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Indian real estate market Anticipating and gearing up for a change

Jackbastian K. Nazareth
Group CEO-Puravankara Projects Limited
Sunday, September 21, 2014
Jackbastian K. Nazareth
Founded in 1975, Purvankara (BSE: 532891 | NSE: PURVA) is a real estate developer in India. The company has completed 36 residential/commercial projects spanning 7.80 million square feet and currently, has 29 million square feet of projects under development. Headquartered in Bangalore, the company has a market cap of Rs 2,296.79 crore.

Indian real estate is going through a phase of transition in the process of its development. “Anticipating and gearing up for a change”, seems to be the emerging motto of the Indian real estate sector as it is transforming from being once dominated by unorganized family-run businesses to one, which adopts a more corporate approach. The resultant and welcoming wave of new thinking with emerging real estate formats is responding to changing lifestyle needs.
The real estate industry is a capital intensive sector and India is continuously becoming a favored destination globally for investors, developers and Non-Resident Indians (NRIs), as now it is driven largely by investor-friendly government policies and increasing globalization. The second largest employment generation sector after agriculture (The segment is expected to generate 7.6 million jobs during the same period. It is also expected to generate more than 17 million employment opportunities across the country by 2025), real estate contributes about 6.3 per cent to India’s Gross Domestic Product (GDP). The foreign direct investment in this sector is expected to touch US$ 25 billion in the next 10 years from its current US$ 4 billion.

Profitable move for NRI Buyers
India may have more than one million people in the Indian diaspora, but most of these expatriates have a strong connection with their homeland. As a result, most expatriates seem to prefer having a home in India, just as a fallback in case something goes wrong and they want to come back. NRI demand has also increased on account of global economic uncertainties, and consequently, lack of alternative investment opportunities. Moreover, a depreciating rupee also makes properties in India almost 20 to 30 per cent cheaper for NRIs. According to the World Bank, India led remittance flows globally received $70 billion in 2013. An estimated 4 to 5% of this amount is allocated to residential real-estate purchase.
Proceeding in the Right Direction
NRIs might be unaware of the process of buying a property in India. There are also some necessary safety measures to be followed before the whole process of it. Here are those necessary tips that can be helpful in such scenario.
Ground Checks

To determine the nature of the property and scrutinize all the legal documents before buying a property along with the gathering ensured details about the quoted price whether it is correct according to the market value or not is the important thing to start with. Assistance for price related queries can be sought out by registered valuer. Thorough title verification for all details about the original title deeds, and necessary approvals are also part of ground checks. By obtaining ‘No-encumbrance certificate" for the last 30 years, ensures that no mortgage has been outstanding on the property to be purchased. Besides this, to ascertain that the property has secured all the clearances required by law, such as environment and municipal clearances and the authority for transferring the constructed or under construction property to owners is an another essential job that will make investment safe. In the event of sale by a third party viz., real estate promoter, to check whether he is the absolute owner or holds a registered power of attorney to sell the property is also very important. It is always desirable to buy a property from an established developer with an unblemished record.

The Purchase

After indentifying a property after due diligence and negotiation, a sale agreement has to be made which mentions all the details such as the final amount of the property, advance payment, time limit to pay due amount and details of installments. After that property has to be registered for the specific address, and in the case of NRIs, it can be registered for foreign address and/or in the name of his Indian representative who has notarized power of attorney.

Taxation Matters

Apart from the registration cost and stamp duty, a service tax is also levied on the transaction. This depends upon the property whether it is under construction or already built up. The amount of the tax also depends upon the size of the property and the region where it is.

Forthcoming Regions to Focus Upon

For NRIs, rupee-fall has made properties in India 15-20% cheaper. Certain cities are more popular among NRIs. Bangalore is a big destination for NRIs, mostly technology/software professionals living in places such as Silicon Valley followed by Coimbatore, Chennai and Kochi. It depends upon which part of the country the person is from.

The evolving global scenario and an altering wave in the Indian policy regime have together left a lot to be re-learnt, making it crucial for the Indian real estate market to re-think its business practices. With globalization, investors will invest capital where they see an investor-friendly environment with associated ease of operation. Therefore, in order to be competitive the Indian real estate sector is becoming more transparent and demonstrating a potential for developing international standard properties and infrastructure which is attracting plenty of NRI investors, whilst at the same time it is also catering to the unique requirements of an Indian population polarized at the two ends of the economic spectrum.

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