Monthly Archives: December 2010

Talegaon- New Destination

Nestled in the Sahyadri mountain ranges, here’s a place blessed with pleasant climate and exhilarating greenery. Pavana and Indrayani rivers enhance beauty of the place. Near Pune yet free from urban problems, Talegaon is beckoning one and all.
The climate here is always moderate. Even if it’s is hot in summers, the temperature in Talegaon has never exceeded 28 degrees. It has remarkably developed over the years and has attracted national and multinational industries, like General Motors, Mercedes, JCB, Volkswagen and TATA Motors have got their units in Talegaon.
An excellent weather has adds one more feather, called MIDC Floriculture, in the cap of this rapidly developing place. Talegaon Floriculture Park that has come up near Pune can well be considered as a symbol of the resurgence of floriculture in the country. Pune alone accounts for close to 90% of floriculture exports from the state. The region has climatic conditions suitable for greenhouse cultivation of flowers .
Amidst mountains near the riverbed and away from city’s hustle and bustle, a shelter for you and your loved ones isn’t one of your dreams? Beautiful landscapes and greens all around will make you feel close to nature.
Chakan industrial area and proposed international airport are easily accessible from Talegaon and it has good connectivity via road and rail. In no time, one can get to the expressway and head for Mumbai or Pune. Many residential schools, which also provide International Baccalaureate (IB) are here to take care of education of your little ones.
Talegaon is also the fastest growing automobile area, where the buzz of the future lies.
It is a beautiful satellite town of Maharashtra’s two major cities Pune and Mumbai. Surrounded by picturesque Sahayadri mountain ranges, it is on a fast track of becoming the most sought after destination for weekend homes.

FDI Realty Guide

The Indian government has set up guidelines for investors willing in foreign direct investment in Indian real estate. In case of development of serviced housing plots, 25 acres is the minimum area allowed, while for the construction-development projects; the minimum built-up area should be 50,000 square meters.
For wholly owned subsidiaries $10 million is the minimum capitalization and for joint venture with Indian partners it is $5 million, to be brought in within 6 months of start of business. Original investment cannot be repatriated before a time period of 3 years from completion of capitalization. But, the investor may exit earlier with prior approval from Foreign Investment Promotion Board.  At least 50% of the project is to be developed within 5 years from the date of obtaining all statutory clearances and the investor cannot sell undeveloped plots.

With this change in the government policy on FDI, the realty sector is currently witnessing huge demand. India in the next 5 year period is estimated to improve investments in the urban housing sector, which will open up opportunities for foreign investments in the realty sector. The Central government allowed up to 100% FDI for setting up townships in 2002. However, the flow of FDI investments has been thwarted by the 100 acre criterion; since acquiring such a large chunk of land was impossible in metropolitan cities and even satellite cities and state capitals.

Foreign Direct Investments in the real estate sector in India would also contribute towards making the sector more organized. One of the most anticipated promises for the Indian real estate sector, has been the entry of Real Estate Mutual Funds (REMFs) or Real Estate Investment Trusts (REITs). Experts believe that they will definitely ensure more availability of funds to the developers and faster growth of real estate sector and besides increasing professionalism in the sector, it would also bring in advanced technology and create competitive market environment for both domestic and foreign investors.

Home Loans vs Personal Funds

There are payment options for the property purchase, one to make the entire payment paid in advance, at the time of the booking. For that, you need to have much cash available. The other pertains to the safety of the capital, until the reputation of the seller is reliable.

Advantage in the first case is that the purchaser is relieved of keeping track of payments and ensuring that the installments are not missed, another being the upfront discount usually given by builders. The payment for purchase of property can also be made in installments.

