Sanjeev (name changed) is a big-time investor in the real estate sector in Gurgaon who has so far invested in six residential units in the city. For Sanjeev, the real estate sector reaps faster and better benefits than a bank or other financial schemes.
Gurgaon is increasingly becoming an investor-driven market where people park their money in real estate projects to earn quick dividends. Investors, who can range from second-time home buyers to bigger players, push property prices north despite already high-valued launches by developers. TOI takes a look at this market trend in the city with over 300 residential projects.
According to Sanjeev, “When a project is launched and a unit is costing, say, Rs 1 crore, an investor needs to just pay an upfront amount of say Rs 10 lakh (10% of the total cost). In six months or so, the resale value of that unit increases by Rs 200-300 per square ft. So as an investor, even if I sell the unit at that rate, I end up earning a profit of Rs 6 lakh on an investment of Rs 10 lakh in just a span of 6 months (a profit of 60% in a matter of six months). Then again, by just investing Rs 15 lakh in another new launch one can look at earning a similar profit.”
Read more: Magic Bricks
Best Time for Middle Income Home Buyers to Scout for Attractive Deals
With the government announcing an additional interest benefit of Rs 1 lakh on first-time home loan borrowers up to Rs 25 lakh, the home buyers, mainly from the middle-income group, should not postpone their buying decision as this is the apt time for them. The Rs 1 lakh exemption should have been given to the existing customers who already have a housing loan of Rs 25 lakh.
The urban housing fund, to be set up and regulated by the national housing board and RBI with a corpus of Rs 2,000 crore, will help the cash-strapped developers.
Most developers stay away from the affordable housing segment because it is not attractively-priced and the access to funds is limited.
While the budget has small offerings, the big point is missing. The rate of abatement on flats of above 2,000 square feet or costing Rs 1 crore and above has been reduced from 75 per cent to 70 per cent. Effectively, this translates into an increase in service tax outflow, which means that housing will now become even more expensive. The 10 per cent surcharge on companies with income over Rs 10 crore was disappointing. All these will translate into costlier property prices.
The government should have given some more relief to boost the growth of the sector. Taxes are going up, construction costs are going up, approval delay is another cause of concern for the sector which has not been addressed in the budget.
The FM talked about increasing the flow of foreign funds by foreign direct investment (FDI), foreign institutional investment (FII) and external commercial borrowings (ECBs). He later said that Sebi will simplify procedures for FII and international based practices will be followed for FII and FDI.
Read more: My Digital FC
It looks generally positive for real estate
The budget may have failed to live up to the expectations of the realty sector, but realtors believe that one can’t shy away from the fact that this is a responsible budget. “The budget in general is encouraging but tepid as far as real estate is concerned. A first-time housing loan up to Rs 25 lakh would get additional deduction of interest of up to Rs 1 lakh is a welcome step and would empower buyers. Also, more spending on infrastructure projects and setting up of the urban housing fund will give a boost to the housing sector,” explained Sanjey Roy, senior vice-president, Corporate Communications, DLF Ltd.
According to Ravi Saund, Chief Operating Officer, CHD Developers Limited, it might be early to gauge whether this Union Budget would succeed in propelling the growth engine of the Indian economy to newer heights. “However, a couple of reforms announced is a welcome move. Prime facie, it looks positive for the real estate sector at large. Infrastructure has received a major thrust, especially the transport and energy segments. The steps to increase funding for roads, highways and other infrastructure will surely add more terrain on the Indian realty map taking tier 2 and tier 3 cities on the new growth trajectory,” he explained.
Read more: The Times of India
Think New York is costly? In New Delhi, even seedy real estate goes for 8 figures
The fading bungalow at 38 Amrita Shergil Marg does not immediately shout real estate bling.
There is no tennis court, no infinity pool, no Sub-Zero refrigerator or walk-in closet. The paint is chipped, the bathrooms are musty and the ceilings have water stains. The house may ultimately be torn down.
Yet when it went up for public auction, the winning bid was almost $29 million. And many neighbours consider that a bargain. One block away, a gracious if not quite Rockefeller-ready residence once leased by the Mexican ambassador is now reportedly on the market for more than $100 million. Other nearby houses are going for $40 million to $70 million.
“The price of the Mexican residence is $110 million,” said Jorge Roza de Oliveira, Portugal’s ambassador to India. “You can buy a home in New York and Miami and Lisbon and London and keep a lot of change for that much.”
Real estate prices in the heart of New Delhi, especially for the bungalows built nearly a century ago during the British Raj, are among the highest in the world.
Though India’s economy has cooled, the demand for property in elite areas remains so strong that even finding a house for sale is tricky: formal listings do not exist; prices usually circulate by word of mouth. Transactions often require some “black” money, or stacks of cash paid under the table to avoid taxes.
Read more: The Times of India
India’s fiscal plans realistic, positive for ratings: Moody’s
The modest fiscal consolidation plan unveiled in the 2013-14 Union Budget by the Indian government is a realistic effort to correct the country’s macroeconomic imbalances against a backdrop of subdued economic growth and upcoming polls and is credit positive for its sovereign ratings, Moody’s Investors Service said on Monday.
In his budget for 2013-14, finance minister P Chidambaram kept the fiscal deficit for 2012-13 at 5.2% of gross domestic product (GDP), a shade under the estimated 5.3% and vowed to rein it in at 4.8% of GDP in the next fiscal year
“Fiscal consolidation could pave the way for monetary easing, which would revive growth. The extent of easing would depend on whether the Reserve Bank of India, which has noted that “sustained commitment to fiscal consolidation is needed to generate monetary space,” believes that the government has provided evidence of such a commitment in its budget,” the global ratings agency said in a report.
“The fiscal 2013 outcome demonstrates the sovereign’s commitment to the budget target. Efforts to rein in India’s deficits are a step in the right direction because large central government fiscal deficits constrain credit by fuelling inflation, crowding out private-sector access to domestic savings and widening the country’s current account deficit,” Moody’s said.
Read more: The Times of India
Good job given political, economic constraints
Given the economic and political constraints, finance minister Chidambaram has done a commendable job in controlling the fiscal deficit and encouraging investments.
Not only has he met the target of keeping the fiscal deficit below 5.3% of the GDP, but has reiterated his resolve to bring it further down to 4.8% GDP next year. These are the first steps in the long road towards fiscal consolidation.
Measures like the additional surcharge on the super-rich as well as the commodities transaction tax were on expected lines. Given the need to raise resources, the additional surcharge on personal and corporate income taxes does not come as a surprise. The fact that the FM has announced this as only a temporary measure is a good sign. The reduction in STT on equity futures will aid in arresting the export of our markets.
The investment allowance of 15% for investments over R100 crore is a welcome move to encourage corporate investments, while the extension of the Rajiv Gandhi Equity Scheme from one year to three years will hopefully increase retail participation in capital markets.
For capital markets the finance minister has announced wide ranging measures, from re-looking at legislation, to instituting an expert’s council to advise the government in getting our financial regulation in sync with global best practices.
Read more: Financial Express