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J&K may be first to bring real estate under new regime

SRINAGAR: Jammu & Kashmir may be the first state in the country to bring real estate within the ambit of goods and services tax (GST) when it enacts laws to integrate its indirect tax regime with other states, state finance minister Haseeb Drabu indicated. While the Centre and the states had amended the Constitution to move to GST, J&K will have to enact its own laws as it has a special dispensation under the Indian Constitution.

Drabu said he would move the required legislation in J&K assembly to be part of GST and ensure the benefits accrue to the state. The shift is expected to help the state garner around Rs 2,000 crore-worth additional resources to add to its current kitty of around Rs 11,000 crore and expand the tax base by close to 15%.

While the GST Council has agreed to subsume several taxes, including central excise, state VAT, service tax, central sales tax and octroi, it has kept around a third of state revenues outside the GST ambit. Alcohol, petroleum and real estate are three items on which GST will not be levied.

"We were the first to do many things and we may be the first to include real estate," Drabu told TOI ahead of the crucial GST Council meeting here. J&K has moved to a January-December financial year, was first to abolish the distinction between plan and non-plan spending and is now working on rolling out universal basic income, something that has been discussed in the latest Economic Survey.

Drabu said his government proposed to enact laws that would allow for levy of integrated GST, central GST and state GST amid indications that audit powers may not be split between the Centre and the state in the same way as it is done in the rest of the country.

By: Sidhartha & Rajeev Deshpande

Courtesy: http://timesofindia.indiatimes.com published on May 18, 2017

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Real estate companies waiting for clarity on GST, new law: Study

Property consultant Knight Frank India and FICCI today released its real estate sentiment index, based on a quarterly survey of key supply-side stakeholders, which include developers, private equity funds, banks and non-banking financial companies (NBFCs).

Sentiment in real estate sector has improved post demonetisation but the industry is still in 'wait and watch' mode due to lack of clarity on reforms, including the new real estate law and GST, according to a study.

Property consultant Knight Frank India and FICCI today released its real estate sentiment index, based on a quarterly survey of key supply-side stakeholders, which include developers, private equity funds, banks and non-banking financial companies (NBFCs),

"Post the policy intervention by the government in November 2016 that shook the real estate sector, the current sentiment score (53) has seen a substantial uptick from the drastic fall seen in Q4 2016 that had pushed the score to 41, which is the worst in the last three years," the report said.

"This substantiates the transitory impact of the demonetisation policy initiative," it added.

The "wait and watch mode” is still prevailing in the sector in the expectation of clarity on various policy measures by the government in the next six months.

The stakeholders are not very clear about the impact of the changing environment on account of policy interventions like Real Estate (Regulation & Development) Act, 2016 (RERA), Benami Transactions (Prohibition) Amendment Act, 2016 and Goods and Services Tax (GST).

The real estate sector is facing a multi-year slowdown due to poor demand because of high prices. The sluggish demand has resulted in liquidity crunch to developers and huge delays in delivery of projects.

Source: PTI

Courtesy: http://www.moneycontrol.com/ published on May 26, 2017

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Real estate deals likely to close 20-255% lower than pre-RERA, pre-demonetisation prices

Mumbai: The Real Estate Regulation and Development Act (RERA) seems to have had an impact on sale of real estate in Mumbai as the City and Industrial Development Corporation (CIDCO) land auctions in Navi Mumbai last week witnessed 40 per cent lower bids than in November.

Considering RERA having limited the developers' capacity to buy land with advance payments from customers, land prices in Mumbai Metropolitan region have started falling, a moneycontrol report said.

The current bids varied between Rs 65,250 and Rs 96,000 per square metre in comparison to Rs 1.15 lakh and Rs 1.25 lakh in November, before the demonetisation drive.

CIDCO is selling six commercial and residential plots covering an area of 6,000 sq m in New Panvel. The Neelsiddhi Group purchased three plots, two at Rs 65,250 per sq m and one plot at Rs 76,000 per sq m. The Millennium Group acquired one plot at Rs 80,000 per sq m, while two plots went to the Satyam Group at Rs 77,000 per sq m and Rs 96,000 per sq m, the report said.

Contesting the possibility of a post-demonetisation effect solely driving the lowered bids, the report said that as developers made payments to CIDCO through cheques, RERA was most likely the primary cause.

