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Best Time To Buy Your Dream Home written by Ashish Sinha, published in BW Business World. January 1, 2017

Believe it! The year 2017 will be a turning point for the real estate sector in India. There are two concrete reasons for this belief. Firstly, around a lakh units of ready-to-move-in apartments, priced under Rs 65 lakh will get sold within the next few months because home loan rates are likely to be slashed soon. Secondly, not many new launches are likely.


New launches have been staggered over the past two years. Developers say, &ldquogenuine&rdquo home buyers are now lapping up ready-to-move-in apartments for lack of options. Almost a third of the supply is in north India, including the real estate hot spot of the national capital region (NCR) of Delhi. Bengaluru, Chennai, Cochin, Mysore and several other cities down south are also offering value-for-money deals for willing customers. Similarly, Mumbai and its surrounding suburbs are offering thousands of ready-to-move-in apartments at reasonable price points. Apartments that offer two or three bedrooms, hall and kitchen sets &mdash popularly referred to as 2/3 BHKs &mdash are up for grabs across towns.


Last year, a lot was written and spoken about the glut in the residential market. Just when genuine home buyers were waiting for the next best deal and affordable home loan rates, the demonetisation exercise dealt a blow to the not-so-genuine home buyers (read those who use black money to buy and sell housing units across projects to adversely impact market price). Since the Benami Transactions (Prohibition) Act and its provisions came into force, many of the not-so-genuine buyers have been active, trying to sell off apartments to avoid being singed by the law.


Surge in Demand


R. K. Arora, chairman and MD of Supertech, a Delhi NCR-based builder, says demonetisation would benefit the real estate sector in the long term and reward developers of quality projects that have adhered strictly to the highest standards of corporate governance and transparency.


&ldquoImproved cash circulation in the formal banking system is expected to push down interest rates in the economy and boost demand from the working middle class that relies heavily on bank loans to finance real estate purchases,&rdquo says Arora.


Supertech says it had around 10,000 ready-to-move in apartments in Noida, Gurgaon and the Greater Noida region, of which more than a thousand units can be bought directly from the builder, while the rest are in the secondary market. &ldquoA lot of these units are available for interested parties,&rdquo says Manoj Kumar, a real estate broker who operates in Noida. Supertech is offering ready-to-move-in flats in projects like Ecociti, Cape Town, The Romano, Ecovillage and Araville.


Justifying the surge in demand for the ready homes, Arora says, &ldquoReady to move-in property offers several benefits such as immediate saving on rent, ability to physically inspect the property for conformity to building rules, quality of construction and actual space on offer. It also insulates home buyers from the uncertainty of delivery timelines and delays. Hence, ready-to-move in houses generally command a premium over under-construction homes.&rdquo


Apart from Supertech, builders like Amrapali, Ajnara, Prateek, Paras and Logix, among others, are also offering around 10,000 units of 2/3 BHK apartments in Noida, priced under Rs 65 lakh. A. S. Sivaramakrishnan, Head &ndash Residential Services, India, CBRE South Asia, says &ldquoBecause of cheaper real estate, compared to Delhi and Gurgaon, lot of corporates have set up their back-end offices and manufacturing units in this region, leading to more job generation and residential demand in the area. Of course, the connectivity with south and central Delhi (with Noida, Greater Noida) is also excellent...&rdquo


Anshul Jain, Managing Director, India, Cushman & Wakefield says that in 2017, developers would make more efforts to increase the affordability of homes and the sales velocity. Down south, Bengaluru-based Puravankara is offering ready-to-move in apartments across Bengaluru, Chennai and Cochin. The Provident brand was positioned in the affordable segment, according to Ashish Puravankara, MD, Puravankara Projects.


In the affordable segment, the group is offering Provident Sunworth, Provident Welworth City, Provident Harmony and Provident Cosmo City (Chennai). All of these are ready-to-move in apartments that are &ldquooccupation ready&rdquo, says Puravankara. The housing units come with a host of benefits too. First, the base price is fixed. &ldquoThis negates any uncertainty in prices, as the price is locked in at a fixed rate, assuring immediate rental returns that can be utilised to pay back home loan EMIs. These projects also offer immediate possession, thereby avoiding any delays in project delivery leading to unnecessary costs,&rdquo he points out.


