Concerning Property in India, Demonetization Seems a Distant Memory

Sales of property in India have grown by nearly 13 percent in the fourth quarter of 2016-2017. Three cities Mumbai, Bangalore, and Pune were the primary drivers of home sales in India during these past few months. The three cities together accounted for 57 percent of the total sales among the top nine real estate markets in the country for the quarter ended March of 2017.

Going By the Numbers and Laws

The number of new residential units sold increased to 51,700 units in the quarter ended March 2017 from 43,500 units during the previous quarter. According to those who work within the real estate industry, demand for housing is being driven by the affordable housing sector. Residential markets, say experts, have recovered from the lows of demonetization and sales and new launches have reached healthy levels in the fourth quarter of the financial year of 2017. Real estate insiders have also gone on to state that affordable housing is driving rising sales in domestic real estate because affordable housing has been granted infrastructure status which makes it possible for builders to receive loans at lower rates and build such Projects.

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Post Demonetization Resurgence

According to industry reports, realestate in India has been revived post demonetization and sales have risen by 13 percent while they had fallen by nearly 22 percent in the last quarter in the top 9 real estate markets in the country. Concerning Mumbai, Pune, and Bangalore each city has contributed 23 percent, 18 percent, and 16 percent respectively to the total sales of real estate in the latest quarter.

A Rise in Launches

Across the cities of Mumbai, Pune, and Bangalore the number of new launches has risen by 19 percent. This is the highest increase in the number of new launches in the last two years. According to those who follow the industry, the number of new launches stood at 51,500 units in the final quarter of 2016-17 whereas it had stood at 43,250 in the third quarter of the financial year 2016-17. According to this real estate websites the number of new launches was the highest in Mumbai followed by Hyderabad and Gurgaon respectively. for more here

What is the impact of circle rates on property transaction made in India?

In recent past many cities including Noida, Gurgaon and Ghaziabad saw changes in circle rates. One of the objects behind cutting down circle rates was to reduce property prices and to encourage the buyers and investors of invest in real estate market.

Cut in circle rates came as a good move in the stagnant market. Real estate developers also appreciated the move as it helped them get some business. Property sites in India have also seen increase in the traffic from the people looking for new homes. To know who property demand is increasing due to change in circle rates, let’s check its impact on the market.

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In June last year, Ghaziabad saw correction of around 4 to 5 percent in circle rates on residential plots. It tremendously affected the real estate market in the city. A spokesperson of Raheja Developers said on this topic, “This is one of the appreciated course of actions by the local body to cut the circle rate which will lead to correction in property prices. It has been noticed that in some areas of NCR circuit, circle rates are higher than the market rates of land. So this has to be justified accordingly also to boost the realty market.”

Not just the developers, property consultants and agents also appreciated the decision of cut in circle rates. After the move, real estate websites in India are expecting some positive movement in the realty market. At least, people looking for affordable homes will start searching their dream homes to avail the benefit of reduced prices.

This will help the homebuyers save money on stamp duty as they will now have to pay less for getting their property registered. It is completely a win-win situation for the government, builders, investors, agents and end-users.

When talking about circle rates, some people mistakenly consider it market rate. Let’s have a look at both of them and the difference between them.

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Circle rate:

It is the minimum cost at which independent homes, commercial buildings, residential apartments and plots are sold and purchased. Local state government’s revenue department decides the rates.

Market rate:

This is the value of the property decided by the buyers and sellers. Generally, the existing market dynamics of demand and supply affect the final property price. However, some best real estate websites in India show both circle rates and market rates of projects.

Now when you have understood circle rates and market rates, make sure next time when you buy a house, you pay attention to them and grab the best deal.

New Partnership Good News For Buyers Seeking Affordable Real Estate in India

Affordable realestate in India may have finally come of age as the SBI and the Confederation of Real Estate Developers of India (CREDAI) have joined together to create affordable housing in India. The agreement between the SBI and the CREDAI is to be valid for three years in which time the SBI is expected to extend construction finance to developers to the tune of 12,500 crores. Notably the SBI believes that in total, over a period of two to three years, borrowers will demand 25 thousand crores of housing loans to purchase affordable property across India.

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CREDAI and Affordable Property Today

The CREDAI has recently launched 373 affordable projects that once completed, put together, will consist of two lakh thirty three thousand individual housing units. A sum exceeding seventy thousand crores has been invested in the 273 affordable projects mentioned which were launched by Union Minister of Urban Development Housing and Urban Poverty Alleviation Minister Mr. Venkaiah Naidu.

The SBI and CREDAI Partnership

The SBI is expected to support the CREDAI as its national banking partner. The State Bank of India is India’s largest bank and the biggest mortgage lender in the country as well. As the national banking partner of the CREDAI, the SBI will also provide easy construction finance for affordable housing projects to developers who are members of the CREDAI that too at a lower rate of interest than the SBI does to other borrowers.

