Brigade Group Launches Brigade Atmosphere at Devanahalli in Bangalore

Brigade Group, one of India's leading real estate developers, has announced launch of Brigade Atmosphere, a signature villa project at Devanahalli, Bangalore, a high growth corridor in North Bangalore.

 

Brigade Atmosphere offers four bedroom signature villas with sizes ranging from 3010 sq.ft to 3410 sq.ft. The project aims to bring back the concept of courtyard homes, a way of life long forgotten. 

This unique project will have 109 courtyard villas spread across 18 acres of picturesque landscape.

A cluster of eight villas will be surrounding a beautiful courtyard and a series of such clusters will be connected to a central Boulevard. The unique cluster layout ensures optimal utilization of space for recreation while creating a sense of intimacy and harmony.

Brigade Atmosphere offers an ideal lifestyle with the right mix of private, semi-private, semi-public and public spaces.

The project offers a world of amenities like a convenience store, multi-purpose hall, health club, swimming pool, library, amphitheatre, gymnasium, children's play area, billiards, table tennis and basketball courts.

According to Om Ahuja, CEO-Residential, Brigade, "Brigade Atmosphere is truly a unique villa project in North Bangalore. We, at Brigade, have brought back the concept of courtyard homes that faded into oblivion due to urbanization. Each cluster of villas along with the social amenities will act as a keystone of community living." 

Buyers benefit the most in possession-Linked Plans

The current scenario in Indian real estate market clearly reflects the mood of buyers. Developers are extending many offers to improve the demand, which clearly indicates that buyers are in wait and watch mode

Various media reports have suggested price correction for over last three quarters, but not much major correction in prices (with a few exceptions in some markets) has taken place. 

Developers are proffering bundled offers instead of negotiating prices. One such offer is the possession-linked payment plan, in which the buyer pays 20-25% of the apartment cost in advance and the rest on possession, says Om Ahuja, CEO – Residential Services, Jones Lang LaSalle India.

 The Benefits Of Possession-Linked Plans

A critical point here is delivery risk and exposure of credit to developer. Buyers see immense benefits in paying just 20-25% to the developer while booking and paying the balance amount on possession. This eradicates the risk of developer not completing the project on time, and of the developer going bankrupt and not having to pay for a product that is not yet ready. 

We are seeing buyers favouring this option against the construction-linked plans. In the developed world, builders have to complete the product before they can sell to their buyer. Selling before completion is called ‘off-plan’ and this can be approved by the local regulator, but only on the basis of a special request and the overall credibility of the developer. Such checks are missing in India. With possession-linked plans, the benefit to buyers must always be seen in the light of multiple risks.

Points To Check Before Opting For Such A Plan

Three critical safeguards that buyers must put in place before investing into such offers are:

Ensuring that the developer does not have two different pricing structures : (i.e. one for construction-

linked and another for possession-linked plans).  If there are two such different pricing offers, then the developer has already built in the cost of funding that is applicable for a possession-linked plan. This effectively means that the buyer is indirectly funding the developer, and that is not an attractive scenario.

Establishing that the developer has all necessary approvals in place : Buyers funding the developers without approvals is like any another non-approved deposit collection scheme that can catch the eye of financial regulators like SEBI and RBI. Buyers need to use caution while investing in any project where approvals are yet to come and there is a assured-return type of structure. These are very risky structures and have high chances of default and delay in terms of payments.

Reading the fine print : Laypeople generally do not read those critical few lines at the end of the document before investing, but there is a huge risk of losing money by such oversight. For instance, the connotations of terms such as ‘Act of God’ as well as other obscure verbiage in the terms and conditions present a risk to buyers that do not understand them. Any condition that de-risks or absolves the developer can be perceived as a risk of losing the 20-25% of the initial investment. It is therefore prudent for the buyer to review all points mentioned in such an agreement.

What Happens If The Buyer Defaults On Payments?

The developer will cancel the sale agreement and basis the agreement has the full right to forfeit the initial payment of the buyer. Reputed developers only forfeit part of the initial amount, not the full amount. This is normally captured in the options agreement that the buyer will sign with the developer.

Risks Involved In Possession-Linked Plans

Many times, buyers go for construction-linked plans and developers draw 90% of the amount from the bank providing home loan. Delay by the developer in terms of delivering the finished product can sometimes extend to 2-5 years or more, and for various reasons. Buyers continue to bear the interest cost for the amount that the bank has funded the developer with, but cannot enjoy the finished product.