&ldquoWe have made these apartments more accessible to customers by offering innovative financial plans,&rdquo says Puravankara. Strategic partnerships with banks enable customers to avail home loans, after a 20 per cent down payment of the cost of property. The customer pays only Rs 9,999 per month for the first three years and the EMI instalments start thereafter. Provident Cosmo City, from Puravankara is based in Chennai. It offers 2,174 apartments spread across 31-acres in Pudupakkam, in the vicinity of the IT corridor of Chennai on OMR. Company sources say the all-inclusive price for a two-bedroom apartment is Rs 33.36 lakh, while the three-bedroom apartments are priced between Rs 34.36 lakh and Rs 41.36 lakh.


J. C. Sharma, vice chairman and managing director of Sobha Limited, says even his company had forayed into the one-BHK and and two-BHK range in response to the huge demand from home buyers. &ldquoTraditionally, Sobha projects have offered three-bedroom and four-bedroom apartments and beyond. However, with Sobha Dream Acres, we have forayed into the one-BHK and two-BHK product range. These one-BHK and two-BHK units come with a super built-up area of 650 square feet to 1,200 square feet (sq.ft.),&rdquo says Sharma.


The project uses precast technology, supported by Sobha&rsquos in-house precast factory located at the site, which the company claims to be the first-of-its-kind in Indian real estate. These apartments are priced between Rs 40 lakh and Rs 80 lakh. &ldquoThe USP of such projects is the availability of Occupancy Certificate (OC) and &lsquoA&rsquo Khata for the property,&rdquo Sharma says, adding that the first 300 families would be taking possession of their homes by March 2017.


Affordable Homes


A number of ready-to-move in apartment units are up for sale across Mumbai, Pune, Nagpur, Ahmedabad, Surat, Vadodara, Thane, to name some cities. Take the example of Savvy Swaraaj, the two- BHK blocks developed as part of the sports living township by Gujarat-based Savvy Infrastructure. &ldquoYes we do have apartment in the two-BHK and three-BHK categories at Savvy Swaraaj - Sports Living Township, which are ready to move in,&rdquo says Jaxay Shah, president-elect &ndash CREDAI National and MD, Savvy Infrastructure. Shah says the salaried segment had a huge requirement for homes, especially in the smaller segment such as the one-BHK, two-BHK and three- BHK categories in Gujarat.


In the Mumbai metropolitan region (MMR), Lodha Developers is constructing Palava, which is perhaps, India&rsquos first privately developed and the fastest growing greenfield smart city. The entire city will be developed in three phases. &ldquoPhase-1 has over 18,500 homes, of which over 98 per cent homes are ready-to-move in across Palava&rsquos neighbourhood viz. Casa Bella, Casa Bella Gold, Casa Rio, Casa Rio Gold and Lodha Golflinks. The remaining two per cent is unsold inventory,&rdquo says Shaishav Dharia, Regional CEO - Palava & NCP, Lodha Group.


Dharia says homes in the Palava were being offered in the price range of Rs 40 Lakh and Rs 75 lakh. Dharia says that in the 2016 calendar year, the company had a healthy performance and sold 1,350 homes worth Rs 690 crore. &ldquoIn a year that has seen developers struggle to complete their projects on time, Lodha delivered a record 5,942 homes at Palava in the FY 2015-16,&rdquo says Dharia.


Tata Housing has also launched a number of projects in the price range of Rs 30 lakh and Rs 60 lakh across Ahmedabad, Bangalore and Mumbai. &ldquoWe are currently offering attractive offers and schemes for its near to completion projects like New Haven in Bangalore, Amantra in Thane and Boisar in Mumbai, and Ahmedabad,&rdquo says Brotin Banerjee, CEO and MD of Tata Housing.


The Rustomjee Group has also sold 110 ready-to-move in two-bedroom flats in Global City &mdash a project jointly developed by Rustomjee and Evershine located at Virar (West). The price range of these flats is between Rs 50 lakh and Rs 60 lakh, says Kaizad Hateria, brand custodian and chief customer delight officer, Rustomjee Group.


