, we provide this solution with the motto that “Public Transport needs to compete with Private transport in terms of comfort, safety, and cost efficiency”.

With the existing infrastructure of Metro Rail, citizens can be made to use public transport more. All that is needed is the last mile connectivity. So, how do we get the last mile connectivity? By deploying ‘Metro Shuttles’ as shown in the picture below:


    3.1. Implementation of Metro Shuttles:

A high quality 14 seats electric shuttle costs about Rs 3.5 Lacs with following specifications:
  • Overall Dimensions:4650*1675*2020mm
  • Seat Capacity:14 Persons
  • Motor:5kw DC Motor
  • Body Color: Customized
  • Fuel: Electric
  • Emission Standard: 0 Emission
  • Maximum Speed(Unload / Full Load):30km/H
  • Battery:6V*8
  • Max driving distance (20km/h constant speed on flat road) (Km)    ~80

The idea is to connect people with Metro rail using these Metro Shuttles. Each Metro Shuttle will run within the radius of 5 km with multiple predetermined Metro Shuttle Stops. Metro Shuttle Stops will be created keeping in mind that no individual should walk more than 500 meters to catch a Metro Shuttle.

These Metro shuttles can be manufactured in India, thereby, giving boost to Make in India campaign.

           3.1.1. Financing

Let’s assume, there is a requirement of 100,000 Metro Shuttles to cover whole city.
Cost of buying these Metro Shuttles = 100000x350000 = Rs 3500 Crore.
Now, who will provide funding for buying these Metro Shuttles? Here is the plan:
  • Government of Delhi to announce the launch of Metro Shuttles system.
  • By just paying 10% (Rs 35000), an individual with a valid driving license can buy a Metro Shuttle to operate in the city. These drivers will not be on payroll of Delhi Government but will be guided by Delhi Government’s Rule Book of Public Transport system.
  • Remaining 90% (Rs 315000) to be financed by banks at subsidized interest rates of say 5% with Government of Delhi providing collateral support. Therefore, there is no risk for banks to give loans to Metro shuttle owners who normally don’t have necessary papers to get loan.

           3.1.2. App for Metro Shuttle Stops

An app will be developed with information about Metro Shuttle stops, drivers, and timings. Citizen can download the app on their Mobile phone in order to locate the nearest Metro shuttle stop with navigational capabilities. Any individual who wishes to commute within the city can use the Metro Shuttle to go to Metro station or vice versa take a Metro shuttle from Metro station to the nearest stop for his home. Metro Shuttle stops need to be created in such a way that any individual using the app shall not walk more than 500 meters to reach to Metro shuttle stop.


           3.1.3. Pricing

Ticket Price for using the Metro Shuttle will be highly affordable. And it needs to be fixed at say Rupees 5. People can pay in following formats:
  • Cash (If a user wishes to pay in cash, then, the ticket price could be Rs 10. This is to encourage users to use Metro Shuttle Card).
  • Metro Shuttle Card that can be charged at the metro station itself or Pre paid Metro Shuttle Card can be sold at super markets. A person using the Metro Shuttle card can swipe the card at the swipe machine attached to all Metro Shuttles. The money goes directly to the central authority and from there Metro Shuttle Driver can claim once every week or fortnightly.

           3.1.4. Real time tracking

Metro Shuttles will run in 2 shifts with only one shift allowed for an individual driver to operate.
  • 6 AM to 3 PM
  • 3 PM to 12 MID NIGHT
All the drivers driving Metro Shuttles will be registered by Government of Delhi and their behavior & capabilities can be tracked by the ratings provided by users on their Metro Shuttle App.

    3.2. Political Benefits:

Government of Delhi can draw huge political mileage by implementing this proposal. Indirectly, they will be providing jobs to over 1 Lac people (many of them can be women drivers). 

Can it be implemented? Yes, all it needs is a ‘Project Champion’ and in a matter of 2-3 years, the plan can be successfully implemented. And subsequently be adopted in other NCR cities.

