national realty · credit linked interest subsidy component, interest subsidy of 6.5 percent on...

VOLUME 4 | ISSUE 3 | JANUARY - MARCH 2019

National RealtyRs. 150

Affordable housing gets another boost in Budget 2019

RRTSThe Link to Industrial Towns

Evolution of Indian Real Estate into a trillion dollar economy

AFFORDABLE HOUSING BECOMES REAL IN 2019

RISING INDIARIDING RERA

REAL ESTATE SCENARIO

National Realty 2019VOLUME 4, ISSUE 3, JANUARY-MARCH

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COVER STORY

14 REAL ESTATE SCENARIO RISING INDIA- RIDING RERA AffordableHousingBecomes

Realin2019

PRESIDENT’S FOREWORD10 Dr. Niranjan Hiranandani On21September2017,Itookoveras

thenewlyelectedNationalPresident,NAREDCO.

CHAIRMAN’S ADDRESS12 Rajeev Talwar

VICE CHAIRMAN’SADDRESS13 Parveen Jain

16 GST for Home Buyers cut to 5% from April

34 Over 7-fold rise in capital raised by Real Estate investment platform Funds /JVs in last six years

36 Affordable housing gets another boost in Budget 2019

38 Ground Realty: After harsh winters consumers and developers get ready for long-term gains

42 Rapid Metro Rail Transit Corridor System (RRTS): The Link to Industrial Towns

43 BUDGET 2019-20 Overview

45 RBI eases bank loan norms for NBFCs with top rating

18 The money velocity will give an uptick to growth: Piyush Goyal

22 Real Estate Sentiment Index

05 Prime Minister, Shri Narendra Modi’s “Housing for All by 2022” Mission – for Urban Housing

08 Affordable Housing for All

STATE ISSUE27 NAREDCO SOUTH (ANDHRA

PRADESH)

29 NAREDCO WEST (MAHARASHTRA)

31 NAREDCO CENTRAL (TELANGANA)

46 What’s in store for Indian real estate in 2019?

33 Industry and Reserve Bank of India: The Game Changer

4 National Realty January - March 2019 National Realty January - March 2019 5

Buzz

It began with the passing of 10% reservation and Triple Talaq Bills by the Parliament in first days of January opening Indian economy and bringing 50% of female population in the mainstream of urban development.

Thus began a massive shift in real estate scenario over the past three months beginning with the massive thrust to Affordable Housing for All by 2019 to Housing for All by 2022.

NAREDCO emerged as the flag bearer of Private Public People’s Partnership to implement Prime Minister Narender Modi’s Awas Yojna through Global Housing Technology Challenge organized by Ministry of Housing (MoHUA - GOI), lead by the dynamic Union Minister of State (Independent Charge), Housing and Urban Affairs at Vigyan Bhawan, New Delhi on March 2-3, 2019. The two day Seminar cum Expo, focusing on Technology challenges in Housing/Construction Sector, will seamlessly integrate national and global technologies to bridge the gap of decades and bring quality affordable housing in 2019 paving the way to India being the global housing destination resulting in a massive investment inflow into the housing sector.

NAREDCO, formed in 1998 has spread its wings to all parts of the country over the past 21 years and participated in Vibrant Gujarat Mission on January 18-20, 2019 with a view to forming NAREDCO Gujarat as also integrating the national as also technologies of ten global nations into the two day Global Housing Technology Challenge India Seminar cum Expo.

The killing 40 CRPF Jawans on February 14, 2019 at Pulwama united the nation and Housing industry as taken up the call to fulfill its pledge to provide Housing for All.

This conspiracy to Destroy India on Festival of love and flowers -Basant on February 14, 2019 by massacring of 40 CRPF Jawans by Masood Azhar of Jaishe Mohammad through Adil Ahmad, a brain washed suicide car local bomber, is similar to the torture and killing of my ancestor, Misr Beli Ram, treasurer of Maharaja Ranjit Singh , who on his death bed on June 27, 1837, was denied his last will of offering the Koh-i-Noor to Jagan Nath, the ruler of Univers at Odisha when his son Prince Ajit Singh was converted into Christianity leading to the to end Sikh Empire with Kohinoor passing to Britain Whose Queen Elizabeth wears in her crown.

NAREDCO planted trees in green belt of Gurugram as a tribute to fallen comrade in arms at Avantipura, Kashmir.

Col. (Veteran) Prithvi Nath Editor-in-Chief

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EDITORIAL BOARD

Printer, Publisher & Editor-in-Chief Col. (Veteran) Prithvi Nath, VSM on behalf of NAREDCO

Deputy Editor Sumit Bhatia

Advertising & Circulation Yogesh Kumar & Asad MubinEmail [email protected]/ [email protected] No.: DELENG17455/29/1/2009-TCPublished from National Real Estate Development CouncilFirst Floor, 8 Community Center, East of Kailash, New Delhi110065 Tel: 011-26225795, 41608570, Fax: 26225796

Printer Naveen Printers, F-11/B, Okhla Phase- 1, New Delhi 110020

NAREDCO (North)Haryana officeNAREDCO Haryana 76G, 3rd Floor, Sector -18, Behind HIPA Building, Gurugram-122015, Haryana Tel: +9124-4055124

NAREDCO (South)Andhra Pradesh officeNAREDCO Andhra Pradesh Plot No. 723/A, Road No. 37, Near Srinidhi International School, Jubilee Hills, Hyderabad - 500033Tel: +9140-23541447Karnataka officeNAREDCO Karnataka, 2nd Floor, Old No. 1097 New No. 58, 18th B Main, 5th Block, Rajaji Nagar, Bengaluru – 560010, KarnatakaTelengana officeNAREDCO Telengana Plot No. 43-A, Journalist Colony, Road 76, Jubilee Hills, Hyderabad – 500033, Tel: +91 40-65572184

NAREDCO (Central)Jaipur officeNAREDCO Rajasthan 307, Pink Towers, Opp. Nehru Garden, Tonk Road, Jaipur- 302015, Tel: +91 141- 2741375, 510865

NAREDCO (West)Mumbai officeNAREDCO West Foundation, C/o Shah & Shah AssociatesC-Block, Wankhede Stadium, Near Sachin Tendulkar Stand, D-Road, Churchgate, Mumbai – 400020

NAREDCO (East)Odisha officeNAREDCO Odisha Plot No. 84, Satyabadi Enclave, Gayatri Vihar, Chadrasekharpur, Bhubaneshwar-751024 , Tel: +91 674- 2740103

EXECUTIVE COMMITTEE CHAIRMAN Shri Rajiv Talwar, CEO DLF Ltd.

VICE CHAIRMAN Shri Parveen Jain, CMD Tulip Infratech

PRESIDENT Shri Niranjan Hiranandani, CMD Hiranandani Group of Companies.

PRESIDENT ELECT Shri R Chalapathi Rao

VICE PRESIDENT NORTH Shri Anil Suri, CMD Suri Group & Shri. Gaurav Jain, CEO, Samyak Properties & Infrastructure

VICE PRESIDENT SOUTH Shri P Prem Kumar

VICE PRESIDENT CENTRAL Shri Ashok Patni

VICE PRESIDENT WEST Shri Rajan N Bandelkar, Director, Unnathi Estate (Raunak Group)

MEMBER FINANCE Shri Rajesh Arora, Managing Director, Arora & Associates Infradevelopers Pvt. Ltd.

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Prime Minister, Shri Narendra Modi’s“Housing for All by 2022” Mission – for Urban Housing

Central grant of Rs. one lakh per house, on an average, will be available under the slum rehabilitation programme. A State Government would have flexibility

in deploying this slum rehabilitation grant to any slum rehabilitation project taken for development using land as a resource for providing houses to slum dwellers. Under the Credit Linked Interest Subsidy component, interest subsidy of 6.5 percent on housing loans availed upto a tenure of 15 years will be

provided to EWS/LIG categories, wherein the subsidy pay-out on NPV basis would be about Rs.2.3 lakh per house for both the categories. Central assistance at the rate of Rs.1.5 lakh per house for EWS category will be provided under the Affordable Housing in Partnership and Beneficiary-led individual house construction or enhancement. State Government or their para statals like Housing Boards can take up project of affordable housing to avail the Central Government grant.

a) Slum rehabilitation of Slum Dwellers with participation of private developers using land as a resource;

b) Promotion of affordable housing for weaker section through credit linked subsidy;

c) Affordable housing in partnership with Public & Private sectors and

d) Subsidy for beneficiary-led individual house construction or enhancement.


The scheme will be implemented as a Centrally Sponsored Scheme except the credit linked subsidy component, which will be implemented as a Central Sector Scheme. The Mission also prescribes certain mandatory reforms for easing up the urban land market for housing, to make adequate urban land available for affordable housing. Houses constructed under the mission would be allotted in the name of the female head of the households or in the joint name of the male head of the household and his wife.

The scheme will cover the entire urban area consisting of 4041 statutory towns with initial focus on 500 Class I cities and it will be implemented in three phases as follows, viz. Phase-I (April 2015 – March 2017) to cover 100 Cities to be selected from States/UTs as per their willingness; Phase – II (April 2017 – March 2019) to cover additional 200 Cities and Phase-III (April 2019 – March 2022) to cover all other remaining Cities.

A Technology Sub-mission under the Mission would be set up to facilitate adoption of modern, innovative and green technologies and building material for faster and quality construction of houses. The Technology Sub-Mission will also facilitate preparation and adoption of layout designs and building plans suitable for various geo-climatic zones. It will also assist States/Cities in deploy-ing disaster resistant and environment friendly technologies.

The Technology Sub-Mission will coordinate with various regulatory and administrative bodies for mainstreaming and up scaling deployment of modern construction technologies and material in

place of conventional construction. The Tech-nology Sub-Mission will also coordinate with other agencies working in green and energy efficient technologies, climate change etc.

The Technology Sub-Mission will also work on the following aspects: i) Design & Planning ii) Innovative technologies & materials iii) Green buildings using natural resources and iv) Earthquake and other disaster resistant technologies and designs.

The Mission will also compile best practices in terms of affordable housing policies of the States/UTs designs and technologies adopted by States and Cities with an objective to spread best practices across States and cities and foster cross learning. The Mission will also develop a virtual platform to obtain suggestions and inputs on house design, materials, technologies and other elements of urban housing.

The scheme will cover the entire urban area consisting of 4041 statutory towns with initial focus on 500 Class I cities and it will be implemented in three phases as follows, viz. Phase-I (April 2015 – March 2017) to cover 100 Cities to be selected from States/UTs as per their willingness; Phase – II (April 2017 – March 2019) to cover additional 200 Cities and Phase-III (April 2019 – March 2022) to cover all other remaining Cities.


