What are Real Estate Investment Trusts and why do we need them badly in India?

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

Recently, Securities and Exchange Board of India (SEBI) has put up Real Estate Investment Trusts (REIT) for public comments in order to draft the final set of guidelines.

So, what are REITs and what benefits can they provide to small investors with 2-3 Lacs of invest-able income? Can these investors invest small amounts in REITs? We explore here.

A real estate investment trust is basically a creation of the internal revenue code. It is a real estate company or trust that has elected to qualify under certain tax provisions to become a pass-through entity that distributes to its shareholders substantially all of its earnings in addition to any capital gains generated from the sale or disposition of its properties. Because the individual investor has the opportunity to pool his/her resources with those of persons of like interests, funds are assembled to permit purchase of buildings, shopping centers, and land in whatever proportion seems to offer the most attractive returns. Investments must be approved and management activities reviewed by a board of trustees who are accountable to shareholders and are ordinarily well qualified to make such decisions.


Following are the requirements to qualify as trust in countries where REITs are in existence for years:

Asset requirements:

1. At least 75% of the value of a REIT’s assets must consist of real estate assets, cash, and government securities.
2. Not more than 5% of the value of the assets may consist of the securities of any one issuer if the securities are not includable under the 75% test.
3. A REIT may not hold more than 10% of the outstanding voting securities of any one issuer if those securities are not includable under the 75% test.
4. Not more than 20% of its assets can consist of stocks in taxable REIT subsidiaries.

Income requirements:

1. At least 95% of the entity’s gross income must be derived from dividends, interest, rents, or gains from the sale of certain assets.
2. Minimum of 75% of gross income must be generated from rents, interest on obligations secured by mortgages, gains from the sale of certain assets, or income attributable to investments in other REITs.

Distribution requirements:

1. Minimum of 90% of REIT taxable income must be distributed to shareholders.

Stock and ownership requirements:

1. Be taxable as a corporation
2. Board of directors or trustees should manage the REIT
3. Fully transferable shares
4. REIT shares must be transferable and must be held by a minimum of 100 persons

REITs that are not listed on an exchange or traded over the counter are generally called private REITs.



Various types of REITs:

Industrial/Office: 
These REITs are further subdivided into those that own industrial, office, or a mix of office and industrial properties. Some analysts further segregate these REITs by property location (i.e., whether they are in CBD or suburban locations). For example, if REITs were to become reality in India, the REIT with focus on Office Space in Gurgaon can result in attractive returns for investors.

Retail:
These REITs are further subdivided into those that own strip centers, regional malls, outlet centers, and free standing retail properties.

Residential: 
These REITs are further subdivided into those that own multifamily apartments and manufactured home communities. Some analysts further segregate those REITs that own student and military housing.

Diversified: 
REITs that own a variety of property types.

Lodging/resorts: 
REITs that primarily own hotels, motels, and resorts.

Health care: 
These REITs specialize in owning hospitals and related health care facilities that are leased back to private health care providers who operate such facilities.

Self storage: 
These REITs specialize in ownership of self storage facilities.

Specialty: 
These REITs specialize in numerous types of properties, including prisons, theaters, golf courses, cellular towers, and timberland. Specialty REITs have been a rapidly evolving segment of the industry.

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What are the various way in which I can raise funds to buy house?

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

Now that you have decided to buy a home, you need to determine the home affordability and sources of home finance before you actually approach the developer to buy your dream house.

First thing first, what is the value of home that you can afford? Well, home affordability is derived by taking into consideration your current household income levels, and monthly expenditures. Here is the detailed example of calculating home affordability.

Now, the crucial aspect in home buying is sources of funds.

Let’s say, based on your current income levels and monthly expenditure, it is determined that value of home that you can afford is Rs. 6000000

As per banking norms, you can avail 80% of this as home loan from banks or housing finance companies. However, check your loan eligibility from the local bank. Your loan eligibility depends on host of factors such as nature of loan, amount of loan, income of the applicant, financial status of the applicant, his/her age, qualifications, number of dependents, spouse's income, assets, liabilities, stability and continuity of occupation, income, expenditure and savings history.

