Realtors give a thumps up to budget

K Ramanathan

Chennai: Realtors have given a thumps up to the Union Budget, saying the proposals made by the Finance Minister on Real Estate Investment Trusts, hiking income tax limits and reduction on the threshold for FDI in real estate will come a long way in enhancing the sagging realty sector in Tamil Nadu.

Ajit Chordia

While welcoming the budget as proactive as far as real estate sector is concerned, Ajit Chordia President of CREDAI-Chennai, said, “Amendment to IT Act to provide Real estate Investment Trusts (REITs) a pass-through status will be an advantage to commercial real estate. A number of larger IT parks and office complexes will be available for retail investors to participate and dependence on bank borrowings will come down drastically. Also, reduction on the threshold for FDI in real estate from 50000 sqm to 20000 sqm will encourage medium sized projects and developers to raise money through the FDI route. The reduction on minimum capitalization from USD 10 mn to USD 5 mn is also an added encouragement.”

Anuj Puri

Observing that the Finance Minister has taken a cautious, yet courageous path with his budget announcement, Anuj Puri, Chairman & Country Head, JLL India, a leading real estate research firm however, said, “Considering the high inflation and curtailed savings that they have had to contend with for some years now, taxpayers still expected a fair stake from the new government, such as enhanced deductions, reduction in tax rates, interest subvention on home loans and tax incentives to affordable housing.”

Puri however, stated that the real estate sector’s expectations have definitely not been met completely in this budget. “However, given the economic situation prevailing in the country, this is not really surprising as the government needs to balance myriad issues while addressing growth.”

Expressed his disappointment for not according ‘industry status’ to real estate sector, N Nandakumar, President of CREDAI-Tamil Nadu chapter, said, “We expected the government to announce industry status to the sector, which is a huge disappointment. Also, no decision has been taken on single window clearance system. Time delay in getting project approvals will continue to haunt developers and stock creation will get delayed proportionately.”

N Nandakumar

Welcoming the decision taken on REITs, Nandakumar further said, ‘This is a welcome move as liquidity in real estate will improve while ensuring lower cost of funds.’

On affordable housing, the CREDAI state head said, “Industry was expecting access to ECB for all types of projects as against present permissibility only for affordable housing projects. The government should consider it for the benefit of the sector.”

He also expressed dismay over non-removal of service tax for housing under construction, which will benefit individuals and also helps to bring down the housing prices.

REITs get budgetary support

The Government will provide necessary support for Real Estate Investment Trusts (REITS) as it would be set up in accordance with the Securities and Exchange Board of India (SEBI) regulations.

Announcing this in his Budget speech, Union Finance Minister, Arun Jaitley said, “REITS have been successfully used as instruments for pooling of investment in several countries. I intend to provide necessary incentives for REITS, which will have to pass through for the purpose of taxation.” 

As an innovation, a modified REITS type structure for infrastructure projects is also being announced as Infrastructure Investment Trusts (InvITs), which would have a similar tax-efficient pass-through status, for PPP and other infrastructure projects. These structures would reduce the pressure on the banking system, while also making available fresh equity. I am confident these two instruments would attract long-term finance from foreign and domestic sources, including the NRIs,” Jaitley added.

“The budget has some positive news for the real estate sector. The FM has clarified that REITS would be given a tax pass-through status to avoid double taxation. This will help developers create liquidity and raise capital using REIT,” said Sharad Mittal, Director & Head–Real Estate Fund, Motilal Oswal Real Estate.

“A lot of private equity funds are looking at exiting their investments via REIT. This brings the much needed relief to the overall cash strapped real estate sector. Change in FDI rules with minimum built up being reduced to 20,000 sq m v/s the earlier 50,000 sq m is a big positive for the sector,” Mittal added.

“The government has clearly shown its focus on infrastructure and real estate sector by making a proposal to provide a tax pass-through to Infrastructure Investment Trusts and REITS. This was one of the biggest uncertainties and bottlenecks which prospective real estate and infrastructure trusts were facing for the set-up and the tax clarity will see the creation of many such REITS,” said Bijal Ajinkya, Partner at Khaitan & Co.

“The REITS platform provides an attractive option to exit some investments and will give developers a new avenue to raise funds and conduct development activities in the country,” he added.

Skyscraper and Prefab India Summit 2014 to be held on July 24

Mumbai: “Globalisation has brought in numerous foreign architects to work in India. Some have contributed to the betterment of the Indian urban and built environment, and some have not. Neverhtheless, foreign architects tend to charge higher fees because of the higher costs of their doing work in their own countries.”, stated Dr. Ken Yang Principal of Hamzah & Yeang, and one of the key note speakers at Skyscrapers and Prefab India Summit, to be held on July 24-25, at The Leela, Mumbai.

