Developers offer discounts to encourage the purchase of dream homes

Buying a house can be a challenging decision for many. After all, it involves investing your hard-earned money. People get finicky when it comes to purchasing their dream home as they expect the best amenities and facilities that are worth their investment. There have been many cases where people go house hunting for apartments in Bannerghatta road and other such places in the south, but return disappointed because of the expensive property prices. Now, you no longer have to wait for the prices to drop. Your dream home can be well within your reach as real estate developers are offering lucrative discounts for apartments and flats for sale in Bannerghatta road.

• The slowdown in the housing industry

Unlike earlier times, potential house buyers have plenty of choices available now. Builders and brokers are willing to negotiate better deals, which wasn’t an option some time back. Working professionals, especially those from the IT sector, are ready to purchase a second home and buy apartments on Bannerghatta Road, Bengaluru, because of the declining prices. There are a large number of people who are unable to purchase their dream homes because of the weak economy. But, simultaneously, there is also a significant section of the population who is grabbing the discounted offers introduced by real estate developers. With changing times, developers are now accepting requests from buyers and providing benefits. The price corrections have already taken place in the different sub-markets, depending on the supply and demand dynamics.

• Rise of the buyer’s market

Builders need to keep the cash flow steady. For this reason, they are willing to provide discounts when they are close to finishing the inventory. They are enthusiastic to provide schemes rather than turning away a customer. The pre-launches are occurring at aggressive prices. Due to the rising debt, unsold inventory, and slow new home sales, builders are ready to negotiate with potential buyers. The end-user can bargain the best deals as the quoted prices remain stagnant. To make things better, the Reserve Bank of India has started offering home loans at low-interest rates. In fact, due to the recent RBI rate cuts, banks have been asked to reduce their base rate, which can substantially decrease the cost of home loans. Industry experts and financial advisers believe that now is the right time to buy flats for sale in Bannerghatta road, Bangalore.

• Introduction of innovative offers and schemes

There are several real estate developers that are offering payment plans for possession. Such programs require individuals to pay 2 percent at the time of booking and take a loan for 80 percent. The EMI will be borne by the builder. After six months, the cost has to be paid, and the final 10 percent is due at the time of possession. Similar schemes with payment options ranging from 30-65-5 to 30-70 and 30-40-30 are designed to attract buyers. Be it cities such as Hyderabad and Chennai or apartments in Bannerghatta Road, Bangalore, developers are coming up with large projects. Real estate analysts believe that people expect an increase in disposable incomes once the economic indicators improve, and the interest rates reduce. As property prices continue to remain stagnant, this combination works as an excellent opportunity to potential home buyers and investors.

When it comes to luxurious properties, developers are ready to sit across the table and negotiate the payment scheme. So, you can choose to buy your dream home by purchasing apartments in Bannerghatta road, keeping in mind the current market conditions and flexible payment options.

This is a guest post by Deepak Yewle

Taxation aspects for an NRI, PIO, or a Foreigner for buying an immovable Property in India

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Buying a property has tax implications. If a property is meant for income generation, then one has to pay income tax in addition to property tax, service tax, Capital Gains Tax, and wealth tax. Tax guidelines vary from state to state in India. A typical resident of India who has invested in property has resources and time to adhere to taxation aspects.

However, an NRI or PIO or a foreigner can find it cumbersome to adhere to taxation aspects of buying an immovable property in India. What are the various kinds of taxes, what is the definition of NRI or PIO as per income tax act, and what are the various tax exemptions? These are some of the questions a Non Resident Indian (NRI), Person of Indian Origin (PIO), or a foreigner will be confronted with. Here we present the detailed paper for taxation aspects for an NRI, PIO, and Foreigner for buying an immovable property in India:

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

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

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.

Follow @sach_gupta

Have any Questions? Tweet to @sach_gupta

How to calculate the true value of a commercial property which provide steady stream of rental income for the investor?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

In our blog post titled “How to calculate the true value of the property”; we primarily focused on valuation of a residential property. In this post, we will however, focus on valuation of commercial properties which provide steady stream of rental income for the investor. This valuation approach is based on the principle that the value of a property is related to its ability to produce cash flows. For this approach 3 techniques are commonly discussed.

• Gross income multiplier:

Gross income multipliers are relationship between gross income and the sale prices for all comparable properties that are applied to the subject property.

