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Wednesday, September 24, 2014

Looking for rental returns? Try Central Mumbai localities!

Looking for rental returns? Try Central Mumbai localities!

If you are looking for investment opportunities to earn maximum rental returns, then your search can end in Central Mumbai.
The recently organised webinar by Magicbricks on ‘West and South India: Know buyer/seller sentiments and property trends’ revealed that Central Mumbai localities offer maximum rental returns across the city. In fact, Sewri and Wadala are the two areas where rental yield is highest, ranging between 1.8-3.31 per cent.
Industry experts suggest that it is because of growing connectivity towards Chembur from Wadala through the Monorail which is working in favor of the location. “The travel time between Bandra-Kurla Complex and Chembur from Wadala has now reduced, which is attracting tenants to this location,” says Ravish Sharma, owner, Mumbai Realty Solutions, a property consultancy in the city.
The Eastern Freeway is another transit development which has added advantage to the location as it connects the locality with Ghatkopar-Mankhurd Link Road that links it to Navi Mumbai.
In fact, MMRDA is planning to make Wadala into an international business centre as it boasts swift connectivity to existing Central Business District of BKC and Navi Mumbai. However, the Monorail Phase-II which will connect it with the south city has been delayed, adding speculation to the commercial and residential real estate here.
As per the data with Magicbricks, Wadala has properties priced in the budget range of Rs 1-2 crore. The rental value of the same apartment ranges between Rs 30,000-50,000 per month.
For Sewri, availability of fresh supply has brought opportunities for landlords to earn high rents. “Majority of the properties in Sewri are under re-development. Those projects which have been completed, demand rentals upto Rs 75,000 for a 1BHK flat,” says Ali Jawed, a local broker active in the area.
However, the traffic congestion between Worli and Sewri is a major concern for the residents which is expected to ease once the Worli-Sewri Elevated Road gets completed.
As per the data with Magicbricks, a 2BHK apartment in Sewri is available in a price range of Rs 2-5 crore which carries a monthly rental value of Rs 55,000 to Rs 1.5 lakh, depending upon the amenities offered. Several new projects are slated to come up in Sewri, creating new stock in the real estate here.
Sewri also witnesses spillover demand from South Mumbai localities such as Worli and Parel. Most of the home seekers here are employed in the banking sector and belong to the upper-middle class segment.
Hence, investment in the locality having convenient transit options to nearby jobs market or a planned infrastructure can ensure good flow of rental income.
Surbhi Gupta, Magicbricks.com Bureau

Is it wise to invest in redeveloped projects?

Is it wise to invest in redeveloped projects?

As urban centers in Mumbai are running out of new land banks for residential development, existing structures in the city, which are either dilapidated or in a bad condition, are being re-developed by builders. But is it a wise idea to invest in such properties where the down payment is as high as 50 per cent? Magicbricks finds out-
Recently, Magicbricks organised a webinar on ‘West and South India: Know buyer/seller sentiments and property trends’ where one of the users raised a query about investment prospects in re-developed projects.
E Jayashree Kurup, head-content and research, Magicbricks, and one of the panelists in the Webinar said, “Localities where re-development is taking place usually have a good flow of demand with existing infrastructure. It is like modernisation of the area with new properties.”
However, she adds, “One should check the background of the developers before investing as several risk factors are involved with respect to FSI, conversion regulations and approvals.”
The flip side
On one hand, where investment in re-developed properties can be beneficial for end users, the same might not be true for investors looking for capital appreciation. “The scope of capital appreciation is less in established localities as compared to areas where there is potential of new infrastructure planning,” says Ravi Ahuja, national executive director, Cushman & Wakefield.
Areas like Santa Cruz, Khar and Bandra are already developed and saturated with property prices in a range of Rs 20,000-40,000 per sq ft, whereas, Vashi in Navi Mumbai is still developing in terms of infrastructure, connectivity and re-development in the area opens new avenues of investment.
“Since City and Industrial Development Corporation (CIDCO) has allowed FSI up to 2.5, new affordable housing stock will be entering the market which will enable a better scope of appreciation for those looking for capital gains as the base value is very less,” says Ahuja
Other than this, re-developed properties require more initial investment from consumers. “Builders involved in re-development projects ask for high down payment which can range up to 60 per cent of the total value compared to new projects where construction-linked plans are quite popular,” informs Ahuja.
As the matured residential areas in Mumbai are undergoing re-development to bring new supply, end users can find ways to invest while investors can evaluate scope of returns to earn maximum profits.
Other panelist in the webinar were Dr Venkatesh Panchapagesan, associate professor, finance and coordinator, IIM Bangalore and Uma Sitaraman, lead researcher at IIMB-Century Real Estate Research Initiative (CRERI).
Surbhi Gupta, Magicbricks.com Bureau

