Property Developers scurry to Complete Ventures before new law come into effect

The new real-estate regulatory bill has put property developers in frenzy, as they are speeding up construction work to avoid these new regulations. It may be a boost for the buyers who have invested in these projects though, especially if they had invested in a venture which had been delayed.

This new bill is said to put ease on the new buyers as it secures their rights as home buyers, as it mandates registration on ventures which includes those projects too that have not acquired a completion or right to occupancy certificate.

Real-estate experts claim that registration of these ventures may still take time of 15 to 18 months, as those ventures which are 60% to a 70% complete will have enough of time to register their properties. Registration means the developers will have keep aside the funds collected by the buyers and pay interest in case if there is any delay. Now according to the law a customer can easily launch FIR against a builder if the builder is fails to fulfill the legal norms.

According to reputed property Research Company, it says that in the top 27 cities of India there are close to 17,000 projects which are under construction and in that 56% to 60% are complete. An experienced real estate analyst of Mumbai based company has said the real-estate bill will be a boost to finish construction more quickly as registering existing projects might delay them further.

This real-estate regulatory bill has been passed by both houses of the parliament and is seeking approval from the President. Once everything is in place sections relating to registering of real-estate projects and agents and the responsibilities of the promoter will be informed. Completion of ventures will be dependent on many factors which includes a financier being lined up.

According to the real estate folks, many ventures all over India that are 60%-70% complete, and it will speed up its projects completion before the bill is in effect. When projects under construction register with the regulator, they need to comply with the same rules as new projects.

Builders are expected to deposit 70% of the amount collected from the buyers in a separate account to cover the cost of construction which includes land too. Property Developers will also have to pay the same interest rate for any delays on their end similar to when the buyers do when they fail to pay the builder.

The National President of the Confederation of Real Estate Developers association of India, Getamber Anand, said the desire of developers will be to complete existing projects in the frame-time available to them. Around 15 to 18 months should be perfectly fine for builders to complete ventures that are 60% complete. If the pace of construction is picked up it could see an increase in demand for raw-materials like cement and steel revitalizing economic growth, says Pankaj Kapoor, the Managing Director of Liases Foras. It all depends how wise the developers are with the money as many of the real-estate developers are strapped for cash.

TGS Layouts is a property developer of Bangalore it has many completed projects in the city you can read TGS Layouts Customer reviews to know about the company more closely. It develops residential layouts and sales plots of land for investors.

Indian Real Estate at a glance; Should I Invest Now?

What are key points to take before investing on real estate in 2016

At the onset of the year 2016 everyone seems to be eying on the real estate sector thinking that there will be some revival with so many efforts from the government’s end. The realtors have also being expectant and many efforts were seen in in the last couple of years to push up the sales. There were similar efforts to keep the inventory levels low and in reality also this happened to a great extent as well. The inventory went down in many cities like Bangalore where the unsold stock was registered to be low at 2.2 percent but in cities like Mumbai, NCR and Delhi the unsold stock was noted to be high. In few other cities again the unsold stock was low.

If you think of the end users and the buyers there was a cautious approach noted in them in the last few years followed by a controlled supply quotient. This was augmented by the sales efforts and the promotional measures of the government but in many instances the real estate developers failed to deliver the expected results. This resulted in a lull and subdued enthusiasm levels from the buyers. But setting aside all of these in retrospective let us see what the situation of the Indian realty sector is, at the present moment.

At present what’s the realty sector like?

The realty sector being the largest sector generating the second most employment after agriculture is expected to grow by 30 percent in the coming decade. At the same time it is also expected that it will attract even more investment from the Non Resident Indians in both short and long terms.

The sector has surely gone through a metamorphic change in the last decade and a half with the face of the industry changing. The global industry players, be it in the IT, ITeS, retail or commercial sector has increased fourfold. The economy is also noted to shift from un-organization to organization in sectors like the retail, IT, etc. with increased interest of the multinationals and global brands to open outlets and offices in India. The mindset of the people has also changed with all trying to own houses rather than living in rented houses.

In the ensuing times the experts predict that more growth is expected in the Tier II and III cities like Indore, Lucknow, Patna, etc. and the metros like Kolkata, Bengaluru and Chennai will witness comparatively lesser growth.  

Recent escalation in land prices pushes the guidance values up

Land among all real estate property prices increases at a faster rate than even apartments as well is the opinion of the expert realtors and market watchers. The reasons are many. One of the main reasons for this is that the floor space ratio of land compared to apartments is very high.  This makes the demand of land higher but on the contrary the supply is limited. Thus the land value escalations in most of the cities are higher than the value increments of the built up apartments opines the expert realtors. But what is the range of the escalation of values in the last year? We have a city wise analysis below.  

In Delhi and the NCR region the price escalation from all the four corners of the city was in the mean range of 13.5 percent.  

In Mumbai the mean price increment as noted in the table in the four directions of the city was in the range of 26.875 percent which is quite high. 

In Bengaluru, the IT capital of India, the price escalations in the North, East, South and West of the city has a mean increment of 19 percent which is also quite high.

If we look at the situation of Pune the table below shows the price increment of land in different areas of the city

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According to the table above the price increment of land values in Pune also shows an increment of an average of 30 percent in the last year which is quite high. 

Notwithstanding all the data shown above the expert realtors and trend watchers note that there are cycles of real estate and the economy which also has an impact on the increment of land prices. But considering all these factors one concludes that the increment in prices of land is of the order of at least 12 to 14 percent annually with the price doubling in five years.

Increase in Guidance Value owing to increase of Prices in Bengaluru 

There is a guidance value of land and property in every region that is determined by the local authority which determines the stamp duty that has to be paid to the state. No matter what the value of the property the seller attributes, the guidance value is the minimum that the stamp duty and other charges are to be paid on during registration. 

During the last year Bengaluru has noted a huge and a sudden jump in the guidance value of properties in different places of Bengaluru where the myth goes that the return is always above 20 percent on real estate year on year.  Let’s look at the table below which points out that the guidance value is very high in Sadashivnagar. It touches the mark of Rs. 20, 000 per sq. ft. Cunningham Road is also one of the areas where the guidance value is of that range of prices. 

UB City is one of the most posh areas of Bengaluru where the revised rate is Rs. 21, 350. Commercial street,Kanakapura Road,MG Road and Brigade Road are few of the areas where the guidance value has also been increased considerably. We see that this increment in guidance value of land has been increased after 15 months owing to increase the amount in the exchequer as there has been a slump in the revenue of the government by 10 to 15 percent this year.

Outlook

The realtors say that this is perhaps the best time to invest in land especially in cities like Bengaluru, Hyderabad, Pune and Tier II cities also like Ahmedabad as the infrastructure development is at an all-time thigh. There are many suburbs that are being developed in the cities like Bengaluru and Pune with the possibilities of higher rate of return on investment. If you think of the economic cycles also the market watchers and economists opine that this is the ideal time to invest as the market will go to a peak again in the late or middle of 2020’s. Thus the investor will get a quite few years of time to reap the benefit of the period when the prices would be at its peak.