Gross income multipliers (GM) = Sales Price/Gross Income

In arriving at a value for the subject property, the appraiser must develop an estimate of gross income based on the market data on comparable commercial properties. For the comparable properties the gross income should be annual income at the time the property is sold. Some appraisers use potential gross income (which assumes all space is occupied). Others use effective gross income (potential gross income less vacancies).  Since this method relies on gross income, therefore an assumption is made that the operating expenses are about the same proportion of gross income for all properties. This method relies heavily on current market transactions involving the sale of comparable properties. These techniques resemble the sales comparison method for valuation of a property discussed in the previous section in many ways. The focus of these techniques is to determine a market value that is consistent with prices being paid for comparable properties trading in the market place. However, rather than giving priority to adjusting for differences in value by adding and subtracting directly from the prices of comparable properties for physical and location attributes, these two methods tend to focus first on the income producing aspect of comparable properties relative to the prices at which they were sold. Adjustments are then made for physical and location dissimilarities.

• Capitalization rate

This technique is similar to the Gross income technique except that it considers net operating income (NOI) rather than the gross income of comparable properties. When it is suspected that differences in operating expenses exist between comparable, the focus of the analysis should be shifted from gross income to NOI.

Capitalization Rate (cap rate) R = NOI/Sales Price

Following data should be collected to calculate capitalization rate:

Sale price, rent, and operating expenses should be collected from brokers, agents who were involved in the sale of comparable properties.

Important warning: both Gross income multipliers and cap rate approaches does not assure that the property will be a good investment if purchased. They only assure the buyer that it is a competitive market price and that if the method is applied correctly, the buyer is not overpaying or underpaying for the property relative to what other investors have paid for similar properties. The question of whether or not it is a good investment will depend on the future growth in rents, income, and property values.

• Discounted present value techniques

This income approach is based on the principle that investors will pay no more for a property than the present value of all future NOIs. Based on the knowledge of market supply and demand, lease terms, as well as income and expenses, a forecast for cash flow is developed for a period for which we have knowledge regarding supply and demand, lease terms, income, and expenses. Normal forecasting period are 10 years.

1. The first step in this technique is to forecast NOI (based on market supply and demand, lease terms, and expenses)
2. The second step is to select a relevant period of analysis or the holding period for the investment.
3. The third step is the selection of a discount rate (r) – this discount rate is the desired return for the real estate investment based on its risk when compared with returns earned on competing investments and other capital market benchmarks.
4. Present value of expected NOI beyond the holding period. These cash flows are represented with reversion value (REV) or resale price.

Presently, capitalization rate method is used in India when evaluating the worth of the income generating properties. The discounted present value method relies on assumptions about demand and supply and therefore, there are possibilities of arriving at the wrong value of the property. 

Now, whenever you as an investor are looking to sell your commercial property such as office space or retail outlet, do your calculations as explained by us and make sure you get the right value of your property. Alternatively, if as an investor, you are looking to buy a commercial property, make sure to do these calculations in order to ascertain that you are not overpaying.

In a nutshell:

Did you calculate the true worth of your property before selling?? Let us know at nirrtigo@nirrtigo.com

Follow @sach_gupta

Have any Questions? Tweet to @sach_gupta

Four Financial Issues to Resolve Before You Settle Down

When the time comes to finally settling down, we often get so caught up in all the emotional and operational aspects that we forget to take the practical course of considering the financial aspects, before embarking upon this new phase in our lives.

It thus comes as no surprise that financial incompatibility can often cause situations of conflict in a marriage. This includes factors like budgeting, current debts, and current and proposed investments.

Here are a number of crucial financial issues that one needs to delve into, before settling down –

Review current debts –If you have a loan on a car or an education loan, or a credit card bill, you ought to put a number to the debt in terms of the value of your liabilities. It is also important to factor in how long it is going to take to pay back the amount, given the new expenses that are bound to crop in post-marriage. You should also review your partner’s financial liabilities and make a joint decision on whether to individually clear all debts, or pool in resources. This way, budgeting becomes much easier and the fact that there are debts to pay comes as no surprise or a cause for concern later in the marriage – full disclosure is mandatory.

List out assets and ongoing investments –Once you have identified the financial liabilities in terms of current debt, it’s important to look into current assets, investments and income, so as to be able to set a financial plan in place. While most of your investments till now were defined by your individual goals, marriage entails deciding what goals remain individual to a person and which goals, two individuals can combine and work towards achieving together. Make a list of your current and ongoing investments, approximate returns, stock investments and current assets like jewellery and real estate. Once you do this, you can decide the financial responsibility to be borne for each investment, post marriage.

Also, if need be, you might want to make future investments in your spouse’s name, or change the nominee in current investments, and while listing assets. These are aspects that need to be taken into account before settling down so that there are no conflicts or misunderstandings later on.

