How the 2016 Budget Will Influence the Affordable Housing Sector in India

For a large part of the Indian populace, an owned home is a distant dream. Some estimates claim a demand of 22 million houses and growing. The affordable housing segment (less than Rupees 50 lacs) comprising the bulk of this market is expected to get a huge boost following budgetary announcement of sops. Let us now examine in detail how the budget will influence consumers, investors and developers, and help revitalize the affordable housing sector in Indian real estate.

2016 Budget India

Win-Win for All Stakeholders

These measures along with an additional tax benefits on interest payments for individuals are aimed at increasing attractiveness for real estate consumers, investors and developers. These steps will help revive demand in the sluggish property market and increase economic activity.

For consumers, the budget aims to induce the first time buyer to purchase his or her house and create a provision of an additional deduction for interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned in 2016-17. However the house cost should not exceed Rs 50 lakh in this case.

The budget also has good news for investors, apart from the increased attractiveness of investing in an under construction project. Real Estate Investment Trusts (REIT’s) can now safely purchase completed rent bearing commercial and residential projects, and expect to generate good rental yield. Globally REITs provide fixed income options to investors and help them invest indirectly into such big ticket rent bearing real estate assets. This will now become a reality in India. The budget exempts REITs from dividend distribution tax (DDT) which is their primary channel of paying back their investors.

2016 Budget India

Builders and developers currently reeling under the double whammy of declining sales and huge debt will benefit with 15-20 per cent upside on profits after paying the MAT. Builders have till now been focussing on the premium segment which though small, was profitable. These players will now be incentivised to shift focus to the low cost segment to avail the benefits outlined in the budget, which include a hundred per cent tax deduction for profits on projects building homes up to 30 square metres in the four metro cities, and 60 square metres in other cities, approved between June 2016 and March 2019.

Also, construction for any government scheme for houses up to 60 square meters would also be exempted from service tax. However, to avail these benefits, developers will have to expedite construction and ensure that projects are completed within three years from the date of approval. The budgetary proposals will also make it easier for the builders to access the much needed capital from foreign and domestic investors by showing them the expected Return on Investment (ROI).

With all of these proposals and improvements to the tax structure, the government hopes to turbo charge the housing & construction sector which in turn translates into huge gains in employment and economic activity.

However, there are a few challenges which remain to be sorted out. The industry now has to work with the state governments to convince them to increase density norms to achieve 30 square metres and 60 square metres of housing and also introduce single window clearances for projects to be completed in the mandatory three year time frame. Overall, the industry is optimistic that this budget kick-starts the recovery process of the real estate sector by boosting activity in the affordable housing sector.

6 Crucial Tips for NRIs Investing in Indian Real Estate

Majority of the world’s millionaires owe their wealth to real estate which has either been acquired or inherited by them. For any individual, real estate provides the potential to generate returns by both capital appreciation and rental yields.

Non Residential Indians (NRI’s) holding Indian passports, unlike foreign origin people, hold similar rights as Indian residents in property ownership norms under FEMA rules. They can invest and own Land in the form of Residential and Commercial units, except forests, or agricultural land. Smart NRI’s have taken advantage of these rights and favourable exchange rate differentials to buy properties for their investment potential and sometimes a future retirement home.

6 Crucial Tips for NRIs Investing in Indian Real Estate

However, it’s not always smooth sailing for them. Stories are around of NRI’s falling prey to wrong property investment decisions including fraudulent ones. Real estate, like all financial investments require proper due diligence on the part of the buyer. Here are some tips for the discerning NRI investor who wants to invest in the Indian Real Estate Market:

  1. Purpose: NRI’s are advised to understand their risk appetite and invest in Indian Real Estate with a clear purpose. If its returns that they are interested in, they can get direct exposure by buying real estate units in a developed area and then renting it out. They could also buy equity shares of listed real estate developers which could give them an indirect exposure. NRI buyers sometimes also look for a future retirement home, and this could lead them to investing in a developing area.
  2. Reputation of developer: It is imperative for any customer to do a thorough check of the track record of the developer if it’s a primary sale. Past delays in project implementation and history of complying with laws will give a good indication of the reliability of the developer.
  3. Legal title/document checks: It would be advisable for the NRI buyer to also check the legality of the property. Confirmation should be sought about current owner, past history, any legal disputes, and local regulatory approvals before any deal.
  4. Location: Like any real estate deal the world over, location is important. In a country like India where infrastructure lags demand, a location closer to better infrastructure would yield greater long term returns.
  5. Government policies: Real estate in India is susceptible to changing government regulations. Investment in forest, plantation and agricultural areas are a no-go for NRI’s. Policies related to leasehold, freehold, zoning areas require careful understanding in addition to future plans of the government for that location.
  6. Tax implications: NRI’s should also think through the tax implications including withholding taxes, TDS at the time of a purchase, rental taxes and property taxes should be properly understood with the help of a tax attorney. For NRI’s looking for capital appreciation, it is recommended to stay invested for at least three years to avoid short-term capital gain tax.

