Towards better urban planning

Not many cities are planned with active participation and involvement from urban planners and architects.  That is the reason most cities have one well-designed structure among many mediocre ones. Most cities face challenges of being polluted and having lesser open spaces. Well-designed spaces will be flexible enough to accommodate changed in traffic, pedestrian and every Government should show the way in developing better cities by taking an active interest in urban development from the planning stage till implementation.

In European and other developed countries, all major projects of architects, urban designers, with an area over 1000 sq. m. are to be compulsorily put on the public domain before granting them an approval, to ensure public participation to curtail damage to public spaces and life.

Unfortunately, in India, architects and urban planners look at the project in isolation and not as part of the total urban system. There is an impact every structure has on the environment in terms of energy consumption, solid waste management, water use and traffic and pedestrian movement. Planning around these helps develop greener cities, sustainable and with less carbon emissions.

It is important to keep the community in mind while planning urban spaces.  The design has to reflect the comfort and other finer aspects that social spaces exude.

It is time our planners created such dialogue between communities, designers, and governing bodies before addressing the future transformation of our urban spaces.

SEBI seeks to bring hotels, hospitals under real estate to boost REITs

The Securities and Exchange Board of India (SEBI) has proposed to include hotels and hospitals and convention centres under the definition of real estate as part of its efforts to ease norms related to REITs. Earlier this was under the infrastructure domain. Since large townships and commercial parks are now offering the above facilities as part of their rent generating assets, it will now be part of real estate, says SEBI.

REITs had not generated enough interest from investors and hence the move to make it attractive, apart from tax sops. The restrictions on SPVs that are holding companies to invest in other SPVs that own assets are removed, allowing higher proportion of investment in under construction properties. This will do away with costs in terms of stamp duty and tax on dividend /buyback.

There is a proposal to increase number of sponsors from three to five, enabling joint venture partners, developers and multiple schemes/funds of private equity firms to participate in the REITs, collectively identified as sponsors.

The proposed changes also include aligning minimum public holding requirements with Securities Contracts (Regulation) Rules (SCRR). The other change is about allowing REITs to invest up to 20%, up from 10%, in under-construction properties, helping widen the portfolio.

Among other key changes, the paper has sought to clarify the definition of associates so that entities that have no connection to the investment manager or sponsor don’t get included.

 

SEBI seeks to bring hotels, hospitals under real estate to boost REITs

The Securities and Exchange Board of India (SEBI) has proposed to include hotels and hospitals and convention centres under the definition of real estate as part of its efforts to ease norms related to REITs. Earlier this was under the infrastructure domain. Since large townships and commercial parks are now offering the above facilities as part of their rent generating assets, it will now be part of real estate, says SEBI.

REITs had not generated enough interest from investors and hence the move to make it attractive, apart from tax sops. The restrictions on SPVs that are holding companies to invest in other SPVs that own assets are removed, allowing higher proportion of investment in under construction properties. This will do away with costs in terms of stamp duty and tax on dividend /buyback.

There is a proposal to increase number of sponsors from three to five, enabling joint venture partners, developers and multiple schemes/funds of private equity firms to participate in the REITs, collectively identified as sponsors.

The proposed changes also include aligning minimum public holding requirements with Securities Contracts (Regulation) Rules (SCRR). The other change is about allowing REITs to invest up to 20%, up from 10%, in under-construction properties, helping widen the portfolio.

Among other key changes, the paper has sought to clarify the definition of associates so that entities that have no connection to the investment manager or sponsor don’t get included.

Housing sales grow in April-June for fourth straight quarter

The residential real estate market seems to be inching towards recovery in top eight cities in India. Sales have gained momentum during April-June quarter.  Tier 1 cities have shown a growth of 9% from earlier year. Reports also point to the fact that buyers are cautious and hence the sentiment is still muted.

The buyer sentiment has shifted towards units priced above Rs 50 lakh. The total sales in this segment touched 26.4 million sq ft. The market share of the affordable segment declined from 10% in the previous quarter to 8% in the latest quarter. The reason for decline in demand for the affordable segment could be the location of these projects, experts feel.  This segment remains the bright spot in the sector, though.

Experts at IKIA feel that property markets may take another 10-12 months to come back on track – light at the end of the tunnel!

While total new launches dropped 35% quarter on quarter, 34% of the new supply was in the price bracket of Rs 50 lakh to 1 crore followed by 33% in Rs 25-50 lakh category.  Prices across the markets grew 4% on a yearly basis and 2% on a quarterly basis, with Ahmedabad seeing double-digit growth.

