In the recent few months, we are seeing a stunning growth in real estate. Fuelled by over-optimism and high economic growth, a lot of even shabby properties are quoting a few crores now, and the prices have almost tripled in many sectors in the last couple of years. While real estate India needs more development, I feel that there is a lot of "irrational exuberance" (a euphemism for dumbness) in the market that keeps appreciating a small portion of the market to stratospheric heights. The situation is now dangerous as this could affect all those who mortgaged enormous sums to buy those high pricey houses, affect those banks that might get loaded with NPAs if there is a bubble burst and affect the country in general if there is a huge collapse in this sector. RBI is seriously concerned and has started to discourage banks in giving housing loans.

An important thing about investing in housing and real estate India is that it has to be only a long term investment. If the investment horizon is less than 5 to 10 years, it is counted as speculation and becomes a dangerous business. Unlike stocks or gold, houses are illiquid and cannot be disposed at will and taxes and transaction costs can easily build up to kill any short term gains. And being a heavily leveraged business (people take upto 90% as loans), it gives no scope for error. Also, given the legendary speed of Indian court system and confusing property laws, investors need to do enormous homework before buying houses.

Here we will try to discuss a few common myths:

1. India has a shortage of land, given its enormous population, and land prices everywhere would always head north.
2. Capital appreciation will be at least GDP growth + inflation.
3. Regardless of the appreciation in the last few years, house prices will always go up.
4. Cash flow from rental is immaterial for buying a house.

Contrary, to popular assumptions India is never short of land for its people. India uses a very small percentage of the land for residential and commercial purposes and there is huge amount of wasteland many times more than all of the residential and commercial properties combined. India has a land surface of nearly 800 million acres of which at least 150 million acres (63 million hectares) are considered waste land. Even if we could utilize 20% of this space, we could build a 5000sq ft bungalow for every single Indian family and don't even need high rises and no land shortage whatsoever! Thus, the fundamental myth that land is limited and in shortage is busted. But, what is a fact is that majority of the land has to be developed. We need four things - infrastructure, strong capital market, industrialization and job creation in the undeveloped waste lands and rural areas and better technology. This is where the current developments & economical growth matter.

One major development is the SEZ (Special Economic Zone). While there are major controversies regarding whether it will lead to a major revenue loss or will lead to greater exports, there is no doubt that this will at least be massive real estate India development in those areas. A lot of them are far away from the major cities and use a portion of the wasteland and agricultural lands (India has nearly 69% of lands in agriculture, the highest for any major nation and could be reduced by a couple of percentage). The SEZs also bring infrastructure & employment in the region and could lead to greater shifting of population from the super-costly cities. Chennai and Mumbai are going to have huge SEZs far away from the main cities and places like Navi Mumbai-Maha Mumbai will compete with Mumbai just like how Noida-Gurgon are doing for Delhi. In the next twenty years thousands of such zones from wastelands will lead to an overall deflating of Indian property prices & better utilization of Indian land surface.

Second is the economic and tech development. A decade ago Bangalore and Pune were still sleepy pensioner cities and Chennai was a conservative southern city and Hyderabad was undeveloped and don't find Gurgoan or Noida on the India map. Economic development has changed everything and we have got a dozen more economic centers now than a decade ago. This process will be accelerated now even more. IT companies are trying to move towards Tier-II and Tier-III cities, organized retail is trying to push into more of suburban culture and Infrastructural growth would connect these remote regions with economic powerhouses. The party has just started and we are going to have dozens of new industries taking over various parts of the country. In another decade, it should not be surprising if we have a hundred more economic centers and together they will average the property price (high priced city properties will come down and the low price sub-urban & Tier-II cities will go up).

Summary: India has no land shortage and there is no guarantee that every property in India will go up in price in the next decade. The new developments could cause the averaging out of high-priced top cities and low priced suburban and smaller cities.

 

BASEMENT

One, but uses many!

