NRIs Switch to Commercial Realty as Residential Stutter


Non-resident Indians (NRIs) from the US and West Asia are now diversifying their asset exposure and investing more into commercial properties rather than residential due to high risk and the imminent slowdown in the segment.

The preference is also being driven by better returns from the office assets and a fixed income that is being generated by such investments.

“Its returns outperform those of traditional fixed deposits (FDs), mutual funds and Sensex, with an average rental return of 7-8% and overall returns of 18-22%.

Currently, 40% of our NRI clients are investing in Indian commercial real estate through fractional investment,” said Kunal Moktan, co-founder of Property share.

Commercial office space vacancy has almost halved in the past six years due to robust demand from corporates. Office space absorption is not only strong, but pre-leasing is at an all-time high, which is an indication of sustained demand and occupiers’ interest in commercial spaces.

“Over the last one year, we have sold around 1 lakh sq ft of small offices in Navi Mumbai. Of this, 15-20% have been bought by NRIs and this is a significant jump compared to our earlier experience. ,” said Ashok Chhajer, CMD, Arihant Superstructures.
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Govt may reduce GST on construction materials

At least two state finance ministers told TOI that a number of items like bath fittings, cement, steel products such as rods used for construction are in the top bracket and do not belong there

GST Council may reduce the number of products in the highest slab, following a series of complaints by state finance ministers, who have argued that several common-use products face a 28% levy, causing hardship to people.

At least two state finance ministers told TOI that a number of items like bath fittings, cement, steel products such as rods used for construction are in the top bracket and do not belong there. “The idea was to classify the goods and services into merit and non-merit goods with the non-metrit goods in the top bracket.
But we have gone beyond that,” said a state finance minister, who has usually sided with the Centre on most issues.

The minister said the “block” was too big and needed to be reduced. On Saturday, CBEC officials had also said that there were far too many items in the top slab.

The second state FM said the issue is expected to be discussed at the next meeting of the Council scheduled in Guwahati, given the concerns expressed by several states.“In the medium-term the aim is to move to fewer slabs,”

The minister said. Finance minister Arun Jaitley had last week reiterated the plan to move to fewer slabs in the future.

Some of the state government officials also believe that the 28% levy was also resulting in sellers evading taxes as it is quite common for shopkeepers to advise buyers to pay in cash, where no invoice is issued.

The talk of reducing the number of products in the top bracket follows finalisation of a concept paper at last Friday’s GST Council meeting.

It was decided that a formula for review, including the need for reduction in slabs, the tax credits available and revenue impact will have to be discussed by the Council in detail before a decision is taken, said a source.

Separately, the government has also announced the establishment of a panel of state FMs, which will review the tax structure for different categories of restaurants for a possible reduction or rationalisation. Restaurants currently face a levy of 12% to 28%, depending on whether they are mereeateries or restaurants in five-star hotels.

In addition, the panel has three other terms of reference, including possible exemption for sales revenue from exempted goods in calculating the overall turnover of an entity, a decision that is fraught with the risk of massive leakage from the government treasury.

The committee will see if the composition scheme can be extended to the outward supply of goods. The scheme allows traders (1%), manufacturers (2%) and eateries (5%) with turnover of up to Rs 20 lakh to Rs 1 crore to pay GST at a flat rate with a lower compliance burden.

In deciding GST rates, the government had opted for a principle of equivalence, where the combined incidence of VAT and excise, or service tax, was factored in. The Centre’s focus was on ensuring that there was no rise in the burden on common-use items, especially those which are part of consumer price index, while protecting its revenue.
Several items such as stationary were put in the top bracket, decisions that have already been tweaked.

At the same time, the GST Council, comprising the Centre and the states, had consciously opted for multiple tax rates in segments such as restaurants and hotels with the luxury segment in the top bracket.

RBI allows banks to invest up to 10% of REITs’, InvITs’ capital


MUMBAI: In a move to boost spending on infrastructure, the RBI on Tuesday allowed banks to invest up to 10 per cent of the unit capital of single Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

“It has been decided to allow banks to participate in REITs and InvITs within the overall ceiling of 20 per cent of their net worth permitted for direct investments in shares, convertible bonds/debentures, units of equity-oriented mutual funds and exposures to venture capital funds (VCFs),” a Reserve Bank of India notification said.

The apex bank said the permission was subject to the condition that banks will not invest more than 10 per cent of the unit capital of a REIT or an InvIT.

“Banks should put in place a Board approved policy on exposures to REITs/ InvITs which lays down an internal limit on such investments within the overall exposure limits in respect of the real estate sector and infrastructure sector,” the notification said.

Banks will also have to ensure adherence to the prudential guidelines on equity investments, classification and valuation of investment portfolio, Basel III Capital requirements for commercial real estate exposures and large exposure framework, it added.

In its first bi-monthly monetary policy review of the fiscal presented on April 6, the RBI had permitted banks to invest in REITs and InvITs in a measure designed to revive stalled infrastructure projects.


