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Amnesty to builders at what cost & for whose benefit

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: Track2Realty debates whether amnesty given to the developers by the banks, development authorities and the courts actually serves the purpose of safeguarding homebuyers’ interests.     

Rules Changed, Favour to builders, Government favours builders, Amnesty to builders, Builders control government, Builders change policies, Indian realty news, India real estate news, Real estate news India, Indian property market,  Best news site for Indian real estate, Track2Realty, Track2Media ResearchContrary to the general perception that the eco system is getting tougher for the builders due to home buyers’ activism, vigilante media and judicial intervention, the facts suggest that the developers have been given too long ropes to cross the bridge over the buyers’ interests. As a matter of fact, there are many instances of amnesty to the developers in the last few years.

When the homebuyers of Amrapali in Delhi-NCR announced massive protest, the Noida administration immediately intervened to deny permission of protest with Section 144 and instead asked the buyers to come to table with the builder

The authorities of Noida, Greater Noida and Yamuna Expressway that allotted the land parcels to developers on deferred payment have time and again heeded to their request to reschedule the payment plan when the builders have defaulted

The authorities of Noida, Greater Noida and Yamuna Expressway cleared an exit policy for developers if they fail to fully or partially complete project after land being allotted

In the wake of non-payment to the banks the builders have on many occasions been allowed to restructure the payment

In some instances even the courts have granted the developers extra time to complete the project with strict warning or some fine

The Supreme Court has given stay on the demolition order of extra towers by High Court with project Emerald Court by Supertech

UP and Gujarat dilute RERA law; UP provided four exemptions to exclude incomplete projects from the category of “ongoing projects”, Gujarat has exempted all projects launched before notification of the rules 

All these instances clearly suggest that once the home buyers have made the payment to the builder, the policy makers and the judiciary take a lenient stand to offer the developers amnesty. The basic philosophy is that any punitive action against the developers will hurt the delivery timelines and hence the buyers’ cause.

The moot point nevertheless is that amnesty to the builders is at what cost and for whose benefit. The home buyers allege such amnesty does not help their cause and rather give the developer an escape route.

Gaurav Gupta, a home buyer in Paras Tierea, Sector 137, Noida is extremely critical of such amnesty to the builders. According to him, instead of penalizing the builders if they are offered amnesty after failing to fulfill their business commitment then the policy makers are setting a bad precedent for the future.

“To the best of my knowledge majority of the builders in Uttar Pradesh and Haryana who were offered amnesty have failed to take advantage of it and correct their wrong doings. This is what compels the buyers to take it to streets. Unfortunately, there is no amnesty for buyers if they default,” says Gupta.

Grey zones with amnesty to builders 

Majority of the builders who are beneficiary of various amnesty schemes have failed to reverse their fiscal mismanagement or delivery delays

Amnesty to builders lends a perception that builders who have compromised with the buyers’ interest can get away without getting penalized

There is no mechanism to verify whether the builder has defaulted by will or due to market dynamics 

The developers naturally have reasons to stand with the peer group. Vineet Relia, Managing Director, SARE Homes maintains that considering that the real estate sector has been facing a slowdown in the wake of weak demand, measures like these are important in sustaining momentum to some extent. Some development authorities like Greater Noida have restructured their payment plans to help allottees, while restructuring of debt by banks is a move to tackle mounting bad loans in the banking system and bring relief to the banks.

“While the recent judgment of NCDRC does place a higher financial burden on developers, but the move will only help improve efficiency and transparency in the sector.  While these measures are welcome, the realty sector is yet to come out of the slump which can only happen when demand picks up,” says Relia.

Parth Mehta, Managing Director – Paradigm Realty feels quasi ownership in real estate makes it so unique that policy adaptations are required to suit the real estate sector. Till the time the project is not delivered the ownership doesn’t get fully transferred. The turnaround time for a project delivery is generally 3 to 4 years and when the business cycle changes it generally hurts the project during the execution, thus buyers as well as builder is affected.

“In my view such amnesty definitely helps to solve buyers and builders problems at large. Amnesty provided to builder helps in getting the possession or regularization of the flat, thus at any given stage even with certain loss of time buyer receives the possession or occupation of the flats. In the final analysis buyers are definitely getting benefited,” says Mehta.

Interestingly, these amnesty schemes are not just Indian reality. In the neighbouring Pakistan too the government is designing an amnesty scheme to address the concerns of the real estate sector, which was reflected in freezing investment and reduced number of property transactions.

The only difference is that in Pakistan the policy makers have favoured a targeted amnesty, which could benefit genuine property buyers and real estate developers rather than those parking their ill-gotten money in plots. Thus, it is a purpose specific amnesty for real estate developers and first time property buyers.

