With a large inflow of foreign remittance and higher level of disposable income, Indians have long started investing in multiple properties for rental income and value appreciation.
Though property value appreciates well over a period of time, rental income is still not quite lucrative. An apartment bought for 30-40 lakhs fetch only about Rs. 10-15k as monthly rent, which translates to just 4-5% return annually.
However, if you opt for some out of the box ideas instead of relying on just regular rentals, you can rent out your property to get much better returns. Here are some such actionable, yet easy tips that can help.
If you haven’t already bought the apartment, then ensure that the one you buy is in a prime location with easy access to shopping malls, offices, IT complex, hospitals, schools and other amenities. Not only will the price in such areas appreciate dramatically, but also, rental demand will be much higher.
Amenities like gym, club house, swimming pool, house-keeping are no longer a luxury. With most apartment complexes having these facilities, the ones that don’t have them are finding it hard to retain its value in the market. No matter how ideally located your property is, if it doesn’t have such features and facilities, families and health conscious individuals wouldn’t prefer to call such a place home.
- Furnish and Ensure Ample Storage Space
Furnished apartments always demand a premium rent over unfurnished ones, especially if your property is located near a commercial hub or IT park. You can also demand higher security deposit on furnished apartments.
Beautifully furnished places are quite alluring and much in demand from professionals change location frequently.
While furnishing, ensure ample storage space and proper natural lighting inside every room as these are qualities that most tenants would love to have.
Just like furnishings, being equipped with home appliances is also a value addition that you can monetize upon.
You could also offer to get dryer, dishwasher and such smart energy efficient appliances if the tenant agrees to enter in to a long-term tenancy contract.
- Care About the First impression
Always keep your apartment clean and presentable before a potential tenant visits. Nothing turns off a tenant more than unkempt apartment that require plenty of repair work.
Ensure that the plumbing works are done and that there are no leaks. Also, apply a fresh coat of paint and take care of all maintenance works. You could opt for deep cleaning by professional cleaners, followed by weekly maintenance by the building house-keeping staffs to ensure that the place looks spic-and-span all the time.
Most corporates enter into long-term lease/ rental agreements with landlords for their guesthouses. You can contact reputed local real estate agents to find such deals. Not only will you be able to fetch premium rent for your luxurious well-furnished apartment, but the property will also be well-maintained by the in-house corporate house-keeping staffs.
Your apartment may look perfect on a superficial level. But seasoned tenants know that they need to check for leaks, bathroom fixtures, cracks and kitchen cabinets to really know if the property is well-maintained and trouble-free. So, keep an eye on your property even after you have rented it out. Check out the place every 3-6 months and ensure regular repair and maintenance are done so that your place retains its freshness and appeal in the long term.
- Be proactive in listing your property
Keep 2 month notice period in your tenancy contract so that you have ample time to find a new tenant when the old ones leave. A month of vacancy means 8 – 9% loss in annual rental income. So, be proactive and when market turns grim, be prepared to take in 3-5% cut on rent as in the long run, it is much better than keeping the property vacant for extended duration.
The aftershocks of multiple disruptive policy reforms and structural changes continue to ripple through the Indian real estate sector. While its visible transformation from unorganized to organized and opacity to transparency are indubitably positive, we cannot help but count the fatalities of this process.
Many real estate developers are finding it extremely difficult, if not impossible, to realign their businesses to the new norms. It’s not just a question of compliance, but also the fact that the new real estate development norms call for massive capital infusions.
The practice of raising interest-free monies via pre-launches now more or less a thing of the past, interest rates are hardening and the banking sector is not especially well-disposed towards lending to developers.
Simultaneously, investors who had depended on heavy cash components for their resale properties have been left in dire straits by demonetization and the concerted drive towards financial transparency.
Many developers need to sell their hung-over inventory in a hurry – either to raise funds for new projects or so that they can cash out and leave the business. Likewise, many investors or other property owners are also desperate to exit their holdings.
And as is usually the case, one man’s loss is inevitably another’s potential gain. The current state of the market certainly presents a window of opportunity for smart property buyers who can make the most of it.
Today, there are plenty of distressed properties available on the Indian real estate market. The available opportunities include retail assets, hotels, individual residential units and even entire housing projects. With proper due diligence and the appropriate capitalization, one can actually strike a gold mine.
However, one still needs to know what one is doing, and also follow some very necessary precautions before entering into a distressed property deal.
