A latest study by Cushman & Wakefield has ranked India 20th in the list of world’s top real estate investment markets with investment volume of $3.4 billion in 2012.
Notwithstanding the gloomy scenario, the report had some positive news for the real estate sector stating investment volumes rallied in the fourth quarter signalling the beginning of real momentum and a return of confidence in the market which could see volumes this year increase 14 per cent to exceed $1 trillion mark for the first time since 2007.
China was at the top position with an investment of $304.1 billion, followed by the U.S. ($267.1 billion) and the U.K. ($56.3 billion). The consultant said the global property investment market grew by 6 per cent in 2012 to $929 billion and was expected to cross $1 trillion mark in 2013, the first time since 2007. “India was (20th) among the top 20 real estate investment markets globally with investment volume of Rs.19,000 crore ($3,466 million) recorded in 2012,’’ the company said in a statement issued with the latest assessment.
Majority of the investment in India was through institutional sales (67 per cent) while the remaining were through private equity (PE) investments (33 per cent). Investments in institutional sales saw a decline of 37 per cent over last year, but private equity investment in India rose by 7 per cent in 2012 to Rs.6,200 crore. Bangalore saw the highest number and value of private equity investments at Rs.3,250 crore in 2012, posting more than double the investment over the previous year, followed by Mumbai with Rs.1,300 crore and National Capital Region (NCR) Rs.700 crore investments.
The report states that the global property investment market recorded a modest 6 per cent rise in activity during 2012 with volumes reaching $929 billion.
Are you looking to buy a house but don’t want to wait for three to four years that developers take to complete projects? Or do you want to live in an area where basic infrastructure is already in place? If yes,your best chance is buying a house in the resale market. This will reduce the waiting period for developing the property and the locality.
Though this will eliminate some risks, still there are many things you must remember while buying a property in the resale market.
RESALE UNITS
Such houses are not necessarily old. The market has a large number of recently-built houses that are owned by investors who want to cash out.
Properties in the resale market can be put into two categories. First, ready houses owned independently. Second, units in projects which are in the construction phase. In such projects, the seller does not own the property yet, but has an agreement with the developer entitling him to ownership in the future.
One reason for buying a house in the resale market can be non-availability of new projects in the area where you want to settle. “In big cities, new residential properties tend to be scarce or non-existent in many central locations,” says Om Ahuja, chief executive officer, residential service, Jones Lang LaSalle India (JLL), a real estate advisory firm.
Or, in areas where new properties are coming up, they may have been sold out. This is particularly true in speculator-driven markets such as the Delhi-National Capital Region (NCR). With investors booking at launch so that they can sell out as the project gets going, anyone looking to buy later has no option but to approach them.
PRICE FACTOR
A property in resale is not cheaper than a new one-unless, of course, the structure is old. In urban locations, where land accounts for a very big part of the cost, the difference, if any, between a new and an old structure is small.
The situation is different for projects in which a lot of people have booked houses at discount at the time of launch with the intention of booking profit before the project is complete. In locations such as the Delhi-NCR, Mumbai and Bangalore, such properties are being sold at 5-20% less than the latest prices that developers are offering.
“In today’s scenario of oversupply and plateaued returns, resale properties are available at a lower price in many markets, especially where there is high investor participation. Investors usually sell when they get a reasonable profit and when they feel the valuation has peaked or started to stagnate. They attract buyers by offering a lower price compared to the fresh stock in the market,” says Ganesh Vasudevan, chief executive office, Indiaproperty.com, a real estate brokerage website. There may not be any price difference between ready-to-move houses and underconstruction houses close to the possession date.
“If the under-construction project is close to completion, the price difference will be minimal. The difference will be more in the initial stage, but in such a case the risk will also be higher,” says Ahuja of JLL.
TRANSFER CHARGES
Though under-construction houses may cost less in resale, you must factor in the transfer charges levied by developers to know the total cost of ownership. Many developers charge Rs 100-500 per square foot for such transfer. So, if the transfer fee is Rs 500 per sq ft, the buyer will pay Rs 5 for a 1,000 sq ft apartment. Builders levy this fee to safeguard their interest as otherwise they risk losing new customers when early birds who have booked at a lower price sell their houses for less than the price they are asking for the fresh stock.
“Typically, the launch price is Rs 500 -1,000 per sq ft less than the market price of ready-to-occupy flats in the vicinity. This period is used by investors and speculators to buy below market rates. The transfer fee is levied to deter speculators from selling at less than the developer’s price,” says Shreekant Shastry, vice president, business development and strategy, Ozone Group, a Bangalorebased developer.
Apart from discouraging sale by early investors until all the units have been sold, the fee also helps developers claim a share in investors’ gains.