We have to note that in many developed countries in Europe, Government provides last mile connectivity to people. In addition to trains, they have trams which take people from one stop to another within the city. However, In India, building trams is a futile and expensive exercise. Instead, we can easily implement Metro Shuttles.


    3.3. How to discourage use of Private Vehicles:

In addition to implementing the Metro Shuttle system, Government can tax the use of private vehicles in following way:
  • High cost of parking
  • More taxes on fuel

4. Conclusion:

In a nutshell, government needs to provide high quality public transport system. A system that is inexpensive, can be implemented fast, and at the same time strengthens the government’s political capital. Metro shuttle system can be the answer.

Thanks! Please comment and we can take the discussion further. Maybe we find some other ideas :)

Kindly share :)




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Saturday, September 30, 2017

How to calculate Reverse Mortgage Loan Monthly Payments?

Author: Sachin Gupta | Find me on Twitter

In our previous post, we covered the concept of Reverse Mortgage Loan (RML). We covered elements such as definition of Reverse mortgage Loan, eligibility criteria, amount that can be availed, and modes & nature of payments.

People from across the country showed substantial interest in Reverse Mortgage Loan.  And there were queries from ‘formula to calculate monthly payment’ to ‘paying the amount back to bank’. We cover all of this below:

Installment Amount = ((PV*LTVR-OTDA)*I)/ (((1+I)^n)-1)

Where, PV=Property Value;
LTVR=LTV Ratio;
OTDA=One Time Disbursement Amount;
n=No. Of Installment Payments;
I= the value of 'I' will depend on Disbursement Frequency selected.

For Example,
Property Value (PV) = 10, 00,000
LTV Ratio (LTVR) =80%
One Time Disbursement Amount (OTDA) =0
Loan Disbursement Period=15 Years
Disbursement Frequency=Monthly
Interest Rate (IR) = 9.25 %

Calculations: On the basis of the inputs:
The disbursement frequency selected is Monthly so 'I' will be IR/12(i.e. 9.25%/12)
No. of installment payments (n) will be calculated monthly e.g. if 15 is selected then the n=15*12=180
Putting the values in the formula:
Installment Amount=Rs.2, 070;


Here is a detailed example of Mr. Sharma, 62 years of age and own a property worth Rupees 1.5 Crores in Gurgaon. Mr. Sharma lives with his wife 59 years of age. Both his sons are married and settled abroad. On knowing about the merits of Reverse Mortgage Loan (RML), Mr. Sharma decided to check on the eligibility and monthly payment that he will be getting.

While he is clearly eligible for the same (find Reverse Mortgage Loan Eligibility criteria), he found it rather cumbersome to calculate the monthly payment that he will receive.

Property Value PV = 1.5 Crores (15000000)
Loan to Value Ratio (LTVR) = 80% (As specified by RBI)
One Time Disbursement Amount (OTDA) = 0 (No amount is disbursed in one go, instead banks pay monthly payments to applicant)
Loan Disbursement Period (n) = 15 years or 180 months
Disbursement frequency = Monthly
Current Interest Rate (I) = 10.25% yearly or (10.25/12)% = 0.854167% monthly

Calculating the monthly installment amount by putting all these value in given formula in excel:
Installment Amount = (((PV*LTVR)-OTDA)*I)/ (((1+I)^n)-1)
Installment amount = 28294

So, Mr. Sharma will be getting a monthly payment of Rupees 28294 for 15 years. Upon completion of 15 years, Mr. Sharma can either extend his Reverse Mortgage Loan (RML) payments or pay the outstanding amount to bank to get back his house.



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Saturday, September 23, 2017

The Real Impact of the RERA Act

It’s been over four months since the Real Estate Regulation Act (RERA) came into effect in India. While the much-welcome move from the Indian parliament came as a boon for home-buyers in the country, there were (and still are) a lot of teething issues for developers and builders and the real-estate sector as a whole.

As is known, the RERA Act covers all projects that were still being executed and hadn’t received a Completion Certificate as on the date of commencement of RERA Act, that is May 1, 2017. Thus, many under-construction properties have come under the ambit of the RERA Act. All of these projects had to be registered with the housing regulatory authority, and the developers or builders concerned had to provide regular updates on the approvals at various levels. All these registered properties have to follow the rules of RERA.


