Monday, December 13, 2010

Real estate, most preferred investment option: survey

Investing in gold, National Saving Certificates and fixed deposits - "Out of Fashion"!



As far as investment is concerned, Indians like to play it safe, a survey has found. According to it, 65 per cent of working individuals in urban India prefer real estate as long-term investment option as it guarantees higher future returns and helps them stay off other riskier investment options like the stock market, equity, mutual funds and gold.

The country-wide survey, “Current Investment Patterns in working Urban Indians,” conducted by the Associated Chambers of Commerce and Industry of India under the aegis of ASSOCHAM Social Development Foundation (ASDF) asked almost 1,500 directors, officers, executives, teachers, professionals in the public sector and multi-national companies and self-employed traders, lawyers, doctors and financial experts about their preferred investment options for savings.

Most respondents said investing in gold, National Saving Certificates and fixed deposits was passé and represented the “old school” of investment concepts. Real estate, mutual funds and life insurance found favour among the younger lot.

To read more, please, visit The Hindu

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Thursday, November 11, 2010

RBI's stance on home loans to increase borrowers' woes

"Every borrower should examine his repaying capacity rather than his loan eligibility"
"If the property value dips any point of time, banks can ask for additional collateral. At this point of time, you have to provide additional collateral or pay the extra margin money. If you are not in a position to pay up the extra cash/collateral, the bank can categorize you as a defaulter. This is clearly mentioned in the home loan agreement."
“Don’t borrow up to the maximum limit as a percentage of your income. You should keep aside some contingency funds and investments which will come in handy in case of unforeseen emergencies such as job loss, forced sabbatical or even a family."

Home hunters are in a spot. While real estate prices are not showing any signs of easing (in fact, they have started hardening again), the Reserve bank of India (RBI) has chosen to tighten a few norms for home loans , adding to borrowers’ woes. In its recent policy review, RBI has taken three steps that will adversely impact prospective homebuyers who are dependent on home loans. To begin with, the loan-to-value ratio has been lowered to 80% from 85%.
To read more, please, visit:
The Economic Times

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Sunday, November 7, 2010

New realty funds - not suitable for all!

However, real estate funds are for investors who already have savings parked in other asset classes and also have allocable surplus in hand. As Mr Mahadevan states, “for a 22-year-old guy who is looking to own his property, a real estate fund cannot be viewed as a substitute”.

While real estate funds may help investors do away with the hassle of locating a good property to invest, offer diversification and avoid the legal impediments involved, they remain a ‘medium to high risk' investment option.

Mr Sunil Rohakale, Executive Director, ASK Investment Holdings, feels that it is important for investors to assimilate the fund strategy besides knowing key clauses tied to such funds. Real estate funds typically come with a 5-8 year lock-in, which makes them illiquid. The structure, fee and payout patterns in these products are also complex. Read More

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Wednesday, November 3, 2010

Banks will now lend only 80% of property price

Now, anyone applying for a home loan from a bank will have to pay a margin money of at least 20% of the value of the property. This in effect means that you will have to shell out more from your own savings to buy that house you have been eying for a while. Earlier, this margin money varied between 10% and 15 %
Top industry officials feel this is a pre-emptive measure and is a warning sign for all in the real estate sector — developers, financiers and also the buyers — that there could be danger ahead.

“The RBI has always taken pre-emptive measures to prevent asset bubbles, particularly in real estate. It is in this context that the RBI has restricted the maximum loan to value ratio to 80% and increased risk weights on housing loans above Rs 75 lakh,” said Renu Sud Karnad, MD, HDFC, the mortgage finance major.

The RBI measure could also work in favour of home buyers in the form of a either a slow or nil rise in real estate prices. “The message from RBI is clear: There is a worry about real estate prices spiralling. This concern will ensure that there is a short-term cap on real estate prices and in the near future it may come down marginally,” said Gagan Banga, CEO, Indiabulls Financial Services. “A correction in prices should result in higher volumes given the strong macro economic conditions,” Banga added. Read More

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Tuesday, October 26, 2010

Loan against property

Are personal loans the only option for urgent cash requirements?