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The SBI and Affordable Housing

As a housing financier, the SBI is the largest one in the country when it comes to financing affordable housing. According to this property website, those within the SBI have stated that the partnership with the CREDAI is a special time as the partnership between the SBI and CREDAI is part of a larger national mission to provide housing for all in India by 2022. The initiative between the SBI and CREDAI is expected to fulfill the dream of homeownership for millions of Indians and in the long run will boost the real estate sector in India and the nation’s economy as well.

Financials of SBI’s Partnership with CREDAI

The SBI will provide up to 35 basis point (.35 percent) interest rate concession to eligible builders in the form of construction finance. A partnership between the SBI and the CREDAI will benefit both builders who are members of the CREDAI and to end users who actually buy the housing units.

Conclusion

The CREDAI president has stated that the organizations partnership with the SBI will bring the CREDAI one step closer to it’s goal of providing housing for the masses in India and to elevate the quality of lives of many of the urban poor in India. According to many real estate sites in India once the urban poor have a permanent home they will cease to suffer from the many disadvantages that are a part of not having one’s own physical home address. for mor info click here

Builders Altering Plans Midway To Construct Affordable Property in India

Builders who construct Property in India have an additional reason to build affordable housing since the builders will be able to borrow capital for such projects at a lower rate of interest.

Housing for All by 2022

The government is offering numerous incentives and tax benefits to encourage the construction of affordable housing with the end goal that by the year 2022 there would be housing for all in the urban regions of the country. Builders of real estate in the country have been building a larger number of smaller houses since the government granted affordable housing infrastructure status. Some builders have even begun to alter buildings currently under construction into affordable houses and buildings whose plans had been decided before the government granted infrastructure status to affordable housing are being tweaked and reshaped to be completed as affordable houses.

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Benefits to Builders of Affordable Housing

There are tax benefits to builders who take steps to begin and successfully complete affordable housing projects in India. Additionally because affordable housing has been granted the status of infrastructure, the builders who begin such projects are eligible for institutional funding at better than normal terms.

After the government’s encouraging plans to promote construction of affordable housing in India, a prominent builder in Mumbai modified its project in Borivali into one of 400 apartments where each unit size is now to be of a 1 BHK configuration. This developer now offers the flats of sizes 350 to 380 square feet at prices ranging between 60 to 63 lakh rupees.

Developers are choosing to build homes for the affordable housing segment because doing to leads to a better management of cash flows which in turn leads to better management at the construction site and to a higher sales velocity. According to this site and to some of the best property sites in India the demand for homes in the affordable housing segment is genuine and thus the sales velocity is high in this segment. One of the top builders of who launched an affordable project in Mumbai stated that they sold two thirds of the units they launched three months ago.

Why Affordable Housing is Catching on?

Experts in domestic real estate have stated that the affordable housing trend is catching on and besides the quality of the builders work and easy financing options for buyers, the ticket size plays a vital role in decision making and ultimately in sales conclusion. According to this property site, numerous builders are gravitating to towards building affordable property as building and selling such property has now become financially viable.

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Why First Time Buyers of Property in India Must Understand Maintenance Charges

A first time buyer of Property In India should have a working knowledge of what maintenance charges are. Buyers should understand that the asking price is not the only price that needs to be paid when they purchase a flat in a development, rather every society charges maintenance charges which have an impact upon the total cost of a property.

Why Maintenance Charges are Relevant?

Many first time homebuyers often overlook the fact that maintenance charges will need to be paid for any property they purchase. If overlooked buyers may find that the maintenance charges charged by a society will derail their financial plans. Calculating how much needs to be paid in maintenance charges is as important as calculating how much needs to be paid as EMI for a new house.

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What Exactly Are Maintenance Charges?

Every society has commonly-owned property areas and the upkeep of these requires the payment of maintenance charges. Societies offer residents facilities such as a gym, tennis or basketball courts, a swimming pool, power backup, elevators, parking spaces, community centers, well maintained lawns, etc the upkeep of all of which requires residents to pay a certain monthly amount to the society.

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The buyer and builder together enter into a contractual agreement pertaining to maintenance charges and this is mentioned in the allotment letter by the builder. Unfortunately many builders fail to provide clarity of what the maintenance charges are likely to be at the time the project is launched, however it is always a good idea for buyers to try and get a rough estimate of this from builders.

Who Collects Maintenance Charges?

Usually maintenance charges are collected by the Residents Welfare Society (RWA), in the absence of which and when the project is completed and welfare association is formed, the builder bears the cost and passes it on to the RWA.

The Maintenance Charges Calculus

There are two ways that maintenance charges are calculated. The simplest method according to this real estate website is the flat rate. A flat maintenance charge for every unit in a society is usually charged when most of the flats in the development are of a similar size.

