Friday, May 22, 2015

How is rent for residential property in India calculated? What are the basic components of Rent?

Author: Sachin Gupta | Find me on Twitter

Are you a tenant looking to occupy a residential property? Or are you a landlord looking to earn income from your residential property? For both the parties, rent is the primary area of discussion before they enter into a lease agreement. How much rent shall be paid for a given residential property? What are the main components of rent? How much is the security deposit? What are the other monthly charges? How is security refunded back when tenant vacates the property? These are some of the questions we will discuss below in this article:


How much rent shall be paid for a given property?

Rent is the monthly payment paid by the tenant to the property owner for the use of property. A residential property is used by tenant for living purposes or for the purposes defined in the lease agreement. Any deviation in the use of property by tenant can lead to eviction. And what is the agreeable rent that tenant and owner can arrive at? Principally there are 2 methods:


  • Rent comparison method

It is the most common yardstick that is used by both tenant and owner for determining the rent of the residential property. This method is based on the ability of similar properties to generate monthly rent. For example, in a given locality, one needs to look at the rent that others are paying on a monthly basis. If properties in question are highly similar, then, one would expect the same rent for a specified property. However, if the properties are dissimilar, then monthly rent is adjusted. If the subject property is superior to other properties in the locality, then, chargeable monthly rent will be on higher side. And if the subject property is inferior to other properties in the locality, then, chargeable monthly rent will be on lower side.


  • Cost method

This is a method based on the cost of the property. Cost of the property is the sum of current market value of land + cost of construction. In India, rental yields for residential properties are not very high. Typically, a property fetches anywhere between 2-3% of annual return on the cost of property. For example, if the cost of property is say Rupees 1 Crores, then, expected yearly rent could be in the range of Rupees 2-3 Lacs Or in other words, Rupees 16000-25000 per month. One must take note of the fact that, this 2-3% annual rent is calculated when the property in question is fully developed or its FSI (Floor Space Index) is fully utilized.

What are the main components of Rent?

Monthly Rent for the residential property comprises of following elements:

  1. Base rent which is calculated by ‘rent comparison method’ or ‘cost method’.
  2. Utility charges to be paid by tenant as per actual. Utility charges include electricity bill, water bill, Gas charges.
  3. Maintenance charges. Maintenance charges are paid extra by the tenant.
  4. Security deposit – it is the lump sum payment demanded by landlord at the beginning of the lease. It is an interest free payment and is refunded by the landlord to the tenant when the property is vacated. However, if the property has been damaged during the tenure of tenant, then, landlord may hold some part of security deposit to cover the expenses. This is clearly highlighted in the lease agreement as well. Security deposit differs from city to city. In Delhi, security deposit is about 2-3 months of rent. However, in Bangalore, the security deposit demanded by landlord is around 10 months of rent.


It is imperative for both tenant and landlord to discuss these things well in advance and all the charges shall be clearly mentioned in the lease agreement to avoid any difficulties during the course of stay.

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Tuesday, May 12, 2015

Real Estate Investment in Kolkata

Investing in real estate is profitable in many ways. Property can either be rented out for a fixed monthly income or sold later for profit. However, most of the purchases consist of a considerable amount of money changing hands and it is advisable to check up on a few facts before plunging into any deal involving real estate.


  • Factors to consider when investing in real estate

Location has the biggest impact when it comes to investing in real estate projects in Kolkata. For e.g. the price of any residential project in a prime location is invariably much more in comparison to other projects. Proximity to schools, malls, markets etc. is something that buyers look for and this appreciates the value of an upcoming or ongoing project. So, the better the location, the higher the value of the property becomes.

There are many other points to consider. Any project which adheres to government regulations about building norms helps in increasing the value of the property by virtue of its trust factor. The main entrance of the project also plays a role in deciding the property’s valuation. A nice entry for a property can help in creating a good perception for a project as a ‘feel-good’ factor. Safety and security in the region and within the property is another important aspect to consider when investing in real estate.

The facilities that the property promises to provide must be looked into when the purchase is being made. This is especially important when dealing with residential projects or complexes as they have many features and facilities which can make a property attractive.