He believes that the Green design is an inevitability, if we are to have a sustainable future. In less than the next 10 years or so, almost every architect in the world will be applying green design, which will become second nature to their way of practice. Green building design basically is useful to balance environmental responsibility, community sensitivity, occupant comfort and well-being, and resource efficiency.

Dr. Ken Yeang is an architect, masterplanner and ecologist who is best known for his signature eco-architecture and eco-masterplanning buildings and projects, that have a distinctive verdant green aesthetic. He will be speaking about “The Idea of Eco-Skyscrapers”, elaborating on defining the alternate approach to community housing, converting skyscrapers into Eco Towers and challenges of building Eco Towers in India.

Lalit Kumar Jain, CMD of Kumar Builders and Chairman of CREDAI will be speaking at the summit on the crucial topic of “Urbanization – Opportunities and Challenges”. He will address the cause of physical growth in urban areas as well as the opportunities therein and explore the critical role of private capital in real estate.

Participants will get a comprehensive understanding of how urbanization can be a driving force for the economy. Additionally, the summit will feature ground breaking new project presentations on building skyscrapers in India, role of Government in construction of skyscrapers, understanding the concept of Green Buildings for sustainable living, and structural safety for tall buildings to name a few. The summit is supported by the Builders Association of India (BAI).

Founded in 2005, Fleming Gulf is young, dynamic and has fast become one of the leading providers of business intelligence through industry specific conferences, webinars and skills enhancement training courses.

AP builders to stop buying cement from July 5

Hyderabad: Following the decision taken by the neighbouring Tamil Nadu to boycott purchasing of cement, real estate developers and builders in both Telangana and Andhra Pradesh too decided to stop buying cement from July 5 to 12 if cement firms fail to roll back the steep hike in prices.

Terming the hike of 50 percent as "unjustified", the construction industry has called on people to join the protest.

The decision was taken by the Joint Action Committee (JAC) of the chapters of Confederation of Real Estate Developers' Associations of India (CREDAI) in both the states, Andhra Pradesh Real Estate Developers' Association (APREDA), Telangana Real Estate Developers' Association (TREDA), Builders Association of India (BAI) and Telangana Builders Federation.

The JAC, which is represented by more than 2,000 developers and 1,000 small, medium and mega contractors, unanimously decided to stop the procurement. They purchase daily about 20,000 tonnes of cement.

The JAC warned that if the cement companies failed to roll back the hike till July 12, it will be forced to stop the purchase indefinitely.

Leaders of various groups of developers and builders alleged that the cement manufacturers created artificial shortage by forming a cartel and increased the price overnight by Rs.100 per bag (of 50 kg). They reiterated their demand for an authority to control the cement industry.

They said the hike dealt a blow to the real estate sector even as it was trying to recover after five years of uncertainty.

The developers will suffer a loss of Rs.200 per square feet due to the hike as they cannot charge escalation, he said.

C. Shekar Reddy, CREDAI national president and JAC chairman, urged the governments of both the states to intervene as the hike would hit their schemes for affordable housing for poor.

He wondered why the cement manufacturers resorted to the hike when the transportation costs in Andhra Pradesh and Telangana were minimal.

The two state contribute 80 million tonnes, which is 25 percent of total capacity of 325 million tonnes in the country.

He alleged that the cement companies increased the price in south India without any reason. The builders and developers in Tamil Nadu have also stopped purchase to protest the hike.

The price of cement bag was Rs.165-Rs.190 for the last 9-10 months. The manufacturers suddenly increased the price by Rs.100-Rs.120.

Cement price hike: Builders to stop construction works in Tamil Nadu

Realtors and home buyers in Tamil Nadu are on tenterhooks, thanks to the unprecedented hike in cement and other construction material prices, as several builders have either stopped work or have slowed down putting buyers in a quandary.

Ajit Chordia

Jumping into the bandwagon to register their protest, the Confederation of Real Estate Developers’ Association of India (CREDAI)’s Chennai chapter while expressing its strong resentment over sudden cement price hike, has threatened to discontinue construction activities indefinitely from July 7 and also stop procuring cement from south India if the government does not reign in on the rising cement prices.

“The steep hike will result in an increase of around Rs 45 per sq ft for property buyers without considering other costs. We cannot pass this extra burden to home buyers,” said Ajit Chordia, president of CREDAI-Chennai. Already in doldrums, the price increase will further affect the construction activity in and around Chennai and its suburbs.

“Almost 95 per cent of the public and private projects across south India and especially in Tamil Nadu are at risk,” said Suresh Krishn, vice president of Credai-Chennai.

Advocating to have a regulatory authority for cement industry for controlling prices, Sarita Hunt, MD of Jones Lang LaSalle (Chennai and Coimbatore), a leading real estate research firm, said, ‘The steep hike of cement price will increase the construction cost, which will in turn affect the growth of the already sagging realty sector.”

