For retail investors, the wisest decision is investing in a home

Ireo Skyon, Gurgaon

Ireo Skyon, Gurgaon

Being euphoric about one’s residential real estate investments may sound fairly justified.

While intending buyers decry the rapid rise in real estate prices, investors are on Cloud Nine. It’s actually quite interesting to note how the same people who first complained about how expensive homes in India have become go on to exult about how nicely their properties are appreciating once they have bought them.

The simple fact is that investment into residential real estate is today the wisest route that a retail investor can take.

Show Me the Data

When it comes to equities, bonds, commodities and currencies, one can rely on global trends and domestic data to take investment decisions. Decoding data and trends into an investment strategy is the very basis of success in all asset classes. However, when it comes to real estate — the largest and most preferred investment asset class in India — smaller investors seem to rely almost exclusively on hope, faith and belief. The information available is usually fragmented, and its reliability for providing indications on returns are comparable to that of monsoon predictions.

Data points are crucial, but they become relevant only when they are backed by ground intelligence and based on multiple parameters. For instance, an interesting picture emerges when one considers how India’s young population is driving the consumption story. This story has, in fact, been driving most of the domestic business sectors for the whole of the last decade.

Read more: Indian Express

Infrastructure

Chief Minister announces strengthening of 673 roads

Delhi Chief Minister Sheila Dikshit on Saturday announced that 673 roads transferred from the civic body will be strengthened by her government at an estimated cost of Rs.1,800 crore.

Inaugurating a road at Jalebi Chowk in Sultanpuri here, the Chief Minister said these roads will be repaired and made motorable.

Asserting that the State Government was committed to providing a smooth transport system in the city, Ms. Dikshit said: “As Delhi is one of the most populous cities of the world, major roads are choking due to high density of traffic. There is a constant need for developing a better road network system and upgrading existing ones to cater to the ever-increasing traffic. The Delhi Metro has been catering to two million passengers daily. With the coming up of monorail, the scenario will change as it will supplement the existing metro, which is being expanded by another 140 km under Phase-III.”

Ms. Dikshit said the traffic situation in Delhi had eased substantially with the coming up of 75 flyovers. “The situation is bound to further ease with the commissioning of the Signature Bridge over the Yamuna in the next few months. The extension of existing Barapulla elevated road will soon begin.”

Ms. Dikshit said the cost of the total project at Jalebi Chowk was Rs.12.33 crore. It will include strengthening and improvement of footpaths, providing signages and upgradation of street lightings on the road from Nangloi railway crossing to Sultanpuri.

Rs 2,200cr highway to bring Shimla closer to Chandigarh by 45 mins

The journey to the “Queen of Hills” will become less taxing in about three years from now. A 90-km four-lane express highway planned between Parwanoo (near Chandigarh) and Shimla will shorten the distance to the hill station by 17km, cutting down average travel-time from Chandigarh by 45 minutes.

The newly constructed Himalayan Express highway between Chandigarh and Shimla has already reduced the travel-time to three hours.

The National Highways Authority of India (NHAI) has prepared a project report for the planned highway, which will cost about Rs 2,200 crore. As per the project plan, large-scale demolition of commercial and residential buildings will be avoided.

NHAI project director Satish Kaul said all the formalities had been completed and the agency was just waiting for the no objection certificate and forest clearance for the land identified.

“We have decided to complete the project in three years,” Kaul said, adding, “…The project will be started as soon as the land is handed over.”

The highway will start from Banasar village near Parwanoo and terminate at the Mashobra-Kufri junction near Dhalli in Shimla. It will have four rail overhead bridges to bypass rail tracks and five tunnels.

The bridges will be constructed at Koti, Barog bypass, Chambaghat and Kaithlighat. One 1.4-km-long tunnel, which will be the longest on the route, will be built at Kaithlighat. The other tunnels will come up between Kaithlighat and the Mashobra-Kufri junction.

Govt to ease green norms for road projects

The tribal affairs and environment ministry on Friday resolved their differences to clear hurdles for allowing road projects in forest areas without mandatory consent of gram sabha — the village body.

At a meeting anchored by Prime Minister Manmohan Singh, the two ministries agreed to change the 2009 guidelines issued under Forest Rights Act for quicker approval for road projects on the ground that it would benefit the tribal and forest dwellers by improving area’s economic value.

Environment minister Jayanthi Natarajan and tribal affairs minister Kishore Chandra Deo had attended the meeting called by the PM to resolve the forest right issues considered as biggest stumbling block for fastening highway growth in India.

Many of the National Highway Authority of India’s road projects were struck because of delay in getting gram sabha approvals, which under the Forest Rights Act (FRA) is must for any project in forest area.

Now, the environment ministry would issue fresh guidelines exempting certain road projects from the provisions of the forest act.

Banking

FM to sweeten home loans with tax break

Finance minister P Chidambaram may have good news for home loan borrowers in the union budget for the financial year 2013-14 to be presented later this month. The government is considering hiking the tax deduction limit on home loan interest from the present Rs. 1.5 lakh to more than Rs.

2 lakh per annum.

The tax deduction on interest on home loans has remained frozen at Rs. 1.5 lakh a year for 12 years despite a steep rise in borrowing costs and inflation.

Increased costs for land and building materials, such as cement and steel, combined with rising demand to own homes in urban areas, flooded by migrants, have pushed up demand for mortgage-backed home loans in India in recent years.

The average home loan size has grown from about Rs. 17 lakh about three years ago to close to Rs. 22 lakh currently.

“This move would also increase the demand for housing units and have a multiplier effect on the economy through increased demand for steel, cement and labour,” said Homi Mistry, partner, Deloitte Haskins & Sells, a consulting and auditing firm.

In its first rate cut in nine months, the RBI last week said it would lend to banks at 7.75%, instead of 8%, enabling them in turn to offer cheaper loans to home, auto and corporate borrowers.

Private Equity

PE funds in India

In the last eight years, private equity funds have invested over $65 billion and some of the sectors like IT, pharma and real estate got much-needed funding to grow their businesses. Though private equity funds were very bullish on India during the boom years between 2006 to 2008, policy paralysis coupled with the global economic slowdown has affected private equity investment in India. Last year, PE funds invested $7.4 billion as compared with $8.8 billion in 2011. The number of deals, however, increased from 373 to 400 during the same period. Average deal size reduced last year as compared with 2011 and mid-market growth capital deals continued to be the focus of PE funds.

Analysts say the PE industry earlier had funds that were focused on providing only growth capital. Now the industry is balanced with funds available at all stages of the lifecycle be it seed, venture, growth, buyout and even distress. Sector-wise, IT received PE funding of $1,867 million last year in 140 deals, followed by pharma, healthcare and biotech, which got funding of $856 million in 28 deals. Domestic consumption sectors like pharma, healthcare, food and beverages, FMCG and education look attractive for PE investors. From 2005 to 2012, PE funds have invested over $9 billion in over 150 deals followed by banking and financial services at over $7 billion in over 260 deals.

There are over 200 PE funds operating in India and are broadly categorised as international funds operating through an India office, funds sponsored or anchored by Indian financial institutions; or funds sponsored by business houses and funds managed by general partners with prior investment or industry experience.

Read more: Financial Express

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