Financial planning and budgeting – A critical factor you need to take into consideration when getting married, is that your attitude towards money and those of your future spouse, might be different. You should thus have a discussion with your partner, about their spending habits, goals, and future expectations vis à vis those of your own. What you might consider a frivolous expense, might be a priority spending area, in the eyes of your future spouse.

You should also factor in financial responsibilities like monthly maintenance bills or looking after parents, and future plans like buying a house or having children. At this point, you ought to have your individual as well as joint priorities set, so that you can put a number to your short and long term finances.

An additional area of conflict could be actually spending on the wedding, which you should factor in into the financial-planning process as well.

Defining financial responsibility and demarcation of money – Often, conflicts arise depending on who manages the money, or who’s paying the bills. It thus becomes important to plan whether one or both the individuals have access to the funds, whether there are joint accounts or individual accounts or both, and each person’s role in making investments, bill payments and household expenses.


This is a guest post by Paisa Bazaar

Why You Don’t Need to Leave Your Home to Find a New One

House hunting isn’t for the faint of heart.

No matter how structured your city is or well paying your job might be, you might still be short of a decent place to live in. A house hunt takes seemingly countless hours of neighborhood tours and location drive-by to finalize that decision on ideal property. If your weekdays are packed, chances are that you would also have to compromise on your weekends to go property hunting with your broker.

As if putting up with your broker isn’t enough, these incessant trips to different localities will also leave you physically and financially drained. Opting for an online realty search, you get to check out countless listings, be it rental or lease apartments, without even having to step out of your home.

Image: Pixabay

Here’s how taking your house hunt online can take a load off your shoulders.

• Saves Time and Energy 

Visiting each flat for rent personally would take up a lot of your time and energy. Additionally, you’d have to cough up parking and fuel charges if you plan on taking your own vehicle to new localities. Getting stuck in traffic for hours can also leave you frustrated.

When you search for properties online, you save yourself from all these unnecessary hassles. You can simply surf through numerous sites that give you a virtual tour of the property. You can make a list of a couple of properties that you want to check out personally, and pre-book a visit before you zero in on a particular piece of property.

• Eases The Documentation Process

Unlike conventional processes where the broker would be in charge of the situation while you were in the dark, you would take the lead here. You’d be aware of the proper pricing and wouldn’t be taken advantage of. Some of the real estate sites even help you understand the documentation process.

• No Brokerage Fee

When you opt to search for flats without brokers online, you directly interact with the owner and avoid having to go through any intermediate. This helps you in getting to know the owner and learning more about the property first-hand. You also free yourself from paying a brokerage fee and all that unnecessary running around.

• Refines Your Search

One of the best parts of searching for a property online is not having to go through hundreds of random properties to get what you want. Filtering your search according to the locality, specification, amenities, or the budget you are going for will help you streamline your search.

You can get your hands on the best deals when you compare different properties and their rates online. Doing your homework on the current real estate scenario across different neighbourhoods also helps you build confidence in your ultimate decision.  

• 24/7 Availability

Round-the-clock realty portals let you access different properties throughout the day. With just a PC and phone at hand, you can check out properties online without the even needing to get out of bed. You can get all the contacts and listings you need within the comforts of your home.

This means that you don’t have to compromise on your leisure time. Using this method, you can shortlist a few prospects before you shift into a new home in a different city.

You can now find the home of your dreams without giving up on daily activity. Comment below to let us know how online realty portals have helped you find the right place, and/or if you have a better suggestion!


This is a guest post by Sudarshan Purohit

How to check for legalities, cost, penalty clauses, and available financing options for a real estate project in India?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Are you looking to buy property in India? Have you decided on the location, or choice of builder? Are you satisfied with your research of similar offerings available in the market? If you answered ‘YES’ to these questions, then there is all the likelihood that you may be about to make the booking amount to the real estate developer. But, hang on; despite making all the efforts to research for the right property, right builder, location, and budget, there is still a possibility of things going wrong. What else can you do to minimize such risks? Well, conduct a thorough due-diligence including verifying the legalities of the residential project of your choice, It’s pricing, penalty clauses to the developer, and available financing options for the project.

It’s not that difficult a task, just be more open and ask a set of questions from the developer, and bank. This is to make sure all bases are covered in case something goes wrong with the project. We have put together a detailed list of “TO DO” things for you to verify before you pay the booking amount for a property of your choice.

Here it is:

Process to check for legalities, costs, penalty clauses, and financing of a real estate project in india from Green Realtech Projects Pvt. Ltd

Follow @sach_gupta

Have any Questions? Tweet to @sach_gupta

How to Select a Real Estate Agent

Whether you are a property owner who wishes to sell real estate or whether you are a prospective buyer who wants to buy a property, you will need to hire a real estate agent to help you in your endeavor. When it comes to hiring property agents, not all home buyers and sellers are as informed as they should be about these service professionals. The following tips will help you analyze a real estate agent's credentials, his work and success stories so that you can conveniently achieve your goal.

