What To Do After Selling Your Home

Kishor Pate

Selling one's home is never a very easy thing to do. Usually, the four walls one is putting on the market are the frame for many fond memories, and one needs to say goodbye to the neighbours and familiar sights that have often defined many years of residence. But over and above the emotional upset of selling a home, not keeping a record of the actual sale transaction can lead to problems later on.

Maintain a file of all documents pertaining to the property sale. This will ensure that you are able to address all future queries by the buyer, the bank involved and the municipal or tax authorities. You will especially need a seamless financial record while filing your tax returns for the year of sale, says Kishor Pate, CMD – Amit Enterprises Housing Ltd.

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The documents should include proof and receipts of payment for items that you had included in the sale price, including parking space, structural modifications or additions which enhanced the value of the property, society charges and property tax paid for that year. There should also be a clear record of home loan closure if you had bought the sold property by this route.

The sale of a property involves short term capital gains tax if it was sold before the three years have elapsed since the date of purchase. The tax authorities will factor in the profit you made on selling the property, consider it as regular income for that year and apply tax accordingly. If you sold your property after three years have elapsed since its initial purchase, you will need to pay long term capital gains tax at the rate of 20% post indexation.

There are instruments such capital gain bonds available in which the profit coming from the sale of a property can be invested. These investment instruments come with a lock-in period of at least three years, and the maximum limit for investing in them is Rs. 50 lakh. Discuss all financial movements resulting out of the sale of your property with a chartered accountant and take appropriate guidance.

It is very likely that you sold your home with the intention of buying a new one with the proceeds, so start your search for a new home if you have not already located one. The proceeds of the property sale will have to be verifiably shown to have gone into the purchase of a new home within three years from the date of sale. 

Though three years is by no means a short period, it makes sense to fast-track your home search if you live in a city like Mumbai or Pune. Despite all 'informed' market predictions, the real estate markets in these cities have proved to be remarkably resilient and property prices are rising with every passing quarter. While you should certainly not rush into buying a new home, it is wise to make a decision within a few months of selling your old one.

Whether you have moved into a newly-purchased home or a rental flat, do not neglect to update your new contact details with all banks, insurance agencies, investment firms, telephone companies and other such institutions that were corresponding with you on your old address. Also, do not rely on the new owner to keep forwarding correspondence to you indefinitely.

Net office absorption in Kolkata up by 82%

Commercial office supply in Kolkata during the first half of 2013 was recorded at one msf, which is in line with what has been witnessed in last five years, except for H1 2009 and H12011 when it was around 2.0 msf.

The net absorption during Q2 2013 was higher by around 82% on q-o-q basis as majority of the space was pre-committed by IT companies in IT Special Economic Zone developments in the peripheral location of Rajarhat. However, the H1 2013 absorption was still down by about 51% compared to corresponding period last year owing to the domestic and global slowdown that has resulted in occupiers adopting a cautious approach with regard to their expansion plans, says Cushman & Wakefield.

Consequently, though the number of enquiries has remained stable, the deal sizes have shrunk to an average range of 2,000-7,000 sf from 10,000-15,000 sf witnessed in the previous couple of years. 

Around 27% of the total net absorption during H1 2013 was recorded in Rajarhat, which was mainly pre-committed to in past couple of years in IT SEZ developments. During H1 2013, majority of the demand was seen emanating from IT/ITeS and BFSI sectors. However, the share of IT/ITeS sector has dropped substantially to 35% from an average of 90% witnessed in corresponding periods of past two years. 

This could be largely attributed to the slowdown in global IT demand and lack of pro-SEZ policies from the state government. Due to this several IT majors have even got their SEZs denotified. Meanwhile, there is an increase in demand BFSI and Telecom sectors as their share in the total net absorption during the H1 2013 have increased to 23% and 16% respectively from almost negligible share that was witnessed during the corresponding periods of past two years. 

Weighted average rentals have dropped between 0.2-3% on q-o-q basis across sub-markets. However, weighted average rentals in markets such as the CBD, Park Circus Connector and Rashbehari Connector are up by 1-9% in on y-o-y basis. 

Going forward, given the prevailing subdued economic conditions, the net absorption during H2 2013 is expected to remain range bound to around 500,000 sf as was witnessed during H1 2013, taking the total net absorption for the year to about 1.0 msf, slightly lower than the 1.2 msf net absorption recorded in 2012. However, post the general elections next year and in tune with an improvement in the overall economic scenario, we can expect the demand for office spaces to pick up and the net absorption to gradually climb up.

