How Real Estate Bill May Shake Up Property Sector

How Real Estate Bill May Shake Up Property Sector: ReportA shake-up of the property sector is imminent once the Real Estate Bill gets implemented in the next three months, according to India Ratings & Research.

Developers wouldn’t be able to launch new projects before obtaining all approvals and will have to deposit 70 per cent of sale receipts in an escrow account once the new law comes into effect. The new rules are likely to impact the liquidity of real estate players in the short-term, the research firm said.

“This will put pressure on developers to raise more funds (debt or equity). Organised players have access to varied sources of funds, namely loans from banks/non-banking financial companies, non-convertible debentures, private equity and structured debt, thus they are likely to be able to tide over the liquidity crunch, though the debt raising and cost of such funding will result in weaker credit profiles in the short term,” it said.

The new norms prohibit the sale of projects without registration with the Real Estate Regulatory Authority, for which the receipt of all approvals and commencement certificate is a prerequisite.

Sales from new projects are a key source of liquidity for developers. Tighter liquidity could force developers to rely more on joint venture projects with land owners due to lower availability of surplus cash to buy land, said India Ratings.

The research firm also said that the provision of depositing at least 70 per cent of sale proceeds in a separate account will “especially impact developers with projects in cities such as Mumbai or high-end projects in other cities, where the component of land cost is much higher than the construction cost”.

Over Dollar 1 Trillion To Enter Global Real Estate Market in 2016: Survey

Global realty market is likely to witness an investment of more than dollar 1 trillion this year, up 6 per cent from 2015, as investors continue to find real estate appealing on relatively higher returns, according to property consultant CBRE survey.

India’s real estate sector is also expected to get some benefit, though a small share, of the global real estate investment funds, the consultant said.

“Global real estate investors remain strongly expansionary in 2016, with more than USD 1 trillion of planned expenditures anticipated to enter global real estate markets – 6 per cent higher than in 2015,” CBRE said in a statement.

North America is the most popular destination for investment (48 per cent), ahead of Western Europe (26 per cent). London, Los Angeles and Sydney are top regional targets of investors.

The CBRE’s Global Investor Intentions Survey, conducted between January and early February, asked investors how much capital they would deploy in real estate purchases this year.

Majority of investors (82 per cent) indicated that their buying activity would increase or remain same as in 2015.

“The results reveal there is approximately dollar 1.16 trillion of capital targeting property investment in 2016 – an increase of 3 per cent from 2015 levels in local currency terms,” CBRE said.

Commenting on the survey findings, CBRE’s Global President Capital Markets Chris Ludeman said: “Investors continue to find real estate appealing, chiefly due to the relatively higher returns and stability on offer.”

“We believe that 2016 will be another active year for the global real estate investment market, with capital flows 6 per cent higher than in 2015. There is more than dollar 1 trillion of capital targeting real estate in 2016 and this volume of expenditure will maintain support for global real estate prices,” he added.

Stating that investment strategies are shifting amid concerns about the health of the global economy, Ludeman said 2016 looks likely to be a “risk-off” year, with investors more focused on core assets and less likely to seek secondary, value-added and alternative opportunities.

“Real estate remains an important asset class for domestic and overseas investors. The year 2016 promises to be a good one for the industry and it is expected that India’s real estate sector will get some benefit, albeit a small share, of the global real estate investment funds,” said Anshuman Magazine, Chairman & MD, CBRE South Asia.

In terms of asset classes, CBRE’s report said office (30

per cent) remains the most popular property type globally, though interest is down slightly compared to last year. “There is a notable uptick in interest for retail (21 per cent) and multifamily assets (20 per cent) from 2015”.

Real Estate Bill To Safeguard Rights Of Home Buyers: Industry Body

The real estate regulatory bill will safeguard the rights of consumers against delays in completion of housing projects, industry body CII said on Wednesday and sought single-window and time-bound approval system for realty projects.

The Real Estate (Regulation and Development) Bill was passed by Lok Sabha yesterday, five days after its passage by Rajya Sabha.

“Passage of the Real Estate Regulatory Act by both houses of Parliament paves the way for a well-deserved and long overdue legislation for safeguarding the rights of consumers, especially the common man, against occasional delays,” CII Director General Chandrajit Banerjee said.

The bill seeks to protect consumer interest, ensure efficiency in all property-related transactions, improve accountability of developers, boost transparency and attract more investments to the sector.