You are required to be little creative

If there is a basement in your house, then do not use it as a waste house. Instead concentrate on its decoration and think of using to its fuller extent. It can be given a new shape with little efforts and creativity. In a basement, maximum attention is paid to sufficient light and ventilations. Windows, doors and ventilations are fitted properly for the purpose. You can consult an expert for their proper placement. Other alternative is that an open court-yard is made at the level of basement, which may be directly connected to it. Real estate India suggest some of the useful tips "How to utilize your basement"

HOME GYM

More and more people are health conscious now a day. Daily exercise is a routine part of their life. Age, money, male or female is not an impediment to it, but every professional cannot join a gym. In such eventualities to arrange a gym in home itself or to open a mini gym is a better alternative. You can use the idle basement for this purpose, but before opening mini gym there, ensure proper light and ventilation in it. Without proper ventilation one may develop trouble like dehydration and blood-pressure while exercising. For setting up a gym, you may consult a gym instructor to ensure proper placement/fixing various machines etc. purchased for it. Meanwhile, home gyms are also available in the market which occupy lesser space and ensures exercise of your complete body.

FUN SPACE

If there exists more than enough space in the basement, then you can utilize same for birthday party like functions or any other home functions, or may arrange a small concert also. For this purpose set a small stage in a corner and may place carpets or chair for sitting of audients in front of it. Thus, your basement is ready for religious functions like prayers, worship, kirtans etc.

WORK STATION

If you are a self-employed professional, then basement will prove a very useful place provided you use it properly. You may set-up your office in basement. It is in your home itself and realizes a separate office space also. If you are in a job like fashion design, then you can set up your work-station along with office.

CHILDREN ROOM

Children always demand a separate space for their toys and soft toys; therefore you can make the basement a play-station for children. Such a personal space for children, where they can keep all their toys according to their choice, apart from keeping a toys-rack in a corner, you can get prepared cartoon characters on walls. Spread a mat on the floor so that children's cloth may not be spoiled while playing.

HOBBY ROOM

Sometimes not only the children, home elders also need a separate room, particularly when he is any one-a painter, musician or a designer. Basement can be shaped as a hobby-room for these artists. This way, they could be able to prepare their art pieces in isolation separate from family

LIBRARY, ENTERTAINMENT ROOM

If you are fond of reading and writing, you can make your personal library in the basement. If you want to convert this part of the house into entertainment zone then you can get installed TV, Computer, home theater and also get written funky slogans on walls with colorful paint.

If your resident have basement or you happen to purchase house from real estate India. You can try this suggestion. But you can also try more by applying some creative ideas.

 

In the times to come, the real estate India market may undergo some such changes, after which while the mode of marketing in this area will be changed, the investment in property will not be a profitable deal. Now trends of investment in property market were also discussed during the meeting of an investors club recently.

As told by the general secretary of the club as well as a renowned advisor of tax and investment, Mr. Subhas Lakhotia that with the increase of FDI volume, the concept of pre-launch will be a matter of past. Simultaneously, annual return of 24-36% by way of investment to buy property in India will also be reduced.

In his opinion it may be the reason that the real estate India market will be flooded with money and it will reduce the difference in demand and supply.

As per the views of Lakhotia, bloc investment in real estate India may be better in changed scenario. He suggested that the whole investors should gather at one platform and invest in real estate collectively. In his opinion, investment in bloc deal of land in tier-III cities only may be beneficial that too by imposing a three years lock-in period.

 

Today the hottest topic is increase in rate of interest for home loan. Before increase in interest rates, the constant increase in property price was the main theme of the real estate India market. Now costly home loan over the increased price of property in India has troubled the buyers. A group of property market experts agrees that the costly home loan era will prevail for a longer period, whereas as per the views of the other group, the increase in interest rates may not continue for a long time. The government has adopted the traditional formula to control the rising cost by increasing the CRR that now does not look very practicable. The dearness cannot be controlled by removing the money form the real estate India market but it is necessary to increase availability of goods, many economists are also of the same opinion.

There are going to be several factors that are likely to pave the way for large scale capital inflow from FDI, private equity and real estate funds. The list of features includes chunks of large scale land acquired by some known names in the real estate India sector, government incentive for public private partnership models and high amount of bank finance.

The report further forecasts and estimated investment of approximately $396 billion for the housing segment alone over the next few years, with a yearly investment of $83 billion. Likewise, the expected investment for the commercial sectors is around $27 billion with an annual investment of $5 billion and retail with $13 billion (annual investment of $3 billion), resulting in a total investment of $435 billion. This indicates a good growth in buy property in India.