Is this the right time to buy distressed properties?
With rising population in urban areas (more than 10 million people migrate to Indian cities and towns every year, and India’s urban population likely to surpass 800 million by 2050), there is a significant inherent demand for homes, offices, malls and other real estate asset classes.
In the current market conditions, many distressed assets are available at attractive valuations and it may not be a bad idea to seal a deal. However, one should not do this without a clear plan of action on how to utilize or monetize the acquired asset.
Aspects to investigate before acquiring a distressed property:
- Reasons for the distress sale
It is extremely important to identify the reason for why a property has become distressed, to assess if they involve policy changes (which may affect the new owner as well), financial troubles or wrong intent. The latter is the most difficult to identify and tackle, and so must be investigated with utmost care.
A distressed property buyer must do a thorough check on the existing debt which the new buyer will assume. In addition to the overall quantum, one must segregate such debt into short-term and long-term, and also understand if the debt is backed by any security or otherwise.
However attractive the valuation may appear, the physical condition of the asset to be purchased plays a key role in its inherent value to the new owner. Regardless of whether the buyer plans to refurbish and release/sell and/or demolish and rebuild the property, this check is important to assess the cost implications.
A prospective buyer of a distressed property must ensure that the asset is developed as per the stipulated regulations, including FSI permissions, statutory approvals, fire safety norms, and many more. If there is even a faint hint of a violation, the buyer must understand the risks and have a plan towards mitigating them.
The buyer should check for litigations that embrace the distressed asset. It should be commercially viable to own the property despite the existing litigations, and the buyer should have the knowledge, means and a plan to overcome such issues.
A clean title is a must for the hassle-free future transactions or development of the purchased asset.
If a buyer is acquiring a pre-leased asset, it is imperative to check the lease contracts and their expiry dates so that they can be factored into future financial projections.
The momentary pause and panic in the real estate sector of a country whose GDP likely to reach $5 trillion by 2025 can certainly be viewed as an opportunity by large global investors who are looking to enter into or expand in India.
However, such players are not gamblers and will always ensure that they have the benefit of an experienced India-based consultancy to identify opportunities as well as their accompanying risks and required mitigation plans.
Individual investors, on the other hand, bear the onus of due diligence while acquiring distressed assets.
It should be clear that a well-meditated play in distressed property can reap rich benefits, while an inadequately researched acquisition can result in a severe financial setback and even legal complications.
Monsoon is a season to relish hot snacks with hot tea or coffee in a house which has been taken care off for the season. The monsoon can bring with it spillages, fungus and different issues, all of which can harm your home, furniture and other significant assets. Homes turn out to be more helpless during monsoon season and it is very vital for you to shield your homes from the desolates caused by rains.
Here are few handy tips and hacks that will help you get your home monsoon-ready:-
- The walls and roofs with cracks and holes are the places for the growth of Moss and fungus in the humid monsoon season. These are very harmful for the people living in the houses thus before monsoon starts one should check, locate and repair the cracks.
- To avoid seepage of rain water in to the house, one should paint the exterior of the house with waterproofing coat of paint.
- The rain water harvesting pipes needs to be checked and ensured that they are not having water clogging on the roof for water stagnation.
- To avoid accidents from electrical shock, one should check the external wiring and repair them before the season starts.
- To avoid rusting doors and windows with metal needs to be repainted and sunshades over the windows should be checked and overhauled.
- Water accumulation should be avoided around the house for the fresh water, mosquitoes to be breaded so puddles of water should be cleared then and there.
- Furniture should be kept dry and away from walls to avoid the moisture transfer.
- Wooden doors, windows and furniture should be waxed and oiled to keep it from swelling during the season.
- Naphthalene balls should be kept in wooden wardrobes to keep moisture at bay.
- Carpets and rugs should be rolled up for the season to avoid moisture and filth accumulating in them.
- Check for termite infestation, as a humid atmosphere will only boost the growth of termites. Make sure that wooden floors and furniture are properly polished to prevent moisture from building up. Cupboards and desks are easy target for infestation. Use camphor, neem leaves or cloves between clothes to keep away insects.
- Keep all the indoor plants outside the home as they increase dampness inside the home during rainy season.
Monsoons are keenly anticipated by every homeowner, but when it arrives it brings along a series of challenges for the homeowners. It is essential to drift clear of the problems to truly enjoy the season!