Here are some useful ways by which you can find out more about the agent before you decide to get him on board.

• Get in touch with the agent’s recent clients

Ask the potential agents to bring with them a list of their previous clients along with what they have listed or sold in the past one year. Now before you pick up the phone and start calling up the clients, ask your agent if you should expect any specific client to be particularly satisfied or particularly upset. You can also ask the other clients about the asking price and sale price. If you happen to be the seller, find out if the properties sold by this agent are similar to yours in terms of price, amenities and features. One should hire an agent who has a specialization in the type of property you are looking for or wish to offload. You may also ask the clients as to how long their property been on the market?

• Check the license

Real estate dealers must hold a license that is authorized by a board of a particular state. You should check with your state's regulatory body to find out if the agent is licensed and whether there has been any sort of complaint or disciplinary action taken against him. You may be able to find information related to certain states on databases available online, which the consumers can access.

• Opt for the best

Check out the peer-given awards held by the agents. Look for felicitations that actually mean something, for instance, ‘Realtor of the Year’ award conferred by the state or an association of realtors. Real estate agents are best judged by contemporaries and peers and if an agent has been honored by his allies then that is a huge endorsement.

• Look for the right credentials

Just like doctors specialize and have a niche, real estate agents also excel in a niche. Even professionals working in the general sphere will seek special training in a particular area. So make sure you go through the name and look for any indication that the agent has made extra effort and taken specialized training in a specific sub-domain of property sales. Here is what the designations imply –

1. Accredited Buyer's Representative or ABR – The agent has added education in representing shoppers in a transaction.
2. Certified Residential Specialist or CRS – This implies that the person holds extra training in managing residential real estate.
3. Seniors Real Estate Specialist or SRES – This means that the agent has completed training for helping both sellers and buyers who are over 50 years of age.

• Find out how much experience the agent holds

You can find out facts like how long a particular agent has been dealing in real estate. Such information can be obtained from the state licensing authority. Or you may simply inquire the details from the agent himself. If the agent has been out of business for over five years, they could now be learning on you which is definitely not good. You should always hire a professional who has been actively engaged in a specific sub-domain and price category. You should gauge the magnitude of knowledge of through these two parameters and check the agent’s market presence.

• Check the current listings

Go through the agent's listings shown online. Check out the agent’s official website or other portals with Multiple Listing Service as a searchable online database. Nowadays, most buyers begin their search over the Internet. Thus, you should hire an agent who uses the web effectively. Presentation is everything and so the agent must be able to show his work through pictures of properties and establish credibility through listings. 

Your responsibility is to see how close the listings come to the type of property you wish to sell or buy. You should also check whether the agent operates in the area where you would like to invest and whether he has dealt with homes in the same price range. The person must be able to have sufficient listings to portray a steady business. However, the list should not be extremely long either because then you will just be a mere number in it. 

You can also assess the agent’s proficiency by mentioning about a recent deal in the area. If he knows about it and can give some details, this means that he knows his job and you can hire him immediately.

Lastly, don't forget to check the various fees charged by the real estate agent. And compare these fees with other real estate agents in the locality.

This is a guest post by Devika Arora who is a professional writer dedicated to following the current real estate trends and writing guest posts and blog posts for the benefit of potential home buyers and investors. The above article talks about how to choose a property agent.

Indians Buying Property Overseas

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Post 2008 financial crisis and sovereign debt problems in various European countries, the property prices fell down. Speaking to one person familiar with Spanish market, one get the sense that there is huge property overhang in the country and therefore government has relaxed norms for foreign nationals to buy property. Similarly, in Switzerland, one can easily buy a holiday home in upcoming projects in Andermatt or in other picturesque locations. Fall in property prices in US, EU, and Dubai make these places attractive for NRIs as well as resident Indians.

There could be various reasons for buying property in these countries from settling there later in life, or sending kids for education, pure investment, holiday destination, etc. "Dubai, London, New York and Singapore are the most popular property destinations for Indians. In 2013, Indians topped the list of foreign nationals who invested in Dubai Property market.

However, buying property overseas has its fair share of glitches and therefore one should adhere to following tips and RBI guidelines in order to make sure that process is legal and hassle free.

