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Monday, August 18, 2014

Shall I invest in commercial properties with 12% assured returns scheme in India?

Recently in the month of May 2014, the managing director of Vigneshwara Group and two of his family members were arrested for multi crore alleged fraud. What was the fraud? Well, the group is in the business of real estate. Ohhh…real estate…yea, most of the frauds happen in this sector only. In this case, the group had received money from investors (around 700 of them) for commercial office space properties in Gurgaon and Manesar. What was the selling point of this group? This group isn't a household name like DLF, or Unitech. So, what was the selling point which brought in these many investors? Well, the selling point was ‘12% assured return on investment, till the possession of the property’. So, if an investor invested about 1 crore rupees for 1000-1200 square feet of office space, then he/she will continue to get 12 Lacs rupees per year as investment returns till the property is handed over. And the builders normally in India claim to handover the property in 3 years.

However, Vigneshwara Group despite taking money from around 700 investors for properties in and around Gurgaon in 2006-07, and promising assured returns till possession, the group allegedly didn't begin construction of some projects and defaulted on payments to investors. And that was the reason "The three members were booked under sections 420 (cheating), 406 (breach of trust), 120B (criminal conspiracy) and 34 (common intent) of the IPC".

On the surface, the 12% assured return is not a bad deal. For an investment of Rupees 1 crore, one would get 36 lacs rupees back in 3 years as assured returns. And at the end of 3 year period, the property is handed over which can be leased to earn decent income. And of course, there will be capital appreciation gains as well. So, on the surface, it looks a good deal.

However, as is the case in life, one needs to scratch the surface to fully comprehend the deal. Let’s do it here:

Why do real estate developers come up with such fancy schemes?

  1. Bank money is not available or is very expensive: What do you think? The builder did not try to raise money for the project through banks or formal channels? Yes, of course, he did…but the money was expensive, i.e. @ 17 or 18%. And he found the easy goats in form of unsuspecting investors who have plenty of cash with them.
  2. These schemes ensure project is sold off at early stage: Real Estate is a risky business, but a builder is always carrying out financial engineering calculations to make sure his interests are safe. When a developer launches a new project especially in commercial category, he wants to play it safe and sell the project to investors along with the incentives of schemes like 12% assured returns. Selling a residential project is rather easy because of demand in India; however, selling a commercial project takes financial engineering skills.
  3. Lack of other funding options: Why can’t builders raise money from other sources such as Private Equity funds or other institutional funds? Well, all these funds carry out comprehensive due-diligence before investing in any project. And the due-diligence process also involves supply-demand analysis for the commercial property along with builder’s track record, etc. And based on their analysis they decide not to invest in such projects if supply of such kind of property is high or demand is low. Because at the end of the day, the commercial property will be valued on the basis of monthly income it can generate once leased.

Why do builders fail to deliver?

Well, all is not lost for investors who invest in such projects provided builder delivers on his promises. But a real estate developer seldom delivers on his promises and that’s why these issues of fraud and money laundering keep on sprouting every now and then.

Why do builders fail to deliver? ‘Greed’ is word that best describes the failure of the builder to deliver on time. Having successfully launched and sold the commercial project on the back of 12% assured returns scheme to fallible goats, he begins to start acquiring land parcels for new projects with similar schemes.  If one project can be successful, why can’t other projects be successful? And in doing so, he diverts funds received from first project to acquire land parcels. The construction progress of first project is delayed, and there is no money left to pay the assured returns as well.

If the builder has remained disciplined, the 12% assured return scheme would have worked. But that is a Utopian scenario.

Are schemes like 12% assured returns good for investors?

  1. Stay away from such schemes if you are a first time investor.
  2. If you have propensity to invest in real estate and can carry out due-diligence, then one can consider such schemes. Due diligence involves carrying out supply-demand analysis, builder’s track record, income levels of the people in the city, etc. It is a challenging task and one should look at if banks or institutional funds have invested money in the project or not? These banks or institutional funds will not invest money in any project without carrying out the due-diligence.

Good Luck with Real Estate Investment!

Friday, August 15, 2014

Happy Independence Day India

Happy Independence Day India!

NirrtiGo wishes each and everyone good times ahead.

May Real Estate sector continue to shine and flourish!

Tuesday, August 12, 2014

Why Dwarka is one of Delhi NCR’s sought after localities?

Dwarka is a micro market which is located in the Delhi National Capital Region. It is located in south western part of Delhi in Delhi NCR and is considered to be one of the most sought after real estate destinations in Delhi NCR. There are many factors going in Dwarka’s favor which have earned it this sought after title. The area is not very pricey, has good social and civic infrastructure and is well connected to all parts of Delhi.

Dwarka lies in close proximity to both Delhi and Gurgaon. It is also well connected to Noida. It is one of those areas which is preferred by those who are working out of these cities. It is also well connected through the Blue Line of the Delhi Metro. Any area which is well connected through a metro line is constantly in demand. Metro connectivity acts as a catalyst for real estate growth for both residential and commercial properties. The Blue line of Delhi Metro Rail begins from Noida City Center and ends at Dwarka Sector 21. Almost all the major sectors in Dwarka have a metro station with a total of ten stations being present in Dwarka. The locality is also well connected to the Indira Gandhi International Airport. It is located at a distance of 10 kms from the airport. Dwarka is also well connected to the airport through the Delhi Airport Express Line. Any property which is located within a 2 kms radius from metro station witnesses a price appreciation of about 20 to 30 percent over time. Hence this is true of properties such as 3 BHK apartments in Dwarka which are located near the metro station.

The affordable rates have also made Dwarka a destination for rentals. Those who are working out of the major commercial hubs in Gurgaon and Delhi prefer flats for rent in Dwarka as they are more affordable than those in their locations. A 2BHK flat for rent in Dwarka can fetch a rental income between INR 15000 to INR 18000.

The most preferred budget range in Dwarka falls between INR 1 and 2 crores followed by the INR 20 to 30 lakhs range. The most preferred unit size for properties here is between 751 to 1000 square feet followed by the 1001 to 1250 square feet range. The most sought after apartment configuration here are 2 BHKs followed by 3 BHK apartments in Dwarka. The area is considered to be an end user’s market and falls under the middle income category.