Standing for 91% of the overall real estate India activity in India, Housing sector alone acts as the principal growth driver. The nest biggest segment is commercial space, with 80% of the demand sprouting from mushrooming IT/ITes sector.

Real Estate India has seen a tremendous positive change in the last decade. Today, Indian construction industry enjoys a substantial presence in the world and has reached a niche where there is no going back. Escalating GDP, improving demographics, growing affordability, and rising impact of IT and ITes are some of the factors that are believed to have fuelled the growth.

The booming real estate India sector is all set to witness a cumulative investment inflow of around $435 billion in the next approaching years, says a report by Edelweiss Securities.

Further, data showcased by known property surveys have come up with results that the real estate India is all set to see an average annual addition of 2.3 billion sq ft in residential, 61 million sq ft in office and 25 million sq ft in retail space. This makes a total of 33% increase in total constructed area five years down the line.

 

At present, the government allows FDI in real estate India, but does not permit foreign institutional investment. It is, however, considering a proposal not to view FDI and FII as distinct investment flows while specifying an overall limit.

It is yet to permit foreign venture capital investors (FVCI) in the realty sector. To ensure that the concept of special economic zones (SEZs) did not distort the realty market, the RBI has classified lending to SEZs on par with commercial real estate, according it higher risk weight and provisioning.

The RBI allows ECB in real estate India projects involving integrated townships of 100 acres or more. In real estate India projects, a large portion of money is required for land acquisition, which is classified as working capital. But end-use restrictions like not allowing ECB money to be used for working capital take away its attractiveness.

Previously, only NRI's and PIO's were allowed to invest in the housing and the real estate India sectors. Foreign investors other than NRIs were allowed to invest only in development of integrated townships and settlements either through a wholly-owned subsidiary or through a joint venture (JV) company along with a local partner.

India fully opened FDI in real estate India in 2005. However, norms issued later made a minimum capitalization of $10 million for wholly-owned subsidiaries and $5 million for joint ventures mandatory. The government also imposed a minimum area requirement. 

The department of industrial policy and promotion had in March 2005 allowed FDI in real estate India in projects in a minimum area of 25 acres.

The finance ministry has allowed external commercial borrowing (ECB) in realty projects involving integrated townships of 25 acres or 50,000 sq m. However, the Reserve Bank of India has not yet notified it.

 Options are an alternative form of offer. A potential buyer offers a sum, an "option consideration", in order to effectively take a property off the market for a period of time. Option offers generally run anywhere from a few hundred to a few thousand dollars or rupees in real estate India and other, but higher or lower amounts are possible. Some options bind one party only, some are called "bilateral", requiring each to adhere to contractually specified conditions. Conditions involve contingencies around inspections, financing, and always have a time limit.

Every deal is a little different and, of course, if the option isn't exercised by the specified time limit, the optionee - the potential buyer - forfeits the money. Risky, but potentially rewarding, since you've effectively eliminated alternative bidders. One advantage to the optioner is the time to find a buyer for the property itself, then selling the option. This eliminates the need to pay for transactions costs, keeps debt low, etc. Do your homework, first.

To fill out the other part of your portfolio, nothing beats the "real" in real estate. Historically, buying and selling real property in India or other countries, or even long-term owning, has proven one of the most profitable, least risky investments available in real estate India sector and other countries. Observe carefully the words "least risky". That doesn't mean "zero risk" - there's no such thing in investing. Prices can always go up or down, relative to other goods and investment channels.

Be willing to get educated about the market and the law. Make purchases while minimizing costs like real estate India agent fees, repairs, interest rates, etc. Have sufficient cash and other liquid assets to be able to hold until the time to sell is right. Follow these guidelines and you'll never have any reason to regret making real estate investing a major portion of your portfolio

 

Any ethical professional will insist that the first rule of investing is to diversify your portfolio regarding real estate India and other Countries. Generally no more than 30% of available investment funds should be allocated to any one category. Stocks, bonds and other savings instruments usually form one leg of a many pronged platform. Direct commodity investing is a highly risky venture, usually safe only for the savvy investor who has time to closely monitor the market. Options, commodity oriented mutual funds and other indirect investments are less risky, but still far from wise for the average person.

