On October 10, Securities and Exchange board of India (Sebi) released consultative guidelines for the operation of REIT, five years after delivering its first draft on the subject, in 2008.
Currently, individuals either have to invest in property directly, or through closed ended funds with a minimum transaction size of Rs. 1crore. With REIT you could invest with small sums, receiving proportional returns.
Once the Real Estate Investment Trusts come into effect, individuals can invest in property funds even with small sums of money.
NEW DELHI: India’s eight major cities saw launch of 1.32 lakh homes during January-September 2013, up by five per cent from the year-ago period, according to global real estate consultant Cushman & Wakefield.
These eight cities — Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, NCR and Pune — had witnessed launch of 125,590 residential units during the corresponding period of 2012.
As many as 31,434 units were launched in affordable segment, while 75,529 and 24,032 homes were introduced in the middle-income and high-end segments, respectively. Nearly 1,100 luxury homes were also launched.
For many owning a house is a dream that calls for a strict financial discipline, as the loan repayment tenure ranges from 10 years to 25 years. Housing, a basic need, also enables access to credit market by working as collateral/security.
A report by real estate services firm, Cushman & Wakefield, this month said the estimated demand for office space across the top eight Indian cities during 2013-2017 is expected to be 132 million sq ft (msf). The supply of new office space during the same period expected to be approximately 143 msf of which approximately 90 msf is under construction and expected to be completed by 2015.
“With economy expecting more stability in the post election phase from 2015, the absorption is expected to pick pace in Bengaluru, Mumbai and NCR. We expect growth to set in from the second half of 2014 when an increase in leasing activities both on account of entry of new companies, expansion of existing companies and relocation and consolidation activities that are expected to continue,” said Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield, in the report.
On 10 October 2013, the Securities and Exchange Board of India (Sebi) issued a consultation paper on draft Real Estate Investment Trusts (REITs) Regulations, 2013. Once it has received feedback from the public, the regulator will come out with the final regulations on REITs. Thus, it appears that after a long wait REITs may finally start operating in India soon.
Asset allocation requires rebalancing, which means that every six months or so, you sell a part of the asset class that has outperformed and buy more of the asset class that has under-performed. At present it is impossible to apply the asset allocation strategy to real estate. Suppose you buy a second house for investment. Since the ticket size is large, in case of most investors the house comes to occupy an overwhelmingly large portion of their investment portfolio.
With the Securities and Exchange Board of India (Sebi) proposing to allow Real Estate Investment Trusts (REITs) in the country, the stage is set for investors to tap the real estate sector. Globally, these are common investment vehicles which pool investors’ money and invest in revenue generating assets, such as building, offices, warehouses and malls, and distribute a major part of the earnings among the investors.
A KPMG research note said the Sebi move will revive substantial investor interest in India’s subdued real estate market. “REITs are a positive move towards a more professionally organised and globally well accepted framework for funding real estate development. The move will also reduce individual speculation in real estate assets,” the note said.
The successful implementation of the cluster development scheme and redevelopment of cessed buildings will generate at least 2.5 lakh housing units in the city.
According to Liases Foras, a real estate research firm, the redevelopment of cessed buildings will generate 1.50 lakh housing units, while the implementation of cluster redevelopment will create 26,272 housing units after rehabilitating the existing tenants. According to a conservative estimate, if the entire 16,000-odd buildings are developed in a cluster mode, the city will get 2.5 lakh housing units, said an expert.
“There is no virgin land available in the island city and redevelopment is the only option,” said Paras Gundecha, former president of Maharashtra Chamber of Housing Industry (MCHI).
Mumbai witnessed the launch of approximately 18,000 real estate units during the first half of 2013; representing an increase of 30% compared to the first half of 2012. Of the total launches, 30% were witnessed in the western suburbs of Mumbai which had the highest share in new launches at locations like Andheri, Bandra, Malad and Goregaon. The prominent submarkets of South, South Central and Western suburbs prime witnessed substantial increase in capital values in the range of 17-24% over the past year due to low availabilities of quality ready apartments.
The main reason that the Indian real estate market finds itself in trouble today is that prices have become unaffordable, even for most professionals. The underlying reason for this is an artificial scarcity of land in our cities
The resultant shortage of land where apartments, offices and shops can be built inflates prices. Today, as demand starts to weaken across property markets countrywide, we need to think of ways to build really affordable real estate.
With the rupee touching all time lows against the dollar, it appears to be a great time for Non Resident Indians (NRIs) to remit funds to India for investment. And for most NRIs, the preferred asset class continues to be real estate. But with the India story looking a little bleak, is property a good investment right now?
So if you are ready to take that challenging road, here are a few tips to help you along the way.
Mumbai, has recorded a rise of 16 % in the registration of properties in the year 2013, when compared to the data for the first six months of 2012. Reporting the figures for the same period in the year 2013. There has been a multifold increase in the number of properties being sanctioned in the first two quarters of this year as compared to the figures recorded during last year. Another prominent push for the growth in sales of homes has come from the easy and lucrative schemes offered by the developers. Schemes like the subvention plan has lured the home aspirers to cash upon easy payment options that requires not more than 20% of the net value of the property to be paid up-front.