Finally, property management is crucial. NRI’s would do well to hire a good property manager or a broker as they may not be in the country all the time. This combined with a sound exit strategy at the appropriate time with good returns will provide the peace of mind every deserving NRI should get when they invest in the Indian Real Estate market.

Sustainable Affordable Housing

Energy efficiency as a concept in India emerged only a decade back. Today buildings use up to 35-40 per cent of energy and it becomes imperative to employ eco-friendly methods for every line of activity.

The Indian Government has come up with numerous energy efficiency initiatives like Green Buildings by Indian Green Building Council (IGBC), Energy Conservation Building Codes (ECBC), Green Rating for Integrated Habitat Assessment (GRIHA), star ratings by Bureau of Energy Efficiency, etc.

For employment of green technologies in buildings.

townships+ sustainability+ affordable housing+ real estate

Landscaped Gardens at VBHC Vaibhava

According to Indian Green Building council (IGBC), India currently has over 2000 registered green building projects and is amongst the top five countries in the world involved in the green building movement. This trend highlights the growth opportunities present in India for Green building projects.

Green buildings utilize less materials, through elimination of unnecessary finished resources and efficient design. Increased comforts, healthier indoor environment quality, lower development costs, lower operating costs, enhanced durability and less maintenance costs. An environment friendly home reduces the operational cost for a home by bringing it down considerably.

At VBHC, we integrate environmental considerations into every stage of project construction and focus on the design, operation and maintenance of all our projects. The major factors taken into account are resource efficiency, indoor environmental quality, design and development efficiency, energy and water efficiency and the project’s overall impact on the environment.

An essential characteristic of a green building is its focus on protecting existing ecologies, at VBHC, we too focus on practices preserving the existing ecosystem by implementing environment friendly practices such as form technology, low flow taps, rainwater harvesting, dual plumbing and STP to conserve water, LED lamps, solar heating panels to conserve electricity, segregation of waste (organic and inorganic).

Our homes are constructed in way to allow for ample natural light and ventilation which further reduces electricity consumption. Projects have large landscaped gardens and a lot of greenery. All of which contribute to delivering value homes for customers.

The long run benefits of building Green projects are in lower energy, reduced waste and water costs, lower environmental and emissions costs, lower operational and maintenance costs. Any home buyer should look for a cost effective house to cut down expenses. An environment friendly house is pocket friendly and helps maintaining budget by significantly reducing avoidable expenses.

VBHC maiden project in Bangalore was the first project in Asia to receive the much coveted EDGE (excellence in design for greater efficiencies) certification by the International Finance Corporation, World Bank for its efforts in inculcating green building practices into all facets of operations.

EDGE indicates that VBHC’s resource-efficient design will result in reductions of up to 33% in energy, 39% in water, and 23% in materials’ embodied energy compared to local benchmarks.

To underscore our commitment to green building we are currently in the process of getting all VBHC projects across the country EDGE certified, our sustained emphasis on sustainability will preserve local ecosystems and eventually result in savings for our customers.


Overwhelming response to VBHC offers in GOSF 2014

The Great online shopping festival (GOSF) is the brainchild of Google and this is a concept quite analogous to the one day sale originated in the United States, where many online shopping sites offer discounts on Cyber Monday, the first Monday after black Friday.  Similarly Great Online Shopping Festival (GOSF) too will offer huge deals to Indian buyers.

This initiative is aimed at encouraging shoppers to adopt online shopping with a focus to reach out to first time online buyers. The three-day online festival started on 10th December and will close on 12th December.

VBHC is also offering special discounts in the shopping extravaganza and has received overwhelming response in terms of enquiries and bookings. Attractive discounts by VBHC has converted customers who had expressed interest in our projects but were waiting for discounts from VBHC.

VBHC has also leveraged this campaign platform to expand its reach to a set of customers who are quite open to invest in properties with high price appreciation in India.