Rs 100-500 per square foot is the fee that developers charge for transferring property from one party to another
“The transfer fee is the developers’ way to cash in on the price escalation in the market. They are aware of the enormous profits investors make by buying at a lower rate during the launch stage,” explains Vasudevan.
The fee also covers the cost and effort required to execute the ownership change, the reason cited by builders for the levy.
“Transfer fee is charged to meet administrative expenses as transfer of booking involves a lot of administrative and documentation work. It also involves legal issues, which the developer has to address,” says RK Arora, chairman and managing director, Supertech, a New Delhi-based developer.
Supertech does not charge anything for the first transfer, like a lot of developers. Some developers do not charge anything if the transfer is to a family member.
One more reason developers charge the fee is heavy churning of properties by speculators. The ownership of units in under-construction projects often changes multiple times before the end-user gets the possession. Such active trading pushes up prices.
“The fee is at times justified to control active investor participation. But in recent times, developers have increased the fee drastically,” says Vasudevan.
You don’t have to pay the fee at some locations. “The fee has been abolished in Maharashtra. It is hoped that the other states will follow suit. It is a regressive system with no logical basis,” says Ahuja.
DUE DILIGENCE
You make big purchases only after necessary enquiries. You should conduct due diligence before buying an under-construction property in resale as well. The checks include verifying title records and ensuring that the property specifications conform to the claims.
“Some of the documents one should review before buying are the builder-buyer agreement and original payment receipts against the installments paid. One should also check if any dues are pending with the builder,” says Anshuman Magazine, chairman and managing director, CBRE South Asia, a property advisory.
Before buying a property one should review the builderbuyer agreement and original payment receipts against the instalments paid.
Anshuman Magazine
CMD, CBRE South Asia
You should also find out the reasons the owner is selling the property. “If the seller is an investor, there may be valid reasons. The property may have appreciated sufficiently to make a sale attractive,” says Ahuja of JLL.
“If the property is being sold by someone who had originally intended to live in it, there could be negative reasons. For instance, the developer may not have met the timelines. Even the completion of the project may be in question,” adds Ahuja.
A property in a housing society requires the buyer to check its rules. Housing societies control various aspects of services, charges and even sale of properties based on their bylaws. You should get a copy of the rules and regulations from the society and invest only if you are comfortable with all of the housing society’s rules.
“Society bylaws are drafted as a collective check to ensure that the society’s core values, stated during registration, are safeguarded. These can cover any and every aspect of the lifestyle experience offered by the society to its members,” says Vasudevan of IndiaProperty.com.
For additional safety, you can go for a loan as banks usually do due diligence on the property. Many home buyers get their homes part-funded for this additional check even when they have adequate funds.
Payment schemes such as 20:80 introduced by developers have made some impact in offloading inventories. Its success hinges on the price point and most important, track record in delivery, say a cross-section of experts
Developers, saddled with huge unsold inventories, are wooing hesitant buyers with seemingly attractive payment schemes.
Earlier, buyers kept off the sales counter as the price points were high, and the global slowdown resulted in delayed deliveries, and in many cases, projects not taking off at all. While price points do not look like they would witness a correction, developers are aggressively advertising payment schemes, the most popular being the 20:80 scheme and its variants such as the 25:75 or 35:65, with an aim to keep their sales counters abuzz with activity.
Under this scheme, the buyer pays 20 per cent of the unit price upfront and 80 per cent on possession, with the EMIs (equated monthly installments) in between being handled by the developers. This is usually advertised as ‘no pre-EMIs’ for a certain duration. Such developers undertake to pay the EMIs for up to two years, with the assurance that the buyer will get possession of the unit by then.
For example, if a flat costs Rs 40 lakh, the bank will pay Rs 30 lakh (80 per cent of cost) to the developer, say at an interest rate of 10 or 11 per cent. The developer will pay around Rs 25,000 per month to the bank for two years.
It is a huge gamble for developers who are taking the responsibility for interest payments on behalf of the buyer for a designated period. For some developers, however, it appears the move is yielding dividends. Enquiries are increasing, which has led to increased sales. “Deferred payment schemes like 20:80 and their variants have emerged as a major tool to stimulate sales. In Delhi NCR, developers like CHD, Indiabulls, Nirmal Lifestyle and Bdi, are offering the subvention scheme, which has resulted in improving their sales,” says Rohit Kumar, head of India research at DTZ, a property consultancy.
Raheja Developers, a leading player in the Delhi NCR market offers 50:50 payment schemes for some projects under development, says sales have picked up. “Sales have gone up by 50 per cent in the Gurgaon market, after the implementation of this scheme,” says Harinder Dhillon, a spokesperson for the company.
