Slowdown in real estate: Time for home buyers to go bargain hunting but exercise due diligence before buying

By: Karshni on 12:51

A slowdown in the real estate sector can spell opportunity for the prepared. Delhi-based publishers, Umraopati Ray, 30, and his wife PriyankaSaxena, also 30, own an apartment at PaschimVihar. As the slowdown in the National Capital Region (NCR) intensified, the young couple went hunting for good deals. Recently, their efforts were rewarded when they managed to buy a flat at VasantVihar at a price 15% lower than the peak rate witnessed in the area in the past.


Pan-India slowdown

Real estate markets across the country are currently witnessing a downturn. In Mumbai, it has lasted for about a year now. Down south, it began about six months ago. The Delhi/NCR market was the last to be impacted by the slowdown, but here, too, the signs have been apparent over the past three months.

While developers have not slashed their prices overtly, the slowdown is visible in the drastic fall in the number of transactions. According to a Gurgaon-based broker, this figure has dwindled to 30% of last year's level. The speculators who had booked a large number of properties in the hope of exiting profitably in a rising market are now jettisoning surplus holdings, often at a discount. In the primary market (where you buy from a developer), the slowdown is evident in the large number of subvention schemes and discounts (ranging from 5-20%) being offered by cash-strapped developers. Another marker signalling a downturn is the widening gap between prices in the primary and the secondary markets (where you purchase from another buyer).

The downturn is most pronounced in the markets where speculation over the past couple of years had driven the prices high, though the infrastructure is not yet in place. The Dwarka Expressway area in the NCR, where the highway providing connectivity to the region has not seen much progress over the last year or so, is a prime example.

Prices are also correcting more steeply in projects where barely 20-30% payment has been made and possession is a couple of years away. Says Rajan Ahuja, executive director, Realty & Verticals, a Gurgaon-based real estate consultancy: "In such projects, buyers have begun to feel the pinch. If these get delayed amid the slowdown, there could be a lot of exits and prices could see a further correction."

What's causing the slowdown?

The fall in the real estate market is only mirroring the slowdown within the economy at large. According to Anshul Jain, chief executive officer, DTZ India, "The weak economy has affected the demand for residential units. Inflationary pressures and lack of increments have left the buyers with no surpluses."

India's real estate sector, much like other sectors, is subject to cyclical downturns. Says Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield: "A lot of projects have been launched, so inventory levels are running high. Prices have also gone up a lot. Meanwhile, the sentiment is not so bullish." A negative feedback loop has set in. With quick gains becoming hard to come by, new investors are staying away from the market.

Real estate consultants blame the current slowdown on the speculative excesses in the past. Says Ahuja: "In markets like Dwarka Expressway, speculative buying and selling had pushed the prices to unsustainably high levels. A period of price correction was bound to follow."

Opportunity for buyers

In the popular imagination, the word 'slowdown' carries negative connotations. However, it spells opportunity for buyers who had found the prices moving beyond their grasp when the markets were rising. Those who had deferred the decision to buy may now go in for the kill, as the young couple— Rai and Saxena—has done.

As Dutt says, "This is a good time to buy, especially in projects and locations that would have been difficult to secure in good times." Vishal Dhawan, chief financial planner at Mumbai-based financial planning firm, Plan Ahead Wealth Advisors, says you are likely to get good deals in the secondary market, since the individuals who had invested in multiple apartments and are in desperate need of cash, will readily sell at a discount.

Jain of DTZ believes that the current slowdown will continue until a new government is in place after the general election in May 2014. Hence, buyers have time on their side. Sanjay Sharma, managing director, Qubrex, a Gurgaon-based real estate consultancy, advises patience. "This will gradually turn into a buyer's market. Make an offer and bide your time. Even if it takes three to four months to strike a deal, be patient," he says.

 

 

http://articles.economictimes.indiatimes.com/2013-06-2/news/40166820_1_slowdown-real-estate-sector-dtz-india

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As hills tremble from tragedy, real estate feels the shivers, too

By: Karshni on 12:48

Property markets in Uttarakhand and Himachal Pradesh, which have had a dream run in recent years, are set to face a downturn.

The Uttarakhand calamity may bring the prices of residential units down at least 10 to 15 per cent, according to industry representatives and analysts.
“The real estate market will slow down for the next six to eight months. The prices in the interior, hilly areas, will see a dip of 10-15 per cent. Besides, property transactions will also take a hit,” a broker in Uttarakhand said.

However, realtors are still betting big on the long-term prospects. The slowdown would be temporary and once the situation normalises, it would be business as usual, the broker claimed.

Sumit Jain, CEO, Commonfloor.com, a real estate website, said the enquiries for properties in Uttrakhand and Himachal had dipped on the portal over the last four to five days. “The prices would definitely see a drop of 5-10 per cent and investors’ interest would come down." Jain, too, downplayed the impact.

North India-based developer Supertech is among those still upbeat on the future of real estate in the hills.

Supertech has three projects in Uttarakhand and has invested Rs 1,000 crore (Rs 10 billion).

Chairman and Managing Director R K Arora said though there would be dip in prices in the hilly areas by up to 15 per cent, the rates in the foothills/plain areas could see an upward movement by a similar percentage due to the increase in demand there.

“People would like to move to safer areas like Dehradun, Rudrapur, Pantnagar and Haridwar, among others, in Uttarakhand, ” Arora said. He, however, admitted the sales would come down over the coming months.

A broker in Himachal Pradesh said the end-user market would not be impacted much. But people looking for second or retirement homes in hill stations would think twice.

Rudrapur in Uttarakhand has attracted an estimated $2-billion investment in real estate and is being touted the next-big market. Tata Motors, Voltas, Britannia, HCL, Hewlett-Packard and Dabur have bought land there.

In Uttarakhand and Himachal, buying is mostly restricted to domicile holders. Flats or apartments are largely free of such restrictions.

However, there is a contrarian view, too. Jones Lang LaSalle Real Estate Research Head Ashutosh Limaye said the prices won't be impacted.

"Nobody buys a property in pilgrimage destinations, where the tragedy has occured, so it won't deter people from buying their second homes in such areas. And if government sends clear signals that sustainable planned development would take place from now on in these areas, the interest would not go away."

http://www.rediff.com/business/report/as-hills-tremble-real-estate-feels-the-shivers-too/20130622.htm

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NRIs hope to build their homes in India on Rupee crash; enquiries jump 20% in a month

By: Karshni on 12:47

The rupee's slide to almost 60 to a dollar is of great concern, but real estate developers are likely to gain from a fresh burst of interest from NRI buyers who now have to pay less dollars. Enquiries from non-resident Indians have jumped 20% in a month, builders say.

"This is a small boost to home sales in the country which have been sagging in recent quarters," says Lalit Kumar Jain, president of the Confederation of Real Estate Developers of India.

Besides the fresh business, developers also stand to gain from a likely inflow of much-needed cash as NRIs are keen to make payments in advance while the rupee is still weak. "We are witnessing a trend towards 100% down payment due to the current ( forex) scenario," says Girish Shah, Executive Vice-President, marketing & sales, Godrej Properties.