Indians buying property abroad from Green Realtech Projects Pvt. Ltd

Follow @sach_gupta

Have any Questions? Tweet to @sach_gupta

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

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

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

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

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

Down payment plan

A typical down payment plan looks like this:

Down Payment Plan [(8 % Rebate on Base Selling Price (BSP)]

• At the time of Registration / Booking - 10% of BSP
• Within 45 Days From date of Registration / Booking - 85% of BSP + Car Parking + DC +Club Membership + PLC (if any)
• On Possession - 5% of BSP + Other Additional Charges etc.

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

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

Construction linked plan

A typical construction linked plan looks like this:

Construction/Time Linked Installment Plan

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

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

Flexi payment plan

A typical flexi payment plan looks like this:

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

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

20-80 payment plans

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

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

According to some media reports, Reserve Bank of India (RBI) has banned the 20-80 schemes.

Rent on home buy plan

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

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

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

Which payment plan one needs to choose?

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

Follow @sach_gupta

Have any Questions? Tweet to @sach_gupta

The rise of India’s commercial real estate market

While talks about the residential real estate sector have got people gripped, commercial property is not far behind. Thankfully, good days have returned for office real estate property in India, with lots of domestic and foreign companies looking for space and many businesses in expansion mode. Bangalore being the prime location for office spaces, many companies are purchasing apartments in Bannerghatta road Bangalore and converting them into office spaces.

• Change in government

One of the most stabilizing factors is last year’s general election and that was one of the reasons behind the upswing of the real estate. It brought with it new confidence in the country’s economic development. Though, the country witnessed uncertain times in the first quarter of 2014, and market morale was low, sentiment improved gradually following the elections. Apart from buying apartments in Bannerghatta road Bangalore, the city of Mumbai, for example, witnessed 65 per cent appreciation in average deal sizes between the second quarter of 2014 and the second quarter of 2015.

The growth of the real estate sector can also be attributed to expanding businesses, especially due to India’s emergence as an attractive offshore destination. The government’s decision to introduce incentives to attract foreign investors plays a role. Also, the availability of a large pool of highly skilled technicians and engineers, customer-friendly banks and housing finance companies, the country’s favorable demographics, and increasing purchasing power. Increasing professionalism among real estate brokers is also cited as an advantage.

• The big three cities

Major shares in the profit are gained from tier 1 cities such as Bengaluru, Mumbai, and New Delhi. These cities are technological, commercial, and political hubs respectively. According to a survey, these cities even outperformed global commercial property market when it comes to annual rental yields. The Indian office market has been maintaining a healthy traction in 2014 and has clocked office space transactions of 18 million square feet in the first six months of 2015.

It is a record year for Bengaluru, which is expected to transact office space to the tune of about 12 million square feet in 2015. The three cities have also endured the largest individual transactions in the sector, with big corporations and expansive start-ups such as Flipkart and Snapdeal picking up a lot of office space. Some of them are purchasing apartments in Bannerghatta road Bangalore and expanding them to set up their offices. And with the growth in office activity, other commercial spaces follows suit, particularly retail, as well as hospitality due to increasing demand for lodging in the trade hubs from business travelers.

• REITs on their way

The Real Estate Investment Trusts (REITs) is expected to come up with a future boost. However, due to some legal barriers, the scope of taxation proceeds from such trusts remains unresolved. Foreign investors will be allowed to buy units. It will help reduce pressure and stress on the banking system to fund the real estate sector as REITs will enable the industry to propose fresh equity by attracting long-term finance from domestic and foreign investors. The Indian REIT sector is expected to give a further push to commercial real estate and is tipped to attract investments. So far, REITs worth a total of $20 billion in assets are mainly focusing on Grade A office space and parks, logistic space and warehouses, malls and shopping centers, hotels and other commercial space.

Today, the potential of the Indian real estate sector is enormous, but there needs to be a clear solution with regards to REIT taxation. Among other trends, there's been a steady growth of the commercial sector, which is favorable for organizations.







This is a guest post by Deepak Yewle

Can development of Secondary Mortgage Market help fix the housing shortage in India?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

As has been documented on numerous occasions about the shortage of housing in India, till 2012 (as per the census results) the housing shortage in urban areas stood at 18.78 million units**. About 99% of this housing shortage pertains to the economically weaker section (EWS) and low income group (LIG) categories. That’s a whopping number and constructing those many housing units for growing urban population will take enormous effort on the part of government, private businesses, and finance ministry.

Providing low cost housing finance to plug the housing shortage is seen as the key ingredient. However, most banks use traditional products such as using funds from deposits to finance long term housing loans. Therefore, to provide housing on a scale as large as in India, the concept of secondary mortgage market may well soon be adopted in India. In this article, we will briefly talk about the secondary mortgage market and why it is difficult to implement in India.

