Tuesday, December 24, 2013

The Real Property Market of North India - an Insight

The property market of northern India has scaled great heights in the last few years. From Gurgaon to Noida and now Bharatpur to Bhiwadi in Rajasthan, the property market of northern India has evolved to a great extent.

Decades after the real estate giant DLF developed Gurgaon, the realty boom in northern India has been creating ripples ever since. Initially it was Gurgaon that emerged as the hottest property destinations in Delhi/NCR during the mid 2000s. Then on the other part, Noida in Uttar Pradesh also started gaining popularity as a realty destination. As the country’s economy started gaining new grounds, the real estate landscape also underwent tremendous changes. Now, in the last five years, major cities across north India has joined the realty boom bandwagon. Among them tier II cities like Chandigarh, Jaipur and Manesar are worth mentioning. The real estate market, especially the residential segment in these cities has proliferated rapidly over the last five years. Affordable Flats in Chandigarh, Jaipur and even Manesar have been experiencing a huge demand among the end users.

Coming back to the real estate scenario of the nucleus, that is Delhi/NCR, surrounding areas have been developing at a great pace; so much so that new areas are being included with each passing day, though most of them are nondescript. Mahendragarh and Bhiwani in Haryana have been announced to be a part of NCR. Developers are queuing up and investors are banking on the capital values of these regions. At a more recent event, Bharatpur in Rajasthan, known for its famous Keoladeo Bird Sanctuary has also been declared to be included within NCR. Though the property market in the region is yet to develop, but industry experts opine, that the market will develop pretty soon. It is estimated that these areas will experience at least 15 percent rise in the property prices. So, properties in Bhiwani and Mahendragarh, now available at a price of INR 3000 on an average are bound to increase to at least INR 4000 in the next four years.

Barely a year or two old, the residential property segment of Bharatpur, is already selling at INR 1500 per square feet while the industrial plots come at a cost of nearly INR 200 per square feet. The government’s plan for the development of a rapid rail transit system is expected to add to the realty market of these areas.

On the other hand, Bhiwani, 125 kilometres from Delhi and Mahendragarh about 70 kilometres has already witnessed the foraying in of top international brands in retail; and some leading finance companies have also set up operations in these regions. These are all signs of a bright future of the property market of these areas. At the Rajasthan front, in Bharatpur, builders have already started constructing in-roads. Demand for residential apartments has increased in areas like Manesar, Bhiwadi and even Bharatpur.

The industrial hub of Bhiwadi in Rajasthan is one of the fastest emerging residential townships in northern India. Spread over nearly 5300 acres of area, Bhiwadi has long attracted a lot of attention from investors and developers. Real estate developers have been highly instrumental in developing the property landscape of Bhiwadi. The township today boasts of the presence of well-known developers, like Omaxe, Avalon and Ashiana.

Moreover, the rapid infrastructural developments, like the expansion of the Honda factory has seen an increase in the workforce of the area which in turn has had a positive impact on the real estate market.

So, initially restricted to Gurgaon, Noida, now the real property market has spread to areas like Punjab, Haryana and Rajasthan. Towns like Manesar and Faridabad in Haryana, Bhiwadi and now Bharatpur in Rajasthan; and of course the state capitals like Jaipur and Chandigarh have raised the bar when it comes to the property market of northern India. Following the current status, it can be said that the property market of north India has loads to offer in the coming ten years.

This is a guest post by Sampurna Majumder. Currently she is writing about latest trends related to real estate.

Saturday, December 14, 2013

What lessons can real estate sector in India learn from Aam Aadmi Party?

Author: Sachin Gupta | Find me on Twitter

Well, it’s been an incredible journey for Aam Aadmi Party. Although still in its nascent stage, the party has chosen the path less traveled by political parties so far in India. The party was the product of anti-corruption movement in India with Anna Hazare at its helm. However, due to internal differences among the anti-corruption movement members and a burning desire of the leaders of Aam Aadmi Party (AAP) to make a substantial change to the Indian political system led its entry into formal politics. If the anti-corruption movement was all about putting pressure from outside on the political system in India, the members of Aam Aadmi Party has vowed to make a difference by getting inside the political system. The party is led by Arvind Kejriwal, who has a substantial track record in Indian Revenue Services, RTI activism, other NGOs, and joining Anna Hazare for bringing in Lokpal bill in India.

As things stand in Real Estate sector in India, there is this need to clean up the sector. Property transactions, construction, track record of real estate developers, soaring home prices, housing shortage, etc. are issues that require immediate clean up. And it is in this environment, what we need is a set of leaders who can change or rather clean the existing system and processes. These leaders can be real estate developers, architects, policy makers, or entrepreneurs looking to enter the realty sector in India. What can these new set of leaders learn from the spectacular achievement of Aam Aadmi Party?

  • Take big risks:

Just like Arvind Kejriwal stood against Sheila Dikshit and did not play safe, the leadership in real estate sector needs to take big risks. For example, a builder can come into the real estate sector and act transparently and professionally. Why don’t we still see any real estate developer selling their projects based on the carpet area? Why don’t anyone of the developer state the actual project completion time instead of the industry trend of 3 years? Each one of them knows that the project will be completed in close to 5 years, then why don’t they say it when selling the apartments to customers. Most developers still play safe and the result is that we have a real estate sector which is perceived as corrupt.

  • Efficient execution:

Aam Aadmi Party did not have the resources to compete with well established political parties such as Congress, and BJP. Neither, they had money, nor the backing of big corporate houses. Still, they had the passion, hunger, and discipline to win against all odds. Remember how the established parties will use volunteer by paying about 5000-6000 Rupees in reaching out to voters. AAP simply inspired the existing resources such as volunteers and media to take their message forward to the voters. Similar results can be achieved in realty sector with the contribution of honest government officials, set of developers, and media. The sector would go a long way if few of the government officials simply don’t sit on project approval files and sanction the real estate projects on their merits rather than on black money, and the developers focusing on completing the existing projects rather than building the land bank by diverting the funds.