Since Dwarka falls under the planned development category, the roads and other civic amenities are well laid out and planned here. The area also possesses educational institutions of good repute. Most of the housing units here have been developed by the Delhi Development Authority (DDA).

Whether you are looking to purchase 3 BHK apartments in Dwarka or just looking for flats for rent in Dwarka, the area will be a good fit for anyone as the property rates are not very expensive here.

This is a guest post by Sulabha Kulkarni who is a freelance writer and an avid blogger. Her areas of expertise are flats for sale in Noida.

Monday, August 11, 2014

Furnished Office Space 15000 Square Feet on Golf Course Road Gurgaon for Lease

E-Commerce, IT/ITES, Consulting, Banking & Insurance, Other financial services, or Companies looking to set up their Head Office in Gurgaon have an opportunity to lease 15000 Square Feet of A-Grade Office Space at highly attractive rental and terms. The Office space is fully furnished & ready to move and offers following amenities:

  • 170 workstations
  • 15 cabins
  • 1 Cafeteria for 35 persons
  • Separate toilets for Ladies/Gents/Directors
  • 15   reserved car parking space
  • 100% Power back up
  • Conference hall for 50 persons

This fully furnished office space on 3rd floor with a super area of 15000 sq ft is located on one of the most prime location at Golf Course Road, Sector 53 in Gurgaon.

Office Space Details:

FLOOR : 3rd Floor
COVERED AREA : 15007 square feet
POWER BACK UP :  Available with DG
CABINS :  15 
TOILETS :  3 Gents, 3 Ladies
CAFETERIA :  1 (35 People)


For more details:

or Write to us at

Thursday, August 7, 2014

Pune Real Estate Trend 2014

Gera Pune Realty Report January 2014 to June 2014 revises price increase expectations of the Pune realty market for 2014 to be in the region of 10% to 14%

  1. The half yearly price increase has been at the lowest in years at 2.2% 
  2. Pune realty market has expanded by only 22% in the calendar year June 2013 – 2014 as compared to 31.9% in the corresponding period of June 2012 - 2013
  3. The average price across the city is pegged at Rs. 4910/- per square foot 
  4. Inventory has reached an all-time high of 66,279 units which translated into 29% increase over the past year

Pune, August 6, 2014 - Gera Developments, one of the pioneers of the real estate business in Pune and the creators of premium residential and commercial projects in Pune, Goa and Bangalore released the Gera Pune Realty Report for the period January – June 2014. The consolidated report which is now an industry benchmark presents a detailed update and analysis of the Pune real estate residential market. The current report reflects that the impact of the overall economic slowdown has finally started showing on the Pune real estate numbers over the last 6 months and clearly indicates that the same has had a bearing on the demand in the market place. The assessment of the overall gross stock (defined as projects under construction and ready projects with more than 5% unsold stock and more than 10 units) reveals that the rate of market expansion has come down in the last 12 months i.e. June’ 13 to June’ 14. This period saw the gross stock rise from 200,944 units to 245,674 units, an increase of 22% as compared to the preceding 12 months from June ’12 to June ’13 which saw stock rising from 152,311 units to 200,944 units, an increase of 31.9%.

The half yearly price increase has been at the lowest in the years at 2.2% for the period January’ 14 to June’ 14. There is however a counter effect of increased loading and extra charges that has, to an extent added to the price rise but does not show up in the normal analysis. The average price across the city is now just shy of Rs. 5000 psf and stands at Rs. 4910 psf. The average basket of homes has delivered a 41.29% increase in rates over the last 3 years where average prices in June 2011 were at Rs. 3475 psf.  The 3 year compounded annual growth rate has been 12.25%. Investors who have purchased homes 3 years ago with mortgage rates at 10.5% and loan to value of 80% would have seen an equity returns of 18.75% per annum, making real estate still an attractive investment especially when factoring in tax benefits and deducting entry load costs.

Commenting on the key findings of the Gera Pune realty report, Mr. Rohit Gera, Managing Director, Gera Developments said, “We have studied and evaluated the Pune realty market to realize that on the surface there seems to be a slowdown in the rate of increase of realty prices. However the quantum of slow down needs to be viewed with total cost of purchase rather than the traditional rate per sq. ft. model that has been used to value property. The loading of the common areas onto the carpet area is in the region of 33% to 35% for the common areas.  This has had an impact of 8% - 10% on the carpet area or 5% - 7% on the saleable areas. The increase in the extra costs like club house charges, infrastructure etc. has risen more than the rates themselves thereby having a positive impact on the overall cost that the consumer pays for the home.”

Mr. Gera further added “We have gauged the market in terms of supply and unsold stock based on the category of housing. The categories we have created are Budget, Value, Premium, PremiumPlus & Luxury. These parameters have helped us to understand that the maximum stress is on the luxury segment (where current quoted prices are in excess of Rs. 7500 psf) which has seen a 61% rise in unsold stock in the last 12 months. This segment is most exposed to the vagaries of the economy which has resulted in to a deferment of purchase. Also customers seem to have found greater value in the prices between Rs. 6000 and 7000 psf.”

For today’s buyer there may appear to be a slowdown in the increases in rates over the past years, however it is interesting to note that the rate of increase in luxury specifications and amenities has only increased. Locations where Italian marble or home automation would have been considered extravagant a year ago, now have a number of projects offering higher better specifications and amenities.  All these amenities end up costing the developer but are provided in a hyper competitive market. The boost to infrastructure and civic amenities  have provided customers with a better bargain since homes are actually getting cheaper in real terms with lower rates of appreciation, adjusted for infrastructure, better specifications and amenities. Though the additional loading and extra costs have impacted the overall prices, customers continue to look at the cost per sq. ft. and as such, feels satisfied that the rates have not risen. In reality, the overall cost of ownership has increased over the last few years.

While commenting on the price outlook, Mr. Gera explained that, “Our previous price outlook had indicated an increase of 13% to 18% for the year 2014. The first half of the year has shown a mere 2.2% increase.  Keeping this in mind, we would like to revise our outlook for the future and would recast price increase expectations for the upcoming 12 months to be in the region of 10% to 14%.”

