At What Age Should You Invest in Real Estate?

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

In India, the current mantra is that property investment is ideal only for upcoming or established career makers – but is this true?

How do banks, lenders and the property sector at large view investors who do not fall in that age bracket anymore?

Can one be too old to put money into property, and would one have missed the chance to grow their wealth through real estate at some point?

Of course, it is true that banks are willing to lend to a person only for so long; when a prospective borrower is looking at retirement in the near future, the concept of giving them a long-term home loan understandably does not make much sense to them.

Let us examine this a little more closely.

When a person is in his or her 30s, they have around 30 years of active professional life ahead of them. Naturally, this gives them abundant time to develop a large property portfolio.

However, even when they are in their 40s, they are far from too old to successfully invest in property. There are still as much as 20 years ahead as an income-generating citizen – and even more if one is successfully self-employed or runs a business.

In other words, there is still plenty of time ahead to make some profitable property investment choices even in one’s 40s.

Of course, it goes without saying that the sooner one invests, the higher will be the ultimate gains because profits from property compound over time.

Home Buyers

Generally, it is assumed that one must have the ability to service home loans for 25 to 30 years to finance one’s property portfolio. However, many banks in India have now understood that people can and do work past the conventional ‘retirement age’ of 65 these days.

Interestingly, once one has secured a good portfolio of assets, one has additional clout and credibility with banks since these properties can act as collateral for fresh loans even at age 50 or above.

Definitely, the time to experiment with ‘speculative’ investment should be over by this time, as one should justifiably have a healthy aversion to risk by age 55.

By this age, the ideal strategy should be to boost the value of one’s existing assets via proven value-boosting routes such as renovations.

Without a doubt, a person who wants to keep investing in property in India at age 60 or above needs to have a very clear understanding of the market, as well as a great deal of confidence in one’s personal finances.

As already explained, it is now technically possible – under certain circumstances – to raise a home loan for property investment even after retirement.

The question whether one would want to is, of course, a personal one and would depend on a variety of circumstances – most related to one’s financial soundness and appetite for such activities.

So far, so good – but what about buying a home for personal use? This is where it gets a lot simpler because there is no ‘ideal’ age for home ownership.

If one has been living in rented homes all one’s life, buying a home even at 65 makes perfect sense. In the first place, it is the perfect retirement gambit, as it provides freedom from the recurring expense of monthly rent.

Secondly, it secures a sound asset which gives unmatched financial security and can be used to raise funds in emergencies. Thirdly, a property is the perfect bequest to leave behind for one’s children.

The bottom line is that there is definitely such a thing as an ‘ideal age bracket’ for property investment – though this age bracket is flexible depending on various factors.

However, there is no ‘ideal age’ to buy a home for personal use. The latter fact is especially true if one sees a self-owned home more as an abode and sanctuary of financial freedom and security than an investment instrument.

About The Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

Focus Areas for Tackling Pune’s Urbanization Challenges

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

Pune – one of the fastest- growing cities in India – is the seventh-largest metropolitan city of India, and the second-largest in Maharashtra.

Over the years, it has attained unprecedented momentum and dynamism on the back of its popularity both as an academic center and a business hub, with Information Technology having become the predominant industry driving its economy, job creation and real estate demand.

It goes without saying that Pune’s growth story is not a temporary phenomenon. The city will expand exponentially in the years to come, both geographically and economically. This will bring its own challenges with it, many of which are already manifest today.

To understand the challenges that urbanization poses to a city, one needs to examine the proportion of population and existing lack of social and physical infrastructure required to cater to the needs of this population.

Obviously, the areas where lack is evident will pose increasingly bigger problems if we assume that population growth is assured and inevitable.

Without a doubt, the city planning authorities are not blind to this. The massive influx of inward migrating population into Pune has catalyzed a major rush for infrastructure up-gradation on all fronts.

We are seeing a lot of efforts being put in to optimize road connectivity, parking facilities, public transport, electricity, waste management, water supply and land planning. Nevertheless, there is a need for increased pace and momentum.

