RBI Bans Subvention !!!

After the land bill getting approved from the RAJYA SABHA, now its another hit by RBI for the developers.
RBI has recently banned the subvention scheme or the 80:20 scheme which the developers used as a marketing tool to sell and promote their residential projects. The government has for sure pulled up socks against the real estate developers.

Bad News Developers !!!!

I wrote about the subvention plan earlier in my blog http://realestatenirad.blogspot.in/2013/07/subvention-scheme.html. This post discussed about the subvention plan, its benefits both to customers and the developers. The question arises Why should RBI ban a scheme which benefits both, the customers and the developers ?
I would like to enlighten the fact that the RBI has actually banned the upfront payment of 80% of total cost by the bank to the developer. This means that the developer cannot  demand the full payment from the bank under subvention irrespective of the construction status. This is what our respected RBI trying to curb.

In my opinion this would not affect the real estate industry, the developers or the customers. Most of the developers in NCR do not practice the process of acquiring the 80% of cost under 80:20 scheme at one go.
They follow the Construction linked plan while getting the disbursal from the bank. So the matter of banning upfront 80% disbursal from bank is null or void in NCR. Recently BPTP launched "Pedestal", Independent floors in Sector 70 A, Gurgaon under the same scheme. their subvention is planned as per the construction linked plan, which means, they demand the payment from the bank as per the construction stage.

Effect of RBI ban on Subvention !!

As customers move deep into the ban details, they would come to know that their is not any change in the plan. As earlier said that, it is a ban on the upfront payment of 80%, which is not practiced  by developers in NCR, the customers would come to know that the ban does not affect the subvention in NCR. But this is a fact which people will understand after getting deep into the details of the ban.
For Now, the developers are hit hard by the ban. The sales will surely come down as most developers used it as a marketing and sales tool. It was easier for a customer also, as he was not supposed to pay EMI till he get the possession or till the subvention period. Moreover the builder used this plan to generate funds at a lower rate of interest when compared to commercial loans or construction financing loans.
This move by RBI will make real estate transaction more transparent as the end users and the investors will come to know the facts of Subvention. For the financing authorities, this ban will compel them to think twice before financing a project.
In my opinion, RBI is trying to curb the generation of construction finance at the interest rate of retail home loan, as many builder used this technique to generate funds to finance their construction cost at a cheaper rate of interest.
Moreover as the loan was on the credibility of a individual, any default on the the loan(in the subvention period) would affect the credit score of the individual. RBI move is surely going to affect the builders who are used to malpractices with the help of subvention scheme.

Let's see what's next in the bag for the Real Estate Industry !!

If you found something useful in the post, remember to share it among your circle.


Thanks
Nirad K Singh

Land Bill 2013 !!!!

LAND ACQUISITION, REHABILITATION AND RESETTLEMENT BILL,2013

After the food bill getting consent it was the time for the cloth bill but we skipped it and came to a land bill being executed. We should have moved in the sequence of ROTI, KAPDA and MAKAAN but nevertheless, I expect a cloth bill in the near future.
Jokes apart, lets see what this land bill is, and how will it affect the real estate industry.

On 29.08.2013 the Lok Sabha passed land bill with 216 "yes" on the bill.
The major highlights of the bill are as follows :-
- Compensation for the acquired land @ 2 times in urban areas and 4 times in the rural area of the market value of the land.
- Consent of 80% of land owners for private players and 70% of land owners for PPP for acquiring the land.
- If a SC or ST land is acquired, the owner will be provided the same area of the land being acquired or two and half acres land (whichever is lesser) at some other place. If the land losing family of SC or ST is migrated to another district then other rules of rehabilitation and settlement also applies.
- If acquired land is sold again at a profit more than 40% of the acquired value, the profit is to be shared with the original owners also.
- Bill applicable on acquisition of 50 acres in urban areas and 100 acres in rural areas.
- The bill gives the right to states to impose restriction on acquisition of agricultural cultivation land.

Impact on Real Estate Industry :-

A simple impact which anyone can analyse is that the new entrants in the real estate industry will have to pay much more than before for purchasing land more than 50 acres in urban areas and 100 acres in rural areas.
This would simply affect the big infrastructural projects being executed and if executed would come at a premium price tag. With the bill being passed even the cost of the smaller pieces of land, which do not come under the provisions of the bill , will see an upward movement.
One of the highlights of land bill requires the consent of 80% of land owners for acquiring land by private players and 70% in case of PPP. This point will surely delay the land acquisition process as getting consent from the majority land owners requires a lot of negotiation with a lot of people. And for every negotiation every owner might not be available. So one can expect a major delay in the launching of next big housing or infrastructure project. This will not affect the retail users and the investors but will surely be a tedious job for a developer to complete.
The rehabilitation and settlement clause of the bill is expected to add that extra penny to the total cost of a house for the investors and the end users. The extra cost which the acquirer incurs, apart from the new acquiring cost, in the the form of rehabilitation and settlement expenses will trickle down to the overall cost of the final property.Thus increasing the total cost of the finished product . i.e. an apartment or a plot or a villa or a floor.
The major hit will be on the the affordable housing projects, as these projects are mainly dependent on the low cost of land. In my opinion, the concept of low budget will disappear in the future or the benchmark of the affordable housing will increase.
The bill confirms transparency in land acquisition process and safeguards the interests and rights of the land owners both in rural and urban areas. The only positive point, I could make out in context of the real estate industry.
So, as per the consequence of the bill, real estate industry will see a price increase of as much as 25% - 30%. It is a good news for the pre-bill investors as their return on investments will also see a sharp upward movement if this bill becomes a law after approval from the Rajya Sabha and our honorable President.