Holistic Socio-Economic Development Including Environment

Affordable Housing for All

addresses the need for non-essential human entry for cleaning of sewers and septic tanks. SMART Cities are also developing smart, sustainable and resilient sanitation systems through public private partnership.

Under PMAY, the government is building affordable homes for poor people migrating to urban centres, allowing them to live a life of dignity. From categorizing housing under infrastructure, to low taxation rates under the Goods and Services Tax; from credit-linked incentives to providing subsidies, the government has created an enabling environment for the real estate sector, making it one of the most lucrative investment opportunities. The government is committed towards in-situ development of slums ensuring residents of such localities won’t be forcibly evicted from their homes under the garb of upliftment.

The target under PMAY (U) is to build 1.1 crore homes by 2022, the construction of over 63 lakh houses has already sanctioned. I am confident by the middle of 2019, we would have sanctioned the remaining 50

lakh. What is most important about this mis-sion is that each home will be built under the highest standards of sustainability. Each home that we construct will be green and resilient.

The Smart Cities Mission is in convergence with other infrastructure projects such as AM-RUT, PMAY and the Swachh Bharat Mission. Under the Smart Cities Mission, a number of Smart Road projects, heritage conservation,

water front development and public space development have been completed in various cities.

I congratulate the Indian Cement Indus-try for being the second largest cement producing country in the world, with cement capacity of over 500 million tonnes and production, accounting for about 8 per cent of the global installed capacity.

More than 2.05 lakh houses worth almost Rs. 7,400 crore have been approved during the 40th CSMC meeting with the total

number of sanctioned affordable homes under “PMAYUrban” crossing 65 lakh

The flagship missions of the Ministry are anchored in the ideals of sustainability. The Swachhata movement has become a “Jan Andolan” with unprecedented citizen participation and behavioral change towards cleanliness. The Swachh Survekshan shows that we have achieved complete sanitation and the eradication of open defecation (UDF) in urban areas of 19 states and UTs, and this movement only keeps growing. The theme – Sustain to Gain – reflects the necessities that are driving conversations and cooperation worldwide.

We can no longer think of socio-eco-nomic development in isolation from the environment. Growth cannot be devoid

it is no surprise that the Country’s national development goals are mirrored in the SDGs. India has been effectively committed to achieving the SDGs even before they were fully crystallized.

I am satisfied that under this mission, over 60 lakh household toilets and over 4 lakh community toilets have been built in urban areas and we are well on our way to achieving the target of 67 lakh toilets before October 2019. However, it is also important to remember that achieving physical targets is one thing, but to achieve the vision of an open-defecation-free India, we have focused on sustained behavioral changes through conventional as well as innovative means.

Under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), over 2400 projects worth Rs. 74,000 crores that are targeted towards improved water supply, sewerage, and drainage have been approved under the State Annual Action Plans for the period 2015-2020. We have also introduced the AMRUT Technology Challenge, which

Under PMAY, the government is building affordable homes for poor people migrating to urban centres, allowing them to live a life of dignity. From categorizing housing under infrastructure, to low taxation rates under the Goods and Services Tax; from credit-linked incentives to providing subsidies, the government has created an enabling environment for the real estate sector, making it one of the most lucrative investment opportunities

Hardeep Singh PuriUnion Minister of State with Independent Charge in the Ministry of Housing and Urban Affairs

of climate action – we have to get over this zero-sum mindset which pits development against our responsibility towards the climate.

India has played an important role in shaping the Sustainable Development Goals (SDGs),


PRESIDENT’SFOREWORD

Esteemed Readers,

Greetings from NAREDCO!

The greatest glory in life lies not in “never falling, but in rising after every fall.”

India is now on the Rise- on the foundation of Prime Minister Narendra Modi”s Mission of “ Housing for All” through ethics and transparency on the wings of REAL Estate Regulation Act. NAREDCO, under the aegis of Ministry of Housing and Urban Affairs, Government of India, is happy to announce that we are going national by spreading our wings in all states and Union Territories by uniting the Housing Industry.

At the recently concluded Affordable Housing and HARERA Summit, organized by our Haryana Chapter on October 26, 2018 at Gurugram, Hon’ble Chief Minister of Haryana, Shri Manohar Lal Khattar, echoed the role of NAREDCO in promoting Affordable Housing, ethical business practices under RERA and the determination of the members to support the Government in achieving the Mission of Housing for All by 2022. set by the Hon’ble Prime Minister. Various recent reforms announced by the Government and the continued willingness to engage with industry stakeholders in order to eliminate unscrupulous business models has been the priority of this Government, to which NAREDCO has responded positively.

The positive impact of RERA reflects that now the Real Estate sector is getting more organized, structured, streamlined and running on the right track with increased transparency. RERA has laid down the things in the right perspective to regain the confidence and trust of the buyers in the Real estate and it has rekindled and inculcated the interest of the buyers for buying and investments in the Real estate.

After the car, cycle and landpooling, co living pooling has become the new trend for the millennial workforce is the sign of the new age.

While it is largely the major cities like Bengaluru, Mumbai, Gurgaon and Pune that began promoting this concept, the demand for co-living spaces is also gradually percolating into tier 2 cities like Jaipur and Lucknow where both working millennials and students are increasingly opting for co-living spaces.

Co-living is much more than a mere bed-and-breakfast deal. These are fully-furnished homes where the privacy of tenants is respected. Private bedrooms with access to common shared areas like the kitchen and living room are the norm. Such spaces offer

NAREDCO chapter, - NAREDCO Gujarat in January 2019 during Vibrant Gujarat.

I wish the readers of this edition of National Realty, a very happy 2019 and great reading.

Dr. Niranjan Hiranandani President

convenience and an entirely new lifestyle for young professionals – most often bachelors and singles - who are not keen to change cities because of their work.

There has been an increase in demand for flexible work space. In India, the future of co-working space looks bright. It is slowly catching up across prime Indian property markets with the segment report around threefold growth over 2017. Property managed and optimized

in actual usage, co-working will play a major role in the future supply demand dynamics effectively, by changing the service office industry evolves. Estimate suggest that over the next few years with office rents continuing to move up across India, the total space leased by co-working operators in tier 1 and tier 2 cities could touch 6-10 million sq. fts by 2020.

Lastly, we are privileged to announce our intention of opening a new

DR. NIRANJAN HIRANANDANIOn 21 September 2017, I took over as the newly elected National President, NAREDCO. For real estate, these are the most challenging of times - the best and the worst of times, the Government at all levels has launched a program in real estate reforms - RERA, GST and Bankruptcy, as also moves to kick start a Housing Revolution based on the Public Private Partnership (PPP) model.


CHAIRMAN’SADDRESS

HARERA Gurugram has become the model for the nation designed to regulate the business practices followed by all developers in the country it has made rapid progress in granting approvals before marketing of projects.

VICE CHAIRMAN’SADDRESS

The prime minister flagged off the Mughisar and Ballabhgarh metro sections with Haryana Chief Minister Manohar Lal Khattar in Sultanpuri village of Gururgram. I feel that with this new beginning, people of this area will be able to reach at other places in Delhi NCR faster

My Dear Reader

Greeting to one and All!

It is once again my privilege to be addressing you at a time when the nation is at crossroads before takeoff into a massive leap forward in 2019. Promulgation of Real Estate (Regulation & Development) Act, 2016 on May 01, 2016 has become the forerunner of a massive housing revolution, which initially lead by Maharashtra has now reached all parts of the country. HARERA Gurugram has become the model for the nation designed to regulate the business practices followed by all developers in the country it has made rapid progress in granting approvals before marketing of projects. The publication of HARERA Gurugram, 1st Edition by NAREDCO Haryana has introduced a compendium of all rules and regulation which are a reference document for all buyer and builder alike. This is surely going to be a step forward towards the establishment of transparent and ethical real estate resulting in winning the trust and confidence of all.

After years of neglect by UPA2 till coupled with Reserve Bank on India’s fair treatment to the Housing and Construction Sector, Banks have given additional risk weighted and even high rates with NBFCs given even higher. Housing sector is down from last ten years and face the financial burden. Many of good company is gone under and many are defaulter and next bubble will in NBFCs.

At this critical juncture the industry has united to present a way out of the financial deadlock. If government comes out with a policy that a builder will not charge GST from home buyer, who will pay it himself, it will be a win-win situation for the entire country, whereby, customers will return to the market in a transparent economy as the builder price will be inclusive of GST. As a matter of fact, whatever GST credit the builder gets, it will pass on to the customer as per the new dispensation of including GST in the sale price which will be a game changer that will give a boost to the sales especially in view of the ongoing financial pressure for funding home loans by NBFCs which will remain curtailed.

NAREDCO will continue to play its designated role as an umbrella organization under the aegis of Central and State governments to vitalize the economy which depends on the housing and construction sector.

Jai Hind !

Rajeev Talwar Chairman

Dear All,

Warm Greetings !

I am privileged to address the readers on the massive strides made by NAREDCO over the past three months in all the fields of the Real Estate sector – Infrastructure, Housing and Construction, Building Materials and allied industries.

Most importantly it is the Real Estate Regulation Act introduced on May 01,2016, based upon the foundation of trust and confidence of the buyers that has been implemented in the states of Maharashtra and Haryana, which has catalyzed economy of the country.

The rise of HRERA Gurugram under the Chairmanship of Dr. KK Khandelwal and the dynamic reform process set in motion by the Chief Minister, Shri Manohar Lal Khattar has energized the housing sector and boosted the market after a long period of stagnation.

The development of Delhi Mumbai Corridor has kick started the economic growth through Kundali-Manesar-Palwal (KMP) Expressway that is emerging as one of the most important Indian long distance expressways, that connects Kundli in Sonepat in the North Eastto Manesar in Gurugram and to Palwal in South West. I welcome the opening of KMP Expressway by the Hon’ble Prime Minister Shri Narendra Modi for the development of the nation. The opening of KMP Expressway will increase the development activities in the NCR and this will benefit the common people of this entire area.

The opening of KMP Expressway will decongest a major chunk of vehicular traffic in Delhi and Gurugram. It shall be the cynosure of all eyes and shall become the new Real Estate destination favoured by all for buying and investments and with a bright future for high returns.

At the same time, the Hon’ble Prime Minister flagged off the Mujesar and Ballabhgarh metro sections with the Haryana Chief Minister Manohar Lal Khattar in Sultanpuri village of Gurugram. I feel that with this new beginning, people of this area will be able to reach at other places in Delhi NCR faster.