The rupee has fallen by about 25% against the dollar over the last two years and is currently at an all-time low of Rs 59.66.

Some developers in Kerala, which has the one of the largest population of people living in the Middle-East, say they are seeing more demand from NRIs than from locals.

 

 "When the rupee was at 42-45 to a dollar, we had 30-40% demand from NRIs. Now with the rupee touching 60, the demand will be 50-60%," says SN Raghuchandran Nair, Managing Director, SI Property, a Kerala-based real estate company.

And it's not just Kerala. Developers across the country are flooded with renewed interest from abroad.

NRIs accounted for 15% of Mumbai-based Lodha group's sales in FY13, up from 7% two years earlier. "NRIs gain is in direct proportion to the depreciation of the rupee, and this is reflected in the huge interest that we've seen from our NRI customer base," says R Karthik, the firm's chief marketing officer.
HARDSELLING PROPERTIES

Supertech, Unitech, ATS Infrastructure and Amrapali, all based in the National Capital Region, are also seeing a jump in enquiries from NRIs, especially from the Middle-East, Europe, the US and Singapore.

"We've seen a 30-40% increase in enquiries from NRIs in the last one month," says Ajay Chandra, managing director of Unitech.

Seizing the opportunity, Bangalore-based Sobha Developers is hardselling its properties to NRIs. 'Invest in homes now and save Rs 34 lakhs,' screams one promotion on its website. The promised savings are on account of rupee depreciation.

"Over three years, we have seen a 20% increase (year-on-year) in NRIs buying homes," says Jagdish Sharma, managing director of Sobha Developers. NRIs form 25% of the company's customer base.A combination of high-end condos and luxury villas are the most sought after, says Nitesh Shetty, chairman and managing director of Nitesh Estates.

Real estate firms are doing every thing to make the most of this interest. About 90 developers went to the Indian Property Show in Dubai. The three-day exhibition, which concluded recently, generated business of over Rs 600 crore, says Sunil Jaiswal, President and Chief Executive Officer at Sumansa Exhibitions in Dubai, which organised the show.

Shetty of Nitesh Estates is now looking forward to participate in Citibank's IndiaHome property exhibition in Dubai next month.In another unique initiative, Noida-based Amrapali Group will pitch its tents in a UK convention where 2,000 Indian doctors from all over the world will converge next month.

 

 

 

http://articles.economictimes.indiatimes.com/2013-06-26/news/40207008_1_sumansa-indian-property-show-nris

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Understanding complexities in real estate industry key to growth

By: Karshni on 12:50

The Confederation of Indian Industry (CII) recently held its flagship 'CII Real Estate Conclave' here with the theme 'Embracing The Complexity of Indian Real Estate'.

Participants described the real estate industry as a key industry to which India's GDP growth is directly linked.

"Is the real estate industry complex or complicated? It is important to have this clarity about each aspect we deal with in the industry because solutions will flow from this," said Firdose Vandrevala, Chairman, CII National Committee on Real Estate and Housing and Chairman and Managng Director HIRCO Developments Pvt Ltd.

"Corruption is complex. Supply chain is complex and disorganized. Construction is complicated. Demand is complex with a lot of speculative short term investors, long term investor, rental markets and genuine actual users. Financial markets are complex while transactions are complicated," he added.

Vandrevala further said: "You have to look at the system in parts and at the same time you have to look at the whole because solving problems of the parts cannot necessarily solve the problem of the whole. Understanding this will ensure that we do not apply the wrong approach to the right problem that happens when we mix up."

CII and International property consultancy Jones Lang LaSalle India, in partnership released its report 'Emerging Investment Hotspots - Mining Opportunities From the Complex Real Estate Terrain of India' at the summit.

Jones Lang LaSalle India, as Knowledge Partner for the Summit, designed this report to dovetail with the event's theme - Embracing the Complexity of Indian Real Estate: Adopting a Pragmatic Approach for 2013 and Beyond.

Anuj Puri, Chairman CII Real Estate Conclave and Chairman and Country Head, Jones Lang LaSalle India said, "India has its own unique and integral complexities, and doing business here is no exception to this fact."

"Corporations strive for increased efficiency and productivity amidst these complexities - and real estate is an integral ingredient in the formation and growth of all businesses," he added.

"On the flip-side of the real estate sector's inherent uncertainties are the opportunities created by them in the real estate sector. Investors stand to capitalize significantly from these opportunities," Puri said further.

"However, in such an environment of uncertainty, returns through capital appreciation and security of the invested capital are obviously prime concerns. The pertinent question of where to invest needs to be answered. This report seeks to do just that," he added.

"The industry needs to come together and put in a lot of thoughts about the issues involved like the availability of space for sale despite increasing rent, expected growth of tier 2 and tier 3 cities not having fructified, unsold inventory being at an all time high even as prices continue to rise etc.," Puri said.

Lalit Kumar Jain, Chairman, Kumar Urban Development Ltd., said, "Firstly, in this country there is a stigma about the housing industry. Then there is a policy paralysis where only a few states talk about land reforms. Today, in any project, 70 to 80 percent of the cost is of land. How do you then expect property prices to go down? So the main issue is about land cost reforms."

He went on to add, "We want a regulator but 90 per cent of regulation today is about delay. The regulator needs to think about how the new bill will benefit all the stake holders involved. Government policy needs to include more thought from the corporate sector.

 

 

 

http://www.business-standard.com/article/news-ani/understanding-complexities-in-real-estate-industry-key-to-growth-113062200191_1.html

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New real estate bill is a bitter pill the industry needs for long-term cure

By: Karshni on 13:00

The proposed real estate bill, if implemented, will hamper cash flows and escalate the cost of capital of realty firms, besides limiting overall growth of the industry.

Of all the proposals, the most negative for the developer is the one that says the builder will have to set aside 70% of the payment from the buyer to be used only for that project. This means, most of the builder's money will get blocked till the project is complete and cannot be used to buy additional land for future projects or service earlier debt.

If the builder wants to invest in additional land, he will have to borrow money. The consequence of this could be fewer project launches and lesser projects in the pipeline, limiting growth.

Another proposal says the builder will not be allowed to sell or even advertise the projects until all the requisite clearances are received, which means there would be no pre-launches. This will delay the recovery of land cost, which was earlier 1-1.5 years. In other words, return on investments will be lower.

Who will be Hit & Who will Gain?

The bill will impact different companies differently. The immediate impact of this will be on companies looking at using the cash from upcoming projects to finish incomplete projects as well as to service their debt. These will be companies with high debt and a lower cash balance. More than 75% of companies fit into this category.

Among the listed companies whose financials are readily available, Unitech, HDIL, Hubtown and Orbit Corp fit this bill. Most of these companies are cash strapped with high debts, and in case the bill is passed, these companies will be in bigger trouble.

Considering the bill could slow down cash flows, some of the highly-leveraged companies — listed as well as unlisted — may be pushed to the brink of bankruptcy.