What is a Secondary Mortgage Market:

The secondary mortgage market is active in developed economies such as USA, Europe, Japan, Australia, etc. The primary function of this market is to provide a mechanism for refilling funds used by mortgage originators (Banks, Housing Finance Companies, etc.). This, in turn, enables them to maintain a flow of new mortgage origination during periods of rising and falling interest rates. They may accomplish this by selling mortgages directly to government agencies or private entities. Or they may form mortgage pools and issue various securities, thereby attracting funds from investors who may not otherwise make investments directly in mortgage loans. Hence, much like any corporation raising funds for doing business, the primary goal of mortgage originators in today’s market is to replenish funds by reaching broader investor markets.

In addition to direct sales of mortgages from originators to investors, many large mortgage originators found that they could place mortgages in pools and sell securities of various types, with mortgages in these pools serving as collateral. With the assistance and expertise of investment bankers, large mortgage originators can then issue securities in small denominations which would be purchased by many more investors. Firms with smaller mortgage origination volumes could continue to sell mortgages directly to government agencies, which in turn would create large pools of their own and issue securities.

Many types of mortgage related securities have been developed in recent years. The number and types of securities are continuing to increase as mortgage originators, investment bankers, and government agencies continue to innovate and reach investor markets that provide the ultimate sources for many of the funds used in new mortgage origination. Major types of mortgage backed securities are:

1. Mortgage backed bonds (MBBs)
2. Mortgage pass through securities (MPTs)
3. Mortgage pay through bonds (MPTBs)
4. Collateralized mortgage obligations (CMOs)

Why it is difficult to implement in India?

RBI recently came out with a report listing down the reasons for non-implementation of secondary mortgage market in India:

1. Low Investor Base
2. Cultural factors
3. Poor capital market infrastructure
4. Regulatory environment
5. Legal hurdles
6. Lack of proper accounting standards
7. Taxation
8. Poor quality of assets
9. System deficiencies
10. Lack of standardization

Road Ahead:
It is clearly evident from the discussion above that development of secondary mortgage market in India is inevitable given the scale of housing stock that needs to be provided. And sooner, we as a country fix some of the issues facing secondary mortgage market; the better it is for growing urban population and economic growth of the country. In 2011-12, the housing loan disbursed to individuals stood at Rs. 68221.12** Crores. With secondary mortgage market in place, this disbursed loan amount can achieve the global levels. And at the same time, provide a mechanism for transparent debt markets.

** Source: National Housing Bank

Follow @sach_gupta

Have any Questions? Tweet to @sach_gupta

Can I afford to buy a home given my current income levels? How do I calculate Home Affordability?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta
 

This piece of blog is meant to illustrate if the home you are buying is affordable or not, given your current income levels.

For many of us working in IT/ITES; Auto; Manufacturing; other services sector, buying a home is a long-term financial commitment. On one hand, we have the aspirations of owning a home while on other hand we have the obligation to fulfill that aspiration. This is where a quick home affordability analysis would help us a great deal given our current financial situation.

Step 1:
Assess your current household income (include your spouse salary to it)
Household Income = your current take home salary + your spouse take home salary + other sources of income

Step 2:
According to global standards, one should allot maximum of 40- 50% of household income for home loan EMIs.
As an example, if your net household income is 1 Lac rupees, allot maximum of 50000 rupees for paying EMIs.

Step 3:
Most banks offer floating home loan rates, Therefore, we will only consider floating home loan rates here.
Analyze current home loan rates (It would help if you have the data for last 5 year home loan rates, because interest rates tend to move up & down in cycles)
As an example, let’s assume home loan rates are @ 10.5% and tenure of the loan is 240 months.

Step 4:
Calculate the home affordability ratio which is
Value of home /your net household yearly income
In this example, the net household income=1200000
Value of home=6260142
HAR (Home Affordability Ratio) = 6260142/1200000, that comes out to be 5.21.

As a thumb of rule, the home affordability ratio should fall between 4.9 and 5.4 for the home to be considered affordable.

Therefore, before proceeding to buy your home, doing simple maths would go a long way in assessing the value of home that you can afford.

Follow @sach_gupta

Have any Questions? Tweet to @sach_gupta
 

5 most brutal accidents in the recent history of infrastructure projects

We are all accustomed to high levels of safety when it comes to construction of infrastructure projects these days. From bridges, to railway networks, to Metro line construction, to expressways, to dams, we expect nothing less than ordinary. The factor of safety in today’s construction is very high and therefore we don’t get to hear massive tragedies at infrastructure projects.

However, it was not all that rosy; it took human beings hundreds and thousands of years to reach these levels of safety. Here we present 5 most brutal accidents in the recent history of infrastructure projects.

