13 - 05 - 2020

CREDAI Bengal Daily News Update | 13.05.20

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Newspaper/Online The Economic Times

Date May 13, 2020

Government considers relaxation in FDI policy for real estate

According to market experts, this - to allow FDI for completed apartments with

occupancy certificates - has been a long-standing demand.

The Ministry of Commerce and Industry is considering relaxation in the foreign direct

investment (FDI) policy for the real estate sector, including 100 per cent FDI in

completed RERA registered projects with over 100 apartments, sources said.

According to market experts, this - to allow FDI for completed apartments with occupancy

certificates - has been a long-standing demand. The consideration by the government for further

relaxation comes in the midst of the coronavirus crisis, lack of business and the resultant

liquidity crisis.

This will allow real estate players to monetise their completed projects so that focus could be

diverted to complete pending housing projects that are struck largely due to shortage of funds.

Secretary, Department for Promotion of Industry and Internal Trade, Guruprasad Mohapatra,

said that there are always some policy considerations going on regarding several sectors, but

refused to comment on the proposed changes for real estate.

Among other proposals, before the government is that 100 per cent FDI should also be

permitted for completed warehouses, people in the know of developments said. Though FDI is

permitted in warehouses, their are restrictions on bringing foreign money on running projects.

In fact, an overhaul of the FDI policy is on cards and the DPIIT is expected to come with

various changes soon.

While the government is looking to liberalise the FDI regime in reality estate sector further, it is

still not included to open overseas investment in 'real estate business'. The restrictions on FDI in

real estate entities is also expected to continue for some more time.

As per the Centre's Consolidated FDI Policy which came into effect in August 2017, 'real estate

business' means dealing in land and immovable property with a view to earning profit there.

Shobhit Agarwal, MD & CEO of Anarock Capital said: "In FDI, the main task has been to

allow FDI in fully built-up OC (occupancy certificate) ready apartments so that developers can

liquidate their holdings and put cash back into circulation. Pre-Covid-19, this proposal had

Newspaper/Online ET Realty ( online )

Date May 13, 2020

Link https://realty.economictimes.indiatimes.com/news/industry/government-considers-

relaxation-in-fdi-policy-for-real-estate/75707714

found little traction with the government. Now, however, the government may revisit this

proposal."

He noted that there is a lot of available inventory and demand may remain subdued because of

the economic implications of the coronavirus pandemic and viewing this, the proposal can have

tremendous advantages which will ripple across the economy.

Ankush Kaul, President, Sales & Marketing at Ambience Group, said amidst the overall

slowdown due to the current lockdown, both commercial and logistics warehousing facilities

need strong impetus.

"RERA approved projects will have a greater degree of pull among investors, making them

profitable investment avenues. Warehousing is already the strong asset class across real estate,

and has been doing well, even under the lockdown due to the demand for various goods and

services. These, if implemented, will have a positive impact on the sector's growth, which is

otherwise struggling to generate liquidity, he said.

Samir Jasuja, Founder & MD of PropEquity, however, was of the view that the approval for 100

per cent FDI in ready-to-move-in RERA registered projects would have a limited impact as the

number of completed projects is very low in the country in comparison to the under-

construction projects.

"It may have some impact on the ready-to-move-in luxury segment but that too is a very small

market," Jasuja told IANS.

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Mumbai’s luxury realty market sees demand pull-back

While Covid-19 hotspots and containment zones pretty much criss cross the city, these

homebuyers are expected to avoid properties adjoining such micro-pockets in localities

like Worli, Parel, Byculla, Lower Parel, Prabhadevi, Sewri and Wadala in central

Mumbai that was already facing a oversupply situation.

India’s most expensive real estate market is seeing a demand pullback in luxury real estate

projects in and around areas designated Covid-19 hotspots in Mumbai as wealthy homebuyers

adopt a wait-and-watch approach on high-ticket deals.

The luxury segment will be most susceptible to the Covid-19 shock amongst all real estate

segments.