Owning a flat or a building requires a lot of information and knowledge related to real-estate laws and terms. It is very important to know all these terms and laws to avoid any conflict regarding the property they are buying. And as there are numerous real-estate terms available today we will be explaining to you a very important real-estate term that you must know about is “Occupancy Certificate” (OC).
Occupancy Certificate is a document that you require to have before shifting to a flat or a building. One must always check Occupancy Certificate with the owner before buying a flat or a building. And to get the OC one need to get Building Completion Certificate. So, let’s start with building completion certificate, then we’ll get to OC as well. Here, have a look!
Building Completion Certificate : When a building is completely constructed, the builder can apply for a ‘building completion certificate’ to local authorities. And if the building is constructed as per the approval plan approved by the authorities, then only the builder will get the building completion certificate plan. There can be flaws like distance from the road, the height of the building etc, and if these common things are not constructed as the approved plan then local authorities will not provide building completion certificate. And as possession certificate is followed by building completion certificate, one cannot get possession certificate as well.
Commonly asked questions about building completion certificate
Question 1 – Who can apply for Building completion certificate?
Answer 1 – Builder of the constructed building.
Question 2 – Who will issue Building completion certificate?
Answer 2 – Local civic bodies will issue building completion certificate
Occupancy Certificate: Occupancy certificate is the certificate that we can apply after the complete construction of the building. It can be applied by the builder or the owner of the building to local civic bodies.
A Occupancy certificate is a proof that clarifies that the property is constructed according to the plan. OC can only be obtained once after the construction of the building. Thus, one has to keep it secure. Though, the process of obtaining OC includes one more step that is obtaining building completion certificate. As per the state laws, one cannot legally move into the constructed building unless the owner gets OC from the local civic bodies. Also, the municipality can ask the building owner to leave the building and will consider it illegally occupied or will impose heavy penalties.
Commonly asked questions about OC
Question 1 – Who can apply for OC?
Answer 1 – The builder of the constructed building has to apply, but a building owner can also apply for the same. And if you have already started living in the building, then you can contact to Local Corporation and apply for OC. And if the building is constructed according to the approval plan and you have got building completion certificate then you can easily get the OC.
Question 2 – Who will issue Occupancy Certificate?
Answer 2 – Local administrative and civic bodies will issue Occupancy Certificate. The local civic bodies will not issue the certificate if they find the building is illegally constructed.
Question 3 – How to get Occupancy Certificate?
Answer 3 – To get OC you need the documents given below:
- Copy of building plan approval
- Building Commencement Certificate.
- Copy of Building Completion Certificate.
- Latest Property Tax receipt
- Built and section plan
- NOC for fire and pollution
- Copy of solar panels and rain harvesting
- Copies of No Objection Certificates
Question 4 – Is it safe to buy a building or apartment without OC?
Answer 4 – No, it is not safe as anytime the local civic bodies can ask you to leave the building as the owner may not have collected OC. It is strictly advised to buy a flat or a building that has Occupancy Certificate.
Question 5 – Can Builders issue Partial Occupancy Certificate?
Answer 5 – Yes, the builder can issue partial occupancy certificate, but it is only valid till 6 months. When the property is constructed in blocks with varying completion dates, then the builder can issue a partial OC. But, after the complete construction of entire property partial possession certificates are replaced by final land possession certificate. But if you think of getting a home loan with partial possession certificate, then it will be very problematic for you.
The most important time when you should consider possession certificate is before buying a flat, even if the builders are reputed ones. Check the completion certificate, as well as possession certificate (occupancy certificate) and demand it from the property or that building’s owner. And if these certificates and not available with the owner, then there are higher chances that the building is not constructed according to the approved plan by local civic bodies. In these cases, do not occupy the property and search for another one. And if you have already occupied the property, ask for an occupancy certificate and get one at the earliest.
Why Completion Certificate and Occupancy Certificate is Important?
- While claiming Income Tax benefits on your home loan, you may be asked to show Occupancy Certificate.
- Living in a property without OC in considered illegal and local administrative can ask you to vacate the building.
- You may face issues in getting sanitary connection, electricity or water connection.
- A home loan is only sanctioned when you have the possession certificate.
- It will be very difficult for you to sell your building or flat without possession certificate in future.
So, this is why Occupancy certificate is important for home buyers.