The stagnant period is expected for another six months owing to RERA and demonetisation spillover, industry experts predict.

Approximately 25,800 residential units were launched in the first quarter of 2017 from the country's top eight cities, witnessing a 16 per cent decline from the corresponding quarter last year.

Real estate launches have seen a steady quarter-on-quarter decline for the last four quarters corresponding with the announcement of Real Estate Regulatory Act (RERA) 2016 in March last year and the demonetisation drive in November 2016, the report said.

Launches in the residential sector have declined by about 8 percent during the period April 2016- March 2017 compared to the same period in 2015-16. In Delhi-NCR, new launches declined by almost 50 per cent, in Kolkata it declined by 29 percent and Bengaluru by 24 percent, the report added.

Courtesy: http://www.timesnow.tv published on June 06, 2017)

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Piramal Finance lends Rs 1,100 crore to real-estate developer Embassy Group

This has been done across residential, commercial projects in Bengaluru, Chennai and Hyderabad

Piramal Finance (PFL), the lending arm of Piramal Enterprises, on Wednesday said that it has financed Rs 1,100 crore to Bengaluru-based Embassy Group. This funding has been done sequentially across both residential and commercial projects in Bengaluru, Chennai and Hyderabad over the past six months.

Piramal first gave Rs 360 crore to Embassy Residences in Chennai — a premium residential project spread over 25 acres with 0.3 million square feet (sq ft) of built-up area and followed up with an investment in Phoenix-Embassy, which is a joint venture between Embassy and Phoenix Group of Hyderabad.

The JV is developing 1.5 million sq ft of grade-A commercial space in the financial district of Hyderabad with a potential to develop a further 4 million sq ft. Subsequently, PFL has provided Rs 650 crore of growth capital to the Embassy Group in Bengaluru.

The Embassy Group is one of India’s largest commercial real estate developers that has delivered 30 million sq ft of marquee commercial office space and 6 million sq ft of premium residential developments. The Group has a pipeline of 17 million sq. ft. of commercial developments in Bengaluru, Hyderabad and Chennai.

PFL Managing Director (MD) Khushru Jijina said, "We are pleased to have extended our relationship with the Embassy Group and look forward to a long and mutually beneficial association. I have always admired Jitu Virwani’s vision, track record and execution capabilities and we are happy to provide them with customised financial solutions as they scale up their presence across both residential and commercial segments.”

Jitu Virwani, chairman and MD, Embassy Group said, "We are delighted to be working closely with a large diversified conglomerate like the Piramal Group, which is known for structuring capabilities and quick turnaround time. We look forward to leveraging their capabilities as we partner with them on our growth capital requirements going forward.”

Courtesy: http://www.business-standard.com published on June 07, 2017

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Now, affordable housing is driving home loan growth

MUMBAI: After years of selling pricey luxury homes that boasted amenities like signature golf courses and jacuzzis, builders finally seem to be moving toward modest apartments to suit middle-class pockets.

A clear indicator of this is the sharp uptick in home loans driven by sales of houses costing below Rs 30 lakh.

The cue for builders to change tack came from this year's Budget, which offered tempting tax and interest concessions for the affordable housing segment.

This year, almost half of all bank credit comprised loans to housing, given the almost non-existent corporate loan demand.

According to HDFC chairman Deepak Parekh, the corporation's January loan applications rose 21% over December. February applications were another 24% higher, and March was 44% more than the previous month.

"What is driving this growth is not high-value property but affordable homes, considering that the corporation's average loan size is Rs 25.6 lakh. This is the first time in several quarters that HDFC's average loan size has dropped from Rs 26 lakh,'' he said.

Property experts said Ahmedabad was the largest contributor of such homes (costing less than Rs 30 lakh), followed by Pune (up to Rs 50 lakh) and some areas in the Mumbai Metropolitan Region.

Housing finance providers are now expecting the affordable homes segment to grow at 25% given the subsidy under the Pradhan Mantri Awas Yojana. The scheme, available until December 2017, provides 4% subsidy on home loans of up to Rs 9 lakh for those with an income of up to Rs 12 lakh per year, and 3% subsidy on loans of up to Rs 12 lakh for those earning up to Rs 18 lakh per year.