Huge supply of around 2.5 msf that is anticipated during the second half of 2013 would be largely concentrated in sub-markets of Salt Lake and CBD and is expected to push up the vacancy level in these sub-markets. This could further result in creating a downward pressure on rentals, especially in the Salt Lake micro market as it is already plagued with high vacancy at about 33%, recorded at the end of Q2 2013. Around 9.5 to 10.0 msf supply is expected to be infused in next 2-3 years. However, this may spill over to subsequent years as most of the developers have slowed the pace of construction considering the present demand-supply mismatch. 

Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, said “Commercial office sector activity in Kolkata is largely concentrated in the peripheral sub-markets of Salt Lake and Rajarhat. These two markets have been consistently contributing more than 80-90% in the overall supply and absorption since past couple of years. However, subdued economic conditions at domestic as well as at international level and the lack of pro-industry policies by the state government have contributed to weak demand, leading to a small decline in overall net absorption across sub-markets and increased vacancies across markets. 

This could put downward pressure on rentals, which would likely to give more negotiating/bargaining power to the occupiers. However, there are expectations that post the general elections next year, the economy will pick up on the whole and occupiers will become active once again. Many companies are still keen on expanding their operations within the city, given its strategic importance as the Gateway to East India and good human resource base and they are actively engaging with the State Government to convince it to provide a better business environment. ”

“To ensure a healthy growth of the office market in the city, the government and the city municipality should encourage redevelopment along with the plans of new business centres. The governing authorities can also incentivise developers to take up redevelopment projects especially in the areas of CBD and SBD which are still preferred locations for office as well as retail”, added Sanjay Dutt.

Builders oppose RBI's remark on teaser home loans

Developers are worried over the recent Reserve Bank of India’s observation that teaser housing loans offered by banks and financial institutions under 20:80 or 25:75 schemes will eventually affect the ‘credit history’ of the borrowers if the builders fail to pay or delay the pre-EMIs or interest (on behalf of the borrower to the bank till completion of project) as agreed in the tripartite agreement signed between banks, builders and borrowers.

The apex bank has also warned the banks that they would expose to higher non-performing assets (NPAs) in case of defaults by the builders, who are facing acute credit crunch, and possible diversion of funds by financial institutions.

Builders after entering into an agreement with certain banks are offering such teaser loans to homebuyers. Though this is good for banks, as they can disburse more loans and for builders, as they will get more cash flow for their projects, RBI wants that the lenders should wary of financial implications in case of delay or default by the builders, which will ultimately become a blot on the credit worthiness of the buyers.

The buyers may not get loans in future as banks usually check the loan applicants’ credit-worthiness before offering housing loans. 

The recent RBI’s observation would make the banks to withdraw such schemes or or selective on builders, and buyers may not opt for such teaser loans fearing that incase of default by builders, their credit history would go for a toss.

Slamming the Apex banker’s comment as a blow to the real estate sector, Kishor Pate, chief managing director of Amit Enterprises Housing, said, “RBI's latest suggested guideline to lending institutions with regards to the 20:80 and related schemes can prove to be yet another blow to the residential real estate. 

Many developers have been banking on funds generated by these schemes to complete and deliver their projects. This comes at a time when construction costs have risen and the cost of funding is crippling, so it is unlikely that this will lead to a reduction in prices. Nevertheless, such moves are definitely setbacks for the industry as a whole. Established developers with the capacity to complete projects on the basis of their own resources and traditional funding will still be able to honour their commitments to their customers. But the shakeup that the industry is experiencing now is going to make it very hard for new entrants to gain a foothold.

While commenting on RBI’s observation on teaser loans and stricture to banks, Anil Pharande, Chairman - Pharande Spaces & Vice President - CREDAI (Pune Metro), said, “Builders who had been relying on this scheme to generate project funding will be hit hard if banks abolish it. Since this would effectively raise the cost of project capitalization even higher, there is no question of a correction in prices as a result of this move.

“We can only hope that the reverse does not become a reality instead. Residential property prices in the PCMC are generally more affordable than in the PMC region and demand is healthy, so builders who are adequately capitalized will not be affected. In the peripheral regions of PCMC, many developers have already marked down their prices to generate demand, and it is not likely that we will see a further correction there.”

However, it is really unfortunate that such moves are made just before the festive season, during which builders are expecting increased demand, Anil further said.