Source: Five deadly construction sites

Celebrities’ amazing homes and guess which celebrity own these homes

Home decor is a personal and subjective choice and often reflects the personalities. Take a look at celebrities’ amazing homes and guess which celebrity own these homes!

What shall I do if interest rates go up?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Sumit booked his apartment in a builder project in 2010 in Noida Extension. He booked a 4BHK unit measuring 2250 Square Feet at a base selling price point of Rs. 1950 per Square Feet. Prices were affordable and he was able to book the apartment within his budget:

Area of the Apartment (SqFt)	2250
Base Selling Price (Rs/SqFt)	1950
Development Charges (Rs/SqFt)	225
Car Parking (Rs)	150000
Club Charges (Rs)	100000
Interest free Maintenance Charges (IFMS) in (Rs/SqFt)	85
Final cost of the apartment (Rs)	5335000

Out of the required 53.35 Lacs, he arranged for 13.35 Lacs from his own sources such as cash, provident fund, and fixed deposits. Balance amount of Rs. 40 Lacs was availed from a leading bank in form of home loan. Home loan rates in 2010 were hovering at around 8 to 8.25%. Which meant his monthly payment in form of EMI was Rs 33458 for a period of 20 years. His home loan interest rates were of floating type. This meant whenever, RBI revises repo rates, home loan interest rates would go up or down depending upon RBI monetary policy.

Everything was going as per plan; however, as the inflation started to go up because of various macro economic factors, RBI started revising its monetary policy. The focus of RBI moved towards bringing inflation under control. And therefore, interest rates started moving up. From about 8% in 2010, the interest rates jumped to about 11% in 2014.

What it meant for Sumit was that his EMI outlays increased over a period of time. At one point of time, he was paying monthly payment of Rs 41288 in form of EMI. That’s an increase of Rs 7830 per month.

What can Sumit do to maintain his EMI under control?

1. Stretch the loan tenure: Sumit had availed home loan for a period of 20 years. However, since, interest rates had moved up, he could sit with bank officials and seek to extend the loan tenure to 25-30 years. Thereby, he can bring his EMI under control.
2. Move to another lender: Sumit can also move to another lender offering lower interest rates. In this case, he has to study and analyze the offers by various banks. And if there is a difference of about 0.5%, then, Sumit can switch to another lender to bring his EMI under control. However, he should check if there are any pre-payment charges with existing lender. As per RBI rule, customer can move from one lender to another without paying any pre-payment charges.
3. Prepay portion of the Loan amount: Sumit can also prepay some portion of his loan amount to the existing lender. This way, his EMI would come within manageable limits.
4. Avoid shifting to fixed loan rates: When interest rates are fluctuating, many people believe fixed rates are way to go about. However, fixed interest rates are more expensive and at the same time, one cannot take benefits of lower interest rates as and when RBI brings interest rates down. Therefore, Sumit should stick to points 1, 2, or 3 and should completely avoid point 4.

Thanks. Please share!

Follow @sach_gupta

Have any Questions? Tweet to @sach_gupta

Mechanism for sudden price appreciation and need for regulator

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta
 

To many this wouldn’t be a new thing, I am talking about the sudden increase in residential property prices in Indian metro cities between the periods 2003 to 2007. On a macroeconomic side, it is very well documented that prior to 2003, the property prices were significantly depressed and they shot up post 2003 on account of huge demand driven by increased jobs in sunshine sectors such as IT, Auto, and services. This coupled with relatively short supply gave further rise to real estate prices.

But how did prices go up so suddenly to the tune of almost 8 - 10 times. Well, I struggled a bit to understand that phenomenon and after years of being in real estate sector, here are my two cents.

Firstly, on account of increase in jobs as well as increase in income levels, the demand for housing was tangible. However, the supply was limited and new infrastructure has to be created to cater to that rising demand. That new infrastructure (if we talk about Delhi NCR) could only be developed in new locations such as Greater Noida, New Gurgaon, Golf course extension road, Greater Faridabad, Far away Ghaziabad, and so on.

Now, simple calculations will tell us that cost of construction is about rupees 1200 per square feet (I am talking about high quality construction at current prices). Add land prices to that number, and you would arrive at rupees 1300-1400 per square feet of developed land in the new locations mentioned above. So, how could builders of these new developments in those locations sell those properties for about Rs. 2500 – 3000 when you have properties being sold in primary (already developed) locations such as Faridabad, Noida, Gurgaon, Ghaziabad being sold for Rs. 1800 – 2000 per square feet. No guessing here, the prices have to move northwards in primary locations to justify the Rs. 2500 – 3000 in new locations.