Is real estate looking up? Shankara Building IPO may be signal of better times ahead


The IPO Shankara Building Product, which hit the market today, is seen by some industry watchers as sign of improved investor confidence in the sector

The real estate sector is poised to look up as industry practices turn more customer-friendly, incomes rise and investor confidence improves.

The initial public offering of home improvement and building product company Shankara Building Product (SBP), which hit the market on Wednesday, is seen by some industry watchers as a sign of improved investor confidence in the sector.

Remember, the company had previously filed a DRHP in December 2007 but did not go ahead with the public offering.

Meanwhile, state-run Hudco has recently received capital markets regulator Sebi’s approval to raise funds through an initial share sale as part of the government’s disinvestment drive, PTI reported.

SBP’s initial share sale commenced on Wednesday and will close on March 24. The price band for the IPO is Rs 440-460 per share.

The real estate industry has been under pressure ever since 2008, but finally, it seems to be on the verge of the resurgence, which may not be a U-turn, though.

There are expectations that the Real Estate (Regulation and Development) Act (RERA) will be rolled out by the middle of calendar 2017. In recent times, Indian courts have delivered a series of judgments favoring real estate buyers, indicating that customers can hope for a better deal in realty transactions.

Ramesh Nair, CEO & Country Head of JLL India, says things are finally looking up for the industry. “Individual purchasing power has improved over the last few years, with incomes rising faster than home prices. Also, homebuyer confidence is set to improve on the back of several sentiment-building measures,” Nair said in a note.

Nair expects the deficit to reduce in the industry over the next four-five quarters while continued discounts from developers will increase affordability.

On a year-to-date basis, the BSE Realty index is up nearly 25 percent to 1,578 as of March 21 compared with 1,263 on December 30 last year.

Shares of Delta Corp have advanced the most at 53.70 percent this calendar year, followed by Unitech (up 44 per cent), DLF (up 33 per cent), HDIL (up 30 per cent) and Sobha (up 29 per cent).

Other components of the BSE Realty index advanced 15-28 percent during this period.

In a chat with ETNow, Info Edge CFO Chintan Thakkar said: “In terms of consumer interest in real estate, it looks like it is coming back to normal level.”

Kotak Institutional Equities in a research note said it remains positive on the medium-term prospects of the sector due to improving affordability. “The price-to-income ratio for Bangalore has already improved to 4.8 times in FY2016 and is likely to improve further to 4.2 times in FY2018E. This ratio ranged 5-6 times during FY2010-15.”

Shankara Building Products (SBP) is a South India-focused building materials retailer with the limited product offering. The company derived around 40 per cent of its FY2016 sales through the retail channel, with the remaining being through the B2B route.

In 2006, SBP forayed into the retail space by offering fabrication and construction material such as structural steel, TMT bars, hollow blocks, pipes and tubes and roofing solutions. In 2016, the company started offering cement, tiles, sanitary ware, kitchen sinks and lighting products.

However, brokerage IndiaNivesh Securities says the slowdown continues in the real estate market. “Continued slowdown in the real estate market, delays/withdrawal of government subsidies (rolled-out solar and irrigation products for tier II and III cities in 2016) could impact SBP’s growth prospects,” the brokerage said in a research note.




For us all, real estate is a term synonymous with structures and buildings. These buildings can be broadly categorised into industrial, commercial and residential setups. Being a developing nation, we usually observe realty development in clusters; where industries, commercial and residential spaces, all get their separate land parcels for construction. As a result, a city is usually filled up with offices, shopping complexes and houses built on tall skyscrapers. In the meanwhile though, since industries and plant & machineries get land banks around the outskirts, these units end up surrounding a fully developed city, which in case of a natural calamity can multiply the damage.

For any form of development, real estate sector is the backbone. Since privatisation, more and more domestic players have emerged and entered into the realty sector which is allowing our country to meet the much needed supply of housing, retail spaces and offices. This in turn shifts our focus towards the importance of having a system that can keep us safe and alarmed in case of a natural calamity.

Now, calamities can be classified in two ways, where earthquakes, tsunamis, cyclones and others arise from natural causes and won’t knock your doors before coming. On the other hand, floods, landslides and others may or may not be due to natural reasons. Having improper drainage systems and irresponsible ways of construction on hilltops can cause floods and landslides, where nature cannot be regarded as a reason. Tsunamis and cyclones are likely to hit the coastal regions more and usually give us some time to prepare and evacuate; but Earthquakes do not give us time to even react. With modern day technologies and equipments, developers are working very hard towards structural stability and soundness. But all can still go in vain when you’re sitting right above the seismic zones 4 and 5, where Earthquakes can hit at magnitudes of over 7 and 8. Developers in India have access to RCC framed structures and ball bearings installed under the base of structures that allow the buildings to become resistant. “Modern day construction techniques and equipments can allow the structures to become resistant to some extent only. It does not mean that the structure won’t shake during an earthquake or there won’t be any damage to the property. It simply means that structures will hold there ground but doesn’t guarantee safety of life or property. Indian structures located especially under seismic zones 4 and 5 require systems that can alarm the inhabitants in case of an earthquake”, shares Bijender Goel, MD, Terra Techcom Pvt. Ltd.