Indian real estate is going through a major transformation in the recent years. Some of the big decisions and new policies of the Indian Government have affected the real estate sector in big way, albeit in positive or negative manner. Few of the policy changes introduced by the government, such as demonetization, RERA, and REITs in 2016, followed by GST and FDI in 2017, have made huge impacts on Indian real estate sector. Apart from this, there are various other reforms anticipated by the experts in Indian economy, which may come into force in the coming time. However, the new legislation and trends that have come up in the real estate market have the power to reshape the Indian real estate sector for a long term and year 2018 can be a starting point towards the Indian real estate growth story.
Looking at the positive aspects of the reforms, there is a big possibility that years 2018-19 are going to be the bumper years for the Indian realty market. The transformation of market has attracted the eyes of domestic and foreign investors, and there are various positive trends observed by the experts, which point towards a more pro-active, positive and growing Indian Real Estate sector. Listed below are seven major positive trends in the Indian Real Estate market, which shows that there is great depth in the market and the so-called revival of real estate in India has already started.
- Global capital flow into Indian real estate
One of the major signs of revival for Indian property market, investments by global investors has increased recently, with various international property funds and investors acquiring strong position in Indian realty space. As per World Investment Report 2016-17 by the United Nations Conference for trade and development, India has been ranked fourth in terms of FDI inflows, which shows strong interest by the foreign buyers and investors in the Indian markets. Improvement in India’s overall credibility with transformation of regulatory framework has built up an attractive destination for both global and Indian investors. Thanks to improvement in transparency, NRIs and foreign investors find country’s real estate market more reliable than ever before. Thus far, Indian real estate has attracted USD 32 billion in private equity and various other foreign investors are willing to invest in various sectors in India. As per Economic Survey of India, Indian Real Estate sector witnessed significant improvement attracting a total Foreign Direct Investment of USD 257 million in the second half of 2017 only. Looking at this trend, the expectations from private equity is high in the coming years and it is projected that 2018 and 2019 will be even bigger years for FDI investments in India.
- Developers will revamp their business models
From year 2000 to 2016, because of lack of strong regulations of Indian property sector, developers used to launch many projects at the same time and there was no guarantee of completion of projects on time. There are numerous instances where investor’s hard earned money went down the drain, simply because the developer is highly over-leveraged and could not complete the project. Now, with the enactment of RERA Act (Real Estate Regulation and Development Act, 2016), a deadline has been fixed for the projects to be completed, which will force developers to re-zig their business models. The developers will require to bring more transparency as well as accountability in their processes, and do a lot more to increase consumer confidence in the project. Also, other legislative reforms such as The Goods and Service Tax (GST) Act 2017 as well as The Benami Transactions (Prohibition) Amendment Act 2016, will have a major impact on the business models and work ethics of developers. This also means that most of fly-by-night developers will be out of market and Indian real estate will have more reputed and serious property developers. This will bring in more confidence of domestic and foreign investors into the market, which may result in higher and sustainable demand in the long run.
- Ever increasing housing demand
Although past few years have observed comparatively lower transactions in the residential sector, housing demand in the country is quite high, thanks to its ever-growing population size. In India, there is an estimated shortage of around 40 million houses (urban and rural). In addition, population growth of 1.3 per cent per annum, favorable demographics, rise of concept of ‘nuclear families’, increased migration to urban areas, fiscal benefits, rising income/aspirations, etc. could lead to another 10 million demand for houses per annum. However, in the recent times, most of the property developers focused on luxury to mid end housing only, whereas much of this demand is in the affordable housing segment. Moreover, with time, the definition of affordability also has changed and with ever increasing land prices, high finance rates, construction cost and stringent development regulations, affordable housing was not at all profitable option for real estate developers. This required some impetus from the government for developers to focus on affordable housing segment.
With the government nod of infrastructure status to affordable housing in Union Budget 2017-18, this sector is expected to grow at a high pace. The affordable housing segment is expected to be the next big growth driver of the Indian economy with property experts predicting a phenomenal growth rate of over 30% in the medium term. Developers may now have options for diverse and cheaper sources of funding, including external commercial borrowings (ECBs), which eventually can lower the borrowing costs of developers, who should pass on the savings to the buyers and investors. New reforms also amended the size of affordable housing units in big cities, which is more in line with the markets. Moreover, banks may also be willing to lend these projects at attractive interest rates, which will result in easy and cheaper financing options to end users as well. With this in mind, various property developers and builders in India are gearing up to develop affordable housing projects, which is expected to improve the market sentiments in the time to come.
