Monday, September 4, 2017
The real estate sector is slowly catching up after being affected by the goods and services tax (GST) and Real Estate Regulation And Development Act (Rera). It has, however, seen a lot of churning among senior management roles, especially in finance roles. At least half a dozen senior executives, including chief executive officers (CEOs) and chief finance officers (CFOs), have quit and joined rivals or started as independent professionals in the last couple of weeks. “After the GST and Rera, finance, compliance and legal roles have become very critical and are in ...
with thanks : Business Standard : LINK : for more details
Posted by B S Vohra at 3:38 AM
In a Facebook Live discussion with Mint, Smantak Das discussed the sentiment of stakeholders—homebuyers, investors and developers—in the residential real estate market. Edited excerpts:
How do you observe the current residential real estate market? Where is it heading?
I think the real estate sector in India has gone through the most important reforms in the last 6 months to 1 year and these reforms are phenomenal in my opinion. These reforms are going to give medium- to long-term benefit to the sector. If you go by sentiments on the supply side—the financial institutions and developers—definitely they are more into aligning themselves in the new era of real estate. Customers are still in the wait-and-watch mode and they are definitely watching more from the angle of confidence and the angle of transparency. That’s exactly what the customers are looking forward to because of these reforms. But for the developers, this is recalibration of the business model because it’s a new era for them. In my opinion, this is a new paradigm for the real estate sector. So sentiments are slightly confused. Definitely both the consumers and developers have a very positive medium- to long-term outlook. But currently, it is slightly in a state of confusion.
What do you mean by a positive outlook in medium- and long-term?
For the developers, the positive outlook will be to increase the sales volume because, as you know—for example in National Capital Region (NCR) and Mumbai Metropolitan Region (MMR)—the sales volume have come down drastically, by 50% to 70% from the last peaks of 2010 and 2011.
I’m sure that they are not looking at any price escalation. Of course, there will be some normal price escalation that is definitely warranted. But they are not looking for a sudden jump in price as it used to happen 3 or 4 years back.
From the customers’ side, there are more of confidence issues because they have to get the product that they invested for. They have to get the product on time and should get all the amenities that were promised. I think, that is the major problem from the demand side, i.e., the consumer side. From the consumer side, the expectation is that the residential sector should be much more transparent, they should have good recourse to any failures of commitment.
Though home loan rates have come down about 2% in the last couple of years and property rates are either stable or have came down a bit; demand from homebuyers is not increasing? Why is it so?
That is exactly the scenario today. If you talk of the macroeconomic scenario, it is more or less stable and good. That’s what we have analysed.
If you talk of real estate prices, either in some locations there is a decline in prices or mostly there is stagnation. That means, time correction has taken place if you look at inflation-adjusted prices. Then, interest rate has touched 8.3% to 8.4%, which is like 2009-10 levels, when we had 8% or 8.25% on home loans.
So what is it that is deterring, or not allowing, customers to come off the waiting bench and sign the dotted lines? I think the confidence in developer, to deliver the product that they want is not there. Reforms have taken place in the residential sector in India and we will very soon get back the confidence of the buyers.
Do you think there is a mismatch between demand and supply in real estate?
I don’t think there is much of mismatch now. Back in 2008, just after the financial crisis, affordable housing was just a name. There was no real steam in it. Now we are getting full support of the government—and the government has a focus on affordable housing. For instance, giving it the infrastructure status and the Pradhan Mantri Awas Yojana.
So, there is not much mismatch now because even in cities like Mumbai we are seeing some good launches of relatively affordable houses. Of course, in other places also there will be a lot of initiatives in this type of affordable housing, which is good because previously there was a major mismatch (between what the sellers offered and the buyers wanted). Now that gap is slowly reducing because of this affordable housing initiative by the government and the focus from developers.
Yes, the mismatch is still there probably in the confidence, in the timeline of completion; that we have to still wait and watch because RERA (Real Estate (Regulation and Development) Act, 2016) is in place in most of the states and probably that will bring a match. So two things: price mismatch (which in my opinion is now coming to a convergence) and the mismatch towards the confidence (the time of delivery) should get mitigated in the medium to long term.
As per reports, to make houses more affordable in cities like Mumbai, developers are reducing the size of flats. Is this the right approach?
The approach is very simple. Given that the per square feet prices are difficult to reduce—15-25% reduction is sometimes very difficult because you have to understand that the developers are also many a times price takers. They too face the price impact of input factor like labour, steel and cement; which are definitely not coming down. Plus the land prices. Taking into account all these factors, I think the developers have started—in certain parts of Bangalore and Mumbai —reducing the size of flats. But trust me, I’ve seen that they are not pigeon holes. These are very compact houses. Good for a small family and in my opinion, as far as our survey goes, there is good reaction to these types of launches.
So we have to still wait and watch to see how the demand side is reacting to these compact houses. My opinion is that it is not as bad as we had thought it would be, because even in places like Bangalore—where you generally have bigger houses, projects with slightly smaller houses are selling because the ticket sizes are affordable. In Mumbai too, projects with smaller house sizes are not doing too bad.
Is there a possibility of further correction in prices or is it going to stay stable for some time?
