The Most Expensive Real Estate Markets in the World!

Best locations to buy a Home in India in 2015

Oh! Looks like you are thinking of buying a home. Why not think of buying a home in the most sorted locations in India in 2015? Well then grab that steaming cup of coffee, pull your bean bag and relax. We have an assorted list for you.

1) How about settling in the city that never sleeps? Yes! Mumbai

Localities like Ulwe and Chembur in Mumbai are one of those fashionable residential destinations, which have a lot on offer. Apart from great projects and great lifestyle, they assure great return on investment too.

2) What about the national capital- Delhi?

In Delhi, Noida Extension, Delhi-NCR and Dwarka Expressway, Delhi-NCR have an edge over other emerging destinations as they cherish proximity to both the city and the International Airport. These destinations are also foreseeing noticeable price appreciation in the years to come.

3) Oh! How could we forget Pune – The Oxford of the East?

Pune's prominent localities like Hinjewadi, Aundh, Kodhwa and Kharadi in Pune are dotting commendable rise in residential development. A home to prestigious projects, these locations are developing at a fast pace.

4) What's more from the biryani land- Hyderabad?

Forget the biryani and a peculiar lingo, Hyderabad too holds the stage as one of the most economical cities for one to reside. The places like Hi-Tech City, Manikonda, Kukatpally are indeed dream destinations to buy a home.

5) Not to miss- Namma Bengaluru!

Growing with an unmatchable pace, Bengaluru is a popular residential destination. Locations like Whitefield, Rammurthi Nagar, Bannerghatta Road and Marathahali stand as apt locales for residing.

Shortlist your favourite! We hope there is a house warming ceremony soon. Happy Browsing!

------ Thanks for reading RealT Horizon ------

Turbulence Revisited?

Some of our readers must be wondering why we stopped writing further! What happened after our post – ‘Risks in RealT Sector’ that we discontinued our regular practice of giving opinion on RealT matters?

To be honest to our readers, we moved out from the Web-World to the RealT-World to gain some hands-on, first -hand experience. And we are not-so-happy with what we experienced in last 1.5 months L

The RealT market doesn’t provide very rosy picture in the Real World. We stuck to our ideology and started with a fast emerging tier-2 city, Jaipur (Rajasthan, India). We surveyed, researched & roamed around the barren lands of the city in a heat of 46-degree Celsius [:O] But the results of our survey & research were even more horrifying than this heat! Here we go with the overview of our findings:

• Sudden awareness of the anticipated-growth in Jaipur RealT Market in Investors & Developers
• Tremendous increase of Supply in the form of land, flats & colonies – resulting in the mismatch between Demand-Supply curves
• Abrupt & obnoxious increase in the property prices
• Liquidity crunch – both among the suppliers & buyers: resulting in the infinite deadlocked loop
• Stringent policies by the Jaipur Development Authority (JDA)
• Illogical and unexplained formation of local colony association, restricting new constructions in the existing colonies
• Movement out of Jaipur in a radius of 30-40 kms in hope of future investment returns

With all the above points and many more to add to them, the RealT Sector in Jaipur seems to be going through a very turbulent phase currently. This state of the market reminded us of the sub-prime crisis of 2008 and we couldn’t help but get goose bumps. This picture somehow gave us an indication of formation of a property bubble in Jaipur.

This may just be the formation of a bubble, but the scenario has turned to be pretty horrendous right from its beginning. Going by our principal of calculated risk taking and doing a sustainable business, we returned to our RealT Web World, waiting for things to take proper shape. Will you?

Disclosure: No stands in Jaipur Realty Market.

---- Welcome back to RealT Horizon ;-) ----

Special Investment Regions – New Real Estate Investment Opportunities

Every real estate investor keeps on looking for new opportunities for investments, but often ignores the ones standing right in the front. This post is just to throw some light on one such opportunity.

What are Special Investment Regions?

Most of us know about SEZs and their recent outburst in India, but very few of us are aware of the upcoming prospects being offered by the new development plans of Government of India – Special Investment Regions (SIRs). These are meant to be gigantic projects which spans to the tune of several thousand hectares. Just to show it in a hierarchy:

As is quite evident from the above categorization, the size and extent of SIRs is unmatched. The potential for infrastructure and real estate development in these regions can only be judged by the example of upcoming project - Dholera SIR in Gujarat, India.

