Archive for November, 2008

Premium Space

November 26, 2008 at 12:16 pm · Filed under Agent, Bangalore, Broker, Brokergae, Builder, Commercial Property, Delhi, Eastern India, Finance, Growth Investing, India Real Estate, Indian Properties, Indian Real Estate, Internet, Investing, Marketing, NCR Region, NRI Related, Properties, Prospecting, Real esate, Real estate trends, Reality Firms, Realtor, Referal, Repatriation, Residential Property, Selling, Southern India, Traffic, US, Western India, legal, problem

Size matters. Ask any member of a joint family and chances are that they are staying on in their vast crumbling old house simply because flats today are too poky. Even the most united family is likely to see schisms when literally rubbing shoulders with the others on a daily basis. But there’s hope—if pockets are deep. Real estate developers are coming up with what are called “presidential apartments”, or apartments built in over 4,000 sq ft. Some of the uber-premium apartments actually go up to 12,000 sq ft. Never mind not having the space to swing a cat; with apartments this size, you can almost have your own private zoo indoors.

 

Duplex? No, triplex

Some of the apartments are three-storeyed with total living space of over 11,000 sq ft having eight bedrooms, as many bathrooms, balconies, separate home office, family room, powder room, decks….the list is long. Here are the key unique offerings you can expect in these houses:

 

Terrace garden & deck

A private garden; wooden or glass decks overlooking the golf course or greenery


Media room

Your mini theatre in the house equipped with the latest in home electronics; expansive seating and shelves

French windows

With so much of premium on the view (sea, golf course, greenery), these floor-to-ceiling windows let you sit back and enjoy. They also add to the sense of space and light


Plunge pools

Your private pool on the terrace fitted with the latest filtering system


Home automation

Consoles that let you control everything from lighting, television, music to even window blinds

 

In cities that are starved of space, a 10,000 sq ft apartment is more than a mere status symbol—it declares loudly that you have arrived. And if  you’re  going to be able to afford to cough up the Rs 1 crore plus that even the smallest of these presidential apartments cost, you’re definitely headed for material success. Depending on the size and location, you can pay up to Rs 10 crore for an apartment. But for that kind of space—generally in prime residential localities—it really doesn’t seem like a lot.

 

Apart from massive floor space in prime locations, you also get every creature comfort that can be built in. Private lifts, landscaped gardens, a gym, swimming pool and state-of-the-art security are taken for granted. The apartments sport imported tiles or wooden flooring, acrylic emulsions on the walls, and ultra-modern modular kitchens. Bathrooms are more like health clubs with top-end sanitary fittings, sauna, steam, Jacuzzi and shower cubicles. These apartments come with at least four bedrooms (some go up to 12), are centrally air-conditioned, a three-tier security system, separate guest and service elevators. Some developers also give buyers an option of getting the space designed according to their requirements.

 

Take Unitech’s Grande project coming up in Noida in the National Capital Region. The project consists of 12 towers, each designed by a different international architect; all apartments have a view of an 18-hole golf course and 100 acres of landscaped greens. The common facilities are equally lavish with a sports complex, a habitat centre, lounge bars, theatres, bowling alley, library, schools and a 200-bed hospital.

 

The apartments themselves come with their own plunge pools and sky gardens. All this for a base price of Rs 6 crore. Similarly in Bengaluru, Total Environment has launched a project called ‘Windmills of your mind’ that has apartments of up to 7,000 sq ft. Its design and facilities rival the best in the world. In Mumbai, where even a three-bedroom apartment is considered luxury, Oberoi Constructions has already sold half of its 8,000 sq ft penthouses at its Skyz project in Worli. K Raheja Universal, which pioneered the trend of duplexes with its Buckley Court project in Mumbai, now has a duplex in most of its new luxury projects.

 

 

Customize

You can decide the design of your apartment. You have choice of layout, interiors, fixtures, landscaping and even the size and number of rooms— everything except the basic structure

Split-level living

Some of these apartments come as duplexes and triplexes. The lower level has the living space and utility rooms like kitchen and the upper level has the bedrooms

Private lifts

Staying on the 45th floor does not mean waiting for lifts—exclusive high speed lifts open into your house and link the floors of your duplex or triplex

Home office

A fully functional, wi-fi enabled office area with a separate entrance and seating area especially suited for working professionals like doctors and chartered accountants

Multi-tier security

From motion sensors and cameras outside the house to password protected locks, gas leak detectors, state of-the-art fire detection and sprinkler systems

Central cleaning

A central vacuum system with ducts across the house so you don’t have to roam around with a vacuum cleaner. All the dust is then collected into a central bin outside the house

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“People from large kothis are moving to apartments but rarely do they want to compromise on the space,” says Kunal Banerji, Vice-President, Marketing and Corporate Communications, Ansal API. Adds Anuj Puri of JLL Meghraj: ‘‘There are two areas of demand for high-end apartments. First, there are people who want to stay within the city, where Rs 1-2 crore for an apartment is normal. The second category is those who want to shift to the suburbs for more space and it is these people who are creating demand for bigger apartments.” The demand is highest in Delhi and Mumbai followed by Bengaluru and Kolkata.