In India, it is an awkward situation in the real estate sector today where amnesty to builders is lending credence to the perception of the developers getting escape route. While exceptions are always there, the general trend has been that of delay in delivering projects which has had a negative impact on the sector. Unless consumers’ confidence is not restored, the sector will not be able to stand back on its feet.

In this context, developers insist that the relaxation to builders is an attempt to help them serve the consumers better by expediting delivery of projects. But whether the amnesty is actually serving its purpose is quite debatable today. 

By: Ravi Sinha

A home for every budget in Mumbai

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: Contrary to the general perception, Mumbai and its extended property market has something for every budget segment. 

Mumbai City, Mumbai property market, Indian real estate news, Indian property market, NRI investment in Mumbai, Track2RealtySugandha Mishra wanted to buy a 2BHK house within a budget of INR 50 lakh in Mumbai. She initially thought she would not be able to afford a roof over the head anywhere in and around India’s financial capital with such a meager budget. However, she was pleasantly surprised when a property agent told her that she could easily get a flat in some of the locations of Navi Mumbai and beyond Thane areas.

“We looked at the areas of Kalyan, Dombivali and Ambernath beyond Thane. We also went on the property hunt to Navi Mumbai locations like Dronagiri, Karjat and New Panvel. Finally we decided for a property in Ulwe where the price point of Rs. 4400 was quite attractive and within our budget for a 850 square feet apartment,” says Sugandha.

Similar is the story of Siddharth Sood, a marketing professional who was told by friends that he could never buy a 2BHK flat in Mumbai with a limited budget of INR 1 crore. However, his property hunt proved such apprehensions wrong and he could settle for a decent flat of 780 square feet at the rate of INR 12,000 in Mulund West.

“I explored areas like Kurla, Ghatkopar East, Vikhroli etc. In Navi Mumbai, locations like Airoli, Vashi and Nerul also looked attractive from the standpoint of my budget limitations. The advantage with the Mulund property is the fact that there are more business establishments and job catchment area within close distance,” says Sood.

Location mantra

  • Some of the locations of Navi Mumbai and beyond Thane areas best bet for up to INR 50 lakh houses
  • Kalyan, Dombivali and Ambernath beyond Thane and Dronagiri, Karjat and New Panvel in Navi Mumbai hot property for INR 50 lakh
  • With a budget of INR 1 crore one can explore areas like Kurla, Ghatkopar East, Vikhroli etc
  • In Navi Mumbai, locations like Airoli, Vashi and Nerul also look attractive from the standpoint of INR 1 crore budget
  • For a budget up to INR 1.5 crore Western Suburb locations like Jogeshwari, Malad, Kandivali or Borivali are quite attractive
  • In Eastern Surburb Kurla or Vikhroli can be an option with the price band of INR 1.5 crore
  • With a budget of INR 2.5 crore and above one can explore most of the locations of Eastern Suburbs, Western Suburbs and some parts of South Mumbai

Options beyond budget constrains 

Namrata Chawla, another homebuyer was on the house hut in Mumbai and with a budget of INR 1.5 crore she did not face as much dilemma with the location as those buyers who have to buy within a range of INR 1 crore. In her case the choice is either to go for a compact 800-900 square feet of apartment in well-connected locations or have luxury of space beyond 1200 square feet in a far-off location.

“I think this is an ideal budget for Mumbai and if you wish to work in any part of the city. Even Western Suburb locations like Jogeshwari, Malad, Kandivali or Borivali are quite within the range if one is looking to work in any part of the Western Suburb. In Eastern Surburb Kurla or Vikhroli can be an option with this price band,” feels Chawla.

However, what a homebuyer like Namrata Chawla just touched upon, issue of an ideal price band, is something that is always INR 2.5 crore and above. With this kind of a budget one can explore most of the locations of Eastern Suburbs, Western Suburbs and some parts of Central Suburbs also.

 “Of course, you can not dream to buy a house in Worli or Bandra with INR 2-3 crore but most of the other locations can be bought. Having said this, I will maintain that in Mumbai the luxury of housing may be costly but a decent roof over the head is always possible with every budget segment. The only catch is that lower the budget and far off extended suburbs is the choice,” explains Raju Natekar, a local property agent.

Market mantra

  • Fierce competition in the mid segment housing but affordable housing to be next demand driver
  • Western suburbs to have more traction due to infrastructure & connectivity to job catchment areas
  • Experts believe the legal and practical checklist remains the same for all budget segment but the location and value addition is the differentiation
  • For a house below INR 1.5 crore, the buyers should check necessities like the size of the bedroom and drawing room than focusing on fancy apartment of modern living
  • Housing needs have to be classified into basic, secondary and tertiary level. Instead of swimming pool and Wi-Fi facility with INR 50 lakhs one should look for location & connectivity with the work place 

Industry perspective 

Mohan Tharwani, Managing Director of Tharwani Infrastructure feels each segment of housing has its own demand drivers in a city like Mumbai. However, the next wave would be in the affordable housing with the government’s focus on Housing for All. Even from the standpoint of short-term market dynamics the market is poised for more uptake in the INR 25-45 lakh category.