The Hon’ble Prime Minister Shri Narendra Modi has also laid the foundation of Sri Vishwakarma Skill Development University in Palwal district. This is the first university of this kind in the country. This new university will help the youth in this field to acquire new skills and get better employment. This will increase the development of the entire region.

With Best Wishes & Regards,

Parveen Jain Vice-Chairman


Nearly two years after the Real Estate Regulation Act (RERA) was enacted by the parliament, six northeastern states have finally agreed

to implement the law, paving way for protecting the interest of home-buyers in these states.

Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Nagaland and Sikkim had failed to notify RERA due to land and other issues. The development comes after a team of the Union Housing and Urban Affairs (HUA) Ministry visited the northeastern states and held a workshop with their representatives and discussed the issues coming in the way of notifying the Act.

The Housing and urban affairs ministry had approved the construction of nearly 2.15lakh affordable houses for the poor in six states under the Pradhan Mantri Awas Yojna (Urban) and with the sanctioning of 2,15,083 more housing units, the total number of houses being funded under the PMAY(U) across the country would be 62,53,731.

COVER STORY

RISING INDIA- RIDING RERATEAM NR

Affordable Housing Becomes Real in 2019

RBI to transfer Rs 28,000 crore to government as interim dividend

The Reserve Bank of India (RBI) board has decided to pay an interim dividend of Rs. 28,000 crore to the fovernment, the second successive year that it has paid one – a move that analysts say may help the government meet its fiscal deficit target of 3.4% for 2018-19.

Last year, RBI oaud an Interim dividend of Rs. 10,000 crore in February. It paid another Rs. 40,000 crore in August.

Maharastra Government has sanctioned the Mumbai Development Control and promotion Regulations 2034 (DCPR) by issuing a corrigendum. The Mumbai Development Plan 2034 seeks to open up 3,700 hectares of land that was earlier designated as non-development zone (NDZ) for construction of residential real estateKundali- Manesar- Palwal (KMP) Express is

emerging as one of the most important Indian long distance expressways which connect Kundali in Sonepat in the North East to Manesar in Gurugram and to Palwal in South West. The KMP expressway was conceived in 2003 by the Enviornment Pollution Authority (EPCA) and the project came into being in 2006, but was delayed and remained incomplete due to delay in land acquisition and inability of the contractor to close the project financially, among others reasons. In August 2016, the Haryana government gave the contract to another company with the mandate to finish it by February 2019. It is now, after 12 years, that the KMP Expressway has opened for use. The first phase between Manesar and Palwal was made operational in 2016. Emphasising on the importance of

REAL ESTATE SCENARIO

the KMP Expressway, Modi said, “ The KMP Expressway will reduce the number of vehicles entering Delhi as external traffic need not enter the national capital. This road also means that a 270km network has become operational around Delhi. Improved connectivity is related to economic growth and development. In the last four years, our government has built 33,000km lenth of highways across the Nation,’’ Modi said, adding that this could be accomplished because there was a strong will to deliver.

Shape of things to come

GST Council discussed lower rates for under-construction housing

The GoM presented its report in the upcoming GST Council meeting though the Council is expected to give precedence to discussion on lower tax rates for under-construction residential housing.

A Group of Ministers (GoM) on issues related to lottery under goods and services tax (GST) regime had met earlier and favoured a uniform tax rate of either 18 per cent or 28

per cent from the current rate of 12 per cent for state-run lottery or 28 per cent for state-authorised lottery.

The Group of Ministers (GoM), under Gujarat Deputy Chief Minister Nitin Patel, set up last month to analyse tax rates and challenges being faced by the real estate sector under the GST regime is leaning in favour of lower rates for under-construction residential properties. The panel has favoured lowering the GST rate on under construction residential properties to 5 per cent (without input tax credit) from the present effective rate of 12 per cent with input tax credit (after abatement of land) and for affordable housing to 3 per cent from the current rate of 8 per cent.

The effective pre-GST tax incidence on such housing property was 15-18 per cent. GST, however, is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale. There have been complaints that builders are not passing on the ITC benefit to consumers by way of reduction in price of the property after the rollout of the GST.

The ministerial panel was set up last month to suggest whether a uniform tax rate should be imposed on lotteries or the current differential tax rate system be continued. The GoM was also tasked to suggest whether private persons authorised by the states were misusing the lower rate and getting enriched themselves at the cost of the state and suggest measures to curb it. It was also mandated to examine issues related to enforcement including the legal framework, so as to prevent evasion of tax on lottery and suggest appropriate tax rate to address the problem. The 33rd GST Council meeting is scheduled to be held on Wednesday via videoconferencing.

16 National Realty January - March 2019

GST for Home Buyers cut to 5% from April

GST Council in its 33rd meeting clears proposal to lower GST rates for real estate; Reduces the rate to 5% without ITC for non-

affordable housing and 1% without ITC for affordable housing; Considers residential properties with cost of Rs 45 lakhs as affordable & in terms of size, 60 sq. mts. for metros & 90 sq. mts. for non-metros to be considered affordable housing.

TEAM NR

GST RATES

Press note on recommendations of the 33”' GST Council meeting held on 24th February, 2019Real estate sector is one of the largest contributors to the national GDP and provides employment opportunity to large numbers of people. “I lousing for All by 2022” envisions that every citizen would have a house and the urban areas would be free of slums. There are reports of slowdown in the sector and low off-take of under-construction houses which needs to be addressed. To boost the residential segment of the real estate sector, following recommendations were made by the GST Council in its 33rd meeting held today:

1. GST rate:i. GST shall be levied at effective GST rate of 5% without

fa: on residential properties outside affordable segment;

ii. GST shall be levied at effective GST of 1% without ITC on affordable housing properties.

2. Effective date: The new rate shall become applicable from of April, 2019.

3. Definition of affordable housing shall be:A residential house/flat of carpet area of upto 90 sqm in non-metropolitan cities/towns and 60 sqm in metropolitan cities having value upto Rs. 45 lacs (both for metropolitan and non-metropolitan cities).

Metropolitan Cities are ltcngaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).

4. GST exemption on TDR/ JDA, long term lease (premium), FSI:Intermediate tax on development right, such as TDR, JDA, lease (premium), FSI shall be exempted only for such residential property on which GST is payable.

5. Details of the scheme shall be worked out by On officers committee and shall be approved by the GST Council in a meeting to be called specifically for this purpose.


The money velocity will give an uptick to growth: Piyush Goyal

INDIA TODAY

The careful targeting of budget incentives, aimed at particular sectors of the economy and all electorally significant groups of people, is unsurprisingly being seen as blandishments ahead of the forthcoming Lok Sabha election. But Union finance minister Piyush Goyal insists there was a careful economic rationale behind every decision. In an interview with Group Editorial Director Raj Chengappa and Senior Editor Shwweta Punj, Goyal argues his case. Excerpts:

Q. After the budget, there’s an impression that India is heading towards becoming a welfare state.

It is incumbent on every government to work for the welfare of the poor and marginalised. And if that is the allegation against our government, we have no regrets at all. But this government has shown what fiscal prudence is. We have managed to convert the economy from a fragile one to the world’s fastest growing. We have successfully provided basic amenities, which every citizen has a right to we cannot have our sisters and mothers deprived of a toilet. Is this the 21st century India aspiring to be a superpower? Can we have millions of children without [access to] electricity and expect them to compete with the world? I think it is incumbent on any government to use the resources available first, for a better, basic future for all our citizens. What about those who could not board the train of development? They cannot be destined to misery all their life. We have to pull them up.

We have managed to convert the economy from a fragile one to the world’s fastest growing. We have successfully provided basic amenities, which every citizen has a right to we cannot have our sisters and mothers deprived of a toilet. Is this the 21st century India aspiring to be a superpower?

INTERVIEW

Q. Why didn’t you give farmers the sops announced much earlier?

Elementary, my dear Watson. From the first year, this government has cared for all sections of society. For the farming community, we have consistently had a series of measures to enhance productivity and output from their farms. After all, giving out 170 million soil health cards helps farmers understand what is suitable for them. Crores of rupees had gone into corruption in irrigation schemes without providing the promised water, like in Maharashtra. We are trying to complete many of those projects and get our farmers more and more water. We have ensured that everybody gets a power connection. They don’t have to depend on diesel gen-

sets and [other] such expensive operations to get water to their fields. We have brought them the Pradhan Mantri Fasal Bima Yojana, a national farmer insurance scheme that bears 100 per cent of the loss if there’s a natural calamity. We have ensured doubling of credit so that money is not a problem. Production has gone up so much that where we imported pulses and oilseeds, India is now [production] surplus and we are exporting agricultural produce. In some sense, this huge production surplus has caused prices to be depressed. Consumers are enjoying the benefits of near-zero inflation. But farmers are facing some stress. Seeing that, we thought we need to particularly respect the small farmers, who are more stressed. We are only recognising their contribution and paying this amount (Rs 6,000 per year scheme) as a mark of respect for their

hard work in making India food secure.

Q. How do you see the farmers’ compensation package impacting the economy?

We have provided the funds. We are not like the Congress, which announced a loan waiver in 2008, but didn’t provide a rupee for it and left it for the future government to bear the cross. In the current year, we have not only provided Rs 20,000 crore for the first instalment December to Marchbut also the entire Rs 75,000 crore for the next year. I dare say no government in the past has been as honest with their budgets as we have been. It has made a small fiscal deficit slip of 0.1 percentage point, but I think it has been received well. Because this income going into rural hands is going to be spent on the


economy, and with money velo city, it will give an uptick to the economic growth. It will also help GST and income tax collections, the industry will do better and capacities will get utilised. Jobs will be created. With the revised numbers of growth that we are seeing, the fiscal deficit will be 3.2 per cent, and at 3.1 per cent next year. Our glide path is getting better and better. We will be able to meet our fiscal deficit target. Look at our track record. We have done everything systematically prepared India, prepared the revenues, and now we are implementing.

Q. Expenditure has gone up by 12 per cent or more in this budget. How does the math add up?

It’s all out there in black and white. To the

extent that our fiscal deficit number was coming between 3.2 per cent to 3.3 per cent. Everybody would have suggested that you reduce Rs 5,000 crore of expenditure somewhere and it will come to 3.34 per cent, and then you can show 3.3 per cent [deficit] and say that we met the fiscal deficit target. But the prime minister was very clear to me. He said that your job is to aggregate whatever numbers are coming from different ministries. Whatever numbers come, you show. Don’t adjust and make it look good. I think that’s been the strength of Mr. Modi and Mr. Arun Jaitleytheir focus on delivering honest budgets.

