Buying A Home That Works For Your Children

Kishor Pate, CMD – Amit Enterprises Housing Ltd.

If we take a close look at how the average Indian family perceives home purchase, children and their needs are a massively important factor.

It, therefore, makes sense to factor in the specific requirements of children while short-listing flats. But what exactly does this entail?

When it comes to children’s needs in a home, there are basically three levels to be looked at:

  • Safety
  • Convenience
  • Recreation

If any one of these is ignored – perhaps in favour of other attractive features that an apartment may have for the adults – the interests of the children in the family are compromised.

Let us study these three levels in some detail, so that the features that families should look for in a home become clearer:

Safety

There is a lot more to children’s safety and security in a residential setting than burglar alarms – though those should definitely be considered.

Even if a home is not a ‘smart home’ at the DNA level, incorporating security-focused electronic features such as burglar alarms and CCTV camera monitoring makes a lot of sense. Such features are pretty cost-effective these days.

However, children’s safety must essentially also involve mitigating or eliminating potentially hazardous situations within the home. For instance, child-proofing electrical outlets is important.

To begin with, one should not consider buying a flat where the electrical wiring and fittings are old or inferior.

Here, buying a flat from a branded developer rather than an unknown but player can make a big difference, since branded developers ensure quality of their offerings at all levels, including ensuring that bathroom tiles, as well as tiles around the project’s swimming pool, are of the non-skid variety. They will also provide sufficient security at a project level.

Another reason to opt for a home by a branded developer is that one is assured of power back-up in the project. Getting trapped in an elevator is not the only risk to children that is mitigated with this all-important feature.

Many accidents in a home happen during power-cuts as the inhabitants stumble around in the dark looking for alternative light sources.

Apart from the fact that power-cuts are also very scary for very young children, the thought of their kids suddenly engulfed in darkness while playing outside is a nightmare for parents.

Convenience

The first factor one must consider here is flat size – children require enough space within a home. While a 1 BHK flat is definitely cheaper, it cannot cater to the spatial requirements of growing children, and too small a flat also compromises everyone’s privacy.

Privacy is one of the major requirements of a family that is buying a home for the long haul. Therefore, families with children should opt for a least two bedrooms in a flat.

The second factor is location. One should definitely look for the availability of good schools and hospitals with full-fledged emergency rooms in the vicinity. Likewise, the location needs to be properly enabled with public transport.

One should also invest some time and effort to inquire about the crime rate in the area. A mere 15 minutes spent on Internet searches for news about the area in question can go a long way in establishing whether it is relatively safe or potentially a source of concern about the safety of one’s children.

Recreation

The third factor is the children-friendly features that the developer has provided within the project. Sufficiently spacious common areas for children to run and play around in are a must-have, as are a well-equipped playground, swimming pool, and clubhouse.

Children – as well as their parents – need sufficient options for recreation beyond the four walls of their home, but within the safe confines of the project’s compound. The clubhouse should have enough means for children to recreate outside the home and must be adequately attended by dedicated staff.

The above checklist is definitely not exhaustive, but these are the basic features a family should look for while selecting a home to buy. Purchasing a home which works well for children is one of the most important long-term decisions a family can take.

If a home proves to be inadequate for the needs of children at some point, there will be no option but to start looking for one that is more suited. This can be a costly and time-consuming undertaking, which can be avoided with proper foresight while planning one’s first home purchase.

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.

 

RERA Is A Reality – Should You Buy Your Home Now?

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

RERA – or the Real Estate Regulation Act – has finally become a reality.

Though there are still plenty of hiccups and it will obviously take some time for the industry to absorb all the facets of the Act, it should be kept in mind that RERA is a process, not an event.

Meanwhile, the foremost question in property buyers’ minds is – should they wait until the RERA process is streamlined, or can they go in for home purchase now?

This is a fair and valid question.

After all, buying a home is in many cases a once-in-a-lifetime event, and one which most people look forward to and plan for assiduously.

At the present time, the real estate market in most cities is flush with options for buyers in most price brackets, and developers have also kept various offers and schemes in place to maintain the sales momentum.

Prices have corrected in most locations, and projects which seemed too pricey only a year ago are suddenly quite affordable.

Indeed, buyers have every reason to view this as a very favourable time for home purchase. Yet, the ongoing implementation process of RERA is giving them pause.

In the past, we have seen that anticipation of price corrections and lower interest rates keeps many potential buyers on the fence.

Paradoxically, the announcement of RERA is now having a similar effect, largely because buyers are unsure of whether they will benefit from it immediately or whether the benefits will take some more time to come in.

As of now, developers have been given until the end of July to register their projects under RERA. Likewise, real estate agents – who also fall under its ambit – are still in the process of registering under RERA.

As mentioned, RERA is a process and not an event. The process includes the remaining States falling in line and adopting the Real Estate Regulation Act in letter and spirit – and, most importantly for buyers, developers registering their projects under RERA.

None of these things can happen instantaneously, as many people had expected.

As of now, developers have been allowed to continue marketing their under-construction projects until 31st July 2017, which means that they have a three-month window period in which they can register these projects under RERA.

Meanwhile, buyers should only consider projects in good locations, by builders who are in the process of registering their projects under RERA.

Only players with strong balance sheets and an equally strong reputation on the market will be able to see this process through and to prevail in the future.

One sound piece of advice for homebuyers is to check out the developer’s website, which should reflect the fact that they are actively pursuing RERA compliance.

A builder’s depth of credibility on the market has always been the foundation of his success – and it will be even more so in the post-RERA era.

