global economic turmoil means the Indian real estate sector is bound to be affected in the short to medium term. Will this offer good opportunities to those who are flush with cash to invest in the property in India? Some Industry experts give there views.

Cushman & Wakefield
Executive director of global realty consultancy firm, Cushman & Wakefield, Kaustuv Roy said that 2012 will have to be year for the real estate sector due to some factors which will have a far reaching impact.

Tight liquidity
The developers’ tight liquidity position will cause stress not only to the consumers, but also to the banking sector as their exposure is huge. Because of the tight liquidity condition, developers may find it difficult to deliver on time to the buyers.

Uncertainties in the job markets
At the same time, because of the turmoil in the economy, there will be uncertainties in the job markets too. This may discourage the young buyers, who play an important role in the residential realty market. Therefore, Roy said, in the residential sector, there will be high dependency on the Indian corporate performance, and if the economy is slowing down, demand may dry up, which is likely to lead to residential prices softening.

Jones Lang LaSalle India
These developments will not only dry up the future demand but also lead to tightening of liquidity in the sector. In that case, developers will not go for fresh launches. “The absorption rate – meaning the ratio of sales over inventory in the market – is likely to be low, and the incidence of new launches will decline,” said head, Research & Real Estate Intelligence Service, Jones Lang LaSalle India, Ashutosh Limaye.

Further interest rate hikes by the RBI
“Because of the prevailing uncertainties in the global market and the likelihood of further interest rate hikes by the RBI in the early part of 2012, sentiments in the residential market will remain cautious over the short term,” said Limaye.

Cautious optimism
Roy also said that overall, 2012 will be a year of cautious optimism with the hope that the Indian economy is suitably insulated from the western economies. However, he felt, for the sector 2011 has turned out to be a mixed year. The first half of the year was extremely good, but by August, the market sentiment underwent a change, depicting more caution in the air.

Standard Chartered Bank reports from the last 6 months BSE Realty Index has not given any good news and world realty index by 47%.

BSE Realty underperformed 500 by 36%
Also Mumbai-based brokerage firm Ambit Capital Pvt. Ltd. reported that since April 2010 BSE Realty underperformed 500 by 36%. However there are several other reasons those are affecting to the property market.

Slowdown in sales property
High rates of property in Mumbai and Delhi, rising interest are showing challenge to Homebuyers as slowdown in sales property is the big concern.

Valuations will improve by 2012
Whereas as there are negative signals in the property market. “Debt equity ratio will reduce by 50% by 2012” Standard Charter report said. The report more added that valuations of these stocks will improve as these companies are on a stronger footing than in 2008, as most continued and forthcoming projects will contribute to their operating cash flows

The Indian Union Budget 2011 pointedly ignored the larger issues affecting the Indian real estate sector at this sensitive stage of revival and growth according to Jones Lang LaSalle India

Direct Implications:
SEZs have been brought under the purview of MAT, which basically diminishes the benefits that SEZs offer for developers over other commercial real estate asset classes Raising the priority home loan limit from Rs 20-25 lakh is good news for the LIG segment, but will do nothing to ease the pain in the metropolitan Indian cities where real estate prices and therefore demand for affordable housing is highest.

1 per cent interest
The 1 per cent interest subvention for home loans upto Rs 15 lakh from the previous limit of Rs. 10 lakh will come as a relief to home loan borrowers from the LIG segment.

Indirect Impact and Implications:
Enhancing personal tax exemption limit from Rs 160,000-180,000 is insignificant and insufficient to make a difference in real estate market terms. Allowing FDI in mutual funds would have been a blessing if the Government had been more proactive in allowing REMFs.

Foreign investors
Stricter measures against black money can potentially help bring about greater transparency and make the real estate sector more attractive for foreign investors.
he budget made no mention of FDI in retail, which is great disappointment since the retail sector seriously requires the benefit of foreign investments into multi-brand retailing.

Western India saw a rise in real estate values across cities during the Jul-Sep 2010 period with a few key localities witnessing maximum growth.