It provides for setting up of Real Estate Regulatory Authorities (RERAs), which will regulate transactions related to both residential and commercial projects and ensure their timely completion and handover.

The real estate sector is not only crucial from economic perspective, having linkages with around 250 sectors, but also has deep socio-cultural importance in the Indian scenario, he added.

CII hopes that all state governments would now soon come out with guidelines enabling time-bound approval procedures for housing projects with appropriate penalties for erring departments/ministries, he said.

“Not only would this step usher in a new era of transparency and accountability amongst all stakeholders, but will also help realise the government’s ambitious ‘Housing for All’ scheme by 2022,” Banerjee said.

CII would continue to strive towards a single-window clearance regime for real estate and housing projects, he said.

The bill provides for imprisonment of up to three years in case of promoters and up to one year in case of real estate agents and buyers for any violation of orders of Appellate Tribunals or monetary penalties or both.

Expect REIT, Start-Up Listings to Pick Up in Next Fiscal: Sebi

Expect REIT, Start-Up Listings to Pick Up in Next Fiscal: Sebi

Moving beyond the vanilla equity and derivative products, Indian capital market is set to offer a host of new investment avenues in coming months with the Securities and Exchange Board of India (Sebi) expecting a sizeable number of REITs (real estate investment trusts) and start-up listings to hit the market in the next fiscal year.

Market regulator Sebi is also gearing up for significant steps to deepen the corporate bond market to develop a market-based financing framework for companies, while it also expects instruments like ‘muni’ bonds and infrastructure investment trusts (InVITs) to get a leg-up in financial year 2016-17, beginning April 1.

Sebi has also put in place a new regulatory framework for the municipal bonds, commonly known as ‘muni’ bonds which are very popular in various developed markets as an instrument to raise funds.

The regulator expects the government’s ambitious smart cities programme to get a major boost from the issuance of muni bonds as the local bodies can tap the capital markets with these instruments to garner the required funds for building infrastructure and for providing other facilities.

Besides, Sebi is working on an electronic auction platform for primary offering of corporate debt, and also a complete information repository for corporate bonds, covering both primary and secondary market segments, as proposed in the Union Budget by Finance Minister Arun Jaitley.

For deepening of corporate debt market, Mr Jaitley had also announced that the Reserve Bank of India (RBI) will issue guidelines to encourage large borrowers to access a certain portion of their financing needs through market mechanism instead of the banks.

Sebi expects this move, in addition to its own regulatory measures, to give a significant boost to the bond market.

“There are several developmental measures we have taken for the markets – One is the area of REITs (real estate investment trusts) and InVITs.”

“With recent Budget announcements and based on my interaction with the industry, I am hopeful that during 2016-17, we will see a sizeable number of REITs coming up,” Sebi Chairman U K Sinha said recently here after the first post-Budget board meeting of the capital markets regulator.

Last week, Sebi also allowed foreign portfolio investors to invest in REITs and InVITs.

Mr Sinha said Sebi has also put in place new norms for listing of start-ups, with easier disclosure compliance requirements along with various other relaxations, which coupled with the sops announced by the government would result in many such ventures hitting the market.

“I am hopeful that those (start-up) listings would happen in the new year,” he said.

“We have also come out with norms for municipal bonds. We all know that there would be smart cities and otherwise also there are municipalities and they can issue these bonds.”

“Now, there is a Budget announcement on corporate bonds and RBI is going to incentivise the corporate bonds that is for corporates planning to raise funds through bonds rather than from the banks… This is a government policy now that from banks-based financing, the country has to move to market-based financing. These are some of the proactive measures,” he added.

IDBI Federal Life Buys Rs 111-Crore Office Space

Representational imageIDBI Federal Life has purchased office space for Rs 111 crore in Marathon Realty’s commercial project at Lower Parel in Mumbai.

It has acquired around 61,720 square feet office space spread over two floors in the project ‘Marathon Futurex’.

“IDBI Federal Life Insurance Company Ltd has bought commercial space worth over Rs 111 crore at Marathon Futurex in Lower Parel in Mumbai,” the realty firm said.

The deal was registered last week, it said in a statement.

The 450 employees of IDBI Federal Life will occupy the offices on 22nd and 23rd floors of the tower.

The deal works out at around Rs 18,000 per square foot and falls within the ongoing property rates for outright transactions.

