Redevelopment is a fact of life in any ageing, land-starved metropolitan city. In India, no city defines this dynamic quite as accurately as Mumbai.
The conventional norm of redevelopment in India involves appointing developers to redevelop old and dilapidated housing projects.
However, several housing societies in Mumbai are now contemplating self-redevelopment instead. We can dispense with the usual metaphor ‘not as easy as it sounds’ – this does not sound easy by any definition, and it isn’t.
Broadly, some homeowner groups are now taking the route of appointing their own architects, contractors and project management consultants to execute the redevelopment of their projects.
These can be single stand-alone buildings or housing societies of more than one building. For funding self-redevelopment, the owner collective will invariably opt for bank loans.
The Benefits of Self-Redevelopment
For redevelopment by any means, homeowner groups are motivated by the prospect of larger, more secure homes with vastly improved facilities and amenities.
The only reason why a developer would undertake redevelopment is obviously that he gets a massive stake in the whole undertaking.
This is, without doubt, a very favourable market for homebuyers looking to purchase properties for their own use. One of the obvious reasons is the abundance of options in all categories of housing to pick from.
Also, property rates have reduced considerably across cities. Nevertheless, many fence-sitting buyers still hope for further corrections.
There may still be scope for some marginal rate corrections in certain depressed markets – but as we often say in the industry, timing the market is a game only investors should play. There are no guarantees for when, where and even if corrections will occur.
Certainly, a whole country’s real estate market does not witness synchronized corrections like on the stock market, where everyone is affected simultaneously and to the same extent.
For genuine homebuyers who recognize a good thing when they see it and can call it good enough, it has certainly never been a better time.
The Government has also provided several incentives for first-time homebuyers, especially in the budget homes category, and developers are rolling out year-round attractions in their keenness to close transactions.
The interim budget may focus on wooing voters rather than boosting specific industries
PMAY and employment shortfalls must be addressed
Funding announcements without implementation guidelines will not suffice
Before every annual Budget, the real estate sector trots out a highly optimistic (and unrealistic) wish list to the Finance Ministry.
Whether the industry actually expects the upcoming Budget to cure all its woes with a wave of its magic wand is beside the point. Unrealistic expectations – many completely outside the purview of the Finance Ministry – have become the norm.
Single-window clearance, industry status and hiked tax exemptions limits which will miraculously revive demand for properties have become the usual suspects in such wish lists.
Let’s be rational in our expectations from an interim budget which is announced shortly before general elections.
Though the larger ‘acche din’ premise is debated to the present day, the first Union Budget under the Modi Government in 2014 was certainly a harbinger of change for buyers and builders.
A significant drop from 47 months of inventory overhang in Q4 2017
NCR still constitutes 52 months’ inventory overhang; Bengaluru & Hyderabad at an all-time low of 17 months each
Sales exceed the number of units launched the second year in a row
property sizes across the top 7 cities shrink by 8% compared to 2017 & 19% since 2016
Mumbai, 15 January 2019: Despite all headwinds including the liquidity crisis in 2018, housing sales rose by 18% and new launches by 33% across the top 7 cities compared to 2017. Residential inventory overhang reduced to a year-low from 47 months in Q4 2017 to 33 months in Q4 2018 across the top 7 cities.
The DeMo effect in late 2016 had pushed up unsold inventory to 47 months in Q4 2017 from 40 months in Q4 2016. An inventory overhang of 18-24 months signifies a fairly healthy market.
“Having absorbed a lot of the impact of various structural changes, the Indian real estate sector seemed poised to grow from the previous year,” says Anuj Puri,
Benefits aside, a cut could have been a major setback to the affordable housing segment
GST rate cut, clarity on / abolition of ITC – boosted demand vs. actual sales
After much anticipation, the GST Council has failed to deliver a final verdict on GST applicable on real estate – but how much would it really have mattered?
Here’s a Utopian vision – the government would announce a GST rate cut, homebuyers would cheer up since prices would reduce marginally, and the market revives. Really?
The biggest paradox in Indian real estate is that numbers suggest a massive burden of unsold housing stock in the midst of a chronic shortage of housing. As long as prices don’t reduce significantly, the housing shortage will only widen regardless of tax sops.
What we have today is a nation of aspiring homebuyers, many of which are perpetually on the fence, waiting for a slew of minor policy windfalls to cumulatively make a home purchase feasible and attractive.
India has emerged as one of the world’s most-preferred investment markets, thanks to its thriving economy, burgeoning start-up ecosystem, and its ever-deepening talent pool.
With businesses big and small continuing to grow and broaden their horizons, expensive real estate coupled with new-age professional’s desire to work in an aesthetically appealing environment has spurred demand for collaborative workspaces in India.
In fact, the new millennial workforce will accelerate this changing office dynamic further in the years to come.
As per statistics, millennials are set to form 50% of the global workforce by 2020 – and India is the youngest start-up nation in the world, with a rapidly-increasing millennial workforce.
This generation is ready to ditch conventional workspaces for more swanky, flexible and cost-effective office spaces that effortlessly embrace the latest technologies into their system. To meet this growing demand,
Don’t expect all available options to be available online
The ‘hidden’ costs of renting a home
The elements of a sound rental agreement
The Government’s much-touted aim to deliver Housing for All by 2022 may not have met with spectacular success in terms of on-ground deployment, but it was certainly a very effective electoral promise. Housing is a sensitive subject in India, precisely because so many people don’t have it. Such an electoral promise was bound to draw attention – and hope.
Providing a self-owned home to every Indian household in the promised timeline seems unlikely. Building enough dedicated rental housing and backing it with a sound rental housing policy could have brought this electoral promise closer to its goal. However, there has been little progress on this front beyond the discussion stage, either.
While a large number of Indians do hope to live in self-owned homes someday, renting homes is still the default option for many. For some, rental housing is seen as a temporary measure until the dream of homeownership is fulfilled.
A possible GST rate cut at the very beginning of 2019 could bring in the much-needed respite for the Indian residential sector, which is still reeling from reformatory changes.
Though ANAROCK data indicates that sales numbers picked up by nearly 16% in 2018, sales are still far from their peak levels.
The ongoing 12% GST rate levied on under-construction properties has proved to be a major deterrent for homebuyers, who understandably shied away from this added burden on their finances.
ANAROCK’s consumer sentiment survey also confirms that the prevailing GST rate has prevented as many as 49% of property seekers from buying under-construction homes liable for GST. They preferred ready-to-move-in homes that were exempt from this tax.
To attract home buyers and kick-start a more convincing revival of the residential sector, the GST Council is now considering reducing the GST rate for under-construction homes during its next meet in January 2019.
In fact, this move was expected in December 2018; nevertheless implemented, it will be a perfect New Year bonanza for millions of aspiring homebuyers looking to buy under-construction homes in the coming year.
If you are looking to buy a property or have already invested in one, you will know that there are tax implications involved. Let’s first examine the tax on property purchase and then elaborate on how one can save on it via tax exemptions and deductions.
To begin with, the taxation on property purchase has become much simpler than it was before. With the roll-out of GST, all taxes previously applicable on real estate purchase (VAT, Service Tax etc.) have been subsumed under this single unified tax system.
The overall costs involved in buying a property are broadly divided into two components – the first being the one paid to the builder/seller and other – the statutory and legal costs – to the government.
While the former roughly comprises 80-85% of the overall property cost, the remaining 15-20% goes as taxes to the government coffers.
So, are the taxes same for both under construction and ready-to-move-in properties? The answer is ‘No.’
Taxes for Under-Construction Properties
Statutory and legal costs for under-construction properties vary between 15-20%,
The applicability of GST in the Indian taxation system was a move aimed towards ‘one nation, one tax’.
Post land abetment, the applicable GST for under-construction properties was 12% while ready-to-move-in flats were kept out of the GST ambit.
Even for under-construction properties, there was a ruling of Input Tax Credit (ITC) pass-over to the buyer to ensure that it becomes a tax neutral proposition.
While calculations and ITC pass-over still remain a challenge after 1.5 years of GST regime, a recent announcement stated that there is no GST applicable only on ready-to-move-in flats wherein sales took place after the issue of completion certificate.
This is likely to add woes to buyers as well as developers.
Impact on Buyers
Until now, all properties that were treated as ready-to-move-in were out of GST ambit, so buyers had significant choices.
As per ANAROCK data, more than 90,000 units out of total unsold inventory of 6.87 lakh units (as of Q3 2018) across the top 7 cities were ready-to-move-in – a massive 14% of the overall unsold stock.