However, companies such as Oberoi Realty and South-based Sobha Developers and Prestige Estate, which have strong cash flows, will be not impacted. In fact, these companies could be indirect gainers as the weakness of one can be the strength of the other.

They will face limited competition from distressed and smaller players. For instance, cash-rich companies that have been hunting for land assets at good prices will get better prices as there will be fewer bidders for land assets. Also, lower inventory due to a drop in the number of projects from financially weaker players could boost demand for projects of stronger companies.

Long-Term Advantages

In the long term, this will benefit all the stakeholders — investors, developers, buyers and the government. Having a regulator will mean a more disciplined industry, timely delivery of projects and better governance with greater transparency.

This will help attract more investors at the project level. Further, creation of an escrow account will lower the risk for lenders, which will give realty firms access to low-interest debt. Most importantly, all these will keep prices under check. Spiralling of prices through creating additional demand for land by cross-collateralising and routing funds from one project to another will not happen.

We may see more developers preferring to partner with landowners or giving them a stake in the project as against snapping up land banks by over-leveraging. One possibility is that banks could start lending to builders against future receivables from the land they are interested in purchasing as against the current practice of lending against existing assets. However, this will increase the risks for banks. 

 

 

 

http://economictimes.indiatimes.com/markets/real-estate/policy/new-real-estate-bill-is-a-bitter-pill-the-industry-needs-for-long-term-cure/articleshow/20672820.cms

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How new real estate bill could reshape the realty ecosystem?

By: Karshni on 12:58

1) Project Registration

When the Real Estate (Regulation and Development) Bill 2013 comes into effect, all projects will have to be registered with a real estate regulatory authority.

Promoters will have to disclose details about the project (name, type, plans, partnership companies, names of persons involved with construction etc). Will have to specify what kind of area is for sale (based on standardised markers).

All brokers and agents will have to be registered with the regulator before they can practise. Builder will have to provide a list of agents who will represent each project.

Once the project is registered, all details will have to be put on the website and updated every quarter. This includes disclosing the extent of project completion.

What This Means

A) Buyers can take informed decisions. "Today, it's impossible to compare properties because square footage, amenities, floor-space index consumed and even delivery schedules are different for different builders," says Pranay Vakil of Praron Consulting. "Standardising this will allow consumers to make apples-toapples comparisons."

B) Which standards to follow? "The Bureau of Indian Standards has laid down standards for the construction industry, and clearly defined things like carpet area, plinth area or how to calculate the difference between the balcony and room area," says consumer rights advocate Anand Patwardhan. "If the bill brings in a new set of definitions, it will create a conflict."

C) Do away with middlemen: When all the details are on the website, housing rights activists feel there is no need for brokers and agents; buyers can get in touch with promoters directly. Also, if the regulatory authority is going to insist on brokers being registered with it, to what extent will it be liable for their actions? Activists say this is not clear.

D) "Having access to the relevant information will help de-risk lending," says VK Sharma, MD and CEO of LIC HousingBSE -5.18 % Finance. At the moment, buying a house is like groping in the dark, he adds. "Even with the most trusted builder, you don't know what you will get. This kind of transparency will boost buyer confidence."

2)All-Round Clearances

Builders will not be able to sell — or advertise — a project till it receives the requisite approvals. These range from land titles and amenities, to provisions for water, electricity and sanitation. This means pre-launch sales are out. Brokers will be barred from trying to sell an unregistered project, or one that has not received the necessary approvals.

The regulatory authority will get 15 days — after receiving an application for registration from a promoter — to either clear it, or reject it. Reasons for rejection will have to be put down in writing. If the regulator fails to do either of these, the project will be considered as registered.

What This Means

A) "Ensuring prior permissions is the only good thing I see in this bill," says Patwardhan. "But this will open the window to more corruption. Builders will stop at nothing to get clearances."

B) Regulator for 'some': "We would welcome a regulator if it's going to regulate all the players in the real estate industry," says Vimal Shah, president of the Maharashtra Chamber of Housing Industry (MCHI). "Right now, the bill appears to only hold the developer responsible." Adds Navin M Raheja, managing director of Raheja Builders: "Developers will be penalised for delays, but what about the delays created by government departments in providing clearance for projects? If there is a delay in giving approvals, the government official should also be made accountable for it."

C) Approvals come in phases, and never all at one go, says MCHI's Shah. If a developer has to wait to launch a project only after all the approvals are in, this would only mean further delays in handing over the house. "We wanted this to be an automated registration process so that there is no human interface, and therefore no chance of corruption," says Lalit Kumar Jain, president of the Confederation of Real Estate Developers of India (Credai).

D) Smaller builders will be hit harder. After putting down money for all the clearances at one shot, they may not have much left over to start construction right away - especially since pre-launch sales are discouraged. "This will only mean delays in launching projects and escalated costs," says a promoter. Which may get passed on to the buyer.

3) Funds From Buyers

Builders have to open a separate bank account for every project and set aside 70 % (or less, as designated by the local authority) of buyers' money, to be channelled only into the construction of that property. 

economictimes.indiatimes.com/markets/real-estate/policy/how-new-real-estate-bill-could-reshape-the-realty-ecosystem/articleshow/20672755.cms

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Falling gold price takes the sheen off real estate

By: Karshni on 12:44

The decline in gold prices over the last two months and the Assembly elections in May have seriously impacted revenues from the real estate sector, resulting in the Stamps and Registration Department missing the target for the first two months.

Department officials attribute this to the migration of investors from real estate to gold, which has suddenly become a “hot instrument” for speculative gain for its comparatively low cost. So much so Union Finance Minister P. Chidambaram on Thursday appealed to investors to look at other avenues for investments.

Gold price fell from its peak (about Rs. 32,400 per 10 gm) last September to its recent low (about Rs. 26,000) in April this year.

“We feel that the number of property transactions have declined because of the thawing of gold prices. If the same trend continues, small investors will be favourable to gold than the real estate,” a source told The Hindu. “With the May elections, purported investments in real estate may have been diverted also.”

“Another reason for lower registration in Bangalore could also be a calmer Hyderabad where the pro-Telangana protests have come down, boosting investor confidence,” a department official said, conceding that the annual target of Rs. 6,100 crore would be a tough one if the trend continues.

Venkatesh Babu, former president, Bangalore Jewellers’ Association, acknowledged that the comparatively lower gold price had been good for the jewellery business for the last two months. Small investors look at gold for gains, he added.

Balakrishna Hegde, managing director, Chartered Housing, and former president of Confederation of Real Estate Developers’ Association of India, said: “Declining gold price will have marginal impact on the industry. The low [property] registration was due to elections. Many registrations would have been postponed due to the financial year ending March that would come with a tax burden for buyers.” 

 

 

http://www.thehindu.com/news/national/karnataka/falling-gold-price-takes-the-sheen-off-real-estate/article4811379.ece

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New Gurgaon, Greater Noida emerge as real estate hot spots

By: Karshni on 12:43

For investors, New Gurgaon and many parts of Greater Noida are fast emerging as new real estate hot spots. In the past year, New Gurgaon has recorded property price appreciation of 66 per cent. While property prices have risen about 21 per cent in Greater Noida, the area isn't limited to being an end user market; investors were investing in residential units in Greater Noida, hoping for significant returns through the next few years, said experts.

