Demand for Semi Luxury Real Estate in India May Stall

The demand for much of the middle premium range of real estate in India may fall in the coming few months thanks to the layoffs of middle management employees. Over the past month, IT industry leaders have expressed that to remain globally competitive will require them to hire employees overseas rather than from India.

Outsourcing Jobs to India

Over the past two decades, Indian IT companies grew rapidly on the back of a large and well trained workforce. Such a workforce could be deployed for work at client’s site overseas at a fraction of the cost the client would have to pay to hire workers onshore. The term offshoring became a buzzword that was heard usually in the context of India.

Well trained Indian engineers would usually work at a fraction of the cost of foreign workers. Outsourcing became such a concern among educated American and European techies that they told the generation still in school not to pursue a technical degree because in all likelihood, their job would be done by an Indian at a fraction of what they would have to be paid.  properties websites in india

Indian Techies Living Large

Many mid-level Indian techies earn between 20 to 60 lakhs per annum and make up a significant bulk of buyers of semi luxury properties in India. Most such working professionals are between the ages of 30 to 40. Because such workers earn a large income at a relatively young age, they make up the biggest segment of buyers of flats priced between 4,000 to 7,500 rupees per square foot.

Risks Looming Large

In addition to the protectionist policies of important foreign markets which are harming Indian IT companies; Indian IT companies are also suffering due to a large number of jobs being automated and by the advent of Artificial Intelligence.

Cities such as Pune and Bangalore depend on mid-level technology workers for job creation and to spur demand for office and residential real estate. This makes such cities especially sensitive to layoffs of mid-level IT workers.

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There are nearly 16,000 Indian IT companies that employ close to forty lakh tech workers. Today middle management is such companies is particularly at risk of layoffs because many in this working segment have skills that are less irrelevant today. Employing workers in this segment is also more expensive for IT companies who require the skill sets of fresh graduates yet may be able to do without such a large middle management.

Impact Upon Real Estate

If there is a meltdown in the Indian IT sector, then many in the middle management may be the first to go. This would lead to a fall in the demand for semi luxury and even luxury properties in the country. According to this property site, there is a significant possibility that a recovery in the mid premium real estate sector will be delayed.

Tax Rebate to Owners of Property in Ahmedabad Leads to More Revenue

The owners of property in Ahmedabad provided the Ahmedabad Municipal Corporation (AMC) with more revenue than they did in the same period last year. Between April 1 and May 15 of this year, the AMC earned revenues from property tax of 282 crore rupees, over 23 crores more than it had earned during the same period last year.

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Attracting Defaulters to Pay

Though the AMC earned a higher income this quarter than it had during the same period last year, it wasn’t due to the eagerness of a larger number of homebuyers to pay their dues. Rather, the larger inflow of tax revenue was spurred by a ten percent rebate offered by the AMC to all defaulters who chose to clear their dues. Hence, the Ahmedabad Municipal Corporation earned an additional 24 crore rupees of tax revenue over what it had earned last year because many defaulters choose to pay during the beginning of this financial year. On an even more positive note, the AMC also earned 1.6 crores in professional tax during the same period mentioned.

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While officials in the AMC acknowledge that the larger collection in property tax was due to the ten percent rebate offered to defaulters, they are unsure why there was an increase in the amount of professional tax they were paid.

Region vice Breakup and Income

Officials at the authority have stated that the West Zone and New West Zone which include regions such as Satellite, Bodakdev, Memnagar, and Ranip together accounted for a fifty-nine percent increase in revenues earned by the authority thus far this quarter. The AMU earned 14.08 crore rupees more in tax revenue this year from the localities mentioned than it had earned in the same period last year from these localities.

The regions in the West Zone of Ahmedabad mentioned above are among the most highly sought after in the city. Rates in the locality of Satellite, based on real estate trends in Ahmedabad, are easily valued in excess of four thousand five hundred rupees per square foot. In certain regions of Satellite, prices are known to exceed five thousand five hundred rupees per square feet.