Dholera SIR – Quick Insights 

• Total Area : 800 sq. kms: a green field location
• Developable Area: 500 sq. kms.
• World-class infrastructure & connectivity: within & outside
• Central spine express way & Metro Rail to link the SIR with mega cities
• Airport & Sea Port in the vicinity
• Proximity to mega cities: Ahmedabad, Bhavnagar, Vadodara
• Capable to cater to both International & Domestic Market
• Close to Gujarat International Finance TechCity (GIFT)
• Logistic support of the Dedicated Freight Corridor (DMIC)
• Benefits of the high impact Delhi Mumbai Industrial Corridor (DMIC) 

Dholera SIR is a project planned along the Delhi-Mumbai Dedicated Freight Corridor:

As shown in the above map, Dedicated Freight Corridor (DFC) spans through 6 states with a length of 1483 kms:

• Uttar Pradesh-22 km (1.5%)
• NCR of Delhi- 22 km (1.5%)
• Haryana- 148 km (10%)
• Rajasthan- 578 km (39%)
• Gujarat- 565 km (38%)
• Maharashtra- 148 km (10%)

This scale of the DFC offers a lot of industrial, commercial and subsequently residential development along its length. In order to make full use of this opportunity, Gujarat government has initiated a mega SIR project along the DFC – Dholera SIR.

This visionary approach will offer a lot of real estate development opportunities in this region. Some of the planned RealT & infrastructure developments include:

The above representation indicates just few of many possible developments that are going to take place with the upcoming SIRs in India. These are mega projects that require decades to complete and fully implement, hence giving investors ample horizon for investment. Dholera SIR, for instance is planned to roll out in 3 phases:

Closing Remarks: With the announcement of Special Investment Regions, there has been a huge anticipation of investment opportunities among investors. The other upcoming SIRs include the one between Mumbai-Bangalore DFC. RealT Horizon is keeping an eye on these developments, are you??

---- Thanks for reading. Your comments will help us improve our analysis. J ----

Transacting & Using your Real Estate Asset

After a project is constructed, it is time for actual transactions and possessions to happen. There are various intricacies involved in these seemingly simple stages. Let's see how.

Transactions

The sell and purchase transactions in the real estate sector follow several innovative methods. More often than not, builders initiates the transaction process much before the actual project is constructed - as soon as from the concept stage. Just to have a better picture of this look at the following chart:

The above chart is a snapshot of one of the prevalent schemes that builders follow for selling off the constructed property. This process of interval payments ensures that ready supply of funds is available with the builder which can be used to service the operational costs of the project.

Usually the process of transactions is carried out by:

1. Brokers
2. In-house marketing
3. Word of mouth publicity

Out of the above 3 channels, brokers are the most prevalent and considered-effective means of carrying out transactions. In Indian scenario, especially, brokers form an integral part of the real estate value chain. Although they are the most convenient means of sell/purchase of properties but having brokers in the transaction process gives rise to a plethora of additional costs for both the parties - buyers and the sellers.

Of course having brokers for this process reduces the time-to-possession and do not divert builder's attention from his main job, but if some other effective channel can be devised for this process, we are sure that a lot of costs can be saved in every project - nearly to the tune of approximately 5-10%!

Usage

As already discussed by us in our first post - Understanding the reality in RealT – Generic Real Estate Value Chain, usage can be divided into following 3 categories, depending on the nature of use.

There are different norms and procedures for acquiring the possession of all the above mentioned categories, but more or less the underlying process is the same.

Ending Notes: With this post, we have completed an eagle-eye view of all the phases of value chain which are involved in any, literally ANY, real estate project. We will now cover various topics which we think will be benefitial for a first-time investor in understanding how one can make money here ;-)

----- Till then, Keep reading RealT Horizon :-) -----

Financing - Funding a Real Estate Project

We got a feedback from some of our readers that our last post Ownership - Holding a RealT was a bit too much complicated to understand for a beginner. Totally respecting their valuable comments, we have tried to mellow down this post on RealT Financing (although the topic is way more complicated than the last one :-/).

What is Financing?

So coming back to the main business, the second level of Value Chain in Real Estate circumference – Financing. Just as you require money to pay for your household items, you need money to pay for your house (realty property) too. But financing a RealT deal is not as simple as buying vegetables down the street! More often than not, realty buyers need a proper plan, strategy and an agency to finance their dream projects. This is where this post originates J

How is Financing classified?

There are several ways in which a RealT deal can be financed. Typically all the ways can be classified under 2 heads – Equity & Debt.

To start with, we will cover the Debt portion in this post and try to explain the various options to raise finance through debt.

Debt

Debt, in literal sense means – “raising money from the market for a particular time horizon, at some interest rate”. Due to the advancement in the financial markets, many instruments have been developed to carry out this function. These instruments, if used rationally can benefit both lenders & borrowers, but improper use of such instruments can even lead to catastrophes like ‘Sub-prime crisis of 2008’.