The increase in inventories has also continued with unsold inventories at an all-time high – the unsold inventory that was at 39238 units 24 months ago increased by 30.9% to 51363 units 12 months ago and currently stands at 66279 units, an increase of 29% over the past year. On a macro level, areas like Chakan and Kondhwa saw the most infusion in terms of new supply, followed by Wagholi and Pradhikaran region of PCMC. City center, Vimannagar, Erandwane, Kothrud & Karve Nagar witnessed the maximum price appreciation in the last 24 months while Sopan Baugh, Khed, Aundh and Koregaon Park witnessed the lowest price appreciation owing to the saturation in those micro markets.

Years of the economy slowly grinding to a halt has finally seen the impact on the real estate sector.  While there is a renewed sense of optimism in the air, the same has not translated into demand into the market place as yet.  This enhanced demand when triggered has the potential to create an upward pressure on prices as seen in the earlier years.

The counter effect to increasing prices is the hope that that simplified procedures with reduced red tape will improve the supply into the markets thereby keeping prices in check. The question of the timing of these two significant developments will determine the impact on prices.  The more likely outcome seems to be that the optimism will turn to demand sooner than the simplification of processes and reduction of red tape.

About Gera Developments
Gera Developments, one of the pioneers of the real estate business in Pune are recognized as the creators of premium residential and commercial projects in Pune, Goa & now Bangalore. Gera Developments has recently unveiled ChildCentricTM Homes, a new way to live for today’s young home buyer. It is a revolutionary concept and an innovative solution that is set to create a new category in the residential real estate industry and establish a benchmark in the product + services model.

Find the detailed Pune Real Estate Report below:

Pune residential realty report for the period January to June 2014 from Green Realtech Projects Pvt. Ltd


Demographic Projections for Pune Municipal Corporation, 2001-2027

Pune's Population Projections:

Year Population
2001 1855476
2007 2138243
2012 2371663
2017 2650482
2022 2975720
2027 3356121

Monday, August 4, 2014

What are the Key Stages in Construction of a House?

There are 2 ways in which one can own a house. One, by buying it from the real estate developer in a group housing project, and the second option is by buying a plot of land and constructing it in your own way by adhering to building guidelines.

There are pros and cons of both the options.

When you buy the house directly from builder, you do not have to worry about land acquisition, approvals, construction, architects, contractors, etc. However, builder of the housing project may take upward of 4-5 years to hand over the housing unit to you. There is all the likelihood that you may not like the final product and therefore you might end up spending decent amount of money on renovation of your house. There could be other issues such as not finding the apartment on your desired floor, or an apartment with good view and access to sunlight, etc. As far as payment is concerned, you will be making it as per the construction linked plan and that is a big positive.

On the other hand, if you decide to build your own house, then, you take charge of all the things such as buying the plot, obtaining necessary approvals, dealing with architects & contractors, construction, and finishing. The whole process of building your own house may take about 1 year or more depending on the size of the house you wish to build. However, there will not be any compromise on quality. One important point you should take into consideration is that building your own house will be costly than buying it from the developer. Moreover, you should be prepared to shell out significant portion of the value of the property in 2-3 months time period. Also, you may not get benefits of group housing project such as gym, club, pool, playground, etc.

Having assessed the pros and cons of both the options and then deciding to develop your own house, you should stick to following construction stages in the development of your house.

Saturday, August 2, 2014

Bloomberg TV India to launch “Tracking the Recovery – Real Estate”

Press Release:

~ First of its kind show that is all set to be the final world on India’s Real Estate story ~

Mumbai, 1st August, 2014: Bloomberg TV India, the nation’s leading English business news channel, is launching the first of its kind show - Tracking the Recovery - Real Estate.  The on-air series will put the spotlight on the road to recovery and analyse the triggers of the industry’s growth by engaging industry stalwarts in a series of exclusive round table discussions. The show will also rank India’s most successful real estate firms.

The realty sector in India is upbeat about Finance Minister Arun Jaitley’s Budget promise to provide incentives for the establishment of Real Estate Investment Trusts (REIT). This has sent, the stocks of real estate developers soaring high, continued improvement in the overall macro-economic scenario; both telltale signs of the real estate sector coming back on track.

The Indian real estate sector has enormous potential at churning out huge revenue and contributing to the country’s economy. Yet, the sector has to overcome a lot of challenges in order to move ahead and be stable. Tracking the Recovery – Real Estate, will help one understand the challenges faced by the real estate industry as well as the means to clear the roadblocks in its path.

Mr. Lavneesh Gupta, COO, Bloomberg TV India said, “Tracking the Recovery – Real Estate, promises to serve as a reality check for the Indian real estate market. Our efforts will be to focus on the larger issues around the real estate industry and its future growth, as the country’s best thought leaders highlight the growth triggers and map the sector’s road to recovery. Taking into consideration our position, as a responsible business news channel, we will present an up to date analysis on an industry that contributes to the development of the economy.”

Tracking the Recovery – Real Estate, will be a five-part series comprising of panel discussions with the best minds in the sector, on a single platform, to be held in Mumbai and New Delhi. These discussions will involve industry chiefs and thought leaders from the real estate sector, telling it as it is, to help you get real with realty. The panels will be moderated by Ms. Mini Menon, Executive Editor – Bloomberg TV India.

“Tracking the Recovery - Real Estate” will air exclusively on Bloomberg TV India, in the month of August, 2014.

About Bloomberg TV India:

Bloomberg TV India, nation’s leading English business news channel with unique access to newsmakers and research-based data, illuminates stories that affect companies and industries. Bloomberg TV India provides immediate perspective on critical business news as it happens, from where it happens. Backed by an enviable squad of Indian journalists, global network of 150 bureaus and 2500 professionals, we deliver the most credible insights to our viewers. 

Bloomberg TV India’s focus on delivering breaking news and key insights aligns with Bloomberg's overall goal of being the world's most influential news organization. The core of the channel’s viewership is formed by influential leaders, business executives, and affluent professionals.