Pankaj Kapoor, MD of Liases Foras, a real estate research firm, said on a quarter-on-quarter basis, maximum sales growth (31%) was reported in the affordable segment (properties priced below Rs 25 lakh), while the ultra-luxury segment witnessed a 4% decline in sales. The October to December 2016 period saw a slump following demonetisation, but demand between January and March 2017 was healthy.

Developer Niranjan Hiranandani said sales at his Thane project for flats below 600 sq ft had been good. "There will be a further surge when more projects start hitting the market and people start getting the tax benefits,'' he said.

Mortgage company Indiabulls Housing told investors that for a borrower seeking Rs 24 lakh, the effective rate he or she will pay works out to only 0.42% after factoring all tax breaks and subsidies.

"Effective home loan rate in the mid-income affordable housing segment is at near-zero levels. With rental yields at 3.2%, home ownership is very affordable and much cheaper than renting a house," a company official said.

According to Subhash Chennuri, senior consultant with consulting firm FSG, more finance is being made available for housing units which are as low or even below Rs 12 lakh. There are now a range of housing finance companies targeting customers who were traditionally not getting loans. "Traditionally, credit evaluation used to be all about documentation, and primarily those with salary slips and IT returns could avail a loan. Now some firms are able to do credit assessment using alternative methodologies or mechanisms for those in the informal segment," he added.

According to Harshil Mehta, CEO, DHFL India, efforts announced by the government under PMAY for economically weaker sections (EWS) and low-income groups to boost mass housing in peripheral areas with attractive interest subventions have helped a great deal. "These drivers, along with the industry's efforts to create awareness, are helping expand financial inclusion. The affordable housing segment is likely to grow at a faster pace than industry at over 25%," he added.

The PMAY scheme comes on the back of the Union budget proposals. Besides, developers who build affordable homes are exempted from paying taxes on their profits for five years starting 2016 instead of three years. These are for 300 sq ft homes in the four metro cities and 600 sq ft in non-metro areas.

A report by the investment bank CLSA states that in addition to interest subsidy, the move to allow 90% of provident fund money for home purchase is spurring demand. "While growth in the prime home loan segment could witness moderation, the affordable housing segment is likely to grow at a faster pace," said Rohit Inamdar, group head, Financial Sector Ratings.

By: Mayur Shetty & Nauzer K Bharucha

Courtesy: http://timesofindia.indiatimes.com published on June 11, 2017

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Post RERA, Mumbai among 8 top cities to see dip in residential project launches, says report

As the real estate industry grapples with the new Real Estate Regulatory Act (RERA), 2016, regulations, Residential Project launches have declined by about 8 per cent over the last one year.

Residential Project launches across eight top cities, including Mumbai, Delhi-NCR, Bengaluru and Chennai, have declined by about 8 per cent between April 2016 and March 2017 compared to the same period a year ago, as the real estate industry grapples with the new Real Estate Regulatory Act (RERA), 2016, regulations, said a report by property consultants Cushman & Wakefield.

RERA was announced in March 2016. According to the report, at 25,800, the top 8 cities saw a 16 per cent dip in residential launches from the corresponding quarter. “A closer look at the trend indicates that launches have seen a steady quarter-on-quarter (Q-o-Q) decline for the past four quarters, corresponding with the announcement of the Real Estate Regulatory Act (RERA), 2016, in March last year and the demonetisation exercise in November 2016,” said the report.

The share of affordable segment in total launches improved to 30 per cent in April 2016 to March 2017 compared to 25 per cent in the same period in 2015-16. The launches in high-end and luxury segments have reduced to 11 per cent from 13 per cent in the same period.

“Launches in the residential sector are expected to remain restricted over the next two-three quarters as developers will be making intrinsic changes to their business structure, operations and marketing strategies to comply with the RERA norms. Consumers would continue to remain restrained in the first half of the year. Further, with mild change in end user sentiments due to news of downsizing in the IT / ITeS segment, the sales velocity is expected to reduce,” said Anshul Jain, managing director, India, Cushman & Wakefield.

“A gradual improvement in buyer sentiment is expected towards the second half of 2017 as the impact of real estate reforms will begin to play out in the market. Capital values that are already reduced in selected locations within markets such as Delhi-NCR, Bengaluru and Mumbai, will continue to remain under pressure in the coming quarter as the markets readjust in the post RERA and GST regime,” Jain said.