  • Putting pressure on the existing system and processes:

Aam Aadmi party declared their funding, processes, volunteer model on the website for everyone. They also carried out internal surveys and declared the survey results along with the methodology and data for anyone to scrutinize. Even after the election results, they had been consistent in their approach to sit in the opposition rather than form the government by any means. Contrast this with the political maneuvering we see in India wherein MLAs and MPs are bribed, traded to form governments. Similarly, a set of real estate developers and entrepreneurs can stand on their principles of fair practices, no bribe, timely execution and delivery of projects. And all of this will put pressure on the established developers to fall in line and ultimately sector as a whole will benefit.

  • Perseverance:

Aam Aadmi Party simply did not get lucky and did so well in elections in a year or two. They had been at this anti-corruption movement for about a decade. From Anna Hazare to Arvind Kejriwal, they have persisted with their idea of cleaning the system. Real Estate sector demands that kind of perseverance to truly achieve results. Policy makers will not change over-night and bring in transparent systems of project approvals, financing, taxes, etc. One has to persevere and put pressure on the system continuously by leveraging the support of media, and customers.

Have any Questions?

Thursday, December 5, 2013

What is the Return on Your Investment? Find the detailed analysis of returns on Gold, Silver, Property, Stocks, Bonds in India!

Author: Sachin Gupta | Find me on Twitter

Have any Questions?

Monday, December 2, 2013

Housing Prices in India and price appreciation trends across different cities

Author: Sachin Gupta | Find me on Twitter

How does one justify his/her returns on investment? Simply, by comparing the price point at which they bought and the current/latest price point. Until recently, justifying one’s return on residential property investment was difficult due to lack of credible data. However, now, one can get sense of housing prices appreciation across different cities in India and micro-markets within a particular city. The data is assembled by the team of National Housing Bank and can prove to be very useful for people looking to invest in housing across India.

Here is a trend for housing prices appreciation till quarter July-Sept 2013.

Following point should be kept in mind:
The above chart shows the housing price appreciation across various quarters in different cities. For example, in Faridabad, housing prices have doubled from 2007 to Sept 2013. While in Patna, housing prices have appreciated 1.5 times from 2007 to Sept 2013. However, it does not suggest that housing prices were same in 2007 in these cities.


  1. Chennai has witnessed the highest housing price appreciation across India with prices increasing about 3.18 times from 2007 to Sept 2013. Within Chennai Ayanavaram; Purasawalkam; Kolathur; Virugambakkam; Anna Nagar; Kilpauk; Nungambakkam registered maximum appreciation of more than 6 times within the same period. While, Chetpet; Egmore saw the lowest price appreciation of about 1.8 times during the same period.
  2. Housing prices in Hyderabad and Kochi have depreciated from 2007 to Sept 2013. However, certain micro markets in Hyderabad such as Shamshabad; Kapra, Uppal Kalan, L.B.Nagar have seen slight appreciation during the same period.
  3. Faridabad housing prices have appreciated almost twice during the period 2007 to Sept 2013. Maximum price appreciation of 2.34X have been witnessed in the Neharpar region of Sector -75, Sector -76, Sector -83, Sector - 85, Sector – 86.
  4. Patna has seen price appreciation of 1.50X during the 2007 – Sept 2013 period. Kankar Bagh; Phoolwari; Bailey Road (New); Gola Road in Patna have appreciated by 1.71X during the same period.
  5. Ahmedabad and Lucknow have appreciated 1.91X in this period. Bhadra, Dudheswar, Gaikwad Haveli, Girdhar Nagar, Wadigam in Ahmedabd saw price appreciation of 3.45X during the period 2007 – Sept 2013. While in Lucknow micro markets such as Malviya Nagar; Tilak Nagar; Rajendra Nagar; Raja Ji Puram;Aish Bagh; Raja Bazaar; Sarojni Nagar Pratham; Hind Nagar; Sharda Nagar; Om Nagar; Chitra Gupt Nagar witnessed maximum price appreciation of 2.22X.
  6. Housing prices in Jaipur and Bangalore have remained static during the period of 2007 – Sept 2013. However Lavelle Road in Bangalore has appreciated tremendously by 2.61X during the same period. While in Jaipur Agra Road has seen maximum appreciation of about 2.64X in the same period.
  7. Pune and Bhopal appreciated by about 2.20X from 2007 – Sept 2013. Kharadi; Hinjewadi; Thergaon; Chinchwad; Baner; Yerwada; Wakad; Pimple Saudagar; Chakan in Pune grew approximately by 3X during the same period. While in Bhopal maximum housing prices appreciation was seen in Koh – e- Fiza, Shyamala Hills.
  8. Housing prices in Kolkata grew by 2X from 2007 – Sept 2013. Rajpur Sonarpur; Barrackpur; Bidhan Nagar; Thakurpukur, Sorsona; Bhawanipur witnessed the most significant appreciation. While Rajarhat; Madhyam Gram; Chandan Nagar; Barahnagar grew at below average rate.
  9. Mumbai witnessed the price growth of 2.22X from 2007 – Sept 2013. Lower Parel, Matunga East, Mahim West grew at rapid rate of 3.71X during the same period. Vashi, Khar Garh Road, Pokaran Road 1 &2, Kalyan, Mira Road, Virar Vasai, Badlapur grew at below average rate.
  10. Delhi along with the NCR region grew at 1.90X from 2007 to Sept 2013. Dakshinpuri, Hari Nagar, Jahangir Puri, Jhilmil Colony, Sangam Vihar, Mangol Puri, Ghazipur Dairy, Khyala(I-III), Sriniwas Puri, Sultan Puri were the fastest growing sub-markets in Delhi.