 

 

 

 

Private Comfort Versus Shared Luxury

 

Bungalow

Apartments

Cost

Land (Rs 5 cr) + Construction (Rs 1 cr) = Rs. 6 cr

Apartment (Rs. 6 cr) + Facilities (Rs 5 Lakhs)= Rs. 6.05 cr

Garden

Private

Private terrace garden & common garden

Spacious & Split-Level Living

Yes

Yes

Uniform Neighborhood

Less likely

More likely

Scope For Future Modification

Substantial

Marginal

Security

Private

Private & Common

Common Facilities

None

Several (Pool, jogging track, golf course, club)

Comparison for a luxury apartment project and a bungalow in the same location

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

According to the Confederation of Real Estate Developers’ Association of India, the market for high-end properties is growing fast and will continue to grow at 7-10% at least over the next two years. The reasons for that healthy outlook, say experts, is the strong economy and big pay packets. These high-end projects have an active resale market too. Over the

past two years, most such properties saw a price appreciation of up to 100%. One reason is the profile of buyers. As NRIs look for ready-to-move-in options, investors get their exit options easily.

 

However, exclusivity is a double-edged sword if you are looking at your property just as an investment; in case of a slowdown or a market crash these are the first to take the hit. “But so much premium is built into these projects because of intangibles that prices will almost never go below the cost of acquisition,” says real estate expert Abdul Bari.

 

 

 

Article by Rakesh Rai

Source: Money Today 2008

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Indian Real Estate

November 21, 2008 at 6:41 am · Filed under Real esate ·Tagged , , , , , , , , , , , , , ,

amantran

 

The unstructured real estate industry, high home loan rates, forged land titles, the possibility of corruption, high taxes?

Nothing matters as the real estate market in India is getting hotter.

Indian real estate has witnessed a phenomenal development in the last couple of years due to its flexible nature and its value appreciation over time. The limits of people’s aspirations, concept of good living, contemporary working style and recreation, their risk appetite, and money they can commit for high quality construction and smartly done up space has led to the revolution in the real estate industry in the country.

Path breaking policies like relaxation in FDI policies by the Government of India have also paved the path for the transformation of Indian real estate. The combination of factors like strong economic growth, reforms and policies have lured global investors, easy terms of repayment of home loans, rise in income levels and urbanization.

A change of attitude amongst the generation X from that of ’save and buy’ to ‘buy and gain’ has also boosted the housing demand in the country. India’s economic performance has provided momentum to the real estate sector that has been seeing enhanced activity in the recent years. Investment in infrastructure and swift and speedy urbanization has boosted the growth trajectory of real estate sector in the country which is evident with urban centers such as Delhi, Mumbai and Bangalore attaining global character and recognition.

As the biggest part of one’s investment portfolio, the idea of capitalizing on existing property has been taken to stunning heights. Whether it is a retail space, commercial land or the neighborhood each and every piece of the real estate sector has turned into a stable income/rent potential as investment property; the Indian real estate market is now offering the best bet on property.

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Prices of properties are in India are rising fast, and not just in the biggest cities. As the technology boom is spreading across the country, as more Indians buy homes, and as the economy grows at faster rate, real estate is attracting more and more investors, many of them from overseas.

Merrill Lynch forecasts that the Indian realty sector will grow from $12 billion in 2005 to $90 billion by 2015. India is the most exciting real estate market in Asia. It’s one of the last major countries in Asia with an improving market. Today India is the country of growth, development, better economy rate and a higher GDP. Due to this and innumerable other reasons India is emerging as the preferred choice of a lot of NRIs and apart from this due to the variety of climate and culture with a varying attraction in different cities India offers a lot to its habitants and the tourists from abroad.

It has been estimated that the market of real estate has grown remarkably in the past 10 years because of some open market schemes of Indian government. At the same time a lot of emphasis has been laid on improving tourism and offering better places for people to stay in India.

