The year 2016 has been an interesting one in more ways than one for the real estate markets. A number of initiatives such as the passage of the Real Estate Regulatory Bill in March; amendments to REIT guidelines in Budget 2016-17, which exempted levy of dividend distribution tax paid by SPVs to a REIT; notification of the Benami Transactions Bill in August; announcement of the third list of smart cities in September, were just some of them.
Eighteen states ratified the GST and the GST Council and Secretariat was constituted, the efforts towards incentivising affordable housing continued with Budget 2016, allowing for additio-nal Rs 50,000 tax exemption for first-time home buyers. The demoneti-sation of Rs 1,000 and Rs 500 currency notes re-emphasised the war against black money across all sectors and especially so for real estate.
All these initiatives set the tone for what is in store for the sector and for the mid-income buyer in 2017. A more transparent, better regulated, less cash dominated real estate sector holds the promise of low risk and stable returns. However, even as the sector moves towards consolidation, to cherry pick an investment in 2017, the buyer must follow certain parameters related to the asset class, geography as well as investment horizon.
In residential projects, the most important factor will continue to be developer branding. Check for prior delivery record, source of funds and essential documents such as commencement certificate, environmental clearance and approved plans. A close to completion project, surrounded by good infrastructure, close-to-work destinations, with project approval for a home loan by key banks (even if you do not need one), would be essential criteria.
Check the status of the land title; to understand if the builder owns the land or has development rights for it. And most importantly, in 2017 too, try negotiating across the table for a better price; whether it is a primary sale or a secondary market one. And do keep in mind a longer investment horizon of at least five years; the days of fast churning of investments are now gone.
With the demonetisation move, cash transactions, especially in resale will take a hit. We hope to see a gradual revival of genuine buyer interest in residential markets across key geographies. Buyer affordability and revised seller expectations, will help dictate a new market-determined pricing. In such a scenario, selecting the correct micro-market within a geography will be of immense importance as value picks will be found there.
City Picks: In NCR, projects along Noida Expressway, NH-24 in Ghaziabad, Dwarka Expressway and extended Gurgaon look promising. In Bangalore, Sarjapur, Kanakpura Road and Varthur look attractive. These destinations are close to IT hubs and will witness continuous rental demand. Mumbai markets will offer attractive projects in the Kharghar, Ulwe, Taloja and Kalamboli locations.
In Chennai, Guindy, Alandur, Avadi, Perumbakkam, Oragadam and Medavakkam look promising. In Pune, areas close to Mumbai-Pune Expressway like Punawale and Mamurdi will offer attractive rental returns.
The first REIT too is expected by June 2017, and it will provide an instrument offering regular dividends at relatively low-risk levels. While it may take the first half of 2017 for the full impact of demonetisation to be felt by real estate markets and transactions will be slow, the second half should see business-as-usual resume.
Things are changing; and changing times are indeed the best times for cherry-picking opportunities for the mid-income buyer.
Author: Anuj Puri
Credits Business World