Prices have already declined in cities like Delhi-NCR and Bengaluru and select markets in Mumbai during the first quarter of 2017. Developers are now offering several lucrative packages and incentives to close deals for genuine buyers. They have launched a higher number of subvention schemes like paying 5 per cent now, 95 per cent on delivery and some developers are even offering assurances of compensation/refund of difference, if prices decline in future.

By: Express News Service

Story courtesy: http://indianexpress.com published on June 10, 2017

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Home buyers, wait for GST rollout on July 1. Here’s why

After GST is implemented, a number of hidden and cascading taxes will be removed, which will help buyers, says experts.

Is it a good time to buy a house? This is the perennial question on the minds of homebuyers. But this question assumes significance as India moves to a new indirect tax regime, the Goods and Services Tax (GST) from July 1.

Experts say that buyers will benefit if they buy houses in projects launched post July 1. Though a 4.5% service tax is being replaced by a 12% GST, the advantage is that a number of hidden and cascading taxes will be removed under the new regime. Developers will also get several tax credits under GST, which experts believe will make projects launched post July 1 comparatively cheaper.

Value Added Tax and sales tax are not reflected on the invoice in most states when a consumer buys a house, but are added to the cost.

“The heavily taxed real estate sector welcomes a single stable 12% GST rate, inclusive of the value of land and with full input tax credits,” said Rajeev Talwar, CEO, DLF and chairman of National Real Estate Development Council (NAREDCO).

But these tax credits will not be applicable to projects that are under-construction, nearing completion or ones that are ready.

To allay fears over whether developers will pass on the tax credit benefits to consumers, the government has proposed anti-profiteering measures.

Many developers are offering pre-GST discounts but experts warn against them as they are allegedly ways for builders to collect money and clear dues. Reducing inventory through deep discounts is also a motivation for developers.

Builders in Noida and Greater Noida are advising existing buyers to clear their remaining property dues before July 1 to avoid a 12% GST and pay 4.6% service tax, instead.

Experts warn against such claims.

“The government has introduced anti-profiteering clauses to ensure the input tax credits that builders claim will be passed on to buyers of houses who get possession after July 1. The expectation is that the builders will extend a discount on the amount due from buyers to protect them against a 12% GST,” said Amit Bhagat, partner, indirect taxes, PwC India.

But experts and developers are divided on the impact that GST will have on the real estate sector.

“Confusion persists over the impact of GST on the different segments of housing such as luxury and affordable. But we are working closely with the government and are hopeful that initial hiccups are dealt with out once GST is implemented,” said Manoj Gaur, MD, Gaursons and vice-president of CREDAI (National). The 5-8% stamp duty charged during registration of a house will continue to be levied under GST, but developers want clarity on it.

While developers are cheering the unified tax regime that will replace the plethora of state and central levies on realty, many said that due to multiple layers of GST on land and raw materials, project costs could escalate.

By: Suchetana Ray
Courtesy: http://www.hindustantimes.com published on June 15, 2017

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Six Indian cities in top 10 realty investment spots in Asia-Pacific

Real estate investment volume in the region is expected to hit $611 billion this year

Six Indian cities — including Hyderabad, Bengaluru, Pune, Mumbai, Delhi and Chennai — have found place in the top 10 emerging property investment destinations list for the Asia-Pacific.

“Most global investments this year will be made in commercial office assets. Markets in Bengaluru, Chennai, Delhi NCR, Hyderabad, Mumbai and Pune are well placed to outperform other cities from emerging economies in the Asia-Pacific,” said a report titled ‘Betting on Asia Pacific's next core cities,’ by property consultant Cushman & Wakefield.

Limited investment opportunities in safe haven core markets of Asia-Pacific have prompted investors to turn their attention to secondary and tertiary markets and even to non-core property types, said Cushman & Wakefield.

The consultant used a proprietary tool, strategic location indicator and selected the next core and emerging markets in the region that will offer investors the opportunity to tap into their long-term growth fundamentals, which will become increasingly viable due to sustained reforms.

Siddhart Goel, senior director, research services at Cushman & Wakefield, said: “Asia-Pacific remains a very viable investment target for global capital. After entering in 2005 to 2008 and having learnt many valuable lessons since, global investors are well equipped to take advantage of the potential that Indian real estate markets offer. The country is firmly on track to become an economic powerhouse, with strengthening GDP (gross domestic product), better business environment and investor-friendly policies”.