- Commercial market shots
One of the major leader of property sector, commercial office market, is turning out to be the front runner in witnessing positive changes in the market owing to various legislative revolutions. RERA, REIT, demonetization, GST, Make in India and various other reforms have given numerous positive shots to commercial real estate market, which has started springing back towards high growth curve.
A) REITs: With the government making way for REITs (Real Estate Investment Trusts) in Indian realty market, the commercial office market has already started bouncing back in Mumbai, Bangalore, Delhi and Pune. With major market players such as Blackstone, Embassy and DLF making fast in-roads for REIT model in India, the trickle down impact on other realty players in anticipated in 2018-2019, which may result in improvement in other commercial office markets of the country with higher investment returns to its investors. The REIT potential in India is huge, with around 229 million sq. ft. of office space currently being REIT compliant. As per industry experts, even if 50% of this space is listed in the next few years, it will be mammoth $18.5 billion worth of REIT listing. Moreover, India’s stock of Grade A commercial assets is also increasing with more and more developers are looking to contribute to this sector and REITs acting as a sure-fire growth catalyst. The long term results should show investments in other markets such as retail, industrial and hospitality, which is expected to improve the overall market sentiments.
B) Co-working spaces: Indian office sector is moving into ‘hybrid’ spaces or co-working culture, looking at the strong demand for flexible working spaces in India. The rise of numerous start-ups in Indian markets has paved the way for this market, which is turning out to be a big boost for the commercial office sector. Co-working spaces are popping up across Indian metros as well as Tier-II cities, providing start-ups with flexible working options at affordable rents. Presently, there are more than 100 operators in this space across India, though there is still very limited supply of co-working spaces available. This sector is slowly moving to become a big success story, with various other countries also following the same model.
C) Industrialization and Trade: Apart from various other factors, improvement in industrialization and trade opportunities in the recent past are also fueling the demand for commercial office space in various cities in India. Moreover, with recent changes in FDI policy, demand for warehousing industry is expected to increase many-folds in 2018-2019, which will have a positive impact on other sectors including commercial office market.
- Alternative asset classes
It is quite heartening to know that it is not only the residential, commercial and hospitality sector, which are showing revival of trends. Instead, various alternative and new asset classes have emerged in the Indian real estate sector such as short term stays, specialty hospitals and medical institutes, schools, student housing, aged care facilities, etc. These emerging sectors are showing great signs of high growth in the recent times and promises to push the sector further up with induced investments by various domestic and foreign investors.
- Market consolidation
In the past few years, owing to slowdown of realty sector, comparatively few sales and lack of financing options in India has led to various developers over-leveraging themselves. This means that most of small time developers may either have to sell off their assets or enter into JV with big and more reputed developers to save them from this financial mess and deliver their projects. With this consolidation of property development market on the cards, the highly overcrowded real estate sector in India is expected to become a lot leaner and meaner. With consolidation happening by ways of joint developments and joint ventures between landowners and/or small developers with bigger, better-organised players, smaller developers being bought out by larger players, and struggling developers cashing in their land banks by selling them to players with stronger balance sheets and appetite for growth.
This may be a lengthy process for the time being, however, the initial feelers of this process are prominently visible in various markets in India. Several small builders with half-baked projects are already looking for investments and rescue from big brothers, with many more sitting on the fence to gauge the initial results. This consolidation will surely flush out all the bad elements from the real estate market and it is expected to be more transparent, level playing and promising market for foreign and domestic investors.
6 Important Points To Remember Before Investing In Real Estate
Investing in real estate is an enormous task. A prospective buyer, first time or otherwise must consider a number of factors before committing to a piece of property. However, there are some basic mistakes that a prospective buyer can avoid. This list will attempt to provide some clarity in the messy business of investing in real estate.
1. Research: This is the golden rule. The importance of research cannot be stressed upon enough. A fair amount of research can make all the difference between a good investment and a bad one. Attention should be placed to details such as
- Type of locality
- Connectivity to hospitals, schools, airport, etc.
- Reputation of the builder and developer
- Property rates as well as the rates of neighbouring properties
- Is the house located in a problematic area like a flood-zone?
- Is the home insured? Will the property require additional maintenance expenditure?
- Judging the market value of the house and find out if you are paying above the market value.
- Ask yourself questions. Assess if the house will be mainly for living purposes. If not, then can the house be rented out? Or, can it be put on the market again? If so, what will be the value of the house then? All in all, be clear about the purposes you have in mind for the house and proceed accordingly.