The city is looking forward to the new regime to take urgent real-time steps to ensure that its citizens are not deprived of basic services. Some of the areas that need to be focused on are:

Traffic and transportation:

  • Use of advanced urban street designing for better roads, subways, walkways, overbridges and flyovers
  • Develop better public transport which can reduce usage of individual vehicles (there are 46 lakh vehicles on Pune’s roads every day)
  • Encourage carpooling and bike pooling initiatives. Encourage cycle-to-work concept, develop better accessible cycle tracks and discourage encroachment by motor traffic
  • Focus on Metro, which will significantly reduce the daily travel time for commuters
  • Address the mounting parking issues with more creative cost to parking in major areas, mechanized stacked parking facilities, etc.

Water supply management

Pune’s water supply – and its management – needs to be focused on priority. It has been estimated that about 30% of water is lost in distribution, the main causes being heavy leakages and imprudent household use.

The Government should encourage the use of water cards as already being seen in areas like Nanded, and similar progressive initiatives.

Solid waste and storm water management

  • Develop enough facilities to collect solid waste
  • Increase civic education on waste segregation and improve efficiency of garbage collection
  • Create organic compost systems which can be used for agricultural lands in nearby areas as fertilizer
  • Improve channelizing of drainage systems and storm water drains which released into mass water bodies. The city has only 44% tertiary drains, and the primary and secondary drains are increasingly obstructed by silt. The municipal authorities need to get more proactive on cleaning these drains regularly

Sewerage and waste water treatment

All developed and developing areas should have access to underground drains (UGDs). Pune’s existing sewerage treatment capacity is not efficient, and a large volume of untreated water is released into its rivers.

The Mula–Mutha rivers are polluted, as untreated domestic waste is being discharged into them. Likewise, Khadakwala Lake has also been polluted. Addressing these issues must become high-importance focus areas.

640px-New-Yerwada-Bridge-Over-Mula-Mutha

Sharp focus on housing

  • Encourage the development of more integrated townships with walk-to-work options
  • Encourage housing with open spaces for children and for Senior citizens
  • Create more affordable value homes / low-cost housing and SRA schemes to help curb slums proliferation in the city
  • Increase the pace of project completions via proactive policies to boost the availability of ready-to-move homes where they are needed the most. Given the massive increase in job opportunities in Pune, the supply of affordable, completed housing projects is insufficient when compared to under-construction projects
  • Step up infrastructure creation in the fringe areas with low real estate rates to encourage migration to these areas, and also develop commercial development of these areas to give them economic strength
  • Formulate and implement better zoning for commercial and residential usage
  • Encourage sustainable real estate practices such as mandatory use of solar panels, rainwater harvesting, etc. in new residential projects, and in older projects wherever and to the extent feasible

Modernize public safety

  • Encourage smart transportation with real-time tracking to ensure timely response to emergency situations. This includes geographically integrated systems for identifying caller location
  • Increase public safety with better city surveillance systems and video analytics

While Pune’s inclusion in the Smart City program will doubtlessly address some of these areas, the benefits will not be uniform across all of the city’s ever-expanding boundaries.

The vision of our city planning authorities must be all-encompassing and democratic to all regions. In particular, more attention needs to be given to the much-neglected gaothan areas which have not yet been included within the municipal limits because of various reasons.

In short, Pune must become a uniformly modern city, capable of handling urbanization growth – both now and in the future.

About The Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

Image By Rsrikanth05Own work, CC BY-SA 4.0, Link

How Does Job Creation Lead To Demand For Homes?

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

Among the key variables that generate interest from property investors in any given location or city is job creation.

An area in which several businesses are generating career opportunities for people becomes a magnet for demand from homebuyers. Such areas also become the focal point of interest for residential property builders.

Employees of these firms will always hope to find homes close to where they work. Home prices in such areas can be very attractive if it is still developing – as long as it provides good access to a office hub, it will attract a lot of demand.

Apart from end-users, investors will also be interested in buying up residential properties and putting them out on rent.

In any case, since a substantial number of families may decide to purchase their houses there, developers will line up to buy available land parcels and build residential projects.

