Selective relief for affordable housing, but big picture missed yet again: David Walker, SARE Homes

The real estate sector’s expectations of being accorded Industry and Infrastructure have been belied yet again.

Union Budget 2016-17 is a mixed bag for the real estate sector. Plans to meet the fiscal deficit target are a good move, since this will leave more headroom for the RBI to opt for a reduction in lending rates during upcoming rate review cycles. The additional exemption of Rs. 50,000 for housing loans up to Rs. 35 lakh – provided the house cost doesn’t exceed Rs. 50 lakh – is a welcome move too. Also, eliminating service tax for houses built in less than 60 square meters under Central or State Government schemes, including PPP schemes, will boost the affordable housing segment. Excise duty exemption on ready-mix concrete used in construction sites will also benefit the construction industry.

The Finance Minister’s proposal that any distribution out of SPV income to REITs and INVITs with specified shareholding not being subject to Dividend Distribution Tax (DDT) will spur investments in REITs, which had not happened till date since DDT was acting as a major deterrent for investors.

Nevertheless, other small and big measures that could have helped spur a revival in the real estate sector have been completely overlooked. To begin with, a change in income tax slabs was expected, which would have benefitted common citizens. Such a measure would have put more money in the hands of people, making it easier for them to purchase a property of their choice. Coming to the macro picture, the real estate sector’s expectations of being accorded Industry and Infrastructure have been belied yet again. Moreover, no attempt has been made to move towards single-window clearance. Furthermore, some cues were expected about firm action being taken to expedite GST Bill, but there was no mention whatsoever of this important legislation that has been pending for long.




NH-24 – The next-best promising destination in Ghaziabad

The much-awaited launch of Rs. 7,566 crore project for widening the Delhi-Meerut Expressway, commonly known as NH-24 will boost huge development opportunities and create new residential hotspots.

Among the several highways/expressways that connect Delhi to cities, NH-24 is probably the most densely populated, as it interconnected to several other small cities along the corridor. Providing access to Ghaziabad, Noida and Greater Noida, the national highway once fully developed, will connect up to Meerut and Hapur and become one busy stretch. The widening of the expressway will only act as a catalyst for real estate demand and create smart infrastructure development on both sides of the road. Other than that, the development would ease the lives of people living on the Ghaziabad-Indirapuram stretch as this project is expected to decongest NH-24 that connects Delhi with Meerut. Ghaziabad has been in a growth mode for the past couple of years and has become one of the most favorable investment destinations. Considering the large population base in the city, infrastructural developments such as the extension of the Metro route to Ghaziabad and the construction of Delhi-Meerut Expressway project would increase the demand from investors as well as end consumers.

The NH-24 Expressway may also emerge as a hub for affordable housing and could offer solutions for accommodation in the 1-2 BHK category within the price range of Rs. 15-30 lakhs.

Looking forward to the development of the expressway and how it will add a new dimension to the real estate market in Delhi NCR.

Owning your dream home is now a lot easier!

The new government’s focus on housing sector has given a fresh lease of life to the real estate sector, which has been struggling under high interest rates and economic slowdown. The Reserve Bank of India has announced a series of measures to encourage lending to the housing segment, which falls under the category of priority sector lending.

Banks now have an avenue for raising long term funds via the 7 years bond to finance affordable housing and infrastructure projects. Home loans of upto Rs. 50 lac for houses of value upto Rs 65 lac in Metros, and loans upto Rs. 40 lac for houses of value of Rs. 50 lac in other cities will now be considered as affordable housing. This will make it easier to get loans in this price range and also you will be entitled to a lower rate of interest. As per former State Bank of India chairman Pratip Chaudhari interest rates on new home loans might fall by 40-50 basis points (0.5 percent). A back-of-the-envelope calculations shows that a 50 basis point drop in interest rate on a Rs. 50 lakh loan for 20 years will bring down EMIs by over Rs. 1,700 per month. Additionally, the increase in interest tax deductibility on home loans from Rs. 1.5 lac to Rs. 2 lac and Rs. 2.5 lac to Rs. 3 lac for senior citizens reduces your tax bill.

Here is what our leaders had to say:


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Repo rate raised by 25 bps to 8 percent by RBI


In a bid to strengthen the rupee, Reserve Bank of India Governor Raghuram Rajan raised the key repo rate on Tuesday (Jan 28th, 2014), the third time since the September of last year when Mr. Rajan had taken over as the governor. And the Indian currency has already shown a sharp recovery since the policy announcement.

However this meant that he made a choice to confound expectations in order to renew focus on inflation. Mr. Rajan is of the view that the value of the rupee faces a major risk from the CPI (consumer price index) inflation, which is already elevated at close to double digits, despite the predicted disinflation in vegetable and fruit prices. He also claimed that the main target of the RBI is that they want to bring the inflation down so that it will present them with some room on the monetary front which could then be passed on.