Home loan = 60 lacs x 80%
                  = Rs. 48 lacs

How do you source the remaining Rs. 12 lacs?

• Cash savings

Firstly, Pool in the cash that you and your spouse may have accumulated over a period of time. Additionally, if possible, you can borrow the money from your close relatives or friends. The benefit of borrowing from family sources is that you will be paying zero or low interest as opposed to borrowing the same amount from commercial lenders.

• Fixed deposits

If your fixed deposits are nearing maturity, unlock them. Or one can also avail loan against fixed deposits. Banks normally lend 70-80% of the total value of fixed deposits.

• Savings in the form of shares or mutual funds

Shares and mutual funds are highly liquid asset class. You can trade your stocks and generate the money that is needed to make the down payment for your home. Some banks also offer loan against these securities. Check with your bank about the eligibility for loan against your stocks or mutual funds. The interest rate charged (10 to 14%) will be in direct proportion to the nature of your stocks and mutual funds.

• Personal loan

This is probably the easiest way of making down payment for your home. If you are employed, approach your company’s bank for personal loan. Your company’s official banking partner will certainly have attractive interest rates schemes for the employees. We have noticed in past when employees were given personal loan at 11-12% as against the market norm of 17-18%.

• Loan against gold

Indians are the largest consumer of Gold. Your gold collections may be lying idle at home or in your bank locker, instead why not unlock the value of gold? It will definitely be handy towards your down payment. Gold is relatively a safe asset class and therefore, banks will charge relatively low interest rate when sanctioning loan against gold. Approach your bank for loan against gold and you will be surprised at ease with which banks will provide you loan against gold.

• Provident funds

Provident funds can also be a reliable source of generating funds towards down payment. One can also avail loan against his/her provident funds.

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Shock absorbers using aerospace technology for making buildings earthquake proof in India

The earthquake tremors of Nepal have not only caused extensive damage to the reinforced concrete multi-story buildings in Kathmandu, but have also shaken the confidence of people in India and ignited the fear of a magnitude 8 or higher earthquake striking North India as per statements made by the National Disaster Management Authority (NDMA).

The prohibitively high repair costs for buildings designed and built as per the building code earthquake standards has prompted Taylor Devices Inc., to launch a unique and one-of-its-kind solution for the Indian realty market. The Indian subsidiary of Taylor Devices Inc., Taylor Devices India Pvt. Ltd., has launched its brand certified earthquake resistance by the name of “Taylor Protected”, which far exceeds the minimum code criteria. Buildings vying for this certification will need to comply with extremely strict and high international standards. These buildings will have giant shock absorbers installed which will stay hidden in walls and these will act just like the shock absorbers in a car absorbing the earthquake shocks so that the building structure remains unharmed.

According to Mr. Sandeep Donald Shah, Managing Director, Taylor Devices India, “India has yet not seen this premier earthquake protection which is extremely popular in countries like US and Japan. These brand certification marks will enable the consumers in India to be rest assured that the apartment they are purchasing contains premier earthquake protection which is much ahead of its times and much higher than the minimum protection as spelt out by the building codes. “It makes great business sense for us to allocate this brand certification as our dampers are built using aerospace technology and come with 35 years warranty.” 

Presently there is no way to identify if a building is earthquake resistant, other than take the word of the seller that the building he is selling is earthquake resistant. Also there are four distinct categories of earthquake resistant buildings – Category A, B C & D - and the difference between their earthquake performances is so huge that merely saying that the building is earthquake resistant has no meaning. Category A and category B buildings stay operational even after a major earthquake whereas category C and category D buildings need to be abandoned/vacated and structurally repaired before being reoccupied.

The building code in India requires a minimum compliance to category D standard, which is “collapse prevention”. “Taylor Protected” and “Taylor Earthquake Protection” brand certification will only be given to Category A and B buildings (Operational and Immediate Occupancy buildings).

