What the elections mean for real estate?

What the elections mean for real estate?

real estatePolitics is a favourite topic of discussion across the country. And why not? It has an all-encompassing effect on us all. What happens in the higher echelons of power always percolates down to the average citizen, affecting everything from his income to his ability to buy a dream home.

India’s recent economic history is one that will go down in the annals of history as being among the worst. Across India, the real estate scene has been subdued for a while now and things will continue to remain in this state of uncertainty till the highly anticipated May elections. With speculation rife on the outcome of the elections and its subsequent effect on real estate in general, the time is right to delve into some thoughts on the matter from the Bangalore perspective. Two experts in the field tell us their thoughts on questions that are today on every prospective home-buyer’s mind.

Real Estate Today

Before we actually get into the effects of the May election, an understanding of the current real estate scenario of Bangalore is in order. “There has been growth,” asserts Dr. Madalasa Venkataraman, Lead Researcher, IIMB-CRERI, “but it is slower than usual. Unlike other markets that have clearly suffered a downturn, Bangalore’s fundamentals continue to remain strong. One reason for this is that Bangalore’s real estate offerings are suitable for all budget ranges and there have been no price-bubbles in this market. Mid-size housing is powering growth currently, rather than high-end.”

That being said, research by industry observers show that a decline of around 12% in the number of residential properties being launched across cities – Bangalore included. Most developers agree that there is a lull of sorts in the demand for residential units and that the need of the hour is to stimulate demand to improve the outlook of the sector. Currently the focus is placed on execution of projects in hand, and the launch of new ones will probably begin in the second quarter of the year, post the elections.

The upcoming elections are being keenly viewed by the international investor community, which is interested in getting into the Indian market in several sectors. Anuj Puri, JLL India Country Head and Chairman believes that international investors are confident that a new government is going to accelerate the nation’s economic growth which will have a positive effect on real estate. He says, “My fear was that confidence may have abated, but that’s not the case. I’d characterize the overriding feeling as ‘dissatisfied optimism’. Short-term there’s dissatisfaction, but long-term investors are far more optimistic, given the inherent potential. India is often referred to in the same breath as China – that’s how strong the fundamentals are.”

Reiterating those thoughts Dr. Madalasa emphasizes that investment potential in Bangalore city, in terms of the residential sector is quite good. “We have a proven track record of being a development-oriented city. Despite the bottlenecks, our growth story continues. Bangalore is one of the most preferred destinations for NRI investment in residential spaces.”

The Upcoming Elections

The national elections have probably not been as interesting in the past years as it is in this one. With chances of a BJP-led coalition government coming into force speculation abounds on the consequences for the economic climate post these elections. This after all will percolate down all aspects of every industry and sector. The National Democratic Alliance (NDA) has not really made any specific policies public yet and so only speculation on two possible scenarios is possible at present.

The BJP-led NDA coming to power: The belief is that it is all tied to whether the election provides stable governance or not. There are many strikes against the current government – no infrastructural growth, low GDP due to policy paralysis, impasse on decision-making, large subsidies because it is election year bringing revenue deficit to a potential all-time high and more. The sentiment in market is weak due to falling industrial/manufacturing growth. While the world seems to be moving forward, India’s growth story has virtually come to a standstill.

Dr. Madalasa says, “The NDA coalition is perceived to do better than most others due to Gujarat’s growth model, though no one knows how easy it is to replicate the same across India. Any government that provides stable governance is likely to improve sentiment. They will need a majority and the ability to turnaround infrastructure woes. The NDA is perceived to be a strong development oriented government. So it is likely that if the NDA comes to power with a clear majority, it will spur sentiment, growth and infrastructure investment, increase real estate investment.”

A Hung Parliament: For Anuj Puri, the results of a hung parliament will definitely not herald good news for the country, especially in terms of the international investor market. “Investors want conclusive action,” says Puri. “We’ve had plenty of great intent, but too much over-promise and under-delivery. Investors may currently hold off for a couple of quarters for conclusive evidence that the new government means business. If it is a hung parliament though, they will not be interested.”

For everyone across the board right now it is a game of wait and watch. As to whether you should wait for the election results to make that investment in a dream home… the market still has some good deals, so if you find something worth your while, negotiate a good deal for yourself. There will be an uptick in prices soon after the elections and prices will start going up again.

The way forward is entirely in your hands at the moment. You may choose bide your time till the elections or make the most of the deals on offer right now.

How to gauge the prospects of a location that you plan to invest in?

How to gauge the prospects of a location that you plan to invest in?

real-estate-locationRishi Singh has been in the city for a few years now. A tech job brought him from Kolkata to the Garden City of Bangalore. No longer happy with a rented space, he decided to set out looking for a home that he could buy. Naturally, the first step was to ask for advice from friends and family, and he was overwhelmed with all that came pouring in.

While many emphasised the importance of location, others insisted that location was immaterial and amenities were important. Yet a few others spoke about maintaining a particular lifestyle and few more insisted on examining the appreciation of the property. For many finding one that matched all the criteria put forward proved to be a humungous task .