Have any Questions?

Monday, November 25, 2013

Who are the private & public sector banks, and housing finance companies that offer home loans to customers in India?

Author: Sachin Gupta | Find me on Twitter

As we highlighted in our previous post about home loan that housing finance disbursed to individuals has grown at a rate of 20% year on year. It presents an opportunity to existing banks, and housing finance companies to develop new products in order to satiate this massive demand for home loan across India. At the same time, the sheer market size of housing finance sector presents new entrants the big opportunity to innovate and target specific customer segments within the housing finance market.

As on today, the need of long term finance for housing in the country is catered to by the following types of institutions:

  1. Financial Institutions
  2. Scheduled Commercial Banks
  3. Scheduled Cooperative Banks (Scheduled State Co-operative Banks, Scheduled District Co-op Banks and Urban Co-op Banks)
  4. Regional Rural Banks,
  5. Agriculture and Rural Development Banks
  6. Housing Finance Companies
  7. State Level Apex Co-operative Housing Finance Societies
  8. NBFCs/MFIs/SHGs have also been lending for housing though in a small way.

Here is a comprehensive list of these public and private sector banks, housing finance companies:

Have any Questions?

Wednesday, November 20, 2013

Why US like sub-prime (housing) crisis will not happen in India?

Author: Sachin Gupta | Find me on Twitter

If one were to observe the recent trends across real estate sector in India, he/she would realize that market is slow. Damn slow. From increasing unsold stock of housing units to slowdown in office space absorption across major cities in India, the trend has been depressing to say the least. Will it lead to price correction? Yes, we predict so, read "Real Estate Bubble in India" to get a sense.

However, question to be asked is “will prices fall so dramatically that it leads to US like sub-prime crisis”? And the answer is BIG ‘NO’. Why? Let us explore!

First of all what is a sub-prime crisis?

It was about 5 years ago, some of us were in business schools and the shocking news of Lehman Brothers going bust filled the classroom. Most of us were new to business jargon like ‘sub-prime’, ‘securitization of home loans’, ‘derivatives’ and therefore could not grasp the solid reasoning behind the banking crisis. However, as days passed by, we began to understand this better by discussing with professors; peers; and reading articles. One of the better anecdotes that explains US sub-prime (housing) crisis goes like this:

“Linda is the proprietor of a bar in the city. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around and as a result increasing numbers of customers flood into Linda's bar. Taking advantage of her customers' freedom from immediate payment constraints, Linda increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Linda’s borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral. At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide.

No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a risk manager (subsequently of course fired due to his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Linda's bar. However they cannot pay back the debts. Linda cannot fulfill her loan obligations and claims bankruptcy.

DRINKBOND and ALKBOND drop in price by 95%. PUKEBOND performs better, stabilizing in price after dropping by 80%.

The suppliers of Linda's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor.

The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties (and vested interests). The funds required for this purpose are obtained by a tax levied on the non-drinkers”.

Well, simply, replace unemployed alcoholics by home loan seekers, Linda with a housing company, and throw in a mortgage company and investment banks with all their financial engineering skills. And what you had was major financial crisis.

Why can’t it happen in India?

Reason 1: Black money
Yes, it’s actually true that no matter how much we curse the existence of black money into the real estate sector, but it actually won’t allow a sub-prime (housing) crisis to happen in India. In US, banks started to lend 100% of home value at lower rates in initial years (known as teaser loans in India) to borrowers and this led to default when home prices fell. However, in India, even if a bank lend 100% of home value to its borrowers, a borrower will still have to pool in the equal amount of cash to buy the house at market value. 

For example:
A housing deal takes place between a buyer and seller and the market price is Rs 80 Lacs. However, as per the government circle rates, the home value on paper is 35 Lacs. Due to high stamp duty charges, the buyer will not report the actual value of Rs 80 Lacs to the registrar office. And the seller will not report the actual value of 80 Lacs in order to save on capital gains taxes. Therefore, what we get is a property which is worth Rs 80 Lacs, is actually registered at Rs 35 Lacs. The remaining 45 Lacs is paid in cash by the buyer to the seller. So, even if the buyer’s bank offered 100% of home value which is 35 Lacs on paper, the remaining 45 Lacs is arranged by the buyer. And who on earth would walk away from this home where he/she has invested 45 Lacs of their cash even if the home prices dip.

Reason 2: RBI Policies
Reserve Bank of India (RBI) has put in place certain policy measures which until a few years ago looked conservative to many people. But these very measures will not allow the Indian banking system to lend aggressively and these measures are:
  • In India Banks provide home loans for about 70-80% of property value. The remaining 20-30% has to be arranged by the buyer. Whereas, in US this norm was relaxed and banks began giving loans equal to the entire value of the house.
  • In India, banks check the credit worthiness of the borrowers and lend only to people who have income records and have the capacity to pay EMIs. Whereas in US, home loans were granted to people with no documented income, job or assets. 
  • In US, banks came up with teaser loans (interest rates are low in initial 4-5 years and then are aligned to market rates). Borrowers were happy to get home loans at sub-prime rates; however, they found EMIs too hard to pay as soon as the interest rates were realigned to market rates. And they simply walked away. In India, the concept of teaser loans is not allowed.
  • Non-recourse debt in US. This kind of debt is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender's recovery is limited to the collateral. However, in India, the borrower is personally liable. In other words, banks can seize his/her other assets to recover their claim.

Add to these above reasons, the fundamental issues of housing shortage and emotional attachment of owning a home will make sure that housing sub-prime crisis will not happen in India.

In a nutshell:

Have any Questions?

Thursday, November 14, 2013

What are the lessons that we as buyers can learn from Campa Cola fiasco in Mumbai?