Sarita Hunt

According to Builders’ Association of India (BAI), prices have gone up by as much as 125 per cent for certain key construction material. The construction industry has claimed that the increase in the prices of key materials like blue metal by 125 per cent, hot mix by 75 per cent and cement by 50 per cent have brought work on several projects in the state and Chennai in particular to a grinding halt.

According to an estimate, projects worth around Rs 10,000 crore, including public and private, are being executed in Chennai.

While the cement prices went up by 12 per cent last year, this year it shot up by about 50 per cent. A high-grade cement bag that was available for Rs 250 about a month ago is now being sold at Rs 350-375 per 50 kg bag.

It is not just cement prices alone that realtors are worried about says Vivek Chandra of Srinidhi Builders. “Not only cement, prices of sand and steel have gone up. We are planning to go slow and the projects’ deadlines are sure to be breached. We have informed our clients about the impending delay in getting their keys due to unavoidable circumstances.”

Government projects in Chennai, including the metro rail, would be affected once the strike begins, say builders. Urging the Centre to establish a regulatory mechanism for cement prices and provide concessions on import duty, Chordia wants the government to allow construction firms to import cement from neighbouring countries.

However, manufactures claim that the hike in cement prices is due to the increase in cost of raw materials, and the recent power cuts has added up to it. Hope the prices of construction material stablise at the earliest for the benefit of home buyers.

ASSOCHAM suggests ways to mobilise resources for urban development

To mobilise the resources to the extent of Rs.70 Lakh Cr by 2030 as an aggregate capital investment mainly for urban roads, affordable housing and transportation, ASSOCHAM has submitted a 10-point strategy to the government including incentivisation of REITs and Urban Development Funds (UDFs).

In a meeting with the Urban Development Minister M Venkaiah Naidu recently, the ASSOCHAM 12-member delegation led by its past President Anil K Agarwal said that urban cities are the growth catalysts and likely  to create 70% of net new jobs and contribute over 70% to India’s GDP in another 16 years.   The delegation stated that India will have six mega cities with 10 million population entailing annual per capita investment on urban services to Rs.Rs.8000 as against the current investment of Rs.1000.

Mumbai and Delhi, according to the study undertaken by ASSOCHAM, will be among the five largest cities in the world and, in addition, cities with over one million population will increase from 53 to 68.  The urban population is expected to touch 590 million accommodating approximately 40% of total population.  This will create critical gaps in healthcare, education clean drinking water, sanitation, affordable housing and public transportation.

The chamber has suggested development of basic infrastructure like public transport, flyovers, drainage, sanitation and waste management, incentivization of REITs and Urban Development Funds to invest in public utility services like slum rehabilitation, water supply, waste management, sanitation and deepening of e-governance mechanisms for electronic delivery of public services.
 

It has further proposed to establish regulatory authority to monitor work of Urban Local Bodies (ULBs) – build capacity in research, planning, HRD - facilitated by States,  strengthening of  fiscal standing of ULBs through improved revenue collection, expense management, budgetary allocations and developing Municipal Bond Markets by providing suitable tax incentives to investors

Rehabilitation  of slums and creation of affordable housing inventory with rental housing facilities for various income groups at city outskirts and improvement in quality of life in Tier I and Tier II cities by maintaining and developing recreation facilities and public parks needs to be prioritized.

Other issues include development of green-field integrated smart cities along industrial corridors such as DMIC, upgradation of civic amenities, health services, urban transport and inter-city connectivity for Tier II cities, innovation in public transport through intelligent transportation systems incorporating vehicle telematics to reduce commuting time and integration of Disaster Management Systems and a comprehensive Risk Management Framework into Urban Planning, with periodic audits.
 

Agarwal said development of suitable framework for people public private partnership (PPPP) in urban infrastructure projects to enhance efficiency in delivery of urban services and effective use Indian Railways' urban land banks to set up Central business districts with facilities for holding conventions and exhibitions, transportation hubs, affordable housing and shopping centers are must.

L&T Construction sets up service facility in Kancheepuram

Chennai: The Larsen and Toubro Construction and Mining Machinery, part of the USD 13.5 billion infrastructure major Larsen and Toubro, has set up a training centre at Kancheepuram near Chennai.
 

Former Larsen and Toubro Board Member J P Nayak inaugurated the facility at the town, about 50 km from here, a press release said.

The "ultra-modern" service and training centre for repair of construction and mining equipment forms an important part of Larsen and Toubro's product support activities in the construction and mining equipment industry and provides a one stop solution to customers in Southern India, Nayak said in a statement on Friday.

The service centre is spread across 33,500 square metre and houses specialised machinery and exclusive bays to provide service solutions for high-value equipment like dozers, loaders, dumpers and excavators, he said.

The facility was one of the five service centres set up by Larsen and Toubro which are situated at Nagpur, Pune, Durgapur and Bahadurgarh (near New Delhi), the statement added.