In eastern India, Kolkata&rsquos Newtown (Rajarhat) is a fast developing micro market. According to a market analysis done by CBRE India, this micro market boasts of projects by over a dozen builders who are offering ready-to-move in two-BHK and three-BHK apartments. Property developers like Banyan Tree, Jain Group, Purti Group, Greenfield Ideal Group and Bengal Peerless Housing are offering flats in the range of Rs 40 lakh and Rs 60 lakh.


Newtown in Rajarhat is spread across 7,000-odd acres and is a planned township with good road connectivity with the Eastern Metropolitan Bypass, which connects it to southern parts of the city. &ldquoThe demand is mostly driven by the IT crowd working in the Salt Lake area. Long-term residential investment potential is good. Within a period of three to five years, social and civic infrastructure would also develop sufficiently to boost prices,&rdquo says Sivaramakrishnan of CBRE India. The Eastern Metropolitan Bypass, Garia, in Kolkata is another option for willing home buyers. Prominent builders, including the Rajwada Group, the Vinayak Group, the Eden Group and the Sugam Group, are all offering ready-to-move-in flats at less than Rs 60 lakh, the CBRE analysis shows.


Policy Impact


According to a Cushman & Wakefield report, the end-user demand in the residential sector remained fairly muted in 2016, as in 2015. However, after a slowdown in project launches in 2015, the following year (January to September, 2016) saw the launch of approximately 90,000 units across the top eight cities in India, which was a 16 per cent jump year-on-year. The jump in project launches was led largely by a two-fold increase in new units in the affordable segment.


Mumbai, which had a 14 per cent share of the projects last year, has a 21 per cent share of new project launches in 2016. &ldquoWith strong emphasis on affordable housing by the government through the Housing for All initiative, tax incentives extended by the government, as well as the cautious approach by end-users in other segments, developers are expected to increase their relevance in the affordable segment, especially as there is huge pent-up demand in this segment,&rdquo says Jain.


Rohit Gera, Managing Director, Gera Developments and vice president, CREDAI &ndash Pune Metro, says demonetisation may impact land prices. &ldquoIf land prices crash then there is a likelihood that property prices can come down as a result,&rdquo says Gera. According to Jaxay Shah, president-elect of CREDAI National, &ldquoDemonetisation itself will have an overall positive outlook in the long run. We believe that 2017-18 will be a year of robust growth for the real estate market,&rdquo says Shah.


According to Mudhit Gupta, CMD, EMGEE Group, the biggest beneficiary of demonetisation will be affordable and mid-income housing. Gupta expects interest rates to come down substantially. &ldquoAlso, most buyers, who have not been filing tax returns will definitely come under the income tax net now. Thus making it easier for them to get home loans at competitive rates,&rdquo says Gupta. The EMGEE Group will be launching its affordable housing project at Neral in February, selling homes within a price point of Rs 8 lakh and Rs 14 lakh.


In 2017, experts say three events will have a specific impact on the housing sector. The first will be the immediate fall-out of demonetisation, since some States are rooting for rationalisation of stamp duty. For example, in Maharashtra, property registration and duty collection has reportedly declined by 38 per cent in November 2016.


The likely roll-out of Goods and Services Tax (GST) is also expected to impact the sector. Says Ashish Jerath, head-sales, Emaar MGF, &ldquoThe real estate sector is hoping for a viable GST rate and getting the benefits of Input Tax Credit (ITC). If either the rate is set higher, or the ITC benefits are not given, it will, in turn, increase the cost of construction for developers and jack up prices for end users.&rdquo


The third policy impact will be that of the Real Estate Regulation Act (RERA). The Act aims to bring in transparency and end the trust deficit among customers. The notified RERA rules makes it mandatory for builders to pay an interest rate of 10.9 per cent per annum for delaying possession to home buyers. It also makes registration with the State regulator mandatory, among other things.


&ldquoImplementation of RERA and the revised GST &mdash with improved focus on uniformed taxation policy across &mdash will boost the credibility of the sector and enhance transparency,&rdquo says Sharma of Sobha Developers.


Going forward, the demand for middle income group housing, which has a lion&rsquos share in the overall supply of residential units, is expected to grow further over the next four to five years. So, it may just be the right time to evaluate your options, check the quality of construction and avail that housing loan.


This article was published in BW Businessworld issue dated 'Jan. 9, 2017' with cover story titled 'The BW Real 500-2017'