Top 5 policy game changers for real estate

The real estate fraternity is positive about the year ahead as some policy changes are expected to bring back the lost sheen, after the slowdown. This was marked by the recent surprise cut in repo rate by RBI which delighted realty experts, leading to high spirits. Here are few other changes which can further bring cheer to the sector.

Reduction in interest rates - As repo rate reduction has brought cheer, banks and housing finance companies are also considering cutting home loan interest rates. This would not only encourage home buying but will also clear inventories which are piling up in big cities.

Real Estate Regulatory Bill - Pending from a long time, the Real Estate Regulatory Bill, if passed, will bring relief to all stakeholders of the sector. “The long-pending Real Estate Regulatory Bill is expected to bring transparency. It will provide relief to buyers and investors as it will ensure buyers get their properties as per promised specifications,” says Anuj Puri, chairman & country head, JLL India.

100 Smart Cities – The ‘Smart City’ concept is one of the most talked about term currently. Allocation of Rs 7,000 crore in the Union Budget 2014 made the real estate sector go ‘gaga’ about the anticipated development. As more clarity over the subject is expected in the coming month, it can be one of the game changers for the real estate sector.

MISIDICI - ‘Make India Skill India Digital India Clean India’ is one of the visions which the government is focusing on. Creation of manufacturing hubs to generate jobs, digitisation of land records, single window clearance for speeding up processes and clean India for developing a pollution free environment will not just improve transactions in the market but will create opportunities for economic growth as well.

REITs - As SEBI announced regulations for Real Estate Investment Trust for the commercial sector, the market is expecting the same for residential also with easier exit routes. Interestingly, this will also bring NRI money to invest in the sector hence, giving more funding channels for a developer to source funds and complete projects on time.

With so many policy reforms anticipated by industry experts, the onus is on the government on what they will deliver and what will still be in the waiting list.

Source: -PropertyatNeoDevelopers.Wordpress.Com

Realty sector desperately needs organised funding

With the two most important agendas of the Narendra Modi government being Housing for All by 2022 and development of 100 Smart Cities, real estate stakeholders are expecting something exciting from the upcoming Budget 2015-16.

Om Chaudhary, founder & CEO of FIRE Capital, the first India-centric Real Estate Fund to be registered with Securities Exchange Board of India shares his expectations from the Budget.

Chaudhary says the first thing that should come to the sector is organised funding, as the developers are facing serious liquidity crunch at this point of time. He expects the finance minister to introduce some measures such as lowering the current interest rates to make this happen.

Granting 'industry' status:

Given the requirement for large quantum of funds and the long gestation period in the real estate development of projects (townships and large commercial/mixed use), the sector needs patience and low cost capital from banks and ECB (External Commercial Borrowings), if ‘industry’ status is to be granted to the real estate sector.

Real Estate Regulatory Bill:

The enforcement of the Regulatory Bill will ensure the formation of a Single Window Clearance mechanism. Through the Bill the government needs to make all stakeholders responsible and create a single window clearance mechanism at the state level for a time bound approval process. Chaudhary reinforces that once there is certainty and less scope for corruption and delays, organised capital will flow, especially Foreign Direct Investment (FDI).

Regulations on REIT:

Chaudhary wishes the finance minister to sort out the tax/structuring issues and make the Real Estate Investment Trust (REITs) a reality, thus making investments in the real estate sector more organised for retail and institutional investors. This will ensure developers get the much needed liquidity.

Source: PropertyatNeoDevelopers.Wordpress.Com

Five things that can raise consumer confidence

When the governor of Reserve Bank of India (RBI), Raghuram Rajan, announced a 25 basis points cut in repo rates, which is yet to translate into any significant rate cut in home loan interest rates, the general feeling was that it was too little, too late. However, few developers have maintained that a drop in interest rates may well trigger a rise in consumer sentiment but not significantly impact the buying decision.

Interest rates:

So what can banks do? Just wait around for the RBI to cut rates which today are predicted to drop and tomorrow to hold their levels? Why is the Indian home buyer hanging on to the sidelines waiting for a trigger? Banks have historically made old consumers pay more or for longer periods if home loan interest rates have gone up. But when rates drop, the beneficiaries have been only new customers. So this time consumers have decided to wait till the interest rates actually drop to attractive levels. If banks assure consumers that irrespective of whenever they took the loan, they can avail of lower rates when interest drops there may be a move in the right direction.

Real estate regulator:

Consumers have waited helplessly when the industry giants delayed projects and offered small or negligible penalty rates that too often delayed. In many cases force majure is invoked because authorities delayed approvals or some other unforeseeable factor prevented the completion of the project. A speedy passage of the Real Estate Regulatory Bill with local authorities as well as developers under its ambit would help change the scenario.

No speculative launches:

Consumers have been searching for smaller homes that fit their budget. PropIndex (Oct-Dec 2014), the India Apartment Index by Magicbricks, clearly showed that 1BHK units or houses worth Rs 20-60 lakh were in demand. However, the market is skewed towards larger 3 and 4BHK units. Instead of speculative development, Indian developers and the market would benefit from better market research by developers before projects are launched.

Rational market rates:

The industry is holding on to the rates at which properties have been launched or the last hike stands. However, investors have started buckling under the strain of a complete stoppage of sales for over a year now. The difference between listed prices and transacted values are growing. This bodes ill for markets and does not restore consumer confidence in the industry.

Rental laws:

The ones who can afford to buy property, don’t dare to put it on rent. Weak rental laws have impacted consumer confidence. The Model Rent Act, enacted a few years ago but not implemented, would be a good way to trigger a rise in consumer confidence and therefore raise sentiments.

Source: PropertyatNeoDevelopers.Wordpress.Com

Cabinet defers approval of real estate regulatory bill

The Cabinet today deferred a decision on setting up a regulator for the real estate sector.

According to sources, the Cabinet discussed the Real Estate Development and Regulation Bill but deferred a decision on it.

The bill, which was introduced in the Rajya Sabha in August last year, seeks to protect home buyers from unscrupulous developers.

It was then referred to a Parliamentary Standing Committee, which had submitted its report in February.

The bill provides for mandatory registration of all projects, besides mandatory disclosure of information like details of promoters, layout plan, land status, schedule of execution, status of various approvals and carpet area.

It also seeks to enforce the contract between the developer and buyer and provides for quick remedial measures in case of disputes.

Real estate developers have been opposing the proposed law, saying that it does not cover all the stakeholders including the government authorities that give project approvals.

However, Minister for Housing and Urban Poverty Alleviation Venkaiah Naidu had last month assured the industry that "there will be no strangulation, only regulation".

"The bill will be a people friendly and construction sector friendly bill. In a democracy, regulation is required," Naidu had said.

Source: The Economic Times