In case the purchaser is taking a housing loan, such installments are paid by the bank directly to the builder.
Most builders keep payment schedule on a time basis. The purchaser is required to make a payment at the time of booking of the apartment, ranging from 10-25% of the cost of the apartment, and the balance amount is spread over a period of time. The final payment is to be made before the handing over of possession, to the purchaser.
Some builders also give the option to link the payment schedule with the pace of the construction work, including an upfront payment at the time of booking, followed by installments depending on the stage of construction completed.
A purchaser needs to plan and track the payments  and also, in case one has opted for a loan, he has to pay interest on a higher amount and for a longer duration. All these costs are normally payable with the last installment, once the apartment is ready for occupation, and just before the possession is handed over.
Generally, stamp duty and registration charges are payable along with the last installment and the recovery of the EMI starts only after disbursement of the entire loan amount.

An Elusive Dream

Affordable housing continues to be an elusive dream, in terms of supply and implementation of affordable housing schemes. National Urban Housing and Habitat Policy (NUHHP) defines affordable house as, dwelling unit having super built-up area not less than 300 square feet for Economically Weaker Sections, 500 square feet for Lower Income Group and between 600 -1,200 square feet for Middle Income Group available to the end user at a price that permits home loans in monthly installments, not exceeding 30%-40% of a person’s monthly income.

The biggest impediment to construction of affordable housing projects is the non-availability of land. It is almost impossible to find land at appropriate locations at affordable prices, which accounts for more than 40% of the cost of the project. Confederation of Real Estate Developers Association of India (CREDAI) points out, that well-connected, accessible land with title and infrastructure needs to be provided on a regular basis, only then can developers provide affordable housing.

Land availability is a bigger problem, in Tier I cities. 23% of India’s urban population resides in 8 cities. If the housing shortage (of 26.53 million housing units) is to be addressed effectively, at least 3 million housing units must be added to the cities, every year. Instead, only 0.3 million housing units are being added in the existing cities. Urban land expansion is, therefore, the need of the hour. Most developers however continue to cater to the niche market that serves about 5-10% of the population.

Promoters are averse to handling more number of clients; in an affordable housing project, for instance, it’s a volume game. You need to provide a large number of housing units, as opposed to a luxury project where you deal with very few clients and big spaces.
Coupled with this is the problem of financing affordable homes. To offset this problem and deliver financial assistance to the poor so as to enable them to purchase their own homes, the central Government has instituted the Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) scheme across the country.
Harsh Roongta, CEO,, an online portal specializing in price comparison of loans, insurances and investment options, believes that the affordable housing industry has led to the growth of a microfinance industry as well, that funds people who may not have the means to buy a house otherwise.
Groups like Mahindra, MAS, Micro Housing Finance Corporation Ltd offer loans at 12-14% interest rates to those who do not have proofs of salary documentations. Tax concessions and a micro level road map for affordable housing will help plan such projects. A public- private partnership (PPP) is a solution too.

To facilitate affordable housing, the government has announced a few incentives and subsidies to developers who cater to the lower income segment, announcing a Transfer of Development Rights (TDR) of 30 sq m of floor area per slum dweller to the private builder who provides housing for the slum dwellers and the Development Regulations (DR) have been amended suitably. Also, additional FSI concessions of 50% over and above the normally permissible FSI for those who construct dwelling units of size 30 sq m and below are given. For those who construct dwelling units of size 50 sq m and below, an additional FSI concession of 30 % over and above the normally permissible FSI is given.
These policies and incentives will go a long way in promoting affordable housing. However, unless the bigger issues of land availability, planning and pricing are addressed, the market will not be able to serve the needs of those who really need an affordable house.

Lavasa Directive Stayed

On Tuesday, Bombay HC stayed the order of status quo issued in november by ministry of environment and forests against Lavasa Corporation and its ongoing construction of Lavasa city in Maharashtra, till December 16.

The court agreed with Lavasa that the order by the ministry to stop construction was drastic, and stayed it after the company volunteered not to go ahead with any construction for another week and after the Centre said it would hear Lavasa and give reasons on its order.

A bench of Justice D K Deshmukh and Justice N D Deshpande told  that the fact that it did not act for 6 years since the construction began made it obligatory for it to give them reasons after hearing Lavasa.