“Schemes like 20:80 have existed in the market, but they started becoming popular since last year. 2012 was a difficult year, which witnessed slow sales amidst liquidity crunch being faced by developers. Such attractive schemes and offers were launched and profusely marketed by developers to help boost sales,” says Samir Jasuja, CEO, PropEquity, a real estate research firm.
The scheme has shown results in the Mumbai market, at least for some developers. “Sales have surely picked up in Mumbai (of course limited to specific projects only) after stagnating or narrowing through 2011 and 2012,” says Abhishek Kiran Gupta, real estate analyst at Bank of America -Merrill Lynch.
Gupta, however, adds that one should not become exuberant as this is not yet verified by clear findings. “We shall get greater clarity once the second quarter figures for the calendar year come in by June-end. The first quarter definitely looked better, but I would not get too excited too early as historically the fourth quarter and the first quarter of each calendar year are typically good due to festive seasons.”
DISCERNING BUYER
Yet, such schemes are not the determining factor in influencing purchase decisions, for the Indian home buyer is equally discerning. “The Indian residential real estate market is currently at a phase where sales are subject to the baseline attributes of projects — proper pricing, good location in relation to workplace hubs, capital value and — very importantly, immediate availability or advanced state of completion,” says Santhosh Kumar, CEO-operations, Jones Lang LaSalle India.
A banker says that the scheme has swelled home loan portfolios, but cautions that it carries risks as well. “The scheme seems to have taken off quite well. Banks are safe as the property is mortgaged and they can recover their money. If the builder refuses to pay up mid-way during the two-year period, the customer will end up paying the money. Not all developers are into this scheme. Some of the reputed ones who have deep pockets have stayed away from it,” said the former chairman of a leading nationalised bank. Kumar adds that when the fundamentals for a project are in place, such schemes positively influence sales.
Other analysts say that on the face of it, such schemes appear to be a win-win proposition for the developer and buyer, but did not really take off in the manner it should have. “The 20:80 payment scheme hasn’t been fully endorsed, especially considering what happened in Noida Extension- there is an element of uncertainty as not all projects get completed on time,” says Harinder Singh, MD, Realistic Realtors, a Gurgaon-based property consultancy.
PRICE POINT
The key attribute that determines the success of this scheme is the price point. “It is not very successful in cases where prices are above Rs 1.5 crore,” says Mamta Gakhar, MD, Bricston Realtors, a property broker based in Gurgaon. “The main reason being that the subvention scheme of 2 years costs 16-18 per cent extra to the builder and is built in the price list. So investors generally avoid this scheme and book properties in a normal construction-linked plan. That way, it becomes easy for them to liquidate their investment after the third or fourth instalment with a little profit on the amount invested.”
Gakhar’s experience shows that the attractiveness of the scheme is maximum for price points that range between Rs 25-75 lakh. “This category attracts the salaried class of buyers who are buying their first home. So this scheme saves them from the burden of paying EMIs along with their monthly rents.”
As Singh adds, “Home loan repayment is a long-term process, whether a concession during the initial years will prove to be beneficial or not.” This means, the buyer would have to keep an eye out for the track record in delivery, for that is the only determining factor.
I was searching the internet to find a topic for writing a blog and I landed upon the home loan types. To my surprise I was not aware that, there are these many home loans in India so I thought why not I share this information with the viewers as it might help them in anyway; I am sure about it
HOME LOAN TYPES
HOME PURCHASE LOAN:
This is most common loan that everyone is aware of. If you are planning to buy a new home or flat, then, this is the loan for you. Interest rate for this loan is either fixed or floating type. Going for fixed rate of interest is bit costly as the interest rate will be bit higher compared to floating rate of interest?
HOME EXPANSION LOAN:
You can get this loan, if you are planning to add a room to your house or if you want to build additional floor. That is good news isn’t? Maybe you are planning to rent your house in the first floor but you don’t have one, then you can go for this loan and in due course add an extra income. This loan will come in handy if your family expands and you need more space for living.
REFINANCE HOME LOANS:
When the rate of interest is higher for a home loan and you want to switch to another loan, then this is the best option. Another reason one can go for refinance is when one wants to reduce the risk from an adjustable-rate by switching to a fixed-rate loan. A mortgage refinance has the same costs as a mortgage, such as loan application fees, loan origination fees, and appraisal fees that must be taken into consideration. Though homeowners will have to pay these costs upfront, in the long run a refinance with a lower interest rate is likely to save more money. Overall, when refinancing for a lower interest rate, the main deciding factor is if savings on interest will be greater than the total refinance costs and prepayment penalties.