Residential property builders put in a lot of research before launching a project in any new area. One of the main factors they will focus on is what kind of demand is likely to exist.

For instance, an area near an industrial area or BPO will definitely see a lot of demand from budget home seekers, while a location around a software development firm is likely to generate demand for mid-income and semi-luxury homes.

Baner_from_Baner_Pashan_Biodiversity_Park

If a new office hub is generating highly-paid jobs, it becomes a suitable target for luxury home projects as well. However, many developers tend to miscalculate an area’s potential to sustain demand for luxury offerings.

Also, the Information Technology-driven job market a lot more fickle than that of, say, the manufacturing industry. Industrial jobs in India are largely driven by local demand for manufactured goods, so careers in a manufacturing company can be quite steady even if the salaries are not spectacular.

Infotech jobs, on the other hand, are not as predictable as they may have initially seemed. The demand for such services in India is primarily driven by companies in the United States, where policies regarding outsourcing to other countries can have a big impact.

We are currently witnessing such policy fluctuations happening in the US, causing a lot of uncertainty to software companies here in India.

Not all job categories in the IT/ITeS sector are affected equally, but developers of residential properties looking at cashing in on IT-driven housing demand must nevertheless be attuned to which level of housing demand is sustainable, and which is subject to sudden change.

Investors must also be able to gauge where Infotech-driven residential demand is headed. For instance, the previous IT capital of Bangalore is now rapidly yielding its market share to cities like Pune, which are attracting more and more IT companies with their burgeoning workforces and cost-effective property rates.

About The Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

Image source: Wikimedia

Urbanisation: Can We Reconnect Our Cities With Nature?

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

In pre-modern times, people in Indian cities still coexisted peacefully with nature. Sadly, in the current real estate development scenario, we have definitely witnessed an increasing separation between nature and individuals.

In the pursuit of their development and urbanisation agendas, our cities have seen high-rise buildings replacing backyards, parks and forested areas.

However, it is wrong to blame solely real estate developers and municipalities for this scenario. They are effective reacting to the growing demand for such buildings from people whose evolving lifestyles focus more on work and after-work entertainment and shopping.

Let us take the city of Pune as a case in point. In previous times, this city had a much smaller geographic spread and there was no real need to increase it.

Pune was supposed to be city for retired people. The city and its trade activities coexisted very well with a strong agrarian component both in the central and peripheral regions.

Population growth was relatively limited. The neighbouring city of Bombay, established by the British circa 1845 as a major port and trade hub, attracted a significant mass of migrants looking for urban-based employment.

In fact, the British viewed Pune – or Poona, as it was known in earlier times – as a region of political unrest and resistance against their rule. Pune began growing both in terms of population and geographical spread only after India attained independence in 1947.

Then came Pune’s Technological Revolution.

Pune transformed from a relatively small city to a full-fledged metropolis and was drawing a massive influx of people responding to its rapidly increasing employment opportunities – first in manufacturing, then also in software technology and information technology-enabled services (ITeS).

When Pune was still relatively small and untouched by the rampant urbanisation we see here today, there was negligible impact on the natural wealth for which it was once so famous.

Today, we see its once generous share of green open spaces eaten up by both low-rise and high-rise housing developments, landfills, commercial complexes and shopping centres.

Sahakar Nagar Pune
Sahakar Nagar Pune

As a result of this process, city dwellers become disconnected from nature. It is true that there is a lot of awareness and concern about the need to reestablish a healthy environment, and healthier cities.

However, it is also true that most real estate development taking place today is about amenities and facilities, and that any vegetation that is factored in is merely aesthetic and ornamental.

Essentially, the city has gone from green to grey, and any new thinking about and efforts towards reconnecting people to nature must indeed be trans-disciplinary and coordinated.

Construction is an inseparable element of a city – a city without buildings is inconceivable, and deforestation is inevitable. In fact, the very genesis of buildings lies in mankind’s need to protect itself from the wild animals inhabiting forest areas with strong, impregnable structures.