In the months to come, we will see many small-time developers who do not have the capacity or willingness to abide by RERA’s rules and regulations vanish from the market.

They will sell off incomplete projects or land parcels to bigger, established players, dissolve their real estate businesses and turn to other market areas.

This kind of consolidation is a natural and expected by-product of RERA, and one of the primary ways in which it will create a more transparent and healthy property market.

Only builders with sound reputations will remain in the real estate business. In the future, RERA will revolutionize the manner in which residential housing projects are planned, marketed and sold across India.

Homebuyers will be able to stop worrying about lopsided sales agreements, delays in handing over their properties, unscheduled changes in building plans and several other risks which were so far considered part and parcel of buying into under-construction projects.

At the current time, the safest bet for homebuyers is to turn their focus on projects whose builders have a strong reputation and track-record.

It is these players who will eventually remain on the market, and are in fact gearing up for making their projects and businesses RERA-compliant as we speak.

The others will wind up and their projects may either be taken off the market or rebranded under the auspices of these stronger players.

In other words, there is no need for aspiring homebuyers to wait for more clarity on RERA to emerge. It is certain that RERA will clean up the market – and it is equally certain that it is only strong, reputed developers will be able to do business in the future.

The soundest strategy for buyers is to identify projects by these builders which are either complete or in advanced stages of completion, and make use of the very favourable market conditions existing now to close the deal on their dream home.

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.

Property Investment Tips: Buying A Home That Delivers

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

With RERA as well as various other policy initiatives such as the Benami Transactions Act and the Government’s determined push for affordable housing, the time has never been better to buy a home.

We are already seeing a lot of increased activity in the residential property market in the larger cities. After the dampener of the demonetization move late last year, the positive buyer sentiment visible now is especially significant.

With the return of buyer sentiment, builders are obviously determined to capitalize on it via increased marketing efforts.

Given that there is already a lot of supply on the residential market – a lot of it for ready possession – fresh launches have been curtailed so that existing inventory can be absorbed. Much of the intensified marketing efforts are centered around special deals and offers.

Advice to property buyers

Obviously, it is a very advantageous time for property buyers right now. Yet, they should be judicious while evaluating offers and schemes and base their purchase decisions solely on the real value of the home instead of on freebies.

Buying a home is an expensive undertaking, often involving a substantial part of a middle-class family’s savings as down-payment and a prolonged commitment to pay EMIs for several years.

Freebies such as gold, cars and household goods have an undeniable attraction, but they are fundamentally frivolous in nature and do not add to the value of the home.

The price of a home is obviously an important consideration for middle-class property buyers. However, the strategy of looking for the cheapest options on the market does not make much sense because it is quality that determines value. In the case of residential property, the quality of an offering is vested in three aspects:

  • The quality of the location
  • The brand value of the builder
  • The availability and quality of facilities and amenities in the project and in individual units

The evolution of ‘location value’

Central locations are traditionally the costliest, thanks to the fact that they offer great access to many important parts of the city – most importantly the CBD and SBD (central and secondary business districts).

These areas tend to host the offices of high-profile companies, which also tend to offer a vast cross-section of jobs – from highly-paid management to more modestly-paid support staff jobs.

Even the second category of jobs is attractive because growth prospects in high-profile companies are usually very good. This is what makes living in central locations very desirable – and, from a real estate pricing perspective – very expensive.

In India, this mantra was rather inflexible and held true for a very long time – until the advent of the Infotech culture. The IT/ITeS industry tends to offer very good salary packages but is not focused on high-value locations.

Quite to the contrary – such firms prefer to set up shop in peripheral locations so as to save on the real estate costs. As a result, many of a city’s outskirts have become very desirable places for homebuyers, and they are far less expensive.

For IT professionals and industrial employees as well as property investors, buying a home in a peripheral location that connects to an IT hub and/or manufacturing belt makes perfect sense.

Unfortunately, such locations attract all kinds of developers – from those who have a reputation for creating true lifestyle value offerings to those who specialize in constricted, lifeless ‘pigeon-hole’ homes. This is where the brand value of a developer plays a significant role.

Brand value stands for assured quality

With a lot of housing supply available in the new growth corridors, buyers are spoiled for choice. The consideration of ‘ticket size – the cost of a flat – is obviously important, but one still only gets what one pays for.

Ultimately, a home is not just an asset but one which performs the very critical function of offering refuge, comfort and security – the three mainstays of lifestyle.

Buyers must look for options which offer them these three advantages to a satisfactory level. Branded builders provide these as part of their standard value offering because their reputation demands it.

Facilities and amenities – life beyond mere living

If four walls and a parking space would be enough to serve our housing needs, the real estate industry the world over would be a very unexciting one at best.

The fact is, urban life today places a lot of stresses and demands on us, and our homes cannot only be places of refuge but must also provide healing and rejuvenation from these.

A clubhouse, swimming pool and children’s park are no longer luxuries but the bare minimum an Indian homebuyer can and should expect. A residential project that does not offer these falls far short of the required mark.

Obviously, even projects without such offerings will find buyers because of their lower prices – but such buyers find very little comfort in their purchases. While short-listing prospects for home purchase, it is definitely important to ensure that the final selection provides a decent lifestyle and not just an abode.

If one looks at the supply on the residential property market from such a focused perspective, the bewildering choice of options automatically narrows down to a more manageable and comprehensive level.

Always to be kept in mind – buying the right home is not just about present and future comfort but also about investment growth. Homes in good locations, built by reputed developers with a good saturation of amenities and facilities will always yield better capital appreciation as well as potential rental income for property investors.

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.

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.

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

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.