The development of real estate in India is estimated to be around US$ 15 billion and it is growing at a rate of 30 per cent every year. Almost 90 per cent of real estate developed is residential space and the rest include office, hotels shopping malls and hospitals. This kind of double-digit growth is primarily attributed to the off-shoring and outsourcing businesses, such as high-end technology consultation, call centers and programming houses which in 2004 are estimated to have accounted for 12 million square feet of real estate development.

The demand from the information technology sector certainly has changed the urban landscape in India. According to estimation in India, there is a demand for nearly 70 million square feet of IT & ITES space over the next four and five years. Several multinational companies continue to move their organizational operations to India to take advantage of lower manpower and other costs. Providing human resources and home at their work place assume great significance and therefore the requirement to create space for people to live and work that in turn cause the development of other related infrastructure. It has been a predominant trend to set up the world’s best business centers, often campus-style establishments, bearing a distinguishing corporate stamp. Some of these locations are so distinctive that they are termed as the “temples of new or modern India”. It is just an indication of the extent that the development of real estate taking place.

800pxggrandeur3delev1Better social and environmental conditions are the permanent plus points for India and apart from that, growing population and inclination of people in relocating towards metros is one of the major reasons why a greater demand of genuine Indian real estate agents and communities is felt.

A lot of real estate communities have been introduced in India whereby providing an ease to all those who want to relocate, migrate or immigrate in India. These real estate communities or agents provide a crisp and authentic information about different locations across the map.

This not only eases the job of a person who wants to relocate in terms of selection according to his requirements and budget but also provides a clear picture of property rates and condition in front of buyer, seller or renter. Real estate communities in India have marked a really appreciable initiative for all those who really want to purchase/sell or rent a property in India but due to hesitation or lack of confidence in this field were unable to get a better deal.

People can get help through these Indian real estate communities while searching a place or while negotiating a deal for a location or while gathering more information about the location. Apart from that these communities offer their services in all the domains of property dealing May it be for personal or commercial usage.

Nimisha Sinha

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Service Tax on Renting of Immovable Property

November 15, 2008 at 11:47 am · Filed under Real esate ·Tagged , , , , , , ,

Introduction

The prices of immovable properties have shot up over the last five years. There is also a sharp rise in the rents of immovable properties simultaneously. With the arrival of MNCs and a revolution in the work culture due to the computerization has increased the demand for well-furnished properties in the country. This trend has drawn the attention of Indian Finance Ministry too. With an aim to broaden the Service tax base, the Finance Ministry, in Budget 2007, proposed to cover several new services under the umbrella of service tax net, and “Renting of Immovable Property” is one of those. The Department intends to gain significant tax revenue from this new service sector. The activity of renting immovable properties for commercial use is taxable with effect from 1st June 2007.

What is Immovable Property?

According to the definition, in all the civil law systems, immovable property is the equivalent of “real property” in common law systems, i.e. it is a piece of a land or any permanent feature or structure above or below the surface. Immovable properties include premises and property rights, houses, land and associated goods and chattels. Immovable properties are located in and always have a fixed address.

As per the Indian Law, Explanation 1 to section 65(105)(zzzz) states that types of land & building are included in the meaning of “Immovable property” and types of land & building are not included in “Immovable Property” for the purpose of applicability of service tax on its rent.

Details of the same are as under:-
(I) Included in Immovable Property:-
i. Building and part of building, and the land appurtenant thereto;
ii. Land incidental to the use of such building or part of building;
iii. The common or shared areas and facilities relating thereto; and
iv. In case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate.

(II) Not Included in Immovable Property:-
i. Vacant Land solely used for  agriculture purpose, aquaculture purpose, farming purpose, forestry purpose, animal husbandry purpose, mining purpose.
ii. Land Used for  educational purpose, sports purpose, circus purpose, entertainment purpose, parking purpose.
iii. Vacant Land, whether or not having facility clearly incidental to the use of such vacant land.
iv. Building used solely for residential purpose.
v. Building used for accommodation purpose (like hotels, hostels, boarding houses,
holiday accommodation, tents, camping facility).
What is Renting of immovable property?

Renting of immovable property includes renting, letting, licensing or other similar arrangement of immovable property for use in the course of furtherance of business or commerce. “For the use of furtherance of business or commerce” includes use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple use buildings.

As per section 65(90a) “renting of immovable property is for use in the course or furtherance of business or commerce.” Further as per section 65(105) (zzzz) taxable service means any service provided or to be provided to any person by any other person in relation to renting of immovable property for the use in the course or furtherance of business or commerce. Here it is pertinent to note that meaning of the word “person” is not specifically defined in the statute related with service tax.

Who are liable to pay service tax?