To get this state-of-the-art brand certification the building will need to meet numerous stringent earthquake resistant criteria, firstly it would need to be designed to Category B or above seismic performance standard (operational or immediate occupancy) and will have to have Taylor Devices aerospace technology dampers, that are maintenance free and come with a 35 years warranty. 

Proactively divulging the earthquake resistance category of the building will set precedence in upholding the two most important consumer rights on India i.e. “Right to Complete Knowledge” and the “Right to Awareness” which presently is being flouted by one and all in the real estate industry.

This is a press release by Neha Kaushik

6 steps that can make real estate efficient and corruption free in India

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

We have been writing a lot about the inefficiencies and mal practices in real estate sector in India. A lot of focus of our writing has been on highlighting the issues that plague the industry and how those issues can be tackled. While other ideas such as RTI; Aadhar; and recently Jan Lokpal bill has seen the light of the day, issues in real estate sector still remains unresolved. There is no denying that implementation of RTI, Aadhar, and Jan Lokpal bill will help in eliminating corruption from the government-public interface. But, what about real estate, where most of the cash finds its way? Why is the government not bringing in policy measures to cure the sector? We list some of the measures that can help in eliminating corruption from the real estate sector. In no way, these are the only measures, but, we are confident that implementation of the following measures will certainly help the sector.

• Equalize market rate and circle rates

As the name suggests, market rates are determined by the economics of demand and supply equilibrium. Buyers and sellers participate in the market and transactions take place fairly & without any stimulus. Circle rates are the minimum rates fixed by the state government and a buyer of the property is entitled to pay stamp duty charges on these rates whenever a transaction takes place. For example, in Gurgaon, the market rate of an apartment in a multistory building is 7000 Rs/sqft, while the circle rate for the same apartment as fixed by the state government is 4000 Rs/sqft. For a 1000 sqft apartment, the stamp duty charges as per the circle rate would be Rs. 320000. While the stamp duty charges as per the market rates would be Rs. 560000. Therefore, it presents an opportunity for the buyer to under report the apartment value on papers in order to save on stamp duty charges. Equalizing market rates and circle rates would eliminate the practice of under-reporting of the property value. However, this may affect the growth of real estate sector because of fewer transactions between buyer and seller. And this can lead to an adverse impact on GDP of the state as well as the country. Well, the move to equalize market rates with circle rates should also be complemented with reduction in stamp duty charges.

• Reduce stamp duty charges:

Stamp duty charges are exorbitant in most states across India. Stamp duty charges are least in Madhya Pradesh at 0.5%, while they are about 8% in states like Haryana, Punjab, Rajasthan, UP. Now, let’s say stamp duty charges are brought down in all states to a uniform level of 1%. Therefore, one would now pay Rs. 70000 as stamp duty charges on a flat of 1000 sqft with a market price of Rs 7000 per sqft. This move will not only encourage buyers to report market value of the property but will also lead to more and more transactions. Research based on past transactions can result in the optimum value of stamp duty charges which incentivizes true reporting as well as increased velocity of transactions across states in India.

• Cap on property transfer on government sponsored schemes

On government sponsored schemes such as the recent DDA flats scheme, there should be a tenure cap. In other words, people who applied for the scheme and got allocation should not be able to sell the allocated apartment in secondary market for a fixed time period (say, 5 years). This happens in many countries in EU. The tenure cap will drive away speculators and only the real needy people will participate in the whole process. Can you imagine for 15000 DDA flats, some 15 Lacs application came. But this one looks impractical because banks, government bodies, and agencies all made money by issuing a lottery system. And then, they would say, we are pro-poor and these schemes help poor of the country. We came across a property dealer in Delhi who filled 8 forms for the DDA scheme. He called in various relatives and friends from his native Bihar and he made sure that at-least 8-9 forms were filled. He paid for the whole process and in return if a flat was allotted to any of those 8-9 members, he would share 50% of the proceeds. Everyone knows what a big lottery this whole flat allocation system is, yet government is not changing the policy. And who is benefitting? Government bodies by charging a fee for every form sold; banks for providing upfront money to the customer at an interest; and the rich who already owns multiple properties.

