Further Fall Eminent !

Applicability of VAT on under construction flats, enhanced interest on home loans, rising land and construction cost, short supply, cost of funds to be paid to venture capitalist, increasing builders margin and well established speculator network are some of the factor which will influence real estate market to kill the demand for housing. TDR is now become share market, sold and purchased every day and is having rates change every hour. All these factor will lower the affordability of the home purchasers. Not every person is earning Rs.25,000/- per month and informal sector been treated as step brotherly treatment. Hence very few disparate takers are in the market. People who have got handsome funds by selling their property for redevelopment are few who do not care for high cost of purchasing a property, are also vanishing from the market.

For commercial, builders and developers are not selling any property but want it to be given on rent. Huge overhead and monthly expenses are taken care of by such rental incomes. Hence lease rental and commercial property rates will become dearer in Mumbai.

Scraping of ULC in the next session of Maharashtra Assembly, Huge projects are likely to be launched soon. An estimate says, it will be 10 crore sq.ft. will hit the real estate market in mid 2008. Since banks have enhanced the rate of interest, many borrowers, who have over stretched already, will go in for NPA or open market sale.

Real Estate market is already witnessing fall of 25% in property prices in extended suburbs. Average good locality flat in Thane, Navi Mumbai and Mira Road have fallen 25% to 35% of November 2006 level.

Speculators are sitting on fence for opportunities. They want to sell the ready stock in international market. Dubai, London, South Africa and UK buyers are finding the property cheap, since they do not know the market conditions. Real Estate Funds, who have interested in various development and funded for historically high cost of land and FSI purchase, are not interested in selling for less. Hence market is witnessing new corporate buyers for residential units, just changing hands with speculators. Builders are restricting purchasers to sell their flats in open market for next three years, due agreement are entered before handing over the possession, thus, managing price fall temporarily.

After some of the media reports, purchasers are waiting for a fall. Pundits are predicting a major correction in property price in suburbs and extended suburbs. South Mumbai will go still strong since there is hardly any supply.

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source: accommodationtimes.com

Interest on Home Loans may fall

Nationalised Banks have increased interest rates on home loans are not sustainable since demand for home loans on much cheaper interest rates have established a bench mark rate for home loans. After RBIs interventions and caution notice, Banks started taking extreme majors to reduce the risk of turning lendings into NPA. In spite of no major risk factor coming into way, banks started enhancing their basis points on home loans. Industry peers thinks that it is nothing but maximisation of profit on robust growth of real estate sector.

HDFC, the pioneer in home loan concept, still offer home loans at 11 % p.a and HUDCO kept it at 10.75%. Foreign Banks are reaping a good harvest after Nationalised Banks raised interest rates on home loan.

According to NHB, in 2003 to 2005, housing finance market witnessed 73% growth in sanctions. The trend continued till late 2006 when interest rates started climbing up. The demand for housing never declined. So does the demand for home loans.

Finance Ministry recently intervened the situation and compelled the banks to offer cheaper rate of interest for loans upto Rs.20 lakh. Housing and real estate is being in priority sector in RBIs list, banks are compelled to give loans for housing. According to sources, Finance Ministry have taken the matter very seriously and intend to bring out formula for reducing home loan interest offered by Banks.

In the process, banks will be asked to reduce the rate of interest. A PLR is soon likely to be announced by the apex bank. The action is likely to be in action by end of July this year.

With reduced demand for higher rate home loans, Priority sector lending norms of RBI and growing competition, housing finance institutions and banks are likely to reduce the floating rate of interest before October 2007.

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source: accommodationtimes.com

Quit India Movement in 2007

When Mahatma Gandhi decided to announce Quit India Movement in 1942, he would have not realised that it may again be repeated in 2007.

When Mumbai offered a minimum average rate of property at Rs.7000/- per sq.ft. in suburbs and Rs.5000/- per sq.ft. in extended suburbs, NRIs and MNCs were weighing the option of investing in Pune and two tier cities. Mohali sold an acre agriculture land for Rs.5 crore, Delhi and NCR have witnessed highest historic land rates followed by Pune, Ahmedabad, Bangalore and Hyderabad, the situation was dismal for individual investors who wanted to just save taxes by paying housing finance installments and at the same time have a second home.

Housing finance rates have capitalised on the inflation in the country and realty funds wanted to invest in primary market like funding builders at an early stage. Since huge funds are at stack, investors do not want a correction in the property prices. It will kill their depositors faith and hence they want it to be a rising trend.

Buyers are helpless and there were a big slid on the sale though the rates were reportedly constant or touching new heights. Individual investors, now since liberalisation in investing abroad to the tune of US$ 1 lakh in a year is allowed, are looking for oversea opportunities.

Dubai is the most famous destination to park the funds in real estate. Many projects are offering free life time visa to the region if one buys an apartment there. For a mere Rs.40 lakh one can have an two bed room apartment in an future international city. Taxation is relaxed because of free trade zone hence rentals yields and appreciations are not liable for any tax in the region. It is only when you repatriate, Indian Income Tax is applicable.

Exhibitors from Australia, UAE and US have been participating in various Indian Property Exhibitions, offering huge returns for small investments. While UK developers stay in hotels and luring individual investors for investing in farm land with a promise of future town planning which will include the plots on sale within the boundary of the city limit of London.

A huge amount of funds and High Net-worth Individuals have been investing with these overseas opportunities. When a two bedroom apartment at Mira Road is compared with high tech city of Dubai, investors opt for Dubai because for same amount of investment he is getting world class constructions and infrastructure with potential appreciations.

