Tag Archives: Demonetisation

Banks flush with funds but no rate cut

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: After no reduction in repo rate, the homebuyers are questioning the theory of policy makers that demonetization has led to banks flush with funds.

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,Track2Media, Track2Realty“Ever since the demonetization we have been told that the move would be beneficial for the hard-to-manage homebuyers like us. Everyone within the policy corridors and experts were talking that banks would now be flush with funds and it would lead to lower interest rates for the homebuyers. But the quo status on the interest rate has not been in sync with the general perception of the market,” rues Swati Chopra, a prospective homebuyer in Gurgaon.

Like Swati, millions of prospective homebuyers across the country are today wondering why the Reserve bank of India (RBI) has kept the repo rate unchanged. The news of unchanged rate has come as a dampener for the homebuyers who were expecting some substantial sops after the symbolic gesture with the Union Budget that promised more affordable houses.

The RBI on Wednesday, Feb 8, surprised the market as it has kept the repo rate unchanged at 6.25% in its monetary policy review. The disappointed market in general and the homebuyers in particular are not impressed with the arguments of the apex bank about inflation concerns.

The expectations of the homebuyers across the nation have been about the lower repo rate leading to cheaper home loans. After all, they have only recently taken the demonetization hit with the promise that the banks would now be flush with funds.

Homebuyers question financial rationality

  • Homebuyers have taken the demonetization hit with the promise of banks to flush with funds
  • Buyers question what is benefit of banks being flush with funds if cost of borrowing does not reduce
  • Union budget 2017-18 promised affordable housing but the buyers have not been incentivized with lower interest rates
  • A lower interest rate would also fuel demand in consumption and revitalize the economy 

The industry reaction has also been that of concern, even though the leading players preferred caution to not overtly criticize the move. Anshuman Magazine, Chairman, India and South East Asia, CBRE admits that the decision to keep the repo rate unchanged has come as a surprise.

“While the recent demonetization drive has brought in the necessary liquidity into the banks, lowering the repo rate would have helped ease borrowing costs. This would have provided an added thrust to the government’s initiatives for affordable housing and fuelled demand. A low inflation rate amidst slowdown in projected economic growth provided a conducive environment to reduce rates,” says Magazine.

Nikhil Hawelia, Managing Director of Hawelia Group admits that after the budget that promised affordable housing the quo status on repo rate defies the direction of the economy being promised. According to him, if the government is really serious about affordable housing then along with incentivizing the developers to create the housing stock they should also incentivize the homebuyers with lower cost of borrowing.

“The quo status on repo rate means that the market will remain standstill for one more quarter. As developers of affordable housing, we were expecting a sharp cut to fuel the positivity of the Union Budget for this segment of housing. There are reasons for all the stakeholders to feel disappointed,” says Hawelia.

Vineet Relia, Managing Director, SARE Homes feels the RBI’s decision to keep the repo rate unchanged at 6.25% is disappointing, though not unexpected. The fact that credit growth has slipped to multi-year lows, despite lending rates falling by nearly 150 basis points since early 2015, is proof that other factors are at play.

“Demonetisation has accelerated the transmission of rate cuts over the past two months. While it has benefited select borrowers, it has squeezed incomes for most savers, with deposit rates plummeting over two percentage points over the past two years. A cut in policy rate may do more harm than good if inflation creeps up with the rise in global commodity prices,” says Relia.

Experts also believe India needs positive interest rates to induce savings and push up investments. Nonetheless, since demand in real estate and allied industries remains sluggish, a rate cut could have improved liquidity and created renewed interest in property purchase. However, the quo status has sent a warning bell that all is not that well with the state of Indian economy. 

The homebuyers are also asking today whether the rate was kept on hold to assess demonetization impact on inflation. If that is the case, then the theory of demonetization making banks flush with funds does not hold ground. It is generally believed that a rate cut at this stage would have helped in lowering the home loan interest rates further after most banks cut down their interest rates on loan in past couple of months. 

By: Ravi Sinha

Budget to touch upon benami property

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: Will the Union Budget 2017-18 touch upon the benami property, as expected?

Benami PropertyEver since the Prime Minister Narendra Modi announced the demonetisation, the buzz word vis-à-vis the real estate market has been the Benami Transactions. The government has time and again reiterated its commitment to hit out at the benami properties after the demonetisation. It is hence epxected that the Union Budget 2017-18 would have some more concrete road map and suggest financial curbs on the benami transactions.