“This is one of the biggest commercial realty deals in the recent time which instills the hope that commercial real estate is on track,” Marathon Group MD Mayur Shah said.

Mumbai-based Marathon Realty is developing this eight lakh square feet office building in three phases, of which two phases of 24 floors each have already been completed.

IDBI Federal Life Insurance Co Ltd is a joint-venture of IDBI Bank, Federal Bank and Ageas, a multinational insurance giant based out of Europe.

In Marathon Futurex project, Hindustan Petroleum Corporation and its subsidiary Hindustan Colas bought office space for Rs 120 crore last year.

Essel Group had acquired 2.20 lakh square feet commercial space for Rs 400 crore, the company said.

Lodha Sells Rs 1,600-Crore Flats During Pre-Launch

Representational imageRealty player Lodha Group on Monday said it has sold 2,000 flats worth Rs 1,600 crore at its township project in the adjoining Thane district during its pre-launch phase.

The Group received interest from over 3,000 home buyers across India to book flats during the pre-launch phase and it sold nearly 2,000 flats worth Rs 1,600 crore, the city-based company said in a statement.

“The project has not only created super normal demand in a highly competitive market such as Thane but also revived its real estate landscape by reinforcing people’s trust towards appreciation and investment in real estate,” the company’s chief sales officer Prashant Bindal said.

Lodha acquired the property admeasuring 87 acres from Clariant for 1,154 crore in December, 2014. The company has proposed to develop 3,500 apartments of 1 and 2 BHK housed in 27-30 storeyed towers.

Out of these 3500, 2000 are already sold off, Mr Bindal added.

Real Estate Bill Could Encourage FDI Inflows: Nomura

Real Estate Bill Could Encourage FDI Inflows: NomuraThe Real Estate Bill can bring greater credibility to the sector through more transparency as well as accountability and could encourage flow of FDI (foreign direct investment) funds into the market, a report by global financial services firm Nomura has said.

The upper house on March 10 passed the Real Estate (Regulation and Development) Bill, 2016, aimed at protecting the interests of home buyers, bringing in more transparency and accountability into the real-estate sector.

According to Nomura, the Bill could go a long way towards protecting the interests of home buyers by facilitating more timely completion of projects and ensuring greater transparency.

This Bill was touted as a major reform measure to regulate the vast real estate sector and bring order in it.

“Mandatory disclosures and registration may reduce black money transactions in this sector; and greater credibility of the real-estate sector (through greater transparency and accountability) could encourage flow of FDI funds into the sector,” Nomura said.

“The Bill is yet to be passed in the Lower House, though that should be easier, as the government has an absolute majority in the Lower House,” Nomura added.

The key features of the bill include, timely execution, accountability and transparency.

The Bill proposes setting up state-level real-estate regulatory authorities, where builders will be mandated to register all projects above 500 square metres (earlier 4000). This would apply to both residential and commercial real estate projects, including those currently under construction.

State-level appellate tribunals will be set up for addressing complaints. A timeline of a maximum 60 days has been set for resolution of disputes.

Failure to register a project could result in imprisonment of up to three years for developers or 10 per cent of the project cost or both.

Home buyers and real-estate agents could also face up to one year of imprisonment, if found in any violation of the tribunals or regulatory authority.

Real Estate Regulator Now A Step Closer To Reality

Real Estate Regulator Now A Step Closer To Reality The Rajya Sabha passed a bill on Thursday to regulate the real estate sector, protect home buyers and ensure the timely execution of projects with an aim to boost investor confidence and stamp out illegal practices.

The new rules, applicable to residential and commercial developments, will make it mandatory for all projects and brokers to be registered with the real estate regulator who will oversee transactions and settle disputes.

The bill will apply to new and ongoing projects.

Over the years the sector has acquired a degree of notoriety which needs to be addressed to enable enhanced flow of investments, Venkaiah Naidu, minister of housing and urban poverty alleviation said in parliament when tabling the bill.

During recent years sluggish economic growth and delays in getting approvals stalled several projects, leaving buyers waiting for their homes and developers holding high debts. It has also put a strain on investors such as banks, private equity firms and non-banking financial companies.

The bill, designed to bring transparency and accountability to the sector that contributes about 9 per cent of India’s gross domestic product, is expected to revive investor and buyer confidence.