Malabar Hill: Dim lit streets, still most expensive

Malabar Hill: Dim lit streets, still most expensive

If you are a senior citizen and want to own a home in Mumbai’s most affluent location, then this can be important news for you-
Though the properties on Malabar Hill’s LD Ruparel Marg have highest rental value ranging up to Rs 15 lakh, but it is one of the dimmest lit areas of Mumbai, reveals Brihanmumbai Municipal Corporation (BMC) survey. This specific concern is making senior citizens reconsider their decision of looking for rented accommodation in the area.
malabar
“The lighting issue is making home seekers above 65 years of age, to consider other stretches because of convenience and comfort. Most common among these are Harkness Road and Bhagwan Lal Inderjeet Road,” says Keshav Channa, consultant Ideal Home Solutions.
“The footpath here is not on the same level and poor lighting adds to the concern, especially for senior people. However, the corporation is working at it and will give us a solution in the next few months,” says Indrani Malkani, founder-trustee, Malabar Hill Resident Welfare Association.
Vipul Shah, consultant, Reflex Realty and vice-president, South MetroCity Association of Realtors quoted over-greenery as the reason behind dim lighting in the area.
Despite poor lighting, residents have not reported any breach of safety as each bungalow or apartment project has their own security guards on round-the-clock duty. Several existing residents posted their views on the Magicbricks Locality Page, about the highly secure environment in Malabar Hills.
Kirti, a local resident, says “Malabar Hill is a self sufficient and safe locality. It has several politicians, government employees, including senior army and police personnel staying in the area. This ensures high levels of safety and security.”
If you are aged between 60-65 years, choosing a home in Malabar Hills can be tough for you. Not because the luxury here comes with a hefty price tag but because convenience of living can make you search more in the interiors.
Surbhi Gupta, Magicbricks.com Bureau

Key to Maharashtra office deals now lies in extension of IT policy

Key to Maharashtra office deals now lies in extension of IT policy

A small but critical notification awaited from the state government for continuation of the Maharashtra IT, ITeS policy is holding back major office space and other key transactions in Mumbai, Pune and some other cities.
The tenure of the policy, which offers several benefits to IT and ITeS companies, including 75% waiver on stamp duty charges on office space transactions, expired in August. It is expected to be vetted by the state government with any amendments and modifications after after every five years.
“Without the policy being in place, all IT companies are facing problems in executing transactions as these companies will be treated differently for tax and revenue purposes,” said AD Nerurkar, a consultant serving companies such as Tata Consultancy Services and Tata Consulting Engineers.
With the election code of conduct already in effect, the state government may take longer to push for continuation of this policy, resulting in loss for the exchequer as well as troubles for software companies.
This has come at a time when companies are undertaking expansion plans for an uptrend in business and it may prompt companies, particularly new entrants, to consider other states like Gujarat or Karnataka for setting up offices.
Some state government officials, however, say the policy is expected to get an extension of around six months. “A proposal for six months extension for the current policy is under consideration at industries, energy and labour department,” said an official of directorate of industries.
“Draft for the new policy is also ready but that needs to be taken up for approval by the Cabinet that will now get formed after the election results,” the official said.
Experts said that while IT companies may be able to enjoy the benefits even in the absence of the policy, on technical grounds they can be pulled up later for tax evasion.
“There are already certain cases pending in the court with regards to such instances,” Nerurkar said.
Rajiv Vaishnav, vice-president at IT industry body National Association of Software and Services Companies (Nasscom), said, “Based on our interaction with the ministry officials, we understand that an extension to the current policy is under consideration and it will get extended positively. However, the information is not public now and that’s a concern.” According to a Nasscom report, nearly 90% of the IT-BPO industry in India is concentrated in and around seven cities, including Mumbai and Pune in Maharashtra. The report had identified Aurangabad, Nagpur and Nashik among emerging new cities with high potential for the IT sector.
Apart from stamp duty exemption, the Maharashtra IT ITeS policy offers companies exemption from octroi, entry tax or other cess.
Source: The Economic Times, Mumbai