When we break up the collection further between these regions we find that Ahmadabad’s Municipal Corporation earned 7.37 crore more from the New West Zone this year than it had during the same period last year, and earned 6.27 crore more from the West Zone this year than it did during the same time last year.

The West Zone and New West Zone together accounted for sixty-three percent of the taxes collected by the AMC.

What to Make of It All?

It seems that aside from saving money by paying a lower property tax, tax defaulters also signalled to the AMU that tax rates are too high. A ten percent tax rebate is not tremendously large, yet it was sufficient to lead to a tax collection amount that was a little more than ten percent of that earned last year. AMU authorities and builders and developers in Ahmedabad may take note; a ten percent property tax rebate leads to a ten percent increase in the amount of tax collected in Ahmedabad.

 

 

What Has GST in Store for Those Eager to buy Property in India?

Home buyers who purchase a best property in India after the introduction of the GST are unlikely to suffer from any additional tax burden than are buyers who purchase a house before the GST is introduced. The GST will have a partial impact on the price of property in the country as work contracts in India will be levied a tax rate of 12 percent. According to experts, the 12 percent tax rate levied on work contracts under the GST will not have any impact on the price of houses in India.

Indirect Taxes on Real Estate

Currently, three key indirect taxes are levied on houses in India. These are excise duty; value added tax, and service tax which total between 9 to 11 percent of the price of the property. Stamp duty is an additional tax yet being a state tax, its rate varies from state to state. The first three taxes mentioned will be combined into one single indirect tax under the GST regime. One of the key strengths of the GST is that it will lead to the removal of cascading taxes. Under the new GST regime, builders will be allowed input tax credit which will lower the taxes they pay. However, developers in India are still waiting for clarity from the authorities on the abatement rate they will be charged on the land they purchase for a project.best real estate in india

How GST Will Impact Real Estate

Excluding taxes paid as stamp duty, realestate in India is currently taxed at rates lying between 9 and 11 percent. As the GST is expected to tax property at a rate of 12 percent, after the GST comes into force, houses are unlikely to cost more than they do today. According to leading property websites in India, the price of houses post the GST rollout is unlikely to rise.

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The Goods and Services Tax is also expected to widen the government’s tax collection base because, under the GST, the entire industry will be awarded an input tax credit. Authorities believe that awarding the entire industry with an input tax credit will provide a strong incentive to builders to come under the government’s tax net. Furthermore, as more businesses and traders come under the government’s tax net, it will lower the amount of cash in the country’s economy.

Benefits of Buying Under Construction Property Today

Home buyers interested in buying a house will benefit from buying property that is still being built today because after the GST regime is implemented, the property is likely to cost less. This is so because builders are constructing properties today, which when they sell, they will be able to receive a tax credit on under the GST regime. According to this property website, once the GST is in place builders shall receive a tax credit because excise tax and central sales tax on construction materials will be offset against indirect taxes collected from homebuyers.

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Ready to Move in Property in Hyderabad More Popular than Booked Property

Ready to move in property in Hyderabad is more likely to be bought or sold than a property that is under construction. A ready to move in property is likely to be sold faster than a freshly booked property regardless of whether the property is being bought or sold in the primary or secondary market. Thus if a ready to move in property is being sold by the builder, or being sold by an individual, it is likely to attract more buyers than an under construction property.

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The Factors behind this Trend

Two factors have led to greater demand for ready to move in property. The first factor is the lower interest rate being charged by banks on home loans, this has led certain households to invest in real estate which otherwise wouldn’t have invested in a house. Demonetization is still playing a role in the cities real estate market seven months after it was implemented. Due to demonetization, buyers have more negotiating power over sellers translating into buyers being able to quote a more favorable offer price.

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The Ready to Move in Premium

Even though there are more transactions of ready to move in property, buyers are also willing to pay more for such a property due to the money they will save from owning a completed house. A household saves money by buying a completed house because project delays on an under construction property increase the financial burden on buyers.