The repo rate, which is the rate at which banks borrow short-term money from the RBI, was raised by 25 basis points, i.e. 0.25 percentage point, to 8 percent. The reverse repo, the rate at which the RBI borrows from banks, was raised 25 basis points to 7 percent. And in order to maintain the balance, the marginal standing facility, the penal rate of interest for banks was raised 25 basis points to 9 percent, while the cash reserve ratio was maintained at the initial 4 percent.

David Walker, Executive Director, SARE Homes shared his view on this change, “The repo rate increase is designed to reduce India’s persistently high inflation and also provide support to the currency. This will adversely affect demand in the short term, which is of concern given the slowdown in growth, but is required to for price stability which brings with it higher medium to long-term consumption and investment”.

Property Tax brings major relief to property owners

The Haryana government has rationalised Property Tax rates on buildings & land in areas under municipal corporations and simplified the calculation formulae in the state.

Earlier, property tax was calculated on the basis of Collector Rates based on current market price and with the annual increase in collector rates, the total amount of tax would increase. The high rate of property tax in major cities like Gurgaon, Faridabad and Panchkula, bothered people, forcing the government to rationalize the property tax.

House_PropertyTaxThe new property tax is based on the size of residential and commercial property. A slab system is set to be adopted for the property tax on industrial and commercial properties.

As per the new regulation, all the municipal corporations will be categorised into two categories, A-1 cities with municipal corporations of Gurgaon and Faridabad and A-2 cities comprising of Ambala, Panchkula, Karnal, Panipat, Rohtak, Hisar and Yamunanagar.

The owners of residential properties of up to 300 sq yard in A-1 cities, would have to pay Re.1 per sq yard. Whereas, the other four categories of sizes from 301 sq yard to more than two acres would have to pay between Rs. 4 per sq yard and Rs. 10 per sq yard respectively.

The rate for commercial space of upto 1,000 sq yd would be Rs 12. per sq yd and for more than 1,000 sq yard, it would be Rs. 15 per sq yard.

Certain areas like religious places, orphanages, alm houses, municipal buildings, cremation/burial grounds would be exempted from payment of property tax.


RBI Changes 80:20 Home Loan Norms


The Reserve Bank of India (RBI) has stopped banks from offering home loan products such as the 80:20 or 75:25 schemes that make upfront payment to builders for under construction projects. It has advised them to closely link stages of construction of a housing project with home loan disbursal.
RBI feels such loans pose to be risky to the buyer as well as the lending banks. Buyers run a risk of completion delays in the project once their money has been locked. And under the current financial crunch, banks stand a risk of their funds getting stuck due to delay in construction and the matters getting into a dispute zone where the funds eventually end up being locked for a significant amount of time.

While many developers have not taken this decision very positively and feel this will further aggravate the liquidity crunch and in turn affect the buyers, most lenders are feeling this brings down the risk element for them. Industry goers also feel that this move may lead to price correction in the market.

As a leading developer in the real estate space, SARE Homes understands the implications of this decision but completely respects the RBI guidelines. We have always strived to ensure that our investors and customers feel secured and well invested in us.

Respite for the first timers

first_time_home_buyer1Are you looking to buy a house for the first time? Thanks to the Union Budget of 2013, you can heave a sigh of relief as new loans up to Rs.25 lakh will be eligible for an additional tax deduction of Rs.1 lakh for interest payments. This is their way of encouraging people to buy their first home ever. Good move, and definitely deserves a sigh of relief.

However, this is of course on for the financial year of 2013-14 as of now. So that means, a person taking a loan of up to Rs.25 lakh for his first home between April 1, 2013 and March 31, 2014, will be entitled to an additional deduction of interest of up to Rs.1 lakh. Apart from being beneficial to first time buyers, this move will also boost a number of industries like steel, cement, brick, wood and glass, besides giving jobs to thousands of construction workers. With this, the total deduction for interest payment for 2013-14 will be Rs.2.5 lakh. If the interest component is less than the deduction limit, the balance can be claimed in the next financial year.

With the advent of this benefit, taxpayers can continue to claim deductions up to Rs.1 lakh for repayment of home loan principal within the overall limit of Section 80C of the Income Tax Act. There are a few areas to look into though, as can be the case with any rule or law.

1. A deduction of up to Rs.1.5 lakh for interest payment (under Section 24B) is allowed if the house is ready and occupied by the taxpayer.
2. Any pre-construction interest is allowed to be deducted in five equal instalments within the Rs.1.5 lakh limit after the house is ready.
3. If the house has been let out, the taxpayer can claim the entire interest component as deduction from the rental income.
This move is definitely very encouraging for buyers on the lookout as well as opportunities in real estate, both of which will see a significant rise as per predictions of many.