Q. You say this at a time when data credibility, such as on jobs, has come under a big cloud in India. Your off-balance sheet borrowing is 1.5-2.5

per cent of GDP, which investors are concerned about. Why isn’t the government taking that into account?

Certain things cannot wait. For example, I have to make houses so that every citizen has a house. I want to give 100 million toilets to my sisters and mothers so that they have dignity. That programme cannot wait, even if it means I have to borrow a little more. The highways, road expansion, airport programmes you see the benefits they are bringing to the country. The number of air passengers has doubled in five years. Hasn’t that created millions of opportunities for people? Hasn’t that made travel and mobility so much easier? Look at the huge expansion in telecom, the 50 times expansion in mobile data. Could you have imagined that? Surplus electricity, coal production at never-before growth rates. The country has seen a scale of implementation like never before.

Q. You presented a 10-year vision plan considering there are elections in about 10 weeks?

Those with a myopic thinking think small. But those with a vision think far.

Q. Why didn’t you outline what you would do for the next election?

I remember, in the first or second cabinet meeting, the prime minister categorically said that our job is not to look at the next election. Our job is to do what is good for the country, for the people of India, and to do it when it is required. Prioritise your issues. Do what is most urgent. Don’t wait for elections to come and go. He believes that this myopic planning of every decision being based on the next election has cost the country dear.

Q. So this isn’t a desperate act by a desperate government wanting to retain power?

I don’t think anything we have done has any semblance of desperation. Also because we have had the power to take tough decisions all through our five years. Our surveys, done by independent agencies, have given the ratings Prime Minister Modi

enjoys and the support base the party has. We are looking at 300-plus seats for the BJP alone and a two-thirds-plus majority for the NDA (National Democratic Alliance) in the Lok Sabha election. We are very confident of that. Elections will come and go. Our job is to serve the people of India and give (them) a better future, a better deal than any other government has in the past and build a robust economy that will serve the people for decades to come.

Q. It had been widely speculated that a universal basic income plan would be announced in the budget.

I cannot stop the subsidy for farmers. I cannot stop food subsidy. I am not working for the country’s rich. Where was the option? You want me to make fertiliser five times costlier, stop food subsidy? I want them to enjoy this (subsidy), because it’s their right and the nation should take care of their well-being. I don’t want to go back to the Congress government style of 6.5 per cent fiscal deficit and high inflation.

Q. Why did you give an income tax rebate instead of an exemption?

The problem is if I go left, you will ask why I didn’t go right. This is not the whole budget. As Mr. Modi said, this is a trailer picture abhi baaki hai. So I have not changed any of the tax rates or slabs. But the neo middle class...I thought those people should have certainty upfront. And therefore, we said they have full tax rebate. They can do proper planning. What did the Congress do in the interim budget? They made SUVs and luxury cars cheaper. What was the urgency behind doing that? For me, there’s an urgency my

farmer should get the benefit, the middle class, lower middle class should get the benefit. I urgently needed to do good for the marginalised and middle class. I am not running a government for the rich alone. I am not sitting here so that their cars get cheaper. For me, the 1.3 billion citizens are important and I am doing something for each one of them. I have strengthened the economy. I have acknowledged the taxpayers who are contributing towards nation-building. Because it is your taxes, the hard work that you do that is helping me generate resources for ser-ving the poor. So it is truly sabka saath, sabka vikas.

Our job is to do what is good for the country, for the people of India, and to do it when it is required. Prioritise your issues. Do what is most urgent. Don’t wait for elections to come and go. He believes that this myopic planning of every decision being based on the next election has cost the country dear


NAREDCOSOUTH

NAREDCO ANDHRA PRADESH

RajamahendavaramThe Crown of Andhra PradeshTEAM NR

NAREDCO Rajamahendravaram chapter was launched on 26th January 2019 evening by Hon’ble Deputy CM & Home Minister of A.P Shri C. Rajappa garu, in the presence of our beloved M.P of Rajahmundry Shri M. Murali Mohan garu, M.L.A of Rajahmundry Rural Shri Butchaiah Chowdary garu, Mayor of Rajamahendravaram Muncipal Corporation Smt P. Rajani Seshasai garu, M.L.C Shri Adireddy Apparao garu, M.L.A Rajanagaram Shri P. Venkatesh garu, GUDA Chairman Shri Ganni Krishna garu, and Director Town and Country Planning, Shri Ramudu garu.

The gala event was organised at hotel Shelton and was attended by all the local builders of Rajamahendravaram, NAREDCO members of the state, the engineers association, licensed surveyors association of Rajamahendravaram, the press, our affiliate vendors and guests.

The program started off with the recitation of patriotic song to mark the coincidence of republic day, and then the diya was lightened by all the dignitaries on the stage.

All the dignitaries spoke well about the contemporary issues like GST,

RERA, post demonetisation issues, issues related to Muncipality etc and the importance of associations in bridging those differences. Director Town and Country planning Mr. Ramudu garu, being present at the meeting promised us to take all necessary action to expedite the plan approvals.

NAREDCO Rajamahendravaram is the 9th chapter of NAREDCO A.P. With an initial membership of 40, it was a bright start up, to say. We are fast growing and have also participated in several forums and even organised several meetings with different officials. NAREDCO


will definitely work to bring in more efficiency to its members. Let it be bulk purchasing by all its members, resolving disputes among its members or with administrative departments or whatever. NAREDCO Rajamahendravaram chapter is now catering to Rajamahendravaram, Kovvur, Nidadavole and Tanuku. This would

be done till the neighbouring towns attain sufficient numbers to self sustain.

Jan 26, 2019, 160 NAREDCO members from different chapters Andhra Pradesh and simultaneously Director Town and Country planing along with their other officials around 50 members

have arrived to the polavaram dam. It was very great full that Navayuga constructions has taken care of us very well by explaining about the dam and also arranged delicious lunch. It was hosted by Sridhar garu Managing Director of Navayuga. It was very memorable trip to all of us.

STATEISSUE

NAREDCO MAHARASHTRA

The Indian real estate industry has gone under a renaissance over the course of last few years. From a largely unorganized sector,

the industry is rapidly moving towards becoming one of the most organized industries. With the growth of digitalization and a modern approach, the Indian real estate is estimated to hit the mark of a trillion dollar economy by 2030. From 120 billion dollars in 2017, the sector will grow to $ 650 billion by 2025. The sector’s contribution to GDP will go up from about 7% to 13%, which was revealed in a report by KPMG at REIIS 2018 held by NAREDCO. Further to that, elaborated below are key influencers that are projected to majorly drive the evolution of Indian Real Estate into a trillion dollar economy.

The dawn of RERAThe Indian realty entered a new exemplar last year with accomplishing the implementation of the Real Estate (Regulation and Development) Act, 2016 or RERA. It is certainly a path-breaking law that has recharged buyers' self-assurance and made developers vigilant in the short

has initiated ‘Housing for All by 2022’, a campaign under Pradhan Mantri Awas Yojana (PMAY) with an aim to provide affordable living spaces for all by 2022. With this campaign, the government has provided various offers which give subsidized loans, ease in home buying process for those who are not in the financial position to take any loan for the payment amongst other benefits to eradicate illegal settlements and slum dwellings.

A lucrative asset class, affordable housing as a sector is already seeing tremendous growth where Maharashtra solely aims to develop 19.40 lakh affordable homes under the PMAY. With such demand, this sector is projected to give an enormous boost towards driving the real estate industry to a trillion dollar economy.

term. While the Act is sure to profit all stakeholders, there are teething issues to be sorted out in the near tenure. The implementation of RERA remains an issue as many states have not yet implemented it fully and most are even yet to appoint full time regulators. At present only a few states in India have a functional RERA website so there is a lack of necessary supporting infrastructure. However, we must compliment Maharashtra for implementing RERA most effectively and setting an example for other states to follow. Only effective implementation of the Act will help us achieve the desired objectives.

Affordable Housing A recent report on real estate trends revealed that approximately 25% of India’s population living in informal settlements which include slums. The ratio is going to rise higher in proportion to the available spaces as thousands of immigrants are leaving their hometowns and coming to cities like Mumbai in search of better livelihood. As a result, this leads to a space crunch in the city.

To answer this, the Indian government

Evolution of Indian Real Estate into a trillion dollar economyMR. RAJAN BANDELKARPRESIDENT, NAREDCO MAHARASHTRA


Infrastructural Advancements The latest on-going infrastructural developments in the city have already mapped out the zeal of seamless connectivity to the outskirts of Mumbai. We are looking forward to some of the major projects like the Mumbai Metro Rail Project, eastern and western belts of express highways and now the recently approved Pune-Mumbai Hyperloop project. Put together, the overall growth of the city’s infrastructure has led to the establishment of new cities and townships as an extension to the hinterland of the city. A few prominent examples being the development of Khopoli as a new home-buying destination that has attracted a number of investors and second home buyers. Located centrally between Mumbai and Pune, Khopoli is accessible via various modes of connection including the Mumbai Pune Expressway and Indian Railway. Similarly, on the western belt, Palghar is witnessing tremendous growth owing to the extended railway line. CIDCO has planned a Navi-Mumbai like development for Palghar which will boost the liveability factor. Overall, the steadfast development and the pace at which it is going forward promises seamless connectivity from Mumbai to other cities and states which will give birth to new satellite cities in the days to come.

The Indian National Highways Network is expected to stretch upto 50,000 kilometres by 2019, which projects an increment of 20% year-on-year in 2017-18. The pace ofnation growth has created a huge pocket size of investment requirement worth 50 Trillion for sustainable infrastructural development. Many international investors are displaying interest in various asset classes. Taking a glance at the market size, the FDI received in Construction Development sector from April 2000 to June 2018 has been US$ 24.87 billion, as stated by Department of Industrial Policy and Promotion

(DIPP). Overall, infrastructure is the key driver for Indian economy and with such highlights of the progress being made; we can look forward to growing into a trillion dollar economy.

Ascension of ranking on the global graph of EODBWith the ascension of India’s rating in the World Bank to 77th place and even more eye-catchy being the Indian real estate that has moved to rank 52 from 181 last year. This revelation has revived the sentiments of developers and reinstated a sense of faith amongst the investors as well as the end buyers. Earlier, there was a need to secure a minimum of 120 permissions and clearances that took around a year. Whereas, today the permissions and clearance has reduced to 55 which can be achieved in a matter of 60-90 days. With

EODB, the new ratings of India in the global chart looks promising enough to attract investments from within and beyond the national boundaries.