Today, wildlife has been more or less wiped out from our cities, but economic inequality has given rise to new threats of forced entry and loss of life and possessions. As long as mankind prevails, buildings will prevail as well – but can we bring nature back into our cities, as well?

An experiment to achieve exactly that is reaping astounding results in cities like Singapore, where a natural ecosystem is being re-introduced into the urban fabric. It is astounding what such a vision of futuristic urbanisation can achieve.

Clearly, concrete can coexist with abundant greenery and one must not necessarily negate the possibility of the other. However, it takes a magnificent town planning vision, coupled with a strong political will – and also unswerving support from a city’s population.

As long as demand for homes is skewed only towards concrete buildings with modern amenities and some token greenery, only such supply will follow.

Increased demand for urban housing where natural environment is more than just a token gesture and, in fact, available to sufficient saturation to actually have an environmental impact, such supply will surely follow.

We are seeing the return of such demand in Pune, and it is driven not only by the higher environmental consciousness of today’s young homebuyers but also their concerns about their own and their children’s’ health and wellbeing.

A city does not lose its ‘green’ identity overnight – in cities like Pune and Bangalore, the erosion of this identity took several decades.

It will take a few more decades to bring it back, but it is possible if all stakeholders – from town planning and municipal authorities to real estate developers and buyers – decide that it is worth it and must be done.

About The Author:

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

What Lies Ahead For The Pune Property Market

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

Pune’s real estate market is the stuff of legend, and justifiably so. All the five main verticals of the property sector – residential, commercial office space, retail and hospitality – are performing optimally in Pune.

This is by all standards an exceptional real estate market. Moreover, Pune is always growing and adding to its geographical spread, making it by far the largest and most vibrant real estate market in Maharashtra and beyond.

Therefore, it comes as no surprise that investors from Mumbai, dissuaded by the high property rates and slow market conditions in the financial capital, are extremely active in Pune.

Apart from these, there is a constant flow of investments coming in from other Maharashtrian cities like Nanded, Nasik, Sangli, Kolhapur, Nagpur, Jalgaon and Amravati. As a result, the Pune property market is extremely resistant to stagnation.

Know what drives demand

The huge degree of job creation the city’s manufacturing, automobile and Infotech and services sectors is causing inward migration from almost all parts of India and very rapid absorption of commercial office spaces.

This, in turn, is constantly ramping up residential property demand as well. Additionally, thanks to its many educational institutions, Pune boasts of constantly replenishing talent pool which fuels the growth of all the sectors active in the city.

Because of the multidimensional growth drivers that the city enjoys, the Pune residential property market is quite resistant to the severe demand fluctuations being seen in a number of other cities.

However, successful investment into the Pune residential real estate sector still calls for knowledge about what works, and what doesn’t.

Pune_India

Know where to invest

Like in every other city, Pune’s residential property sector sees the most rapid impetus in pockets or locations that are still developing. It is primarily in these emerging locations that we find the most real estate activity, both its terms of development and demand from buyers.

Areas like Undri, Ambegaon, Keshavnagar and Bhugaon have already established themselves as Pune’s fastest-growing new suburbs. The growth of such locations also serves the important purpose of decreasing demand and development pressure in the central regions. However, even in these areas, there is danger lurking for uninformed property investors.

In many of the emerging residential property destinations, we have seen a huge load of housing projects where construction has either been stalled or delayed far beyond the initially committed completion timelines.

Investors and end- users who bought into such projects at the pre-launch phase to take advantage of attractively low rates have literally become stuck along with the projects.

Know your developer

In Pune, the difference between beneficial and hazardous housing investment lies primarily in the reputation and credibility of the developer. While credibility is a much-abused qualification that almost every developer lays claim to, it is actually quite simple to verify.

One merely needs to examine the builder’s track record of successfully completed housing projects. ‘Successful completion’ does not mean ‘eventual completion’, but completion within 1-1.5 years of the delivery timelines promised to buyers.

RERA Compliance – the new Gold Standard

With the Real Estate Regulatory Act (RERA) slated to finally become a nation- wide reality by mid-2017, Pune’s residential real estate market is going to become more vibrant and lucrative for property investment than ever before.