Where there’s a Bill, there’s a way

passing of bill


The Real Estate Bill 2013 has been in the pipeline for quite a while and it’s only recently that it was approved by the Union Cabinet and is now waiting to be passed by the Parliament. This Bill allows for the creation of a regulator in the real estate sector, for residential properties. Here’s how it attempts to safeguard buyers’ interests:
Property brokers must obtain a license.
Developers to submit authenticated copies of approvals and sanctions from the competent authorities while applying for registration.
No advertising, selling or money raising will be permitted before project approvals are in place.
If a developer flouts a provision of the Bill, he could be fined severely or jailed.
The provisions of this Bill will also apply to government agencies involved in housing projects.
Developers should maintain a separate bank account for each project in a scheduled bank to prevent diversion of funds from one project to another.
Compulsory registration of all real estate projects of more than 4000 sq.mts.
One of the best parts of all the documentation this Bill demands is that brokers, especially those who only deal in cash, will have to redo their methods, so to speak. The buyer’s cost will be affected just by this.

With the good comes the bad. Here are some shortcomings of this Bill:
The Bill will be applicable only to new real estate projects. Those projects that have already been launched and sold will not come under its purview
While there are penalties for failing to deliver on time, there is no clarity on what happens if the delay is due to the failure of government agencies to give timely approvals.
Since Registration is required only for projects over 4000 sq. mts smaller developers will evade the Bill’s scrutiny.
A developer will now launch a project only after he has received all the approvals, which is a timetaking process.

There are several complaints that developers will have but it benefits a real estate buyer and is quite the sigh of relief. But the sighs will have to wait as for it to be passed by the Parliament and adopted by all the States, there may still be time. Lots of time.

Our Take on Budget 2013


The allocation of Rs 2000 crore for housing in the urban areas appears to be on the lower side considering that the estimated shortage of housing units is placed at more than 18 million units.
According to David Walker, Executive Director, SARE Home, “The announcement of National Housing Bank (NHB) setting up a Urban Housing Fund, tax sops for first housing loan of Rs 25 lakh and provision of an additional Rs 1 lakh rebate in addition to the existing Rs 1.5 lakh rebate will help to revive the demand for housing stock.
The allocation of Rs 2000 crore for housing in the urban areas appears to be on the lower side considering that the estimated shortage of housing units is placed at more than 18 million units. Provision of Rs 6,000 crores in the rural areas would certainly result in more permanent constructions.
The budget move to levy 1% TDS on properties above Rs 50 lakh would prove to be a major burden for both developers as well as customers especially in the metropolitan cities like Delhi and Mumbai and their outskirts as even small apartments in these areas cost more. High interest rates and soaring land prices have been the major resistance factors in reviving the demand for housing stock and the budget could have announced a few long term steps aimed at improving the supply of land and reducing interest rates.”

A steady boost in housing demands – All appreciation to the latest RBI rate cut for home loans

house and cashes on weights. Isolated 3D image

How many of us were happy when the Reserve Bank of India (RBI) announced the rate cut on home loans? Although the rate cut was minimal, it brought about a new ray of hope to the troubled economy of our country. The real estate sector was given an opportunity to sigh a sense of relief and the common man was given a chance to reconsider the thought of buying a house. It is expected that a lot of leading banks will follow suit and cut down the interest rates for home loans.

Are you aspiring to own a house? If yes, then this is the right time to go ahead and purchase one. It is good news to people that many property consultants have seen the RBIs decision to cut key policy rates as a positive sign to encounter high demands in the real estate sector. The real estate space is on the verge of gaining back its comfort and stability in the industry. Sending out positive ideas and signals to investors worldwide, the rate cut is a policy measure that is going to play a crucial and pivotal role in the betterment of a lot of economical aspects.
Changes that can be predicted in the real estate sector

It is of course great news for each and every individual property buyer in India. The rate cuts provided for home loans by RBI is welcomed by most of the individuals in the real estate sector as well. With the relaxation of such key policy rates which has taken place after a long time span, there are certain changes and developments that can take place in the near future. Some of them are:


* The slowing Indian economy can expect to revive and see a bright future. The annual growth rate can also be expected to see slight stability.
* Home buyers have greater possibilities to get motivated and do their home purchase in the near future.
* Real estate developers and builders can hope to create a balance that was previously hindered by inflation seen in almost all industries.
* Other banks may be encouraged to reduce their own base rates which in turn can benefit a lot of home buyers and developers.
* Reduction of interest rates can automatically instill confidence to those in the real estate sector to perform better and help in the growth of the economy.
* Increase in investments proves to enhance and gradually improve the liquidity in many banking sectors in India.
* Home loan availability will become adequate in the market which can attract a lot of investors.
* A guaranteed boost for the sentiments of home buyers and creating opportunities for more real estate sector activities.
* Apart from being the sole reason for providing relief to individual home buyers, this move can help in the task of stopping the dramatic aspect of price escalation.
The last three to four quarters have seen a considerable lag with respect to home sales. The 25 basis points cut in the Repo rate by the RBI can alter this situation. Though the reduction of interest rates on home loans can differ from one bank to another, home buyers can look forward to see a positive reduction. Lots of excitement and cheer engulfs the lives of those who have dreamt to buy a home at affordable interest rates.