Rise of NRI investments With the currency market giving directions to NRIsmore returns to their investments in India- , the quantum of queries has shot up. The past couple of years have seen price-points stay put mainly inactive across most micro-markets; in some projects we have seen an upfront lead while booking a home. This translates into almost 10 – 15% advantage for the home buyer; the currency valuation aspect adds another 10 – 15%, making it a sweet situation for NRI property buyers.

Put together, strong economic ground rules, proactive reforms and optimum use of technology will also majorly contribute to the goal. Other asset classes such as co-working spaces, rental housing and warehousing realty are seeing light of the day and are growing at a rapid pace. Thus, with such positive sentiments and revival of faith within the buyers and stakeholders as well, the far-fetched dream of Indian real estate transforming into a trillion dollar economy looks quite promising.

A lucrative asset class, affordable housing as a sector is already seeing tremendous growth where Maharashtra solely aims to develop 19.40 lakh affordable homes under the PMAY

NAREDCO TELANGANA

Infrastructure overhaul on the cardsThe State government has announced an infrastructure makeover plan worth Rs 50,000 crore. The prime focus of the development will be stormwater drains, roads, and sewerage system in urban and rural areas. The existing Strategic Road Development Plan (SRDP) will also be fast-tracked and various flyovers, skywalks and junctions will be developed to ease traffic near HITEC city.

Ameerpet-HITEC City metro inches closer to completionThe soon-to-be-operational, Ameerpet-HITEC City metro stretch will not only bring the West and the East zones of the city closer, but improve the realty sentiment of the adjoining ousing clusters. Key micro-markets that are likely to benefit from the development include Jubilee Hills, Maduranagar, Yousufguda and the IT hubs of HITEC City and Madhapur.

Over half of the structures violate building normsApproximately, 50 percent of the properties in Hyderabad have reportedly been flouting the approved building plans. From the construction of additional floors to noncompliance with the norms, multiple issues have been identified. Majority of these structures are located in areas of Banjara Hills, Panjagutta, Kukatpally, Begumpet, Alwal, and LB Nagar.

Increased office space demand from global giantsThe global corporate giant, Microsoft has leased four lakh sq ft of office space in HITEC City along with a 54-acre campus in Gachibowli. The Xander Group also expanded its footprints in the city and signed a deal worth Rs 2,550 crore with a local developer. The group not only plans to develop but also acquire 4.5 million sq ft office space in the city. Holistically, the developments will generate approximately one lakh

job opportunities in the city and will eventually elevate housing demand.

HyderabadHyderabad’s real estate market remained vibrant in Oct-Dec 2018.Despite a fleeting lull caused by the State elections, the city’s real estate landscape displayed resilience in the backdrop of expanding metro connectivity, augmented commercial leasing, proposed Regional Ring Road (RRR) and the extension of radial roads. Overall, the average capital

STATEISSUE


values grew at the rate of two percent in Oct-Dec 2018 vis-à-vis Jul-Sep 2018.

KEY HIGHLIGHTSDemand for residential apartments remained bullish across the city, pushing property values go north in Oct-Dec 2018 vs. the previous quarter. Barring a few micro-markets, almost 75 percent of the tracked localities in Hyderabad registered an upward price movement.West Hyderabad, also acknowledged as the IT hub of the city, remained the most sought-after housing belt. Areas such as HITEC City, Manikonda and Kondapur captured maximum homebuyer interest and clocked around five percent growth in the average weighted capital prices, each, QoQ. Nallagandla, a housing locale along NH-48, deserves a special mention owing to its rising popularity. Being an affordable haven in proximity to the financial district and having a plethora of academic centres such as the University of Hyderabad in its proximity, Nallagandla has emerged as a favoured destination among buyers looking for affordable properties. The average weighted capital values in Nallagandla noted a three percent growth, QoQ, and are pegged at Rs 4,850 per sq ft.

Invariably, 2 BHK units priced between Rs 60 lakh and Rs 80 lakh have been the prime choice of homebuyers in Hyderabad. However, the quarter ending December saw a marked shift in the investor interest towards mid-income properties ranging from Rs 40 lakh to Rs 60 lakh. Plotted developments also regained momentum. Areas such as Shankarpally and Shamshabad witnessed increased popularity for small-sized residential plots priced within Rs 10 lakh. Maximum deals were recorded by the working professionals around the festive period.

The rental market experienced buoyancy and recorded a two percent growth in the average leasing values, YoY. HITEC City and Manikonda emerged as the most popular rental markets and posted eight percent hike in the average rentals, each, YoY. Nizampet also mushroomed as a promising rental housing destination with a five percent increase in rental rates. While IT professionals drove the rental demand in the former locations, student community helped Nizampet gain popularity.

TEAM NR RESEARCH

Industry and Reserve Bank of India

The Game Changer

The role of Governor RBI Has played a great part in policy formations. The exit of Urijit Patel brought to light certain vested interests blocking the reform measures

of the government. While Patel cited “personal reasons” for his decision, the resignation followed feuds between the RBI and the government on a host of issues including the autonomy of the central bank, transferring of RBI’s excess reserves to the government and relaxing of the Restrictive Prompt Corrective Action (PCA) framework for 11 state-owned banks.

The government had invoked the never-before-used Section 7 of the RBI Act to seek consultation on some of these issues when it found the RBI top brass was not inclined to look into them.

The appointment of Shaktikanta Das means that the central bank will once again be headed by a former Indian Administrative Services (IAS) officer. While Patel, who had said he was resigning for personal reasons, and his predecessor Raghuram Rajan were economists.

“RBI Rates Unchanged A Big Relief For Real Estate”- Shishir Baijal, CMD, Knight Frank India

Since the last Monetary Policy Committee (MPC) meeting, there has been a big relief with the fall in crude prices

and the strengthening of the rupee, which reduced inflationary risk, Das said. “With sales and new launches in January-September period on an upward trend, the residential segment of housing sector is definitely showing strong signs of recovery

Effect

Customer will come back in market in a great shopping mood, as the builder price will be inclusive of GST.

As a matter of fact whatever GST credit the builder got, would be passed on to customers as per law as Inclusion GST in the sale price will definitely be better.

This step will definitely give a huge boost to Sales in view of the ongoing financial pressure to fund Home Loans by NBFC's which will

henceforward continue to remain curtailed.

GAMECHANGER

Oct-Dec 2018

49%

40%

47%

39%

83%

/ 1

7%

87%

/ 1

3%

82%

/ 1

8%

70%

/ 3

0%

Jul-Sep 2018

SUPPLY OF APARTMENTS

UC UCRTM DEMAND SUPPLYRTM

* Graph depicts the availability of residential apart-ments wrt other property types in the city along with the distribution of under-construction and ready stock of residential apartments in respective micromarkets M

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onda

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EC C

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Oct-Dec2018

Within Rs 25 Lakh Rs 25-40 Lakh Rs 40-60 Lakh Rs 60 Lakh to Rs 1 Crore Rs 1 Crore and Above

Jul-Sep2018

Oct-Dec 2017

Oct-Dec 2018

Jul-Sep 2018

Jul-Sep 2018

Oct-Dec 2017

Oct-Dec2018

Oct-Dec2018

Oct-Dec2018

Jul-Sep2018

Jul-Sep2018

Oct-Dec 2017

Oct-Dec 2017

Oct-Dec 2017

DEMANDBUDGET-WISE SUPPLY OF PROPERTIES

SUPPLY

27%

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28%

30%

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MASSIVEGAME

Over 7-fold rise in capital raised by Real Estate investment platform Funds /JVs in last six years

● On a cumulative basis, these funds have raised $6 billion since 2012 till date

● 38% of capital raised by these funds committed to commercial office space due to huge opportunities

● Affordable housing and retail – the new mantra for funds

● Warehousing and industrial assets to drive future platform deals

Post the global financial crisis, funds with minimal participation from investors haven’t quite performed well. This has provided an opportunity for emergence of real estate investment platform funds / JVs with investors playing an important role in decision making.

In India, the trend of dedicated investment platform funds/ JVs started with the tie up of Godrej Properties and Dutch asset management firm APJ for their real estate investment platform fund in 2012. Till date, these India-focused platform funds have received total commitment of $6.0 bn.

Though blind pool funds (with unstated investment goals) still account for a major chunk of the capital raised, Indian real estate focused platform/ JVs have witnessed a seven-fold jump to nearly $1.9 billion in 2017 from $ 250 million in 2012. This significant rise in fund raising has been driven by investors seeking more direct control over their investments. Focused strategy and objectives have been key to facilitating deal evaluation and faster decision making.

These platforms aim at building long-term partnership with developers across various real estate asset classes. The rising investor confidence is being reflected in the form of equity investments in projects which is helping JV/platform deal model pick up pace. For the sector and end-users, the partnership of large funds and good pedigree developers has been quite beneficial.

In terms of absolute numbers, these funds have raised $6 billion till date from 2012. Of this, $905 million has been raised in the current year till date.

Some recent key examples of real estate investment platform funds/ JVs are given below:

● Qatar Investment Authority-RMZ Corp raised $300 mln in 2013

● Standard Chartered – Tata Realty and Infrastructure committed $450 mn in 2016

● APG Asset Management N.V. – Godrej Fund Management raised capital worth $450 mn for Godrej Build to Core-I Fund in 2018

Investments in brownfield/ build to core developments are key destination for platform level tie-ups between established commercial

RAMESH NAIR, JLL

developers and global PE players. Investment strategies are being fine-tuned for more development risk to ensure higher portfolio returns. Developers in India are increasingly willing to form joint ventures with foreign investors due to tighter lending norms by domestic banks.

In terms of the share of various real estate asset classes in the total capital raising by investment platform funds during 2012-18, grade-A office and residential segments have 38% share each respectively.

Within the overall residential space, affordable housing has 71% share of the total financing committed by these platform funds totalling to $1.6 bn raised. Some recent key transactions in the affordable segment includes Prestige Estate Project Ltd. and HDFC Capital Advisors together committing Rs 2.5 billion. Puravankara Developers is also in talks with domestic investment funds for their affordable housing projects. Affordable housing is also expected to see greater interest with incentives offered by the government are likely to result in better end-user and developer participation.

Among other asset classes, the retail segment also has been witnessing the momentum with a share of about 12% in funding raised, signalling growing investor confidence in this sector. Phoenix Mills Ltd. and CPPIB forming investment platform of around $250 million in 2016 and APG-Xander Group co-investing $450 million in 2017 are some major examples in the retail segment. Besides investing in operating malls, these funds have acquired greenfield projects as well, thus taking up the role of a developer. Apart from providing growth capital, these platforms will also bring in global expertise and best practices in retail assets. The retail sector is likely to find investors for core assets in smaller urban centres, while platform structures will also gain prominence with players who have managed to show sustained performance.