Goel said that the developments have resulted in net absorption across the top eight Indian cities to remain in the range of 32-35 million square feet in the last three years even as the share of the IT-BPM sector in commercial office leasing has steadily gone down from 65-70 per cent to 52-55 per cent during this period. “Within APAC, India is expected to continue contributing highly to the total office demand.

Consequently, global investors are increasing their capital outlays substantially as they are confident about the long-term prospects of the Indian economy in an environment of increasing transparency and accountability backed by policy reforms such as RERA, REITS, GST, Benami Transactions Act, etc,” he said.

What’s ahead in APAC?

Cushman said according to its ‘The Atlas Summary 2017’ report, real estate investment volume in the Asia-Pacific is expected to hit $611 billion this year. A total investment value of close to $136 billion in the region in the first quarter of this year, a record quarter high, and is a good indicator of health of investment in real estate in the Asia Pacific region. Pending any unforeseen circumstances in the months ahead, a positive momentum is expected to continue making a banner year for real estate investments in Asia Pacific.

By: Raghavendra Kamath
Courtesy: http://www.business-standard.com published on June 15, 2017

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Delhi's CP 9th most expensive commercially

Hong Kong (Central) is the world's highest-priced office market, London's West End comes second

Connaught Place in New Delhi has been ranked the ninth-most expensive prime office market in the world -- down from seventh last year - with an occupancy cost of $153.89 per square foot per annum, according to a survey.

According to the bi-annual Global Prime Office Occupancy Costs Survey of US-based CBRE, Mumbai’s Bandra Kurla Complex (BKC) moved one notch down from 19th to 20th while the CBD (Central Business District) of Nariman Point, also in Mumbai, ranked 33rd on the list of the top 50 most expensive office markets in the world.

Global prime office occupancy costs include rent, in addition to local taxes and service charges for the highest-quality, prime office properties.

Hong Kong (Central) became the world’s highest-priced office market with an occupancy cost of $302.51 per sq foot per annum. London’s West End comes second.

Asia continues to dominate the list of the world’s most expensive office locations, accounting for seven of the top 10, according to the survey.

Hong Kong (West Kowloon) at $190.02 per square foot and Beijing (CBD) at $183.10 per square foot featured among the top five most expensive markets. Apart from New Delhi (Connaught Place), Beijing (Finance Street), Tokyo (Marunouchi/Otemachi), and Shanghai (Pudong) also featured on the top 10 list.

Global prime office occupancy costs rose 1.9 per cent year on year, which is lower than the growth rate in the year ended January-March 2016 (2.2 per cent). This was largely attributed to the slowdown in year-on-year growth in the Asia-Pacific (1.2 per cent); and Europe, the Middle East (West Asia) and Africa (0.8 per cent). On the other hand, occupancy costs in the Americas increased by 3.6 per cent year-on-year.

The top 10 list remains largely consistent, reflecting the strength of these global gateway cities in attracting and maintaining a successful occupier base.

Anshuman Magazine, chairman (India & South-East Asia), CBRE, said: “Despite the fact that Connaught Place has a limited supply of prime office space, its location in the heart of India’s capital, coupled with great infrastructure and connectivity to other parts of the city, makes it an ideal location for any business to be in. With India’s commercial real estate segment continuing to do well, prime locations across the country including Connaught Place, Bandra Kurla Complex, and Nariman Point continue to witness demand for prime office space.”

While occupancy costs continue rise steadily, coupled with low vacancy levels and a limited supply, the commercial office segment is witnessing a strategic shift. Today’s occupier, in India and around the globe, is expecting their office space to have the latest technologies and amenities in the market, according to CBRE.

"While actual office spaces are shrinking, these amenities are growing to include virtual networks, videoconferencing, and cloud storage. Going forward, technology in the workplace will define how much a corporate’s employees need the office to reach their targets. This in turn will impact the demand for office space and subsequently the associated occupancy costs," it said.

CBRE tracks occupancy costs for prime office space in 121 markets around the globe. Of the top 50 most expensive markets, 18 are in the Asia-Pacific; 20 in Europe, the Middle East and Africa; and 12 in the Americas.

By: Raghavendra Kamath
Courtesy: http://www.business-standard.com published on June 17, 2017

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