The larger question within the built environment of Indian real estate is as to what extent it will affect the business of Indian real estate. The stakeholders within the organised segment of property market do welcome the expected move on the face value, but the grey areas are too deep rooted in the system.

Moreover, the unorganised real estate in this part of the world is larger than the organised property market. With land records and transactions not digitised and up to date, it is a challenging job to assess the extent of beanmi properties in the country. The developers within the organised segment of Indian real estate nevertheless welcome the expected budget announcement to curb it.

Benami check & budget

  • After demonetization, curb on benami property is next big goal of the government
  • There are more benami transactions in the unorganized property markets and hence concealed from the law
  • With land records & transactions not digitized benami property a challenging zone for the government
  • Union Budget 2017-18 expected to give some answers as to how to curb benami transactions in property market
  • There is no clarity over what is ideal fiscal deterrence to stop benami property 

Kaizad Hateria, Brand Custodian and Chief Customer Delight Officer, Rustomjee Group asserts that if there is any concrete step on benami property in the Union Budget the serious developers will be the first one to cheer. According to him, crackdown on benami properties can help clean up real estate sector. If the new law is implemented properly, there will be greater transparency in the real estate sector; there will be less corruption; and we may see a correction in prices.

“About a third of the country’s 1.25 billion population lives in cities, with numbers rising as tens of thousands of people leave villages to seek better prospects. A government plan to provide housing for all by 2022 is meant to create 20 million new urban housing units and 30 million rural homes. Going after benami properties can help accelerate the pace of implementing the government’s plan,” says Hateria.

Parth Mehta, Managing Director, Paradigm Realty also advocates that there has to be some stringent measures in the upcoming budget to check benami transactions. Benami Tool was introduced to control black money in real estate sector.

“The registration of property will be flawless in the name of the actual owner; also control on the maximum number of property registration would be under one name. Land inventory can also be managed,” says Mehta.

Vivek Mohanani, Joint Managing Director, Ekta World believes that the realty sector has lately witnessed a series of corrective measures by the government, Benami Transaction Act being one of them aiming at making the sector more transparent and professionalized.

“The institutional framework of the realty sector has already been strengthened by the government by amending the Benami Transactions Act, to make the law more stringent,” says Mohanani.

There is no denying that when the titles are clear and transactions are transparent, the confidence of lenders increases. The Indian real estate will be witness to a pickup in lending to buyers. This will increase the supply of residential real estate. However, it is not as easy a road map as it sounds. The government will have to come up with a well defined road map for the same.

The Union Budget may address it in terms of financial penalties for the benami transactions and the benami property holders, yet the problem is so deep rooted in the system that only a fiscal road map is not enough. With most of the land records not digitized what it needs to put a curb on benami transactions is the structural reforms in the administration than mere policy announcements of budget.

The government has made changes to strengthen some institutional framework by amending the original Benami Transactions Act 1988 to make the existing law more stringent. Under the Benami Transactions (Prohibition) Amendment Act 2016 that recently came into force on 1st November, 2016, a transaction is named ‘benami’ if property is held by one person, but has been provided or paid for by another person. The Act prohibits recovery of the property held benami from benamidar by the real owner. Also, benami properties are liable for confiscation by the government.

However, the impact of such measures can only control such holding and transactions in the organized property markets. The big challenge for the government is to create a mechanism where the fiscal transaction is not possible in property market for benami property deals. Can the Union Budget 2017-18 come out with some concrete answers?

By: Ravi Sinha

Budget compensation for demonetisation hit realty

Posted on by Track2Realty
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Bottom Line: Can the expected budget bonanza compensate the demonetisation hit Indian real estate market?

India Budget, India Finance Minister, Indian Fiscal Policy, India Monetary Policy, Union Budget 2014-15, India real estate news, Indian realty news, India property market, Track2Media Research, Track2Realty“The sector has suffered badly due to the demoentisation and our business have been forced to go through the worst cycle. The recent interest rate cut promises that the government might give some extra sops to the home buyers but my concern is about the larger interests of the business. Can the government compensate the real estate business that has been hit due to demonetisation with a home buyer friendly budget,” questions a developer in Gurgaon while requesting anonymity.

This is not something that only this developer is asking. As a matter of fact, within the built environment of Indian real estate a large section of analysts privately admit that the demonetisation has done more damage to the real estate business than even the Lehman crisis. Some call it home-grown Lehman crisis while others term it as self-inflicted money trap.

The larger issue today is: Can the Union Budget 2017-18 change the market dynamics? Can some interest reduction and other sops uplift the home buyers’ mood and market simultaneously. The opinion is divided but what can be vouchsafed is the fact that budget is being presented immediately after hard hit on the realty sector with demonetization. It is hence being seen as either a budget with major relief or more tough days ahead.