So what else is there? For many, real estate investment is an essential part of a well-rounded portfolio.

If you want to include "paper" in your investment scheme, real estate India or other countries offers several opportunities. REITs (Real Estate Investment Trusts), options, property oriented mutual funds, and other mortgage backed securities are available in a dizzying array.

REITsof India or other countries are entities that invest in real estate India or their respective countries related assets, such as shopping centers, office buildings, hotels, and mortgages secured by real estate. REITs fall into one of three categories. Equity REITs, which invest in or own real estate like real estate India for India and make money for investors from the rents they collect. Mortgage REITs which lend money to owners and developers or invest in financial instruments secured by mortgages on real estate and Hybrid REITs which are a combination of the two. To qualify, a company has to pay 90% of its taxable income to shareholders every year and invest at least 75% of its assets in real estate and generate 75% or more of its gross income from investments in or mortgages on real property.

Investment in housing and property is beset with many uncertainties in the prevailing real estate India scenario. The investment and transaction decisions in this sector are characterized by uncertainties due to low level of disclosures and information.

 

Investment in property has always been known as lucrative, but due to lack of transparency in the property markets for proper valuation, potential investors exercise caution before taking the plunge. Real estate India also requires a huge amount of investible capital; hence professionalism would help bringing in confidence among players.

 

Discipline and better governance of the real estate India business would go a long way in a sector facing challenges from legal, taxation and other regulatory issues like the property tax and stamp duty structure, which create high cost of transactions.

 

Courtesy: TOI Dated 15/04/07

Improving the confidence level of both investors and consumers by bringing in fair practices through self-regulation and ultimately catalysing the growth of real estate India sector is of primary importance. Promoting healthy ethics in the housing sector and facilitating its orderly growth has become a major concern in the market.

 

Investment in real estate India also entails proficiently handling the whole process from property selection to home finance, attaining a right mix of properties in your portfolio as well as knowing when to exit from your investment. For a real estate consultant it is important to establish trust amongst his clientele like those who want to buy property in India and others, as a capable manager of their money by ensuring transparency and honesty in all the transactions.

 

Courtesy: TOI Dated 15/04/07

Real estate India has huge potential demand in almost every sector especially commercial, residential, retail, industrial, hospitality; healthcare etc which are part of property in India.

Commercial office space requirement is led by the burgeoning outsourcing and Information Technology Industry. The leaders of the IT/ITES world have set up or are setting up their centers in India. Estimated demand from IT/ITES sector alone is expected to be 150mn sq.ft. of space across the major cities by 2010. Real estate India are really looking forward to it.

In residential sector there is housing shortage of 19.4 million units out of which 6.7 million are in urban India.

The increase in purchasing power and exposure to organized retail formats has redefined the consumption pattern. As a result the country has experienced mushrooming of retail projects across the cities.

The main growth thrust is coming due to favorable demographics, increasing purchasing power, existence of customer friendly banks & housing finance companies, professionalism in real estate India and favorable reforms initiated by the government to attract global investors.

 

Foreign Direct Investment is encouraged and permitted, subject to certain conditions, in the following real estate India sectors:

• Hotel Development
• Tourism
• Hospitality
• Township development
• Developing Commercial Real Estate
• Built-up infrastructure
• Housing and construction projects
• Building Resorts
• Building Hospitals
• Building Educational institutions
• Building Recreational facilities
• Infrastructure projects: regional and local level
• Special Economic Zones (SEZ's)

 

So foreigner can take the advantage of these facilities available in real estate India sector

Gaurie Mishra &

Mayur Shekhar Jha

     New Delhi

 

ICICI Bank, India's largest private sector bank, is close to signing a partnership with US-based Development Innovations Group (DIG) for providing low-cost housing finance and also for micro financing solutions.

 

DIG, which has an international experience in providing low income housing finance, will partner with ICICI Bank in India.  While DIG will provide its expertise, ICICI Bank will be the financial institution that will disburse loans.

 

             "In this partnership, DIG will offer their expertise and run the organization to provide both low income mortgage finance and housing microfinance and we will provide financing, "said Nachiket MOR, deputy MD, ICICI Bank.

              

           The nature and scope of the tie-up is yet to be finalized and is yet to decide on the total amount of disbursements. Mr. MOR said, "ICICI Bank has the capacity to meet the available demand". So real estate India companies can expect good growth.