2. Discuss: Discuss your plans with others. Consult with family, friends, other buyers as well as sellers. Inform yourself of policies such as the RERA that protect consumer rights. If necessary, seek professional advice from consultants who know their ways around the real estate business. Discuss loan strategies and more importantly, set investment boundaries.
3. Set Investment Boundaries: It is also very important to figure out what one requires from the property they are looking at. An easy and foolproof way to tackle this would be to make a list of requirements. A list of requirements also assists in the setting of investment boundaries. If one does not set an investment boundary, chances are that they will end up paying a lot over the stipulated budget and incur heavy losses. The buyer should also evaluate other properties instead of setting their sight on one. It is often the case that sellers confuse buyers to get them to buy their property. In these cases, to avoid this confusion it is best to consider other prospective properties too.
4. Tax Benefits: Remember your tax benefits. This is a very important step as overlooking this step will guarantee heavy loss and no monetary returns. Keep track of tax benefits on existing property and any new property you might be investing in. It usually helps to have a consultation team as they will keep you informed at all times.
5. Bad Financial Decisions: This is one of the trickier areas in real estate investment. Bad financing has severe and unalterable consequences. Experts say that bad financing is one of the ways in which investors lose most of the money. First off, the buyer needs to be aware of their credit score at the bank. If they haven’t paid off earlier loans it is likely that the bank will not offer any financial assistance to make the purchase. It is advised that the buyer clears any loans they have in the bank before setting out to invest. However, this can’t provide any guarantee, because in 2008, during the credit crisis, refinancing became very difficult. Bad financial decisions can be a combination of factors such as
- High-interest rates
- High monthly payment
- High rates of borrowing
- Balloon payment
All of the above are connected to each other. Mortgages only allow borrowing of 80% of property cost. It is advisable to not borrow more than the stipulated 80% as that could endanger future assets one is borrowing against. High-interest rates combined with high monthly payment can very easily lead to a balloon payment in a short period. This is again, not advisable as selling and refinancing to combat the balloon payment is a difficult and time-consuming process.
6. Debt: This is another important aspect of real estate development. Research on how debt works and chart out the best plan for payment. Experts advise buyers to choose for debt with lower interest rates and a larger down payment. This ensures that the debt incurred is paid off at a steady pace.
Of course, it must be remembered that there is no foolproof way to success in real estate investment. However, with diligence and attention to detail, certain problems can be anticipated. This list attempts to inform prospective buyers of basic problem areas.
Disclaimer: Article has been posted by Oswal Group
Changing Dynamics Of Real Estate in India
2017 has been a one of the most challenging year for Real Estate sector in India. Indian Economy is largely dependent on this sector and it is also top most emplyoment provider. Major Reforms like Demonetisation, RERA followed by GST etc. has changed the entire face of Real Estate Sector.
Let us highlight on few points in short:
- To start with Demonetisation – the sudden announcement of banning two highest value banknotes weakened a lot of the liquidity in the Indian economy, negatively impacting the property sector. The primary aim of demonetisation was to reduce the amount of black money in the Indian economy, of which the real estate sector had been a major beneficiary, along with the legal cash flows it was accustomed to receiving.
- Pradhan Mantri Awas Yojna– Housing for all which is the ambitious project with the mission of Housing for all by 2022. This will tackle the problem of housing shortage of around 2 crore homes in India, including Economically Weaker Sections and Low Income Groups in urban areas by the year 2022 through a financial assistance.
- RERA – A landmark reform by the centre government has completely changed the landscape of the real estate sector. The Aim is to bring down irregularities in the sector. Earlier Home buyers usually faced issues regarding the late possession of the house and illegal project building by the developer. So to boost the confidence of investors and homebuyers, RERA was introduced where the developer has to register on-going project giving the complete details of the project with its completion date and also the amenities offered. The act is applicable to residential and commercial developments. Under the act, along with the Developers and their projects, the Real Estate Agents also have to be registered, thus leading to cleaning up and weeding out of fly by night operators and bring in more professionalism in the sector. This will organise real estate sector, thus infusing credibility and accountability.
- The Indian authorities have also moved to crack down on “benami” property transactions – which refers to property or land being bought in someone else’s name or under a fictitious identity, often to hide black money and stay under the radar of the taxman.
- Lastly the introduction of GST has also greatly impacted this sector. It will streamline the supply chain of developers and bring many small-time contractors and vendors into the GST net. Though the sales in under-construction properties is adversely affected, but we should see positive effects in long run.