Both demand and prices of large super-premium apartments are expected to continue easing

further though prices have softened in the last few years.

“Luxury property market in south central Mumbai has been witnessing downward pressure to

the tune of 20-25% owing to oversupply over the last 2-3 years. And post-Covid-19, clients are

seeking 10-15% discounts over the already discounted price and that is making it difficult to

conclude deals,” said Himanshu Parikh of Himanshu Realty, a realtor operating in south and

central Mumbai.

Parikh said the luxury market in these areas are unlikely to recover at least for the next 6-9

months due uncertainty around economic activity and low customer demand.

While Covid-19 hotspots and containment zones pretty much criss cross the city, these

homebuyers are expected to avoid properties adjoining such micro-pockets in localities like

Worli, Parel, Byculla, Lower Parel, Prabhadevi, Sewri and Wadala in central Mumbai that was

already facing a oversupply situation.

Brokers say that even earlier bookings could be cancelled if the number of infected people in

hotspots continues to rise.

“There’s a possibility of clients reviewing their bookings in projects in all aspects, especially

those that are in close proximity to worst-affected hotspots. In some cases, the prospective

clients have responded that they are rethinking their decision. The pattern of enquiries from

clients has certainly changed,” said Yashika Rohiira, director, Karma Realtors that that focuses

on luxury properties mainly in south and western part of Mumbai.

Rohiira said that for luxury apartments, chambers for domestic helps were earlier a preference,

but now most certainly a need as indicated by recent discussions with clients in premium

Newspaper/Online The Economic Times ( online )

Date May 13, 2020

Link

https://economictimes.indiatimes.com/industry/services/property-/-

cstruction/mumbais-luxury-realty-mkt-sees-demand-pull-

back/articleshow/75704456.cms

category.

Luxury residential property market of south central Mumbai had emerged as an alternative for

the plush set and the country’s most expensive micro-market is south Mumbai.

In the last 2-3 years, homebuyers focused on south-central Mumbai are spoilt for choice as

developers have been trying to recalibrate their product offerings to push demand.

Given the high pricing and large size of these apartments, the luxury segment is relatively

discretionary and the buyer can defer the actual deal to ensure a good bargain.

Brokers, therefore, are of view that developers with limited liquidity options, in the current

scenario, will have to give in to the pressure and settle for lower price. ____________________________________________________________________________________

Government plans to restart property registration in Pune,

Mumbai after May 17

Thorat said the government was taking steps towards lockdown exit and was devising a

system in the four cities for the revival of the real estate registrations.

State revenue minister Balasaheb Thorat has told the property registration department to work

towards resumption of its offices in Pune, Mumbai, Thane and Nagpur after May 17 by

ensuring social distancing norms.

The offices in these cities are closed since the announcement of the lockdown. Pune, Mumbai,

Thane and Nagpur witness the maximum registration of real estate projects in the state. Of the

519 registration offices in Maharashtra, only 272 are currently operational.

Thorat said the government was taking steps towards lockdown exit and was devising a system

in the four cities for the revival of the real estate registrations.

“The registration department generates the maximum revenue for the state. An online system

with adequate security check is being worked out for the process. The department has the e-

step-in facility to enable booking of time slots for registration. This can be used more in the red

zones of cities,” he told TOI.

Govt plans to restart property regn after May 17

The state has issued orders that the government offices in the orange and green zones can

resume with 33% staff. But in the red zones, the government offices can function with only 5%

staff.

An Inspector General of Registration (IGR) official said, “Collectors from 30 of 37 districts

have issued permission to open our offices. We can start the registration process if a system is

in place which will maintain social distancing norms.”

Confederation of Real Estate Developers' Association of India’s Pune-metro president, Suhas

Merchant, said, “The state government has allowed construction of projects with workers

staying at the site. It should also start the registration process with social distancing norms.”