Thanks to this key reform in the real estate sector, the city is set to shed a lot of its ‘bloat’ – or burden of small-time, inexperienced builders out to make a quick buck with small, shoddily designed and executed projects which are also often of dubious legal status.

Such players will simply not be able to sustain operations post-RERA, and will vanish from the market.

What will remain are builders of good repute, market standing and track record – credible players who are able to abide by the strictures that RERA lays down to protect the interests of buyers and investors.

While this landmark is understandably a source of fear and trepidation for fly-by-night builders, it heralds the even more powerful emergence of strong, credible developers.

About the Author

Kishor  Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd.  is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

6 Tips For Investing In Rental Property

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

From the initial choice to really purchasing your first rental property as an investment, there’s plenty of planning and work involved.

Buying rental property should be approached with a lot of circumspection and forethought so as to get optimal returns and avoid a serious financial setback resulting from a wrongly-chosen property.

There are a number of aspects to be considered when looking for an income-generating property.

You should begin hunting for your rental investment property with an unbiased approach to areas and all of the properties in your investing range.

Let us have a look at the top 6 things you need to think about when trying to find the best rental property.

1. AREA:

The quality of the location in which you purchase a rental property will determine the kinds of renters you will find, and how frequently you may face vacancies.

For instance, in case you purchase the home in an area near a university, the odds are that your pool of expected renters will largely consist of students.

You may be faced with frequent vacancies during the times when students generally return home for the holidays. Also, there would be a higher churn of tenants, when ideally you want long-term leases.

Examine the location and project for existing and planned public parks, shopping malls, gymnasiums, cineplexes, public transportation stops and all the other factors that would conceivably entice tenants.

You can peruse developers’ project brochures and also do online research to establish the saturation of such facilities in a neighbourhood.

You also need to know what new developments are coming in, and what has been zoned for special purposes by the local municipality.

You are looking for a region with excellent growth prospects where schools, business parks, shopping malls and entertainment zones are either already in place or planned.

Simultaneously, be wary of any new developments which could reduce the value of surrounding properties, such as by causing the loss of green open spaces or public parking facilities.

2. PROPERTY TAXES:

Property taxes aren’t standard across the board and, as an investor intending to earn money from rent, you would like to know about how much you’ll be losing to taxes.

High property taxes are obviously justified in very good areas which are superlatively connected. Such areas also usually attract long-term renters. Locations in upcoming growth corridors should be preferred.

3. EDUCATIONAL INSTITUTES:

Your tenants may be a family with kids, or intending to have kids, who would prefer areas which are near to one or more good schools. The presence of quality schools in the area you invest in will positively impact the worth of your investment.

Remember, the total worth of your rental property comes into play when you finally sell it, even though you’ll be mainly concerned with earning monthly rentals in the interim.

4. JOB MARKET:

Areas with growing employment opportunities have a tendency to draw more people – meaning more renters.

Obviously, the most desirable situation for you would be to own a rental property near to or well-connected to an established or rapidly growing workplace hub with reputable companies active and generating jobs there.

5. PROJECT QUALITY:

Today, rental home seekers prefer projects which add value to their lifestyle. Good projects with the best lifestyle deliverables may be out of their purchasing reach, but they expect to get such facilities in a rental home.

Projects with all the amenities like garden, children’s play area, sitting area for elders, reliable security and professionally managed maintenance are always preferred by families hunting for rental flats. The ambience inside the complex is very important to them.

6. RENTS:

You should be aware of what the typical rent in the region is. Make sure you find out enough about the region to judge where it is headed in the following five years.

Property taxes may rise and even if you can afford them now, significant developments in the area which increase property taxes may make them less affordable.

Single-family homes often bring renters looking for long-term leases. A dual-income family is definitely preferable over single professionals, as they are likelier to pay their rent on time and to be fiscally stable.

As a landlord, you would like to find an area where finding such tenants is likely and where such properties are available.

