Archive for July, 2010

To buy or not to buy property?

July 22nd, 2010

In India, small real estate investors do not have as much scope as institutional investors at the moment. They can hold multiple properties, but banks will generally not fund beyond a second home loan. That does not mean that they cannot invest beyond that from their personal accruals, however. They certainly have the option of investing in rent-generating assets, which can fetch decent returns if they have been purchased wisely.

Despite the present limitations for small investors, a property investment can give the buyer protection against inflation. Like gold, real estate tends to retain its intrinsic value. However, unlike with gold, it is possible to earn a regular income on it.

Depending upon various economic factors, a property owner can increase rent in times of high inflation. Also, real estate is always good investment option because of the possibility of capital appreciation.

 

News Published Under:  The Hindu

Mixed response to building rule modifications

July 22nd, 2010

The decision of the State government to modify some of the amendments made to the Kerala Municipal Building Rules, 1999, a few months ago has brought some relief to property developers in Kozhikode.

A few restrictions on constructions of buildings close to roads have been relaxed indicating that builders will revive some of their stalled projects as well as launch new ones in the city. The revisions have been in the access width for high-rise buildings, which normally is more than 15 metres from the ground (or over four floors).

The required access width of roads to multi-storey buildings, both residential and commercial, in the past was only five metres. But it was amended based on number of the units — a building with 25 flats should have a minimum access width of seven metres; 50 flats, nine metres; 75 flats, 12 metres; and 100 units or more, 15 metres.

Now the access width has been reduced on all categories and the total space of the buildings, whether small, medium or industrial, will also be considered.

The parking areas have also been reduced considerably by 15-30 per cent. “The revised rules are quite reasonable enabling the builders to go ahead with projects,” says M.A Mehaboob, secretary, Confederation of Real Estate Developers Associations of India (CREDAI), Kozhikode chapter.

A parking lot for two flats each below 100 sq.m and one for each unit above 100 sq.m is acceptable. Earlier, the rule insisted on having two parking lots, one for guest parking, for any single unit in an apartment.

Another is concerning the digging of ground for construction of basements. The amended rule maintained that a builder should obtain a no-objection certificate (NOC) from the neighbour if the depth is 1.5 metres or more or the measurement exceeds the length from the boundary wall.

Mr. Mehaboob says the rule of getting an NOC for digging purpose has been dropped and instead a committee constituted by the Corporation or civic body will look into complaints, if any.

However, a new provision has been brought in regarding the construction of a dedicated road inside the premises of high-rise apartments for fire tenders. The rule, applicable for commercial and housing buildings, has to be enforced even if a public road exists. Besides at least five metres should be left vacant on all sides of the high-rise buildings.

FAR

The Floor Area Ratio (FAR) has been left unchanged (If the floor area of a house is 2,000 sq.ft and land area is 3,000 sq.ft, FAR is 0.66).

The new rule says that builders can increase the FAR only up to 2.75, after remitting an additional fee. It will be Rs.500 per square metre for FAR between 1.5 and 2, and Rs.1,000 per square metre for between 2 and 2.75. Earlier, FAR for residential buildings was 3, giving property developers a wide option in planning buildings.

The coverage of high-rise apartments has also been considerably reduced.

Only 60 per cent of the land available should be covered by buildings having six to 50 units. Only 55 per cent of the land can be used for building having units between 51 and 100; 50 per cent for buildings having 101 and 200 units. The construction should be restricted to 45 per cent for apartments having 200 units and above.

Builders say that overall the new rules will support the construction industry but only to a limited extent as the amended FAR has been left untouched.

Several new projects in the city and the suburbs have been put on hold following the new rules. “The concept of affordable housing will only remain on paper if the government does not further revise the FAR rules, ” Mr. Mehaboob says.

Already builders are thinking of increasing the rates by Rs.250-500 per square foot from the existing rates. The new rule will increase expenditure for builders.

Even so builders can rejoice as the government has reduced the stamp duty. The effective rate of stamp duty, surcharge and registration fee in Corporation areas is now 11 per cent; in municipality, township and cantonment areas to 10 per cent; and in grama panchayat areas to 9 per cent.

A further reduction in stamp duty has been provided for environment-friendly housing projects.
News Published Under:  The Hindu

CREDAI seeks stress on infrastructure development

July 12th, 2010

Infrastructure is a key issue that has to be addressed if urban gridlock is to be avoided, says Kumar Gera, chairman, Confederation of Real Estate Developers’ Associations of India (CREDAI).

He says that according to reports, the population in cities will grow by 60 per cent by 2030.

In five States, the urban population will be larger than in rural areas. By 2030, an estimated 70 per cent of the country’s GDP will come from cities. In such a scenario, infrastructure is hugely important and if it is not addressed, there would be a gridlock. Hence, “greater focus is needed on infrastructure.”

In India, unlike in developed countries, real estate is not part of infrastructure development, which includes roads, power and water.

Affordable housing, play areas and institutions were also real estate-related infrastructure.

Typically, in Indian cities, infrastructure comes after development and thus pushes the prices up in those areas. Those who are unable to afford the cost, had to look to areas with less infrastructure where prices were lower.

In States such as Maharashtra and Rajasthan, developers are encouraged to go in for townships that include infrastructure. On demand in the real estate sector, Mr. Gera says there was a slowdown about a year ago. Real estate came to a standstill in terms of sales and prices did come down by 10 per cent to 40 per cent. Prices had not returned to the earlier levels yet. They have started moving up. Demand for residential units is buoyant in most places.

 

News Published Under:  The Hindu