However, real estate analysts make a distinction between the two regions, in terms of investment - while New Gurgaon is referred to as a high investor market, Greater Noida is termed a market for low-ticket investors.

As of March-end, the average residential property price in New Gurgaon stood at Rs 7,068 a sq ft, against Rs 2,528 a sq ft at the end of March 2009, a rise of 180 per cent, according to data by real estate research firm PropEquity. In Noida Extension, part of Greater Noida, prices have risen 49 per cent through the last five years. In the last year, prices have appreciated 16 per cent, compared with Rs 2,818 a sq ft at the end of March 2012.

In Yamuna Expressway, part of Greater Noida, prices rose from Rs 3,500 a sq ft at the end of March 2009 to Rs 3,664 a sq ft at the end of March this year. In the last year, prices rose 21 per cent.

Sumit Jain, chief executive of commonfloor.com, said, "While the rest of the National Capital Region has seen muted growth, the markets of Greater Noida and New Gurgaon have seen significant appreciation. Investors have a limited risk appetite, due to a slow-moving economy, changing regulations and tight liquidity conditions. Both these markets provide low entry points, with a significant upside to investors."

Samir Jasuja, founder and chief executive, PropEquity, said Greater Noida saw a healthy price appreciation due to availability of affordable options, while New Gurgaon had emerged as the next best location because of good infrastructure, attractive pricing and good-quality projects. Besides, the profiles of developers had also aided growth in New Gurgaon. "New Gurgaon is already attracting a lot of investor interest. And, looking at the trends, this active investor interest would only accentuate. The region is fast emerging as Gurgaon's luxury destination and we expect developers would continue to launch good premium projects," he added.

Apart from these two areas, Dwarka Expressway is also attracting investor interest. Other areas that have grown consistently are Golf Course Extension Road, Sohna Road and Noida Expressway, experts say. Dwarka Expressway and Noida Expressway recorded price appreciation of 206 per cent and 158 per cent in the last five years, respectively. As of March-end, prices stood at Rs 7,121 a sq ft in Dwarka Expressway, while in Noida Expressway, they stood at Rs 9,435 a sq ft. In the last year, property prices in both the areas rose 45 per cent.

Last year, absorption of units in New Gurgaon stood at 3,058 in the mid-level (Rs 40 lakh-1 crore) segment, against 1,649 in 2011. So far this year, absorption stands at 854 units. Absorption in the luxury (above Rs 1 crore) segment so far this year stands at 57 units, against 227 in 2012 and 232 in 2011.


 

 

In the luxury segment, new launches picked up pace in New Gurgaon. A total of 509 units have been launched so far this year, against 3,610 in 2012 and 810 in 2011. In the mid-level segment, 169 units have been launched so far this year, against 3,886 in 2012 and 4,992 in 2011.

In Noida Extension and Dwarka Expressway, absorption, as well as new launches, was primarily recorded in the affordable segment (up to Rs 40 lakh).

 

 

 

http://www.business-standard.com/article/companies/new-gurgaon-greater-noida-emerge-as-real-estate-hot-spots-113061500825_1.html

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Reaction on the real estate bill by Knight Frank India

By: Karshni on 05:55

This is a welcome and a long awaited measure that both the consumer and the relators were asking for. However while consumers have a lot to gain from this, the realtors will have mixed feelings.. Even though progressive developers and trade chambers have welcomed it the Bill appears to be a tad harsh for relators. The questions in my mind are:

- This is an additional mechanism, over and above the existing plethora of authorities who grant permissions and approvals. Have we missed an opportunity to club all regulating authorities and have a single window clearance?

- Projects can`t be launched before all construction plans passed and approvals in place. Will this delay the project cycle further? And will this be practical keeping in mind that the biggest reason for delays in any project is getting plans approved.

- Developers will have to learn and come out with an entirely new way to `go-to-market`

- 70% of the sales proceeds collected to be kept in a separate account for each project. This is good where land cost is low. However for projects where land prices are high and the developer has already disposed of that liability, then will cash flows match?

- The Bill does not factor in delays on account of intermediaries, regulators and other players like contractors.`

Naushad Panjwani, Sr ED ,Knight Frank India

http://www.moneycontrol.com/news/real-estate/reactionthe-real-estate-bill-by-knight-frank-india_892368.html

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Chennai residential real estate report to remain firm, says report

By: Karshni on 13:05

Property prices in Chennai is expected to remain firm with upward bias in growth corridors, says a recent report by ASK Property Investment Advisors the real-estate private equity arm of ASK Group.

"The growth of auto hub and growth of IT/ITeS and BFSI industry has defined the growth of Chennai in last decade and will continue to drive migration and need for houses. Chennai which accounts for major share of US $ 185 bn investments in the State will lead to steady growth in jobs and rising need for houses," says Sunil Rohokale, CEO & Managing Director, ASK Group.


The report analyses the economic and infrastructure drivers that would impact the demographic growth of the Chennai metropolitan area. The study gives an outlook on the housing requirement and supply and its impact on prices.

"The housing requirement in Chennai is expected to be in the range of 30,000-35,000 houses annually. We expect prices to remain firm due to balanced demand-supply, while growth corridors are expected to witness upward bias in prices" said Amit Bhagat, CEO and MD, ASK Property Investment Advisors Ltd.

The PE fund has invested in two residential properties- Mantri Developers and Real Value Promoters, with expected revenue of Rs 725 crore in Chennai between December 2010 and March 2011 respectively. ASK Group has raised Rs.1300crore through its 2 domestic funds. Till date the group has invested Rs. 740 crore in 11 investments.

Chennai-Top 10 global auto Hub and major contributor to State's US$ 10 bn Software exports is expected to witness stable growth in medium term

Chennai's annual housing requirement is expected to be 30,000-35,000 houses (MIG and HIG segment) driven by 2.6% yearly growth of population

Overall Real estate prices are expected to remain stable with upward bias in growth corridors like Medavakkam, Pallavaram, Porur and Sholinganallur 

 

http://articles.economictimes.indiatimes.com/2013-06-11/news/39899589_1_ask-property-investment-advisors-ask-group-sunil-rohokale

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Pune real estate - The smart homes revolution

By: Karshni on 11:25

Over the past two decades, Pune has seen rapid growth of the IT culture. In the beginning, this culture was limited to employees of the city's many IT/ITES parks - today, it has touched almost everyone who lives in Pune.

The cyber revolution in this city is inescapable - those who do not own computers populate internet cafes. The current generation of young people below age 30 is defined by computer savviness, and these are the people who will usher the city into the future. Naturally, this revolution has had a very distinct impact on the kinds of homes that younger people choose to buy today. Whether they are working in Pune's innumerable software companies and IT-enables services firms or in some other sector, the young home buyers today have developed their own criteria for what constitutes an ideal home. 'Smart' homes are now in vogue not only with IT/ITES employees - every home buyer from the middle and upper-middle class is looking for residences that support a cyber-driven lifestyle.

