India's economic growth to remain robust: UN report

New Delhi: India's economic growth is expected to remain robust in 2012 and 2013, despite likely headwind of double-dip recessions in Europe and the US. This has been highlighted in the World Economic Situation and Prospects 2012, the United Nations' annual economic report released today. 

Indian economy is expected to grow by between 7.7 per cent and 7.9 per cent this year, the report said. South Asia's economies are expected to grow by 6.7 per cent this year and 6.9 per cent next year, accelerating slightly from 6.5 per cent last year.

Robust domestic demand will sustain this increase (in South Asia), but the economic slowdown in India, where growth declined from 9 per cent in 2010 to about 7.6 per cent last year, brings down the regional average, the report said. South Asia comprises India, Pakistan, Nepal, Iran, Bangladesh and Sri Lanka.

On Inflation

Among the major developing countries, growth in India and China is expected to remain robust. Brazil and México are expected to suffer a more visible economic slowdown.

The UN report expects inflation in most developing countries to decelerate this year, along with an anticipated moderation in global commodity prices and lower global growth.

Fiscal Deficit

On fiscal deficit, the report said that the Indian Government is unlikely to achieve its fiscal deficit target of 4.7 per cent of the gross domestic product for 2011-12 as lower growth has brought down tax revenues and disinvestment in state-owned entities has been put on hold.

On the global economic prospects for 2012 and 2013, the report noted that the world economy is on the brink of another major downturn and anaemic growth is expected during 2012 and 2013. Source: Hindu Business Line

Gurgaon now looks to its periphery

Gurgaon realty has always been centred on the Golf Course road and the M-G road. The attraction offered by the former is the mixed development of high specifications both in the residential and commercial segment while the latter has been popular on account of the malls and also for its connectivity to the NH-8.

With saturation setting in along these locations, developers have now focussed their attention on the Golf Course Extension Road and the Northern Peripheral Road. In early 2008, prices were in the range of Rs 3,000 a square foot. That has risen since then and today, projects command a price of Rs 6,000 and above per sq ft.

In fact, no builder has a new launch planned that is less than Rs 7,000 per sq ft. Those like Emaar and M3M are selling projects in this area at even higher prices, on account of the luxuries they offer.

Golf Course Extension road is now getting connected to NH-8, which is behind Haldiram in that area. A lot of other new developments are also coming on this road which covers Sectors 70, 70A, 71 etc. DLF had launched several plots in this location a year ago, and interestingly, had managed to sell all the plots in a period of two days on down payment plan.
 

The connectivity to NH-8 and the Golf Course offers an advantage and this is the main reason for the rapid price appreciation. A lot of reputed builders have projects under way in this area such as Tata Housing, Unitech with more than 300 acres, BPTP with similar area and M3M. Projects like Unitech Vistas is already on its way to completion and has attracted about 70 per cent premium from the launch price. Tata Housing is also planning to launch villas in their project in Sector 71. BPTP has been selling plots in the range of Rs 55,000 per square yard.
 

To decongest NH-8, both the NPR (Northern Peripheral Road) and SPR (Southern Peripheral Road) are under construction and will become operational in around 18-24 months, when both the roads would be ready for use.

NPR may get functional a little earlier, as there is less development work to be done in this area and the surroundings are also already occupied. This may also be a reason why property rates are increasing faster in this area.

Both the NPR and Golf Course Extension Road present a good investment opportunity with potential for rapid appreciation once the road links are functional. Source: Financial Express

DLF to sell convention centre project, wind power business for Rs 1800 crore

NEW DELHI: DLF, the country's biggest real estate firm, will sell a convention centre project in Delhi and its wind power business for about 1,800 crore early next fiscal, a senior company executive said.

The developer, which had a debt of over 22,000 crore at the end of September, is hoping to raise 3,000 crore in the current fiscal and about 3,500 crore in 2012-13 by selling its non-core businesses.