Reputed developers believe that the policy reforms may be having a short-term negative impact but they say that ultimately the changes could benefit the sector, as the industry makes the transition to becoming more structured.
The combined effect of all these reforms should positively lead to better tomorrow and affordable real estate – relief to Common Man.
The property prices in cities, especially in metro cities keep fluctuating year by year. However, in the last couple of years, the prices in these cities have been below or stagnant. Despite of this no change in the price, home buyers are still in two minds about buying new apartments. One of the basic reasons behind these two thoughts is due to delay in the existing project, which eventually creates a lack of confidence in the minds of buyers. This is also affecting the decision of investors who may consider it as loss of investment.
Now with the GST coming into the effect, this has further affected the decision. Under GST, the tax for under-construction project has shot up to 12 per cent. The developer will be bearing the burden of GST, which will certainly pass on to the buyers.
This is the reason why home buyers are choosing ready-to-move projects that are less risky in all terms. These ready-to-move homes carry a good resale value also offering less risk compared to under-construction properties.
Let us evaluate why ready-to-move homes are the best choice than under-construction:
- Benefiting the Tax:
As per real estate experts, one must buy the first home in the early age, which would certainly help in tax deduction. There is a huge capital tax gain in ready-to-move homes. Income tax rules allow tax exemption on capital gains under sale of property help for more than 2-3 years only if the amount is reinvested in property within two years. However, if the possession is delayed further, you will end up paying high amount as capital gain tax. This is not the case when it comes to ready-to-move homes. Moreover, there is no service tax involved in ready-to-move-in property.
- Save on Rentals:
This is the primary benefit the home owner will earn by investing on ready-to- move homes. If you’re not planning to move soon and would like to wait for more years, then you can start earning by renting the home. The house rents are fixed according to the location, amenities available and how new the project is. Many home owners usually end up renting the home, especially if invested in other cities. This will also help you to repay the EMI for loan taken for the house.
- No Waiting Period:
One of the prime advantages of ready-to-move homes are there is no waiting period. With the project already completed, you just have to complete the procedures of buying a home and other things related to the purchase.
- Only EMI with no Down Payment:
The best thing about possession ready home, you have to pay only EMIs on home loan immediately, and would include no other payments. In case of under construction property, EMI usually starts after completion of construction. However, if there is any delay in the construction, then the EMI will start once the home loan gets disbursed. However, in some cases, the buyer may cancel the property due to financial strain and increasing interest rates.
- You get what you see:
Since the housing complex is in ready possession, you will find no changes in the property as seen in the booklet or images. In many cases, the under construction project design may change after completion than what you have seen in the booklet. In case of ready to move homes, you can get feedback from the residents, examine the location and learn about the residence.
If you’re planning for ready-possession property, evaluate your financial condition, documents required to purchase and about the developers. If the developer is esteemed, then banks will surely approach you to get yourself a loan. Home buying can be a risky affair, but buying after good research and considering the long term return will be fruitful.
The Real Estate Regulatory Authority Bill was recently approved by the Union Cabinet and is in effect in the State of Maharashtra w.e.f 01.08.2017.
While it might be helpful for some, it has its own hurdles. Few pluses and minuses of the RERA Act.
- Transparency: Promoters must provide accurate disclosures on the website along with the allotment letter.
- Compulsory registration: Builder must register with the housing regulatory projects and submit all the details of the property.
- No misleading claims: A written affidavit should be given mentioning the time frame of the project to be delivered.
- Money management: Builders have to deposit 70% of the buyer’s amount in an escrow A/c to avoid diversion of money.
- Warranty: RERA will provide 5-year warranty for structural defects.
- Hike in property prices: Due to the lack of liquidity, builders have to look for other sources for money thus, leading to rise in the price of the property.
- Stagnant growth: Due to 70% investment in escrow account there will be cash flow hindrances leading to delay in projects.
- Supply-demand imbalance: Compliance to all the aspects will delay the project and as there won’t be pre-selling of the property.
- Harsh penalty: If a builder fails to fulfil any provisions, he will be liable for imprisonment up to 3 years or 10% of the total cost of the project.
- No cover on rental: RERA doesn’t include any rental agreements and arrangements of any sorts.