Ready reckoner review after June, says Thorat

State revenue minister Balasaheb Thorat told TOI that the assessment and implementation of

Newspaper/Online ET Realty ( online )

Date May 13, 2020

Link https://realty.economictimes.indiatimes.com/news/regulatory/government-plans-to-

restart-property-registration-in-pune-mumbai-after-may-17/75707735

the new Ready Reckoner (RR) would be done after June. Under the current circumstances and

the rising Covid-10 cases, it looks practically impossible to work out the RR rates. We will

review the situation after June,” he said.

The RR rates, which are prices of a residential property, land or commercial property for a

given area, are published on March 31 every year.

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Builders must employ more locals: Karnataka revenue minister

A learning from the lockdown, according to the Revenue Minister, is that it is better to

pay more and employ workers from within the state

The Karnataka Government is looking at the return of guest workers to their hometowns as an

opportunity for builders and Micro Medium and Small Enterprises (MSMEs) to employee

locally.

Revenue Minister R Ashoka told Bangalore Mirror that builders and small factories used to hire

people from outside the state as they agreed to work at cheaper wages than locals. “But Covid-

19 taught us a lesson,’’ he said, pointing at the large exodus of migrant workers to their

hometowns, forcing builders to stop construction work and halting several MSMEs in their

tracks.

It is estimated that at least three lakh people are likely to leave Karnataka. “Labour shortage is

being felt in the real estate sector. Over-dependence of developers and factories on guest

workers has created this situation. Had they they paid a little more and given jobs to the locals,

this could have been avoided,’’ said Ashoka.

‘No delay from our side’

Close to one lakh workers have registered so far to return to their hometowns. West Bengal,

Odisha, Meghalaya, Assam, Jharkhand, Rajasthan, Mizoram and Manipur are yet to respond to

Karnataka’s query on accepting stranded workers. “Unless we get a written communication, it is

not possible to send these workers back,’’ Ashoka said.

‘We will pay for our people’

Karnataka has decided to fully reimburse the travel expenses of all those returning to Karnataka.

“We will pay for our people, let other states too pay for their people who are going back,’’

Ashoka said, dismissing suggestions that the state government should bear travel expenses of

the guest workers.

“Why should we waste our taxpayers’ money on outsiders?” Ashoka asked. It is estimated that

at least 10,000 people, mostly from Mumbai, are expected to return to the state. The State will

be paying Rs 12 lakh per train to the respective state governments from where the train

originates.

Rs 208 crore released to all districts

The district administrative machinery has been given adequate funds to prepare large-scale

Newspaper/Online ET Realty ( online )

Date May 12, 2020

Link https://realty.economictimes.indiatimes.com/news/industry/builders-must-employ-

more-locals-karnataka-revenue-minister/75687852

quarantining of people from outside the state, he said.

Ashoka, vice chairman of the Karnataka Disaster Management Board, said he has released Rs

208 crore from the State Disaster Relief Fund to all districts. Besides hospitals, the government

has booked residential school, hostels, community and marriage halls to quarantine people

coming from other states. “They can also pay and stay at designated hotels,’’ the minister said.

Credai dismisses insider-outsider theory

The Confederation of Real Estate Developers of India (Credai) said only 20 per cent of their

workers have left for their hometowns.

Credai Bengaluru president Kishore Jain said, “Credai members control over 85 per cent in

the sector while the remaining 15 per cent are mostly individual builders,’’ he said.

It is estimated that Karnataka, as per the officially registered figures, has around 18 lakh

construction workers. Jain, however, dismissed Revenue Minister R Ashoka’s suggestion that

hiring people from outside the state has caused the problem.

“We do not subscribe to outsider-and-insider theory. We hire locals as well as outsiders. There

is not much manpower available in Karnataka,’’ he said. He also denied that non-locals were

underpaid. “A few workers make more money than qualified engineers,’’ he said, referring to

unskilled, semi-skilled and skilled workers required in the construction sector.

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Rajasthan housing department eases norms for stressed real estate

While, 25% of the amount is deposited at the time of building plan approval, remaining

75% must be deposited in instalments generated after every six months.