That said, the highest demand for smart homes in Pune still stems from people working in software parks and IT companies. This can be largely attributed to a combination of their exposure to IT-driven concepts and the sizable pay packets they tend to draw. After all, there is a premium attached to homes with 'smart' features. The extent to which the cost rises above that of baseline residential property prices in a certain location depends on how many of these features have been included in the project. For Pune's gadget-conscious IT professionals, automated homes are definitely de rigueur and something to aspire for. In the past, smart homes were considered something of a niche concept, owing to the larger ticket sizes.

At their best, Pune's smart homes offer technological features wherein home owners can operate almost anything in their homes (including lights, air conditioners, security systems, curtains and blinds) from within and even outside at the touch or click of a button. Today, smart home technology uses user-friendly software that allows simplified control of climate, lighting, entertainment and communication. The technology involved impacts three key areas - energy efficiency, security systems and telecom systems.

In Pune, the buyers for smart homes fall in the age group of 29-40. They are either established in senior roles within the IT/ITES, manufacturing or services sectors, or are upwardly mobile, highly aspirational and eminently qualified for home loans. They also tend to be quite stressed-out by their professions, and therefore seek the comforts, enablement and security that smart homes offer as a means to relax and generate more time to spend with their families.

Moreover, smart homes have a definite status value attached to them and tend to have higher resale value because of their locations, which are either close to the city's IT hubs or in upscale areas which are defined by higher purchasing power and therefore higher lifestyle aspirations. The biggest success stories in Pune's smart homes revolution so far have been Baner, Aundh, Kalyaninagar and Magarpatta. Other locations where smart homes are in high demand are Sakal Nagar near Aundh and Ambegaon. Appreciation of such properties is also influenced by the very nature of the features that make life simpler, safer, more comfortable and more exciting.

 

Kishor Pate- CMD -Amit Enterprises
 

http://www.moneycontrol.com/master_your_money/stocks_news_consumption.php?cat=realestate&autono=895910

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Real Estate Bill: How home buyers stand to gain & lose

By: Karshni on 12:47

Last week, the Union Cabinet approved the draft Real Estate (Regulation and Development) Bill 2013 that allows for the creation of a regulator in the real estate sector. Once passed by Parliament and subsequently adopted by each state, it will allow for the creation of a real estate regulator in each state (realty being a state subject). While the Bill applies to residential properties, commercial real estate has been kept out of its purview. Let us examine the pros and cons of the draft Bill in its latest avatar.

HOW YOU STAND TO GAIN

Stress on timeliness and adherence to specifications: Once the Bill gets enacted, it will provide considerable relief to the buyer who faces innumerable difficulties and at times even gets duped by developers and brokers. Anuj Puri, chairman and country head, Jones Lang LaSalle India, points to two specific aspects of the Bill that will benefit buyers. "By imposing strict regulations on the promoter, the Bill looks to ensure that construction is completed on time, and on completion the buyer gets a property that matches the promised specifications," he says.

Mandatory disclosure of project details: The Bill will make it mandatory for developers to disclose details, including minor ones, about their projects on the company website. Says Niranjan Hiranandani, managing director of Hiranandani group of companies: "The details will include specifications, such as the layout plan, carpet area of each dwelling unit, number of units in the project, the amenities being provided, and the approvals received for the project from various authorities. Such disclosures will make it difficult for developers to make ad hoc changes to their project plans at a later stage of development."

Developers will also have to specify the carpet area of each apartment. Selling on the basis of the ambiguous super area will no longer be permitted. Periodic updates on the stage of development that the project has reached will also become mandatory.

Separate accounts for each project: The Bill also makes it mandatory for developers to maintain separate bank accounts with scheduled commercial banks for each of their projects. At least 70% of the corpus raised for the project from buyers (at intervals) will have to be deposited within 15 days of realisation in the account. Developers will have to channelise the money to meet the costs of that particular project. Diversion of funds from one project to another will not be permitted.








Misleading buyers will invite punishment: Developers will be prohibited from advertising or marketing their projects before getting all the necessary clearances and obtaining a certificate of registration from the authority. Says Ganesh Vasudevan, chief executive officer of Indiaproperty.com: "Developers will not be able to collect funds from buyers before they have obtained all the necessary approvals."

The Bill states that if any developer willfully fails to comply with or contravenes its provisions, he will be punished with imprisonment for up to three years, or a penalty that may extend to 10% of the estimated cost of the project, or both. Vasudevan informs that the developer will have to compensate the buyer who incurs a loss on account of advance payment based on false information contained in the developer's advertisement. "The regulatory authority will determine the compensation amount," he adds.

Canceling a sale becomes difficult: Developers will not be allowed to cancel an agreement for sale unless they have sufficient cause to do so. Says Vasudevan: "The developer will need to give due notice to the parties to the agreement. He will also have to refund the amount collected along with interest, as prescribed."

Moreover, in case there is a major structural defect or deficiency in the development or services offered and this is brought to the developer's notice within one year by the buyer, the developer will have to rectify those defects without levying further charges.

Licences compulsory for realty brokers: The Bill also makes it compulsory for real estate agents to register and get licences before they begin to conduct business. Yashwant Dalal, president of the Estate Agents Association of India, believes that this is a positive step by the government which will make real estate broking an organised profession.

 

 

 

http://economictimes.indiatimes.com/markets/real-estate/policy/real-estate-bill-how-home-buyers-stand-to-gain-lose/articleshow/20491160.cms

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Real estate Bill, a damp squib

By: Karshni on 12:31

The Real Estate (Regulation and Development) Bill, 2011, focuses on the contractual relationship among three parties: promoter, the allottee or buyer, and the regulatory authority. The Bill essentially seeks to secure the rights of the buyer against unscrupulous actions by the promoter.

But the moot issue is: Should regulation of the housing sector end here?

There are at least five crucial dimensions to urban housing that do not fall under the ambit of the proposed ‘Real Estate Regulatory Authority’. First, housing involves acquisition of land, where the rules of the Land Acquisition (Rehabilitation and Resettlement) Bill (LARR) should come into play. Second, a housing project should not be situated on environmentally sensitive land.

Third, the water use of a housing cluster should be based on the principle of greater common good. Four, black money transactions in housing can be controlled by taking the requisite steps under the Income-Tax law; five, access to housing could be restricted to genuine buyers, as opposed to speculators.

Some of these aspects are addressed (certainly not the last) by a multiplicity of bodies, such as the municipal corporation; autonomous bodies dealing with surface water, ground water, lakes and sewerage; the revenue department of the State government; and the Income-Tax Department. In the case of foreign or NRI investment in housing, the RBI can be added to the list. Powerful interest groups take advantage of the absence of a single window for clearances.

We need a single housing regulator – and a legislation – that addresses all aspects. Alongside, the Real Estate Appellate Tribunal envisaged under the new Bill should be expanded in scope to address a wide range of grievances.