Industrial and warehousing segment, which has a share of 12% of the total capital raising by investment platform funds, is expected to witness paradigm shift with new industry 4.0 revolution and landmark changes introduced by GST. Post GST, we are witnessing consolidation and emergence

Fund Raising by Real Estate investment Platform Funds/JVs in India from 2012 Till Date

2012 2013 2014 2015 2016 2017 2018 Total

Source: JLL Capital Markets Research

250670

240 454

1,6291,870

905

6,019

(USD mn)

Warehousing12%

Retail12% Office

38%

Residential38%

Segment share (2012-2018)

Source: JLL Capital Markets Research

of large warehouses in certain sectors. This will provide a conducive environment for technology to flourish. Robotics, Internet of Things and artificial intelligence will bring paradigm shift with efficiencies and economies of scale. Government’s focus on ‘Make in India’ and industrial corridors is expected to drive increased demand for warehousing space. Large funds with patient capital have an opportunity for superior risk adjusted returns from this segment. This asset class is expected to be the emerging major theme for investors.

Investment platform funds are a clear signal

of the coming of age of Indian private equity players and the maturity. The market share of these funds is rising despite blind pool funds being the mainstay. These funds are fuelling growth of various asset classes like residential, office and retail in larger volume by providing patient capital to competent developers. However, we feel that industrial and warehousing segment as an emerging asset class is expected to witness more platform deals in near term in the backdrop of landmark regulatory changes.


Affordable housing gets another boost in Budget 2019

Homer seekers have reason to be happy with the budget speech of the Hon’ble Minister Shri Piyush Goyal. For real estate in general and housing in

particular, this is a positive budget speech. For the economy, it focuses on the farm sector and the middle class. I would rate it as “9 out of 10”, because the Minister has laid out the path to successfully work out a balancing act. He has given tax breaks, enhanced benefits while not increasing taxes – and yet, has shown a roadmap that will keep fiscal deficit in control.

NAREDCO had submitted a representation, with specific points that would benefit home seekers and the industry, it is satisfying that the representation was taken in the right spirit and we see some of those points

reflected in the Minister’s Budget Speech. He also mentioned that there was an on-going effort to reduce GST burden on homebuyers; he spoke about formation of a Group of Ministers who are looking into this, as the effort was towards reducing the GST burden on homebuyers.

Among other points that the Minister mentioned, the first to my mind would be extending benefits under Section 80-IBA of the Income Tax Act for one more year. This will enable creation of more homes under affordable housing. This will be applicable to housing projects approved till 31st March, 2020.

Secondly, with the aim of giving impetus to real estate, the Minister has proposed extending the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years. This will be applicable from the end of the year in which the project is completed, and this will ensure that the slow-down in creation of fresh stock as a result of the previous situation, wherein the exemption was only for one year, will be positively impacted.

For families which have more than one house – one in the home-town and the

other in a location where family members work or have a job - currently, income tax on notional rent is payable in such cases i.e. if one has more than one self-occupied house. Considering the difficulty of the middle class having to maintain families at two locations on account of their job, children’s education, care of parents etc, the Minister mentioned a proposal to exempt levy of income tax on notional rent on a second self-occupied house.

The benefit of rollover of capital gains under section 54 of the Income Tax Act has been proposed to be increased from investment in one residential house to two residential house for a tax payer having capital gains up to Rs 2 crore. This benefit can be availed once in a life time. The Minister gave the example of Mumbai, wherein a family sells a house in South Mumbai and buys two houses in suburban Mumbai, and the benefit of this was availed only on one of the new homes. Describing this as something that is becoming a norm across urban centres in India, the Minister said this would help families in a similar situation.

In my thought process, two things that could have also made it to this positive Budget speech - which were missing as regards the housing sector – granting of industry status to real estate as a sector, not restricting it only to the affordable segment; as also section 43-C of the Income Tax Act, wherein tax is levied when prices are reduced. Also, the NBFC deadlock and stressed asset problems could have been dealt with in terms of solutions in the Budget speech.

The one paradigm change in real estate, the new regulatory regime under RERA came in for mention from the Minister. He said RERA has helped in bringing transparency in real estate sector, and I concur. The Minister mentioned in his budget speech that India is poised to become a $5 trillion economy in 5 years and aspires to become a $10 trillion economy in the next 8 years. This will obviously augur well for real estate and we look forward to positives in days to come.

INTERVIEW


Ground realty: After harsh winters consumers and developers get ready for long-term gains

ECONOMIC TIMES

It has been a harsh winters for consumers and developers for the real estate sector. But this period has also coincided with some welcome structural and policy changes that will usher in long-term gains for the sector.

Demonetisation The sector was battling weak consumer sentiments due to poor deliveries when demonetisation brought down property prices further. While houses became more affordable after demonetisation, the sector now faces a liquidity crunch as funding has become scarce. RERA: Real Estate (Regulation & Development) Act The grievance redressal mechanism of RERA, enacted in May 2016, improved con-sumer and investor confidence by focusing on transparency. According a Magicbricks poll, around 56% of home buyers still prefer filing their first real estate complaint under RERA. The act addressed compelling issues of delayed delivery, poor construction quality and non-delivery of projects. While the markets in Maharashtra and Madhya Pradesh have moved towards seeking resolution through reconciliation, the NCR market has not yet found a solution to the large number of incomplete projects.

GST: Goods & Services Tax The bid to introduce a uniform tax and

Top City Trends There has been a marked shift in consumer demand towards affordable housing of up to Rs 30 lakh and in the Rs 30-60 lakh range. Government push to first-time home buyers has helped. The 80IBA tax incen-tives offered to developers also pushed up stocks.

compliance structure came into force on July 1, 2017. Taxes such as stamp duty and property taxes were not subsumed under GST. Addition-ally, a 12% tax burden on under-construction property made it less attractive for buyers, as they earlier had to only pay 4-6%. Ready-to-move-in properties became more popular as they did not attract GST. At a GST Council meet-

in all states — barring West Bengal, where the state government launched a similar act, and the Northeast, where the dynamics are still evolving. The goods and services tax (GST), Pradhan Mantri Awas Yojana (PMAY ), Credit Linked Subsidy Scheme (CLSS) and the Insolvency and Bankruptcy Code (IBC) have also made an impact on the property sector.

IBC: Insolvency & Bankruptcy Code The IBC has been successful in instilling a sense of urgency among all stakeholders to resolve bad loans. Home buyers were given the status of secured financial creditors, with a berth on the committee of creditors, along with lenders and banking institutions. Oper-ational creditors and individual buyers have demanded companies be declared insolvent for even delaying payments by a little. This move, however, is unlikely to expedite the completion of stuck projects.

Policy Moves The government has taken a series of mea-sures to bring in structural reforms in the realty sector. Demonetisation and the war on large cash transactions were the first and the most disruptive. Close on their heels came the Centre’s Real Estate (Regulation & Develop-ment) Act (RERA), which has been enacted

ing on January 10, a seven-member panel was formed to understand the impact of the new tax regime on under-construction properties. The tax is proposed to be reduced to 5% from 12%. With over 250 sectors linked to the real estate sector, any change in GST rates will have a direct impact on all stakeholders.

PMAY: Pradhan Mantri Awas Yojana The scheme, under the Housing for All by 2022 Mission, aims to provide every Indian family a pucca house by the 75th year of Indepen-dence. Till December 30, 2018, around 3.4 lakh beneficiaries had availed of CLSS benefits under the PMAY (Urban), which offered a di-rect EMI reduction of about Rs 2,600 a month The Centre has also extended CLSS on home loans for the middle income group under the PMAY (Urban) till March 2020. Urban housing shortage is largely seen among the econom-ically weaker and lower income groups. This suggests affordable housing development over the past several years was skewed towards the more premium sector. Around 40% of home buyers said PMAY encouraged them to buy a new home, according to a poll conducted by Magicbricks. However, some states are still lagging in constructing PMAY houses.

BIGGAINS


There has been a rise in demand for houses near job hubs and transport corridors. Unit sizes have shrunk to suit the wallets of users and lifestyle amenities have become the norm.

Various studies by consultants estimate there are 6.73 lakh units of unsold housing inventory, with nearly 85,000 units ready to move in, across the top seven cities. They estimate that out of these unsold ready-to-move options, nearly 60% units are in the affordable and mid segments, priced below Rs 80 lakh per unit. The National Capital Region and the Mumbai Metropolitan Region have the most unsold ready-to-move stock. Together, they account for nearly 54% of such stock in the top seven cities. Hyderabad has the least, with just over 4,400 units.

Metro And Realty Across cities, metro connectivity has pushed up housing values by 10-25% if the properties are 200-500 metres from the nearest metro or bus stations. Delhi has the country’s biggest metro network and is hence a good place to understand the correlation between connectivity and real estate prices. It was visible in Uttam Nagar in southwest Delhi.

Abutting one of the largest sub-cities, Janak-puri, the area saw two price spikes in our Magicbricks Propindex in the past five years, thanks to metro connectivity. Uttam Nagar is a preferred locality and also an affordable destination to buy builder-floor apartments. It is connected by two metro lines — easing access to educational and commercial areas as well as the airport. Uttam Nagar, an unau-thorised colony, is on the list of colonies to be authorised shortly.

As a result, it was outside the purview of the planning process. When access to two metro stations became a possibility, most landlords redeveloped their plots with three or four single-floor apartments. Demand surged, too. Today, there is a high supply of new formal housing stock listed on Magicbricks, mainly of one and two BHK units. The locality continues to see a price rise for the last 1-2 years, even when prices

stagnated in other markets.

Buy or Sell? With prices stable for 3-4 years, this is a good time to buy, especially ready-to-move-in hous-es. In many places, prices have dropped or are negotiable. Developers are mostly focused on finishing ongoing projects. Sale prices in plac-es such as the NCR are close to construction cost now. The 12% GST on under-construction projects and no GST on completed projects make it even more attractive.

This is a good time to sell, too. It is easier to find a buyer now as prices are not very high. One can now use sale proceeds to buy not just one but two houses to avoid capital gains taxes. It is a good time to sell for NRIs who purchased properties during 2009-10 when the dollar conversion rate was Rs 45. It may not amount to much if NRIs want to sell and repa-triate the proceeds, converted to dollars. But if you want to sell and buy another property or to hold your capital in India, this is a good time. There are two ways your property can be monetised: a regular rental income in the range of 1.5-2 % of the capital values or sell it at a profit and buy another.

