Sector Shares its Budget Wish List

The real estate sector hopes the upcoming budget, will bring some relief for the sector vis-à-vis policies and measures, although a complete revival will take time.

On the eve of the union budget every year, the Indian real estate sector seems to have been fighting a losing battle with the government. For long, the policy advocacy of the sector has amounted to confrontation with the policy makers, where the sector proposes and the finance minister disposes. However, on the eve of union budget 2015-16, it seems there is a visible change in the perception of the developers and the government.

Both, the policy makers and the developers seem to be gradually coming on the same page as far as the legitimate causes and concerns of the sec tor are concerned. They understand the constraints of the other side as well and hence, the union budget this time around, might see a new beginning for the sector. The developers are, in the meantime, not overtly critical and though they have a long budget wish-list this time too, they are also conscious of the fact that they have to go a long way with the government and hence, there is a need to bridge the trust deficit.

The union budget for 2015-16, will be finance minister Arun Jaitley's maiden full-year budget of the new BJP-led government. Manoj Paliwal, CFO, Omkar Realtors and Developers, is expecting the budget to be rational which will remove the anomalies in the tax system that are beyond normal businesses. On the other hand, he is also advising the government to recognize that India is a growing economy and does not need to follow the high tax regime practised by other global economies. He asserts that the current government seems to be serious about growth. Any positive changes in tax laws, need to be duly supported by other regulators.

“One can expect a whole set of second generation reforms to be unveiled in the next union budget. A focus on stability of policy and tax regime besides a reasonable cost of capital, is a must. We have to understand one thing that the change is not going to come overnight. The work towards making the buyer sentiment positive has started, and we shall see that happen for sure. Today, the customer is king and has increased choices. Despite huge regulatory hurdles, the sector is becoming more competitive. Developers need to work and plan as per prevailing business scenarios,“ says Paliwal.

Abhay Kumar, CMD of Griha Pravesh Buildteck, points out that the budget expectations are many the interest rate has to reduce; employment has to increase; implementation of the 7th pay commission is much needed; good and multiple connectivity of cities is required; single-window clearance system has to be granted for businesses; corruption must be curbed; GST has to be implemented, and stalled large infra projects have to restart. “This budget is certainly going to be different because government coffers too, are at an impressive level which could support several social and infra projects. Fiscal deficit and inflation is under control which would further help the government in budgeting such sectors, which were ignored for quite some time. In a nutshell, this budget could be closer to reality than making just aspirational announcements,“ predicts Kumar.

Arvind Nandan, executive director of Housing.com, sums up the budget sentiments of the sector vis-à-vis their expectations, when he says that the sector is patient with the government with confidence that the intent and direction of the government is pro-sec tor. He believes the turnaround of the fortunes of the sector, will be visible post the union budget, as this will be the first 'full budget' of the government; something that will create a clearly-defined road-map. “The good part is that the government is conscious of the needs of the real estate sector and its correlation with the revival of the economy at large. So, I believe the government will have something more this time in terms of the specifics and defining of the road-map ahead. Of course, the focus on infrastructure development itself, will solve many problems,“ says Nandan.

This raises a fundamental question as to whether the sector, thus far, had unrealistic expectations from the budget. Developers deny this, saying it never had any unrealistic expectations but there is less demand today because of the emerging understanding between the sector and the policy makers. A general expectation of the sector, has always been for 'good governance'. Real estate is one of the few sectors which are still under old 'License Raj'. Many sectors like banking and financial services, telecom and manufacturing, have relatively good government support and are witness to growth due to good governance. After a radical improvement in the regulatory environment, the real estate sector will attract a huge amount of capital and resources, which will bring down the cost of homes. Analysts point out that even though some sops are expected with the budget ahead, the budget alone can not turn the situation around; now the time has come to convert words into action.

Touching an emotional chord and creating hype would not be sufficient any more for keeping the business confidence index high. The budget should be followed by quick implementation, to see the real change in an otherwise dim situation. The realty sector too, has become more realistic in its expectations. People now understand that a 40-50 per cent CAGR is no longer possible in the real estate sector. Having said that, this budget will be a litmus test for the government to show some real changes at the macro level. To regain the confidence in real estate, the government must win the confidence of home-buyers first and for that, low interest rates, low inflation and encouraging buyers through tax incentives, are much needed. Moreover, additional land parcels should be made available to curb the ever-rising land costs, thereby, making affordable housing and housing for all, a reality. Union budget 2015-16 is, hence, expected to answer a long list of queries, even though there is patience on part of the sector with an overt 'long way to go' posturing.

Source: PropertyatNeoDevelopers.Wordpress.Com

Hope swells in Sector

Real estate investment forecast indicates improvement due to government stimulus.