Loan against property
Loan against property


For cash emergencies, personal loans are an easy and fast option. However, it could prove to be quite expensive on the pocket, with interest rates ranging between 15 per cent to 25 per cent.

Further, banks follow stringent evaluation of the borrower's financial profile.

So are personal loans the only option for urgent cash requirements? Investment Yogi brings to you a quick guide to other alternatives a borrower can choose from. To know more, please, visit:
7 alternatives to expensive personal loans

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Monday, October 25, 2010

Don't book a flat if there is no commencement certificate (CC) and consider only the carpet area and not the built-up, super built-up or saleable area!

Maharashtra Chamber of Housing Industry (MCHI) wants to end "unethical practices"!


With a view to curb unethical practices, the Maharashtra Chamber of Housing Industry (MCHI), the apex body of real estate business in the state, has directed all its members not to book flats without receiving the commencement certificate (CC) from the authorities.

The MCHI has also asked its members to sell flats as per their carpet area and not on the built-up and super built-up basis, Mantri said. Following a public outcry against the sale of as high as 40% of built-up area, the state government had warned builders of action if they do not sell flats on the basis of their carpet area. Read More

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Saturday, July 31, 2010

Floor rise and Fire-wise - lessons from the massive fire at Mutha Chambers 2 on Senapati Bapat Road Pune

"What if the lift is out of order?"




The other day, Mrs. Kumar called me on my mobile 919860044110 to tell me that they had finalized the 3 BHK Flat on the 10th floor, in the particular project near Pancard Club, Baner, Pune 411 045.

When i asked her, why she finalized this particular flat, Mrs. Kumar said, "I am a very negative person! But the view from the terrace of my flat, tempted me to agree with my husband! You know? Every morning, over a cup of coffee, I can enjoy the view of Pashan Hills!"

Sounds interesting! Isn't it? Do you know, what was bothering Mrs. Kumar about finalizing this flat? How to climb to her 3 BHK Flat on the 10th floor if the lift be out of order? What if there is no power and generator is not working?

Mrs. Kumar's husband convinced her to be positive! Possibilities of all these 3 things happening at one and the same time are very rare, he told her! When i asked her, "How rare?" Mrs. Kumar said that Mr. Kumar thinks that only once in a life time!

So, both of them felt that it's worth to pay floor rise Rs. 50 per floor from 7th floor and finalized the 3 BHK Flat on the 10TH floor.

Mrs. and Mr. Kumar, Stupidly Optimistic and Foolishly Romantic Pune Property Buyers!



Today, when i was reading the news about the massive fire break out at the 8 storied commercial building Mutha Chambers 2 on Senapati Bapat Road, in which top 3 floors - 6th, 7th & 8th - were totally gutted and the blaze could be brought under control only after a 2 hour struggle (Video), i thought, what would be Mrs. & Mr. Kumar's reaction?

Does this news tell Mrs. Kumar that she is not "negative" enough? Has Mr. Kumar thought about this "rare" - once in a life time possibility? Have they realized that they are stupidly optimistic and foolishly romantic property buyers? What do you think?

Mrs. & Mr. Kumar, be wise, fire-wise!



We all know how the system works! Pune Municipal Corporation will continue to sanction and builders in Pune will keep on building 25 - 30 story high rise towers. Right?

But do you think that, it means that Mrs. & Mr. Kumar, educated property buyers in Pune, shouldn't buy a property in these high rise buildings?

Particularly, when Pune fire brigade doesn't have enough fire tenders and fire stations to take care of PMC and adjoining 10 kms area, which comes under town planning where development rules of PMC are applicable and fire NOC is a must.

What say you? Shouldn't the property buyer consider the eventuality of fire? Isn't the safety of your family more important than the view from the high rise building?

Don't you think that "floor rise" is nothing more than the builder's cruel joke? Don't you think that, if you are booking above 8th floor, actually the builder should compensate you for risking your family's life?