Author: Sachin Gupta | Find me on Twitter

Campa Cola is in news and thankfully Supreme Court has stayed the Campa cola society demolition. The next hearing is on November 19, 2013. But what went wrong? The society was built in 1980s and the plan for 9 buildings of 5 floors was sanctioned. However, rules were flouted and only 7 buildings were constructed. 4 of those buildings were of 6 floors, 2 buildings of 20 floors, and 1 building of 17 floors. BMC seeks to demolish these buildings in order to set a precedent that such unauthorized construction will not be tolerated. BMC and the residents are against each other for last decade or so. One can surely ask BMC a question, why the hell did you allow the construction of these apartments in first place? And why didn’t you penalize the builders then and there? We can ask many such questions to BMC, and maybe the local politicians.

However, we will focus our attention on buyers in this post. We need to learn the lesson and learn it quickly. The primary lesson that we as buyers can learn is to be demanding, to be an extrovert property buyer, and asking questions. At the end of the day, you are going to invest your lifelong savings and none of us want to go through the pain that Campa cola residents have gone through. So, what are the things which we should be vary of before investing in a residential project? We have put together a comprehensive list and it surely does make sense to ask these questions from the real estate developer.

Have any Questions?

Thursday, November 7, 2013

Market for Office Space in Gurgaon and analysis of micro markets such as MG Road, Sohna Road, NH-8, Golf Course Road, Udyog Vihar, Cyber City, IMT Manesar

Author: Sachin Gupta | Find me on Twitter

Delhi NCR region comprises of the national capital Delhi, and satellite towns of Gurgaon, Noida, Faridabad, Ghaziabad, and Greater Noida. Among all the cities, Gurgaon has truly become the millennium city. Ever since Maruti set-up their base in the city and subsequent turn of events with back office services company such as Genpact started their operation from here, the city has never looked back. Many auto ancillaries, IT, ITES companies have set-up their office and manufacturing facilities here. This has led to real estate boom for residential and commercial real estate alike. Companies continue to lease office space in Gurgaon and it is no surprise that Gurgaon leads the way for commercial real estate development in Delhi NCR region.

Here is an overview of some of the office space micro markets in Gurgaon:

Udyog Vihar and IMT Manesar offers space for office space and industrial units and have been developed by HSIIDC (Haryana State Industrial & Infrastructure Development Corporation LTD). The other office space micro markets such as MG Road, Sohna Road, Cyber City, Golf Course Road and Golf Course Extension Road, NH-8 have been developed by private property developers in Gurgaon.

Some of the most prominent real estate developers in these micro markets are:

The rental and capital values differ in these micro markets on account of proximity to Delhi, age of property, presence of social infrastructure, and connectivity.

Companies looking to buy or lease office space in Gurgaon will have to pay highest rental/capital amount for micro market of MG Road, whereas IMT Manesar offers lowest value.

Overall, the office space absorption in 2013 across entire Delhi NCR region has fallen substantially which has put pressure on rental and capital values.

Have any Questions?

Tuesday, October 29, 2013

How does the new Real Estate Regulatory Bill in India help me? What impact will this bill have on real estate sector in India? And what are its shortcomings...

Author: Sachin Gupta | Find me on Twitter

In June 2013, Government of India brought in Real Estate Regulatory Bill to provide for a uniform regulatory environment, to protect consumer interests, help speedy adjudication of disputes and ensure orderly growth of the real estate sector and has been much awaited by all aspiring home buyers.

The Real Estate (Regulation and Development) Bill, 2013 is a pioneering initiative to protect the interest of consumers, to promote fair play in real estate transactions and to ensure timely execution of projects.

The Bill focuses on 3 principle parties namely, the real estate developer, the buyer, and the regulator.

What does the Bill intend to provide in nutshell?

  1. Introduction of the concept of using only ‘carpet area’ for sale which has till now been ambiguously sold as super area, super built up area etc.
  2. Register real estate agents which have hitherto been un-regulated, with clear responsibilities.
  3. Promoters (Builders) to register all projects, prior to sale; and only after having received all Approvals from development/municipal authorities and functions.
  4. Real Estate Authority(s) and Appellate Tribunal in the States, to enforce accountability norms for the promoter buyer and the real estate agents.
  5. Timely completion of projects, and prevent fund diversion.
  6. Speedy and specialized adjudication mechanism to settle disputes between the promoter, buyer and real estate agents.
  7. Developers or builders have to put aside 70 per cent of the proceeds of a particular project in a separate bank account which will help to fund the project and in timely delivery.

Well, in its present form the bill appears to be a "Real Estate Thana" and every wrong doing by real estate developer can be reported in this "Thana" and necessary action will be taken as per the Bill's guidelines. However, we all know, how long and tedious it gets to get justice from "Police Thanas". So, let’s wait and watch what action or justice comes out from this new "Real Estate Thana".

Make no mistake, even though the bill falls short on policy front...yet it could prove to be helpful for buyers. However, the bill would have served the larger purpose if it were to encourage people including builders, buyers, and government agencies to do right things instead of taking action when something wrong has been committed. Lets explore...

What is needed?
We need environment ministry, income tax authorities, revenue department to work in tandem with Real Estate Regulatory Authority to provide clearances, keep a check on fair practices, and study the real estate market regularly.

  1. The idea is to have a single window clearance mechanism wherein real estate developers submit their plans for approvals and the regulator approves or disapprove the same. It is estimated that, this alone can reduce the cost of housing by about 20%. Phew…
  2. Income tax department to check who is buying the property from developers. In other words, it should be made mandatory by law for real estate developers to disclose the buyer details. This will ensure true demand for the housing and keep away speculators. After all housing is a need first and then investment vehicle.
  3. Revenue department to study the real estate and housing market carefully and then levy stamp duty. It is widely believed that reducing stamp duty and registration charges will encourage buyer and seller to report the market value of property instead of the circle rate value. Thereby, eliminating cash from resale market.
  4. Environment ministry to provide timely and consistent environment clearances with regards to water, natural resources, forestation, etc.
  5. Land acquisition department to ensure that land has been acquired as per the governing law.