Bank Loans

Raising money from a commercial bank is the easiest way for an individual investor. Banks offer attractive interest rates to the borrowers and are easily accessible. But this may not be the most effective way to finance a real estate deal due to the following reasons:

• Banks disburse loans for short-term
• The amount of disbursement depends on various factors like – individual’s net worth,  MPBF (maximum permissible bank fund), income statements, securitization etc.
• Indian Banks generally do not grant loans to a new real estate developer
• Banks generally do not grant loans on ‘land’ alone

Mortgages

Mortgage typically means taking loan from a party by pledging your property as a collateral against the loan. The mortgagee reserves full right to take a control over the pledged property in case of foreclosure (default, in simple terms).

Whatever you will read after this point is a bit complicated, but we have tried to simplify the concept as much as possible. Let’s see how much sense it makes. So, mortgages can be carried out in 2 ways:

Mortgage Broker:

The whole idea of Mortgage Broking is depicted in the above figure. Few points about this process:

• Brokers are independent agencies, having tie-ups with fund providers
• Fund providers generally prefer these brokers so that the borrower is already researched for credit worthiness
• Mortgage brokers are generally not involved in ‘loan servicing’
• They don’t use their own capital to fund the borrowers

Mortgage Banker:

These are specialized agencies which provides mortgages directly to the borrowers, using their own capital. These agencies do not accept deposits from the public, rather makes money from the loan origination fees & servicing fees.

They typically packages the loans & sell them to the institutional buyers or government sponsored enterprises in secondary markets. In US, there are Freddie Mac & Fannie Mae to carry out these functions while in India there is no such institution yet for this function. The nearest equivalent that can be thought of is Mortgage Risk Guarantee Fund.

We know that this has become a bit too much complicated to understand, but the following diagram may relieve our brain nerves a bit ;-)

So the whole process of Secondary Markets is depicted in the above figure. It shows step by step process followed by the loans to finally reach the borrower.

Note: We understand that this post has been a bit too much complicated. Please feel free to write to us in case you need any explanations on any of the above topics. The remaining portion of financing by equity will be covered in our next post. Stay tuned!!

----- Keep Reading RealT Horizon J -----

                       

Ownership - Holding a Real Estate Asset

Continuing from where I left my last post - Understanding the reality in RealT – Generic Real Estate Value Chain, let me take you further by trying to elucidate the first component of the value chain – Ownership.

So what is the meaning of Ownership?

Just going by the literal gist, ownership implies having a hold or right on something. Just as any other commodity always has someone to claim for it, so is the case with real estate properties. Of course here it comes with some complications due to the nature of this business. In Real Estate, this function – Ownership holds a much more significant stature due the to the following reasons:

• The first reason, time horizon, is important as some of these investments span across generations. In such a case, an unclear ownership can result in blunders in future.

• Involvement of ‘unreported money’: Owners prefer not to disclose their true identity and goes for complex ownership structures. This is due to the nature of this business because there is a requirement of humongous capital for property projects.

• Property taxes, though not very obvious, are also responsible for ownership problems. Reason is simple, to save taxes!

Rights of Ownership

So what does having an ownership title on a property mean? It means that if you have that title, you have the right to:

• Use the property
• Delegate the ownership title to anybody
• To enjoy the monetary/other benefits derived from the property
• To sell/lease the property

Types of Ownership

Ownership can be categorized in 2 ways – Holding Pattern (Structure) & Tenure.

By Structure
Sole		There is a single holder of the property and he/she holds all the rights mentioned above.
Co-tenancy	Joint	A form of co-tenancy where the title is shared by 2 or more holders, in EQUAL proportion. In this type of ownership, the interest of one partner is automatically transferred to other upon former’s death. Generally common for spouses.
	Tenancy in common	A co-tenancy wherein the proportions NEED NOT BE EQUAL. Unlike the above case, here the ownership is not automatically transferred to the other partial partners.

By Tenure
Freehold	Complete rights to the owner forever.
Leasehold	Right to possess and use the property with compliance to the pre-specified terms of use.	Reversion	Right to possess free interest in real estate after the expiration of a Life estate, Estate for years or Leasehold.
Life Estate	Complete rights ONLY till the owner’s death.
Estate for years	Complete rights ONLY for a specified term.

Alarming state in India!

Although I couldn’t find very vivid stats on this but what I found out was enough to raise few eyebrows. Nearly 90% of properties in India don’t have a clear title! Let’s see what impact it has.

Impacts of Unclear Titles

• Scarcity of land – resulting in increased prices
• Inefficient legal practices
• Increase in the use of black money
• Increased insurance complications
• Frauds

Solutions

• Fast track courts
• Computerization of land records
• Audits on existing properties
• Stricter land rules
• Education to investors

Note: The above mentioned information is a just an indicator of what is 'Ownership' in RealT Sector and what relevance does it hold in creating a new Horizon! Hope this was useful :)

 - - - - -  Thanks for reading J   - - - - -