What say you? Please, share your views and help Mrs. & Mr. Kumar to be wise - fire-wise!

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Tuesday, May 4, 2010

Now, 10 per cent service tax on 25 per cent of the value of the built property, including the cost of land!

In a relief to the realty sector and home buyers, finance minister Pranab Mukherjee on Thursday announced tax concessions to the construction sector, which was brought under the ambit of service tax in this year's budget.

With the announcement, service tax would be levied on 25 per cent of the gross sale value of property compared to 33 per cent proposed in the budget in February this year.

Replying to the debate on Finance Bill in the Lok Sabha, the finance minister said he proposed to ``provide the tax relief to the construction sector by enhancing their rate of abatement from 67 per cent to 75 per cent of the gross value, where such value includes the value of the land constructed upon," he said replying to the debate on Finance Bill in Lok Sabha.
To read more, please, visit Realty sector gets 8% tax relief

Wednesday, April 21, 2010

HDFC teaser rates ideal for pre-payment planners - within the first 5-7 years!

Now, HDFC loan rates are charged at 8.25% for this fiscal year to March 2011, and at 9% for 2012. While the fixed rate will remain the same irrespective of the loan size, the floating rate will vary with the loan amount at the end of the two-year period.

The floating rate has two slabs — loans up to Rs 30 lakh where the rate will be 9% (PLR minus 4.75%) — and above Rs 30 lakh where the rate will be 9.25% (PLR minus 4.5%). The bank’s current PLR is 13.75%.

Since the HDFC scheme is on only till April 30, those who opt for the loan will be doing so without any information on the kind of interest rate they may have to pay from the third year onwards. Hence, the scheme could be ideal for home loan seekers intend to pre-pay their loans within 5-7 years. But long-term borrowers could be thrown off the track once the base rate comes into play.

To read more, please, visit The Economic Times

Friday, February 26, 2010

Union Budget 2010-11: Now, renting of immovable property is a taxable service

The Budget has also clarified that renting of immovable property is a taxable service. It would be applied retrospectively from June 1, 2007.
The government today brought eight new services, including brand promotion, under the tax net even as Finance Minister Pranab Mukherjee retained the service tax rate at 10 per cent.

Services promoting brand of goods, services, events and business entity have been brought under the tax net, according to Budget memorandum presented by Mukherjee.

Similarly, permitting commercial use or exploitation of any event organised by a person or organisation is taxable.

To read more, please, visit Service tax net widened, rate unchanged

Union Budget 2010-11: Finance Minister on real estate, and housing

Rural Development

80. Indira Awas Yojana is a popular rural housing scheme for weaker sections. Taking note of the increase in the cost of construction, I propose to raise the unit cost under this scheme to Rs.45,000 in the plain areas and to Rs.48,500 in the hilly areas. For the year 2010-11, the allocation for this scheme is being increased to Rs.10,000 crore.

Urban Development and Housing

82. "Swarna Jayanti Shahari Rozgar Yojana" designed to provide employment opportunities in urban areas, has been strengthened with focus on community participation, skill development and self employment support structures. For the year 2010-11, I propose to increase the allocation for urban development by more than 75 per cent from Rs.3,060 crore to Rs.5,400 crore. In addition, the allocation for Housing and Urban Poverty Alleviation is also being raised from Rs.850 crore to Rs.1,000 crore in 2010-11.

83. While presenting the Union Budget for the year 2009-10, I had announced a Scheme of one per cent interest subvention on housing loans up to Rs.10 lakhs where the cost of the house does not exceed Rs.20 lakhs. I propose to extend this Scheme up to March 31, 2011. Accordingly, I propose to provide a sum of Rs.700 crore for this Scheme for the year 2010-11.

84. The Rajiv Awas Yojana (RAY) for slum dwellers and urban poor was announced last year to extend support to States that are willing to provide property rights to slum dwellers. This scheme is now ready to take off. I propose to allocate Rs.1,270 crore for 2010-11 as compared to Rs.150 crore last year. This marks an increase of over 700 per cent. The Government's efforts in the implementation of RAY would be to encourage the States to create a slum free India at the earliest.