Tuesday, September 23, 2014

Green norms for buildings to be relaxed

Green norms for buildings to be relaxed

The Centre is all set to amend Environment Impact Assessment Notification, 2006 to clear green hurdles to certain types of constructions. This would mean projects such as Akshardham temple or the DTC bus depot on the Yamuna floodplains will not require environmental clearance (EC).
Green activists are, however, worried that the amendment will put massive stress on urban resources and cause great environmental damage. However, this could also speed up construction of many public utility projects in Delhi such as parking lots, bus depots, stadiums and religious structures. It could also simplify the process for acquiring an EC wherein agencies and companies apply for it in bulk leading to delay and escalation in project cost.
Experts say the proposed amendments even lack clarity. “The list of constructions that require EC mentions hostels but not colleges. There are many constructions not included in the list. This means these constructions will not go through the scrutiny of experts and there won’t be any public consultations. These include recreational structures, religious structures, sports facilities and even public utility structures like parking lots,” said Pushp Jain of EIA Resource and Response Centre.
The draft notification that lists out projects or activities that require prior EC only mentions those with a built-up area of over 20,000 sq m and less than 1,50,000 sq m, and townships and area development projects covering an area greater than 50 ha or built-up area greater than 1,50,000 sq m.
Environmentalists say the lack of clarity in the proposed amendment could result in many problems in the long run. “A building that is not commercial today may become commercial later. So listing commercial buildings doesn’t help. If you name only certain types of buildings, the inference is that the rest are excluded. So my concern is that many constructions with possible environmental impact will be excluded,” said Manoj Misra of Yamuna Jiye Abhiyan (YJA).
Similarly, there is no clarity on whether bridges would require EC. “It needs to be clarified if bridges are under EIA cover. If townships and area development projects are under EIA, then bridges, too, could fall under it,” added Jain. “What about non-building construction activities? These could include large parking spaces, monuments and statues over large areas, and ghats and similar construction on river banks. The amendment has clearly been drafted in a hurry,” Misra said.
National Green Tribunal recently issued a notice to the Centre on a plea seeking stay on the Signature Bridge project across Yamuna at Wazirabad till it gets a green nod.
Source: The Times of India, Delhi/NCR

Wednesday, September 17, 2014

Six important things you should know before taking a home loan

Six important things you should know before taking a home loan

17 Sep, 2014, 1259 hrs IST, Chandralekha Mukerji, ECONOMICTIMES.COM
Thought a fixed interest rate may seem more attractive in a high interest regime, experts advice otherwise for various reasons.
Taking a home loan is easier said than done. Though it may seem all banks are eager to lend, getting a loan sanctioned can be a tedious task. Also, like any other financial product, it is important to be acquainted with how home loans work to avoid any nasty surprises later. Here are some important things you should know before signing on the dotted line.



1. Factors Affecting the Eligibility Criteria: A crude way to calculate your loan eligibility is by calculating the EMI. Banks usually limit the instalments at 40-50% of the borrower's salary, that is, basic plus dearness allowance. Reimbursements and allowances are not considered for this. Also, if you have existing liabilities, say another loan, the eligibility goes down further. Some banks are sensitive about the number of dependents you have. Higher number of dependants implies lower repayment capacity.

Apart from your financial strength your profile also effects how much the bank may agree to lend. For instance, people with a stable source of income find it relatively easier to get loan than say a self-employed with erratic earnings. Your age defines how many earning years you have and therefore your re-payment capacity vis-a-vis the tenure of the loan. Usually, loan tenures do not go beyond your retirement age, unless you've a younger co-applicant.

The co-applicant cannot be a minor, but should not be above a certain age as well. Banks have their set rules on this to minimize ownership dispute. Also, having a co-applicant allows you to get a higher loan as the income of the co-borrower is clubbed while considering the eligibility. The value of the property is also considered before sanctioning the loan. Banks usually cap the loan amount at 70-80% value of the property.

2. Your Loan Type: As you already know, there are two types of home loans based on the interest rate—fixed and floating. As the name suggest, a fixed rate loan is where the interest rate doesn't change with market fluctuations. Usually, this rate is 1-2.5 percentage points higher than the floating rate home loan. Floating interest loan, on the other hand, varies according to the market conditions.

The clause varies from bank to bank and is invoked either after a fixed period or a sharp spike in interest rates. So the EMIs also move up and down with change in base rate.
Thought a fixed interest rate may seem more attractive in a high interest regime, experts advice otherwise for various reasons. First, the fixed nature of the interest itself is a disadvantage in a long-tenure loan like home loan where rates are bound to come down some time even if they are high at present. In that case, the borrower has to repay the same amount every time even if the rates reduce. Moreover, fixed rate loans come with the 'reset clause', that says it is subject to revision. Though the nature of the clause varies from bank to bank it is usually invoked either after a fixed period or a sharp spike in interest rates. Therefore, a floating rate makes more sense unless if the economy promises a sharp rise in interest rates in the near future.

3. The Fine Print: a home loan agreement is a legal document and therefore often incomprehensible. However there can be quite a few devils hiding in the details.