When you’ve narrowed down the right location, look for a property that can potentially yield you steady and growing rental income as well as appreciation on the capital value of the home.

Consider properties which are within your budget and slightly above it as well. The slightly costlier options can be paid for by some bank leveraging, and developers may be open to negotiating the price.

Also, remember that buying property can become even more desirable with some modifications and cosmetic uplifts, which will attract tenants who are willing to pay higher rents.

Such changes to the property will also serve the purpose of increasing the sale value of the home in case you want to put it on the market after some years of good rental income.

Every state and every city has areas which have both suitable and excellent properties when it comes to rental potential.

In Pune, areas like Undri, Kothrud and Ambegaon are excellent locations for rental properties because of the consistently high demand.

In Mumbai, the more cost-effective locations in Navi Mumbai such as Koparkhairne, Airoli and Ulwe are very good options, though property prices are naturally higher there.

Do your research well and ensure that you have your finances in place if and when a very good option comes up.

Remember, real estate investing does not begin with purchasing a rental property – it starts with creating the finances where you can purchase a rental property.

About the Author:

Kishor  Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd.  is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

Pune Property: All Roads Lead to Ambegaon

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

No discussion on Pune’s property boom locations is complete without an extensive evaluation of Ambegaon.

An increasing number of Pune’s homebuyers are opting for areas with generous natural endowments and absence of the crush of the city’s central areas.

As Ambegaon offers superb connectivity in addition to a green, hilly environment, it has naturally emerged as one of the most favoured property locations in Pune.

As a matter of fact, Ambegaon will be one of Pune’s most exciting property boom regions for several years to come during the following ten years.

Apart from its abundant greenery, the backdrop of hills and excellent connectivity, it is also an eminently affordable location.

Moreover, it offers a good spread of housing options, from multistoried apartment projects to luxury townships.

Ambegaon is also close to the new MIDC in Shirval, which is a massive employment hub which has given rise to ever-increasing demand for both budget and premium homes here.

Some of Pune’s leading developers have responded to this demand with projects that bear the brand of reliability, are very suitably priced and additionally offer tremendous investment appreciation value.

The growth of Ambegaon has been partially because of the spill-over demand from Sinhagadh Road, which has developed very rapidly and seen unattractive price growth as a consequence.

But one of the leading factors for Ambegaon’s quick rise to fame has been the fact that it gives property buyers a diversified choice of homes, ranging from premium bungalows and villas to budget flats.

This location’s natural ambience and absence of congestion and pollution lend it a distinct aura of exclusiveness, simultaneously providing homebuyers a welcome option to live and raise their families in bracing, naturally blessed surroundings.

Residential areas with the kind of abundance of trees and green open spaces available in Ambegaon are home to healthier and happier people, and have a cooler climate than the inner-city concrete jungle.

It is no accident that Pune’s core city dwellers tend to be more susceptible to suffering from conditions like asthma, bronchitis and hypertension – most of the city’s previously splendorous green cover has been eroded by real estate development.

In contrast, Ambegaon is a haven of peace, calm and greenery – the hallmarks of Pune’s glory years.

Moreover, Ambegaon is constantly seeing upgradation of its support infrastructure by the Pune Municipal Corporation – a very important factor driving property investors’ interest in this location.

Investment appetite here is also because of the accelerated development of places like Bavdhan, Sinhagad Road, Wagholi, Bhugaon and Undri.

These locations have for long been catering to the demand for quality housing coming from employees of Pune’s Information Technology sector, but Ambegaon additionally gains from its proximity to the Pune-Mumbai Expressway, the famous Sinhagad Technical Institute and the Bangalore Bypass.

In other rapidly growing locations of Pune like Baner, Wakad and Hinjewadi, the predominant demand for investment properties comes from neighbouring Mumbai.

Ambegaon, on the other hand, has unique location advantages, Ambegaon is also a hot favourite with investors from cities like Sangli, Satara, Kolhapur and Shirval.

About The Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

What REITs (Real Estate Investment Trusts) Mean For Indian Real Estate

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

The real estate sector in India has been lucrative for savvy investors over the last decade, but it has not been without accompanying uncertainties.