The fundamentals are in place for the global economy to move ahead in 2015.

Experts are of the view that the signs for market recover are clear and present.

“I anticipate better news ahead for India's realty sector, which, however, will take time to recover,“ Anshuman Magazine, CMD (South Asia) of CB Richard Ellis (CBRE), says.

Magazine tots up the factors most likely to impact the real estate market positively: stronger and sustained GDP growth; more relevant reforms like the recent amendments to the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013; and the paring of interest rates.

The outlook for capital markets in the sector continues to look affirmative and transaction activity is expected to improve in forth coming quarters. With the government's reform agenda beginning to build momentum, Magazine expects India to start 2015 on a brighter note than it did the previous year.

In line with the expectations of a gradual market recovery in 2014, the economy, Magazine said, bounced back with growth rates above 5%. By the end of the year, inflation too fell to multi-year lows. Consequently, there is optimism in the market about a stronger economy, and expectations of the government ushering in reforms.

This year's real estate investment forecast also indicates an improvement due to government stimulus efforts. Institutional investments and capital market transactions in the realty market during the year stood at approximately $5 billion. Of this, land and development stage transactions attracted the highest investments from domestic as well as foreign entities, indicating significant investment in greenfield and brownfield development, Magazine said.

Anuj Puri, chairman and country head of a Jones Lang LaSalle (JLL) India, says that with the improvement in the business environment in the country, MNCs that were hesitant to enter the Indian market because of uninspiring political environment earlier are now dusting off their plans for India and getting their entry vehicles back in gear.

Year 2015 will definitely be a good year for the real estate sector on three counts: The threat of inflation has completely submerged, and borrowing rates are sure to go down from the current levels. Economic activity is picking up, and the RBI anticipates GDP growth to reach 6.5% yy in 2015-16. Corporate India will be hiring big to help cope with rising business activity. Market re-orienting with developers now largely focusing on affordable homes, which will bridge demand-supply gap.

Real Vibes:

MNCs that were hesitant to enter the Indian market because of uninspiring political environment earlier are now dusting off their plans for India and getting their entry vehicles back in gear.

Source: PropertyatNEoDevelopers.Wordpress.Com

Right Push - REIT- a game changer or not?

The introduction of REITs will give an advanced funding option and provide a globally competitive edge to the Indian real estate industry, but is India ready for it?.

The Securities and Exchange Board of India (SEBI) recently announced guidelines for the creation of Real Estate Investment Trusts (REITs) in India. A REIT is a company, in most cases, that owns or finances income-producing real estate. Modeled after mutual funds, REITs provide investors of all types stable income streams, diversification and long-term capital appreciation.

Since the announcement of REITs, there has been much talk on whether India is ready for them and if they will be a game changer for the realty sector. Anshuman Magazine, CMD, CBRE South Asia Pvt Ltd feels that at a time when India's realty sector has been struggling for alternate avenues of funding-other than traditional banks and financial institutions-and private players have been sourcing institutional capital, permitting REITs can act as a key enabler for capital markets in the country. The instrument can provide investors with low entry levels into the sector, as well as with exit options. “The establishment of the India REIT market is at a very nascent stage as yet; and successful implementation and development will rest on factors related to the regulatory environment, market conditions and issuers investors," he states.

According to Neeraj Bansal, partner and head Real Estate, KPMG in India, "India has plenty of completed real estate assets ready to be packaged into REITs.The total value of office real estate pan-India stood at USD 34 billion as of end-2013. Additionally, as at the end of 2013, India has office space of 376 million square feet across its seven biggest cities. These statistics do indicate a strong potential investment opportunity and a fertile ground for the REITs to flourish in India. REITs are likely to infuse additional transparency and liquidity in the Indian real estate market. Additionally, the introduction of REITs will provide a new source of funds to Indian developers hitherto struggling to reduce debt, with interest rates among the highest in Asia, while giving investors the access to benefit from regular income and appreciation from the country's property market."

Anuj Puri, chairman & country head, JLL India further explains, "There has been considerable sentiment traction on the introduction of REITs, which can enable small savings to be channeled into real estate for the first time. REITs will render the entire real estate funding process more institutionalized, and therefore transparent. Some of the stringent measures proposed in the earlier version of REIT guidelines have been relaxed, with a view to making Indian REITs competitive globally."

However, according to a report by global accounting firm KPMG jointly with Indian Private Equity and Venture Capital Association (KPMG-IVCA). Real Estate Investment Trusts (REITs) could be a game changer for the realty sector, but lack of clarity on taxation and regulatory aspects might act as roadblocks for attracting foreign investments in the commercial space.