Here is what we know about making decent

With prices stable for 3-4 years, this is a good time to buy, especially ready-to-move-in houses. In many places, prices have dropped or are negotiable. Developers are mostly focused on finishing ongoing projects. Sale prices in places such as the NCR are close to construction cost now.

This dip will encourage buying.

Stronger rental market: Increased ready-to-move stock will lower rentals. Emer-gence of specialised rental units and the entry of organised players is also expected. Boost to affordable homes: The segment, doing well over the last year, will really come of age with big demand upticks. As a result, demand will outstrip supply by a factor of 3-5, depending on the city.

Ready to move in: Cautious buyers, supply and good deals are pushing home buyers for secondary sale (units sold in the open market by individuals), which anyway has always been much bigger (even double or triple) than the primary market (first sale by developers to individual buyers). This is expected to become at least twice that of primary market volume.

returns on real estate investment. You make most money when the ticket sizes are low and the prices middling. Normally, a proper-ty yields best returns in 5-6 years. Core city areas give better regular returns but are more expensive to enter. For instance, even along a delayed infrastructure such as the Dwarka Ex-pressway, people who bought in 2009 and sold in 2013 got good returns. What is important is that as an investor, you have to be unemotional about your exit strategy.

WHAT LIES AHEAD Muted price: Factoring in all the variables, prices are expected to remain largely muted in the next 12 months.

Favourable price/income ratio: Price income ratio (median real estate price in the city divided by median income) has been fall-ing. The lower the ratio, the more affordable the housing. For example, in Mumbai the ratio dipped from 11 in 2010 to 7.2 in 2018.


Rapid Metro Rail Transit Corridor System (RRTS)

October 2, 2013, the day when Delhi Metro was linked to Rap-id Metro Rail at Sikandarpur Ghosi in Gurgram, marked the laying of 70,000 vehicles off

the roads and celebrated Mahatma Gandhi’s message of “Be The Change as also signaled greatest Public-Private- Partnership.

There are no caterinas/ overhead electric cable over the trains to provide a link to Rapid with power. This technological break-through was brought about by Sanjiv Rai, MD and CEO of IL&FS Rapid Metro Rail who used DC System to merge with surrounding Cyber City in Gurugram in addition to the difference in height between the two systems.

Imagine travelling from Gurugram to Sarai Kale Khan in 20 minutes flat, or reaching IGI Airport form the Millennium City in just 15. How about going to Manesar to Sarai Kale khan is just 35 min? Once the first phase of the Delhi-Alwar regional rapid transit system corridor is completed.

A 106km section between Delhi’s Sarai Kale Khan and Shahjahanpur- Neemrana Behror Urban Complex in Rajasthan will be constructed. The board of the National

Capital Region Transport Corporation, which is mandated to build and operate the corridor.

When the entire Delhi-Alwar Corridor is built, not only will commuters to Alwar benefit, the line will also be a boon for those commuting between the capital and many areas in Haryana, such as Gurgaon, Kherki Daula, Manesar, Panchgaon, Bilaspur, Dharuhera and Rewari.

Many industrial towns beyond Gurgaon which have been witnessing a growth in housing too, don’t have a fast and convenient mode of connection transport. The RRTS corridor is expected fill the vacuum. “Once these lines become operational, commuting to major points, such as the airport, will become easier. For instance, the Delhi – Gurgaon on – SNB link will originate at Sarai Kale Khan and reach Aerocity within 15 minutes. Similarly, travelling from Aerocity to Rajiv Chowk in Gurgaon will take 15 minutes,” said Sudhir Kumar Sharma, CPRO, NCRTC. “Older Gurgaon will be connected with this high-speed network and people can reach the airport in 10 minutes,” he said.

“RRTS will be immensely beneficial to residents of NCR. The high-speed RRTS trains will run every 5-10 minutes, freeing commutes from

the daily battle of congestion and pollution on the roads.” Sharma said. The Delhi-Alwar RRTS corridor has four stations in Delhi – the originating station at Sarai Kale Khan, and Jor Bagh, Munirka and Aerocity. At all these stations, the RRTS corridor will be seamlessly integrated with Delhi Metro Stations and other modes of transport.

Sarai Kale Khan will emerges as a major transport hub with all the three purposed RRTS corridors – Delhi-Meerut, Delhi-Alwar and Delhi-Panipat – converging at a mega station at this location. Sarai Kale khan also has the Hazrat Nizamuddin Railways Station, an inter-State Bus Terminal and a soon-to-be-opened Delhi Metro station is expected to provide a seamless connectivity with all these modes of transport.

Jor Bagh station, where integration will be provided with the Metro station of the same name of Yellow Line (Samaypur Badli – HUDA City Centre). After that is Munirka, where the RRTS station will be integrated with Munirka metro station of Magenta Line (Botanical Garden-Janakpuri West). The last RRTS station in Delhi will be Aerocity, where it will not only be integrated with Aerocity station of Delhi Metro’s Airport Express line, but also with the proposed Delhi-Tughlaqabad corridor of Delhi Metro’s phase- IV.

Delhi-Gurgaon-Alwar is planned to be implemented in three stages. In stage 1, Delhi-Gurgaon-Rewari-SNB Urban Complex will be constructed. In stage 2, it will be extended from SNB Urban Complex to Sotanala and in stage 3, the SNB Urban Complex at Alwar will be constructed, a NCRTC spokesperson said. NCRTC has already floated tenders for pile loading test and geo-technical survey on the Delhi-SNB section. While the former is performed to assess the design adequacy, the latter is conducted to obtain information on the physical properties of soil and foundations for proposed structures.

The Link to Industrial Towns

The Group of Ministers (GoM) cleared a proposal to reduce GST on under-construction residential properties to 5%, from the current 12 percent, Zee Business TV reports. On Friday, the panel of state ministers favoured lowering GST on under-construction residential properties to 5 per cent. The Group of Ministers chaired by Gujarat Deputy Chief Minister Nitin Patel was set up in January to analyse tax rates and issues/challenges faced by the real estate sector GST regime. The GoM has favoured reducing the rate in its first meeting. The GoM had also favoured slashing GST on affordable housing from 8 per cent to 3 per cent.

“The GoM favoured lowering GST rates on residential houses to 5 per cent without input tax credit and to 3 per cent for those under affordable housing,” news agency PTI quoted an official as saying.

At present, GST is levied at 12 per cent with Input tax credit (ITC) on payments made for under-construction property or ready-to-move-in flats where completion certificate has not

2 0 1 9 - 2 0Overview

GST on Homes: GoM for 5% tax on under-construction property, 3% on affordable housing

METROLINK


been issued at the time of sale. However, GST is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale.

There were complaints that builders were not passing on the ITC benefit to consumers by way of reduction in the price of the property after the rollout of GST.

The GST Council had decided to set up a GoM to look into ways to boost the housing sector under GST.

Other ministers in the 7-member GoM are finance ministers of Maharashtra Sudhir Mungantiwar, Karnataka Krishna Byre Gowda, Kerala Thomas Isaac, Punjab Manpreet Singh Badal, Uttar Pradesh Rajesh Agarwal and Goa Panchayat Minister Mauvin Godinho.

Apart from Patel and Gondinho, GoM meeting were attended by Mungantiwar and Badal through video conferencing. Also other state ministers, who are part of the panel, too gave their views.

Budget 2019 highlights: Direct Taxes

1. No tax shall be payable by any person

earning taxable income upto Rs. 5,00,000

2. Standard Deduction has been increased to Rs. 50,000 from Rs. 40,000.

3. Notional rent not applicable on the 2nd self occupied house.

4. Notional rent not applicable for 2 years after completion of the house/building.

5. Exemption from Capital Gain on sale of residential house under Section 54

has been extended to purchase of 2 residential house subject to maximum capital gain of Rs. 2 Crores. This option can be claimed once in a lifetime.

6. Deduction u/s 80IBA for developers of affordable housing scheme has been extended by one year for projects registered uptill March 31, 2020.

7. TDS thresholds have been increased for

● interest on bank and post office deposits to Rs. 40,000 from Rs. 10,000.

● rent from immovable property to Rs. 240,000 from Rs. 180,000.

Recommendation to GST council is 3% and 5% respectively for affordable housing and others.

1. With new 3% GST proposal without ‘Input Tax Credit’, likely to increase cost to end customers.

2. Only Mumbai & Delhi real estate market will get 5% to 7% benefit on this new GST proposal as they have higher land cost (more than 60%) while counting on actual sale price.

RBI eases bank loan norms for NBFCs with top rating

Better rated non-banking finance companies (NBFCs) has improved chances of getting loans with RBI relaxing capital requirements for banks that

lend to them. “With a view to facilitating flow of credit to well-rated NBFCs, it has now been decided that rated exposure of banks to all NBFCs, excluding core investment companies, would be risk-weighted as per the rating assigned by the accredited agencies, in a manner similar to corporates,” the RBI said in its statement. Loans to a core-investment company, which acts as a holding company for other businesses, would continue to attract a 100% risk weightage.

Current guidelines require that bank exposure to systemically important NBFCs (other than asset and infrastructure financiers) have to be uniformly risk-weighted at 100%. What this means is that 100% of a loan is deemed to be exposed to risk and bank have to provide capital for the whole loan. As against this, the risk

weightage is around 50% for home loans.

“The amount of borrowing from the banking system, which, as per the new announcement would get rating benefit is Rs. 2.25 lakh crore. The change risk weights, as per rating distribution would lead to capital saving equivalent to 7.58% of the assets under consideration, thereby releasing an amount of Rs. 19,000 Cr of capital,” said Soumya Kanti Ghosh, Chief Economist, SBI.

According to RBI deputy governor N S Vishwanathan, “This was an aberration in the risk-weight system. So, this was a harmonization and aimed at reducing complexity in regulations.” Besides this, the RBI also announced harmonization of NBFC category.

Henceforth, all NBFCs engaged in credit intermediation – asset finance companies (AFCs), loan companies, and investment companies – have been grouped into a single category to provide them flexibility in operations.

The relaxation by the central bank comes at a time when NBDCs are facing tight liquidity conditions. After IL&FS – an infrastructure financier promoted by top rated companies - defaulted on its loans, leanders have turned wary. DHFL’s stocks and bonds came under pressure following rumours and allegation by a news site.

Data released by the RBI shows that bank credit to NBFCs stood at Rs. 5,70,900 crore – nearly 7% of overall bank credit of Rs. 82.4 lakh crore as on December 21, 2018. This is an increase of 55% over 3.6 lakh crore in the previous year.