OK, Now that you have finalised on the property that you want to go ahead and purchase, because it has matched your wish list in terms of location, layout, neighbourhood, amenities etc., it is also very important to check the property documents. Usually documents are given by the seller for verification after the token amount is paid.
Document Verification is a must to avoid unnecessary legal hassles and sleepless nights later. Insist of verifying the original documents and not the photocopies. It is advisable to hire a good lawyer and get the documents reviewed.
The laws governing the sale of property might be slightly different in different states, but there are a few common documents a seller must have if they are selling flats.
- Title Deed / Sale Deed in the present Owner’s Name
- Earlier sale deeds/sale documents if the case is of reselling.
- Share Certificate of the society.
- Bills such as of electricity, telephone etc. Latest Tax Paid receipts
- If any loan outstanding on the property, latest statement from bank
- Flat’s measurements/survey report.
- NOC from the society stating that the flat is not having any pending dues or liabilities to the society.
- Occupation Certificate of the Building.
Public notice in the newspaper on buying property in Mumbai is highly suggested. It could be one in English language and one in local language. This notice is to safeguards a buyer’s interest in case you find any problem over the purchased property.
Lifestyle Property Consultants
Stamp duty is a government tax, which is levied on legal property transactions. Stamp duty is, therefore, a tax which is evidence of any purchase or sale of a property between two or more parties.
Attached is the New Stamp Duty Rates w.e.f August 2017
In Mumbai, with the CBD shifting to BKC and Lower Parel for all practical purposes, even the most attractive parts of the city have not witnessed increased action in terms of sales, relative appreciation and leasing over the last 5-7 years.
In marked contrast to other cities, the dynamics of Luxury housing in Mumbai have changed dramatically over the last decade. Cuffe Parade, Marine Drive, Pedder Road and other premium locations in Mumbai have witnessed a slowdown in demand and price appreciation.
In Mumbai, with the CBD shifting to BKC and Lower Parel for all practical purposes, even the most attractive parts of the city have not witnessed increased action in terms of sales, relative appreciation and leasing over the last 5-7 years. With the CBD and even the Diamond Market moving to Bandra Kurla Complex (BKC), there has been a dramatic shift of preferences for luxury housing in Mumbai. South Mumbai residents now show increasing preference for moving to New Premium Residential Complexes in Mahalaxmi, Jacob Circle, Lower Parel, Worli and Prabhadevi giving up the standalone buildings they have been occupying since security and parking have become a challenge.
The shift towards Worli reflects that a desire to be close to the Sea Link for faster access to BKC is another important market trend. The Bandra-Khar-Santacruz belt and specifically BKC have become the best options for corporate employees who wish to live closer to their workplaces. Diamond traders are also shifting to these areas and to Worli for the same reason.
Few South Mumbai properties that have perennial demand are Samudra Mahal, Beaumonde, Lodha Bellissimo, Planet Godrej, Kalpataru Horizon, Raheja Vivarea, Lodha Primeo, Signature Island where resale price ranges from Rs. 45000/- psf to Rs. 1 Lac p.s.f
Mumbai’s new Luxury Locations:
A family living in South Mumbai that wants to upgrade from a 2 BHK to 3 BHK or 4 BHK usually operates with a limited additional budget after selling their existing home. After a prolonged stay in plush South Mumbai, very few locations provide comparable appeal / options.
Such families will consider options in Mahalaxmi, Parel, Lower Parel, Prabhadevi and Worli, and tend to be open to locations such as Mazgaon and Byculla as secondary options. The additional investment for exploring these alternatives is usually between Rs. 2-4 crore. Reputed developers like K Raheja Corp., Kalpataru, Lodha and others have luxury projects in these areas and are actively catering to the demand coming from erstwhile residents of South Mumbai.
South Mumbai residents who cannot stretch their budget to accommodate their new space requirement are looking at Parel, Sewri and Wadala as alternate option. With the arrival of the Eastern Freeway, Monorail, and JJ Flyover Parel, Sewri and Wadala have in fact become a hot destination. Reputed developers like L&T, Dosti and Ajmera have projects in these locations. Some of them are completed or near completion.
In the CBD area, the BKC belt has surprised most market pundits over the last decade. With the robust development in this prime location of Mumbai, many families from South Mumbai have been able to move into luxury projects there with just marginal budget additions. In the process, they have gained the advantages of additional bedrooms as well as significantly enhanced luxury living experience. The BKC luxury residential market is being serviced by developers like Sunteck, Kalpataru and Rustomjee.
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