  • The rise in real estate investment in Kolkata

Kolkata has witnessed a gradual rise in property prices with more people gaining trust in real estate investments in Kolkata. More properties are being constructed to cater to the needs of the city and also around the outskirts of the city. This growth of the real estate market to an extent is dependent on the transportation facilities in the city. Kolkata features the most economical modes of transportation compared to the other metros in India. Recent developments include plans to extend the metro railway in Kolkata to facilitate connectivity across more regions within the city. This has allowed real estate companies to develop properties away from the main city as these regions will be well-connected after the completion of the project.

Most developers and real estate companies in Kolkata often adapt and follow model projects in other metro cities. Therefore, good planning of residential projects has been another reason why real estate properties in Kolkata are seen as good investment opportunities. Real Estate companies often try to attract buyers by offering gifts with the purchase of any property. Free televisions, cars and parking spots are perks that prospective buyers find worth the investment.

Real estate investment is more affordable in Kolkata than in the other metro cities. The prices for flats in residential projects are lower than those in cities like Mumbai, Delhi, Chennai or Bangalore. Also, the re-sale value of these properties provides a decent return for any investment. It is due to these reasons that investing in real estate properties in Kolkata is on rise.

This is a Guest Post by Anita Kedia

Friday, May 8, 2015

Luxury houses in India: Choose EMI over rent

Are you paying an enormous sum of money on house rent every month? If yes, ask yourself, that why are you letting your hard-earned money to go down the drain? There is no need to do that anymore! Now, you can select your dream home from various luxury houses in India by investing the same money on EMI. As per research, young professionals are seeking accommodation by buying luxurious houses in India on EMI basis. When the real estate market has a lot to offer then who doesn't wish to spend a little extra and raise their standard of living? Read further to discover how young India is investing in apartments in Chennai and other parts of the country.




  • Matching the demands of young professionals

When it comes to buying luxury houses in India, young, ambitious, and working professionals under the age of 30 are not looking for conventional choices. As per a survey, it was found that young adults wish to buy apartments in Chennai and other metropolitan cities. They do not mind investing in residential properties that are surrounded by greenery and situated on the outskirts of the city. The primary preference lies in high-rise buildings with required amenities.

According to the survey, it was also found that conventional residential spaces do not excite working professionals under the age of 30. The hunt is for owning a property that has a decent connectivity with the rest of the city, but the residential complex needs to offer something unique as compared to the other ongoing projects. A decent society needs to provide social comfort, as well as add to the intellectual quotient of the person. Keeping in mind the fast paced lives of young individuals, they prefer purchasing luxury houses in India that have a few restaurants and food joints nearby.


  • What real estate developers think?

Today, the real estate market is buzzing with modern and upscale luxury houses in India. They understand that the young prefer properties with greenery around. Having facilities such as schools, hospitals, groceries or supermarkets, works as an advantage. Since they are working individuals, they would require a well-knit local transportation from their residence to their workplace. Hence, real estate developers are designing homes where young people can choose between both comfort and affordability. Many luxury houses in India, especially apartments in Chennai are booming with an excellent social infrastructure, lifestyle shopping malls and health care centers. Most premium projects are coming up with a temple, swimming pool, Jacuzzi, spa, badminton and squash court.


  • EMI system is soon catching up with the young crowd

It has to be noted that when youngsters hunt for luxury houses in India and are away from their hometown, they avoid the conventional way of staying with distant relatives. Staying on rent turns out to be a huge hassle because you cannot make too many changes to the house as it is rented. For example, even if you would want to drive a nail into the wall, you would require permission from the owner. Banks have now made loan availability procedures easier as compared to the earlier times. The interest rates too have been brought down. These days, even real estate developers are providing low-down payments and EMI options with zero percent interest. In today’s times, owning an apartment in a contemporary housing complex has become a necessity as well as an aspiration for the urban youth. It has created a demand for quality housing and real estate developers are taking a note of this.

Nowadays, the topmost real estate developers of the country such as House of Hiranandani are coming up with the concept of environmentally-friendly buildings. They have lured potential buyers to invest in larger upscale projects with world class facilities. House of Hiranandani believes that young working individuals prefer innovative designs, classy infrastructure, and built-in modern appliances that save time and energy. Hence, they are working on developing luxury houses in India.