The unsold inventory level continues to be at a high –a 17% jump in unsold stock on a year on year basis.  Realty markets of the national capital region, Mumbai and surrounding areas and Bangalore continue to be the most inventory-heavy markets among Tier I cities.

Share swaps kick off SBI merger

The State Bank of India (SBI) will issue 44.2 million shares to the government for one billion shares of Bharatiya Mahila Bank, which is a Government owned bank, which SBI will merge with itself. SBI will issue 28 shares of Rs 1 each for 10 shares of Rs 10 each for the State Bank of Bikaner and Jaipur, and 22 shares for 10 shares of the State Bank of Mysore. Likewise, shareholders of State Bank of Travancore (SBT) will also get 22 shares in SBI for every 10 shares held by them in SBT. The above banks are listed on the stock exchange.

The unlisted banks in which the SBI holds 99 per cent each – State Bank of Patiala and State Bank of Hyderabad – it would be a line-by-line merger. The shares held in these banks by SBI will stand cancelled after the merger. The RBI and the Government has to approve the proposal.

Swap ratio is slightly higher for State Bank of Mysore but it will not make any difference for others as SBI holds an overwhelming majority in them.

SBI has assets worth $550 billion and after consolidation this will improve the banks standing. The SBI Group controls 22 per cent of the Indian banking system. The five associate banks have a market share 5.30 per cent in deposits and 5.33 per cent in advances. Their cumulative net profit was Rs 1, 368.7 crore at end of March.

The challenges will be rationalization of branches, retail networks and employee integration of the SBI Group’s 22,000 branches, including SBI’s own 16,800. Integration of Corporate finance branches are easier because 60-70 per cent accounts are common.

Plotted development in Chennai

Developers are looking at converting land banks into plots resulting in an increase in plotted developments in the city driving cash flows and making the city a destination for investors. These are popular with HNIs NRIs and IT professionals. These turn out to be beneficial to developers who do not have to pay interest costs on such developments.

The increase in land prices resulted in apartment culture in the city during the mid-70s, and was encouraged by the demand from the IT sector. The segment attracted more buyers since the minimum investment amount was less allowing scope for high capital appreciation. There are advantages too as there are no utility bills or mortgage payments and less land tax. The other major attraction is independent living with better amenities.

Though the reason for developing plotted land is cash generation, the locations in suburbs may not immediately serve this purpose. The plots in these locations are only investment destinations. A popular investment choice among locals, the response for plotted land developments is higher when the local administration upgrades infrastructure such as roads, flyovers, and also introduces transit projects that enhance connectivity.

A look at the GST impact

The Real Estate PE firm’s interest in warehousing and logistics park space will rise with the rollout of GST.  The logistics sector being the biggest beneficiary and real estate sector will benefit since the requirement will be to set up huge logistics and warehousing parks.

With this rise in interest in the logistics sector, companies will concentrate on setting up hubs and distribution centers based on operational efficiency rather than in cheaper locations. Private equity firms are sensing better returns with lower real estate cost for setting up such warehouses and logistic parks. One country one tax model will now attract investments into logistics sector. Various taxes in different states were holding back seamless distribution of goods and related supply chain activities. Logistics and supply chain expenses can now be a value adds for manufacturers, as there will be more consolidation in the warehousing sector leading to few big players who will influence the e-commerce sector also.
Supply chain efficiency is going to become the single biggest differentiator in the ecommerce space as organizations strive to make ‘same-day delivery’ a cost effective reality. The GST is going to be a game changer for the fast-growing Indian economy.

Let us have a look at some other sectors as well

The IT sector has different delivery centers contracting to service a single contract. With duty on manufactured goods going up from 15% to 18% there will be a rise in cost of electronic goods.

FMCG companies will have substantial savings in logistics and distribution costs as there is no longer a need for multiple sales depots.  GST of 19% is much lesser than the 25% tax that these companies paid as VAT, excise and entry taxes. Some of the companies that will benefit are Asian Paints, Colgate, Hindustan Unilever and GSK.

There are quite a few winners; there are sectors that may be affected adversely as well. Experts predict that insurance may cost more. So will flying become more expensive.