     

Reacting sharply on the issue, Shobhit Agarwal, Managing Director of Capital Markets, Jones Lang LaSalle India, the leading real estate research firm, said, “RBI’s move is aimed at protecting the interest of buyers who are not informed or aware of the long-term financial implications of such and similar schemes, if defaults occur from builders. This will surely increase the transparency of housing loans and increase the awareness among the homebuyers and at the same time protect funding institutions.”

Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefied said, "RBI’s caution on innovative housing loan schemes, such as 80:20 or 75:25 that allow upfront disbursement of the complete payments in under-construction projects is expected to slow down the current ongoing sales. The RBI has acted responsibly by introducing this directive as it is trying to protect the interests of buyers and lending banks in these kinds of sales. 

"However, the impact would be short term and sales volumes would pick up once the real estate market witness other promotional schemes or correction of prices which would eventually help sales till such time overall economic scenario improves. Mumbai and NCR and some select micro markets across other major locations, are the markets that are expected to see the impact of this directive as this trend was becoming very popular in these markets to attract sales.”

C&W augments Kolkata realty operations

Cushman & Wakefield, the world’s largest privately held commercial real estate services firm, has strategically augmented Kolkata operations as they acquired the entire team of Lemongrass Advisors, a well-respected real estate consultancy firm in Kolkata and Eastern India.  

Abhijit Das, who was the former founder and managing director of Lemongrass Advisors, will be leading the Kolkata operations as the new Office Director for East. 

Sanjay Dutt Executive Managing Director, South Asia, Cushman & Wakefield said, “This talent acquisition will be crucial in increasing our presence and market size in Kolkata. With the larger and highly capable team with strong local market understanding, coupled with our relationship with Indian corporate that have been the drivers of the economy, we are poised to take advantage of the opportunity this market has to offer. C&W has been present in Kolkata for close to a decade in which the company has been instrumental in bringing in and then subsequently servicing the growing requirements of some of the biggest names in the services sector to the city. We are committed to leveraging our relationships bringing in more national and global companies to the eastern region.” 

 “Kolkata realty market has the distinct advantage of good human resource base coupled with some recently announced growth strategies along with its legacy of being an economic centre. The government has further announced initiatives like the creation of the Financial Hub in Rajarhat and proposal for setting up of Industrial Parks in PPP model and the rapidly developing infrastructure of the location. This has put Kolkata in an advantageous position for a future growth.” 

Abhijit Das, the newly appointed Office Director, East India further added, “Kolkata is an important economic hub in India’s eastern corridor which is poised for a new phase of growth. To be part of a company such as Cushman & Wakefield, which not only understands the potential of the market but is also committed to investing in the same by growing its operations in the eastern region is a certainly exciting place to be.  

“With the depth to service clients across the region including the states of Odisha, Assam and Bihar and also overseas destination of Bangladesh, we would be able to provide real estate services  to companies actively looking at expanding their operations in this region, this The Kolkata real estate market itself is promising and we expect to garner 25% market share in the next three years.”

The potential of the market can further be gauged by the fact that construction activity is estimated at 85 million sq ft. (approximately) across office, retail and residential in Kolkata in the next 3 years. Of this, approximately 12 mn sf is estimated to be office space, 1.7 msf is the upcoming retail space while an estimated 40,000 units is expected in organised residential supply while demand for residential far exceeds supply at 77,000 units. 

 Sanjay Verma, Chief Executive Officer, Asia-Pacific, Cushman & Wakefield commented: “The acquisition of the entire Lemongrass team is a crucial step towards strengthening our operations to help us be prepared for the next wave of growth in the Indian region and is in keeping with the growing requirements of our clients and continuing to build our capability for leveraging globally. This team acquisition will help us adequately leverage on the opportunities in the market, and would enable us to enhance our service delivery capabilities and create a dominant position for Cushman & Wakefield in the Eastern India market.”

Property prices dip in major Indian cities

 Property prices in front-line cities such as Mumbai, Delhi-NCR, Chennai, Pune and Bangalore have seen depreciation during the quarter ended June 2013 compared to previous quarter, according to National Housing Bank’s recently released report.

The movement in prices of residential properties for the quarter April-June 2013 has shown declining trend in majority of the cities (22 out of 26 cities covered) ranging from 0.45% in Mumbai to 5.99% in Ludhiana, and rise in four cities ranging from 0.55% in Dehradun to 3.07% in Nagpur during the quarter April-June, 2013 in comparison to the previous quarter January-March, 2013.