Direct Taxes:

1) 133. To provide one time interim relief to the housing and real estate sector which was impacted by the global recession, I propose to allow pending projects to be completed within a period of five years instead of four years for claiming a deduction on their profits. I also propose to relax the norms for built-up area of shops and other commercial establishments in housing projects to enable basic facilities for their residents.
Full text of Pranab Mukherjee's Budget 2010-11 speech

Union Budget 2010-11: Direct Tax Code (DTC) to come from April 1, 2011

Finance minister Pranab Mukherjee on Friday said the uniform Direct Tax Code (DTC) will come into effect from April 1 next year.

"We have already begun wide discussions before implementing the uniform Direct Tax Code by April 1, 2011. We are involving people and other stake holders on its design," said the finance minister while presenting the General Budget for 2010-11 in the Lok Sabha.

The new code seeks to replace the 50-year-old Income Tax Act - that has seen as many as 4,500 amendments since it was enacted in 1961 - to reflect the needs of an emerging economy.

The DTC has been criticized widely including from various political parties who feel that the measure has failed to come up to the aspirations of modern India.

To read more, please, visit ibn live

Union Budget 2010-11: revised tax slabs

The finance minister proposed the following slabs for individual tax payers:

There will be no tax for income upto Rs 1.6 lakh. This was the same earlier.

For income between 1.6 lakh - 5 lakh, the tax liability will be 10%. The older slab was 1.6 - 3 lakh.

For income between 5 lakh - 8 lakh, the tax liability will be 20%. Earlier 20% tax was deducted on Rs 3-5 lakh income.

Individuals with income of above Rs 8 lakh will have tax liability of 30%. Earlier 30% was deducted on income of Rs 5 lakh and above.

The government would allow a deduction of up to Rs 20,000 for investments in long-term infrastructure bonds. The deduction would be in addition to Rs 100,000 allowed under Section 80C of India's Income Tax Act.

To read more, please, visit The Economic Times

The real woes of investing in realty


And surprisingly, real estate investment doesn’t seem to carry any of negative attributes associated other assets such as equities (risky and unfaithful) and banks and post-office deposits (poor real returns).

The scramble to secure a pie of the lucrative real estate market has turned into frenzy ever since the government announced a tax-break on housing loans opening floodgates to the private sector investment in real estate projects. It’s not uncommon to find individuals owning three or even four residential properties. But this over reliance on real estate as financial planning tool can turn out to be a liability in old age. Consider this, post retirement, an individual needs an income stream that is regular, fairly predictable, can rise with the increase in inflation and most importantly easy to administer.

For all, its advertised virtues, real estate fails on the most of the above criteria. As mentioned above, a house is most often the largest investment for any individual, but it is seldom the biggest source of income/cash flows for a retiree.

This is because post-tax yields (i.e. rents adjusted for municipal taxes, income tax on rental income and maintenance costs) are pitifully low in India.


To read more, please, visit ET Slide Shows

Sunday, February 21, 2010

Balancing act

The nagging inflation could negate the returns offered on your investments
Getting out of an expansionary monetary policy is incredibly more difficult than getting in. It is like the Chakravyuh in the Mahabharata—you know how to get in, but not many people know how to get out,” said Reserve Bank Governor Duvvuri Subbarao on January 29. Subbarao, however, seems equipped and set to do the task.

As the first line of attack, he increased the cash reserve ratio (the amount of deposits banks are required to keep with the apex bank) by 75 basis points to 5.75 per cent. But his warning of unleashing more weapons to contain inflation, expected to be at 8.5 per cent by end-March, has left retail investors, too, with the complex task of beating inflation as they invest in the India growth story.

Real Estate:

Anita Sharma, a media professional, is scampering to complete her property buyout in Mumbai’s Kharghar in February itself. “I decided to hurry up so that I get a home loan before interest rates go up. Also, with the economy expected to grow at a high rate, the increase in salaries will lead to higher demand, pushing up prices further,” she said.