Well, we do not live in an ideal world and let's hope slowly but surely, the role of real estate regulator evolves and we have an act that promotes fair practices on part of all the concerned parties involved.


Have any Questions?

Saturday, October 19, 2013

Grave injustice - The BMC is wrong to target flat owners of Campa Cola Compund Worli instead of builders

Grave injustice!

The BMC is wrong to target flat owners instead of builders

To right a wrong is justice. But when that involves punishing the innocent and rewarding the culprits, justice is not served. Yet, the residents of the Campa Cola compound in Worli, Mumbai, face a very similar situation.
To summarize, about 60 years ago, in 1955, the BMC leased 17,901 sq mt to Pure Drinks Ltd, which then converted 13,409 sq mt of the entire plot into a residential zone, and gave the development rights to PSB construction, Yusuf Patel and B.K. Gupta. In 1983, their plans to build nine buildings of five floors each were sanctioned. However, the builders eventually constructed seven high-rise buildings from 1981 to 1989. While four of the buildings are limited to about six storeys, two towers of 20 floors and 17 floors were also constructed. This despite the fact that the BMC issued several stop work notices and a penalty in 1986. Or as the Supreme Court states in its judgment, “It is a different story that after issuing a ‘stop work notice’, the authorities of the Corporation buckled under pressure from the developers/builders and turned a blind eye to the illegal constructions made between 1984 and 1989.” So the builders built, sold and gave possession of all the flats, without an occupation certificate (OC) and hid material facts such as the lack of BMC approval, the sanctions, stop work notices, etc. Nor did the builders execute a conveyance to the buyers.

A review of the facts suggest that had some of the buildings not appealed to the Bombay High Court for a water connection, this case would probably  have never come to where it is today. The BMC, instead of providing a water connection to the other  buildings, issued a demolition notice, stating that the original sanctioned plan allowed for only five floors. The demolition notices cover an area of approximately 8,000 sq mt. Yet, a 2010 order by the chief minister’s office states that the area beyond the permissible FSI limit in this case is only 1,774 sq mt. And if that wasn’t odd enough, the Supreme Court has upheld both – the BMC’s demolition notices and the chief minister’s order! Which begs the question – how can the BMC demolish 8,000 sq mt when the Supreme Court has agreed that only 1,774 sq mt is illegal?

But this case is not just about legal discrepancies. There are much larger issues at stake. The BMC seeks to demolish these buildings in order to set a precedent that such unauthorized construction will not be tolerated. In doing so, it harms 102 flat owners, and over 200 innocent families. Demolishing these buildings serves no purpose other than an empty chest thumping in the name of making an example of unscrupulous builders, and worse, rewarding Pure Drinks with the FSI that will result from the broken flats. Nor does the BMC seek any punishment for the builders, the actual lawbreakers.

In another twist to the case, Pure Drinks sold the remaining, undeveloped parcel of land to Krishna Developers, who sought to develop the property. But the plot remains undivided as per BMC records and due to the ongoing issues, the builder has been unable to construct as planned. Many residents allege that the builder is hand in glove with the BMC to destroy the 8,000 sq mt, and buy out the remaining five floors to ensure a large, prime piece of real estate for the builder and his backers, while the current residents, many old and infirm would be out on the streets.

It is also rather unimaginable, how the BMC plans to demolish over 15 floors of a building while leaving the remaining five intact, without any harm to their foundation or structure? By the BMC’s own admission, there are over 65,000 illegal structures in Mumbai. Experts believe that number is actually far greater. Then why is the BMC hell bent on singling out this group of residents, when it can  easily charge them a penalty, destroy a much smaller part of it, regularize it and make it legal?

BMC supporters allege that the residents are at fault for buying an apartment without an oc. But in a city like Mumbai, it wouldn’t be an exaggeration to say that over 30 per cent of all apartment owners must lack an OC. Besides, at a time when most people buy an apartment before it has even been constructed, there is no choice but to rely on the builder and hope that the plans have been approved by the BMC. To set a precedent that builders will go unpunished, and buyers will be homeless is devoid of compassion, but most importantly, logic.

Courtesy: Business India

Wednesday, October 16, 2013

What are the various kinds of taxes and charges you have to pay when buying a property, residential plot, or apartment in India?

Author: Sachin Gupta | Find me on Twitter

Ok, you have finalized your property; i.e. residential plot or an apartment. Now what? Well, in addition to paying the property price, there are other charges which are incurred and are broadly categorized as follows:

  1. Transaction charges
  2. Stamp duty and registration charges
  3. Service tax
  4. Value Added Tax (VAT)
  5. Capital gains tax to be borne out by the seller for a resale transaction

Transaction charges:
Transaction charges are those that are spent in availing the services of property broker. In case, you are buying an under construction property from real estate developer, then transaction charges are Nil. However, if you are buying the property from resale market such as a residential plot or a completed apartment, you will be paying the brokerage fee which is equivalent to 1% of the property value.

Stamp Duty and Registration Charges:
Real Estate Stamp duty is a type of tax accumulation by the Government of India. Stamp duty is established on the agreement value or on the market value whichever is greater.

For other states across India, click stamp duty and registration charges in India

The procedure also includes a registration fee for properties costing more than Rs. 30,000, which is fixed at 1% of the market value or the agreement value, whichever is higher.

Service Tax:
Service tax is applicable for under-construction property. In other words, if you are buying in an under construction project (apartment, flat, villa, etc.) from real estate developer, then you will be liable for service tax on property price. 

Service tax under composition scheme stands at 3.71% of property price.

Value Added Tax (VAT):
Recently, supreme court of India ruling states that the sale of an under construction property would be liable to VAT. It is likely that real estate builders will pass on this additional VAT on buyers. The VAT under composition scheme stands at 3% of property price.