In a possession-linked plan, the risk involved is limited to the initial capital of 20-25% that a buyer pays to book the apartment. Buyers clearly stand to gain from a possession-linked plan as it reduces their risk and ensures that they do not have to bear the cost of funding the developer with multiple open risks.

 

Because of various potential policy changes after the elections, these plans may not be available very long. It is therefore a very good time for buyers to invest in projects that offer possession-linked plans.  

Property Investment - should you wait further or act now?

Om Ahuja

In the closed circles of large investors, we hear that that the rally of real estate as an asset started in 2003 when country’s GDP growth was hovering at 8% and inflation was at 5%. In 2013, the trend got reversed as India's GDP growth hovered at around 5% and inflation reached 10%.

In such scenarios, informed investors believe that the price growth of physical assets like commodities and real estate slows down. With high inflation eating into the savings of the common man, available budgets do not encourage the taking of long-term investment calls. The middle income segment perceives that limited finances prohibit exposure to assets like gold and real estate, says,  Om Ahuja, CEO - Residential Services, Jones Lang LaSalle India.

Oversupply – Fact And Fiction

Over the last few months, many research and media reports have spoken of excessive real estate supply and slowing demand across many Indian cities. In such an environment, developers roll out discounts and extras that are not part of the normal offers. Despite sporadic incidence of such offers in some cities and locations, this trend is by no means a common one; it is limited to developers who are struggling to attract demand. However, market pundits continue to predict that it will catch up across the board very soon.

This has created an expectation that first few months of 2014 will see a correction in property prices from developers across markets and projects. The obvious question that comes to the mind of hesitant property buyers is whether they should hold their purchase decisions in abeyance in order to benefit from a price correction, or make the best out of the current offers and discounts.

Economy – Here Comes The Sun

With the rupee weakening, exports-led sectors in India will do exceedingly well in 2014. The global economy is looking up once again, and export-centric sectors like Information Technology, automobiles, textiles, garments, diamonds and jewellery will be the early beneficiaries of this trend. Large corporate listed players like TCS, Infosys, Wipro and many other reputed IT companies are hiring more employees and planning to pay better salaries in the next increment cycle. This will lead to improved sentiments - and the stock market is already reflecting this mood.

More pertinent to real estate is the fact that once the positive sentiment gathers forward momentum, fence-sitters will rush to buy apartments. This will be a key trend to watch, especially in cities that are directly catering to these sectors - specifically Chennai, Bangalore, Hyderabad, Pune and Gurgaon.

Evidently, looking at the macro picture is becoming crucial when it comes to property investments. With exports-led sectors set to flourish in the improving economic climate, further fuelled by the agriculture sector's revival on the heels of an excellent monsoon in 2013, a pick-up in GDP growth by the 3rd quarter of 2014 is definitely on the table. The multiple measures by the Central and State governments as well as the RBI to contain inflation will further improve market sentiments.

So far, so good. But what about the real estate supply overhang that has been so generously hyped by the media?

Infrastructure – Not Oversupply – Is Key

Most cities have pockets with excessive supply, as well as pockets wherein supply is severely constrained. Despite concern about economic growth and high inflation, areas with excessive supply will continue to see demand, and therefore price appreciation. As long as an area is seeing infrastructure development, it remains a safe investment bet.

However, areas which are not immediately in line for infrastructure enhancement - such as the far suburbs of Mumbai and many areas in Delhi NCR - are definitely avoidable. Budget-conscious home buyers gravitate towards areas which offer relatively lower real estate prices, but they will understandably not compromise on minimum livability and connectivity standards. 

One last question remains unanswered - that of the elusive price correction versus the real, on-ground discounts and offers currently available.

Considering that sentiments are all set to improve on the back of increased corporate earnings and a revitalized capital market, the current sluggishness in property sales can continue for a maximum of two more quarters. This interim period is crucial for property buyers and investors, as the currently available deals and offers will continue for this period. The basis for this prediction is not conjecture, but the visible presence of economic factors that drive growth in the real estate sector. From this point onward, the clock is ticking and the countdown has begun.

Rules for NRIs to sell property in India

The recent times have seen an interesting new trend in the whole NRI property debacle - NRIs from North America and Europe coming to India to sell their purchased or inherited real estate after they obtain citizenship in these countries. This is not a trend that has been extensively examined, but it makes perfect sense. Holding on to real estate is not always feasible if one is unable to manage them.