According to the RBI, real estate prices have gone up because of the increasing optimism about the recovery and high levels of liquidity. “In the medium-long-term horizon (4-7 years), real estate will beat inflation. The key is to buy the property at an early stage in the project to cash-in on the capital appreciation,” said Kaustav Roy, executive director, Cushman and Wakefield.

The demand now is high for affordable homes (up to Rs 40 lakh). The RBI has upped its growth forecast indicating that the economy will grow at 7.5 per cent. This would fuel demand for both residential and commercial property. The commercial rental business, which has been slow of late, is expected to gather steam over the next year. “Historically, when growth has been over 7 per cent, the real estate sector has done well,” said Sunil Malhotra, vice-president, finance, Omaxe Builders. To read more, please, visit the week

Wednesday, February 17, 2010

Will the base rate be fairer than BPLR?

Home loan borrowers know that old customers on floating rate loans see the rates rise, but not fall. Will the base rate change this unfair game?
For years, home loan borrowers on floating rates felt cheated by banks as they paid more when interest rates rose, but did not pay less when they fell. Banks kept rates high for old customers and reduced them for new ones by keeping the benchmark prime lending rate (BPLR) sticky.

To deal with this problem, among others, the Reserve Bank of India (RBI) on Wednesday announced the move from a BPLR model to a base rate system, effective 1 April. The new rate will apply to all fresh loans but old loans, when they come up for renewal, can switch.

To read more, please, visit livemint.com

Bringing transparency in loan pricing

Higher levels of transparency can be achieved by disclosing important information on loan pricing and possible fees to the borrower before he or she signs an agreement.
“Transparency” was the key word when the Reserve Bank of India (RBI) freed the interest rates from a regulated regime from April 2010. The newly introduced Base Rate is expected to be significantly lower than the prevailing Benchmark Prime Lending Rate (BPLR) and thus the beneficiary would be individual borrowers.

In a notification to all scheduled commercial banks, the RBI stated that the Base Rate system will replace the BPLR system with effect from April 1, 2010. Banks may determine their actual lending rates on loans and advances with reference to the Base Rate.

To read more, please, visit The Hindu

Sunday, January 31, 2010

Your home, car loan rates won't rise till March

Commercial banks are unlikely to raise their prime lending rates — offered to the best customers — or deposits rates at least till the end of March but large companies borrowing short-term money at sub-PLR rates may have to cough up more.

This was indicated by CEOs of several commercial banks soon after RBI announced a 75-basis point hike in the cash reserve ratio, or the proportion of deposits that banks have to park with RBI.

However, car loan rates are unlikely to rise due to increased competition among banks in this segment.

To read more, please, visit The Economic Times

Friday, January 29, 2010

Nothing matters as the real estate market in India is getting hotter

The unstructured real estate industry, high home loan rates, forged land titles, the possibility of corruption, high taxes...nothing matters....!

Indian real estate has witnessed a phenomenal development in the last couple of years due to its flexible nature and its value appreciation over time. The limits of people's aspirations, concept of good living, contemporary working style and recreation, their risk appetite, and money they can commit for high quality construction and smartly done up space has led to the revolution in the real estate industry in the country.

Path breaking policies like relaxation in FDI policies by the Government of India have also paved the path for the transformation of Indian real estate. The combination of factors like strong economic growth, reforms and policies have lured global investors, easy terms of repayment of home loans, rise in income levels and urbanization.

A change of attitude amongst the generation X from that of 'save and buy' to 'buy and gain' has also boosted the housing demand in the country. India's economic performance has provided momentum to the real estate sector that has been seeing enhanced activity in the recent years.

Investment in infrastructure and swift and speedy urbanization has boosted the growth trajectory of real estate sector in the country which is evident with urban centers such as Delhi, Mumbai and Bangalore attaining global character and recognition.