So how does one prioritise the various aspects related to selecting a home to invest in? How does one gauge the prospects of an area? Amenities, prospective lifestyle and comfort levels, in no specific order are the primary factors examined when searching for a home. Before all of this however, is the very important factor of location.

Cities with a high level of job creation continue to see high volumes of residential real estate supply and absorption feels Om Ahuja, CEO – Residential Services, Jones Lang LaSalle India. He explains his thoughts on the prospects of any residential location saying, “Cities with few or no economic drivers to spur the growth of employment fall behind, no matter what other factors seem to work in their favour. Earlier, Mumbai and Delhi attracted the most talent from rural areas. Today, cities like Bangalore, Hyderabad, Chennai, Pune and Gurgaon have taken lead positions and are all set to overtake Mumbai and Delhi. The best investment locations in these cities are the ones where employees of a growing industry such as IT, IteS, manufacturing or the services sector seek homes.”

As you would with any large investment, your purchase of a property has to be one of good value. A smart investor will keep in mind that the built-up structure on any land is going to depreciate with time.

What will appreciate is the land itself. This does not mean however, that the quality and appearance of the structure be completely ignored. It does, to a large extent, have an impact on the growth prospects in that particular region.

So how does one best assess a location to invest in? Sunder. P, CEO & Co Founder, HomeShikari.com, elaborates on a few important basics:

Assess your investment goals: Your investment goals play an important role in choosing a location. Your decisions must support these long term investment goals.

  • If you are a speculative buyer, then it would be prudent to buy in upcoming locations. Studying the kind of projects coming up in the location and the commercial growth it is witnessing today and its future prospects is important.
  • If you want to earn on rentals, the supply and demand of housing in the location is an important consideration. Also examine the profile of prospective tenants in the area and their ability to help you generate and income while meeting various expenses.
  • If you are looking to own and use the home for yourself, then assessing the prospects of surrounding urban infrastructure is as important for the appreciation of land value and your lifestyle? Will proposed government undertakings in the area be favourable or detrimental to your property’s value or its liability in the coming years?

You will get your answers to all these questions by simply visiting the location and making enquiries. Interacting with the local residents and shop owners often reveals a lot.

Assess current urban infrastructure: Whether you plan to live in your prospective home immediately or intend to make the most of rentals, ask these few questions

  • Do you have access to basic urban infrastructure needed to live comfortably
  • Do have clean and well paved access to the road
  • How good is the connectivity of public transport
  • Facilities around you in terms of shops, medical help, educational institutions, spiritual centers, etc

Assess how future infrastructural changes may affect your investment: Visiting the local government offices and asking for proposed infrastructural changes may not be easy but can go a long way in determining the true investment risks involved in buying a property there.

If the property abuts a main road make sure it isn’t earmarked to be acquired for road widening projects. Even if the property is a safe distance from the main road, how long will these infrastructural changes take to come into effect? If you plan to live in the said property or rent it out, you must take into consideration that during such public undertakings, the liability and accessibility of the location may see a downtrend, at least until they’re complete.

Your assessment of a location has to from the long term viewpoint as well as the immediate difference it will make to your current life. Only when you are very sure of all that an area offers you, should you take your home search to the next level.

The elusive ‘A’ Khata is now a betterment charge away

The elusive ‘A’ Khata is now a betterment charge away

a-rupee-in-time-saves-nine-1Many of you who own properties on the outskirts of the city have long since reconciled to being placed in the ‘B’ khata register for lack of verification by governmental bodies. Knowing how long such processes take, you have worked with the disadvantages of being in this limbo state.

Well, all is poised to change – The Bruhat Bangalore Mahanagara Palike (BBMP) council recently announced approved slabs for betterment charges to be collected from owners of revenue properties that are utilized for non-agricultural purposes.

This essentially will help regularize converted property and facilitate the issue of an ‘A’ khata. Most of the properties based on the outskirts of the city now stand to benefit from this scheme. Revenue sites or those that do not have conversion clearance will not be able to take advantage of this scheme.

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Unfolding the great North vs South Bangalore Debate

Unfolding the great North vs South Bangalore Debate

North Vs South Bangalore

North Vs South Bangalore

Bangalore, the IT hub, currently touted as the fastest growing city in India, is been in the conversation for property and real estate developments. If you are looking to move into the city then probably you have already heard about the famous North and South developments, which have put you in a fix for deciding which area to consider.

The endless articles on major developments in each area and would have left you in a dilemma of choosing between price and infrastructure.

On asking a lot of people, immigrants especially, about their ‘finalising’ the property location, we understood that the key parameters of deciding on the location were based on infrastructure, proximity to schools, good connectivity and purely on word-of-mouth and price/appreciation factors.

Keeping these factors in mind, here are two people, who have no connection with Bangalore, and are moving from different parts of country; here is how they decided what to fix on:

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Decoding the E-khata

Decoding the E-khata

e-khataReal estate transactions can overwhelm a first time home buyer. The sheer volume of paperwork and the intricacies involved often make this a long drawn process.

An integral requirement to any real estate transaction is the khata. For a prospective home owner, or even an existing one, the khata is a familiar document. A recent development is that of the e-khata. There is a level of ambiguity surrounding this new term.

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