Here is an example showing different charges for buying an apartment in Gurgaon, Haryana.

So the question to be asked is, if you would like to purchase an under construction property or completed one? While, in an under-construction property you will pay as per the construction plan whereas in a completed project the entire amount is payable within mutually agreed upon time period of 2-3 months.

In an under-construction property, you can make payment through cheque (white) whereas for a completed property you will end up paying by cheque and cash (black). The amount of money you pay by cash is dependent on the market value of the property minus the value of property as per the government circle rate. Why do a seller prefer cash component? Well, to save on capital gain taxes which stand at 20%.

Now, that you have a bit of information about various charges and taxes in property transaction. You decide J

Have any Questions?

Thursday, October 10, 2013

Project launch-Vardhman Flora Byculla Mumbai

Press Release: Vardhman Group launches Vardhman Flora in Byculla

Luxury project with 2 & 3 BHK apartments to change skyline in Byculla

Mumbai: Vardhman Group, one Mumbai’s leading and oldest real estate groups, has recently announced its new project – Vardhman Flora in the up-market area of Byculla, in South Mumbai. Soaring up to 36 floors, Vardhman Flora rises above all else in Byculla promising to alter the skyline of this neighborhood. The project offers a magnificent view of Mumbai’s famous skyline.

Vardhman Flora is one of the first projects where the tenants will be shifted in the transit accommodation provided by MHADA in the same belt opposite to the project; hence the tenants are shifted in the new transit accommodation provided by MHADA in the newly constructed building of the mill land.

The project is centrally located, and is close to local stations like Byculla, Cotton Green, Reay Road and Chinchpokli. Also located in close proximity are hospitals like Prince Ali Khan and J.J Hospital as well as reputed ICSE and SSC Schools. People living in the complex will be spoilt for choice with numerous leisure options ranging from 5 star hotels like ITC Grand Central to shopping malls and theatres in the vicinity. The central business district of Lower Parel with corporate parks is also within quick access, besides the upcoming monorail will add a lot of value to this project.

Vardhman Flora gives home-buyers the opulence of spreading out their life, by giving a very rare privilege that exists in this city: the luxury of having only 2 flats per floor. With choices of 2BHK for 1100 sqft and 3 BHK for 1500 sqft, the apartments at Vardhman Flora have enough natural light and cross ventilation from all sides. Column free spaces add to the luxury of limitless size of the apartments. The project also features majestic full height windows for a panoramic view with high ceilings. Immaculate finishing whether it’s the veneer on the door, wall paints, concealed wiring or window frames add to the impeccable interiors.

The design for Vardhman Flora adheres to the group’s philosophy of ‘Responsible Living’. The concept of responsible luxury will be pioneered by Vardhman Flora across every facet of its iconic residential haven. The structure is designed to provide adequate natural light and air that give the residents clear visibility and coolness without flicking on a switch. Every fixture and fitting used to light up the building’s compound will be energy efficient and rain water harvesting systems channelize the abundant monsoon productivity. Besides, every apartment in Vardhman Flora will be designed after intensive sun path analysis to ensure optimal sun light within the living spaces with minimal heat gain.

Speaking of the project, Mr. Rajesh Vardhan, Managing Director, Vardhman Group says, “Vardhman Flora is the most ambitious project for our group, and the entire project is driven by a passion to create not just residential apartments but rather a landmark that catalyzes the future structures in this city. I am sure that this project will redefine the perception of luxury to include spaces that encourage responsible living.”

Spread over more than 250,000 sq. ft., Vardhman Flora is likely to be completed by 2016.

About Vardhman Group 

Vardhman Group is a revered name in the real estate industry and has become synonymous with luxury living and engineering sophistication. The Group has grown exponentially during its journey spanning close to 50 years. Mumbai city bears witness to a lot of the Vardhman Groups signature structures – innovative, well-engineered landmarks that make no compromise on quality. Customer satisfaction and value for money is the motto of the Vardhman Group.

Wednesday, October 2, 2013

Around 140 families, 35 floors, and a thousand affected people face demolition of constructed floors in Mumbai's Campa Cola Compound Worli. Whose fault is it?

This is a post on behalf of the Campa Cola complex and all those facing demolition of their homes.

"A man is determined to find justice after the loss of a loved one, even though he is incapable of fully remembering the crime. Is the same true for a person who is about to lose their home?

How does one deal with knowing they will have no place to go tomorrow?

Is it an emotion that can be contained in a blog post? Is it something that can garishly be described in a picture of a demolition ball? What face do you show your 90 something year old grandmother when you have to tell her we have nowhere to live any more, we need to move out of your home for the last 20 odd years. What would you do?

We’re all crying here. Do we rent? Do we move city? How will we get through this? These are the larger questions, this is the surface, we haven’t begun to digest or acknowledge what we are really feeling inside.

Worli Naka is now going to be iconic not for its fantabulous view, it’s going to be known for a tragic site, something like what Jalianwala baug was, the same gravity and intensity, but jilted sentiment and energy, energy that could well be consumed in better and more important tasks.

We at the Campa Cola Compound Association, will do all the government asks us to, we will respect and heed the law. We have started packing our bags haven’t we ?  We have started looking for rental houses too. Some of us have help, some of us don’t. Some of us are young, some middle aged and some old. Some of our kids have exams, some of us are about to have children, some of our parents are paralyzed, all simple stories of real homes, being demolished.

35 Floors.
140 Flats.
A thousand people.

Each flat has a story. Each flat has a set of lives. Each of these lives, are fighting the thought of losing their homes.

They say you’ll never know what you have - unless you’ve lost it. We are this close to losing our homes, the place we go to every night – at the end of a long hard work day, when all other lights shut, those at home shine bright. Help us keep our homes, help us keep our light".

- A soon to be homeless person... 