Friday, August 1, 2014

Service Tax on Under Construction Property in India

Whenever a builder sells an apartment in an under construction project to a home buyer, the builder is said to be rendering the construction service to home buyer and therefore, service tax is levied.

The service tax is levied only on under-construction property and not on completed property. An under-construction property is one which is still not complete and the completion certificate of such a property has not been received from relevant authority (Local Municipal body or development authority).

Therefore, it becomes mandatory for the builder to collect service tax from the buyer and deposit it with the service tax department.

Budget 2010 brought Abatement Scheme, under Notification No. 1/2006 dated March 1, 2006, which provides that the contractor is entitled to claim abatement to the extent of 67 per cent of the value of services rendered by him. Hence, the net effect of the tax could be lesser than the 3.4 per cent, since construction attracts service tax only on 33 per cent of the value. In the 2010-11 budget, the Finance Minister rolled back service tax to 25 per cent of the value.

So, essentially, the service tax is levied on 25% of the gross value of the property. In other words, 3.09 % will be the effective rate of service tax on under construction properties in India.

Service Tax – 12.36 %
Abatement – 75%
Service Tax applicable on under-construction property – 25% x 12.36% = 3.09%

One can also find out the Total Property Buying Costs in India.

For more on Service tax on under construction property, read the below document:

Monday, July 28, 2014

What could be the causes of Realty Project delays? And what can real estate developers do to correct this issue?

Take any newspaper, or online forum, or discussions among stakeholders within the property circle, one would notice that project delays have become the endless talking point with no solution to it. There seems to be no dawn for this darkness which has engulfed the entire real estate spectrum. Mumbai, Pune, Chennai, Bangalore, Kochi, Hyderabad, Gurgaon, Noida, Greater Noida, Kolkata, Chandigarh, and other parts of the country continuously witness rising cases of project delays by real estate developers. A middle class home buyer suffers the double whammy of paying the rent as well as EMI (Equated Monthly Installment). On top of that, a home buyer whose energies should have gone towards his/her career progress or personal fulfillments is now consumed by this endless struggle to get the dream home. What a pity? People are nation’s best asset and when those assets are put to use in unproductive ways, then it certainly hampers growth and creativity.

Recently, buyers of ‘Unitech The Residences Project in Gurgaon’ were at the project site to protest against the delay.

“We are exploring the option of moving the High Court and approaching the CCI, apart from writing letters to the Prime Minister, the promoters of Unitech and agencies such as SEBI for intervention and investigation in the matter,” Vikram Bishnoi, President of the Unitech Residences Apartment Buyers’ Association, told BusinessLine.

Similarly, buyers of ‘Emaar MGF’s Palm Drive project in Gurgaon’ were seen demonstrating against the project delay. This project was launched in end of 2007 and delivery was supposed to be made in December 2010. However, the project has not been delivered yet. Builder says they will start delivering the project this year.

Similar cases have been witnessed across the country and as per the CCI (Competition Commission of India) records, biased builder-buyer agreement topped the list of complaints to CCI followed by complaints for project delays.

So, what could be the reasons for realty project delays? Let’s look at from the builder’s point of view as well:

  • Multiple approvals
First thing first, real estate development is a detailed and long process. A builder has to seek various permissions and approvals from the relevant authorities to launch, develop, and complete the project.

To name a few, a real estate developer has to seek approvals/permissions from National Highway Authority of India (NHAI), fire department, pollution department, ministry of environment, electricity department, Airports Authority of India, Ministry of Labor, Ministry of Mines, Central Ground Water Board, Directorate General Civil Aviation among many other sub-departments. It is widely believed that all in all, a builder has to seek a minimum of 40 to 60 approvals depending on the state he/she is operating in.

And it takes time to seek these many approvals, sometimes 2-3 years. Is it an ideal scenario? No, certainly not, and that is why builders are demanding for a single window clearance system. With single window clearance system, costs of projects can be brought down by whopping 20%.

  • Manpower shortages
Real estate is a capital and labor intensive business. Labor shortage is one major issue which impacts the timely delivery of a housing project. In recent times, labor wages have gone up and despite that there is paucity of skilled labor in the market. To counter this, many builders have incorporated pre-fabricated construction technologies. However, this has been restricted to large developers with access to funds and resources to set up such facilities.

  • Lack of funds
Lack of funds is also a major issue in timely completion of a project. With tight monetary policy, cost of funds go up and therefore, a builder explores various options to raise funds by way of underwriting, loans, customer payments, Private Equity money, etc.

  • Lack of demand for the project
Sometimes, demand for the project is rather lackluster. Last 2 years have witnessed low demand for housing and therefore a builder who launched the project 2 years ago is stuck in no man’s land because on one hand monetary policy is tight and on another hand home sales have dropped. This has dried up the funds for the development of the project.

  • Funds diversion to other projects or land deals
Not all of these projects are delayed because of external factors. Many a times, builders divert customer payments to acquire new land parcels for future expansion. To overcome this, Government of India has come up with Real Estate Regulatory Bill which will ensure that 70% of funds received from customers will go in the development of the project.

What can builders do to correct this issue?

Even though, home buyers are the one who suffer the most in cases of project delays, there is very little that they can do apart from protests and litigations. Read more about what can home buyers do if a realty project has been delayed.

The problem has to be fixed by builders themselves.

  1. Builders and their associations can indulge in talks/consultations with government officials to make way for single window clearance system.
  2. After the Budget 2014, real estate sector can breathe a sigh of relief. FDI norms have been relaxed and a builder can take benefits of that.
  3. Budget 2014 also provides incentives for Real Estate Investment Trusts (REIT). And builders can now float a REIT to generate funds for their commercial projects, which will ease out the liquidity crunch.
  4. Even though, Government of India has brought in Real Estate Regulatory Act, the Builder bodies should also come up with a model ‘builder buyer agreement’ which will protect consumer interests.
  5. Implement fair marketing practices. There is no point in making a commitment that project will be delivered in 36 months from the date of purchase when it is fairly evident that project development will take about 5 years. Builders Bodies should also make sure that communication between a builder and the customer is fair and transparent.