Many financial advisors suggest that homeowners look for at least a two-percentage point reduction in their mortgage prior to refinancing. Homeowners can also use online mortgage calculators to get a better estimate of how much they can save by refinancing. However, online mortgage calculators usually do not take into account all the costs incurred with a mortgage refinance.
HOME CONSTRUCTION LOAN:
If you have a land and planning to build a house then you need to apply for this loan. The repayment period and the processing fee and other charges are little different from home loans. If one wants to include the land cost in the total construction cost then the land has to be bought within a year. If the land is bought more than a year ago then his clause will not be applicable.
HOME CONVERSION LOAN:
One morning you wake up and decide that you need a better home with all the luxuries and you want to sell the existing home and move on, then this loan will help you to make the switch. You need not apply for new loan; your exiting loan will be transferred without the prepayment hassles. Decide on the new home you are planning to buy; analyse the extra amount you are going to pay for the new home, how much remains you have to payoff for the old home.
PROPERTY LOANS:
A scenario arises where you need cash to fulfill some commitment, and then you can mortgage residential or commercial property. But you have to sign a declaration that the fund will not be used for illegal activities and for other fraudulent purpose. The loan amount depends upon the income eligibility and bank norms, which change from time to time.
NRI HOME LOANS:
Extending the arm to the NRI the banks are providing home loans to them. The process is bit elaborate.
BRIDGE LOAN:
A bridge loan is availed to fill the short temporary financial gap. When you plan to buy a new house and need time to sell off the old house, this loan comes in handy. The interest rate is usually higher and time period is usually one year. Bridge loans are bit risky as you may not know when you may be able to sell the old house and in a blink you might start paying for two mortgage loans. It also has prepayment charges if closed earlier
So next time you think about loans take a good look at these home loans; pick up your mobile and call your favourite banks or browse the net to apply for this loan.
Buying a house is like completing a huge responsibility and if it comes as smooth as it can then, it is cherry on the top of the ice-cream. Every step you move into buying a house, you feel the heat and keeps you awake at night. But when you are armed with all the information and document and you are aware of the basic real estate terms, then you can land up in the safe zone.
DOCUMENTS NEEDED TO BUY A FLAT
Builders may promote flats without getting approvals and may get the approval in due course. Check whether he has got all the approvals.
1 TITLE DEED, MOTHER DEEDS OR PARENT DOCUMENT:
Get this document and check it for his right to sell the property. If he has any minor children, or if is an ancestral property then you may face problem in the future. He should have a No objection certificate to sell the property on behalf of the minors.
2 GOVERNMENT APPROVED PLAN:
Make sure that the builder has got the approval for building the flat. If he has started the constructions then make sure that the approval building layout is same and there is no deviation in the house or flats. If there is deviation then it will create problems in the future
3 PROPERTY TAX RECEIPTS:
Get the copy of the property tax paid by the owner. If it is ambiguous, then enquire this issue with the corporation office or the municipal office. The property tax should be updated till date and for at least 10 years.
4 SALE AGREEMENTS:
Get the sale agreement between yourself and builder
5 COMMENCEMENT CERTIFICATE:
Usually given by the municipal or corporation authority for the commencement of the construction of the property; it is mandatory for builder to have one, if not, it is illegal.
6 NO ENCUMBRANCE CERTIFICATE:
It is a certificate to make sure that the property which he is going to sell you as a flat is not mortgaged for loan.
7 COMPLETION CERTIFICATE:
It is document given by the municipality or corporation to make sure that the construction is complete and without any deviation.
8 OCCUPATION CERTIFICATE:
It is issued by the municipal and corporation that you have legal electricity connections, water supply and sewage connections for you flat.
9 NO OBJECTION CERTIFICATE: by the land owner for change in electricity bill
Remember for getting loan from the bank you have to produce another set of document. These are:
Main applicant
1 Two passport size photograph, PAN card and employee ID
2 Residential proof address: Ration card, Adhaar card, voter ID
3 Last four months salary slip. Some banks ask for 6 months salary slip
4 Appointment letter from the present organisation and relieving order if your present employment is less those 3 years
5 Form 16 for last two years
6 Bank statements for past 6 months
7 One cheque from salary account as processing fee
Co-Applicant:
Two passport size photo and PAN card details
DOCUMENTS NEEDED FOR BUYING A PLOT
Planning to buy a plot to build a house of your choice is a good idea. The documents that are needed are
1 Mother document
2 Sale deed
3 Encumbrance certificate
4 Tax receipt tax paid by the owner of the land
5 Plan layout and
6 Sale agreements between you and the seller
Hope this blog helps you and do share with us your suggestions