That would enhance the accountability of the state vis-à-vis the citizen and enable one set of citizens and organisations to enforce its rights vis-à-vis another – going beyond builders and buyers to sellers and buyers in ‘secondary market’ deals, buyers and banks, builders and landowners, builders and environmentalists, and home owners and communities over share of water and civic amenities.

It is true that a composite regulator will straddle the domain of the Central and State governments, but these issues can be sorted out if the need for such a body is accepted in principle.

Policy blindness

The draft Twelfth Plan document and the Planning Commission’s Steering Committee reports on urbanisation and environment have not said a word on the many-pronged crisis that is housing, leave aside look for solutions. We all know that black money in real estate fuels much of the economy, the political process and crime. When the Government writes reams about everything but this publicly recognised fact, and passes a Bill that only addresses buyers’ rights vis-à-vis builders, it is ignoring the rhinoceros in the room.

Hence, the need for a comprehensive regulatory framework. The fact that this has not been attempted points to the influence of vested interests – in government, politics and business. Therefore, what we are offered is a Bill that seeks to isolate the rights of one set of stakeholders, the home-buyers (only in respect of the ‘primary market’), so that the rest can carry on as usual.

Once buyers are ensured of their rights vis-à-vis the builders, they are unlikely to get worked up about the social and environmental effects of housing projects. The incentive to know whether the necessary clearances have been sought is less when the regulatory framework is fragmented and weak. A composite, effective regulator may instil a sense of enlightened self-interest.

Speculation, Black money

How can such a regulator deal with black money – a feature of both secondary market transactions between retail buyers and sellers and primary market deals between builders and landowners? As has been proposed in these columns, the Income-Tax Department should purchase property at the guidance value where the black money component is high. This would act as a deterrent to black deals. The guidance value would converge with market value.

It is worth considering whether biometrics or DNA fingerprinting can be used to curb the number of plots or houses purchased by an individual. To ascribe the housing prices to the gap between housing demand and supply alone is to overlook the number of properties purchased as an investment. Banks have recklessly encouraged retail finance in housing, as opposed to commercial real estate, being unmindful of their role in distorting the demand-supply equation. A composite regulator, with an RBI representative, can oversee these aspects.

A crackdown on black money, and on purchase of property as investment, can bring down prices by releasing housing stock. The Planning Commission Steering Group’s report on urbanisation has suggested that to “avoid land hoarding, a vacant land tax should be formalised for all land, including government land”.

Ignorance about water

The Plan documents’ silence on water entitlements is disappointing. The Government seems to believe that proper pricing of water will take care of unregulated use. Imposing a higher price on a scarce essential good is to deny access to the poor, even as the rest manage, anyway. Besides, the market for water seems price inelastic, if one were to go by the willingness of upper middle class residents to pay through their noses for water tankers. The price of an apartment does not seem to be affected by water availability, either because residents are able to pay more for water (whether that continues in an economic downturn remains to be seen!) or because water scarcity is widespread.

The real problem is that, like land, access to water is determined by the logic of ‘might is right’. Use rights over water are not codified. When builders set up high rises near an aquifer such as a lake bed, they tap into the groundwater virtually for free.

This affects the availability of groundwater to surrounding populations – a possibility that the municipality overlooks when giving a licence to a builder. Except for feeble curbs on borewells, it is accepted that land ownership brings with it the unlimited right to use the water below it as well.

Therefore, groundwater levels have receded even in Bangalore which gets rain for half the year. The water tanker business is run by thugs who prevent residents from digging their borewells in areas where they (the thugs) source or distribute water!

Civil society

To complete this circle of criminality and injustice are retail buyers and sellers who, content with their ‘dream homes’ and nearby malls, have shut their eyes to what goes on around them.

The Hindu (June 3, 2013) reported large-scale diversion of wetlands adjoining the Bellandur lake in Bangalore for apartment complexes, malls, offices and parking space. While the lapses of numerous authorities are obvious – strengthening the case for a composite housing regulator – what is sad is the retail investors’ disregard for environmental violations.

Without public awareness and pressure of the sort that we saw for the Lokpal Bill, a composite housing regulator will never come into being. 

 

 

http://www.thehindubusinessline.com/opinion/real-estate-bill-a-damp-squib/article4797602.ece

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How real estate Bill will benefit buyers

By: Karshni on 12:29

The Cabinet nod for the Real Estate (Regulation and Development) Bill 2013 has been met with approval, concerns and questions.

The time frame for implementation of the Bill is envisaged beyond 2014 and the impact of the Bill will likely be seen later than that.

Overall, what is in store for stakeholders once the Bill takes effect?
 

Listed PLAYERS: Neutral

Listed real estate developers may face short-to-medium term concerns after the Bill is enforced.

“We may see a noticeable slowdown in launches of new projects, as getting all the necessary permissions in place is a long and tedious process,” said Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield.

He also felt there may be an upward pressure on prices as developers wait to launch their projects with due approvals in place, unless the Government follows up with much-needed administrative reforms that speed up the process.

However, over the medium to long term, developers are likely to see improvement in funding.

Many large developers are saddled with high debt and incur high interest payment due to lack of funding sources.

As the sector is progressively viewed as less risky, they may be able to access lower cost funding for their cash flow needs, boosting profitability. Over the next two to three decades, a cleaner and transparent real estate market, akin to the stock market, could be expected, said Om Ahuja, CEO-Residential Services, Jones Lang LaSalle India. Pointing to the complaints addressing mechanism, he was optimistic that similar to companies stating the number of pending shareholder issues, project brochures of property developers in the future may need to list outstanding complaints.
 

Small BUILDERs — Mixed

There is concern among small developers that the increased disclosure requirements may add to their costs.

Further, the Bill does not address concerns faced by property developers in obtaining permits and approvals.

Ravindra Pai, Managing Director of the Bangalore-based Century Real Estate Holdings, noted that the Bill would add to the difficulties of smaller builders and new entrants and definitely increase the barriers to entry in the market.

“The Government needs to ensure that the spirit of the Bill is maintained and the regulator does not become just another department giving room for increased corruption and delays,” Pai added.

Small and medium developers may face higher costs due to the vastly increased disclosures mandated by the Bill. This could also help bring in more credibility, and help attract investments from domestic and international funds.
Positive to PE Funds

PE investments in real estate have been decreasing in number and value this year. Sunil Rohokale, Managing Director and CEO, ASK Group, that offers PE funds in real estate, said this regulation would weed out short-term focused developers who entered the market for quick profit.

“The Bill may increase cost for developers but will mitigate a lot of risk in investment as there is higher transparency with the developer taking up ownership for disclosures,” Rohokale observed.

“The uniformity of regulation and specifications across the country are positives for PE investors, mezzanine investors and banks,” he added.

The increased transparency and uniformity may also attract more global institutional investors and financing institutions, according to Anshuman Magazine, Chairman and Managing Director, CBRE South Asia. Buyers have many reasons to cheer the real estate regulatory Bill as it includes many key provisions that are beneficial to them.