Only four cities, that too tier II cities, have shown an increase in property prices, the NHB’s residential housing index (RESIDEX) showed. Maximum increase was observed in Nagpur (3.07%) followed by Lucknow (2.19%), Surat (1.43%) and Dehradun (0.55%).

22 cities have shown decline in prices over the previous quarter with maximum fall observed in Ludhiana (5.99%) followed by Indore (5.64%), Vijaywada (5.43%), Hyderabad (4.55%), Kolkata (4.06%), Guwahati (3.92%), Kochi (3.37%), Patna (3.29%), Coimbatore (3.26%), Ahmedabad (3.13%), Faridabad (2.42%), Chennai (2.26%), Jaipur (1.79%), Chandigarh (1.55%), Delhi (1.49%), Bhopal (1.30%), Meerut (1.05%), Bhubneshwar (1.02%), Bengaluru (0.92%), Pune (0.90%), Raipur (0.65%) and Mumbai (0.45%).

According to real estate experts, oversupply, coupled with high interest rates and sluggish economic growth are putting pressure on the real estate growth and developers are finding it difficult to sell their inventory. Some of them even started to offer various schemes and sops to offload their products.

Under pressure due to increasing input costs, non-availability of skilled and unskilled labours and unfriendly interest regime, realtors across the country are sitting on huge pile of inventory and are finding it difficult to clear it. 

However, developers are putting up brave front. They don’t admit that there is sluggishness in the real estate sector.

According to Sandeep Mehta, president of Confederation of Real Estate Developers' Association of India, Chennai chapter, there was no slump in property prices in the city, though the sales have slowed down a bit due to external factors.

Though from the advertisements appearing on the major newspapers, one can understand that most of the projects launched six months ago are still to be sold out. One of the leading builders is even organizing an exclusive exhibition to showcase his projects in Chennai, which were launched sometime ago. Some developers are even waiting for more than a year to sell their projects and not able to launch new projects due to cash crunch.

“The new launches in major cities have slowed down as realtors are adopting a cautious attitude and don’t want to make fresh investment in the unpredictable market,” says a real estate consultant in Chennai.

About unsold inventory, he said, many of the projects along the Chennai’s most sought-after Old Mahabalipuram Road, East Coast Road and GST lie unsold for months, but developers are putting up brave front and drumming up their success stories in print and online media. 

Some of them even announce new projects giving an impression that they have successfully sold out their previous projects. But, 10 to 30 per cent of the apartments remain unsold. Since developers would have realized their profits from the sold out portion, they don’t bother about the unsold ones and so don’t keep a definite time frame to clear those inventories.

PCMC to bring 20 more villages under city limits

Pimpri Chinchwad Municipal Corporation (PCMC) is all set to merge 20 more villages into its city limits, thereby giving these rural areas the benefit of its globally acclaimed infrastructure-based model of planned urbanization. The list of villages to be included is as follows:

1. Dehu
2. Vitthalnagar
3. Mhalunge
4. Nighoje
5. Moyi
6. Kuruli
7. Nanekarwadi
8. Kharabwadi
9. Chakan
10. Kadachiwadi
11. Chimbali
12. Kelgaon
13. Alandi
14. Khalumbe
15. Gahunje
16. Hinjewadi
17. Manh
18. Marunji
19. Nere, and
20. Jambhe

Of these, Chakan is the most important area from the perspective of industrial growth. Hinjewadi is among the most gripping chapters in the history of India's Information Technology sector - Dehu and Alandi are major pilgrimage destinations.
We are once again witnessing the process of urbanization that has made the PCMC a global showcase model of holistic development, says Anil Pharande, Chairman - Pharande Spaces & Vice President - CREDAI (Pune Metro).

The geographical expansion of city limits has historically been proven as the only viable means of rational urbanization. Without the benefit of expanding city borders, a city tends to densify and eventually stagnate. A city's ability to grow geographically directly affects its economic diversity and health. In fact, the Indian real estate story shows us that the only cities that retain and increase their economic viability are the ones that have the ability to expand. By the same coin, cities which do not or cannot grow eventually stagnate in terms of infrastructure, property market potential and their overall 'liveability' quotient.

Why Indian Cities Over-Densify And Decay

Some of the most serious problems that stagnated cities face are over-crowding, pollution, unrealistic rises in property prices, gradual reduction in employment opportunities and generalized urban decay. In India, this phenomenon is not always the result of lack of peripheral rural areas to urbanize. Relative to its available land resources, India has remarkably few modern cities - and these cities offer the maximum number of employment. As a natural consequence, people from the rural areas steadily migrate to urban areas to earn a better livelihood.

