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.

 

What Makes A Real Estate Investment Location Lucrative?

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

A simple Google search on real estate investment locations will throw up hundreds of results. Finding genuine online advice – the kind that can lead you to a truly lucrative real estate investment decision – is like finding the proverbial needle in the haystack.

The Internet’s usefulness as a tool to guide your property investment decisions depends upon the individual’s capacity to read between the lines of a mammoth amount of information which may or may not lead to house one is looking for.

Year 2017 should be a year for residential real estate investment, as the Government is ensuring low interest rates and a slew of incentives via schemes such as the Prime Minister’s Awas Yojana (PMAY).

So, interest in and appetite for real estate investment is back in force – but where should one invest? After all, successful real estate investment is proverbially driven by ‘location, location, location.’

When you are trying to identify the right location to invest in, you are obviously ready to put up a lot of saved or leveraged capital. This is no time to rely on sponsored advice and blanket generalizations.

What must come into play here is some basic knowledge of what makes the real estate market tick, and more specifically what drives demand in any location. The viability of a location is what will result in the hoped-for returns on investment.

So, how does real estate location viability actually work? From a residential property investment perspective, every city – especially if it is a tier 1 city – has its hot investment corridors, and other micro-markets which are simply not working currently.

Some of the important real estate drivers to look for are employment generation, infrastructure creation and historic price growth.

Mumbai, being the country’s financial capital, has been attracting massive investments over the years despite its astronomically high ticket sizes.

Bangalore has become India’s prominent Information Technology capital and been attracting consummate investments.

However, Pune has begun stealing Bangalore’s thunder as a preferred InfoTech destination, owing to:

  • Better real estate affordability
  • Global reputation for Business Process Outsourcing (BPO) services, and
  • Massive wealth of trained workforce.

The third factor is a very important one, and plays a big role in the city’s viability as a real estate investment destination.

Pune Mumbai Bengaluru

Pune – the veritable ‘Oxford of the East’ – has numerous high-quality educational institutes which regularly churn out graduates who are directly absorbed not only into the city’s IT firms but also into its manufacturing belt and services sector.

This directly translates into housing demand across a broad budget band, and in various locations of the city.

All such cities have micro-markets which are suitable for either commercial or residential investment, and others that are probably avoidable right now.

Because of the amount of business Mumbai, Bangalore and Pune generate – and the fact that they are in the cross-sights of many large commercial players – these cities are excellent choices for commercial space investments as long as:

  • One picks one’s location and property size wisely
  • Achieves a reasonable entry point in terms of ticket size

Commercial real estate investment calls for larger capital and longer investment horizons, and ROI is generally derived from rental income.

Areas which are close to relatively affordable residential catchments or at least provide good connectivity to them should be favoured.

When it comes to residential real estate investment, it pays to remember that speculative investments may have played a role in escalating prices beyond affordability in some areas.

Several factors have now combined to drive out speculators from most Indian cities, and price corrections have occurred. If the prices have bottomed out or the location is still in growth mode, it is a good time to invest in it.

One should look for factors like proximity to workplace hubs, infrastructure availability – especially in terms of connectivity and public transport – and a decent saturation of social infrastructure such as shopping outlets, healthcare and schools.

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.

The Advantages of a Pre-Approved Home Loan

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

A self-owned home is the dream of every Indian, and all of us want to see ourselves being able to go in for it one day. When that day comes, the last thing we want is any reason for delay or insecurity to cloud the decision.

This is especially true if one is a first-time home buyer. Obviously, the most challenging and confusing part of the home buying process is the financials.

Confusion here can relate to which the best lending institution is, what type of loan is best and what the conditions are, and what size of home loan one can comfortably pay off over the years of tenure.

However, one of the biggest worries for a first-time home buyer with regards to a home loan is how long one needs to wait for its approval. In this scenario, the best bet for a first-time home buyer is to apply for a pre-approved home loan.

Getting a pre-approved loan means that you have already dealt with one of the trickiest parts of the purchase process, and can now focus your time and attention on finding the best property options available. Pre-approved loans also give you an upper hand when you at the negotiation table with a developer.

Understanding the difference between loan pre-approval and pre-qualification

Pre-approval and pre-qualification of home loans are completely different things. Pre-qualification is more like an educated guess on the part of the bank or lending institution about how big a loan you qualify for.

This estimate or loan eligibility is based on your current earning power, credit score, financial history, and so on. A pre-approved loan, on the other hand, is a written guarantee by the lender that you have secured a loan.

To grant a pre-approval certificate, loan officers will conduct an employment, remunerations and ‘credit worthiness’ check.

This will include collecting all past financial data like loan of credit card repayment history, credit card statements, disposable income, current debts, and more. Generally, all of this would be done using special software.