The introduction of REITs (Real Estate Investment Trusts) will open up a platform that will allow all kinds of investors – even those with smaller budgets – to make safe and rewarding investments into the Indian real estate market.

The best thing about REITs is that investors can start with as small a sum as Rs. 2 lakh to secure units in exchange.

The REIT platform has already been approved by the Securities and Exchange Board of India (SEBI) and like mutual funds, it will pool the money from all investors across the country.

The money collected from the REIT funds will subsequently be invested in commercial properties to generate income.

A REIT will need to be registered via an IPO or initial public offering. REIT units, as such, will have to get listed with exchanges and consequently traded as securities.

The SEBI board has kept the minimum asset sizes to be invested in at Rs. 500 crore. However, the minimum issue size would have to be less than Rs. 250 crore.

As with stocks, the investors here would be able to buy the units from either primary and/or the secondary markets.

How does a REIT work?

REIT is a process to generate funds from a lot of investors to directly invest in profitable real estate properties like offices, residential units, hotels, shopping centers, warehouses and more.

All trusts with REIT will be listed with stock exchanges as they would be structured like trusts. Consequently, REIT assets will be held with independent trustees for unit holders / investors.

Role of the trustees

Trustees with REIT have defined duties which typically involve ensuring compliance and adherence to all applicable laws that protect the rights of the investors.

The objective of REITs

A REIT’s objective is to provide the investors with dividends that are generated from the capital gains accruing from the sale of the commercial assets. The trust distributes 90% of the income among its investors via dividends.

Apart from minimum entry level, a REIT is supposed to provide diversified and safe investment opportunities with reduced risks, and under a professional management to ensure the maximum return on investments.

The advantages with REITs include:

  • Income dividends: 90% of distributable cash at least twice in a year
  • Transparency: REIT will showcase the full valuation on a yearly basis and will also update it on a half-yearly basis
  • Diversification: According to the guidelines, REITs will have to invest in a minimum of two projects with 60% asset value in a single project
  • Lower risk: At least 80% of the assets will have to be invested into revenue-generating and completed projects.

The remaining 20% of the properties that include properties like under construction projects, equity shares of the listed properties, mortgage-based securities, equity shares that derive a minimum of 75% of income from Government securities or G-secs, money market instruments, cash equivalents and real estate activities.

The REIT concept has been in the news for some time now. However, the real estate regulations rolled out so far have not quite helped bring them to Ground Zero in India as yet.

REITs’ exemption from tax on the distribution of dividends would make it much more attractive for investors.

According to a recent report by Cushman & Wakefield, commercial properties in India that are ‘REITable’ investment opportunities are between $43 billion and $54 billion across the top cities.

Are REITs more attractive than actual property purchase?

Investing in REIT can be compared to investing in Gold Bonds. Indians are partial to buying physical gold rather than in Gold Bonds, implying that having one’s own investment in property will always provide Indians greater satisfaction than mere paper investments.

The Indian property market is now almost stabilized and it is the right time to buy self-owned homes. While it is human tendency to wait and watch, the bottom of the market cannot be fathomed accurately at the best of times.

At the end of the day, REITs are investment instruments and not a means to acquire actual property – which is always high on every Indian’s wish-list.

A budget that clearly favours purchase decisions for first- time home buyers and is a step closer to the Prime Minister’s mission to provide Housing for all by 2022 is in place. 2017 is certainly the year to make home ownership a reality.

About The Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond.

Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

 

Reaction To Union Budget 2017-18

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

The Union Budget has announced that 1 crore rural houses will be created by 2019, and the outlay for rural housing under PMAY is Rs. 23000 crores from the previous Rs. 15000 crores.

This will help address the housing needs of the homeless and those living in ‘kachha’ houses in the rural areas, and potentially help reduce pressure on urban areas if it is in conjunction with employment generation

The total allocation for infrastructure is a whopping Rs. 396135 crores in 2017-18. This is very good news for the real estate sector, as the correlation of infrastructure with real estate growth is a well-established fact.