Friday, September 27, 2013

Stamp Duty & Property Registration Charges in India

Author: Sachin Gupta | Find me on Twitter
Real Estate has always been the priority asset class for majority of Indians to invest their lifelong savings. Whether one is investing for end-use or for investment purpose, he/she needs to take notice of various costs associated with real estate. Other than paying the market value of property in consideration, there are costs such as brokerage charges, insurance, taxes, and stamp duty & registration charges.

In this article, Stamp duty and registration charges are presented in Gurgaon, Noida, Mumbai, Bangalore, Chennai, Hyderabad, Kolkata, Pune, Ahmedabad, Faridabad, Delhi, Ghaziabad, Kochi, Jaipur, and other cities (states) in India.

Have any Questions?

Tuesday, September 24, 2013

Own an Office space property? How to make best use of it and generate maximum revenues?

Author: Sachin Gupta | Find me on Twitter
You chose office space property – why?

Many of us invest in real estate for hedge against inflation, wealth creation, and returns. Within real estate some of us have the propensity to take on higher risk and invest in commercial real estate. Now that you have invested with a reputed builder in a commercial real estate project and own an office space property. There are possibilities that you would have conducted your own due-diligence about the builder, its track record. During the construction phase, builder promised you assured returns and you were satisfied with the entire deal. Finally the construction has been completed and the office space property has been offered to you. Now what?

Now, you would like to either use the office space property for your own use or lease it out to other tenants. Either way, you would like to justify your investment for office space property. Hence income generated by leasing out the office space property will signify how successful has your investment been. If there is demand for office space, then income from leasing will justify your investment. However, if the property remains vacant for considerable period of time then the investment may turn out to be a burden. How can you as the owner of the office space property make best use it?

Enhance the property value

At any given point of time there will be supply of many similar office space properties in the market and user will have the option to choose from those options. For example, the market for Office Space in Gurgaon continues to remain upbeat. However, to stand out from the crowd, you can enhance the value of your property by following below presented tips:

  1. Make sure your builder has delivered on what was promised at the time of contract agreement including the super area, carpet area, and efficiency of the building. It is noticed that tenants prefer office spaces where building space utilization is high. This is to make sure that they are able to utilize majority of the space for their staff and minimum amount of space is lost for common areas such as reception, corridors, etc.
  2. Parking: Parking is a key consideration for tenants when occupying a particular office space. Make sure that parking space allotted for your office space is properly demarcated. If required, do not hesitate to buy or rent the additional parking space from the builder. 
  3. Facilities: Facilities such as power back-up, maintenance, and house-keeping enhances the value of entire premises and not just your individual office space property. Before taking possession, verify if these facilities are properly in place or not. In many cases, builder outsources the property management function to third parties. It is advisable to check the credentials of the property management company so that future disputes related to property management can be avoided.
  4. Form an association with other property owners and make sure that there is an easy entry and exit for people from the building premises. Nobody likes to visit the building that has bad entry and exit points.
  5. For your individual office space unit, check if the lifts are working properly.
  6. Go for fit-outs of your office space property and adjust the rent accordingly. There is likelihood that tenants will choose the ready to use office space as opposed to bare shell space. Negotiate for rent with tenants for your ready to move space.

Market it properly

Having made sure that your office space is in proper condition, it’s time to market it and generate qualified leads.  There are multitudes of channels to reach out to prospective tenants and one can choose among these channels based on his/her comfort.
  1. Spread the word that your office space is ready to occupy with all its features and unique selling points. Inform your friends, colleagues, relatives, and people within your network.
  2. Hire a professional real estate broker and again highlight the unique selling points of your property.
  3. Use internet and list your Office Space on property portals. Make sure, you advertise your property on a platform that is not too crowded and at the same time has the capability to bring leads to you. Provide latest pictures of your property and other unique points. Advertise Office Space here.

Due-diligence of tenants
  1. Financial statements/income statement – balance sheet
  2. Credit ratings (if available)
  3. Any analyst reports on the firm/industry
  4. Bank relationships
  5. Existing obligations (debt, other leases)

Closing the lease

Underwriting leases is a very important component of risk assessment, which ultimately affects the cash flow produced by the property and hence its value. There are varieties of terms in a lease document; therefore, it is advisable that you hire a professional agency or an advocate to complete this task successfully.

Have any Questions?

Tuesday, September 17, 2013

Real Estate Bubble in India! Will it bust and will property prices come down in India?

Author: Sachin Gupta | Find me on Twitter
On recent interaction of our team with broker’s community in Delhi NCR region, one can easily feel that the business is down on accounts of slow transactions. One of them even quipped, “If players such as DLF start launching 80:20 schemes you can understand”. One of us asked…but “why are prices still moving up”?

Well, our team discussed the scenario "will real estate prices fall”? Sales volumes are shrinking; government policies are not helping the sector either…so, will prices come down? Here are some of ideas we came up with which suggest “YES” prices will come down.

Why did prices appreciate so fast in recent years?
  • Favorable demographics
Well, we all know about favorable demographics theory and it still exists. It will continue to exist. The urban population is supposed to grow from 340 million in 2008 to 590 million in 2030. During the same period, the urban middle class households will rise from 22 million to 91 million. However, what we need to mention here is that this kind of urbanization needs affordable housing and not swanky villas and luxury apartments. We need apartments that can be provided for about Rs. 1 million in order to satiate this massive urbanization. Do we find anything within this budget? NO…unless the government policies, builders interests are aligned, we may never have the kind of affordable housing that we as a county require.
  • Shortage of housing
We all know there is a shortage of housing in India…or shall we say affordable housing. Till 2012, the housing shortage was estimated at 26.53 million. How can this huge gap be filled? Well, it isn’t going to be filled anytime soon because misaligned interest of government policies, lack of focus on affordable housing, and developers interests.
  • A move towards nuclear family
Families are getting nuclear and all of them require housing.
  • Easy credit
During those good old days of 2003-2008, credit was cheap and economy was growing. People borrowed at low interest rates and invested heavily in Property in India….primarily in residential asset class.
  • Increase in black money that needed to be parked
Government records suggest that there are only 35 million taxpayers, about 3% of the population. Out of which 1.5 million declare yearly earnings of more than 10 Lac rupees. Shall we believe this? NO.
Well, we all know businesses under-report their incomes to save on taxes. This unaccounted income now has to be parked somewhere and real estate is the place it is parked because of ability of real estate to absorb huge amount of cash.
  • RBI released excess liquidity into the economy during 2009-12
Post Lehman Brothers collapse, all major economies around the world provided stimulus to their economy to keep the investment and demand going. This excess liquidity through various channels ended up in Real Estate in India and prices were zooming.

