Anuj Puri – Page 19

7 Ways To Succeed Or Fail In Real Estate Development

Anuj Puri, Chairman – ANAROCK Property Consultants

Real estate development may seem to be little more than laying down brick and mortar to develop a massive concrete structure. It may seem to be a business that anyone can and probably should enter, especially considering the massive unmet housing demand in the India.

Nothing could be further from the truth – real estate development is a tough business. And though the entry barriers have reduced over time, the complexities of the real estate business have increased manifold.

As of now, developers across the country are grappling with a massive unsold inventory of more than 7 lakh units being unsold in the top 7 cities alone. How does a real estate developer make his mark in today’s dynamic property market where everyone is struggling to sell?

The 7 Hallmarks of Success:

Understanding that it’s still always about location:

Location is the most critical success component for any real estate development. Even the humblest of small-sized projects with the barest minimum of facilities and amenities will find takers if they are in locations with sufficient social infrastructure and good multi-nodal transport connectivity.

by Anuj Puri

Anuj Puri, Chairman – ANAROCK Property Consultants

The landmark reform of Goods & Services Tax (GST) was, in many ways, the final bullet shot to the Indian real estate sector in July 2017. The industry was already reeling under the immediate impact of DeMo and RERA.

GST was touted to be a gamechanger for all sectors including real estate. It was largely anticipated that GST will provide a much-needed respite to homebuyers by way of reduced property prices. Unfortunately, with GST completing one year, it emerges that these expectations were unrealistic.

While the tax-on-tax has been eliminated with the advent of GST, the overall outgo from homebuyers’ pockets seems to have increased by as much as 8% across cities. This ultimately reduces the demand in real estate.

Also, the higher tax rate on purchasing a home – an already staggering expense for most Indians – has kept many home buyers and investors off the market.

Let’s understand this better.

In real time, the cost of raw materials under the GST regime underwent minor changes – cement, paints and plasters were taxed at 28%,

by Anuj Puri

Anuj Puri, Chairman – ANAROCK Property Consultants

Home loans are paid in instalments which are commonly known as Equated Monthly Instalments (EMI). These are fixed amount which is expected to be paid by the borrower to the bank every month as a part of loan repayment.

A bank considers a home loan to be in default when the borrower fails to make a payment and is behind by 90 days. In such a case, the borrower would have missed 3 payments of EMI.

When the home loan is in default, banks do not seize the assets of the borrowers immediately. They send a notice to the borrower stating that the EMI payment has been missed and strict action will be taken in this regard.

Banks are ready to understand the various reasons behind non-payment of the EMIs, which might include financial crisis, accident, etc. if the borrower approaches the bank with an explanation.

Once the reason is conveyed by the borrower or is otherwise evident to the lender, the bank restructures the EMI and extends the loan tenure on the request of the borrower.

by Anuj Puri

Anuj Puri, Chairman – ANAROCK Property Consultants

Coworking spaces have redefined the work culture globally and India is one of the most fertile grounds for the growth of this new work environment option.

From simple workplace with ungainly desks and chairs to much better-utilized spaces, automation and even added recreational facilities, office space structures in India have indeed changed a lot.

One of the offshoots of this evolutionary process is the rise of workplaces that can be easily accessed anytime and from anywhere – a plug-and-play concept of office spaces.

In short, coworking or shared office spaces.

Buoyed by the Central Government’s efforts to create a viable eco-system for young entrepreneurs, India is witnessing the mushrooming of multiple start-ups and SMEs across the country. Such businesses are increasingly focusing on co-working spaces.

These shared spaces are often in prime locations and provide a perfect platform for growth-seeking start-ups.
Moreover, they come at significantly lower costs than traditional office formats
They offer more flexibility greater flexibility to both employees and employers, and
They do not require a massive fixed capital investment.

by Anuj Puri

Anuj Puri, Chairman – ANAROCK Property Consultants

The housing ministry’s decision to tweak the eligibility criteria for MIG-I and MIG-II home buyers for houses eligible for interest benefit under PMAY is a phenomenal move to boost sales of large-sized apartments.

As per the revised norms, MIG-I category home buyers with household income between ₹ 6 lakh – ₹ 12 lakh are now eligible for a subsidy for homes up to carpet area of 160 sq. m. from the earlier 120 sq. m.

Similarly, MIG-II category home buyers with household income between ₹ 12 lakh – ₹ 18 lakh are also eligible for a subsidy for homes with a carpet area of up to 200 sq. m. from the earlier it was 150 sq. m.

This change will have a significant impact on home sales in tier II and tier III cities where the land costs and therefore capital values of properties are low and larger apartments are within the reach of such buyers.

The timing of this increase in carpet area eligibility norms is perfect, as the RBI recently decided to revise the housing loan limits for Priority Sector Lending (PSL).

by Anuj Puri

Anuj Puri, Chairman – ANAROCK Property Consultants

With the implementation of accounting standard – IND AS 115, real estate developers will have to do away with the existing percentage completion method and adopt project completion method.