Demonetization hit real estate & budget expectations

  • Demonetisation has hurt the Indian economy in general and real estate in particular a big way
  • Some call it home-grown Lehman crisis while others term it as self-inflicted money trap
  • The housing sales have come to a standstill and new launches have stopped
  • The rate cut has thus far not shown any sign of increased market transactions
  • The Union Budget can at best reduce interest rate and encourage home buying, but the ground realities of economy and job market discouraging 

Kaizad Hateria, Brand Custodian and Chief Customer Delight Officer, Rustomjee Group maintains that the real estate sector has always been upbeat with the upcoming budget and this time too one is optimistic about the future. Real estate contributes 12% to the GDP, second largest after agriculture. Real estate supports more than 150 ancillary industries. So, any challenge to real estate is challenge to the economy and any opportunity for real estate is an opportunity for the economy.

“2017 is a year of positive reforms. This year we will see the after effects of demonetisation – an axe to cut out black money, RERA – real estate regulatory being formed – a watch dog, GST being introduced – tax simplified and finally the implementation of the new development plans – a well planned city. All of these leading to more transparency, reliability, timely development and thus benefiting the consumers at large,” says Hateria.

Parth Mehta, Managing Director, Paradigm Realty categorically says that demonetization has impacted sales in real estate sector. He demands that there should be some measures in the upcoming budget, for example cut in the tax rates for middle income groups which will lay extra money in people’s hands. “Also, stamp duty reduction can give some breather. Several government approvals should be executed appropriately. Single window clearance has to be introduced.”

Vivek Mohanani, Joint Managing Director of Ekta World admits that post the announcement of demonetization, the real estate sector has seen a temporary hit. However, these changes are surely in the larger interest of the sector and its customers. It will bring about more transparency in the sector. The upcoming Union Budget announcement is expected to bring cheer to both buyers and developers.

“The real estate prices are predicted to increase marginally, as with demonetization in place, stringent rules & regulations are to follow the realty sector in the year 2017 which will give a raise to the sector. There is also a high possibility of the execution of GST in the budget 2017-18, which will relieve the buyers from paying multiple taxes, in turn boosting the purchase of properties,” says Mohanani.

Analysts suggest that with Interest rates coming down sharply at the very beginning of 2017, the demand for end use home buying will not only revive but also catch steam over quarters of 2017. Reduction in interest rates not only reduces interest cost but also increases affordability. The budget should hence focus more on the end user home buyers.

The moot point, however, still remains unanswered as no one would like to address it on record. The state of Indian economy does not allow the Union Budget to compensate the real estate sector for the hit that it has taken with the demonetization. The long term reforms are only projections as of now, and the short term losses can hardly be compensated with the Union Budget 2017-18. The developers nevertheless are living with hope and prayer.

By: Ravi Sinha

Is a price correction possible in 2017?

Posted on by Track2Realty
Track2Realty Exclusive

News Point: The Indian homebuyers don’t have fancy expectations of price crash or correction in 2017 after the demonetization and other policy changes.

  • 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 EstateWill the houses be cheaper post demonetization?
  • Will the curb on flow of black money make the bubble burst in the housing market?
  • Will the over-supply lead to price crash or correction?
  • Will the regulator force exit of investors and make the housing prices correct?

These are some of the questions that have been debated enough within the built environment of Indian real estate. However, the fact lies that the answer to these questions also depend upon the perspective of the home buyers whose wait & watch or impulse may have a direct bearing over the price correction apprehensions in the housing market.

On the eve of 2017, Track2Realty, the real estate think-tank group, conducted a nation wide survey and the answer is a clear ‘NO’ as far as the buyers’ expectations of cheaper houses in the year ahead is concerned.

A vast majority of homebuyers, as many as 74 per cent, dismiss the theory of recent policy changes leading to price correction in the housing market. Contrary to the price correction reports, the property search of prospective buyers and sellers across the country have convinced them that cheaper house in 2017 is a fancy and wishful thinking.

Those who have done their homework on property search are pretty sure about it. This is quite striking as more Indians dismiss the price correction expectations; compared to 2012 when without any policy changes, legislations and transparency, 70 per cent home buyers had refused to believe that home prices would correct.

“I rather feel there is an organised cartel spreading the news that property prices would correct; to keep the end users away from the market and the prices would rather go up this year. With more stringent laws there will be less supply in the housing market and hence property prices will only go up,” says Navneet Sharma, a home buyer in Noida.