While many Indian cities do have the ability to expand their borders, lack of forward-looking city planning leads to rapid densification within the urbanized areas. At the same time, the peripheral areas that could relieve the strain on these urbanized pockets suffer from complete neglect, leading to a huge disparity in economic profiles. When these cities finally expand their borders, they do so as a means of 11th hour damage control - and with a remarkable lack of vision.

As a result, we see areas that nobody had ever heard of suddenly being profiled as 'upcoming locations'. Developers rush to these areas, attracted by the lower land prices, and lose no time in putting up 'affordable housing' projects before any kind of supporting infrastructure has been put in place. This phenomenon has been seen in various parts of the country, including in Mumbai, Chennai and Delhi NCR.

Planned Urbanization - The Inclusive Approach

Over the years, the Pimpri Chinchwad Municipal Corporation has been attracting more and more people from the nearby areas. The PCMC model of urban development is based on planned social and civic infrastructure and the scientific allocation of residential, commercial and industrial areas. This fabric needs to maintained by geographic expansion, and this is precisely the process we are now witnessing. Including more villages into the municipal limits brings prosperity, real estate development and infrastructure to these areas. The PCMC has consistently employed the method of expanding the spread of its real estate map as the most viable means to prevent core congestion.

NRIs on property hunt in Chennai and Bangalore

K Ramanathan

Thanks to the record fall of rupee value, non-resident Indians (NRIs) are flocking into real estate market with renewed vigour with Bangalore becoming their favourite hunting ground for property investment followed by Chennai and Mumbai.

According to a survey conducted by associated chamber of commerce and industry of India (ASSOCHAM) across major cities in India, developers have found an escape route from the present cash crunch and see NRIs as their saviors. 

They expect an increase of 35 per cent in business enquiries from the expat-Indians this year, reveals the survey. According to D S Rawat, Secretary General of ASSOCHAM,  since the rupee value is at one of its lowest ebbs and still not possible to predict its retreat, NRIs have found this as an opportunity to make some good investment in real estate market across India.” 

The value of rupee has gone down to about 34 per cent against US dollar since August 2011 and even crossed 65 against USD. 

The leading industry body has conducted a random study involving 1250 real estate developers in Dera Basi, Delhi-NCR, Mumbai, Mohali, Kolkata, Hyderabad, Chennai, Bangalore, Pune, Ahemdabad, Dehradun etc. Most of the developers have revealed that NRIs have been showing renewed interest especially after the rupee hit the record low since they would get good exchange rates for their currency. 

The ASSOCHAM study also found that NRIs prefer Bangalore as the most suitable city to park their funds in real estate properties, which include residential and commercial establishments. After Bangalore, NRIs prefer Chennai, Mumbai, Ahemdabad and Dehradun.

Punjabis settled in UK and Canada are showing more interest in investing in upcoming real estate spots around Chandigarh like Mohali, Dera basi, Zirakhpur and Panchukla. Surprisingly, India’s hottest real estate destinations like Delhi-NCR and Mumbai markets did not figure in their ‘most preferred’ investment destinations list. 

“The depreciation of rupee value which began six months ago has increased the enquiries from NRIs considerably and we are expecting a surge of business up to 35 per cent in this adverse market condition. The decline in rupee, though affected the domestic market due to macro-economic conditions, sales have increased due to NRIs because they want to get value for their money”, said majority of developers.

Though for non-resident Indians, this is the best time to buy properties in India, the time is not good for people back home. As per market estimate, an NRI who buys a home can save up to 30 per cent on his property value and can expect good percentage of return on investment, opines Rawat. 

With rupees continue to slide to new low levels and government finding it difficult to apply brake, experts feel that more and more NRIs will make investment in Indian property market. A new trend may also emerge, wherein developers will make homes especially for expat Indians, as most of them prefer luxury apartments and commercial property in key cities.

According to the survey majority of the NRI traffic is coming from the US, UK, UAE/Gulf region, Singapore, UK, Canada, Australia, South-Africa etc and the demand is more for commercial buildings and high-end properties. 

As per a recent estimate, nearly five million Indian expatriates are living in six Gulf Co-operation Council (GCC) countries of Oman, Saudi Arabia, Qatar, Bahrain, Kuwait and the UAE and they remit close to 30 billion USD to India every year.

The enquiries from NRIs from Europe, the US, Singapore and Middle-East for purchasing property in India have gone up to 20-25% following the rupee's depreciation, the survey further revealed.

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