Gudi Padwa and its Impact on Indian Realty Sector.

Gudi Padwa, a festival which earmarks new beginnings and new hopes to everybody’s life. Hence many builders announce their new projects at this point of time taking into consideration the sentiments of the local market. The festival is widely celebrated in the state of Maharashtra. As for common people in India, a home is a priced possession and they do not sell and buy residential properties often. They wait for an auspicious date to such transactions.

Keeping this in mind, realtors at Pune has organized Sakal Pune Property Show named as Sakal Gudi Padwa Grihotsav 2012. Across the just concluded quarter, residential prices in the outskirts of Mumbai have seen a positive slide. With the Union Budget 2012 giving due consideration to the loans of affordable housing projects coupled with the positive feeling related to the festival, buyers and sellers expect to strike a great deal during this year’s Gudi Padwa.

The buyers mainly constitute the New Urban Family Sector. Moreover, during this festive season, realtors juxtapose the properties with attractive discounts and freebies. But with these factors only, nobody can lure customers today. They are more oriented towards the location of the property, the pricing and the quality of construction.

The recent years were not so good for real estate sector. The ever rising inflation rates and interest rates kept the buyers at the bay. But the recent decision of the RBI to cut CRR rates gives little bit of hope to the sector.

However real estate experts suggest that the sentiments related to a festival only cannot trigger the sector. But it is decisive in getting the real estate market on the right track after a gloom. Moreover, traditionally Gudi Padwa means birth of bhoomi and bhoomi is everybody’s shelter. We can hope and look forward for bright days for real estate sector ahead with this auspicious festival.

Stamp duty hike report in Maharashtra for the Real Estate Sector.

Shares of real estate companies with significant exposure in Mumbai slumped in a weak market today after media reports surfaced that the Maharashtra government proposes to hike stamp duty for properties.

Shares of realty players like India Bulls, Oberoi and HDIL today slumped as much as 6 per cent after reports that the state government is planning to hike stamp duty by as much as 160 times.

India bulls Real Estate slumped 4.53 per cent to a low of Rs 65.25, Oberoi Realty tanked 2.32 per cent over its previous close to Rs 250 and Housing Development and Infrastructure Ltd was down by 6.64 per cent to Rs 89.15 on the BSE.

If the hike comes into effect, it will increase prices of both residential and commercial leave-and-licence properties, by a huge margin, market analysts said, adding that it will affect the already-sluggish Mumbai real estate demand.

“This news is going to be negative and stock prices of realty companies who have exposure in Mumbai took a hit. The cost of property in Mumbai will move up it will worsen the situation as there are already very few takers at the present interest rate regime,” Ashika Stock Brokers Research Head Paras Bothra said.

Moreover, weakness in the broader market also battered these stocks to some extent, market analysts said. The 30- share benchmark index Sensex was trading at 17,113.62, down 248.12 points at 1321 hours.

According to media reports, Maharashtra government proposed to hike stamp duty on leave-licence to 0.1 per cent on market value or 1 per cent of the average annual rent or deposit paid, whichever is higher, for residential properties.

For commercial properties, the duty for lease agreements over 60 months is 0.4 per cent.

This is a whopping hike from the previous fixed amount of Rs 25,000 for residential and Rs 50,000 for commercial properties for 60 months.

New DTC will be implemented from 2011

On June 15, the revised Direct Tax Code (DTC) was released which has got approval now. This new DTC will be implemented from 2011. The aim of this revision is to simplify the existing income tax laws. There are some changes proposed in the code for the real estate sector too which go as follows:
Taxation policy for Rental Income Originally, according to DTC, the gross rent was to be calculated at a presumptive rate of 6% of either the market value, or acquisition or the cost of construction, whichever is higher. But the revised DTC has proposed that actual rent received or receivable for the financial year should be the basis of calculation.
Home Loan Interest Policy:Originally, it had been proposed to do away with the tax deduction on the interest paid on home loans. But, as per the revised DTC, tax deduction on the interest paid on home loans up to Rs 1.5 lakhs for purchase or construction will continue.  This revision is quite encouraging for the buyers to buy residential properties.
Also, the property which has not yet been let out will be kept out of tax calculations. Thus, there will be no deduction against tax or interest.

Andhra’s Realty Sector Grows

Delhi Properties - Real Estate India - Unitech Location
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The state of Southern India has shown a demand in Real Estate properties over the last few months which is a good news for the people of the trade.

The Realty Sector in Hyderabad, Andhra Pradesh has shown sudden upsurge after the recent political turmoil it went through. The demand for both, commercial and residential properties have registered an increase.

The trend is more evident in Tier I and tier II areas specifically; making them high demand markets.

Prabhakar, a Real Estate Sales Officer had this to say on the topic, “Market is improving as of now because of these developments happening in the Hyderabad areas like outer ring road area, Infosys campus and many other areas, so this is the right time to invest and to buy a customer.”

Even the prices of the realty sector have improved as the customers feel Hyderabad is the right place for investment thus increasing the sales.