We have analysed most of the cities and we have seen that for the last 3 years, if you see the consumer price index (CPI)—that is the retail inflation growth—I think in most of the cities your house prices has increased less than that, even in a city like Mumbai. So I would not say that there would be a price correction as such, because time correction has already happened and prices have been stagnant for the last 3 to 4 years.
So what I would say is that the type of upsides that we used to see in real estate investment, like price doubling in 3 or 4 years, those things are all history now. Because you have to understand that the real estate as an investment avenue will compete with other investment avenues.
So I don’t think I will see in the next 5 to 10 years that prices are doubling in 3 or 4 years, which was a very normal norm in real estate—at least that’s what we saw in 2008-09, and even in 2011.
We saw a lot of price appreciation, but then again it has stagnated. So that scenario is gone, that’s history now. The upside in price of real estate will be very normal upside, which has to now compete with other investment options.
with thanks : MINT : LINK
Posted by B S Vohra at 3:37 AM
Friday, June 30, 2017
List of items in 28% slab of Goods and Services Tax (GST):
- Sugar and sugar confectionery
- Cocoa and cocoa preparations
- Preparations of cereals, flour, starch or milk; pastrycooks’ products
- Miscellaneous edible preparations
- Pan masala
- Beverages, spirit and vinegar
- Tobacco and manufactured tobacco substitutes
- Salt; sulphur; earths and stone; plastering materials, lime and cement
- Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes
- Tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and other colouring matter; paints and varnishes; putty and other mastics; inks.
- Essential oils and resinoids, perfumery, cosmetic or toilet preparations
- Soap, organic surface-active agents, washing preparations, lubricating preparations
- Artificial waxes, prepared waxes, polishing or scouring preparations
- Explosives; pyrotechnic products; matches; pyrophoric alloys; certain combustible preparations
- Chemical products
- Plastics and articles thereof
- Rubber and articles thereof
- Articles of leather; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut (other than silk-worm gut)
- Furskin and artificial fur
- Wood and articles of wood, wood charcoal
- Paper and paperboard; articles of paper pulp, of paper or of paperboard
- Headgear and parts thereof
- Prepared feathers and down and articles made of feather or of down – artificial flowers; articles of human hair
- Articles of stone, plaster, cement, asbestos, mica or similar material
- Ceramic products
- Glass and glassware
- Articles of iron or steel
- Copper and articles thereof
- Aluminium and articles thereof
- Tools, implements, cutlery, spoons and forks of base metal; parts thereof of base metal
- Miscellaneous articles of base metal
- Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof
- Electrical machinery and equipment and parts thereof; sound recorders and re-producers, television image and sound recorders and reproducers, and parts and accessories of such articles
- Vehicles other than railway or tramway rollingstocks, and parts and accessories thereof
- Aircraft; spacecraft and parts thereof
- Ships, boats and floating structures
- Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof
- Clocks and watches and parts thereof
- Musical instruments; parts and accessories of such articles
- Arms and ammunition; parts and accessories
- Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; lamps and lighting fittings, not elsewhere specified or included; illuminated signs, illuminated name-plates and the like; prefabricated buildings
- Toys, games and sports requisites; parts and accessories thereof
- Miscellaneous manufactured articles
- Project imports, laboratory chemicals, passengers’ baggage, personal importation, ship stores.
with thanks : India.com : LINK : for detailed news
Sunday, June 4, 2017
Goods and Services Tax (GST) is set to get implemented from 1 July 2017. There are different GST rates prescribed for various goods and services, which may impact their cost. A homebuyer will have to pay GST at the rate of 12% to buy a home. We talked to Rajeev Talwar, chief executive officer, DLF Ltd and chairman, National Real Estate Development Council (Naredco), about how GST will impact home prices. Along with GST, we also discussed the implementation of Real Estate (Regulation and Development) Act, 2016 (RERA), and more. Edited excerpts:
How will GST impact home prices?
Real estate sector was heavily taxed and we welcome a single stable 12% GST rate, inclusive of the value of land and with full Input Tax Credits. We are of the view that the actual tax impact under GST would match or would be lower than the existing multiple indirect taxes on the sector. There are a few things where we are still awaiting clarity like whether affordable housing will remain out of the ambit of GST or not, as is the case at present for implication of service tax, or whether there will be any abatement for homebuyers.
If not home prices, will it impact the profit margins of developers?
About margins, again it will be too early to say. But yes, margins will get impacted because when the tax is lower, prices should come down. Maybe some margins do get impacted and maybe in some areas they will remain unchanged. It may impact different segments differently, like affordable or luxury segments, because you have to pay a higher tax on higher-costing products. So maybe in case of luxury housing segment, there could be some impact on margins. But then when you say luxury or the premium segment, then the premium there also exists to take care of it. So, I think, hopefully it will allow a fair play of market forces.
GST is scheduled to get implemented from 1 July. At the same time RERA requires all the ongoing projects to get registered before 31 July. How are real estate developers managing these two big reforms? Do you think a 3-month window to get the ongoing projects registered is less?
No, we don’t think so. We were preparing for all such statutory requirements for long. Besides that, there is enough computerization in India. There are enough digital initiatives. I am sure that the earlier the Act gets implemented the better it will be. It will give time for people to get accustomed to the new ways of working or to the new regime, whether it is in real estate or taxation. I am sure this will not pose a problem.
with thanks : LIVE MINT : LINK ; for detailed news.
Posted by B S Vohra at 7:04 AM