Follow and share among your circle, if you found something useful in this !!

Thanks
Nirad K Singh

How is Depreciating Rupee Affecting Real estate Industry ?

In the past few months, India has seen a major depreciation in the value of Rupee against Dollar. It is affecting the economy as well as the real estate Industry. The Rupee has depreciated 25-30% in the last few weeks. This depreciation has major affects on various industries, Real Estate being one.

Affects of Rupee-Dollar fight on Real Estate Industry :-

India imports a part of the raw materials , cement as well as the heavy machinery used in the construction process. Now with the increase in the value of dollar, these imports have become costlier and the overall construction cost has increased.The extra cost incurred in the import of these raw materials and machinery will be passed on to the end users or the customers in the form of escalation costs. This depreciation of rupee will make under construction property rates to move northwards.  The customers will have to shell out that extra bit of money from their pocket. 

The major contribution to that extra cost comes from the increase in oil prices. As India imports the major amount of fuel, the transportation cost also increases. This is applicable to all the sectors in India and so is applicable to the real estate sector also.

The depreciating rupee has forced the banks to increase the lending rates. Recently ICICI and HDFC bank have increased their lending rates which has affected the customers pockets.

The depreciating rupee is having a positive impact on the NRI's who are planning to own or invest into Indian Real estate. With the decrease in the rupee value, the NRI investors are attracted towards Indian Real estate industry as they have to shell out less money at the current rate of rupee than before. NRI's see this as a golden opportunity as for them the property prices in INDIA has decreased by 15-20%. The same property which costed them Rs 100 few weeks earlier is now costing them Rs.80 in terms of their currency.

So with lower rupee rates, Real Estate Industry can expect good sales from the NRI's especially during Deepawali time which is considered to be golden period in real estate industry.

One of the other communities who have gained from this rupee-dollar fight are the Indian exporters. They are booking more profits on the same articles than before. They can be the one who are better prospects to invest in Real Estate market.

So we can clearly make out that the this depreciating rupee has a negative impact on the local buyers but its a great opportunity for NRI's to invest in Indian Real Estate. Calculated predictions shows that the builders,channel partners and consultants will see an upward movement in the inquiries for real estate from overseas if the rupee does not stabilize in the next 2-3 months time.

Thanks 

Nirad K Singh 

Avalon Ridge View , NH8,Neemrana, Rajasthan

Avalon Group is soon going to launch a new residential project in Neemrana , Rajasthan. The project is bang on NH8 in the industrial town of Neemrana.

Tentative Details are as follows

2BHK - 1150 sq.ft
3BHK - 1550 sq.ft

Price- Rs.2725 psft.

Ing. Discount-Rs.100 psft
Land Area - 13.5 acres
Total Flats - 800-900
Booking Amt. - 3 Lacs & 4 Lacs

Notable Features:
Easy accessibility to NH8.
Very close to Japanese Zone in Neemrana.
Equipped with modern amenities.

Avalon Ridge View as an Investment !!
The location seems good but the only negative thing about it is the toll which is just before the site while moving from Delhi to Jaipur. With being very close to industrial hub and Japanese Zone, the project has the potential to deliver good returns on investment. Location not perfect but its not that dull too.
The reputation of developer is good and has recently seen enormous response for their project in Bhiwadi, Avalon Rosewood.
Pricing is competitive as projects from different developers are in the same range.
Good investment option only if you buy it at the first price with inaugural discounts and the channel partners' discount.

Thanks
Happy Investing !!
Nirad K Singh

Neemrana Real Estate !!

NEEMRANA

Neemrana, an ancient town in the district of Alwar in Rajasthan has become one of the hottest destinations of investment in NCR. Around 130 kms from Delhi on the NH8, Neemrana is rightly placed to become one of the hottest destination in real estate development in the coming 5 years. It is an important industrial hub along with Bhiwadi and Baawal in close viscinity. 

Major Developments in Neemrana

1. Part of the Delhi Mumbai Industrial Corridor (DMIC)

2. Around 2000 acres of Japanese Zone.

3. DMRC has plans to connect Neemrana with New Delhi.

4. Major Industrial hub with already operational companies like Daikin,Honda-Siel Cars,Hero,Nissan,Havells, Electrolux to name a few.

5. Proposed Greenfield Airport in Neemrana.

Neemrana is well placed with connectivity through NH8. Major MNC's are planning to set up their manufacturing units in Neemrana, Baawal and Bhiwadi, which forms the 3rd largest industrial hub in India.