Raj Kumar, Marketing Manager in a Real Estate firm puts forth, “NRIs, Doctors and Information Technology (IT) people are coming forward for the investment and even some of the central government employees are also coming forward. As you know, now a days comparing with the facilities what we are giving on what rates we are giving, people are seeing benefits and on these bases they are coming forward for investments and showing interest.”

The sector is one of the biggest in terms of number of employees working in the country. It is anticipated that in the next decade the realty sector will grow at a rate of 30% every year. This is bound to attract foreign investors with as many as 30 billion US dollars along with a number of IT parks as well as residential townships being constructed across our country.

The RBI’s Realty Indices For Ahmedabad

Ahmedabad happens to be one of the 11 countries for which the reserve bank of India would prepare one index for commercial and one for residential properties. This is done to curtail speculations and expected realty bubble burst in the coming years. The RBI report on asset price monitoring system (ASMS) advised to formulate these indices two months back.

Reserve Bank of India, Kolkata
Photo by seaview99

Many different countries such as Canada, France, us refer to these indices for realty prices.

The report says, RBI should start compiling a realty index and update it every quarter. To begin with, the report has proposed Mumbai and Delhi where property prices have skyrocketed to record levels. After these cities RBI would add 10 other cities which include Greater Chandigarh, Hyderabad, Chennai, Bhubaneswar, Pune, Jaipur, Kolkata, Lucknow, Bangalore and Bhopal.

The real estate price index once devised would become the primary index that could be perused by investors to gauge the performance of companies that are listed in the realty sector. The index can also help the investor analyze how real estate is performed in comparison to stocks and bonds. It can also provide information on the risk involved in a particular investment and returns that can be achieved from it.

The ASMS report has defined the deficiencies this indices would help overcome.

HNIs Going For Commercial Properties

Cornhill, Shanghai Commercial Bank
March 20, 2010

You need to give a second thought if you believe that commercial properties are purchased only by companies to aggrandize their business plans. Forthwith, money is put into commercial properties by High Net worth Individuals (HNIs) too.

In the past, the New Age Indians were just confined to investing in residential properties, but it does not goes for now-a-days. The trend is growing fast. According to the CMD of PropEquity, Samir Jasuja ,a large no. of HNIs will look ahead to buy commercial properties if banks do not show aversion to giving loans to individuals in order to invest in commercial properties. He added “the fact that banks do not show any positive response to sanction loans to individuals in order to purchase commercial properties is not a secret anymore. The status is same all over the world. That is why you cannot compel only our banks.”

The reason behind banks avoiding loans disbursal to individuals in investing in commercial properties is that the rate of default is very high in this segment as compared to residential properties. Thus, banks joyfully give loans for residential properties while they are not that interested when it comes to loans for the investment in commercial properties.

The director of Century 21 India, Anu Gupta suggested that HNIs should make investments in commercial properties as investing in them could prove to be highly beneficial as far as their return is concerned. The underlying reason would be that while they could go for bank loans up to 75-80 % for such purchases, the compensation of such loans could be set off against the rental incomes from such commercial properties. Therefore, as the retail/commercial industry grows, by investing a portion of the full price, an investor can gain a high-value asset, which will not only give maximum return (thanks to the set off provision in IT against rentals), but could see a significant appreciation over a period too.

Realty prices unlikely to rise in recent future

Real estate prices are unlikely to go up in the next six-months and the industry may witness huge volumes of sales of residential properties.
According to Mr. Niranjan Hiranandani , MD of Hiranandani Group of Companies, “There is a huge improvement in real estate and prices will not increase, at least for the next six months.
Further he said that in the last two months, they have seen sales of almost eight thousand apartments in the Mumbai region alone, spread in all sectors of the real estate market, but especially focused on the lower segment. But they see across-the-board increase in demand.

Update yourself with recent realty trends

Real estate is known as growing industry. That is why, change is the only constant thing or I must say that the change is the only predictable thing for this industry. We got the know the prediction that real estate will be on peak for residential properties and in the very next week we hear that investing in commercial properties are good for future. Such trend may create dilemma for the prospective buyers and investors.
The best way to update yourself with recent and upcoming trend is to keep your eyes on reliable websites. Information technology is playing very important role in providing information on time, which is needed before taking investment decision.

Mumbai is most preferred property investment destination

The financial capital Mumbai now ranks as the most preferred destination for investing in properties, while Chennai has replaced Bangalore.

The survey, “Trend in residential space across top cities in the current scenario” ranked Mumbai as the most preferred destination to invest in property while in south, Chennai is in the first place for property investments, overtaking Bangalore.

Cities like Patna, Nasik, Tiruchirapalli and Madurai have also become choive destinations for property investments, the survey said.

It said 60 percent of respondents felt interest rates for home loan would come down further in the coming months, while 40 percent evinced interests on properties with an area between 500 to 1,000 square feet.

More than three thousand people from the metros and other cities, including Pune, Ahmedabad, Thane, Coimbatore, and Vadodara participated in the survey.

“Market sentiments are reviving and people are ready to invest. Based on our survey, more than 60 percent of customers are looking at buying residential properties in the next six months. They also have a hope that interest rates on home loans will soon come down”, Consim Info Founder and CEO Murugavel Janakiraman said.