Experts have stated that real estate property in Hyderabad is inexpensive when compared to real estate in other metro cities, this according to industry veterans is the key reason households in Hyderabad invest in ready to move in houses. Regions of Hyderabad such as Gachibowli and Hitech City have numerous ready to move in housing options available for interested buyers. According to industry veterans, usually when money is a major factor in deciding on a home do buyers opt to purchase a house in a fresh booking. Households that are not as constrained by money usually choose to buy a completed house. A major reason that investors choose to buy an under construction home when they have fewer funds is that they hope to benefit financially as the property nears completion and subsequently begin to increase in value.

The Role of Hyderabad’s growing IT Workforce

It is estimated that within one year, the headcount of Hyderabad’s IT workforce will increase by forty thousand; this is likely to lead to more demand for ready to move in houses. Notably, a reason ready to move in houses are more expensive than properties under construction is that there is greater demand for ready to move in houses.

Conclusion

It is expected that a larger IT workforce that is well paid will continue to create demand for completed real estate projects in Hyderabad.

Four Guidelines to Follow Before You Buy Real Estate in India

Prospective homebuyers who are eager to buy realestate in India should know that the Indian real estate market is highly dynamic changing constantly during the course of each year. Because the Indian real estate sector is in a state of constant flux, buyers often feel daunted and find it difficult to judge the correct value of a property and to accurately judge the investment potential of a house.

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The few tips below, if they are followed, will relieve buyers from a great deal of guesswork they will face when they decide to buy a house.

Follow Price Trends for the Locality

For most households a new house is the biggest investment they will make in their lifetime. Before deciding to buy a particular house, the investor should be certain that the property they buy will prove to be an asset for them over the long term. Thus prospective buyers should always track the price trends of the locality where they are considering buying a house. To do this, prospective homebuyers should learn of the prevailing price and compare it to the price at which properties had been sold in the past. Learning of the real estate price movements over the past three years in a locality or region will provide a useful estimate of the direction home prices are heading. Gathering information about home prices in the past will also help prospective buyers arrive at a reliable estimate for home prices in a locality in the future.

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Understand The Growth Drivers

After understanding the price trend in a locality, buyers should try to understand why prices have risen or dropped in the region. According to the best real estate sites in India, micro and macro factors have an impact upon the price of property in a region. If new social and civic infrastructure is created or is planned in a locality this usually leads to higher real estate prices in that region. Macro factors including changes in interest rates, tax reform, and regulatory guidelines also result in changes in realty prices.

Who Does the Market Favor?

It’s important to understand whom the market favors. If a market is a buyers market it means that the number of properties for sale exceeds the number of buyers who are willing to buy at the prevailing prices in that market. Thus a buyer’s market is one where buyers have the upper hand because sellers have fewer willing buyers they can sell to.

In a sellers market, those who are selling the property call the shots because the number of willing buyers exceeds the number of those willing to sell a property in that market.

A prospective buyers can judge for himself whom the market favors by gathering data about how long properties in a region remain on the market before they are sold.

Regions With Potential for Spillover Demand

Buyers who have been focused on home buying in central regions should realize that certain parts of a city are susceptible to spill over demand after more central regions become saturated with developments. Because the regions near central regions already have easy access to good social infrastructure that lies in the central region, once the central region becomes saturated, the surrounding underdeveloped and inexpensive regions become highly desirable localities to live in. According to this property site, prices in the surrounding underdeveloped regions begin to rise dramatically due to demand which spills over from central regions.

Real Estate in Bangalore’s KR Puram Lake, Destructive to Water Body

Many who own realestate in Bangalore are pleased to live in their home and enjoy living in a city that has been bestowed the twin titles “city of gardens” and “city of lakes”. Once Bangalore had hundreds of lakes yet according to reputed sources the number of lakes in Bangalore has fallen drastically and today stands at eighty one.

The Death of a Lake

Much has been reported about the state of the Bellander Lake in recent days. It has been reported that the lake’s future as an important water body is in jeopardy because human waste from numerous developments that surround the lake flows into the large water body.  new residential projects in hyderabad

However another lake that is not at too great a distance from Bellandur Lake is also seriously ill and its future is also uncertain. The KR Puram Lake is rapidly degrading due to the lack of a maintenance system that could prevent sewage from being disposed of in the lake. Encroachment on the lake’s borders is also leading gradually to the lakes demise.