Thursday, July 24, 2014

Noida Extension in the fast track of realty development

Noida Extension part of Greater Noida (part of the state of Uttar Pradesh) has come under the realty radar. The four sectors which comprise of the Noida Extension are governed by the Greater Noida Development Authority. This area was essentially dedicated to affordable homes but things are starting to change now. Noida Extension will be transformed into a new residential hub in the National Capital Region. Several new projects are launched in the area getting a good response from residents in and around Noida Extension. The Dadri Main Road connecting Noida Extension provides better connectivity along with the upcoming expansion of the metro in the National Capital Region. The area is mostly occupied by small scale and medium scale industries. In terms of social infrastructure, the area has a good stronghold with a number of entertainment avenues.

In the year 2011 we saw 2.5 lakh homes launched here out of which 1.5 lakh homes were bought in the pre constructions stage itself. The construction work came to an abrupt halt with the farmer protesting on land acquisition issues. However this has been resolved now. Property in Noida Extension turned out to be a good investment option after all.

“The housing demand in Noida Extension is going to be very high after National Capital Region Planning Board (NCRPB) approval, while supply is very weak. Prices are bound to increase because of various factors such as hike in compensation to farmers and rising input cost. Prices were Rs. 2,100-2,200 a sq ft in this region last year. Now we expect the same to go up to about Rs. 2,600 per sq. ft. “Amrapali Chairman, Anil Sharma told PTI.

However if you look at flats for sale in Noida, they do not fall under the affordable housing bracket anymore. With the increase in land acquisition cost and construction cost including cost of raw material in the recent past, builders are struggling to deliver the dream of affordable housing to the common man. "We were selling homes at Rs. 2,300 per sq ft in May last year when farmers protest started on land acquisition issue. Now, we will launch projects at Rs. 3,200 per sq ft in Noida Extension," R K Arora said, Chairman Supertech said to NDTV Profit.

"This area has been considered as region of affordable homes. Lot of burden has to be borne by the developers. So there will be little bit of price increase," JLL India CEO (Operations) Santosh Kumar said to NDTV Profit. With the steady increase in demand, prices of property in Noida Extension are said to go up. This will further affect the current scenario including the purchasing power of an individual.

Today Noida Extension is planned by the development authorities in such a manner that it has become a haven for urban dweller. The prices are still comparatively lower compared to the rest of the National Capital Region. Following the PPP Model – Public Private Partnership, the development authorities need to chart out future infrastructure developments here.

This is a guest post by Sulabha Kulkarni who is a freelance writer and an avid blogger. Her areas of expertise are finance and real estate sector in India.

Monday, July 21, 2014

Typical Property Registration Process in India

Buying or leasing a property requires that one has to go to through the process of registration at district’s Registrars/Sub-registrar’s office. Under Section 28 of the Registration Act, documents relating to immovable property should be registered in the office of Sub-Registrar of sub-district within which the entire or some portion of the property is situated.  Under Section 30(1), a Registrar is empowered to accept a document which can be registered with the Sub-Registrar who is his subordinate.

Any property that is sold, bought or rented, under certain circumstances, requires to be registered inclusive of:

  1. A valuable sale or purchase of immovable property.
  2. If a property is rented for a period of more than 11 months, then the agreement needs to be registered.

Buyer and seller of a property enter into a sale agreement. This sale agreement typically defines the guidelines and conditions that govern the sale of an immovable property. The sale agreement will also include the details of buyer and seller, property details, location, price, payment structure. Once the sale agreement has been created and signed by both the parties, then this agreement is registered with the registrar according to India’s registration act of 1908.

Once the sale agreement is registered with the registrar, the buyer will also have to pay the applicable stamp duty. Find more about stamp duty and registration charges in various states across India.

Here we present the step by step procedure for registration of property. The procedure remains same whether you buy the property from an individual or from a real estate developer.

Friday, July 18, 2014

What are the various kinds of property disputes in India? What are the laws to resolve these property disputes?

Since time immemorial, property disputes of various kinds have resulted in tension and altercations among parties involved. The parties involved could be family members fighting for ancestral property, buyer and a real estate developer, illegal authorization of a property by someone who does not possess the property titles, cooperative housing society, or buyer and a lender, etc.

There could be multitudes of reasons for property disputes such as title certificates, illegal possession, transfer, mortgage, wrong land use, contractual, rental, etc.

All of these property disputes can create lot of trouble for the buyer or for the person holding property titles. And therefore, taking a legal route to resolve these issues becomes the eventual option. In India, state governments as well as central government have passed various laws in the parliament to resolve property related issues.

What are the various kinds of property disputes in India? What are the laws to resolve these property disputes? What kind of law is applicable to your specific property related dispute? We present them below:

Monday, July 14, 2014

What are the key takeaways for real estate sector from Indian union budget 2014?

Last week in India was all about union budget. Since the new Modi Government came into power in Delhi, most political and economic commentators were looking forward to the Budget 2014. The media and and coffee shop discussions were all about speculating and making projections as to what will or not be included in Minister Arun Jaitley's maiden budget. The budget, which is expected to signal the dawn of socio-economic revival or “acche din” by Modi Government, was the most talked about event.

Railway budget 2014 was presented first, and then the general budget. While the industry has welcomed the budget presented by union finance minister Arun Jaitley, the opposition has slammed it. However, with this budget, one thing is given, that a common man will be able to save more. And these savings when circulated in the eco-system can boost investments and thereby GDP growth.

Among all the sectors, it seems, real estate sector was given maximum attention by Finance ministry. There were slew of measures to revive the sector and boost the confidence of both home buyers as well as real estate developers.

What are the key takeaways for realty sector from union budget 2014? Here we present them.

  • Tax relief available for housing loan interest payment

We all know that home-ownership continues to be the lifelong dream of most middle class and lower middle class people in India. And financing this dream has become expensive due to high interest rates. While, interest rates are not the domain of Finance ministry, the ministry has increased the deductions on interest on home loan from present Rs. 1.5 Lacs to Rs. 2 Lacs. How does this help the buyer? We present the explanation below.