The Urban Development and Housing (UDH) department has provided some relief to the real

estate sector by giving relaxation in depositing betterment levy fee, which is charged on

additional floor area ratio (FAR).

At present, the developers must deposit betterment levy (25% of the reserve price) in four

instalments. While, 25% of the amount is deposited at the time of building plan approval,

remaining 75% must be deposited in instalments generated after every six months.

As per the relaxation, the developers can deposit betterment levy after one year from building

plan approval. This is much-needed breather to real estate developers who are facing financial

setbacks. Rajasthan Credai chairman Gopal Das Gupta said, “The developers were demanding

this relaxation in the state since long. Till the time additional FAR is utilised, the government

was taking 75% of the betterment levy from the developers, which was a burden.”

In its representation to the Real Estate Regulatory Authority (RERA), which was submitted on

Monday, the developers have mentioned due to recession and lesser money with buyers, there is

a strong possibility of people trying to cancel their booking by taking various pleas.

This would lead to a steep cash crunch and with very low sales expected in future the promoters

might take 1-2 years to recoup the availability of funds. Also, there will be non-availability of

financial resources for developers.

“The finance providers would now prefer to invest in assets with the lowest risk and would shy

away from ongoing projects. Even the rate of interest could be higher, going forward, there

would be a race towards ‘safe deals’. So, it looks that new lending may now be almost

impossible or very difficult and if it is then it may be on very unfavourable condition to the

promoter,” reads Credai memorandum.

The developers demanded RERA to declare period of March 15, 2020 to December 2020 as

period of Force Majeure and no liabilities and penalties under the act may be attracted either

towards the allottees or authority, for the said duration, thereby providing complete relief to the

projects.

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Newspaper/Online ET Realty ( online )

Date May 12, 2020

Link https://realty.economictimes.indiatimes.com/news/industry/rajasthan-housing-

department-eases-norms-for-stressed-real-estate/75687827

About 800 construction workers sent home to Bihar from Delhi

The remaining workers, some of whom belong to Uttar Pradesh and Chhattisgarh, are

expected to be sent to their home states in the coming week, he said.

Eight hundred people hailing from Bihar, who worked at a site of a construction major here,

were sent to their home state on a train on Tuesday, South West Delhi District Magistrate Rahul

Singh said. They were among 2,200 people working at the company's site. The remaining

workers, some of whom belong to Uttar Pradesh and Chhattisgarh, are expected to be sent to

their home states in the coming week, he said.

The company had approached the South West Delhi district administration for resuming work.

But it came to light that the workers at its site were not ready to work and were "agitated",

Singh said.

"After talking to the workers and the company, it was concluded that sending them back was

necessary," he said.

The district administration also ensured that the workers' pending salary of two months had

been paid by the company, he said.

Later, Delhi's nodal officer P K Gupta was approached for arrangements to send the workers

home on a train.

"Today after thermal screening and fulfilling other protocols, 800 of the 2,200 workers were

sent to Bihar on a train," Singh said.

It is also being "ensured" that the cost of travel is borne by the company and the workers do not

have to pay anything, he said.

Gupta said a list is being made of the remaining workers, including those from Uttar Pradesh

and Chhattisgarh. After consultation with nodal officers of the states concerned, they will be

sent back to their homes, likely in the coming week, he added. VIT

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Newspaper/Online ET Realty ( online )

Date May 13, 2020

Link https://realty.economictimes.indiatimes.com/news/industry/about-800-construction-

workers-sent-home-to-bihar-from-delhi/75708049

No need to include value of building in first sale deed, Tamil Nadu

govt clarifies

It means, apart from paying 11% stamp duty and registration fees for the UDS, the buyer

has to pay 11% stamp duty and registration fees for registering the building also.

The Tamil Nadu government has issued an order saying sub-registrars should not insist on

inclusion of value of building in the sale document, while registering the undivided share of

land (UDS) of newly completed buildings, if it is first sale.