Making it easier for better-rated NBFCs to borrow could encourage consolidation as less creditworthy companies might sell their loans to those with better finances.

EASE OFBUSINESS

National Realty January - March 2019 4746 National Realty January - March 2019

2018 has been a rewarding year for Indian real estate. It is, however, a result of the turbulent two-year period from 2016 to 2017 when reforms such as the RERA, demonetisation and GST were announced and implemented, and the industry remained cautious in adopting these reforms and re-calibrating business models.

In addition to these, reforms such as the Insolvency and Bankruptcy Code 2018, setting up of a dedicated Affordable Housing Fund and the government’s nod to allow 100% foreign direct investment in single brand retail under the automatic route have improved the market sentiment for both industry and investors. These reforms along with other policy measures have catapulted India’s position to the 77th rank in 2018 on the World Bank’s Ease of Doing Business 2019 Rankings from the earlier rank of 100, recorded a year ago.

The government’s focus on improving infrastructure, lowering policy hurdles to streamline project approval processes, improving ease of doing business along with rising levels of occupiers’ interest, and regular flow of capital has made Indian real estate lucrative for investments. This trend is likely to continue in 2019 as well.

JLL Research highlights some of the big trends that we see emerging across key segments and also presents a forecast for 2019:

Office segment grows strongIndia’s economic growth continues to help the office market to expand further and attract more investors. With strong leasing and investments across offices, the segment remained buoyant with optimistic prospects.

The office market exhibited healthy growth of 16% in 2018 with net absorption estimated to cross 33 mn sq. ft. during the year. This trend is likely to continue, with net absorption expected to surpass 37 mn sq. ft. by the end of 2019.

Signalling good news for occupiers and investors, demand for offices remained high across key markets. The demand traction is supported by a strong supply pipeline with new completions in 2018 estimated to be at 38 mn sq ft, resulting in stable vacancy levels. The new completions are expected to further strengthen in 2019 and cross 43 mn sq ft.

Structural reforms and a refined framework for establishing Real Estate Investment Trusts (REITs) have propelled developers to build quality offices. Positive developments such as the listing of REIT by Blackstone-Embassy JV, which is likely to happen in early 2019, will open the market for similar REITs by other players.

As focus gradually shifts to the development of modern offices that meet the aspirations of new age occupiers, the market will see more such supply in the coming quarters. Hence, there will be a change in the proportion of Grade A stock in the decentralized markets. This would result in the emergence of alternate Central Business Districts (CBDs) in and around cities.

Additionally, a significant change in occupier trends has been witnessed with a marked increase in the collective take up of co-working spaces. The share of co-working spaces in total office leasing increased to 10% in 2018 from 5% in 2017. With more supply likely to come in the near future,

JLL

2018* % growth(Y-o-Y)

2019**(mn sq. ft.)

% growth(Y-o-Y)

Net Absorption 33.3 16% 37.4 12%

New completion 38 41% 43.6 15%

Vacancy 14% 14%

*JLL REIS Estimate ** JLL REIS Forecast

India Office Market Snapshot

What’s in store

for Indian

real estate

in 2019?

17%5%

10%

10%

16%33%

8%

Mumbai Bangalore Delhi/NCR Pune Hyderabad Chennai Kolkata

City-wise Distribution of Net Absorption in Office Segment in 2018

Bengaluru dominated the net take up in office spaces followed by Mumbai and Delhi/NCR. These three markets accounted for 66% of the demand in office spaces across the top seven cities in the country. Source: JLL REIS

FUTUREPOSITIVE


2015 2016 2017 2018 (E) 2019 (E) 2020 (E) 2021 (E)

Grade-A Grade-B

105.9

350

300

250

200

150

100

50

0

War

ehou

se S

pace

(M

n Sq

ft)

120.0143.1

174.1208.8

246.7286.0

158.1139.7

123.6

85.264.8

109.296.1

82.8

37.230.7

75.2

48.1127.9107.1

Pre-GST25% CAGR (2015-17) | Grade A stock12% CAGR (2015-17) | Grade B stock

As of 2018 (3Q) stock has reached~155 mn sqt stock

Post-GST25% CAGR (2018-21) | Grade A stock11% CAGR (2018-21) | Grade B stock

Hike in the supply of Grade A StockStock has substantially increased post-GST

implementation

16.2% CAGR (2015-17) 18% CAGR (2018-21)

Top 8 Cities - Grade A and Grade B Stock Projections

Stable Growth in the Supply MarketGrade A and Grade B Stock in expected to

grow at a stable pace up to 2021

2017 – GST is implemented

Pre – GST Implementation Post – GST Implementation

leasing activity is expected to intensify in 2019. In addition to the strong demand from start-ups and SMEs, large mainstream corporate are also actively looking at these new age office spaces.

Residential segment regains momentumThe dust over policy changes has been settling fast as developers continue to focus on delivery of existing projects. Post the slowdown in 2017, launches in the residential segment revived and are estimated to cross 175,000 (68% Y-o-Y ) by the end of 2018. With the support of government incentives, developers have been able to realign themselves to tap into the opportunities available in affordable and mid-segment housing. Additionally, the commitment of USD 1.6 bn platform funds into the affordable segment indicates the growing focus of

investors and developers. The trend is likely to continue in 2019, however, we expect heightened activity in affordable and mid-segment housing.

While the market has realigned itself to real demand, the transformation has helped in sales revival across most cities. As a result, residential sales volume is expected to exceed 140,000 (47% Y-o-Y ) units by end of 2018. With the government’s recent proposal to rationalise GST in residential real estate, we

2018*(mn sq. ft.)

2019**(mn sq. ft.)

Net Absorption 3.9 7.7

New completion 3.1 10.2

Vacancy 13.3% 14.6%

Note: Numbers pertain to Grade A mall space

*JLL REIS Estimate ** JLL REIS Forecast

with superior quality malls being the main target for space in 2018. Among the three categories, F&B operators followed by apparel remained the most active category across prime high streets.

As retailers continue to focus on experiential shopping, technology interface, and e-commerce, new formats are likely to be seen in 2019. F&B, fast fashion and entertainment zone operators will continue to dominate on this front, as they did in 2018.

The year 2018 also witnessed the comeback of private equity investors in the Indian retail sector. The trend of investments that began in 2016 has continued in 2018 too with leasehold retail assets across the country being their favourite. In fact, investments in retail real estate over the last four years at USD 1.6 bn dwarfs the cumulative investments of USD 134 mn during 2009-2014.

Fully operational marquee retail assets, especially in Tier 1 and 2 cities have been on the radar of investors. In 2019, we expect investors to show further interest in ‘development assets’ (under construction, restructuring and greenfield malls). As far as the geographical spread is concerned, select

believe the under-construction segment is going to see further traction in 2019. However, housing prices are likely to remain range-bound across most key markets.

Other than affordable and mid-segment housing, evolving segments such as student housing and co-living are increasingly attracting investors. With a millennial population of over 400 mn, these housing models hold significant potential in the Indian market.

Retail market witnesses revivalAfter a subdued 2016 and 2017, India’s retail market has seen a revival in 2018. In the past, growth of the retail segment had slowed due to a weak consumer and investment sentiment. However, favourable policies from the government, consolidation of large as well as small e-commerce players, technology disruption and ease of shopping, increasing consumer base, and the entry of foreign retailers have made the environment conducive for growth.

Reformative policies such as clarity in taxation through the introduction of GST, easing of entry norms for single-brand retail, rationalization and consolidation of mall space, and omni-channeling by retailers have added to the overall growth of this segment.

The retail segment is estimated to witness new completion of 3.1 mn sq ft of space during 2018. Against this, almost 3.9 mn sq ft of space is likely to be absorbed during the year. While the net absorption is expected to almost double in 2019 in comparison to 2018, new completion is likely to be over three times in the coming year. This would significantly add to the existing supply.

Similar to 2017, fast fashion, F&B and entertainment operators dominated leasing


Tier 2 and 3 cities are likely to emerge as the next opportunity centres.

Logistics and warehousing sector stands outRising levels of investments by global investors have kept the spirits high for the industrial sector. The year 2018 saw some big-ticket investments announced by ESR-Allianz tie up and HIFL (Hindustan Infralog Private Limited), a joint venture between Dubai-owned DP World and India’s National Investment and Infrastructure Fund.

While ESR-Allianz tie up has announced to invest USD 1 bn in the logistics and warehousing sector, HIPL has committed USD 3 bn to develop ports, logistics and related sub-segments.

Having received the infrastructure status in late 2017, the sector has seen significant expansion in the past one year. The sector got a boost post the implementation of GST. Overall warehousing stock across top seven cities (NCR, Mumbai, Bengaluru, Chennai, Kolkata, Hyderabad and Ahmedabad) stands

approximately at 174 mn sq ft in 2018.

High demand from occupiers has kept the investment sentiment high in this market. This has helped in gradual increase in supply momentum over the past one year. It is likely that higher occupier demand will continue to stimulate the supply in 2019 too. Supply pipeline remains equally robust as developers backed by the demand from large players (mostly by 3PL, e-commerce and automobile/electronics & engineering sector) that have driven leasing in the sector continue to expand and consolidate spaces in the major hubs of the country.

The investable stock (or Grade A and B) of warehousing has grown from a mere 106 mn sq ft in 2015 to 174 mn sq ft in 2018. It is expected to reach around 209 mn sq ft in 2019. Of this, Grade A spaces have grown from 30.7 mn sq ft in 2015 to 64.8 mn sq ft in 2018. The share of Grade A will increase on a regular basis and is expected to reach close to 85 mn sq ft in 2019, according to JLL estimates.

India has seen strong growth in the absorption

of warehousing space and this was recorded to be slightly over 19 mn sq ft in 2017 from 10.3 mn sq ft in 2015. The first three quarters of 2018 has already seen absorption of over 17.5 mn sq ft and the year is expected to close at approximately 27 mn sq ft with majority of absorption being contributed by top eight cities.

Going forward, a key driver will be the focus of logistics and warehousing developers on increasing their footprint and supply of space in Tier 2 cities. As a result of the high demand and continuous supply, rents would remain stable in most of the markets in the short term. However, select markets which have a large supply in the pipeline may witness pressure exerted on rents with increased competition.

Post implementation of GST, the sector will continue to evolve into a mature market driven by global players with growing preference for Grade A space. The sector is expected to witness consolidation giving rise to larger tech-driven modern warehousing spaces which will bring in the required efficiency and economy of scale.

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