• Cap on home ownership in certain cities

Certain cities such as Mumbai, Delhi, and other major metros have become unaffordable for the masses. A basic 2BHK is virtually out of the reach for a salaried person and he/she has to go to the outskirts of the city to fulfill his/her dream of home ownership. People with deep pockets own multiple properties in these cities. Housing is considered an investment vehicle first and then the basic need. In China, the government has moved in recent years to quell home price amid worry that surging costs could lead to social unrest and has set Home-Ownership Curbs in Shanghai and Beijing. Can it be done in India?

• Computerization of property titles across the country

E-governance is the need of the hour. When there is no dearth of talent in the country when it comes to software development and technology, why don’t we see the computerization of property records? In many instances, a single property is registered under 2 or 3 names and this leads to disputes. Computerization of property titles will not only eliminate property disputes but it will also help in land acquisition processes for mass urbanization.

• Make it easy as far as capital gains tax are concerned

An individual is liable to pay capital gains tax whenever there is significant gain over the buying price. Applicability of long term and short term Capital gains taxes should be made simple. In order to reduce or avoid being liable to pay capital gains tax, an assessee can either purchase a house within a period of one year before or two years after the date on which the transfer took place, or construct a house within a period of three years after the date of transfer. Why can’t we have a common wealth tax instead of so many complicated tax structures?

Is it desirable as far as real estate is concerned or are we just getting too ahead of ourselves?

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Stamp Duty Refund Process

So things haven’t been as perfect as you would have expected with your registration procedure and to make things worse you have already paid stamp duty to the state. Since you are right now on this page, I will make a wild guess and deduce that you wish to have your stamp duty refunded. Good for you, however, there’s a slight problem, the first thing you need to realize is that your money has already been received by the state government and the second thing is that to get it back from them wouldn’t be any less of a mean feat. So how can you go about it?


The whole of the stamp duty refund procedure could be described into two general steps:

1. Step 1: Filing a stamp duty refund application.
2. Step 2: Dedicated follow up.

• Step 1. Stamp duty refund application (Maharashtra)

To file a stamp duty refund application you have to complete an online procedure and an offline procedure.

Online procedure: To complete the online procedure you could go to state government’s Department of Registration and Stamps website. Complete the form and download or print a copy of completed form.

Offline procedure: To complete the offline procedure for stamp duty refund you will need to download various forms from IGR Maharashtra’s official website like;

• Application form
• Jabab
• Checklist
• Receipt for the Value of stamps (Two Copies)
• Affidavit
• Pratidnyapatra

Besides the aforementioned list you will further need some other documents, they are as following:

• Photocopy of I.D. (Preferably Pan Card)
• Original Gras Challan/Simple receipt Challan or ESBTR certificate
• A draft of the Agreement which you couldn’t register or Cancelled Agreement
• A cancelled cheque of the account where you wish to receive the refunded stamp duty and registration fee amount

Attach all the downloaded forms and rest of the documents together. Create two more photocopies of all the completed forms and attached documents. One photocopy will be attached with the file you are about to submit, the other photocopy will be served as your acknowledgement.

• Step 2: Dedicated follow up.

Filing of the stamp duty application is just the beginning and you will need to maintain consistent and dedicated follow-up of the concerned government office. Make sure that no additional requirements are asked of you by the concerned office. Usually there is a deduction of Rs. 1000/- (max) only out of your stamp duty and registration fees and the rest is refunded to you. Sometimes the application is rejected.

Those of you who intend to file stamp duty refund application personally, you could check if you are eligible for refund from here: Are you eligible for stamp duty refund?

I hope that you have been informed about the basics properly and sincerely wish that you do get your Stamp duty & Registration fees amount back.

Was this article useful to you? If you have any queries regarding stamp duty refund procedure, please feel free to contact Sarvesh R by posting comments here.

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.

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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

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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

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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

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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.

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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

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