There are, however, some concerns about property prices increasing as a result of the provisions.

Developers indicated that if the Bill increases the costs for them, it will likely be passed on to the buyer, but the timely delivery of projects may offset this cost increase.
 

BUYERS CHEER

The Bill imposes strict guidelines on advertisement and prospectus from builders and also has provisions for claiming compensation for loss caused by misleading statements.

This, along with selling based on carpet area, should deter misleading advertising and lofty promises. Buyers have had limited bargaining power and no easy recourse when the builder reneges on promises.

The provision in the Bill to set up an appellate panel to take up disputes between buyers and builders will help in the speedy resolution of issues such as delays, change in specifications, and so on that are typically faced by buyers.

The Bill may be not comprehensive and there are a few items that are left out.

“The Bill does not cover builder changing the floor plan, keeping the carpet area same,” said Bhupati Shukla, a home buyer who has suffered delivery delays, “and there is no clarity about the timelines for the completion of amenities in the project, such as club house etc.”

As the Bill benefits the customer, all participants expect that it will be positive to the industry.

“The public in general and home buyers in particular welcome the Bill,” says M. Murali, Managing Director, Shriram Properties, Bangalore, “and the desire to own property will go up.” 

 

 

http://www.thehindubusinessline.com/features/investment-world/macro-view/how-real-estate-bill-will-benefit-buyers/article4795136.ece

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Real estate bill makes buyer the king

By: Karshni on 14:18

With the Union Cabinet approving the Real Estate (Regulation and Development) Bill, the country's highly unregulated and unorganized real estate sector moves a step closer towards greater transparency and compliance.

The Bill, which looks at just the residential market, seeks to create a central regulatory authority and various state levels authorities for the real estate market in a bid to protect buyer interests by providing a uniform regulatory framework.

The Bill seeks to prevent developers from putting out misleading advertisements; ensure that they don't market projects unless necessary approvals are in place; and direct developers to declare a time frame for developing projects. The Bill also seeks to impose monetary penalties on the developer for project delays, with repeat offences liable for a jail term.

Developers are also re quired to keep 70% of the monies realized from sales in to an escrow account towards construction costs, which cannot be diverted to other use. Often it is found that money received for one project is used for other projects, thus delaying the first project. "While the Bill may not impact the large developers, it will definitely raise the 'fiduciary disciplinary' bar for the small and mid-level developers catering to 30% of India's housing sector demand," said Shrinivas Rao, CEO-Asia Pacific of Vestian, a global consultancy company.

The Bill defines the sale of property by 'carpet area' and not 'super-built up area' or any other terminology. The carpet area is normally defined as the actual net usable floor area of a residential unit. Super built-up area is the built-up area (carpet area and wall breadth) in addition to the proportionate area of common areas, such as the lobby, lift shaft, stairs, club, etc.

Rao explains, "Say you are buying a 3-BHK unit with a super built up area of 1,500 sqft. The developer gives you the plans with all the dimensions, but in most cases the buyer is clueless about the carpet area or actual usable area. "Hence, with this safeguard, buyers would get to know upfront what amount of livable space they are buying."

However, RICS, a leading professional body for qualifications and standards in land, property and construction, said that the concern is of the actual definition and measurement standards for 'carpet area', which still haven't been clearly defined. Since the definition mentioned in policies and laws tend to be subjective, carpet area is interpreted and calculated differently.

"This problem is not unique to India as it exists in many parts of the world," said RICS.

The Bill is to be tabled in the monsoon session of Parliament. But developers are already upping the chorus for a simultaneous Bill on project approvals.

"The fear is that the Real Estate Bill will add another layer of bureaucracy in an industry which is heavily burdened by multiple approvals from different agencies which increases the project completion cycle and adds to project costs," said Suraj Asrani, COO, Cornerstone Properties.

Across the country developers experience inordinate delays and difficulty in obtaining project approvals from multi-headed government agencies. These delays range from 8 months to 18 months on an average. "These issues do not find any resolution in the Bill," said Asrani.

Asit Koticha, chief investor at Pashmina Developers, said that the government should simultaneously look at setting up a single-window clearance system to streamline the approval process. "This would ensure timely delivery without project cost escalations and help in strengthening the customerdeveloper relationship," said Koticha.

Pro-buyer bill

The Bill seeks to prevent developers from putting out misleading advertisements; ensure that they don't market projects unless necessary approvals are in place; and direct developers to declare a time frame for developing projects

The Bill defines the sale of property by 'carpet area' and not 'super-built up area' or any other terminology

The Bill is to be tabled in the monsoon session of Parliament.

 

 

http://timesofindia.indiatimes.com/business/india-business/Real-estate-bill-makes-buyer-the-king/articleshow/20488898.cms

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Crisil says real estate bill will boost residential segment

By: Karshni on 14:17

Ratings agency Crisil has said the real estate bill, when enacted, is expected to boost demand for residential property.

The Real Estate (Regulation and Development) Bill, approved by the Cabinet on Tuesday, provides for setting up a regulator for the sector and has provisions like jail term of up to three years for developers for offenses like releasing misleading advertisements.

"The Bill will incorporate mandatory disclosure clauses, which would provide greater clarity on the project standards and timelines for completion. For developers, while this bill implies stricter regulatory control, it will also translate into better demand, as buyer confidence improves," Crisil said in a statement.

Delays in hand-over of projects are likely to decline as clauses mentioned in the Bill mandate strong commitment from developers to complete projects as per schedule, it said.

The Bill mandates that 70 per cent or such lesser percentage, as notified by the appropriate state government of the money raised for a project should be deposited in a separate account.

Crisil said: "By ensuring that developers do not divert funds meant for a particular project to other projects, the Bill seeks to curb delays in project completion due to shortage of funds.

"The Bill also protects buyers against project delays by requiring that developers refund the amount paid along with interest in the event of a delay. Both these factors are expected to ensure timely completion and hand-over of projects to the buyers."

 

 

http://businesstoday.intoday.in/story/crisil-says-real-estate-bill-will-boost-residential-segment/1/195671.html

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Real estate sector set to be customer friendly

By: Karshni on 12:13

Transparency, uniform regulatory environment, interests of consumers protected and speedy adjudication of disputes. These, among others, are the features that go into the making of the Real Estate (Regulation and Development) Bill 2013 cleared by the union government this week and promise to streamline a hitherto unregulated sector.

Describing the bill as the government’s reiteration of the commitment to make real estate development transparent and consumer friendly, Ajay Maken, Union Minister of Housing & Urban Poverty Alleviation had said the real estate and housing sector was at largely unregulated and opaque at present, with consumers often unable to procure complete information, or enforce accountability against builders and developers in the absence of effective regulation.

The bill has provisions dealing with registration of projects and agents with the Real Estate Regulatory Authority, functions and duties of promoters, functions and duties of real estate agents, rights and duties of allottees, establishment of Real Estate Regulatory Authority, establishment of Central Advisory Council, establishment of Real Estate Appellate Tribunal, offences and penalties, Finance, Accounts, Audits and Reports etc.
 