If Gross Income Rs 9 Lacs If Gross Income Rs 15 Lacs
Before Budget          After Budget   Before Budget          After Budget
Gross Total Income 900000 900000 1500000 1500000
Less Interest Paid on Home Loan 150000 200000 150000 200000
Gross Taxable Income 750000 700000 1350000 1300000
Less Deduction under Section 80C 100000 150000 100000 150000
Total Taxable Income 650000 550000 1250000 1150000
Tax Payable 60000 40000 205000 175000
Education Cess 3% 1800 1200 6150 5250
Total Tax Payable 61800 41200 211150 180250
Savings 20600 30900

  • Relaxation in FDI for real estate sector

With a view to catalyze investments in development of townships and infrastructure, 100 per cent FDI is allowed under the automatic route in townships, housing and construction development projects and hospitality sectors such as residential complexes, shopping centers, malls, multiplexes, Cineplex’s, commercial offices, hotels/service apartments, resorts, hospitals, educational institutions.

Prior to budget 2014, the FDI in real estate sector in India was subjected to certain conditions.
    • Minimum area requirements, in case of
      1. Development of serviced housing plots - 10 hectares.
      2. Construction-development projects - built-up area of 50,000 sq. mts.
      3. A combination project, any of the above two conditions will suffice.
    • Investment
      1. Minimum capitalization for wholly owned subsidiaries - US$ 10 million; for joint ventures with Indian partners - US$ 5 million, to be brought in within 6 months of commencement of business.
      2. Original investment cannot be repatriated before a period of three years from completion of capitalization.
      3. The investor may exit earlier with prior approval from Foreign Investment Promotion Board (FIPB).

Post Budget 2014, some of these conditions have been relaxed. The relaxed conditions are:
    • Minimum area requirements, in case of
      1. Construction-development projects - built-up area of 20,000 sq. mts now from 50000 sq. mts.
    • Investment
      1. Minimum capitalization for wholly owned subsidiaries - US$ 5 million now from US$ 10 million.

These relaxations will hasten the growth of real estate development in tier 2 and tier 3 cities, because with new rules, small scale developers can also have access to FDI.

  • Incentives for Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts are investment vehicles which are used to pool in investments from retail investors and the money is invested in real estate projects with steady stream of rental income. REITs are successfully used in many developed and developing countries. Mr. Arun Jaitley has announced that REITs will qualify under certain tax provisions to become a pass-through entity that distributes to its shareholders substantially all of its earnings in addition to any capital gains generated from the sale or disposition of its properties.

This will ease the pressure on banking system and provide liquidity for the real estate sector. 

  • Focus on affordable housing
With the objective of providing housing for all by 2022, the government has increased the Rural Housing funds allocation to Rs. 8000 crore for this financial year. At the same time, Rupees 4000 crores have been provided to National Housing Bank (NHB) to provide cheaper credit for the urban households belonging to low income groups.

All of this will add substantial value to the development of affordable housing in financial year 2014-15.

  • Development for 100 smart cities
This is a long term vision and by allocating the corpus of Rupees 7060 crores, Finance minister has set the stage for improvement of infrastructure in Indian cities. While, it may take years to realize the development of 100 smart cities, but nonetheless, it is a welcome step. It has been argued that the allocation is paltry in relation to the levels of investment required to realize a Smart City. Minister Jaitley's speech was marked by a silence about raising investment in this sector through the Public Private Partnership (PPP). Overall, this move signifies a positive intention in the right direction.

Friday, July 11, 2014

Affordable Housing Projects on a Rise in India

In the recent past, affordable housing projects are on the rise in India. The government has also taken several measures in order to promote affordable housing. The following post explores the same.

  • Introduction

India has been a land of stark contrasts when it comes to the real estate and property market. At one side, impenetrable metro areas have witnessed some of the highest property rate increases and have attracted new dwellers from all over the country; on the other side, the overall property trends for the country have experienced a much lower uniform growth and investors have been complaining that they are not getting expected returns on the money that they put in the real estate market.

Despite the apparent slump in the property market for high-end housing projects, builders and development companies working in the low income housing sector have reported great sales and returns. Through special packages, attractive pricing, and targeted focus on mid-level income groups, these developers have ensured high sales and have created so many great options for investors pan India that they are at times confused over which package would offer them the best deal. The initiatives by the central government have also considerably aided these changes and made affordable housing more popular.

  • An urge by the central government for increased focus on affordable housing

The market may have become saturated for luxury and high end segments, but the affordable housing segment is not just on a high, it is experiencing a boom. Simply designed, high quality homes that are aimed at low income groups, and offer buyers a lot of flexibility when deciding a payment plan are a huge hit and have made the builders in this segment very happy. For example, in Chennai, with an advance payment of as little as INR 1.25 lakh some builders will offer you a  new home.

M Venkaiah Naidu, the Minister of Urban Development and Housing and Poverty Alleviation, has asked banks across the country to make it easier for people with low income to get financing for home loans in a simpler manner. He also issued an expeditious completion order to the various builders involved in affordable housing projects, and made it their top priority.

  • Affordable Homes on the Rise
The push by the central government towards an increase in affordable housing is not just for a few cities, but for the country as a whole. The urban poor in particular, slum dwellers and people living on rent should have increased access to cheaper homes, and the government is trying to make sure that this happens.

Of late, the Bangalore property market has also witnessed the launching of affordable homes. Several builders are investing in new projects that belong to the affordable category. Needless to say, an increased demand has been witnessed in this particular segment. Real estate developers like Tata Housing Group and Provident Builders have already forayed into this segment. Welworth City at Doddaballapur, is the first flagship affordable housing project in Bangalore.

On the other hand, Tata Housing is all set to launch its maiden affordable housing project under the banner New Haven. Managing director and chief executive officer Brotin Banerjee, of Tata Housing said in a statement, “Envisaging a rising demand for affordable homes with premium facilities in the Silicon Valley of India, we are pleased to bring this iconic and successful affordable housing brand for the people of Bangalore”.

Localities in Bangalore where affordable homes are on the rise are Mysore Road, Hosur Road, Kanakpura Road. Investors are targeting these areas to build affordable housings.