“It will help distinguish good real estate companies that conduct business by the book from those who have not … It will make buyers more confident and will perk up market sentiments as well,” said J.C. Sharma, managing director of Bengaluru-based developer, Sobha Ltd.

The new law is expected to benefit developers such as DLF Ltd, Oberoi Realty, Prestige Estates Projects Ltd and Godrej Properties among others.

It is also likely to help Prime Minister Narendra Modi achieve his election promise of providing homes for all Indian families by 2022.

“Effective regulatory mechanism will lead to orderly growth of the sector and give a strong impetus to our vision of ‘Housing for All’,” Modi tweeted after the bill was passed.

PROVISIONS AND PENALTIES

Several projects in India have been delayed in recent years after developers diverted funds raised for one project to another, leaving them unable to complete construction and resulting in buyers still waiting for their homes.

The bill seeks to stop this practice and impose penalties in case of a breach.

In a key provision, the bill makes it mandatory for developers to put aside 70 per cent of money collected from buyers during the pre-sale of homes and use that solely for funding the construction of the project.

The bill also proposes that consumers and developers pay the same interest rate for any delays on their part. It also allows for developers to be arrested and jailed for up to three years for any violations.

“Even though some clauses are heavily stacked against the builders, we believe that this bill has the potential to transform our industry,” said Rajeev Talwar, group executive director at Delhi-based developer, DLF.

Sunderbans to be separate district

article picSunderbans, the world’s largest mangrove spread over two southern Bengal districts — North and South 24 Parganas — will become a separate district by next Puja. Chief minister Mamata Banerjee made the announcement at a public meeting in Sandeshkhali on November 27.

Besides Sunderbans, the state will get two more districts in Basirhat, now a subdivision in North 24 Parganas, and Jhargram, a subdivision of Midnapore. This apart, the government has already decided to bifurcate the existing Burdwan district into Burdwan (industrial) and Burdwan (rural). Last year, the government developed Alipurduar, once a subdivision in Jalpaiguri, into the state’s 20th district. Next year’s reorganization will take the district count to 24.

“Sunderbans will become a district in eight months. I have noticed that people from the villages have to travel a long way to reach Barasat, the district headquarters. Similarly, those living in Gosaba have to take pains to reach Diamond Harbour for administrative help. We have plans to develop Basirhat into a separate district and divide Burdwan into two districts,” the chief minister said.

With the 2016 assembly polls drawing near, Mamata announced a total 134 projects estimated at Rs 337 crore for the Sunderbans. They include road projects, irrigation schemes, healthcare facilities and water supply projects among others.

Tax scanner on commercial spaces in Kolkata

article picKolkata Municipal Corporation (KMC) has started to crack down on a host of city malls, hotels and nursing homes that have allegedly declined payment of property tax calculated on rental basis. For some, general revaluation (GR) records have gone missing and in other cases, the rates are grossly undervalued when compared to the surrounding buildings.

The KMC assessment department has formed several area-wise crack teams to serve notices on major property tax defaulters and bring prominent commercial properties under re-assessment.

After attaching a prime property located at Government Place (East) last month, the department has set its sights on a multi-storied building on Rashbehari Avenue. It houses several prominent business houses as tenants. Armed with the high court order, KMC has already served a notice to the owner, asking him to clear the outstanding tax. According to a KMC official, the owner owes several crores as property tax.

Similarly, a team raided a prominent shopping mall at Bhowanipore last week for re-assessment of the space leased out or sold to different business houses. Civic inspectors say a number of business houses that are operating from the mall had been undervalued or had no assessment records. “We hope to raise our revenue by more than a crore annually,” said a KMC assessment department official.

Two malls at Gariahat are also under KMC scanner. KMC officials found that they were paying tax much below the assessed rate. “This property is grossly undervalued. We will stock of the measurement and check book of records for fixing the actual valuation,” said a KMC assessment department official.

Civic officials are working on a formula for re-assessing property tax rate for big business houses. “We have been pleading with them to cooperate with us in re-assessing the space. We are facing a challenge as the business houses fudge book of records or some times we face political pressure as an influential business lobby is at work,” said a KMC assessment department official.

Mayor Sovan Chatterjee, however, made it clear that KMC won’t buckle under pressure. “We have already attached one prime property. Now we are set to teach a lesson to others who will not pay legitimate property tax,” Chatterjee said.