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An Important Body of Water

The KR Puram lake is an important body of water for the locals who depend on a daily supply of water from the lake for essential activities. However today any visitor to the KR Puram lake could see for themselves that the quality of the lakes water is putrid and that illegal encroachments are taking possession of the land from which water has receded. Those who want to buy property in Bangalore so as to be near pristine lakes, today may need to do a double think before they go ahead and buy a house in the city.

Efforts By Those Most Impacted

Residents who have been the most impacted by the deteriorating condition of the lake have decided to hold a hunger strike on the twelfth of this month to compel the concerned authority to take action and establish a functioning maintenance system to reclaim the lake. There have been complaints by local residents who state that the dumping of untreated sewage water, non recyclable waste, and chemical effluents is turning the lake’s water into poison.

A resident has filed an RTI which reveals that a sewage treatment plant in the vicinity of the lake that had thus far been believed to treat 21 million liters of sewage a day is only capable of treating a maximum of 20 million liters of sewage a day. Claims by locals which are backed up by strong evidence point to sewage flowing into the KR Puram lake from nearby residential projects in Bangalore,

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Without Bidders, Government Real Estate in India Will House Affordable Homes

If the government’s efforts to auction the land bank of realestate in India that is currently in the hands of the nations loss making state run enterprises fails to attract bidders, the government plans to use the vacant land to construct affordable homes on it.

The Story Thus Far

A state run real estate firm intends to soon auction 2.000 acres of land that belongs to five loss making state run companies. The companies that will soon have their land holdings under the hammer for auction are Instrumentation Limited, HMT Bearing Limited, Tungabhadra Steel Products, Hindustan Steel Products, and HMT Watches Ltd. If the land holdings of these companies refuse to attract government bidders when the land in auctioned, the government will consider constructing affordable homes on the land.

Public Sector Companies Given Preference

It was reported to this property site in India by a senior government official that in case public sector companies as well as the various state governments fail to bid for the land parcels when they are auctioned, the government will conduct a feasibility study considering the possibility of building affordable houses on the land. If the feasibility study proves that the land would not be a suitable backdrop for affordable property, the government will open the land to private bidders.

As reported by the senior government official, the governments goal is not to generate as much revenue for itself as possible by auctioning the land but rather to utilize the land to it’s fullest potential.

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A Possible Role for State Governments

The state run real estate firm charged with the responsibility for all 2,000 acres of land will hold talks with the respective governments to ascertain whether they would be willing to buy the land. If the governments do not agree to buy the land, a feasibility study will be conducted. If the study indicates that affordable real estate can be built on the land, the state run real estate firm will comply and construct affordable houses on the land. Additionally, if the governments agree buy the land banks, the state run real estate company will provide the various governments who bought the land with the required expertise to build houses on the land.

More Land Banks Up For Sale 

In the next few months there may be more land banks up for sale according to the Chairman of the company responsible for auctioning the land banks of the five PSU’s mentioned. The land banks of six more government run companies may be up for sale within the next few months in addition to the current land banks of the 5 loss making state run companies that are up for sale.

Land Bank Sale Management Galore

The state run real estate company which will auction the land bank of the five companies mentioned has also been appointed as the Land management agency responsible for auctioning the real estate assets of the other six loss making government firms.

After the land bank auction of loss making firms has been successfully completed, the state run real estate company that conducted the sale shall receive half of one percent of the value realized from the auction as its fee for services rendered. The maximum the company may receive from the auction has however been capped at 1 crore.

In Conclusion

The central government will be the first suitor considered for the land banks, followed by Central PSE’s, State Department’s, and finally state government bodies will be considered suitors for the land banks. If all these government’s and government companies do not agree to purchase the land banks within six months, then, according to this real estate website the government will auction the land to private players.

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