Why would prices now come down?
  • High inflation and lack of affordable housing
What has changed now, that will bring prices down? Demographics, housing shortage, and formation of nuclear families are still prevalent fundamentals. True, but as we discussed, the need of the hour is affordable housing to fulfill this demand. However, as things stands “government is not in any hurry to fix the issue of affordable housing”. The Income levels have not kept pace with inflation, Supply of affordable housing projects is low, and lack of job growth has all put pressure on real estate and there are no takers now.
  • Elections coming up
Elections will further put pressure on realty sector. Real estate has been a parking place for unaccounted funds. The need for funds in upcoming Lok-Sabha and state elections will aggravate the outflow of money from this sector over the next 18 months.
  • Rising government subsidies
When government subsidies rise, it tightens the liquidity in the economy and cost of borrowing increases. Subsidies remain high and all attempts towards fiscal consolidation looks unrealistic. Today, subsidies account for 42% of gross fiscal deficit, exactly twice as many times a decade ago. Therefore, high rate of interest will further put pressure on real estate sector.
  • Exit of foreign funds
Foreign private equity funds invested over $20 billion into Indian real estate during 2006-13. After 7-8 years, these funds are reaching their end of term and, so, would have to sell their holdings. Again, this will put pressure on real estate sector and developer might be forced to lower the prices.

When would prices start depreciating?

We predict from November-December 2013 onwards, the prices might start to come down. With festive season of Diwali behind and an eye on elections, funds will move away from real estate sector and that is the time when one can expect price fall.

Have any Questions?

Sunday, September 8, 2013

Solutions for reducing the uninterrupted influx of black money into the real estate sector

Author: Sachin Gupta | Find me on Twitter
Talking to any common man on the street about real estate sector would draw animated conversations on how the sector is riddled with black money, corruption, and political maneuvering. In this section, we will focus on how the black money enters the real estate sector, its effects on economy, and ways to tackle it.

How black money enters the market?

1. Parking place:
Real estate has become the parking place for businesses to park their unaccounted cash in real estate particularly in residential real estate asset class. Most business houses, small or large, even though claims to be doing the business by rule of law but would under-report their profits to save on tax. And that under-reported income would land in the real estate sector which tends to raise the prices of real estate in a land scarce country like ours.

2. High rates of stamp duty and registration charges:
Stamp duty and registration charges account for 12.5 to 15% of property value in most states across the country. As an example, the property with market value of Rs. 1 Crore would elicit Rs. 12.5 to 15 Lacs for stamp duty and registration charges. However, the circle rates (or government decided rates) of property in most cities are much lower as compared to the market value of the property. There lies the incentive to under-report the true market value of the property to save on stamp duty and registration charges. The amount saved is paid in cash to the seller and that cash is again ploughed back into the real estate sector giving rise to a vicious circle leading to ridiculously exorbitant property prices.

3. Capital Gains Tax:
Most of us have observed the real estate deals wherein cash forms the significant part of whole deal. There are instances when cash constitutes as high as 75% of the total property value. Now, cash transactions are encouraged in real estate sector to save on capital gains tax which is 30% of the total gains. There is data available which suggests that more than 70% of that cash is again ploughed back into the real estate sector leading to rapid appreciation is real estate prices. The comprehensive knowledge of capital gains tax including exemption on profit from home sale can be found from following sources.
Capital gains tax exemption makes sale of house more profitable
Tax exemption on profit from home sale

Effects of black money

1. Unaffordable prices of property:
The entering of black money leads to irrational prices in real estate sector. In a country, where demand for affordable property is high and land supply is limited, the whole influx of black money spirals out the prices of property to a level which is almost unreachable for the middle class families. We all have seen how housing prices have multiplied in many cities across the country in the past decade and yet the rental prices haven’t kept the same pace of appreciation.

2. Negative impact on economy:
Real estate is an asset class where money is invested; it sits there and over a period of time produce capital value appreciation on account of true demand in a rational economy. However, when black money or the excess money enters the sector, it not only drives the property prices to irrational level but also leads to deviation of funds from productive sectors. This excess money which has been the subject of greed could have been invested in entrepreneurial ventures, business expansion plans, or if reported genuinely can be collected by government in the form of tax revenues. This would result in circulation of that money into the economy and subsequently expansion of economy creating more jobs, more demand, and production of goods and services.

Ways to eliminate the black money

1. Decrease of stamp duty and registration charges:
The reduction in stamp duty and registration charges can result in proper reporting of the true market value of the property. Even though, government revenues may get affected on account of reduced stamp duty and registration charges, it can however be compensated on accounts of capital gains tax.

2. Paying in Cheques:
We all have been inspired by Anna Hazare movement against corruption; however, we would do that cause a great justice by doing our bit when it comes to property transactions. What can we do? Well, quite simple, Stop paying or accepting in cash when it comes to property buying or selling. The simple yet practical step would reduce the entering of black money into the property sector and would drive away the speculators from entering the market to make quick bucks.

Have any Questions?