Builders are not left behind to capitalise on liberalisation. Hiranandanis have been constructing in Dubai, so is the case with many leading developers are developing in UAE. Oman, Mascat, Behrin and other part of region is witnessing huge construction projects from India Developers. Since there is no land available in India, builders are looking to tap the opportunities overseas. In the process, almost every big brand in India have projects in Middle East, Europe and Far East. Land being a esstential commodity to produce accommodation, and is now captured by leading corporate like DLF, Reliance and others, prices have gone beyond imagination. If the situation persists, there will be only ten developers in India who will be constructing on their land banks for next two decades with full situation of monopolizing and cartelling on real estate prices.

Under the circumstances, there is huge movement to quit India in 2007, after one gets open permission to invest outside India. We were witnessing for 60 years, our trained professionals like MBAs, Architects, scientists, academicians and businessmen have been quitting India for want of opportunities. This year they are allowed to do so with the permission.

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source: accommodationtimes.com

Planning mess in Urban centres of India

Almost 30% of Indian population will reside in urban areas of India by 2010. Rapid urbanisation is in offing, while city planners are finding it difficult to cope up with the rapid pace, reports “India Urban Report, preparing for an urban transaction”, commissioned by the Urban Ministry.

Speaking at the discussion on the report, Montek Singh Ahliwalia, deputy chairperson of the planning commission, said “ Planning efforts so far have evolved supporting a market economy, but the provision and delivery of services won't happen as a result of market forces. Steps will need to be taken towards that”. He further added “ We build flyovers and hotels in order to host the Commonwealth Games for instance, but is that what the city really needs?”

The report said that the a key feature of India's urbanisation is the increasing concentration of urban population in the comparatively larger cities like Mumbai, Kolkata, Delhi, Chennai, Bangalore, Hyderabad and Ahmedabad. These cities have entered a phase of metropolitanisation or to become extended urban corridors. Population growth rates are higher in the periphery than in the core of all these cities, except Bangalore. It has serious implications on infrastructural necessities like housing and transport.

The report conducted by National Institute of Public Finance. Mr. Om Prakash Mathur, professor of urban economics and finance, who headed the research study, said “ Urban workforce has remained stable and manufacturing remains the core activity accounting for 23 per cent of total workforce.” The report says that the composition of the country's Net Domestic Product has changed and manufacturing is no longer the key factor. Manufacturing has been replaced in urban areas by public administration, defence and other miscellaneous services.

New economic activities such as financial intermediation and formal real estate development will characterise future prospects in the economy of urbanisation. The report also said that there is huge imbalance in the level of urbanisation within the country. States like Goa, Gujarat, Maharashtra, Punjab and Tamil Nadu have 35 per cent urbanisation while Uttar Pradesh 20%, Orissa 14.3 and Bihar has 10% of its population living in urban areas.

The report has highlighted some of the anomalies like 90% of all urban areas have water but 40% of it unsafe for drinking. Nearly 50% depend on source other than tap water within premises while average availability is 2.9 hours per day. Nearly 40 to 60 % of the water released is lost to theft and distributional leakages. The concept of 24x7 water supply is no longer a key goal in any of the cities.

The report said that a process of Function and sources of revenue are transferred between the different levels of the government. Local bodies were responsible for public health, sanitation and water supply. Today they are also deemed responsible for economic and social development, urban and town planning, protection of environment and poverty alleviation. But there is also much confusion over the precise role of these local bodies. Their responsibilities overlap with state department over lot of issues. State of Rajasthan scrapped Property Tax and hence additional responsibilities were a burden on them.

Mumbai should learn a lesson from the study and plan more infrastructural projects in suburbs. Instead of projects like Bandra Worli sea link or Pedder Road fly over, planners must consider to expedite Andheri Ghatkopar Link and Trans Harbour Link way. Planners must consider to shift public offices to Navi Mumbai so that day migrants from other part of the state do not add congestions.

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source: accommodationtimes.com

Consumer sentiment strong

OPTIMISM is still the key word for dedicated followers of the property market.

The annual consumer sentiment survey conducted by Mortgage Choice found Queenslanders' consumer sentiment regarding next year was overwhelmingly positive.

The independent online survey in which 96 per cent of respondents were property owners found 86 per cent were confident the economy will be strong during 2008.

Despite the global credit crunch, rising housing prices and home loan affordability problems, sentiment has increased from last year's 77 per cent.

Mortgage Choice national manager Warren O'Rourke said the Queensland survey outcomes provide an interesting insight into the general public's expectations of and plans for the short-term future, especially in terms of property investment.

``There has been a significant uplift in consumers' perception of the country's financial situation,'' he said.

``Sentiment increased by 9 percentage points and consumers continue to have a positive outlook on property and their finances.

``With housing loan approvals still very healthy, though at a more reasonable pace, the results indicate this trend should continue with almost half the respondents (43 per cent) planning to invest in property in the next 12 months, up from 40 per cent last year.''

Interest rates remain a concern but Queenslanders were the least concerned about rates although 93 per cent of statewide respondents believed they will rise in the first quarter of 2008.

Of those Queensland respondents with a mortgage, two-thirds said they could afford a further rate rise and more than a quarter could factor in a rise of up to one per cent.

Most planning to invest in property in 2008 said they were making sacrifices to do so.

The most common were to cut back on spending (29 per cent), to buy a less expensive property than desired (12 per cent), or purchase in a non-ideal location (nine per cent).

A quarter of Quensland respondents said prices were rising quicker than before and it was affecting them in a negative way (for example with increased rent).

But 18 per cent said the price rises were affecting them in a positive way (as with increased rental income) while more than half said they were not affected.

Two-thirds of the sunshine state's respondents said they expected housing prices will increase over the next 12 months, compared with 42 per cent last year.

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source: goldcoast.com