Tag Archives: Homebuyer

Was rate cut precursor to more sops for realty in budget?

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: The rate cut ahead of Union Budget 2017-18 has raised hopes that the policy makers are working on more bonanza for the homebuyers.

Union Budget, Union Budget 2016-17, Finance Minister, Housing demand in Budget, Fiscal Deficit, Monetary Policy, Repo Rate, NRI investment, India real estate news, Indian property market, Track2Realty, Budget disappoints real estateThere has not been any precedence of major interest rate cut ahead of Union Budget. On the contrary, the major financial policy decisions are put on hold or deferred ahead of the budget to make it announce during the budget speech of the Finance Minister. However, the substantial interest rate cut ahead of the Union Budget 2017-18 this time around has pleasantly surprised the market and the home buyers.

The analysts are even calling the year end speech of the Prime Minister Narendra Modi that led to the banks cutting down the interest rate as mini-budget. It is hence expected that the the rate cut has only been symbolic and major substantial gains are in store to be unlocked with the Union Budget.

Was the rate cut really a precursor to more sops for realty sector in budget? At least the larger stakeholders of the Indian real estate would like to believe this. Kaizad Hateria, Brand Custodian and Chief Customer Delight Officer, Rustomjee Group says yes it could be a precursor to more sops for real estate sector. According to him, the developers are expecting regulation of norms which will enable seamless transaction for customers and stakeholders.

“For example, clarity and uniformity in DCR norms, single window clearance, time bound approvals, cluster redevelopment schemes to be more attractive, FSI and TDR norms and seamless flow in stamp duty taxation. We shall expect sops in clarity for the benefit of the customer. With financially disciplined developers having focus on its customers and the timely delivery of their projects, consolidation within the real industry is what we expect in the year 2017. Also, with the implementation of RERA, we foresee confidence coming back among buyers,” says Hateria.

Major budgetary bonanza for home buyers?

  • The interest rate cut that followed with Prime Minister’s year-end announcement indicates major bonanza for home buyers in Union Budget
  • No precedence of sudden rate cut ahead of budget suggests the need for feel good factor was immediately felt while major bonanza is being worked out
  • Tax incentive to home buyers clearly indicate the government wants to reach out to middle class home buyers post demonetization
  • Finance Ministry sources claim the specifics for the home buyers in budget still being worked out   

Parth Mehta, Managing Director, Paradigm Realty says he is pretty hopeful of more policies like tax benefits for affordable housing, home loan interest rate reductions, relief in income tax for individuals.

Vivek Mohanani, Joint Managing Director, Ekta World also believes that the year 2017 will definitely be a good year for the real estate sector, helping the sector with an upsurge with the changes that have taken place in the current financial year.

“The coming year is expected to write a new growth chapter in the realty sector which include the reduction in interest rate, increased FDI, and increase in loan portfolios. With the government giving sufficient interest rate cut precursor, the realty sector is definitely going to see buoyancy in the Union Budget,” says Mohanani.

There are reasons to believe that the policy makers are in a crisis management mode and hence the rate cut was immediately announced. Had it not been the case this could have been put on hold and announcement would have been made in the budget speech. However, the government found it deemed to offer something instantly while other sops for the home buyers were being worked out.

The sources with the Finance Ministry also confirm that the government is also working out the modalities to provide higher tax incentives on home loans to boost the real estate business that has been worst affected with the demonetization. The sources even claim that the government cannot afford to completely ignore the issue now since it goes against the oft-repeated commitment of ‘Housing for All’.

A tax incentive post the demonetization that has made the banks flush with funds would send a strong message to the market. The tax concession is the only way out to not only keep the sector back on track that contributes significantly to the GDP (Gross Domestic Product) but also reach out to the middle class Indians across the country.

Thus, it could be vouchsafed to say that the rate cut being referred as the mini-budget in popular parlance has been the precursor to substantial home buyer bonanza package in the Union Budget 2017-18.

By: Ravi Sinha

Delhi-NCR home to artificial price appreciation

Posted on by Track2Realty

Artificial appreciation might be a pan-India phenomenon but Delhi-NCR defies all conventional wisdom of housing market.

Homebuyer, Home Finance, Indian property market, Indian housing reforms, Property market regulations, Real estate understanding, Real Estate tips, Real estate guide, Track2Media Research Pvt Ltd, Track2Realty, Homebuyers Knowledge, NRI Investors, NRI investment patternPritam Yadav bought an apartment in Noida at Rs 3,000 per sq ft in an upcoming location three years back. The developer had then promised that the price will appreciate to no less than Rs 4,500 per sq feet within 18-24 months. It actually appreciated to Rs. 5000 within couple of years. However, circumstantial exit effort made him realise that the appreciation was only a castle in the air.

This doctor could not find any buyer at the appreciated price point. Forget Rs. 5000 sq feet price that the developer was advertising, he could not get any taker in the secondary market for even Rs. 4000 per sq feet. Even the developer refused to buy back at Rs. 1000 per sq feet lesser than what he has been advertising as his new slaes price.

“Some probing in the property market, however, exposed me to the reality that the developer had the bespoke marketing strategy for his investors and under-writers, to book profit during the construction stage of the project. With his cartel of under-writers the developer had sold nearly 40 per cent of his inventory at a discounted price of Rs 2,500 per sq ft, thus, making them book a profit of nearly 20 per cent by the launch period itself,” says Yadav.

Thereafter these under-writers who had bought nearly 40 per cent of the inventory were for all practical purposes controlling the marketing strategy.

The under-writers were actually pushing the price point upwards through advertisements. These under-writers in the process were offering the discounted and lesser price to the end-users. The gullible homebuyers took it as a golden catch on the face value of these momentum traders.

This artificial appreciation in property prices is whatr really is the bane of property markets of Delhi-NCR. It is not that other property markets are not exposed to this kind of unfair trade practices. Yet, the track record of Delhi-NCR is worst on this count. Not surprisingly, a recent report by PropEquity also points to the fact that cities in the NCR occupy the bottom rankings in the list of investment destinations, with Gurgaon at the 10th position and Noida, Ghaziabad, Greater Noida and Faridabad at 11th, 12th, 13th and 14th positions, respectively.

Developers use artificial appreciation to offload inventory and get liquidity. It also helps them to retain nearly one-third of the apartments and sell it only when they manage to manipulate a sharp appreciation in property prices.

Requesting anonymity, a Noida-based developer agrees that the market practices leave him with no other option. According to him, the cartel of under-writers is so very strong that one just can’t do business without their support.

“Initially I tried to maintain distance and hired my own sales team in-house. But then these brokers/under-writers are more visible in the market. They created such as bad mouth for us that I had to compromise with them. I actually offered them 1% more brokerage than my in-house sales team,” admits this developer.

A survey by Track2Realty in ten housing markets, including Delhi, Noida, Gurgaon, Ghaziabad, Faridabad and Chandigarh, found that home buyers blamed the nexus of over ambitious investors, speculators and under-writers for the price index shooting up, and often, leading to a collapse in the market.

When developers announce that new projects have been completely sold on the day of launch itself, it defies conventional wisdom of economics in a market where beyond the demand-supply gap, stands the gigantic issue of affordability. The homebuyers are hence asking today whether there is any regualtion that can stop this unfair trade practices. More importantly, what is the indicator of real appreciation if they wish to exit?