Mumbai prices rising
Mumbai’s residential market has seen values rising during the Jul-Sep 2010 period. Localities in the western suburbs such as Dadar, Bandra, Andheri, Borivali, Powai witnessed steadily rising capital values during this period.

Premium Mumbai real estate stable
The more premium and highly priced south Mumbai localities such as Kemps Corner, Altamount Road, Cuffe Parade and Walkeshwar, however, remained stable during this period while some localities such as Tardeo, Mahalakshmi and Worli witnessed a drop in values. Rental values in South Mumbai have also shown a downward trend.

Investors for Navi Mumbai and Thane
Investors and end-users have shown interest in localities situated on the outskirts such as Navi Mumbai and Thane due to greater affordability and superior infrastructure facilities.

Goa real estate
Goa’s residential market is growing at a rapid pace and is the ideal location for potential investors. The Arpora-Siolim-Assagaon belt is growing post July 2010.

Ready-to-move-in apartments in this locality offer attractive rental returns from foreign nationals, post-October which is the in-season period. Owners lease apartments for 8-10 months and reap a healthy return of 8-10 per cent on rental values which is higher than that offered by any other locality in Goa.

Ahmedabad’s real estate
The launch of a number of affordable housing projects has been the characteristic feature of Ahmedabad’s real estate market in the recent times. Localities such as Satellite and Thaltej have witnessed bulk of the upcoming development.

Rajkot real estate
The emerging locality is Rajkot which witnessed growth in 2010 was Rathan Path Village which is in the vicinity of a number of newly developed and upcoming educational institutions. Students provide a robust demand in the rental market in this locality and this has provided a boost to the capital values as well.

Six Indian real estate companies, all set to raise over $2.9 billion or Rs 13,000 crore through the capital market, have postponed their plans till the middle of next year.

Fraud has damaged India
Recent Indian real estate fraud has badly damaged India and is blmaed for bringing down the interests of foreign and domestic institutional investors in public offers. For some, the government and market regulator the Securities and Exchange Board of India (SEBI) played spoilsport.

Next year before Indian developers tap the market
Developers such as Embassy Group, Lodha Developers, Emaar MGF and Raheja are not risking their initial public offerings (IPOs) and would be hitting the market only mid next year, sources say. While controversies do not seem to be ending for Sahara Prime and Lavasa whose IPOs, if they see the day of light, will only be able to raise liquidity through the primary market by next year middle. The total amount to be raised by these Indian real estate developers amounts to R13,000 crore. No developer, however, acknowledged that the delay was due to controversies surrounding the sector.

The Reserve Bank of India has observed that residential property prices in India are shooting up in most of the major cities, especially in Delhi and Bangalore , while in Mumbai it seems to have reached a plateau.

Delhi real estate still on the up
According to the ‘Macroeconomic and monetary developments second quarter review by the RBI’, which was released recently ahead of the busy season credit policy tomorrow, while prices in Mumbai real estate in the last three quarters have been showing moderate growth. Delhi real estate prices have been marching ahead at a faster rate. The central bank believes that such a condition of soaring property rates was partly due to the activities in relation to the recent Commonwealth Games.

Mumbai real estate has slowed
On the other hand, the report stated that the number of transactions in Mumbai, which had registered a sharp rise in Q3 last fiscal, seems to have reached a plateau. But housing prices for Bangalore real estate, which were almost flat for the past 18 months, are showing some signs of increase.

The credit ratings agency CRISIL recently launched real estate ratings in India, which would help common buyers make informed purchases. It is expected to bring in more transparency to the Indian real estate sector and will work on a project-specific basis.

New ratings system for real estate in India www.navyroof.com

We take into account our parameters and rate the project. Once the Indian real estate developer accepts the rating, we go public with the rating and project analysis which will be given to common buyers for free.” The parameters include the past record of the developer, the infrastructure he is erecting, finishing, timely completion, cost overruns, aftersales service, legal issues like title and project innovations such as green buildings.

Ratings given midway through project
The rating will be given midway through the project and will be under surveillance till project completion, during which it can be revised. In fact many rating agencies are coming up with real estate rating systems. On the international level Fitch has been rating real estate projects for quite some years.