Talking about the challenges REITs will face for attracting foreign investments in the commercial space, RK Arora, chairman & managing director, Supertech Limited points out, “The success of REITs in India will take some time as much transparency is required in the entire procedure. REITs must enjoy special tax treatments, not only in regular income; but also on capital gains. Policymakers, regulators and the developer community are hopeful that REITs will usher in much-needed transparency, best practices and good governance into the sector. REITs becoming a part of the Indian investment scenario will certainly provide several major advantages to the investors."

A few amendments will certainly give REITs the required push and eventually move the real estate industry in an upward direction.

Source: PropertyatNeoDevelopers.Wordpress.Com

Boom Towns - Haryana, the new boom town state of the north

Haryana's Gurgaon started the real estate movement for north India. But, soon, UP took center stage. Now, Haryana has once again forged ahead.

With the change at the Center and now in Haryana, real estate sector in the state have great expectations from the government. They are expecting that the change will bring in fresh lease of life to the realty sector in the state in the days to come. Especially at a time when Haryana's new chief minister Manoharlal Khattar is already talking about transparency, easy clearances, single window system, and inclusive development, growth chart of the state is all set to head north. With its proximity with the national capital, the newer areas of the sate have already state looking good and are promising to go the Gurgaon way in the days to come. The real estate players too are looking at the newer pastures that can provide then an opportunity to develop new cities and get the growth momentum going.

Navin Raheja, CMD, Raheja Developers and chairman, Naredco, says, “With NCR especially Haryana catering to several industries and manufacturing and services providers, such schemes will go a long way in attracting manpower and skill set to meet the growing demand of workers in the state. Even for migrant workers who relocate to such geographies for work from smaller towns and villages, once they have affordable housing available, they can relocate their families to provide them a better living, education etc. and improve their work life balance. “ Ajay Singal, treasurer, Credia-NCR too is of the opin ion that future growth will certainly lie in areas like Ambala, Karnal, Panipat on NH-1, Rohtak and Hisar.

Taking about the same, Jagadish Nangineni, regional head, Delhi-NCR, Sobha Limited, says, "We believe there are numerous growth regions in the state that will emerge with a growth in the real estate sector. The ability to generate greater employment opportunities by the manufacturing or services sector and the development of better infrastructure facilities will lead to the growth of new areas, as is the case witnessed in cities like Gurgaon."

Sunil Choudhary, CMD Kashish Developers, says, "Apart from the Dwarka Expressway or the Northern Peripheral Road, the Southern Peripheral Road to Sohna also holds tremendous potential for the future."

Source: PropertyatNeoDevelopers.Wordpress.Com

Finally, a Real Estate Appellate Tribunal!

Bill in Parliament: Tribunal to be headed by a sitting or a retired judge for adjudicating disputes in realty sector.

The real estate regulation bill, which has to be passed in Parliament, aims to regulate the housing market and protect the interests of home-buyers and developers.

Although the bill is not flawless, it is certainly a step in the right direction and all the stakeholders hope that this new legislation will be supplemented with necessary rules and regulations which will clarify any ambiguities or gaps that exist in the bill.

Taking a risk-based approach, the bill has been modeled taking into account appropriate checkpoints in key stages of a property transaction where regulation is most required, given the history of fraudulent practices and unfulfilled promises, a consultant said.

A common complaint is that developers and builders do not deliver what is promised when selling apartments.

While their advertisements show buildings and landscaping to match international quality, in a majority of cases, the ground reality is far different leaving buyers feeling cheated.

The regulatory body envisaged in the draft bill would ensure that the developers are held accountable for what they promise and provide recourse to customers in case these are not fulfilled.

Some of the guidelines in the bill are provisions like restricting launch of projects or advertisements unless all approvals are received, maintaining separate account for customers' monies, sale of projects based on carpet area, etc, which will indeed help bring in transparency.

Other provisions like mandatory registration of projects within 15 days and registration of brokers are well intentioned but unless objective guidelines and rules are stipulated regarding the registration criteria, there is a danger of subjectivity creeping into the registration process.

Stipulation of `carpet area' as the only measurement unit will limit fraudulent practices from using units like salable area, super built-up area, etc.

The bill proposes to set a real estate appellate tribunal, headed by a sitting or a retired judge, for adjudicating disputes.

J P Gupta, vice-president of Credai NCR-Haryana, says, “In 2015, we expect the government will accord real estate sector the `infrastructure' status and bring in a single-window system for approvals.“ Aman Agarwal, director of KV Developers, says, “We look forward to a better future in 2015 for the real estate market with the government focusing upon the regulatory and land acquisition (amendment) bill."

Dhiraj Jain, director of Mahagun Group, hoped the government would bring more transparency through the land acquisition bill and that the RBI would reduce interest rate to salvage the fund crunch in the sector.

Source: Times Property, Dec 20, 2014