 

            The tie-up will provide housing finance of small amounts and shorter maturity, with no collateral. It will also disburse larger amounts with a longer maturity along with a collateral. DIG is a private, international firm providing innovative solutions in the fields of development finance, urban and community services, and fund management.  It works in developing and transition economies, and in post-emergency environments. This indicates the possibility of huge development of real estate India in near feature.

 

            With microfinance yet to take-off in India in a big way, it is one of the major issues that financial institutions are trying to address. ICICI Bank alone is looking to forge 500 more partnerships over the next few years in the area of micro-finance. Internationally, DIG partners with financial sector institutions, government agencies, donor organizations, NGOs, and the private sector. It provides development finance which includes both microfinance and housing finance, offers advisory services in infrastructure and also assists in the management of funds invested in profitable development finance institutions. This is a very good news for real estate India companies.

 

             DIG works with governments, regulatory authorities and the financial sector to build their capacity to meet the demand for mortgages, and to determine the feasibility of mortgage finance systems for the poor who like to purchase property in India.  In the field of housing microfinance, DIG provides market assessments, product design, systems and tools development training, design of guarantee facilities and advising regulators and policy makers.

 

                                                                                    Courtesy: E.T Dated 13/04/07.

Govt. is planning to give home loan at lower than market interest rates to first time home buyers.  While on one side the home loan interests are increasing constantly, Ministry of Urban Rehabilitation has brought out with the above proposal.  But home loan discount shall be given to some particular families and particular salary category of people to afforded buy property in India.

 

Ministry has proposed that the banks and housing finance companies may give a rebate of 1 to2% to the first time home buyers to enhance the condition of buy property in India. Urban Rehabilitation Minister Kumari Shailja has confirmed about this proposal. Shailja further added that it is our biggest worry to make available houses at a reasonable price to the urban people as a part of batter maintenance of property in India. She told that keeping this aspect in view, government is working on several strategies. To make available cheaper home loans to low income people is the part of our strategy.

 

An officer from the ministry told that the rebate so given by the banks and finance companies shall be compensated from the subsidy allotted to the central budget. The officer said that the government will have to give heavy subsidy in lieu of the proposed rebate.  Presently the concerned ministry is studying the various aspects of this proposal as well as in property in India.

L&T Urban Infrastructure, a unit of L&T involved in developing real estate India and urban infrastructure across the country which will improved the present condition of property in India, and city-based engineering and construction company Arun Excello have teamed up to build a mega integrated township in the city for the better . The project is slated to cost Rs 1,500 crore and will be set up over 78 acres in phases at Vela cherry in south Chennai. As joint equity holders, the two real estate India companies will develop the entire project, called Estancia, comprising a residential zone with 2,000 apartments a club house, an IT park, a serviced apartment and a hotel, apart from a school which is a part of development of property in India.

 

 

 

Courtesy: ET Dated 08/04/07

Real Estate India took a turn after the year 2000 when interest rates fell making it more affordable to buy property in India.  With increased interest in India by other countries and their setting up operations, demand for real estate India both in residential and commercial sectors increased rapidly.  By the year 2004, the interest rates had touched 7% and were perhaps the peak year for real estate companies.  A lot of supply was released in the market which investor and customers lapped up.  This trend has continued in 2006.  The year has seen a slow down in the residential segment owing to hardening of interest rates and increased inflation.  It is expected that 2007 will be a difficult year for the real estate industry.

 

  

  

                           

                                                                                             Courtesy: H.T.  Dtd.29/03/07

Real Estate India is still largely a single owner driven business.  The foreign companies' interest in entering in real estate India market with JV collaborations, however, is a recent development.  Typically property in India industry never attracted good talent compared to other industries because of the reluctance of the promoter to invest in human resources.  This is slowly changing owing to customer needs, preferences and their demand for more accountability from the builder.  

 

 The future of real estate continues to be bright with GDP expected to be around the 8% mark for the next 3-5 years and is only a matter of time when interest in real estate again becomes a buoyant since it is a sentiment driven industry.  It is expected that the industry should pick up in the second half of 2007.  Tier-II and III cities continue to attract interest and improved valuations.