“In last two decades, about a million people have died due to Earthquakes and the loss to asset is simply untold. Developers in India, especially in NCR regions are working diligently towards providing Earthquake resistance by developing RCC framed structures and even increasing the depth of excavation to provide more strength to the towers. It is true though, that in case of a mega quake, our cities require a system that can help in allowing some time for people to evacuate the buildings before the quake takes full shape”, believes Vikas Bhasin, MD, Saya Group.

To answer such queries and alarm people before the secondary waves i.e. the waves that can cause damage, arrives; Terra Techcom Pvt. Ltd. has entered India and other countries of South Asia, where there are higher seismic zones and number of earthquake occurrences are more. In collaboration with a German based company, Secty Electronics GmBH, it brings ‘On site early earthquake warning and security system (On site EWS)’. “In India, before On site EWS, we had the Regional earthquake warning system (REWS) which had been installed at Uttrakhand and was put under a series of tests. This product had been giving false alarms and thus, lost its credibility and effectiveness. Whereas, the On site EWS has been tested and approved by Chennai-based Structural Engineering Research Centre (CSIR-SERC), a pioneer advanced seismic testing and research laboratory under the Council of Scientific & Industrial Research (CSIR); that has allowed us to install the On site EWS device at HIPA office in Gurgaon and New Secretariat Building Haryana in Chandigarh”, adds Goel.

Earthquake emits two sets of waves, first primary waves (P) which are harmless, followed by damaging waves ‘secondary waves (S)’ and ‘surface waves (R)’. By detecting these primary (P) waves, we can warn the people that ‘an earthquake is on its way’. Earthquakes have become an issue before this world and there is a severe need of any such earthquake warning system that can warn people at least few seconds before the damaging secondary (S) waves strike. On site EWS developed by Secty Electronics senses the primary waves of an earthquake and its eight threshold values are programmed in such a manner that it calculates the intensity of 5 at the threshold value 01 and triggers alarm at the intensity of 6 (threshold value 02). Threshold values 03, 04, 05, 06 and 07 are programmed in such a manner to shut off the running applications, like parking of elevators to nearest floors, shutting off gas/power/water supply, and open/exit gates. Threshold value 08 tells that earthquake is in the building. Thus, it is very useful for IT sectors, Educational Institutions, Shopping Malls, Public Buildings, Industries, Apartments, Multi-story buildings, Hotels, Cinemas, Shopping Malls, Bridges, Tunnels, Metro/ Railways/Airports, Nuclear/ Power Stations, Oil refineries and almost everywhere. “This product at present is the most ideal precautionary measure against Earthquakes, where people can get some time to react to the situation and evacuate the premises. The On site EWS if reaches out to the country, will allow countless lives to get saved and in some cases, even assets”, avers Rakesh Yadav, Chairman, Antriksh India.

“In case of a calamity like an Earthquake, every second counts. In a country like India where real estate sector is on a boom and developing lakhs of units every year, imagine the number of people who will be living in the coming years. Multiple researches and reports are suggesting that there is a big earthquake due, which will hit India anywhere, and it is like a time bomb ticking. In such a scenario, On site EWS is the only technology available to mankind today which can help reduce the losses of life in future”, shares and further explains Goel. Speaking about the seismic zones 4 and 5, almost entire NCR and northern parts of India are a part of it. Every year we witness several earthquakes with varied magnitudes whose epicentres are usually in Nepal or Afghanistan, and still its ripple effects are so strong that we can feel it hundreds and thousands of kilometres away. India has been a witness to many major earthquakes in the past, and one just cannot forget India’s 52nd Republic Day in 2001 when an earthquake that lasted 2 minutes had struck Gujarat with its epicentre being in Bhuj with a depth of only 16 Kms. As many as 20,000 people died and over 1,50,000 people were injured with almost 4,00,000 homes and other properties destroyed. “Every major earthquake in India has resulted with a loss of thousands of lives. With the land being limited and put to use for development, there is tremendous pressure on the ground below and with people residing on these lands, they are under the risk of getting exposed to such unforeseen damages. Thus, it becomes imperative to have devices that can alarm before the secondary waves of an earthquake strike. And with the availability of On site EWS now in India, damage to life and property can be significantly reduced”, says Dhiraj Jain, Director, Mahagun Group.

Indian real estate sector is on a development spree with numerous residential and commercial projects mushrooming in Tier 1 and 2 cities of the country. As these cities develop, migrations will increase, due to high job opportunities and thus, these will become densely populated over the years. As more and more people reside in one city, the risk of loosing higher number of lives increase as Earthquakes won’t tell the time and place before they strike. With the presence of such a technology that can grant even a single second to save lives, it is highly welcomed by the realty sector and very soon we will see this system becoming operational in several townships and other commercial projects in India”.