“It will take another nine to ten months before the market gets back to the purchase of INR 1 crore and above. Most of these housing transactions are witness to paying 40-50% as down payment and the rest through the bank finance. But since there is no cash available in the market after the demonetization this segment will be muted. In the below INR 50 lakh property market down payment is nominal and the property is by and large purchased with the bank finance only,” Tharwani explains the rationale.

Rajendra Joshi, CEO of SD Corporation feels the location would be the differentiating factor in the choice for property. According to him, the mid segment and affordable properties would be the demand drivers moving forward. Quality developers will definitely be the key differentiating factor.

“The sheer land cost is so high that anything below INR 1 to 1.2 crore is not feasible for any location that has connectivity to the work place. So, this price range is ideally the segment to attract most of the buyers. In terms of the location, today 60% of the work force is living in the Western Suburbs and hence despite of traffic challenges that region will see most of the launches and the absorption. There will be some demand in the Eastern Suburbs as well.  For the affordable buyers below INR 1 crore the markets that look attractive are Thane and Navi Mumbai,” explains Joshi.

In a nutshell, contrary to the general perception that only the Richie Rich can buy a house in Mumbai, the fact of the matter is that there is something for every budget segment. If not the fancy luxe living in posh areas, a roof over the head is always there with the rider of more money adding to more amenities and lesser travelling distances.

By: Ravi Sinha


Is there no incentive for green buildings?

Posted on by Track2Realty
Track2Realty Exclusive

News Point: India is way short of green buildings and the incentive of extra FAR fails to attract the builders.

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Delhi NCR real estate, Mumbai Real Estate, Bangalore Real Estate, Pune Real Estate news green buildings, energy efficient buildings, energy efficiency“If extra FAR (Floor Area Ratio) can be a good incentive to attract the developers for ‘Green Development’ then Noida should have very many green buildings. It is just not attractive incentive to persuade the developers and the buyers for green and sustainable developments. FAR benefits have to be supplemented with tax incentives,” suggested a panelist at a seminar on sustainable developments in Delhi.

The fact is that it is not only Noida but the incentive across the country has been less than desired to encourage the green, sustainable and eco-friendly developments. The Ministry of Environment and Forests (MoEF), Government of India issued a memorandum to facilitate fast track environmental clearance for GRIHA pre certified projects. GRIHA stands for Green Rating for Integrated Habitat Assessment.

Facts speak for themselves: 

  • NOIDA and Greater NOIDA have incentivized GRIHA projects (on a plot of more than 5000 sq m and above) with free of cost 5% additional FAR for projects for complying with 4 or 5 Star GRIHA Rating
  • The Pimpri-Chinchwad Municipal Corporation in Maharashtra offers a rebate of up to 15 per cent on property tax for green buildings, and up to 50 per cent on premium for builders who get their projects GRIHA-certified
  • In West Bengal 10% additional FAR for green building as per provision under rule 69A of the said rules, notified by Kolkata Municipal Corporation affairs department vide notification no. 54/MA/O/C-4/3R-3/2014 dated 05.02.2015
  • Jaipur Development Authority, a body constituted under Jaipur Development Authority Act 1982 (Act. 25) under the Department of Urban Development and Housing, Government of Rajasthan has notified that the buildings constructed on plot area more than 5,000 m will be eligible for an additional 5% FAR free of charge if they get 4 or 5 star rating from GRIHA

Yet, all these cities are way short of green developments. This raises a fundamental question as to whether the extra FAR to builders are not reasonable incentive for green building to invest.

Green floor space accounts for only 3-5 per cent of all construction in India so far. In developed markets like the UK, where green building began almost two decades ago, around 40 per cent of all buildings would fall in that category. In the US, it would be around 30 per cent.

Vineet Relia, Managing Director of SARE Homes maintains that one of the main reasons why growth of green projects has slowed down is the absence of incentives due to which buyers are not willing to pay premium amount. The additional Floor Area Ratio (FAR) for green projects will lead to more space utilization and more saleable area for builders which will work to be an incentive for builders as well as buyers.

“FAR alone will not translate into increased investments. Other incentives like reducing development charges for green projects also need to be considered. Green buildings are designed to minimize energy, water consumption and allow recycling of waste and recharging of the groundwater. The concept of green building is a progressive step towards sustainability. One of the biggest barriers in green building is cost,” says Relia.