The view from Navyroof.com
Navyroof.com welcomes such a move, as certain developers do not deliver and this should separate out the good from bad in Indian real estate. The Indian government too is to come up with a regulatory body and all these are good for real estate in India. RICS is also looking to improve the industry with greater training and regulation.

All these are positive steps, however ratings systems really only work if they are fair and impartial and we will reserve judgment on these until all criteria are released and more importantly verified. The developer in the above ratings system must accept the rating before it goes public, so what happens the rating if they do not? Also we feel Indian property developers should be rated and measured on delivery time and promptness after completion as we have experienced developers in India who have not delivered or refunded clients in a timely manner and some never at all.

There are few takers for affordable Indian houses now, according to a report released by PropEquity, a real estate consultant.

According to the report, post the initial euphoria during early 2009 affordable segment has witnessed a gradual decline in absorption levels. However, these levels stand closer to sustainable levels.

The mid-segment defined as houses in the price range of Rs30-75 lakh is a major contributor to the increased sales, surpassing in certain cases the absorption in the affordable segment.

The report takes into account prices, launches and absorption levels in the residential real estate segment over a period stretching from third quarter of 2008 to the first quarter of 2010, covering a total of 13 cities.

The report added that cities such as Gurgaon real estate, on the outskirts of New Delhi, and Mumbai real estate witnessed a decline in unsold inventory, indicating a revival after the slump in the market.

However, while there has been a regular supply of units in the affordable and mid-housing range between the last quarter of 2009 and first quarter of this year, absorption levels have been low in most

The Delhi cabinet gave nod to a proposal to significantly increase the registration fee of real estate in Delhi.

Officials said a rationalization was long overdue given the ridiculously low rates of filing of appeals and fee for registering wills, gift deeds etc. The revision is expected to increase revenue collection from Rs 1.5 crore per year to Rs 100 crore.

As per the new rates, fee for registering conveyance deed, sale deed, gift deed etc relating to immovable properties will be 1% of the stated value or the circle rate whichever is higher up to a fee of Rs 50,000. Where the value of the property is not mentioned, the fee will be Rs 1,000. Earlier the fees were just Rs 100 for both categories.

The fee has also been revised from Rs 100 to Rs 1,000 for registration of lease of an immovable property and from Rs 100 to Rs 500 for registration of wills. Miscellaneous registration of documents will now cost Rs 1,000 per document.

Officials said the rock-bottom rates had meant that despite the flurry of registration, government collection was very low. In 1007-08, 291469 documents were registered which generated a revenue of around Rs 1.48 crore. In 2008-09, Rs 1.40 crore was earned from registration of 284203 documents while in 2009-10 the earning from registration of 2,74,466 document was around Rs 1.31 crore.

The most dramatic revision has happened for fee relating to filing of various appeals. In this case, the fee has been revised to Rs 100 from Re 1 in some cases and Rs 10 in others. For inspection or search, the fee now stands at Rs 100 from the earlier Re 1.50.

Copies of registered documents will now come at Rs 10 per page instead of the earlier 25-75 p per page. Attending registrations at private residences in case of the infirm or in jail for the incarcerated will now be charged Rs 500 instead of Rs 10. In all other cases where a Rs 20 fee was charged, now Rs 200 will be charged.

Filing for translation will now cost Rs 50 instead of Rs 2. Authentication of a power of attorney for which fee was Rs 3 earlier, will now cost Rs 1,000. Rs 10 will be charged now instead of Rs 10 for deposit/withdrawal/opening of the will. Safe custody of documents after registration will cost Rs 50 per week instead of Re 1 per week.

The Rajasthan government is planning to set up a real estate finance company in collaboration with World Banks arm International Finance Corporation (IFC) to facilitate affordable homes in the state.

The state urban development and housing principal secretary GS Sandhu said that the state government has received a proposal from IFC for this corporation. This is good news for investors looking to buy real estate in Rajasthan.

“We are evaluating the proposal. It is aimed at fulfilling the housing loan needs of financially weak people,” he said. The company to be set up under the PPP model would also have equity participation of banks like HDFC and National Housing Bank bring a new option for buyers of real estate in Rajasthan.