Source The Economic Times

 

 

 

Higher TDS for NRI investors – norms eased

Non-resident investors who do not provide permanent account number will no longer have to face higher tax deduction at source.
Currently nonresident investors are charged 20% tax deduction at source or TDS on their interest earnings, royalty or technical fee. They would require furnishing some personal details and taxing residency certificate from their home country and a few other easily available documents.

Provisions of Sec 206AA shall not apply in respect of payments in the nature of interest, royalty, fees for technical services and payments on transfer of any capital asset. Section 206AA of I-T Act provides that if an investor does not have permanent account number or PAN, he or she will be liable to withholding taxes on payments at the rate of 20% or as per tax treaty with the country where investor is resident, whichever is higher.

Under the new rules 37BC, investors will instead need to provide their personal details such as e-mail and contact number, residential address and tax residency certificate from the government of their home country. The investor can provide tax identification number or any other unique identification number, in case a tax residency certificate is not available.

Home buyers hail circle rate cut

The state government’s decision to slash the circle rate of properties in Gurgaon by up to 15% in both residential and commercial segments has brought smiles back on the face of developers and homebuyers alike. Realtors are now hoping for some improvement in the sluggish real estate market that is in the grip of a prolonged downturn.  This will encourage people planning to buy homes in Gurgaon to come forward to purchase houses at lower price.  Everyone in the real estate market in Gurgaon/NCR has been expecting positive steps from the government to boost the market. It is a win-win situation for both the government (as revenue will increase if the real estate trading increase) and investors who will have to pay less for property registration.
However, the farmers may not be happy with the move as they get compensation for their agricultural land on the basis of circle rates. Real estate consultants are also upbeat about the cut in circle rates. The decrease in circle rate will primarily help investors in the secondary market to exit easily and in turn may encourage them to make more investment in primary market. For buyers also, it is a good move as now they will have to pay less stamp duty.

New destination for investors:Pallavaram Thoraipakkam radial rd

Pallavaram-Thoraipakkam radial road is the new destination for Chennai-ites who look to invest in a new property. A survey conducted by IKIA Research team has revealed that the location is gaining preference due to the easy connectivity it provides between OMR and GST together with its accessibility to the airport. The average time required traveling on this stretch of 15 kilometers between OMR and GST road is 40 minutes, which is much lesser when compared to the time taken to travel a similar distance within the city. With the metro increasing its connectivity into the suburbs this location will be accessible in minutes.

Corporates could not wish for a better location to set up shop here due to the above reasons. The fact that there is connectivity to the main arterial roads has made this a destination, developers are vying for. Embassy Splendid Techzone, a SEZ Project venture between Embassy group and SNP Infrastructures Pvt Ltd is developing a 2 million square feet office space in this location. This project is aiming to complete its first phase by year 2019.

Throwing open an office space close to 2 million square feet, would mean employment opportunities 1 lakh job seekers, by the IT and ITES sector who will be the major occupiers of this space. This will translate into more housing demand here in the future.

IKIA research team has put together a list of housing projects in the Embassy SEZ. These are all under construction or launched recently. The land parcels were acquired by developers when they were available at lower rates. Most of the reputed developers in Chennai are developing their projects here. Close to 95% of the inventory supply is in the 2BHK and 3BHK category and the rest 5% in the 1BHK category.

The projects are priced very competitively currently, making it an ideal investment destination for buyers. The prices range between Rs 4999 and Rs 6979 per sq.ft. These prices may increase when the SEZ projects come to completion and demand increases.

IKIA Research team foresees a capital selling price appreciation in the range of 5% to 7% year on Year plus a high rental demand growth at its peak this locality, once large corporate and the IT sector occupies the office spaces in the SEZ. Hence, this may be an ideal investment for those looking at RE investments that will provide returns within a span of few years, and for those who are looking at a steady rental income for a longer time span. Half a million square feet of residential inventory is already cleared as of now.

IKIA Research has put together the indicative price per square feet of some of the projects in the corridor.doc1

The SEZ will initiate growth potential along the corridors of Velachery-Tambaram main road connecting Velachery and Tambaram via Medavakkam and Pallikaranai. Also along the Medavakkam Main road which connects Nanganallur and Medavakkam via Keelakattalai and Nanmangalam.

Another plus to the location is the elevation of the corridor which provides a natural protection from floods, now a priority for Chennaiites. With the above connectivity and other advantages mentioned here, the location will prove to be strategic to corporates. Chennai is watching this space grow, making this a significant chapter in the city’s RE book.