Additional solicitor general Darius Khambata argued that the show-cause notice had in fact spelled out Lavasa’s lack of the compulsory prior environmental clearance under a 2004 notification as the reason behind imposing the status quo order against continuing with the blatant illegality, Justice Deshmukh said the government must spell out independent reasons too.

Green Laws for Realty

Adarsh and Lavasa housing projects have become household names.    With environmental concerns being a major concern in realty sector, major construction projects have recently been pulled up by the ministry of environment and forests (MoEF) on the ground of violation of norms. Notices for the demolition or cease-construction for these projects are pending. Thus, for an investor it will serve well to ensure that all environmental clearances have been obtained rather than investing money in property that may face the risk of demolition in the future.

It is vital for end users looking to purchase or construct property, to acquaint themselves with these rules and regulations and the various clearances that are required.  In Delhi, for any major construction project, the Delhi Urban Art Commission (DUAC) is to give the final go-ahead.  For someone looking to invest in property, the issue of environmental clearances becomes critical; however, the situation would change from city to city. There are also local level bodies from which clearances might be required like the DUAC, Yamuna Standing Committee (YSC), Delhi Pollution Control Committee, in Delhi and it would not be a bad idea to ask builders for all clearance certificates before investing in a property. One must be careful before investing, must either approach local authorities, or lawyers and architects concerned to ensure that there have been no violations.

Realty on a High

With post-recession era dawning, realty sector in India is touching new heights. The growth also depends on the policies by the government to facilitate investments in economy. In recent times the FDI policies adopted by Indian government have encouraged an increasing number of NRIs/foreigners to invest in Indian properties.

India has replaced US as the 2nd most favored destination for foreign direct investment in the world and making India amongst the “dominant host countries” for foreign direct investment in Asia and the Pacific (APAC).

The outlook of Indian government is the main factor behind the sudden rise in the realty sector; it is the 2nd largest employer after agriculture in India. The real estate sector in India is experiencing growth in all its areas, be it residential or commercial in the tier I & II cities.

Flying high on the wings of real estate, property in India is a dream for every potential investor looking for profits. India is an ever growing economy, on a continuous rise, which has created increased purchasing power and demand for realty sector.

With as many as an estimated 2 million students graduating from various Indian universities and presence of large number of Fortune 500 and other reputed companies demand of office and industrial space has also increased.

Relaxed FDI rules in India have attracted more foreign investors and allowed NRIs to own property with minimum size for housing estates built with foreign capital reduced to 25 acres. With these changes in investment policies, the overseas firms can now put up commercial buildings as long as the projects surpass 538,200 sq ft of floor space. Real estate investments in India yield huge dividends. 70% of foreign investors in India make profits and another 12% break even. These attributes of Indian economy is definitely going to attract more foreign investors in the near future.

SEBI bars organizations

Securities and Exchange Board of  India, in an order barred Murli Industries Ltd, Ackruti City, Welspun Gujarat Stahl Rohren Ltd and Brushman India and their respective promoters from trading on the stock exchange.

These companies were charged of manipulating share prices before the of issue of convertible shares and  placement of private institutional investors, have decided to take action against market regulator’s decision.

Realty firm Ackruti City said it is taking legal advice to challenge the order and claims to follow fair business practices.

Welspun Wintex, a promoter group entity of Welspun Corp, said that they are going to approach higher authorities for relief and the company is in full compliance with the prevailing rules, regulations and guidelines.

In an order, SEBI,  directed Murli Industries Ltd, Ackruti City, Welspun Gujarat Stahl Rohren Ltd and Brushman India and their respective promoters to cease and desist from carrying out the activities. SEBI has also barred Sanjay Dangi and his group firms from dealing with any kind of securities.

Ex-UP chief secy held in Noida land scam

In a historic decision today, former Uttar Pradesh  chief secretary Neera Yadav along with Ashok Chaturvedi, Chairman and Managing Director of Flex Industries and Flex Engineering, Noida was sentenced to 4 years of rigorous imprisonment, by the CBI Special Court which found her guilty of abusing her official position as chairperson-cum-chief executive officer of Noida Authority to provide monetary advantages to Flex Industries. Both of them have been fined Rs 50,000 as penalty.