Every person who is providing taxable services for more than Rs.1,000,000 in any financial year (from 1st April to 31sty March) is liable for tax. As service tax is an indirect tax so payer can collect the tax from the service recipient. In case immovable property the owner is the service provider and tenant is a service recipient. If the service provider is located in India, he is the person responsible for paying the service tax, irrespective of whether he has collected the service tax from the receiver. However where the service provider is located outside India and the service receiver is located in India, then the service receiver will treated as the service provider and service receiver is the person liable for paying service tax.

Properties are not liable for service tax

i. Renting of immovable property by a religious body or to a religious body
ii. Renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching center.
iii. Land used for educational, sports, circus, entertainment and parking purpose and
iv. Building used solely for residential purpose and building used for accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.

General exemptions

a) Services provided to the united nations or an international organization declared by the central government
b) Services provided to a developer of Special Economic Zone (SEZ) or a unit of a Special Economic Zone which satisfy prescribed conditions.
c) Services provided for official use of a foreign diplomatic mission or consular post in India/ Service provided for personal use of family member of diplomatic agents or career consular officers posted in foreign diplomatic mission or consular posted in India.

Impact of ‘partly used for business and partly for residential’

According to the explanation 2 to section 65(105) (zzzz), it has been clarified that if an immovable property is partly used in the course or furtherance of business/commerce and partly for residential or any other purpose, then it shall be considered as an immovable property for use in the course of furtherance of business or commerce. For example, in small cities/towns it is generally found that a building is taken on rent by bank branch in which, banking activities are conducted on ground floor while other floors are being used for the purpose of residence. In such condition, as per the Indian law, service tax will be applicable on consolidated rent for branch and residence.
Rate of Service Tax

The Finance Act 2007 did not say anything about the rate of service tax and hence it has not been increased service also. The service tax will be charged at the rate of 12% plus 2% education cess & 1% secondary & higher education cess. Therefore a service provider will own the immovable property and service recipients will be tenant, and service provided will be charged as the service tax on the rent at prescribed rates.

Whether Ownership is Necessary

If we take the statutory definition into consideration then we find that it is not necessary that an immovable property has to be given on rent only by the owner of said property. Therefore, if a person other than the owner sublets the immovable property, he may come under the Service Tax net.

Impact on Business & Trade

We can safely say that after enactment of above said provisions, the service tax burden of all commercial and official organizations will increase significantly, especially on those who are constituting the part of metros and state capitals. Tax burden of the manufacturers will also increase because most of them are having storage spaces in various cities on rental basis. Besides, some of the manufacture not having own factory but working in a factory taken on lease will also be affected.

Presuming that a service provider is not providing any other service but receiving rent of around 66700/- or more per month from immovable property, then he shall have to pay service tax. Further, since the concept of “commercial concern” is not used in statute for this service, thereby government offices and charitable institutions may have to pay service tax on the rent of immovable property used by them for business activities even with no profit motive with ultimate object of charity. It is also pertinent to note that exclusion is granted only for religious & educational body and not for charitable body. However, true charitable institutions also deserve the said exclusion.

Clarifications Required

Some issues like joint ownership of property, renting of furniture & fittings in addition to building etc. are yet to be clarified in the statute. Some sort of litigation may arise between owner and tenant on the agreement executed for certain fix period for fix rental amount including local taxes etc. on the principal of estoppels, which is required to be given due care. Besides this, the rules regarding valuation of services require due clarification on the amount spent on repair, maintenance, whitewash, electricity & water bills etc. either borne by owner or borne by the tenant. However, it is clear that owner will not get any deduction of expenditure incurred by him on repair, maintenance etc. of immovable property because service tax is chargeable on gross value.

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Investment in Commercial Properties: Why Should I?

November 6, 2008 at 11:59 am · Filed under Commercial Property, Delhi, Eastern India, India Real Estate, Indian Real Estate, Investing, NRI Related, Real esate, Realtor

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Introduction
There are various reasons why you’d wish to own a property in India. Having your roots back in India, you probably are aware of the rising economy and the effect it brings over industries, business, infrastructure, society and to every individual at large. The growing Indian real estate market and its potential to offer good returns to investors is no longer a hidden secret. Along with the options that the industry has to offer comes the omnipresent complexity in deciding– Residential or Commercial – What’s best for me?