  • The Much-Needed Respite

One of the highlights in the RERA guidelines is that any real-estate property, be it a luxury apartment in OMR Chennai or a simple 2BHK in a suburban location of Mumbai, will be priced on the basis of the carpet area, and not the super built-up area. As per a report in The Economic Times, BMR & Associates LLP’s Manoj N Kumar, who is a Partner in Direct Tax, has clarified that the carpet area is 30–35% lesser than the super built-up area of a project. The sale of projects on a carpet-area basis can lead to a significant increase in the per-square-foot price of the project, he adds.


  • The WIP Bane

The newly introduced rules under the RERA Act bring about a major transformation in the way real-estate dealings have been taking place in India. Switching to the new rules was expected to take some time, especially in the case of under-construction properties that have already seen a lot of paperwork. And, as can be seen, the shifting of gears has slowed down the growth of the sector in many states. The properties that were under construction at the cusp of the switch to RERA are bearing the worst brunt as their regularization and documentation had to be changed midway. And, until these properties get completed, their respective builders and developers are not willing to start off with new projects. This means, there is a lot of pressure on them to complete the ongoing projects and sell them, failing which there will be a pile-up of unsold inventory.


  • The DeMon-RERA Impact

Experts express unison in the opinion that the demonetization drive by the Indian government in November 2016 was a blow to the real-estate sector because of the unprecedented and heavy cash crunch that made an appearance without any warning. Add to that, the RERA Act has forced builders and developers to mend their ways and set things straight, and bring about transparency at every level.

The back-to-back moves by the Indian government have taken the businessmen in the sector by shock, and it is only natural that they will need time to ensure things are in order. Until then, the sector is expected to continue facing a slowdown. However, given the motive of RERA to ensure thorough regularization and accountability in real estate, it is believed that the sector will start looking up gradually and that the benefits of the Act will be here to stay.


This is a guest post by Dinesh Dhawde

Saturday, September 16, 2017

Joint Venture agreement and registration process between a land owner and the real estate developer in India.

Author: Sachin Gupta | Find me on Twitter

In one of our earlier post, we covered the topic of joint venture agreement between landowner and the real estate developer. Keeping in mind the interest shown by audience in that article and the number of emails that we received about a sample joint venture agreement, we have decided to write another post covering sample agreement and registration process between a land owner and the real estate developer.

An owner of a piece of land (an individual or a company) can enter into an agreement with a developer to construct residential or commercial premises on land owned by the former, with the developer getting a right to sell the whole or part of the building to be built. The consideration payable to the owner in this case may be in the form of a lump sum (to be paid upfront or in installments) or alternatively in the form of a share in the property to be built or a combination of payment plus part of the property to be built.

Find below the sample joint venture agreement between a land owner and the real estate developer.




Source: National Housing Bank




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Saturday, September 9, 2017

What are the main approvals you need from the concerned authorities in urban areas while constructing a house in India?

Author: Sachin Gupta | Find me on Twitter

Building one’s own house is what most people dream of. You are always filled with the excitement of designing your bedroom, drawing room, choosing the right set of tiles for the floor, bath fittings, modular kitchen design, etc.  However, in all this frenzy, one might lose track of important approvals that are required from the city planning bodies.

To ensure that your dream home takes a concrete shape in a smooth manner, you need to obtain certain approvals from the concerned authorities such as Municipal Corporation, Area Development Authority, Electricity Board, Water Supply and Sewerage Board, etc. You must submit relevant documents/certificates along with the design plan to the concerned authorities.

In case, you are not constructing your own house and rather you are buying it from the real estate developer in a group housing society, then again, you need to verify that your developer has approvals from the concerned authorities such as Municipal Corporation, Area Development Authority, Electricity Board, Water Supply and Sewerage Board, etc.



Here is a quick reference for the main approvals you need from the concerned authorities in urban areas while constructing a house:






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