Affordable housing has finally been given infrastructure status. This will mean cheaper loans for developers of budget housing and significantly boost the Government’s target of Housing for All by 2022.

The Affordable housing has seen a significant change in the Government’s existing scheme, with the qualifying size requirements now changed from built-up area to carpet area of 30 sqm and 60 sqm for projects within the municipal limits of the large 4 cities.

On the all-important front of personal income tax, the existing tax rate for incomes between Rs. 2.5 lakh to 5 lakh has been reduced to 5%, and taxpayers in other categories will also save Rs. 12,500.

While this will definitely boost the overall consumption story, it, unfortunately, will not have any significant impact on housing demand.

However, the FM did indicate that lending rates are likely to come down in the wake of the demonetisation move. A decline in interest rates would have positive implications on housing demand.

8 Expectations the Real Estate Sector have from Union Budget 2017

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

The real estate sector has been the second biggest employer for India after agriculture, and market estimates suggest that it will grow by as much as 30% in the next decade.

Consequently, stakeholders have high expectations from the 2017-18 Union Budget. Here are 8 such changes that the industry and its stakeholders are unanimously looking forward to:

  1. Income tax relaxation

As of now, the tax deduction limit for home loans is just Rs. 2 lakh, which becomes insignificant when you take into account the high prices of properties in our larger cities.

In Mumbai, for instance, the standard housing price is Rs. 1 crore, so the current tax deduction limit is insignificant for homebuyers in the financial capital.

Apart from extending the tax exemption for home loans to at least 5 lakh, the budget should also introduce concessions on insurance premiums to encourage buyers insure their property.

  1. Increase in HRA deductions for the self employed

Salaried individuals already get HRA (house rent allowance) as a component of their income, and can also claim deductions on it.

However, self-employed individuals are limited to only Rs. 2000 as a maximum deduction on HRA as per the provisions of Section 80GG. The 2017-18 Union Budget should address this dichotomy.

  1. Standardize construction materials

A major reason for increasing home prices is the constantly escalating cost of construction materials like cement and steel.

Standardization of such materials can help reach tax clarity and also make real estate a viable opportunity for investment.

  1. Single window clearances for real estate projects

As per the usual process, real estate projects need to go through a long line of approvals, and this bureaucratic process has been resulting in delayed deliveries.

Single window clearances have been a long-awaited step to reduce these bureaucratic setbacks. Once in place, it can give a major boost to the market.

Union Budget 2017

  1. Simpler tax norms of REITs

Until today, the real estate sector has not benefited from any REIT listings, with the model in its current format still weighed down with multiple taxes.

Taxation for REITs needs to be simplified to allow developers and investors to benefit from REIT listings. It is necessary that the Union Budget 2017-18 recognizes the importance of REITs and provides:

  • Lower taxation on REIT income
  • Reduction/removal of service tax with leased premises
  • Waiving capital gains during transfer of property to REIT
  1. Better GST Clarity

Although the GST (Goods and Services Tax) structure has been declared, stakeholders are eagerly waiting to understand the rates applicable to the real estate / construction industry.

We seek clarifications on abatement schemes, and scenarios when developers use composition schemes and the resultant credit for input tax.

  1. Financial protection with project delays

Currently, the interest deductions associated with self-owned homes has been limited at Rs. 2 lakh. However, for projects under construction, the deductions applicable are just Rs. 30,000. Further, the applicable period for the interest is 3 years, starting from the year that the loan was approved.

This has proved to be a hardship for property buyers and investors. Union Budget 2017-18 should focus on further interest deductions in late deliveries and also amend the period of repayment from the year the possession was due.

  1. Clarification on PMAY beneficiaries

According to a recent announcement by the Union Government, a 3% interest rate is applicable for loans up to Rs. 12 lakh and 4% up to Rs. 9 lakh, as per the PMAY (Pradhan Mantri Awas Yojana) scheme.

The scheme also states that two new income categories have been added to avail higher loan amounts with higher subsidies. We look forward to further clarifications on the definition of these beneficiaries.

About The Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond.

Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.