With young investors choosing to buy luxury houses in India on EMI basis, real estate developers are coming up with lucrative schemes for their housing projects. After all, every potential investor wishes to buy a luxurious home at their convenience.


This is a guest post by Deepak Yewle

Tuesday, May 5, 2015

Rahul Gandhi attacks Modi Government’s Real Estate Regulatory Bill. Is he right??

Author: Sachin Gupta | Find me on Twitter

Real Estate Regulatory Authority Bill is facing tough resistance from the Congress Party. Congress Party Vice President has taken up the cause of middle class home buyers. Congress Party is of the view that the bill in its current state is anti-home-buyer and pro builder.

Last Saturday 2nd May 2015, about 200 home buyers who have grievances against builders met Mr. Rahul Gandhi at Congress Headquarters. The problems highlighted by home-buyers ranged from delay in deliveries of flats to shortchanging by the developers.

Congress opines that some amendments to their bill have been made which are pro-builders (Read here about Real Estate Regulatory Bill 2013 passed by Congress Government).

  1. Definition of Carpet area has been changed. As per the bill passed by the Congress party, carpet area was ‘net usable area’ in an apartment, excluding the walls. Now, it has been amended and the ‘net usable area’ will be ‘rent-able area’ as defined in National Building Code 2005 or its later versions.
  2. In the bill passed by Congress government, builders were not allowed to change the sanctioned plan once it was approved. Now it has been amended and minor changes are allowed by informing the buyer. 
  3. In the bill passed by the Congress government, it was difficult to get extensions on project deadlines. However, it has been amended now and builder can seek extensions‘…due to force majeure or under such conditions as may be prescribed, which may include issue of completion certificate, approvals etc. without default on the part of promoter…’
  4. In the bill passed by Congress government, a builder had to keep 70% of the money collected from home-buyers for the project. Now it has been amended to 50%.


Well, the points made by the Congress party are certainly in the interest of the home-buyers. However, we need to look at the whole picture comprising of Home-buyers, builders, and authorities.

Let’s take an analogy. A car comprises of fuel injection mechanism and exhaust mechanism. Fuel goes in the engine and burns and produces emissions. If fuel is of good quality and is mixed appropriately, then, we have a complete combustion and there are no toxic emissions.

As things stand today in real estate sector, we won’t get the solution if we focus only on the exhaust side. Because make no mistake, howsoever, we may try to fix the problem at the exhaust side, we won’t get the solution. There will always be toxic elements.




What we need to do is ‘fix the problem at the Fuel intake side’. And that means, taking into consideration all stakeholders including the builders, home-buyers, and authorities.



What are the ingredients for ‘Good quality of Fuel’ at the intake stage?

  1. Make Land acquisition process smooth and transparent.
  2. Digitize land records in order to eliminate title disputes.
  3. Single window clearances for realty projects. As things stand today, a developer has to take 40-60 approvals depending on the state. This whole process of taking approvals delays the project and increases the cost. By some estimates, project cost will come down by 20% if we have a single window clearance mechanism in place.
  4. Independence agencies to inspect the project during construction phase in order to make sure that project is being constructed as per the ‘National Building Code’.


Having the right Fuel at the intake stage will make sure that construction of the project is smooth and on time. There won’t be any discrepancies.

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Saturday, May 2, 2015

Kisan in Demand! Are Political parties such as Congress, AAP, and others in opposition right in keeping Kisan a Kisan?

Author: Sachin Gupta | Find me on Twitter

Kisan in Demand

In the name of Kisan, major political parties are organizing mega rallies. Congress Party organized a Kisan rally in Ramleela Maidan in Delhi on 19 April 2015. Aam Aadmi Party followed the trend and organized a rally on 22 April 2015. Gajendra Singh of Dausa (Rajasthan) died at an Aam Aadmi Party (AAP) Kisan (Farmer) rally in New Delhi on Wednesday 22 April, 2015. The rally was organized by Aam Aadmi Party and its leader Arvind Kejriwal against the Central Government’s land acquisition bill. Gajendra Singh, a farmer from Nangal Jhamarwada in Bandikui of Dausa district, ended his life by hanging himself from the tree during the rally. And as expected, the blame game and politicization of issue has begun. Well, what we are witnessing today is the recreation of ‘Peepli Live’ in Delhi.