The clarification has been issued by the inspector general of registration in the wake of several

sub-registrars insisting on inclusion of the value of newly built apartments or the value of

construction agreement in the sale deed along with the value of UDS, if the building has

obtained completion certificate. It means, apart from paying 11% stamp duty and registration

fees for the UDS, the buyer has to pay 11% stamp duty and registration fees for registering the

building also.

As per rules, for a building under construction, apart from the registration of the UDS (paying

11% of the value as stamp duty and registration fees) through a sale deed, a construction

agreement is signed between the developer and buyer. The buyer needs to pay only 2% (1%

stamp duty and 1% registration fees) for registering the construction agreement. When the

building is not included in the sale deed, the savings for the buyer is 9% of the cost of the

building. But the flipside is that there is no sale deed generated for a new apartment when the

first sale happens. When the same apartment is resold, the buyer has to pay 11% stamp duty and

registration fees for the UDS and the value of apartment. In effect, the building gets a sale deed

only in the second sale.

However, many sub-registrars were refusing to include UDS alone in the sale deed of

completed buildings even it is first sale. Their contention was that there cannot be a

construction agreement between the buyer and the developer when the building is completed

and the regulatory agency (like CMDA or DTCP) has issued a completion certificate. Hence,

for completed buildings, like in the case of second sale, both UDS and value of the building

should be included in the sale deed, many sub-registrars insisted.

The developer community has been arguing that even after obtaining the completion certificate,

several works would be pending in the apartment. The buyer would specify several alterations,

without tinkering with the regulatory parameters. Hence, for all practical purposes, the building

should be treated as incomplete, they argued.

Newspaper/Online ET Realty ( online )

Date May 13, 2020

Link https://realty.economictimes.indiatimes.com/news/residential/no-need-to-include-

value-of-building-in-first-sale-deed-tamil-nadu-govt-clarifies/75708090

Taking a view that buildings under construction and completed buildings can be treated on a par

for registration purpose, the IG registration has asked sub-registrars to register if documents are

presented for registration of sale of UDS alone in the case of first sale. They have been

instructed not to demand inclusion of building in the sale document in the case of first sale.

________________________________________________________________

UBS downgrades also point to a grim realty

UBS has also downgraded Godrej Properties and Prestige Estates Projects to sell from

buy. Overall, UBS has cut target prices of these stocks by 53-57 per cent.

Top brokerages are cutting their earnings estimates for real estate companies as the Covid-19

led lockdown has intensified the gloom in the sector. A day after CLSA slashed the target price

of Oberoi Realty for high unsold inventory woes, UBS has downgraded the stock to sell from

buy and halved the target price to Rs 300.

UBS has also downgraded Godrej Properties and Prestige Estates Projects to sell from buy.

Overall, UBS has cut target prices of these stocks by 53-57 per cent. UBS believes India’s

residential real estate recovery has been derailed by the pandemicinduced lockdown.

“Residential property sales have almost collapsed since the lockdown. Given the economic

impact of Covid-19 and uncertain income/jobs outlook, we believe the path to normalcy could

be longer,” said UBS.

Highlighting the trend during the global financial crisis, UBS said it took 16 months for

aggregate primary property volumes to recover.

The brokerage expects a 25 per cent decline in industry pre-sales and pressure on system

realisations for FY21.

“With 45 per cent average decline YTD (year-to-date), our covered developers still trade at 20

per cent discount to average and we believe are vulnerable to de-rate as the path to normalcy

could be longer,” said UBS. The brokerage has maintained buy ratings on DLF and Phoenix

Mills.

The brokerage expects residential property realisations to correct over the near- to medium term

but said price declines are not likely to be more than 15-20 per cent.

Meanwhile, CLSA believes luxury apartments in Mumbai could see further price decline. Price

expectations have fallen 10-15 per cent and distress sales have also been seen, the brokerage

firm said.

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Newspaper/Online ET Realty ( online )

Date May 13, 2020

Link https://realty.economictimes.indiatimes.com/news/industry/ubs-downgrades-also-

point-to-a-grim-realty/75707891