For example, we have received enquiries from NRIs who are on vacation in their native place in Andhra Pradesh open to invest in our properties in Bangalore and Mumbai.

Hurry up..!! Today is the last day to avail the exciting offers and book your dream home now.!!!

Buyer’s Guide – The Do’s and Dont’s about festival season offers

With the festive season around the corner, marketing departments in all companies cerebrate to be the next Claude Hopkins (known for his idea in promoting a leading brand) to sell their product or service.  The million dollar question is… are these deals for real or just a marketing gimmick that developers use to earn easy money to increase their cash flow?

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Source:Business today

As reported in Money today, Mr Arora invested in real estate after being impressed by a real estate company’s advertisements. However when he visited the site after a year, there was no sign of the project. What should have been an easy transition as promised in the advertisements, finally turned out to be legal battle for years after which the court ordered the company to be liquidated. It is important to remember that as with everything else in life… it pays to read the fine print as you only get what you pay for…

Most developers try to cash in by advertising an avalanche of special offers since the buyer’s purchasing propensity during festivals is very high. According to a recent survey conducted by a leading online realestate portal, 61% of homebuyers prefer investing in property during the festive season.

Few reasons why developers are keen on discounts to increase sales:

  • Inventory not getting sold: The huge pile up of unsold inventory left vacant since developers are keen on launching projects where they have invested huge sums, and it is crucial for them to get return on their investments.
  • Lack of funds: Developers with good track records over long tenures tend to get loans in comparison with the new developers. Therefore they experience a cashflow crunch which will only be compensated via quick sales.
  • Loss for the Developer: Developers are often willing to sell at a discount when the property costs them more in interest to hold on to and wait for a higher price. They often prefer to move it quickly and sell it to clients.
  • Longer gestation period: Buyers are unwilling to invest in properties where there is a longer gestation period. They prefer properties which are scheduled to be completed in the next one-two years. Hence developers offer attractive discounts on properties with longer gestation periods. 
  • Rise in affordable housing sales: With affordable housing segment becoming a common interest area amongst the buyer’s fraternity, developers who have invested in luxury projects find it inevitable to offer discounts.

Tips to detect “Foul Play”:

  • Invest in the developer and not the deal: Be careful and conduct a due diligence on the developer. This festive season will be the perfect opportunity for developers to lure customers to purchase prelaunch properties. Hence it is important to assess the developer’s financial position and their credibility in the market.
  • Start asking the right questions: During the site visits, you often get to meet the sales and marketing professionals, instead of being trapped by their charismatic attitude, start your conversation by asking smart questions like quality of infrastructure, connectivity to the main road, government approval on projects, timely completion of projects, information on completed projects, waste management system etc…
  • Use Social networking channels: The silver lining in an otherwise discount oriented market is to join real estate forums to research if the concessions offered are genuine, based on the current market rates for similar projects in the same locality. It can be possible that the developer has exaggerated the listed price for the project and then offered healthy discounts.
  • Be a smart buyer: Buyers should base their purchase decisions on the intrinsic value of the property rather than on the give-aways. They should make a conscious decision by researching on all the developments in the vicinity of the project. Increase in developments around the project is directly proportional to a higher price appreciation of your property in future.
  • The Silver lining: There are real estate companies which are reputed and well established, you can always rely on them to grab a great deal. With multiple lucrative options high returns are always guaranteed, real estate should be the primary investment option for you to look out for this festive season.

“Festivals are the best season to avail good offers, considering the amount of investment it is important that the customer completes a due diligence on the developer. Customer’s should verify the following questions:

How is the financial stability of the company(review the companies investors) , List out their completed projects, check the terms and conditions properly on the offer, relate the compatibility of the offer with their needs, and use caution while investing in projects which have not yet started” says Ajay Kumar Singh , Head of the Sales Fulfillment team from Value & Budget Housing Corporation.

To make sure that you are unscathed from the offers, this festive season … it’s necessary for you to wear the invisible deerstalker hat and go all Sherlock Holmes before investing.

Let’s remember the famous quote from the famous Shakespearean play “The Merchant of Venice”.

“All that glisters is not gold;
Often have you heard that told:
Many a man his life hath sold
But my outside to behold:
Gilded tombs do worms enfold.
Had you been as wise as bold,
Young in limbs, in judgement old
Your answer had not been in’scroll’d
Fare you well, your suit is cold.  Cold, indeed, and labour lost: Then, farewell, heat and welcome, frost!”

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