The great realty confusion: Mumbai offers little hope for home buyers

Sky high prices have put off customers. Add to that the confusion created by the new DCR. However, there are some who expect matters to improve

To buy or not to buy? Despite a profusion of analyses and research reports on housing prices and their future direction, home buyers remain as confused as ever. So it is little wonder that 37 lakh of flats remain vacant in Maharashtra, of which 4.79 lakh are in Mumbai. The Census Directorate data says that even Thane district has more than 5 lakh vacant flats.

In a recent report, Jones Lang LaSalle said that Mumbai seems to be in a tighter spot with Rs275 billion being sunk in land since FDI (foreign direct investment) was allowed in real estate in 2005; most of which has failed to yield returns. Even many investments done in South Bombay—once named as one of the hottest and costliest property location in the world—have met the same fate. Read Mumbai has sunk Rs275 billion in land since 2005

The reason is known to all. Sky high prices have put off customers. In Mumbai, an average flat costs more than Rs10,000 per sq ft and even in Navi Mumbai, in less populated areas, there are many projects that have flats priced at over Rs1 crore.

Add to that the confusion created by the new DCR (development control rules). Many builders now have to make fresh plans to accommodate the proposed changes about FSI; and the worst affected are those whose projects are already underway. Many of the launches have been put on hold, and construction has been stalled in many places. And for people who have already invested in these projects, the longer the deadlock lasts, the more they have to pay.

Despite talks about the unsustainability of the Mumbai situation, builders can afford to hold back prices. “Why doesn’t the government or RBI (Reserve Bank of India) understand that the more they squeeze liquidity by raising interest rates, it raises returns on black investments even higher. If our country can bring down black element out of property, rents will fall, property prices will fall,” said a commentator.

The home-buyer, however, is at a loss. The Budget came as a flop, and a recent Crisil report says that prices of steel and cement will go up, which will probably be passed down to the end-user. And then, there is the proposal to hike on leave-license, which is going to make rentals expensive.

There are some who expect matters to improve. A few days ago, while commenting on a report on the realty situation in the city, Pranay Vakil, chairman, Knight Frank India, had said that considering the slumping sales, burgeoning debt and repayment pressure, attitudes might soften.

Others, however, are not so optimistic. “When you have slums proliferating and flats remaining vacant, it is high time the builders and the government have a hard look at themselves,” says a sector observer. “When prices are high for new flats, people turn to second-hand properties. The kind of figures we are seeing now indicates that even that is no longer the option. And if rentals become expensive, I think the government should stop talking about affordable housing,” he said.

Pankaj Kapoor, MD, Liases Foras also had echoed similar thoughts. “The high prices are not fault of only the builders. The hike in stamp duty was uncalled for and it is too revenue-centric and indicates a short term vision.” Read Maharashtra Stamp duty hike: “Neither can you afford to own a home, nor take it on rent”

However, as most experts say, one can buy a home any time. “You never know what will happen next. And honestly, there is little evidence to suggest that customers have waited for better home loan or price options when they have to buy a home—because it is a necessity. So if you want to own a home, there is no bad time,” said an analyst.


RBI tightens banks’ reporting norms to monitor gold import

According to the RBI directive, banks have been asked to file a half-yearly statement on quantity and value of gold imported by nominated banks, agencies, export-oriented units and special economic zone in gem & jewellery sector, as well as mode of payment

Mumbai: The Reserve Bank of India (RBI) on Tuesday tightened the reporting requirements under which banks will have to submit a monthly statement informing the central bank about the quantity of gold imported and mode of payment adopted, reports PTI.

“It has been decided to further rationalise the entire reporting system on import of gold,” a RBI notification said.

The directive comes amid concerns of huge outflow of foreign exchange on import of gold which is putting pressure on the India’s current account deficit (CAD).

According to the new RBI directive, banks have been asked to file a half-yearly statement on quantity and value of gold imported by nominated banks, agencies, export-oriented units (EoUs) and special economic zone (SEZs) in gem & jewellery sector, as well as mode of payment.