This is not a mere accounting change as it will have a severe impact on the ways & means in which the real estate developers run business, raise funds, price and sell projects.

Under the percentage completion method (old accounting standard), advance payments received from a home buyer towards an under construction flat were considered as revenue and added to the company’s turnover and net income generated from such projects were treated as profits.

However, under the project completion method (new accounting standard), advance payments received from a home buyer towards an under construction flat will have to be treated as loans and not income from sales. This will bear the following impact:

Real estate stock prices may witness a significant correction – stock prices are a function of the company’s profitability and leverage. With changes in the accounting standards, the price-to-book value ratio will change and will bear an impact on the current stock prices.

by Anuj Puri

Anuj Puri, Chairman – ANAROCK Property Consultants

When it comes to Indian real estate, the topic of NRI investments is pretty much an evergreen one. The fact that Indian developers had, in the past, launched and marketed projects with an almost exclusive eye on NRI customers is certainly no secret.

There were many reasons for this, but the primary one was that NRIs – especially NRIs based in the Gulf and the US – were seen as cash cows with more money than sense.

Time has proved this theory erroneous. NRIs are among the savviest property investors on the Indian market today. This is amply demonstrated by how adroitly they have gauged the new investment trends on the Indian real estate market.

For a long time, the returns on investments that NRIs could get on residential assets were extremely rewarding, considering the significant capital appreciation whilst the rental yields have always been low.

However, during the last couple of years, the market slowdown resulted in capital appreciation on residential assets no longer being as per NRI investors’ expectations.

In the current market conditions,

by Anuj Puri

Anuj Puri, Chairman – ANAROCK Property Consultants

The Goods and Services Tax (GST), a revolutionary tax reform rolled out in July 2017, has effectively replaced the previous Gordian Knot of multiple taxes like VAT, central excise duty, commercial tax, service tax, octroi, etc.

It has made India a ‘tax-neutral’ nation – and while it evoked a response best described as ‘mixed’ from real estate buyers, most of them are in favour of it.

This is natural, as the unitary tax compliance system has simplified the homebuying process – and with the passage of Input Tax Credit (ITC), there may not be a significant additional burden to buying a home.

Homebuyers in the affordable housing segment – specifically homes of up to 60 sq.m carpet area in size – have benefited significantly from the reduction of GST by 4% (from 12% to 8%).

However, even almost a year after GST implementation, the only real clarity that exists for property buyers is on the prevailing GST rate of 12% on under-construction projects.

There is still confusion about the amount of rebate that a prospective homebuyer is entitled to on the back of the pass-over of ITC.

by Anuj Puri

Anuj Puri, Chairman – ANAROCK Property Consultants

Across the globe, 5th June is celebrated as World Environment Day, which is the principal platform of the United Nation to create more awareness and action towards protecting Earth’s environment. This day has a very special significance for the real estate sector

Over the past few decades, fast-paced economic development coupled with rapid population growth and urbanization has led to a rapid depletion of natural resources.

The accelerated rate of resource consumption and rise in greenhouse gases’ emission has resulted in significant environmental degradation. This has, in turn, resulted in climate change, the rise in average temperature and deterioration of air quality.

The building sector is one of the major consumers of natural resources such as water, energy and other raw materials. It generates a large number of wastes and pollutants during the three phases of its life cycle – construction, maintenance and deconstruction.

As per estimates, the construction sector consumes an approximate 25% of water and 35-40% energy, apart from other raw materials. Additionally, it emits 40% of global wastes and 35% of greenhouse gases.

by Anuj Puri

Anuj Puri, Chairman – ANAROCK Property Consultants

‘Small is beautiful’ is the new buzzword with Indian millennials when it comes to buying homes in cities like Mumbai.

These young professionals are less focused on size and look for homes in locations close or well-connected to their workplaces so that their daily commute is reduced and work-life balance is maintained. Compact homes are also low on maintenance expenses and are invariably very budget-friendly in all respects.

With the ever-increasing rents in a city like Mumbai, buying a compact home is also a very suitable option for several new citizens. Taking a small loan and paying up the monthly EMIs on an investment-grade asset which can be easily resold is seen as preferable to shelling out hefty rents.

On the back of this trend – and the prevailing market sentiment which is averse to overly heavy investments into residential property – apartment sizes in the Indian metros are definitely shrinking as developers increasingly deploy affordably-priced homes for which the demand is currently the highest.

In fact, apartment sizes have already reduced significantly enough to justify any and all measures that help maximize the usability of the available spaces.

7 Ways To Succeed Or Fail In Real Estate Development

GST Enters Year 2 – Real Estate Still Flummoxed

How To Avoid Defaulting On A Home Loan

Coworking Space – A Threat To Conventional Offices?

Revised Flat Size Norms a Major Demand Boost for Larger Homes in Tier 2/3 Cities

Change In Accounting Standards – Impact On Real Estate

The Changing NRI Real Estate Investor Landscape

One Year Of GST – Good, Bad Or Ugly For Real Estate?

Green Buildings – An Imperative, Not A Choice

The Low-Down On Compact Homes In Mumbai