Various theories are floating around as to why Gajendra Singh ended his life. Was it because of crop failure due to unexpected hailstorm and nonseasonal rain? However, local officials said crop loss in Gajendra’s area had been between 20-25%, far less than the damage in many other parts of Rajasthan. Well, investigations have been ordered by the home ministry and we will get to know the truth in coming days or weeks.

However, Gajendra is not alone in this battle. Suicide has spread like an epidemic among the distraught farmers. About 158,745 farmers have taken their lives since 2004 till 2013 and 86.5 percent of farmers who took their own lives were financially indebted.



Do these so Called Pro Poor and Pro Kisan Parties really care about Farmers issues?

Now, the question that needs to be asked from so called Pro Poor and Pro Kisan parties is, ‘Should the farmer remain tied to farming for generations and live in poverty’?? A closer look at the world data tells us the complete picture:





It is clearly evident from the Graphs above that rural population & employment in agriculture in India needs to come down to China level or world level. There are simply too many farmers working on the farm and they need to be put in industries to lift them up from abject poverty. To increase per capita income, to improve people’s livelihood, jobs and employments need to be created in a massive way. And Focus on Manufacturing can help in lifting millions out of poverty.



And the parties such as Aam Aadmi Party, Congress Party shall introspect and not oppose land acquisition bill just for the sake of opposing it. The bill must be debated and passed in a given time frame for rapid industrialization in India. Most farmers approach MPs and MLAs for jobs for their children in industries and not for working in farms. However, the very same farmers are incited by these parties for political gains. The focus shall not be on Bills in parliament; instead, the focus shall be on ‘how to lift people out of poverty’?



Land Acquisition Bill

In this political slug-fest, Land acquisition Bill has now become a hot potato. Congress, Aam Aadmi Party, Left, and Janta Dal have all united to oppose the bill in Rajya Sabha. Congress Party is in such bad mood that it is opposing the laws mooted by them in first place. They failed to deliver on those laws is another matter.

For moving millions out of rural areas to urban & semi urban areas, government needs to build capacity. And by Capacity building, we mean, developing industrial corridors, housing, roads, power generation, and irrigation. And all of this capacity building needs to be implemented at a fast pace because Kisan cannot wait for entire generation to move out of poverty and live a dignified life. 

In this context, Land acquisition becomes vital. Land is required for all these capacity building projects. India is in sweet spot at this stage among major world economies and domestic as well as foreign investors are willing to pump in the money to build infrastructure projects. However, land acquisition is major issue for these firms with many of them postponing investment in projects citing land acquisition problems. There are suggestions by some corners that these industrial enterprises shall purchase the land directly from the farmers. However, it doesn't seem feasible in India because of disputed land titles. And this is where Government has to step in to acquire land and then invite industries to build projects.

So, what are the main issues that Opposition Parties are against in the amended Land Acquisition Bill?

Till 2013, Land acquisition in India was governed by The Land Acquisition Act of 1894. However, following the controversies of Singur in Kolkata and bhatta parsaul in Uttar Pradesh, the UPA government in 2013 brought in a new bill called ‘Right to Fair Compensation and Transparency in Land Acquisition, Resettlement and Rehabilitation (RFCTLARR) Act’ to repeal the 19th century act. However, Industry players objected in unison saying the bill was too draconian and the bill will make sure that no land is acquired in the country thereby halting economic development.

After the NDA Government under Mr. Narendra Modi came to power, the focus shifted to industrialization in order to create jobs and economic prosperity. The new government decided to bring in following amendments to UPA Land Bill of 2013:

According to PRS Legislative Research these are:
  1. Excluded Acts brought under the RFCTLARR Act: According to the Act 2013, 13 Acts were excluded from the RFCTLARR Act but with the new ordinance they are now brought under its purview. Thus, it brings the compensation, rehabilitation and resettlement provisions of these 13 laws in consonance with the Act.
  2. Removal of consent clause in five areas: The ordinance removes the consent clause for acquiring land for five areas - industrial corridors, public private partnership projects, rural infrastructure, affordable housing and defense. The ordinance also exempts projects in these five areas from Social Impact Assessment and acquisition of irrigated multi-cropped land and other agricultural land, which earlier could not be acquired beyond a certain limit.
  3. Return of unutilized land: According to the Act 2013, if the land remains unutilized for five years, then it needs to be returned to the owner. But according to the ordinance the period after which unutilized land needs to be returned will be five years, or any period specified at the time of setting up the project, whichever is later.
  4. Time frame: The ordinance states that if the possession of acquired land under Act 1984 is not taken for reasons, then the new law will be applied.
  5. Word 'private company' replaced with 'private entity': While the Act 2013 stated that the land can be acquired for private companies, the ordinance replaced it with private entity. A private entity is an entity other than a government entity, and could include a proprietorship, partnership, company, corporation, non-profit organization, or other entity under any other law.
  6. Offence by government officials: If an offence is committed by a government official or the head of the department, then s/he cannot be prosecuted without the prior sanction of the government.
The Congress Party, Aam Aadmi Party, Left, Janta Dal are against these amendments. Recently, Rahul Gandhi in Parliament even termed the government anti poor and pro corporate.

Is Corporate really a Bad/Dirty word??

Citizens of this country answered in big numbers that we want economic growth by voting for Modi Government in 2014 elections. If Congress Party was Pro Poor, they would not have lost the elections so badly. Because make no mistake, the real power in India lies with poor. Now that poor has voted for Modi Government, the opposition parties shall introspect and not halt economic progress of the country.

Is ‘Profit’ a dirty word? Why would an industrialist take all the risks and set-up factories if ‘Profit’ be labeled as dirty? On the other hand, so called pro poor parties shall answer; is ‘Poverty’ a virtue? Since Independence, more than 65 years have passed by and pro poor parties are still shouting pro poor slogans. What did they do to lift poor out of poverty? Take a look at China & other countries and how they have successfully lifted millions out of poverty.

Ask any farmer from the Greater Noida (Noida extension region) about their land. And they all will tell you, that they are happy to sell their lands. Son of a farmer who was working for Rupees 4000 a month is now driving an Audi. Sanand in Gujarat has also witnessed such boom after Tata set-up their Nano plant. Manesar, Bhiwadi, Daruhera, and Greater Faridabad are other such examples where farmers have benefited from industrialization. As depicted in chart (employment in agriculture sector in India), millions of farmers need to move out of farms to work in industries for better livelihoods. Farms can simply not feed such a large population.

Market Place Economy:

We no longer live in a capitalist economy as termed by some Congress and Left members. Instead, we are moving towards market place economies. Anyone with entrepreneurial spirit can succeed. Capital is available for innovative business ideas and business models. Merit is the need of the hour and not doles. The more efficient or skilled one is, the more prosperous one grows. Therefore, keeping farmers on farms is nothing but hindering their growth.

Land Acquisition is an important legislation and must be communicated well by the central Government. It’s not about land acquisition; it’s all about removing poverty from India. Moving towards industrialization will mean more tax revenues for the government which then can be used for social welfare schemes for the benefits of poor.


The new Nara (slogan)

Jai Jawan Jai Industry

Author: Sachin Gupta LinkedIn




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Friday, May 1, 2015

Power of Attorney in India

Author: Sachin Gupta | Find me on Twitter

Power of Attorney is used in many real estate transactions in India. In fact, there are instances when people opt for Power of Attorney instead of the property registration to save on exorbitant property stamp duty and registration charges.

The literal definition of Attorney is ‘a person, typically a lawyer, appointed to act for another in business or legal matters’. Therefore, in real estate transactions, a typical Power of Attorney would mean one person authorizing another person to act on his/her behalf as a legal representative to make binding legal and financial decisions. The person who gives Power of Attorney is known as donor or Principal, while the person who receives the Power of Attorney is known as Agent or holder.

In Delhi, many real estate transactions take place on ‘Power of Attorney’. Since property circle rates in Delhi are extremely high, therefore, there are people who opt for Power of Attorney to save on stamp duty and registration charges. However, there are risks attached to such transactions in case the Agent or holder does not discharge his/her duties accurately and honestly. For example, if the Agent or holder defaults on EMIs on a given property, then, the Principal’s property may be taken over by the authorized bodies by issuing a SARFAESI notice and auctioned for recovery of dues.

More on Power of Attorney can be found below:




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