To read more, please, visit Industry Today

Fitch: Real estate sector stabilising but risk remain

Fitch Ratings has today said in a just published Special Report that its 2010 Outlook for the Indian real estate sector remains Negative; however, the sector could exhibit signs of stability by the second half of the year.
Fitch notes that the fundamentals of India's real estate sector are improving, as seen by better liquidity and improved demand in the residential segment. The agency expects growth in 2010 to be driven by government support, especially for the affordable housing segment, improved access to debt and capital markets, and the recovery of real estate demand.

Yet, there are concerns that the government may roll out moderately adverse policies to keep property prices in check when economic conditions become more stabilized.

In addition, the government may also find it politically difficult to provide a supportive environment if developers continue to increase real estate prices.

The full report, "Indian Real Estate 2010: On the road to Recovery", is available on the Fitch Ratings' website: 'www.fitchratings.com'.

To read more, please, visit Reuters

Monday, January 25, 2010

Assets versus bubbles in real estate

The finance ministry has reportedly turned down a proposal by the Department of Policy and Promotion (DIPP) that had suggested doing away with the mandatory three-year lock-in period for FDI in the real estate sector.
The ministry’s point of view is that a lock-in acts as a deterrent, checking speculation and protecting the sector from the sudden flight of capital. This could be particularly true at times of an unprecedented crisis, such as the global meltdown in 2008, when foreign institutional investors pulled out nearly $5 billion worth of equity investments between September and October 2008.

For sure, there is a big difference between portfolio investments or hedge fund money coming into the stock market and money that is being channelled into the development of projects that by nature are of a much longer gestation.

However, the ministry’s contention is that despite the correction after the meltdown, real estate prices were not eroded to the extent that values of some other asset classes were, largely because the lock-in prevented investors from sending their money back home.

To read more, please, visit Shobhana Subramanian -Financial Express

Sunday, January 24, 2010

Indian real estate to see fresh investments to the tune of $1.5 billion in the financial year 2010-11

3 times more than 2008-09:

The Rs 70,000-crore Indian real estate sector is expected to see fresh investments to the tune of $1.5 billion in residential deals by exclusive real estate funds in the financial year 2010-11, three times more than the total quantum that such funds invested in FY 2008-09.

These funds include Sun Apollo, HDFC India Real Estate Fund, RedFort Capital, ICICI Prudential Infrastructure Fund and Xander Real Estate Partners. The investments will be both in the metros as well as Tier II cities in India and signal a rebound in realty fund activity in the country after a lull in the last 12 months.

Top 10 most attractive cities to invest:

The residential projects are largely centered in Mumbai, Thane, Panvel, Pune, Ahmedabad, Gurgaon, Noida, Ghaziabad, Faridabad, Bangalore, Chennai, Kolkata and Lucknow. These are prime residential centres in India which form the radar for most fund houses.

As per the recent rankings based on Knight Frank research, the top 10 most attractive cities to invest in include Delhi, Mumbai, Surat, Bengaluru, Kolkata, Ahmedabad, Jaipur, Chennai, Pune and Lucknow.


To read more, please, visit Financial Express

Kotak Realty Fund to invest Rs270 crore in several projects

Kotak Realty Fund, an $800 million (Rs3,672 crore) real estate private equity (PE) fund from Kotak Mahindra Group, will invest Rs270 crore to acquire stakes in a Mumbai-based realty firm and a slum rehabilitation project and a Bangalore-based developer, chief executive S. Sriniwasan said.
The fund will spend Rs100 crore to acquire a 60% stake in Star Light Developers Pvt. Ltd and another Rs100 crore for 50% of the slum rehabilitation project undertaken by Ackruti City Ltd near Mumbai’s international airport, Sriniwasan said. It will spend Rs70 crore to purchase a 60% stake in Bangalore-based Lalith Gangadhar Constructions Pvt. Ltd.

Kotak Realty has in the past acquired a 9.5% stake for Rs130 crore in Lemon Tree Hotels, which operates 11 hotels and is building nine more, an 11% stake in Pune-based Pride Hotels for Rs50 crore, and invested Rs250 crore in IVRCL Infrastructure and Project Ltd’s Rs2,000 crore, 500-acre township project in Sriperumbudur near Chennai.

To read more, please, visit livemint.com