Home Loan

How to get a pre-approved home loan

The first step towards obtaining a pre-approved loan is finding a lending agency you can trust. It might be one that you know, one that an acquaintance works for, or one that has been reliably referred to you.

While any lenders would conduct an extensive credit check, you must find one that is not only willing to lend to you but also has a good reputation on the market.

Another important thing to check is the rate of interest that will be charged on your home loan. The best agencies will come up with competitive rates and also offer helpful customer service.

In these cases, the loan officer will actively help you out to get the pre-approval, and discuss the type of settlement you would be eligible for given your salary, investments, tax returns, debts, credit score, etc.

How does a letter of pre-approval help?

An important advantage of a pre-approved loan is that you know your spending limit. You are precisely aware of what kind of property you should be searching for. This eliminates from your search properties that you are not eligible for.

Secondly, with a pre-approval letter, you will not have to wait for many of the formalities of property purchase once you come across a suitable option. You have the advantage of being immediately able to book the property using the pre-approval letter. A pre-approved loans also gives you a lot of credibility with builders/promoters, and increases your negotiation power.

Getting a pre-approved loan is the easiest way to buy your dream home in the current market scenario. It is not only assuring but also keeps you within the limits of your affordability – and makes you a highly credible buyer whom any seller will take seriously and extend the best possible deal.

The approval should give you an opportunity to make a choice at leisure, but should not lead to the trap of landing in a circle of indecision and complacency. The pre-approved home loan should be a tool which lets you make a decision when you find a house of you and your family’s choice, and to act on it.

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 Real Estate – Green Is the New Gold

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

If we look at Pune’s real estate landscape, it is quite evident that the city has taken a hit in terms of its previously legendary green cover. This is of course unavoidable in the urban areas, which must accommodate the constantly growing population in the city.

This is the price we must pay for growth, which is ultimately good for the economy. However, there’s no escaping the fact that there is a deep link between green environment and the quality of living that a city’s residents enjoy.

Residential neighborhoods that are bestowed with trees, foliage, lawns and natural open outdoor spaces also have healthier and happier people. This is by no means just a romantic concept.

The existence of green spaces actually contributes to air quality, as trees and other greenery absorb toxic pollutants like sulphur dioxide, carbon monoxide, nitrogen, ammonia, nitric acid vapor and ozone – and give back life-giving oxygen. Greenery and green open spaces also play a major role in controlling urban temperatures.

Just a decade ago, Pune was known for its abundance of green cover, which generously embraced almost all of its residential areas. Today, a lot of this green cover has gone under the development hammer with the unconstrained proliferation of real estate and massive industrialization.

This, coupled with road development and the unbelievable increase in traffic movement within the city, has given rise to serious health issues now cropping up into once healthy neighborhoods.

As a result, today Pune’s citizens are far more prone to suffering from ailments like high blood pressure, bronchitis, asthma, depression and overall stress. A city that was once an epitome of modern natural living is now starved for oxygen and visual relief from the ever-expanding concrete jungle.

Though a green environment evidently benefits everyone, it is particularly important for the very young and elderly. Children obviously thrive most in green surroundings, and senior citizens living amidst sufficient greenery have fewer health problems and lead a considerably fitter lifestyle than those who live in an environment of unrelieved concrete inside the city.

The more the availability of greenery and green open spaces in a residential neighbourhood, the likelier it is for its residents to spend time outdoors and avoid a sedentary lifestyle.

Without a doubt, life in a city should not be merely about owning a beautiful home, but also about being happy and healthy. As the world continues its fight against global warming and urban areas grow, home buyers in cities like Pune are starting to prefer neighborhoods that have amenities like parks, gardens and enough natural green cover.

sahakar nagar pune
Sahakar Nagar, Pune

Locations like Undri and Ambegaon, where the benefit of protected green cover is still available, score high on their preference list – not only because of their greenery but also because they are also more price-friendly than the congested inner city areas.

These are also among the most preferred locations for property investors; as Pune continues to develop rapidly, its greener areas will eventually command premium prices.

After all, green cover is the pièce de résistance that gives luxury areas like Sahakar Nagar, Koregaon Park and Boat Club Road their unique appeal. And for home buyers, it’s not just about giving kids the opportunity to play outside but also living in a healthy environment – and a more active and vibrant community.

Green spaces in and around residential projects have been proven to bring people outdoors to engage in healthy interactions with neighbors. Common gardens and parks are spaces where people meet and spend time together.

Consequently, people who choose greener living spaces over concrete jungles enjoy better social bonding, are more concerned about the development of their community and neighborhood – and live longer and happier lives.

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 Real Estate: The Year That Was, And The Year Ahead

Kishor Pate, CMD – Amit Enterprises Housing Ltd.