Kerala has sanctioned a sum of INR 14.59 crore for the development of homes intended for the individuals and families belonging to low income groups. Tamil Nadu is also experiencing a high, with the Chennai-Vizag industrial corridor, and that will bring in a new wave of affordable housing projects. Chennai in particular has already several such projects underway, with some builders offering homes at prices as low as INR 18 lakh.

Industrial development schemes are also expected to close the gap between the number of people living in the low income bracket, and the affordable housing projects that are available to them.  With thousands of workers who will need affordable homes close to the new factory and plants that will open up, the demands for homes that offer quality at a low price will also rise exponentially.

  • Schemes available for individuals falling in the low income bracket
M Venkaiah Naidu,  has asked the banks to make it more attractive for individuals belonging to the low income bracket to apply for home loans. He also requested that the process be made simpler. A central bank that governs property development across India is needed, and Naidu says that either the NABARD will need to have its jurisdiction extended, or an alternate organization like the SIDBI will have to take up this new role. Schemes that encourage builders to use new technologies have also been discussed, and construction tools like gypsum boards are expected to be used to make these homes, ensuring the quality in the construction work, while bringing down the overall costs even more:

  1. Banks to make home loans more attractive for low income groups
  2. A central body to be put in place for managing development of affordable housing pan India
  3. Use of newer technology in construction to be encouraged in order to reduce costs

  • Price trend for affordable housing projects
Low income houses across India are becoming even more affordable. Newer construction technologies reduce the cost of building a home, sometimes by as much as half. The average cost of building a house will now be closer to Rs 900 per square foot, as opposed to the normal Rs 1500 per sq foot. Combined with the government plans that will provide builders, land at subsidized rates, affordable housing is expected to become a lot more affordable.

This is a guest post by Puspashree Mohanty

Monday, July 7, 2014

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

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

Friday, July 4, 2014

List of Permits and procedures generally required for construction of a real estate project in India

Chennai building collapsed on June 28, 2014. Death toll has risen to 61.

As rescue operations by multiple agencies entered the sixth day, Chief Minister J. Jayalalithaa announced that the one-man commission headed by Justice (Retd) R Reghupathy will probe the circumstances leading to the collapse of the building at suburban Porur on June 28.

"The Commission will find out whose ignorant attitude resulted in such a mishap that left many workers dead and others injured and decide on (fixing) those responsible for it," she said in a release.

Who is responsible for the mishap? Is it the builder, designers, or the authorities? We will get to know by the findings of this commission.

Here is a list of various permits that are generally required for constructing a realty project in India. However, these may vary for Municipal Authorities across India.

Now, once the commission probes the matter, we will get to know at which stage the laxity happened. We are also sure that necessary corrective actions will be taken to prevent such mishaps from happening in the future.

The construction processes will be streamlined and there will be enough watchdogs to make sure that construction of buildings take place as laid out in the design. We recommend setting up of non-partisan private construction quality agencies which will ensure that construction is as per the design and there is no usage of sub-standard material.

Monday, June 30, 2014

Another building collapsed in Chennai, India. What could be the causes of building collapse at such regular intervals in various Indian cities? Who is responsible for illegal and low quality construction? What can home buyers, municipal body, and builders do to stop illegal construction and low quality construction in India?

June 28, 2014 was a disastrous day in Chennai. A 12-story building named ‘Trust Heights’ under construction collapsed in heavy rain in Moulivakkam, Porur. Officials confirmed that 14 people had died amid fears that the death toll could rise as many others remained trapped under the debris. Tamil Nadu chief minister J Jayalalithaa visited the site on Sunday, June 29, 2014 and ordered a thorough probe. Reason for building collapse has been cited as ‘structural defects’.

Police have arrested six people, including promoters and employees of ‘Trust Heights’ developer Prime Sristi Housing Pvt Ltd, Madurai, in connection with the collapse.

Well, this was Chennai. But this has been happening in the country for far too long and at far too many places. In recent months various buildings have collapsed in Thane, Mumbai, Delhi, Goa, and host of other cities. Did anything change? Did local municipal bodies or town planning departments bring in new laws? Well, given the current state of inefficient and colluding bureaucracy, we can’t expect much from the babus.

What are the causes of buildings collapse at such regular interval across various Indian cities?

What could be the causes of building collapse at such regular intervals in various Indian cities? There are many theories going around and one among them is the use of sub-standard material in building construction. However, if one digs deep, then it can be safely said that most of these collapses happen because of corruption. It is now commonly believed that builders flout building codes by paying bribe to babus of governing authorities.

Take the case of Campa Cola compound in Mumbai where illegal floors were built in 1980s. The recent DLF case in Gurgaon is also a prime example of illegal construction. There are many such cases where builders and babus have colluded to maximize their gains. And there is no way that these people will care for the plight of common man and workers working on these building sites. Bottom-line of their balance sheet is what they are worried about. Well done!

Home buyers also overlook the construction quality part. Because of soaring real estate prices in metros, home buyers tend to buy whatever is served on their plate and thereby a compromise on construction quality is made. So, there is no bottom-up pressure on authorities and builders from the home buyers. And things continue to drift along like this. One building collapse here and one building collapse there…its ok, it happens. Phew…

Who will be penalized?

Well, now that, this builder in Chennai has been arrested, he and his associates may be penalized. But is this the solution? Will this penalty make sure that no such future mishaps happen? What could be done to eliminate such instances?


We are not experts in building construction codes. We are just creating awareness through this article about the urgent need of overhaul of construction practices in India.
  • Things that a home buyer can do:
    1. It is impossible for an individual buyer to conduct construction quality check of a project he/she has invested in. However, when you buy an under construction home from the real estate developer, a few unannounced visits to the construction site will help you understand the quality of construction.
    2. Ask for a copy of soil test report from the builder – Before construction, all builders will conduct soil test. You as a home buyer should be extrovert enough to ask for the soil test report. This soil test report will ensure that building is not standing on a shaky ground. Maybe poor soil condition could be the reason that this building in Chennai collapsed. So, insist on this report from your developer.
    3. Ask for a certificate of concrete mix from your real estate developer. Strength of the concrete mix is extremely important to analyze because it will directly impact whether the building can withstand the structure load or not.
    4. Visit the construction site and check the external wall thickness. The standard practice is to have 9 inches thick external wall.
    5. As a buyer, you bought the apartment by looking at brochures, and sample flat. Make sure that amenities, fittings, and apartment specifications that are provided in brochures and sample flat are also included in the legal builder buyer agreement. During the construction stage, verify if things are going as per the agreement or not.