But how do prices move northwards in primary locations? Well, tried hard and after spending some years in real estate sector came to realize that it needed vitamins, injections, or even better steroids. To illustrate it very simply, take a case of real estate sector in Noida where land rates in 2003 were hovering at around Rs. 800 – 1000 per square feet in most localities. All of a sudden builders ABC, XYZ, and few more enter the market and purchased the land plots for Rs. 3000 – 4000 per square feet and I am talking about the primary Noida locations here. What it meant for those builders was loss of money (maybe 50-100 crores) having bought the land at high prices when same was available at very low prices. What does it mean to Mr. Sharma, who believed that since Mr. Verma has sold his plot at Rs. 4000 per square feet, that he wouldn’t sell it for anything less than the Rs. 4000. And rest as they say, residential land price of Rs. 4000 per square feet became the market price in no time.

Now, the very same builders were developing the new locations and now that the price in primary location has already been put on steroid, they can charge Rs. 2500 – 3000 in new locations. So, for the loss of Rs. 50-100 crores, they can now easily make thousands of crores. No fault of theirs, in a capitalist world maximizing value is the key and they did it in open market. However, presence of real estate regulator could have avoided this steroid and maybe saved the common man with pains of going to new locations when most jobs are in primary locations. Given the income levels in major metros, can you justify the prices of real estate? No, and that’s where the real estate regulator could have been helpful.

Follow @sach_gupta

Have any Questions? Tweet to @sach_gupta

UK’s Generation Rent

Presenting below the info-graphic on UK’s Generation Rent!

Young adults between the ages of 18 – 35 who are living in rented accommodation in UK are known as UK’s Generation Rent. 

This segment of population has little chance of becoming homeowners because of high property prices in UK. Is it true? Let’s compare UK’s Generation Rent with other nations in the EU.

Source: https://money-pod.co.uk/guides/generation-rent/

Mistakes to avoid when you rent out your apartment

A real estate report that was released recently highlighted the facts why Bangalore is considered as the most preferred city to stay in the country and also to invest in properties. While the real estate and property markets are down in cities such as Mumbai and Delhi, the report suggested that Bangalore has now a high rate of residential properties and the rate of rented apartments is going up with every quarter. Bangalore has a typical mobile population wherein people, young adults to be precise, come to the city to study and work on a temporary basis. This has resulted in the increasing numbers of rental accommodations like houses, flats and paying guests in Bangalore.

There are certain dos and don’ts that tenants need to keep in mind while finding a rent house in Bangalore so that the deal is profitable and stay is comfortable. However, as an owner also, one must keep in mind certain factors to avoid making mistakes. Grabhouse.com, India’s first broker free housing portal lists down the common mistakes that one can avoid as an owner of rented properties.

The first basic mistake that a landlord might make is deciding on a proper rental amount to charge. Apart from the basic rental charge, there are many additional charges that as a landlord, one might need to pay. These may include maintenance bills, water bills, etc. If the tenant has to pay these separately, you may keep them out of the rental charges. Else, make a list of the utility items that you need to pay and make it part of the entire rental charges for the tenant.

Make sure to conduct a background check on your possible tenants before you allow them to stay in your house. It eliminates the possible chances of inviting uncalled troubles if the tenant turns out to be someone charged with legal cases or similar other situations. It also helps you stay clear of the legal issues as a landlord. You can call up their workplace or any reference number to get a background check about the person or the family and then decide accordingly. If required, do not hesitate to check on your tenant after renting out the house also. Regular screening of the property and the house and a proper credit check of the tenant is important.

One basic rule of being a landlord is to be familiarized with the various legalities involving the laws of real estate sector and what it means when renting a house. Get yourself familiarized with the various aspects of the laws regarding renting out apartments to the tenants. You can consult a legal adviser specialized in this sector. Be sure about the policies involving security deposits, maintenance costs, and payment of rent on a mutually agreed upon day, parking and other community charges if any.

While preparing the lease document, make sure to include all the clauses pertaining to maintenance of the house, items provided by the owner, payment of rent on a particular day of the month, extra payment for the utility items, etc. Get the lease documents verified by your legal adviser, read it carefully and share it with your tenant. If your tenant suggests changes, get it verified by the adviser, come to a mutual agreements and then sign the paper, after you have read it carefully (again!).

Before renting out the apartment, make sure to have discussion regarding the revision and raising of rent amount annually. Discuss the percentage of raise and other associated charges properly to avoid ambiguity at a later stage.

Lastly, maintain a cordial relationship with your tenant. It will help in having the same tenant year after year and will develop the trust. Ensure that you are there to help them if they need you and offer to fix any damage in the house immediately that has not been caused by them.

This is a guest post by Shanaya Mehta