The second method to calculate maintenance charges per flat for a society depends upon the size of individual flats, this method is often used in societies where the size of the flats are different. For instance if the rate charged is 5 rupees per square foot area in a certain society, then owners of a 2,000 square foot flat would have to pay 10,000 rupees per square foot as maintenance charges.

When Maintenance Charges Change

Maintenance charges for a piece of realestate in India may increase if additional amenities are added to an existing society. This usually requires consent from the owners of flats in the society.

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Government and Housing Ministries Role in Creating Affordable Property in India Under PMAY

To create more affordable Property in India, the housing ministry had hoped to join the Credit Linked Subsidy Scheme (CLSS) with the prime minister’s vision to build a house worth the name for every Indian within a period of five years.
The Story Thus Far
Over the past few months and Government has received over 1.66 crore applications for credit linked subsidies for housing loans. In India the online internet penetration is a mere 37 percent but in urban areas stands at 62 percent, these statistics indicate that the need to digitize land records exists and will add efficiency to the Indian real estate sector. Additionally the action leading to digitalising land records and making them available to landowners will lead to the creation of more jobs in India as well. Citizens of India will be able to access digitized records online as internet penetration, with the aid of some facilitation, will be deep enough to allow doing so by leading visitors to property sites in India that have been created by the government.
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Financials at the Heart of the Matter
There has been a reversal of sorts between housing shortages and capital for new houses. Earlier housing shortages were computed whereas today the extent of the subsidies sanctioned are computed. Hence the mindset has shifted from a negative image to a positive one where rather than bemoan the shortages in housing, discussions revolve around how much subsidies shall be provided, a shift from the physical to the financial has taken hold concerning Realestate in India. This change signals a diversion from the earlier passive stance to an active one concerning real estate.
In a previous budget under the Pradhan Mantri Awas Yojana the CLSS allowed for a 6.5 percent interest subsidy to be credited to the borrowers account on a loan up to 6 lakhs taken for a house that was 30 to 60 square meters in carpet area. In the instance mentioned a family whose annual income Is upto 6 lakhs is eligible for the subsidy. The applicant which meets the criteria in effect gains a net subsidy of 21 percent under this scheme.

Creating a Wider Subsidy Net
For the first time ever the government has spread the social net wider to include Lower Income Group families rather than just the Economically Weaker Section (EWS). On the eve of last year the net was broadened further to include subsidies for Middle Income Group (MIG) 1 and 2 allowing households with an annual income up to 12 lakhs could earn a subsidy of 4 percent. By creating a wider net, more individuals will be able to own Property in India at rates that are more and more affordable.

Don’t Wait to Buy Property in India Expecting Lower Interest Rates

Prospective homebuyers who were eagerly looking forward to buy property in India in the near future hoping interest rates would fall further may not find a better time than today to buy a property. According to experts in the field of finance, interest rates are highly unlikely to fall further. While over the past one year, interest rates have fallen significantly, a further reduction in the rate of interest charged from borrowers is unlikely and hence today is as good a time as any to invest in property, especially if one is waiting to pay a lower EMI in the future as a result of lower interest rates. Here is why

The Marginal Cost of Lending Rate (MCLR)

Most home loans are linked to one-year Marginal Cost of Funds Lending Rate which had been pulled lower in the recent past leading interest rates to drop with it. Aggressive rate cuts by the RBI were one reason why the MCLR dropped. However the RBI has changed its current stance from that that of accommodative to neutral which is far less likely to lead to lower interest rates in the future. Additionally since lower interest rates mean more inflation (inflation is something the RBI is concerned about and is taking action to tackle) the chances of lower interest rates in the future are slim.

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Demonetization

According to this property website, demonetization was an additional reason why interest rates fell in the recent past. Because of a glut in the availability of cash during demonetization the MCLR was pulled lower. Notably most of the MCLR’s recent deductations happened between November of last year and January of this year, precisely when the impact of demonetization was most felt.

Liquidity in the Market

Liquidity in the market has fallen from a high of 7 lakh crores in January to 4 lakh crores today. The RBI has taken steps to bring inflation under control by removing liquidity from the market through instruments such as MSS Bonds, and by using Cash Management Bills. The RBI is concerned about liquidity and intends to bring it under control sooner rather than later. Hence the beneifts of excess liquidity in the market have already been passed on to consumers in the form of lower interest rates and rates are unlikely to fall further as the RBI reigns in liquidity from the market.

Conclusion

Once the RBI removes the excess liquidity of 4 lakh crores from the economy interest rates will rise further, thus according to this real estate website, the chance of lower interest rates anytime soon is slim and so interest rates on home loans are very unlikely to drop any lower than they are today.

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