This is especially true if the NRIs in question do not visit India frequently and are not open to renting out their properties. They prefer not to burden relatives and friends with the task of paying property tax, maintenance and society dues and see more sense in encashing the capital value of their inherited properties, says Om Ahuja, CEO – Residential Services, Jones Lang LaSalle India.

Selling such real estate is usually not the biggest challenge. What can create confusion is the viability - and ways and means - of remitting the resulting funds back into the country of residence. There is, in fact, a fairly straightforward process.

The aspects that come into play are:  Taxation:

As in the case of resident Indians, NRIs who sell purchased property after three years from the date of purchase will incur long term capital gains tax of 20%. The gains are calculated as the difference between sale value and indexed cost of purchase. Indexed cost of purchase is nothing but the cost of purchase adjusted to inflation. Calculation of indexed cost of purchase is easy - many websites provide a calculator; else a chartered accountant can assist.

In case of inherited property, the date and cost of purchase for purposes of computing the period of holding as well as cost of purchase is taken to be the date and cost to the original owner. To be more precise, the amount of long term capital gains together with the cost to the previous owner (i.e. the person from whom the property is inherited) would be considered as the cost of purchase. NRIs are subject to a Tax Deducted at Source (TDS) of 20% on the long term capital gains. But there are certain instances when NRI can get a waiver of the TDS. One such case would be if the NRI is planning to re-invest the capital gains of the property in another property or in tax exempt bonds. In such cases, the NRI will be exempt from tax in India, and no TDS will be deducted either.

If the NRI sells the property before three years have elapsed since the date of purchase, short term capital gains tax at his or her tax slab is incurred. Short term capital gain is calculated as the difference between the sale value and the cost of purchase (without the indexation benefit). The NRI will be subject to a TDS of 30% irrespective of his or her tax slab.

NRI selling their properties can apply to the income tax authorities for a tax exemption certificate under section 195 of the Income Tax Act. They must make this application in the same jurisdiction that their PAN belongs to and will be required to show proof of reinvestment of capital gains. If the NRI is planning to buy another house, the allotment letter or payment receipt will need to be produced; if capital gains bonds are chosen instead, an affidavit to this effect will have to be prepared. Usually, buyers withhold the last installment of payment until the NRI produces a certificate of exemption. A NRI has up to two years from the date of sale to invest in another property, or up to six months to invest in bonds.

Tax Exemptions

Section 54 - This section stipulates that if NRI sells a residential property after three years from the date of purchase and reinvest the proceeds into another residential property within two years from the date of sale, the profit generated is exempt to the extent of the cost of new property. To illustrate - if the capital gains is Rs. 10 lakh and the new property costs Rs. 8 lakh, the remaining Rs. 2 lakh are treated as long term capital gains. The sold residential property may be either have been self-occupied property or given on rent. The new property must be held for at least three years.

 NRIs cannot invest the proceeds on the sale of a property in India in a foreign property and still avail the benefit of Section 54. However, some recent hearings with the appellate authorities have held that exemption can be claimed under Section 54 even if the new house is purchased outside India. However, this is not explicitly specified clearly under the law, and it is advisable for an NRI to consult a tax expert before making any investment decisions outside India to avail of tax benefits under Section 54.

Section 54EC - This section of the Income Tax Act states that if an NRI sells a long term asset (in this case, a residential property) after three years from the date of purchase and invests the amount of capital gains in bonds of NHAI and REC within six months of the date of sale, he or she will be exempt from capital gains tax. The bonds will remain locked in for a period of three years. 

Repatriation

General permission is available to NRIs and PIOs to repatriate the sale proceeds of property inherited from an Indian resident, subject to certain conditions. If those conditions are fulfilled, the NRI need not seek the RBI's permission. However, if the NRI has inherited the property from a person residing outside India, he or she must seek specific permission from the RBI.

The conditions for repatriation of such funds are not really complicated - the amount per financial year (April-March) should not exceed USD 1 million, and should be done through authorized dealers. NRIs must provide documentary evidence with regard to their inheritance of the property, and a certificate from a chartered accountant in the specified format.

What NRIs must pay attention to is the income tax implications in their country of residence. Many countries tax their residents on their income regardless of where it originates from, while others provide partial or total exemption on capital gains arising on sale of a residential house if certain conditions are met. The most important point to ponder is the income tax liability in the country of residence on the amount of gain, and whether claiming exemption under Sections 54/54F/54EC is really worth it. The NRI may, in fact, be better off claiming only partial or no tax exemption on the capital gains in India.