Raj Gala Shah, Partner, Zara Habitats feels extra FAR to builders will definitely be reason enough to invest in green buildings only if the builders can recover the additional cost incurred for building it, plus earn some profit for the effort put into it.

“The ideal incentive for the both the developer and the buyer would be in terms of money and time. It also needs faster approvals for green buildings, as that would result in reduction of interest cost for the developer and in turn faster possession for the buyer as well. Thus, giving rise to monetary benefits to both,” says Shah.

Green Realities

  • India had only around 1,850 sq metres of certified commercial green floor space in 2001
  • The first residential green rating standard was launched in May 2008. Seven years later, India has around 325 million sq metres of registered green floor space, both pre-certified and certified, across all categories
  • CSE warns suggests governments should not give fiscal sops or extra built up area to developers without stringent monitoring of actual energy savings and environmental performance of green-rated buildings

While green buildings does cost slightly more than conventional ones, but it is important to realise that the payback period would be in 3-4 years with a reduction in operational costs. Alongside it protects the environment, has economic and social benefits and finally protects the needs of future generations.

More awareness about benefits and usage of green products will lead to growth in investment. Also, this will happen only when developers and buyers together and in unison realize the positives from green buildings. The government, on its part, is gradually increasing incentives for green home concept such as increasing the FAR, reduction in development charges etc.

Though the developers in principle agree that extra FAR is an incentive, yet the practicalities of the business indicate that higher FAR has to be supplemented with lower taxes. Higher FAR would then entice the developer to opt for green buildings since one would be promised of higher profits in a shorter time span. 

Lowering the taxes for such buildings would result in lower monthly outgoings for the buyers and this would also encourage buyers to opt for green buildings automatically.

By: Ravi Sinha


What is right property in right market & right price point?

Posted on by Track2Realty

Bottom Line: An average homebuyer always has this dilemma of what is right property in the right market and at the right price point.

Professional Stress, Real estate professionals, Client demand, brokers pressure, NRI investment, real estate salary, real estate depression, unprofessional real estate, Track2Media Research, Track2RealtyIn the absence of any scientific research that could help the homebuyers to make an informed choice one either concentrates on the short term wants to overlook the long term needs or is confused between the end use necessities and quest for appreciation. More often than not the homebuyers’ wants and needs contradict; there is no clarity on economic rationale and emotional urge; and a clear view of the parameters that collective form the livability index is missing.

There is definitely underline need for more research on the subject to help both the developers as well as the homebuyers which could lead to bridging demand & supply mismatch as well. Analysts point out that it depends on which location suits me and at what value is that available to me.

Unfortunately, there is always a confusing as to what is right value and people misread it with right price point. There is a need to look at the overall value of the house. A homebuyer may be paying an extra premium for the said property if he is getting the right value addition with the house.

Ten metrics to determine what is right property 

Physical infrastructure

Social infrastructure

Location & Aspiration

Appreciation potential

Competitive advantage

Rental potential

Launch2sales ratio

Construction quality

ROI cycle

Livability index

Naushad Panjwani, Managing Partner with Mandarus Partners maintains that very much like the beauty, the value of a project lies in the eyes of a beholder; something that the other person does not understand. According to him, the mistake most of the homebuyers make is to look at the self-use house as an investment and this is where they compromise on both the aspect. First, they compromise on the quality of the house because they want to invest in a place where there will be appreciation and then they would compromise on the basic needs that has to be there.

“In a market where the rent is just two or three per cent, even one per cent in a place like Noida, why should one buy a house for investment. I mean you can live on lease at walking distance from your house and have a better property at 25 kilometers distance. I think this is where we often fail to differentiate between investor and end user,” says Panjwani.

Arvind Nandan, Director – South Asia with Colliers International says from a homebuyers’ perspective what matters is that how do you conduct your life. To conduct your life what comes first is your professional life and then there is personal & social life, and these two things matter the most. So, other than the job catchment area, I have to see if there is enough social support in the vicinity; if there is enough healthcare support in the vicinity; are my daily needs going to be fulfilled.

“Once I know that these conditions are met then I will think whether I will afford it or not. It cannot be the other way round where I first start looking for the affordability and then see whether these conditions match or not.   So, by these two filtering I do most of my basic search that whether it is livable place from where I can work and manage my daily life. And then I come to which all projects match my price band, and then which unit etc. So, there are four layers of home search,” says Nandan. 

Right property, in the right market and at right price point is quite subjective and it depends on person-to-person and market-to-market. However, what cannot be denied is that what differentiates between the right product in the market and way-too-ambitious project are – job catchment area, median income of the population and their social needs. 

By: Ravi Sinha