You may think a 'default' is only if you do not pay the EMI. However, there are some banks who define default as when the borrower expires, gets a divorce (in case of joint-loans), or the borrower is/are involved in any civil litigation or criminal offence.

Also, some banks have a security clause that makes that entitles the bank to demand additional security along with your loan amount in case property prices fall. If you fail to pay up, you'll be marked as a defaulter.

Be careful about the add-on charges and penalties. It's not just the interest that you pay. There are additional charges such as administrative and service charges or processing fees. Also, there are penalties like on pre-payment of the loan. Consid4. Negotiate the Rate: Which ever option you choose, do not forget that you can negotiate on the interest rate. Though the bank would always have an upper-hand, you can haggle as well, especially if you are an old customer with a long relationship with the bank. Have a clean record in your credit history for payments done on time? Use it to negotiate loan amount and the rate. Every bank wants good business and a high credit score gives you bargaining power. Also, try to purchase the loan at the end of the month. Banks have their monthly targets and may be more flexible as they do not want to lose business.

5. Longer tenure means costlier loan: The RBI has been hawkish in its monetary policy for quite some time now. An increase in the base rates means the banks have also been increasing their floating home loan rates. For the borrower it means a higher EMI. Many can't afford such rise and often request the bank to re-adjust (increase) the loan tenure to bring down the monthly outgo. While it can be a temporary relief if you are in a desperate situation, in the long term you actually end up paying more.

Consider a situation where you've taken a loan of Rs 30 lakh at 10.5% for tenure of 20 years. Your EMI will come at Rs 29,951 and the total interest you'll have to pay on it will be Rs 41,88,240. In a home loan of long tenures, you usually pay more interest than your principle amount.

Now, say after two years of paying the EMI the bank increases the rate by 0.5% to 11%. Since the interest component is very high in the initial years you would have paid Rs 6,20,460 by the end of first two years while the principle would have reduced by Rs 98,373 only leaving you with an outstanding balance of Rs 29,01,627. At 11% for the remaining 18 years the EMI comes at Rs 30,904. But you decide to extend the tenure by two years and bring the EMI back to Rs 29,950. The total interest now payable on the re-adjusted loan will be Rs 42,86,373, that is, Rs 98,153 more than the initial interest payble. Plus you have already paid Rs 6,20,460 interest. So, the long-term effect is that you end up paying Rs 7,18, 613 more (Rs 6,20,460+ Rs 98,153 ).

6. You can Switch lenders: Taking a loan from a bank doesn't mean you are stuck with it forever. In extreme situations or in case you are getting a significantly better deal from another lender, you can always switch. Most banks don't have any pre-payment penalty anymore on floating rate loans. Therefore, processing fee is the only additional cost you have to bear. Try negotiating on this as well or at least ask for a reduction if not a full waiver.
er these when comparing the deals offered by various lenders

Wednesday, September 10, 2014

Mumbai faces an oversupply of properties worth Rs 2 crore and above

Mumbai faces an oversupply of properties worth Rs 2 crore and above

Mumbai

Localities along the harbour line and in central and south Mumbai, are facing an oversupply of properties in the Rs 2 crore and above category, as per the latest PropIndex data (April-June 2014) by Magicbricks.com. While the central and south Mumbai zone registered 15-17 per cent oversupply, harbour line saw an oversupply of approximately 25 per cent in the April-June 2014 quarter.

According to real estate agents, one of the reasons behind the oversupply is the economic slowdown the city is currently facing. “Homebuyers are holding back money in the expectation of a price correction which has led to a halt in the inflow,“ says Santosh Arte of Search Enterprises, a broker firm. “Developers who used to sell 10-12 units a month earlier have been selling just 3-4 units for the past few months,“ adds Arte. “During the monsoon, the realty market of the city generally takes a back seat. This has added to the woes of developers and owners of properties,“ adds Rajesh Butani, owner of Rajesh Property Consultants, a broker firm active between Andheri and Bandra.

“Most of the localities in Mumbai are end-user driven. Investors look towards Navi Mumai and Thane where the profit margin is high while the initial investment remains less,“ says Butani.“When it comes to end-users, they take a lot of time before finalising a deal especially when such a huge amount is involved and hence the conversion rate remains low,“ says Arte.

According to Butani, buyers in this segment include businessmen, jewellers, doctors, people working in stock market, CEOs, CMDs and other professionals working at top managerial levels. “Though the developers are faced with unsold inventory and bargaining prospects are more at present, it is hard to imagine that they will slash prices further as their profit margin will decrease,“ says Butani.

Source: Times Property, Mumbai/MagicBricks.com Bureau