2016 did not bring as much cheer to Pune’s real estate market as previous years had. Nevertheless, Pune outperformed Mumbai by between 20 to 25% in terms of overall sales.

The highest-selling category in Pune was mid-range properties priced between Rs. 35-50 lakh within the city’s municipal limits and its nearby periphery, followed by lower budget housing on the outskirts priced between Rs. 15-30 lakh.

The latter pricing category offered on the market saw some response; however, whether it sustainable is debatable.

The questions which bothered most buyers in 2016 were:

  • What are the hidden cost?
  • Does the location serve my purpose?
  • Will the project I am interested in be completed as per promised timeline?
  • Is the developer inherently RERA-compliant?

Due to these completely understandable apprehensions, reputed builders saw the most number of serious inquiries in 2016. It would not be an exaggeration to observe that the year saw developers being examined with microscopic scrutiny.

There was clear evidence that Pune’s property buyers have become very aware of their rights, and that they can expect their interests to be protected by the upcoming RERA; promoters will not be able to dictate terms as they so far have.

However, irrespective of the potential protection that RERA will provide, buyers were more focused on the reputation of the builder than prices.

This was a significant change of temperament among Pune’s traditionally price-sensitive consumers. It indicated that long-term investment value and growth now matters more to them than short-term savings.

More than ever before, the inherent value of sticking to players with an established track-record will make itself felt in 2017.

When RERA becomes a nation-wide reality in mid-2017, Pune’s established developers with a good track record quality products and transparent dealings via official financial channels will emerge as dominant.

Once the Real Estate Regulatory Bill kicks in, fraudulent builders will be pulled off the market, and there will be more clarity than ever before about the genuine opportunities that Pune’s real estate market offers.

For the entire year of 2016, Pune remained a buyers’ market and primarily end-user driven. Developers vied with each other for customers in most locations – a ‘competition’ in which only those with projects nearing completion emerged as clear winners.

High buyer caution prevailed throughout the year with regards to pre-launches and under-construction projects in the earliest stages of development.

With many projects offering ready-to-move options to buyers and investors, the thought of having to wait for 2 to 3 years before gaining possession simply failed to entice.

The locations which scored highest with buyers in 2016 were not the overpriced central locations, but those which offer good connectivity to Pune’s various workplace hubs while circumventing the steep price points of the city’s central areas.

property investment

Most buyers had a firm list of must-haves to refer to:

  • Proximity to the city’s various workplace centers; good overall connectivity via roads and public transport
  • Rational property prices
  • Availability of good schools, affordable healthcare, shopping and entertainment
  • Market-proven reliability of developers’ brand

In terms of location, Undri-Pisoli in Pune’s south-eastern sector was a clear favourite with buyers employed in the city’s Infotech sector and manufacturing industries, as all the requirements were available as above,

Also Ambegaon in the south-western part saw a lot of conversions, thanks to its good connectivity to Mumbai as well as onward to Satara and Kolhapur.

Apart from the fact that these locations are extremely well-connected, they also drew demand because they have a good supply of completed projects by reputable developers.

Fast-paced infrastructure deployment also helped bring these two locations to the top of the charts in 2016, and will continue to sustain their desirability in 2017.

Bhugaon, Keshavnagar and Manjri in the city’s eastern quadrant saw a lot of absorption because of overall access they provide to various key areas of the city. Though they are still emerging in terms of general infrastructure deployment, these are certainly locations to watch in the future.

In terms of general pricing, Pune saw a correction of 3 to 6% in property prices in most markets. Most developers rolled out additional schemes to attract buyers to their projects, with varying degrees of success.

Construction-linked plans drew some interest, but the clear winners among such schemes were all-inclusive packages which included all statutory costs such as VAT, stamp duty and registration fees.

Buyers showed a lot of preference for transparency in pricing, a decent saturation of in-project amenities and facilities, and developers whose trustworthiness was not in question.

2017 will be a year of significant and much-needed change for Pune’s property market. The Government’s demonetisation initiative has kick-started a process of elimination of fly-by-night developers and the cash components in the transactions will come to an end- a process which the final implementation of RERA will bring to culmination.

There will be a lot of consolidation throughout the year, with such players yielding whatever marketable land parcels and incomplete projects they hold to more established players.

2017 will not bring any further correction in Pune’s residential property prices, as demand is already returning in force to the city’s property market. Also, the fact that RERA will bring with it a significant additional financial burden on developers with regards to various statutory compliances, prices may go up towards mid-year.

Nevertheless, the year ahead will be favourable for property buyers in Pune. It will continue to be a buyers’ market, and the relationship between developers and buyers will see a major upgrade because buyers’ rights and interests will be well-defined and well-protected by the new Real Estate Regulatory bill. This is what the Government wants to achieve.

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.