Key findings

  • 74% homebuyers dismiss the theory of recent policy changes leading to price correction in the housing market
  • Compared to 2012 when without any policy changes, legislations and transparency, 70 per cent home buyers had refused to believe that home prices would correct, more home buyers rejected correction theory now  
  • 78% homebuyers who invested in second house and are planning to sell this year have been assured by the dealers & brokers for higher returns if they exit in the year ahead
  • 78% believe that if they missed it now, they may not be able to buy it ever
  • 68% repent investing in other instruments and wish they could have put the same money in buying a house
  • 58% are not sure whether price correction would ever happen in the Indian property market
  • 94% don’t find media reports on property market reliable
  • 68% go for physical search & verification of the locality and the property, 20% hire a reliable broker, and the rest 12 per cent go by the references of friends & families
  • 90% believe that even property search sites are biased in their valuation of the property
  • 96% Indians believe that the market is and will continue to be sellers’ market
  • 74% buyers believe that the benefits of even distress selling do not reach to the end-users since there are enough investors & speculators still operating in the market

Track2Realty conducted this survey in ten cities – Delhi-NCR, Mumbai, Pune, Bangalore, Kolkata, Chennai, Ahmedabad, Lucknow, Coimbatore and Hyderabad. A total number of 2000 prospective buyers & sellers in search of property prices were interviewed.

The property quest was put into 3 categories — seeking property up to the price range of Rs. 50 lakh, seeking a house up to the range of Rs. 1 crore and seeking upper segment house of Rs. 1 crore and above. Interestingly, the voice and market search of the prospective buyers & sellers in the all the three segments indicated the same results.

A majority of them, 74 per cent of the home seekers are convinced that they will have to shell more money to buy a house in 2017, as compared to the last few years. An equally high number of those, 78 per cent who invested in second house and are planning to sell this year have been assured by the dealers & brokers for higher returns if they exit in the year ahead.

In most of the cities home seekers’ property search indicates that the prices are only going to head northwards. 78 per cent believe that if they missed it now, they may not be able to buy it ever. 68 per cent repent investing in other instruments and wish they could have put the same money in buying a house.

Nearly six out of the 10 homebuyers, 58 per cent, are not sure whether price correction would ever happen in the Indian property market. Nearly four in five, 76 per cent, who went on a house hunt in the last three years, are disillusioned with the affordable houses advertised in the newspapers.

What is most interesting find of the survey is the fact that almost all the buyers, 94 per cent don’t find media reports on property market reliable. Nearly seven out of ten, 68 per cent, go for physical search & verification of the locality and the property. 20 per cent hire a reliable broker, and the rest 12 per cent go by the references of friends & families.

“There is no point to trust media reports as different media is reporting different price of the same property in the same locality. Even real estate websites are misleading. When my local property dealer takes me for a ride if I don’t cross check his advice with another one, how can I trust one-way communication of media,” questions Gautam Patel in Ahmedabad.

No less than 90 per cent, believe that even property search sites are biased in their valuation of the property, that is often far away of the ground realities. “Why are property price listings on different newspapers and portals different in the same locality? They are supposed to be based on the BSP of the developers,” questions Amrit Mohan, a home buyer in Thane.

A whopping 96 per cent of the Indians believe that the market is and will continue to be sellers’ market. 74 per cent of the buyers believe that the benefits of even distress selling do not reach to the end-users since there are enough investors & speculators still operating in the market.

Homebuyers wish budget encouraging for end users

Posted on by Track2Realty
Track2Realty Exclusive

News Point: Track2Realty pan-India survey finds that homebuyers wish the Union Budget should encourage first time homebuyers and put riders for the retail investors buying more than one house.   

Union Budget, Union Budget 2016-17, Finance Minister, Fiscal Policy, Fiscal Deficit, Monetary Policy, Budget disappoints real estate, Incentive for home buying, NRI investment, Track2Realty, India real estate news, Indian property marketThe Indian homebuyers are quite convinced that whatever incentives are given to them in the Union Budget, it will never reach to them. Reason: There are enough investors and middlemen in the Indian housing market to absorb the budget benefits. And hence, they demand a combination of incentives and penalties to make sure that the government’s oft-repeated commitment of ‘Housing for All’ becomes a reality.

This speaks volumes about today’s discerning homebuyers or whom  more than the tax reforms and more than the much-awaited GST, what is even more important in the Union Budget is to have the differentiation between the home buyers and the retail investors. They are quite convinced that the wealthy Indians acting as investors are the biggest road block in dream of ‘Housing for All’.