With such massive plans for Neemrana, the requirement for quality housing will boost up in these areas.

Real estate Investment in Neemrana :

The development path for Neemrana looks bright. The Developments which have come and are yet to come is tremendous. With various MNC's planning to set up their manufacturing units in Neemrana, the real estate requirement will surely see a northward movement. The major reason for development is the 2000 acre Japanese Zone which has given a new face to an ancient historical town. The rates of property is quite low in Neemrana as of today. So, It can turn out to be a great investment option in NCR.  

The NCR real estate has already seen a transformation in the real estate prices in Bhiwadi. The prices of apartments have seen a constant growth in the last 1 year in Bhiwadi. Similar trend is expected in Neemrana.

Rajasthan Govt. is equally aiding in the development of Bhiwadi, Neemrana, Behror and Shahjahanpur in the form of RIICO. A realty investment in Neemrana will see a return of 70-80% in the next 3-5 years.

Neemrana Real estate is a long term game and one should not expect returns if their horizon is in months.

Infact, if your horizon is in months, keep away from Real Estate investment as it might turn out to be a nightmare. 

Real estate players have started building group housings in Neemrana. Major Players include Eldeco , Ashiana and Avalon.

Thanks

Happy Investing !!!

Nirad K Singh

Supertech New Project In Sector 68, Gurgaon !!

SUPERTECH NEW PROJECT ON SOHNA ROAD GURGAON

Once again a new opportunity for investment and for that matter, end use also Supertech is coming with a new project in Sector 68, Gurgaon.

Tentative Details :-
2 BHK (1200sq.ft)
3 BHK (1600 sq.ft)
4 BHK (2400 sq.ft)

Land Area - 28 acres
Price Band - Rs.5500-6000 psft.
Booking Amount - Rs. 5lacs
Tentative Launch date - September 2013.

Analysis of the project :

The pricing for the project seems good as far as the location is considered. It is minutes away from the already developed Sohna Road. Again for this project, Location is the very important parameter which can define its fate. Moreover, Google is planning to shift their office to Sohna Road, rates for various projects on Sohna Road will move towards North and that would benefit the Supertech's project also.
For investors , its again the 1st price for this project, Location is good and Builder is average. So one can consider it as an strong option for investment in Gurgaon as far as you are planning for a long term investment(more than 2 years).

Thanks
Happy Investing !!!
Nirad K Singh

Dwarka - Manesar Expressway !!

Northern Periphery Road

The Northern periphery Road, commonly known as Dwarka Expressway has been fascinating Investors ever since it came on papers. This 18 km, widest expressway is being developed under the PPP model and will connect Dwarka with Gurgaon on NH8 near the Kherki dhaula Village. It is being planned as an alternate connectivity between Delhi and Gurgaon and is expected to ease the traffic on NH8.
The property prices alongside Dwarka Expressway has seen an upward trend ever since the 1st project was launched. Numerous projects were launched and all have seen good price appreciation in it. Investors, also made huge money by investing on D-Eway. The prices shot up from Rs.2500 psft to a whopping Rs.10500 psft (Tata Sector 113). There were some projects which did see very less appreciation while being very close to D Eway.

Salient Features of Dwarka Expressway :-
1. Widest expressway of Asia.(150 meter wide)
2. Very Close to IGI airport and West Delhi.
3. Well planned Infrastructure.
4. Will reduce travel time between Gurgaon and Delhi Drastically.
5. Diplomatic Enclave in close vicinity.
6. Commercial Developments along side.
7. Metro Route Planned with D Eway

Dwarka Expressway as an Investment !!

Its not very difficult to say that Dwarka Expressway is a one of the best investment option available in the NCR after analyzing the past trends.It was and will be a destination which will keep on attracting investors by its extra ordinary returns. Many builders have come up with their world class projects alongside D Eway.
It is obvious, that it will be a place to stay in the near future with all the modern facilities and excellent connectivity.The Sectors alongside D Eway will soon become the posh sectors of gurgaon with options for both middle and upper class people. The Expressway has got a diverse range of offerings in terms of housing and commercial developments. The Price tag starts around Rs.50 lacs and shoots up to Rs. 8.5cr.

For a new investor, I would suggest that if you are investing on Dwarka Expressway, you should have patience and ability to hold your property for the next 2 years. Gone are the days when D Eway used to give returns in 6 months time. I agree to the point that D Eway prices has saturated to some extent, but still it has long way to go. This is the essence of Dwarka Expressway that TATA came up with a project with a price tag of Rs.10500 psft. The average prices on D Eway is around Rs. 5000 psft which is expected to double once the Expressway is operational.

Current Status :-
The prevailing litigation on D Eway is almost cleared now and NCR people can expect this expressway to be operational in 2 years time.(2nd quarter, 2015).
Early this year, there were some obstruction from the New Palam Vihar residents.

View 
Dwarka expressway will be a dream come true for the government officials,residents and the investors.Its very obvious that the hype created along Dwarka Expressway will not go into vain and one day it will come into operation. Its just a wait and watch game.

Happy Investing !!

Nirad K Singh