The statement, to be filed with the foreign exchange department of the RBI, has to be submitted at the end of March and September.

The central bank has also asked them to file monthly statement on the quantity and value of gold imports by the nominated agencies (other than the nominated banks), EoUs, SEZs as well as the cumulative position at the end of the reporting month.

Earlier, banks were required to submit a monthly statement on the number of transactions and value of gold imported by EoUs, units in SEZexport processing zone and nominated agencies/banks.

India’s gold import bill was $46 billion in April-November 2011, next only to $71-$72 billion of crude oil.

To discourage gold imports, the government has recently doubled the customs duty on it to 4%.

As per the World Gold Council, the total gold imported in India in 2011 was 969 tonnes. India is the world’s largest importer and consumer of the precious metal.

Jewellers and traders are on strike since 17th March to protest the hike in import duty and imposition of 1% excise duty on unbranded jewellery.



SEBI proposes AIF norms to bring unregulated funds under its ambit

SEBI has proposed a comprehensive framework in the form of Alternative Investment Funds Regulations, under which AIFs operating as private equity funds, real estate funds, hedge funds etc, must register with the market regulator

New Delhi: Widening its ambit by bringing in unregulated funds like hedge funds, capital market regulator Securities and Exchange Board of India (SEBI) has proposed a comprehensive framework in the form of Alternative Investment Funds (AIFs) Regulations, reports PTI.

“With a view to extending the perimeter of regulation to unregulated funds and ensuring systemic stability, increasing market efficiency, encouraging formation of new capital and providing investor the board approved a proposal to frame SEBI (Alternative Investment Funds) Regulations, 2012,” the regulator has said in a press statement.

As per the proposed regulation, Alternative Investment Funds (AIFs), operating as private equity funds, real estate funds, hedge funds etc, must register with SEBI under the AIF Regulations.

SEBI (Venture Capital Funds) Regulations, 1996 shall be repealed, it said.

However, SEBI said, existing VCFs shall continue to be regulated by the VCF Regulations till the existing fund or scheme managed by the fund is wound up.

Existing VCFs, however, shall not raise any fresh funds after notification of these regulations except commitments already made by investors as on date of the notification, it said.

“The proposed regulation will provide necessary impetus to the local fund raising against existing practice of overseas fund raising,” said Mahendra Swarup president of Indian Private Equity & Venture Capital Association.

The new regulation has prescribed a threshold limit of Rs1 crore for investors of private equity and venture capital fund, he said, adding, it will help promote the industry.

Further, the AIF shall have a minimum corpus of Rs20 crore, the regulator proposed.

The fund or any scheme of the fund shall not have more than 1,000 investors, it said, adding, the manager or sponsor shall have a continuing interest in the AIF of not less than 2.5% of the initial corpus or Rs5 crore whichever is lower.

SEBI further said existing funds not registered under the VCF Regulations will not be allowed to float any new scheme without registration under AIF Regulations.

However, schemes floated by such funds before coming into force of AIF Regulations, shall be allowed to continue to be governed till maturity by the contractual terms, except that no rollover or extension or raising of any fresh funds shall be allowed, it said.

The proposed regulation seeks to cover all types of funds broadly under three categories.

Category I AIF would be those funds with positive spill-over effects on the economy, for which certain incentives or concessions might be considered by SEBI or Government of India or other regulators in India; and which shall include venture capital funds, SME funds, social venture funds and infrastructure funds, it said.

Category II AIF would not enjoy any incentives or concessions given by the government or any other regulator, it said, adding these would include private equity funds, debt funds, fund of funds, etc.

The third category of the AIFs including hedge funds that are considered to have negative externalities such as exacerbating systemic risk through leverage or complex trading strategies.

These funds can be open-ended or close-ended, may engage in leverage subject to limits as may be specified by the SEBI.

Earlier, SEBI had floated a concept paper along with the draft Alternative Investment Funds Regulations on the SEBI website on 1 August 2011.


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