Judge A K Singh sentenced the two after the CBI prosecutor appealed that they be given strict punishment to set an example for corrupt public servants and to establish the common man’s trust in the judiciary.

Yadav was charge sheeted by CBI in 2002 in at least 4 graft cases, accusing her of allotting plots out of turn to bureaucrats, politicians, industrialists and family. Yadav, was country’s first IAS officer to be removed from the chief secretary’s post by the Supreme Court on charges of corruption in 2005, and was voted one of the “most corrupt officers” in a poll held by the UP IAS association in 1997.

PE funding in Real Estate on a surge

With the loan scam unveiled and access to bank lending being tough, real estate funds and private equity (PE) firms now sense a business opportunity. Hoping that the loan scam will put more transactions on the table, they are actively working for the deal bargains. Bank funding and capital markets are the primary sources of capital in the realty sector and with these slowing down; it is inevitable to use PE for funding with more deals likely to come in their way.

Red Fort Capital, a real estate PE fund says that it plans to be more aggressive and step up investment activities in India, as more developers are looking on private equity for funding their future projects. Fire Capital, another realty fund is planning to deploy nearly $100 million into the real estate market.

The scam-triggered scrutiny of loan disbursements would allow PE players to drive a harder bargain. But despite the bargaining power, it would be safe not to push for terms that are unsustainable and not to do too many deals where execution can then become a challenge. While it is anticipated that any liquidity pressure in the market will provide more opportunities for PE, it may be just too early to decide on how much of it will materialize into actual funding.

Noida Park gets Green Signal

Supreme Court’s Green Bench said that the project site of the Noida park is not on forest land, thereby giving a go-ahead to resume construction.

On Friday, the Green Bench of Chief Justice of India S H Kapadia and Justices Aftab Alam and K S Radhakrishnan, said that the ‘pucca’ construction and the landscaping of the park should not exceed 25 per cent of the site area. And, for the remaining 75 per cent of the land, there should be trees on 50 per cent of the land and the rest should be covered with grass. Also, adequate measures should be taken to maintain ecological balance.

The apex court had last year halted construction in the park citing the violation of environmental norms and its proximity to the Okhla bird sanctuary.

DDA housing scheme lures

After 2 long years Delhi development authority has launched its very own housing scheme from 25 November 2010 to 24 December 2010 giving out approximately 16000 flats in Delhi. DDA allotted about 5000 flats in the year 2008 with maximum price of 77 lakhs, this year the number of flats has gone up to 16000 with the highest price of 1.12 crores.

Some of the houses are furnished and ready to move in as soon as one gets the possession letter.  These flats available are with 1-3 bedrooms and expendable categories and located in Vasant Kunj, Motia Khan, Mukherjee Nagar, Jasola, Dwarka, Rohini, Narela etc. Prices of these flats range from as low as 3 lakhs to as high as 1.12 crores. The cost of these new flats includes maintenance charges of the exteriors and the common areas. About 2700 flats are located in Vasant Kunj priced between 34 lakhs to 1.12 crores.

In June this year the Noida Authority had also come up with a similar scheme of allotting 371 duplex houses ranging from 80.53 lakhs to 1.11 crores.

Although there are no income criteria and the payment has to be made from the allottee’s account with a bank statement to be submitted at the time of possession, many experts believe that this is certainly not a mass housing scheme as the prices are comparable to real estate market with nominal discounts of 20-30% to that of market prices.

According to real estate experts, DDA is trying to reduce spectacular interest; hence the investor’s interest will be less without much difference in prices. The consumers this time will be those who can afford such prices. There is surety of large end-user demand as more professionals are ready for all-white deals. This scheme offers a very good real estate option for the masses and classes because of its “ready to move” in feature and a residence in Delhi as an added attraction.