The decision to buy a property can be attributed to two main reasons at large – emotional or investment. We may buy a property as we wish to live into it or have our families enjoy a bigger space, a better locality or better schools. It could be a planning to return to the roots or a lifestyle issue. It could be treated as a second home which you’d use during your frequent trips to India to meet family, friends and get your kids to know your culture and values from a closer distance. In such cases, we must satisfy our emotional cravings and invest in the pride and comfort that come along owning a home back home. A home is a place which you can call yours, a place that you can relate to and fulfill your Indian Dream. Return on investment is not the primary objective in such case and should not be the main concern.
 
When investment is the objective, the decision factors change totally. While deciding to invest into Indian real estate for investment reasons, many choices are available today, and though the final decision might be based on the comfort of the individual, normally the ROI (Return on Investment) acts as one of the most important criteria. Now I agree that you’d be rather comfortable investing in a property that’s in your home town or a place which you know well. But I wish to bring out the point that ROI cannot and should not be ignored. As this is going to be your investment, focus on ROI will help you determine if your investment can be termed as a Great, good or an average one.
The Dilemma – Residential or Commercial?
Real Estate is seen as a reliable form of investment that has a tangible asset underneath and which normally appreciates over long period of time. Normally land is an appreciating asset while a building is a depreciating asset. While both commercial and residential properties appreciate in value over time and offer better returns as compared to other investment options like stocks, bonds and money markets, when compared relatively between commercial and residential, the results might vary.

A common dilemma that an investor normally faces is deciding whether he should own a residential or a commercial property. Which of the two could end up in higher returns, less effort and where one can leverage his investment to the fullest? There are several reasons why commercial property might be a better return then residential property. The reasons are clear for anyone who has ever worked as a landlord as he faces cranking tenants complaining about everything on earth in the middle of the night.

Most people invest in residential real estate because commercial real estate feels like unchartered waters and we are afraid. How exactly does a commercial landlord do, act, and say? Commercial property must work pretty well, after all Donald Trump started his emperor by being a commercial property ‘landlord’ and if it worked for him it can work for you.

Types – What are commercial properties?
In India the types of commercial properties include Commercial Shops, Showrooms, office spaces in busy markets, shopping malls, IT parks, factory, Business Centers, Industrial Plots, SEZ’s, time shares and more.

Reasons – Why Commercial Over Residential?
Below are a few reasons why you might want to consider investing in commercial real estate instead of residential.

The first reason is that commercial real estate has a higher rate of rental then residential properties. Commercial property is a space for businesses to sell their products and services. The main goal of Businesses is to earn profits. Businesses depend on the number of visitors they receive each day, availability of trained resources or access to freeways. These businesses know the value of being centrally located and they are willing to pay to be in the right place. Location is less important for residential properties and it takes time to fill up your real estate. When a business comes and want to rent from you they do so because they know you have a good location. Thereby commercial properties can command the most of the opportunity value it has over residential property.

Second reason is that commercial property has limited availability. Recently, India started the effort of segregating Residential from Commercial areas. This has fuelled into a very strong demand for commercial properties.

Thirdly, most commercial renters will fix problems and minor repairs on their own with out calling the landlord. This is because they realize that problems interfere with their business and need to be taken care of immediately. Unlike residential renters who need the help of a landlord to take care of repairs.

Fourth, the upgrades done on commercial property can be fairly substantial and stay with the space when the business moves on. Companies usually need to put in networking and cable wires, sound systems, and electrical outlets. All of which increase the market value and marketability of your commercial space. If you are interested in buying and renting property do not over look the benefits of buying commercial property.

It is far more passive then residential real estate and appreciates in value much quicker. Being a commercial ‘landlord’ is far easier and you have the ability to network with people and businesses which you may work with in the future.

With the above mentioned reasons let’s study with an example: an average apartment worth Rs. 40 Lac would potentially rent for an average Rs. 6000 per month, whereas a similar investment in commercial in the same vicinity will probably generate Rs 20,000 per month. Residential properties return an average of 2-5% or return whereas commercial can start from 3-4% and go to 20% p.a or higher.

Word of caution when selecting
India is going through a zoning exercise. Recently Supreme Court had a ruling to detach residential from commercial in order to provide a safer and more private environment of accommodation. MCD ran a notorious drive all around NCR. While selecting the commercial property care must be taken to ensure that the property falls under the commercial zoning area. For future any residential will no longer be able to operate commercial activity from the area.

Closure
There are many options currently available in form of IT Parks, where the developers are offering smaller unit sizes to own, with no property management hassle as they undertake the responsibility of leasing them initially and with assured returns for initial years; shopping malls, where the developers have rented out the property to reputed tenants with lock-in periods thereby ensuring a good return on investment for the investor and more. If your objective is purely an investment, consider commercial property as a choice that might help you achieve your objectives of a higher ROI.

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