Key aspect

One key aspect of the bill happens to be the initiative at introduction of the concept of using only ‘carpet area’ for sale which has till now been ambiguously sold as super area, super built up area etc.

It also aims to ensure consumer protection, by making it mandatory for promoters to register all projects, prior to sale, and only after having received all approvals from development/municipal authorities, thereby protecting buyer investments.

It makes mandatory upon the promoters to deposit 70 per cent or such lesser per cent as notified by the government to cover the construction cost of the project of funds in a separate bank account to ensure timely completion and prevent fund diversion.

A mandatory public disclosure norms for all registered projects has been put in place which would include details of the promoters, project, layout plan, plan of development works, land status, carpet area and number of the apartments booked, status of the statutory approvals and disclosure of agreements, names and addresses of the real estate agents, contractors, architect and structural engineer.
 

Maintaining accounts

Real estate agents are also expected to adhere to certain guidelines which include not facilitating the sale of immovable property which are not registered with the Authority and maintain books of accounts, records and documents among others.

The bill empowers the Authority to give directions for specific performance powers to impose penalty for non-registration of projects including imprisonment for continuous violation up to three years and impose penalty in case of other contraventions.

 

 

http://www.thehindu.com/features/homes-and-gardens/real-estate-sector-set-to-be-customer-friendly/article4791481.ece

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Real estate regulator: Harsh rules & soft banks will keep realty unclean

By: Karshni on 12:11

After politicians, builders are the most despised lot. Everyone has a story of someone who got a raw deal. The keys were handed over three years after the promised date; buyers had to cough up more midway, thanks to a clause that initially appeared insignificant; the redeveloped apartment had two-and-a-half bedrooms instead of three; and a year later, another 20-storied tower sprung up on the "open space", blocking the view of the racecourse or the sea — for which the owner, taken in by pictures on glossy brochures, had paid a premium. The list is endless.

Some angry buyers move the consumer court while others grudgingly accept what they get. A few years down the line, they stop cribbing as properties in the neighborhood change hands for double the price they had paid. By then, they could be browsing another brochure that has found its way into the inbox, planning a second home that comes across as the only sensible, even if a little sticky, investment.

The housing market is about spiraling rates that have priced out most buyers, ambitious developers who are answerable to no one, emergence of property as an asset class and mortgage installments becoming the dominant outgo in household budgets.

Like politicians, developers require no qualification: anyone with a claim on a slice of land can put out an advertisement to attract buyers. It's a business that employs millions and flourishes without a watchdog. Thus, any hint of a new law that assures fair deals and exemplary punishments that would be handed out by a new regulator is irresistible.

But it won't be a cakewalk. Advocates of such legislation should be prepared for the tortuous road towards a well-regulated and cleaner property market.

First, home prices could go up in the medium term. Once the new Real Estate (Regulation and Development) Bill, 2013, becomes law, builders would be barred from selling a project till all approvals — as many as 70 of them — are in place. This would delay launch of new projects and push up prices of those that are cleared.

Second, corruption may rise as multiple agencies drag their feet on clearances. Developers may strike convoluted deals giving buyers the option to purchase later. Third, disqualifying a shoddy builder could stall construction in all half-done projects and hurt genuine buyers. And, lastly, the validity of many regulatory actions could be challenged in higher courts.

There would be hurdles on the way and unless there is a quick and effective mechanism to throw out unscrupulous developers and hand over unfinished projects to others for completion, harsh measures would backfire on home buyers. This could defeat the purpose behind an otherwise strong law. 


http://economictimes.indiatimes.com/opinion/comments-analysis/real-estate-regulator-harsh-rules-soft-banks-will-keep-realty-unclean/articleshow/20468159.cms

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Cabinet clears real estate bill; repeat offences may land developers in jail

By: Karshni on 02:04

The Cabinet on Tuesday cleared the Real Estate (Regulation and Development) Bill that provides for the creation of a regulator for the sector and tighter norms for selling housing projects.

The bill seeks to provide a uniform regulatoryenvironment to the real estate sector in the country. Builders will have to now register all projects on plots measuring 4,000 sq metres or more with a regulatory authority.

They can launch projects only after acquiring all the statutory clearances from relevant authorities. The bill also has provisions to deter builders from putting misleading advertisements related to the projects. Failure to comply with these provisions for the first time would attract a penalty, which may be up to 10% of the project cost, and a repeat offence could land the developer in jail.

Lakhs of unorganised property agents have also been brought under the purview of the authority. They will have to mandatorily register with the real estate regulator authority.

The bill also makes it mandatory for a developer to maintain a separate bank account for every project to ensure that the money raised for a particular task is not diverted to other projects. The bill provides a clear definition of carpet area and would prohibit private developers from selling houses or flats on the basis of the ambiguous term 'super area'. To help consumers settle disputes, the bill also provides for establishment of fast-track disputeresolution mechanisms through adjudicating officers, to be appointed by the regulatory authority.

Developers, however, are opposed to the bill in its current form.

"We are not against a regulator in principle, but any such bill should not be anti-development and retrograde in nature. It may be misused by people in the power to unnecessarily delay real estate projects," said Geetamber Anand, managing director of ATS Infrastructure and president elect, Confederation of Real Estate Developers Association of India.

Anshuman Magazine, chairman and managing director of property advisory firm CBRESouth Asia, said: "The real estate regulator bill should have been more balanced, taking into account challenges faced by developers and consumer grievances. While consumers need protection, administrative reforms are required urgently for real estate development to happen more efficiently and in a transparent manner."

http://economictimes.indiatimes.com/markets/real-estate/news/cabinet-clears-real-estate-bill-repeat-offences-may-land-developers-in-jail/articleshow/20435090.cms

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Real Estate Regulatory Bill: How will it protect you

By: Karshni on 02:03

The Cabinet on Tuesday approved Real Estate Regulatory Billthat is expected to bring about a sea change in the business practice of real estate developers. Implementation of the same will take time as it involves land and land is a state subject. If you are looking to buy a property, here's how you will benefit when the Bill becomes a law:

1. Developers can launch projects only after getting all relevant clearances.

2. Developers cannot offer any pre-launch sales without the regulatory approvals.

3. Authorities have 15 days to approve or reject a project.

4. Construction to begin only after the developer's website has displayed all details of the project including receipt of clearances.

5. The buyers are entitled to full refund with interest in case of delay in projects.

6. Realty developers will have to maintain a separate bank account for every project to ensure funds raised for one project is not diverted.

7. It will be mandatory to keep 70% of the buyers’ funds in a separate bank account to ensure timely completion of projects.

8. Developers cannot take more than 10% of the advance from buyers without a written agreement.

9. Builders will have to use photographs of actual site for advertisements purpose. Failure to do so will attract a penalty which may be up to 10 percent of the project cost.

10. Repeat offenders may land in jail.

http://www.moneycontrol.com/news/business/real-estate-regulatory-bill-how-it-will-protect-you_890882.html

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