  • Things that Authorities can do:
Well, an individual buyer can do very little in his/her capacity to check the construction quality of real estate projects. However, authorities have the wherewithal to completely eliminate low quality construction and illegal construction.

At the moment, what they do is simply issue the license based on the building plan given by the builder. If the plan meets their guidelines, a license is granted. And builder commences construction. Once the construction is complete, the authority will inspect the site and based on the observations of the completed building, a completion certificate is provided to the builder.

They do not do anything during the construction period. And that is where most of the things go wrong. That is where sub-standard material is used. That is where illegal floors are added up, etc., etc.

So what can authorities do during the construction stages?

Nominate third party private construction quality check agencies across the country. These private agencies with top civil, structural engineers shall enter into an agreement with builder and home buyers to carry out periodic construction quality check. The agency will update home buyers and authority on a regular basis about the quality adherence of a building. Who will pay to this professional and private agency? Home buyers can easily pay for the services of this agency.

Let’s take an example – A builder submits the building plan to Chennai development authority for developing a group housing society comprising of 600 housing units. Assuming that building plan adheres to the guidelines and a license is issued. Along with the license, the builder should be mandatorily asked by the authority to sign on a third party private agency for construction check. Even if the cost of services of such an agency is Rs 10 crore, it can be evenly distributed among all the home buyers. This third party agency with top talent in its rank can monitor the real estate project from foundation to completion, thereby ensuring peace of mind to every home buyer and workers working on that building project.

  • Things that Builders can do:
With so many cases of illegal constructions, many people view ‘builders’ as thugs and corrupt. This may not be true; however, that is the perception. It is important for builders to stick to building codes and deliver on the promises that are made when selling an under construction flat.

Dear Builder, Please follow the construction guidelines ethically and unequivocally. Thanks!

This article is primarily written for creating awareness among home buyers, consultants, architects, builders, government authorities to seriously assess the current state of construction in India. We cannot afford to lose so many lives to such mishaps. We encourage comments from all stakeholders. One can also write on this issue and we will carry forward that message in our next columns.

Look forward to active participation.

Friday, June 27, 2014

What is a completion certificate and how to apply for it?

In our last post, we discussed about various approvals that are needed to construct a house. We also discussed that no matter if you are constructing your own house or buying it from the real estate developer; you still need to get approvals from relevant authorities within your city.

An important approval (or document) among all the approvals is completion certificate (CC). As the name suggests, this certificate is granted after the completion of construction of your house or a group housing society. The certificate is issued when the property is ready to be moved in. Completion certificate is issued by the local development authority/Municipal Corporation certifying that:

  1. All necessary works have been completed according to the design plan and other directions, and
  2. The property is fit for moving in.

Therefore, it is your duty to apply for completion certificate when the house you are constructing is ready to be moved in. Or you should ask your developer to get the completion certificate in case you are buying the property in a group housing society such as high rise or low rise apartment complex.

Find below the procedure for obtaining the completion certificate:

Wednesday, June 25, 2014

Raj Nagar - an emerging residential locality in Ghaziabad

Delhi NCR is the hub of realty in North India, which is supported by various completed infrastructure projects, and many in the pipeline for the near future. The national capital of Delhi is the biggest urban agglomeration in the country and has many localities as a part of its growth and development strategy. Ghaziabad is one such city which enjoys many benefits because of its strategic location and good connectivity. Out of the many vibrant localities in Ghaziabad, Raj Nagar stands out because of its affordable housing category. It has been the top choice for middle income group people. There are many options of housing available namely, ready to move in homes to builder floor in Raj Nagar.

Affordable housing has been the cornerstone for investment as well as rentals here. Apartments for rent in Raj Nagar are also available at reasonably low rates. The dream of affordable housing has been made possible here in Delhi NCR as compared to other metros. It is because of no land acquisition issues as most builders had directly purchased the land in the region from local farmers. This is one of the prime reasons why affordable housing projects in most metros don’t take off or face serious troubles.

In this front Raj Nagar has fared very well and the development authorities like the Ghaziabad Development Authority (GDA), Municipal Corporation of Ghaziabad (MCG) and developers and builders have played a major role in providing good quality of life to many residents in and around the area. Raj Nagar today has all the basic infrastructure amenities and good social infrastructure to support the growing population. Because of the affordability factor many individuals are considering the area as they have an option of builder floors and apartments in Raj Nagar.

It’s perfect for people who would like to have all the facilities of modern living coupled with serene peaceful and calm atmosphere away from the crowded city center. Accessibility of the area from its surrounding localities of Delhi is good, thereby making it a favourable investment option for many. For better connectivity within the area, the Ghaziabad Development Authority has approved a Metro Line between Arthala and Dilshad Nagar. The RRTS (Rapid Rail Transit System) proposed between Meerut and New Delhi will be crossing the locality at the nearby Mohan Nagar Station. Land acquisition is in process for this project and it is likely to have positive impact on the real estate sector if experts are to be believed.

A major highlight around the locality has been the green cover around it. The Ghaziabad Development Authority has declared a 500 acre parcel of land along the Hindon River as a green belt void of any construction to preserve its serene eco-system. This commendable feet by the authorities further adds charm to this developing locality overlooking a facade of beautiful green cover.

Talking about the locality Manoj Gaur, MD Gaursons Ltd, said to Times Property that “Raj Nagar Extension in Ghaziabad is today buzzing with a lot of construction activity. This developing residential area is near the bypass and one can travel to Delhi or other cities without crossing the crowded areas of Meerut or Ghaziabad. Another good thing about the area is that it is in the vicinity of posh localities of Ghaziabad.”

This further proves that this area can be an interesting investment choice.

This is a guest post by Sulabha Kulkarni

Monday, June 23, 2014

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

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: