The value of India real estate – From sprint to marathon

Ireo Waterfront, Ludhiana

Ireo Waterfront, Ludhiana

In mid-2010, India`s investment grade real estate that was under construction joined the 100-billion-dollar club. Currently, the value of the investment-grade real estate under construction in India is estimated to be USD 173.9 billion (nearly 35% more than Vietnam`s nominal GDP) as against the USD 160.1 billion figure in 2Q11 and USD 101.3 billion in 2Q10.

Following a steep rise of 58% y-o-y during 2Q11, the past 15 months have seen the value of these projects grow by a mere 8.6%. Rising input costs in recent quarters and lacklustre macro-economic sentiment have led to relatively fewer new construction launches in the sector when compared to 2010. Between then and now, the country`s real estate market has traversed from a great deal of positivity to uncertainty. With 2012 nearly through, it hard to deny that it has been a forgettable year for the Indian realty market.

The market value of the commercial (office and retail) real estate under construction is USD 41.6 billion. The commercial office space that is under development contributes approximately 78% to the estimated market value of the commercial sector. The nominal decrease in supply, which was offset by a marginal rise in capital values, caused the share of the market value of commercial (office and retail) assets under construction to remain range bound to the figures estimated in 2010 and 2011.

As the number of malls that were under development dropped and the size of malls increased, compared to 2Q11, the market value of retail assets under construction remained unaltered during 3Q12.

Read more: Money Control

New circle rates of properties in Delhi go into force

The new circle rates — the minimum valuation at which properties have to be registered with the government — came into effect in Delhi today, which is likely to push up property prices in the city.

The rates in Category A colonies have been hiked by 200 per cent, category B by 50 per cent while in remaining coloneis the rates will go up by 22 per cent.

As per the government order, Rs 6.45 lakh per square metre has been fixed as new circle rate for category A colonies like Greater Kailash, Defence Colony, Gulmohar Park, Panchsheel Enclave, Anandlok, Green Park, Golf Links and Hauz Khas.

This means nobody would be allowed to buy land and immovable properties in these colonies for less than Rs 6.45 lakh per square metre. The existing circle rate in category A colonies is Rs 2.15 lakh.

The rates in Category B neighbourhoods like Andrews Ganj, Kalkaji, Munirka Vihar and Nehru Enclave have been increased and fixed at Rs 2,04,600 per square metre as against the current rate of Rs 1,36,400 per square metre.

The circle rates were last hiked in October last year by upto 250 per cent.

See article: The Economic Times

Global Investors Take Fresh Angle in India

A farmer tilled his field last week near BPTP's struggling Park Granduera project in Faridabad., about 15 miles south of New Delhi. Sanjay Austa for The Wall Street Journal

A farmer tilled his field last week near BPTP’s struggling Park Granduera project in Faridabad., about 15 miles south of New Delhi. Sanjay Austa for The Wall Street Journal

Global investors got burned badly in Indian real-estate a few years ago. Now, a handful are trying anew—but with a different strategy.

In the largest commercial real-estate deal in India this year, private-equity firm Blackstone Group BX +0.54% made an equity investment of $170 million in a portfolio of three office complexes. That followed a $200 million investment a year earlier into a joint venture that operates an office park. In March, Morgan Stanley’s MS +2.23% real-estate investment fund invested $90 million in a joint venture developing a Mumbai apartment complex, the firm’s first investment in Indian real estate in four years.

What is different this time around is the type of investment the firms are making. In the past, private-equity firms, hedge funds and other investors put their money in untested development companies that were building large-scale residential and office complexes for the first time.

Now, they are largely investing in actual properties, rather than companies. Since the buildings are finished or under construction and presold or preleased, the returns are clearer to see.

“Investors are being far more selective and far more disciplined,” said Shirish Godbole, India head of Morgan Stanley Real Estate Investing. At the residential complex the firm invested in earlier this year, one third of the homes have been sold already.

Read more: The Wall Street Journal

FDI in retail is all about real estate

Forget buying stocks of retailers on the decline after FDI for retail is cleared, it is the real estate companies that will be the biggest gainers. Communications and IT minister Kapil Sibal in his speech on the ongoing debate in the parliament said that retailers coming to the country to set up shop will not be doing so in Chandi Chowk (populated area in Old Delhi) but in the NCR (National Capital Region – outskirts of Delhi).

As far as Delhi is concerned, a sizeable portion of land is held by companies like DLF.  The average size of a Walmart supercenter is around 200,000 square feet while a discount store is generally 100,000 square feet in size. The average size of a Pantaloon store in India is 30,000 square feet while that of Big Bazaar is 50,000 square feet.

Such huge chunks of real estate in city centres will be prohibitively expensive, but will be much cheaper on the outskirts. Having said that, real estate in India costs much higher than in other parts of the world where these major retailers operate.

Read more: Business Standard

Developers want liberal real estate policy

The Punjab Government has indicated that it will come out with a revised real estate policy by December 15 in a bid to give an impetus to the crisis-ridden real estate business and the housing sector in the state.

With stakeholders and developers persistently demanding a liberal and realistic housing policy, which also addresses the menace of proliferating unauthorised colonies in the state, the government apparently needs to put the real estate business back on the tracks. There has been a heavy revenue shortfall in stamp duty collection, which is way short of the projected income during the first eight months of the current financial year.

Several city-based real estate developers, property dealers and people from other walks of life, however, want the government to formulate a comprehensive policy which fulfils the aspirations of all stakeholders.

Kultar Singh Jogi, president of the Punjab Colonisers and Property Dealers Association, is of the view that the real estate business should be accorded the status of an industry as had been done in many other states. He also wants that the time period of 90 days for the grant of a licence for the development of a colony should be followed in letter and spirit, and, if possible, the licensing process should be brought under the purview of the Right to Service Act.

Read more: Tribune India

Economy

Goldman Sachs expects India to grow by 7.2% in 2014

India’s economic growth is expected to grow from 5.4% in 2012 to 7.2% in 2014, and remain high through 2015-2016, according to American Investment Bank, Goldman Sachs.

Three factors drive Goldman Sach’s view. These include, a decline in oil prices in real terms over the next few years, a more favorable external demand outlook and domestic structural reforms which can ease some supply-side constraints.

It sees headline inflation remaining high through the third quarter of 2013, before gradually coming off due to a waning of food and oil shocks. Core inflation remains elevated throughout. The investment ban also expects the Reserve Bank of India to cut policy rates by 50 bp in each of 2013, 2014 and 2015. Elevated core inflation prevents a more aggressive near-term easing.

The current account deficit is expected to decline gradually, largely due to a lower oil deficit compensating for an increase in the non-oil trade deficit.

An improving balance of payments and the rupee being close to the lower end of its trading band on a real effective exchange rate basis, has lead it to expect an appreciation relative to the USD over the next couple of years.

Read more: The Economic Times

Infrastructure

Smart cards available at toll gates: Delhi-Gurgaon Super Connectivity Ltd

During Tuesday’s hearing in Punjab and Haryana high court, the private concessionaire, Delhi-Gurgaon Super Connectivity Ltd (DGSCL), said that it has already started distributing “touch-and-go” smart cards to commuters. The court was satisfied with the outcome of the meeting held last month by the stakeholders to solve the traffic jam problem on the e-way.

DGSCL claimed that commuters have already been issued smart cards at the three toll plazas of the Delhi-Gurgaon expressway. The three toll plazas are located at the Delhi-Gurgaon border, Kherki Dhaula and IGI Airport in Delhi. A spokesperson said that the marketing department had planned to publicize it in the coming days. The concessionaire has introduced two types of cards – Flexi Smart and Smart Express. Flexi Smart does not offer any discount on toll charges and is valid for life (till 2023). This card is available at a minimum value of Rs 200. The same goes for tags.

Smart Express offers a discount of 50% on 40 trips and is valid for one month. In other words, commuters will have to pay just Rs 10.50 per trip instead of the actual amount of Rs 21, but at the same time the discount will be valid on 40 trips in one month. No identity proofs are required to buy these cards.

Read more: The Times of India

NRIs

Income tax exemptions for NRIs

Did you know that your NRI status can help you with exemption in income earned or received by you outside the country? Apart from tax deductions (including a standard deduction of 30% of net annual value and interest on borrowed capital), your NRI status confers tax exemptions from other assets and investments such as:

  • All the dividends that you receive from domestic companies
  • Income arising on any of your deposits at banks – this income will be treated as interest income which would be chargeable under ‘Income from other sources’
  • Money exceeding Rs. 25,000 (US$ 625), even if received as a gift, is liable to be taxed to the recipient, except in cases of gifts received on occasions like weddings or inheritances

Wondering if you will be taxed on your remittances?

Since income earned outside India falls outside the purview of the IT Act, you cannot be taxed on remittances to India. So you can send money to your own accounts in India without any fear of attracting tax! And what’s great is that you can utilize the money for any purpose you like.

When you are remitting money to India, you will not be taxed unless the transfer is compensation received against services in the country which then results in the amount being chargeable to tax for the recipient.

As an NRI, your tax exemptions include:

  • Income from interest on National Saving Certificate VI/VII issue and notified bonds purchased by you in foreign exchange
  • Income from interest on your funds in NRE/FCNR accounts
  • Interest on notified securities or bonds and even premium on redemption of such securities
  • Interest paid by scheduled banks on RBI approved foreign currency deposits, to an NRE or NRO

See article: The Economic Times

IREO Devils Circuit

Ludhiana’s run to remember

A view of obstacle run, Ireo Devils Circuit, at the sprawling Ireo Waterfront township campus on Sunday.

A view of obstacle run, Ireo Devils Circuit, at the sprawling Ireo Waterfront township campus on Sunday.

More than a 1,000-strong crowd of enthusiastic Ludhianvis braved the chilly winds, Sunday lethargy and obstacles comprising of fire, ice and tires to participate in India’s maiden obstacle run, Ireo Devils Circuit, at the sprawling Ireo Waterfront township campus on Sunday.

The 4-km military styled run is an extremely popular format worldwide, and was brought to Ludhiana by Ireo, one of India’s leading real estate developers, in association with sports management company, GameOn India.

Sunday saw people across age groups, professions and gender take part in the event. “I had heard of such runs happening in United States but to have it in Ludhiana was very exciting,” said Dr. Geeti Arora, one of the runners.

The first lot of 80 participants began the run in the early hours of the Sunday morning. They chartered a rugged 4 km course — covered by wild grass and off shoots — that entailed crawling, jumping and climbing over nets, pits and tires among other tasks.

“Finding my way out of a pit full of freezing water was the highlight. The run was muddy and difficult but full of adventure and fun,” said Gurvir Singh, who completed the course within an hour’s time.

For the less nimble runners, scaling the wicked web turned out to be an arduous task. This particular challenge demanded a 12 feet climb over a spider like net to proceed. The consistent movement of ropes and need for a firm grasp had some participants swaying from one side to another. Occasionally, instructors intervened to help the runners.

Read more: City Air News

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