Nearly eight out of ten, 77 per cent demand more incentive for first time buyers. They assert that the incentive should not be passed on to the second time buyers or the repeat buyers. The general mood of the nation is that this is one way to ensure end users are incentivized while the investors are kept at bay. A substantial number of home buyers, as many as 70 per cent even recommend more taxes to the second and third home buyers.

The homebuyers across the country even feel that the budget should encourage more rental housing in the major cities of India. Nearly two third, 62 per cent, think this is one of the ways to keep the housing crisis in check. And hence, the Indians demand heavy penalty (at least up to the renal value of the apartment) to the scores of purchased and locked houses in the cities.

Homebuyers’ budget wish list

  • 77% homebuyers demand more incentive for first time buyers
  • 70% buyers recommend more taxes to the second and third home buyers
  • 62 per cent think tax incentive to fist time buyers and additional taxes to repeat buyers would be deterrent to retail investors
  • 92% demand simplificati0n with the taxation of house purchase where any infinite delay in construction should not deprive them with the legitimate tax rebate 
  • 54% buyers feel additional tax incentive of Rs. 50,000 for houses up to Rs. 50 lakh announced in the last budget is not enough in most of the metro cities of India
  • Buyers demand the incentive cut-off to be houses worth Rs. One crore to be eligible for getting additional tax exemption 
  • 72% feel demonetization won’t make houses cheaper
  • 68% feel the negative publicity with the demonetization and the reported loss to the Indian economy on the eve of elections in five states will force the government to dole out something for the home buyers in the upcoming Union Budget
  • 58% homebuyers demand the Finance Minister to clarify taxes post GST in the upcoming budget 

These are the findings of a pan-India survey by Track2Realty, the real estate think-tank group. Track2Realty conducted this survey post the 50-Day cut-off date after the demonetization was announced. The survey was conducted in Delhi-NCR, Mumbai, Pune, Ahmedabad, Bangalore, Chennai, Kolkata, Hyderabad, Chandigarh and Lucknow. 

The idea was to have a comprehensive understanding of the home buyers wants & needs with regard to the Union Budget 2017-18. A mix of open-ended and closed-ended questions were given to the respondents who were mostly first time home buyers, salaried class and living on rent. The representative set had 58 per cent males and 42 per cent females.

“As of now the policies do not differentiate between the actual end user and the wealthy persons who are retail investors with four or five houses. It seems the policy makers only understand who are organized investors. However, the tax benefits should be clear and encourage one house per person. No one should be encouraged to have more than one house at the cost of needy home seekers,” says Abvhinav Shukla in Mumbai.

“If only the government is sincere about its ‘Housing for All’ then the Union Budget this time should clearly announce all incentives and tax exemptions only for first home buyers. People having more than 2-3 houses should be rather levied additional taxes and stamp duties as a deterrent for investment,” opines Swati Chandra in Mumbai.

The developers on their part maintain that it is the policy makers who have to look into this grey zone. Nikhil Hawelia, Managing Director of Hawelia Group maintains that if Union Budget announces incentives for the first time home buyers the developers will only be benefitted by this instead of business getting affected.

“We are already complying with the mandatory provisions, like asking for Pan Card of the buyers. Contrary to the perception that the housing sales will be slow if investors are discouraged, I feel if end users are encouraged then the housing market in general will be benefitted. It will help both the developers as well as the buyers if Union Budget announces so,” says Hawelia.

Nearly all the home buyers, 92 per cent, demand simplificati0n with the taxation of house purchase where any infinite delay in construction should not deprive them with the legitimate tax rebate.

More than half of the respondents, 54 per cent, feel additional tax incentive of Rs. 50,000 for houses up to Rs. 50 lakh announced in the last budget is not enough in most of the metro cities of India. They are hence demanding the cut-off to be houses worth Rs. One crore to be eligible for getting additional tax exemption.

The survey asked the homebuyers most relevant question of housing market today: will the demonetization benefit them? Nearly three-fourth of the Indians, 72 per cent, do not think so. However, More than two-third of the respondents, 68 per cent, feel the negative publicity with the demonetization and the reported loss to the Indian economy on the eve of elections in five states will force the government to dole out something for the home buyers in the upcoming Union Budget.

Finally, the homebuyers also want clarity over the tax implications Post the roll out of GST. More than half, 58 per cent, do not really understand what would be the tax burden after the GST. They demand the Finance Minister to clarify this in the upcoming budget.