The executive, who did not want to be named, said DLF is close to finalising a joint venture agreement for the convention centre at Dwarka, in west Delhi, with a Japanese company that executes mega mall projects. The source declined to name the company but said DLF may hold a very small stake in the joint venture as part of a structured deal. The convention centre is expected to fetch DLF about 800 crore.

DLF had acquired a 35-acre plot from the Delhi Development Authority (DDA) in 2007 for 901 crore to ready a convention centre ahead of the 2010 Commonwealth Games. But the project, which was to include three hotels, commercial complexes and meeting areas, could not take off. Later, when the company wanted to exit the project and sought a refund from the DDA, the development body refused after seeking legal advise.

A top DDA official told ET, "DLF has sought permission to change the structure of the company that has got the land for the convention centre. They want to convert it into a consortium with a foreign partner, but DDA has not taken any decision yet."

The DLF executive said the developer has started negotiations with investors for its wind power business and expects to raise 1,000 crore through its sale.

A DLF spokesperson declined to comment when contacted by ET.

To pare its debt, DLF has decided to sell its non-core assets, which include land, special economic zones, hospitality business and some office buildings. The company's debt pile rose nearly 1,000 crore in three months to 22,519 crore at the end of September.

DLF has said it will raise 3,000 crore this fiscal through sale of its "Noida IT Park, Pune IT SEZ, some select land transactions and hospitality assets". Of this, the company has already raised 1,200 crore. Source: Economic Times

Six loopholes in Realty Bill

On Wednesday, January 11, the Ministry of Housing and Urban Poverty Alleviation invited comments on the draft Real Estate Regulation Bill (RERB). In Maharashtra, the state government has released a draft version of its own real estate regulation Bill, the very first state government to take the step.
 

In this backdrop, it would be instructive to take a look at the draft legislation once again. There are some loopholes in the legislation that need to be examined thoroughly so that the interest of the buyer is protected.

SIX AREAS OF CONCERN

A lot has been said and written about the provisions of the Bill and its benefits. Even as the intent of the Bill is laudable, there remain some concerns arising out of its provisions that need to be examined in detail.

Plot Size: The provision of minimum plot size could potentially create problems. The proposed minimum of 4,000 square metres to be covered under the legislation leaves out a substantial portion of the market unregulated. Let us look at three examples of how this can be circumvented:

Case 1: Developer “A” has, say 3,800 sq mt (40,888 sq ft) plot to develop. He can carry out everything as he likes as he is out of the purview of this regulation. Most standalone projects, and most of the redevelopment projects are under this segment and also the subsequent litigations. This could also lead to unauthorised development in tier-II and tier -III cities and towns where local forces may prevail more than laws.

Case 2: Developer “B” has plot larger than 4,000 sq mt, say, 7,500 sq mts. He may divide the plot into two and propose two separate projects say, 3,800 sq mt and 3,700 sq mt. As per the Bill, each project needs separate registration if the area crosses the threshold. But in this case he develops the land smaller than that size as one project, and is out of regulatory ambit. This can happen with still larger plots if division is allowed or managed as per local regulations.

Case 3: Developer “C” has the same size of land. This fly-by-night operator does not want to wait for two projects to be done one after the other or cannot afford the cost of waiting. He may be able to sell the part of it-on paper, of course. So, he creates another entity and then selsl/transfers/gifts the other half of the plot. Now both the projects can be carried out simultaneously with different names of the company and yet without adhering to the conditions of the regulation. There are no specific provisions or restrictions in this regard. Besides, many builders operate under more than one name for different projects. There are many projects, which are carried out under joint-venture agreement. These possibilities must be considered specifically.

Delay: The Bill makes it mandatory for each developer who registers with it to declare the time frame of the project. Regulation does not insist or compel anyone to declare a particular time frame, the freedom rests with the developer who has to adhere to it throughout the construction process till it is completed.

So, we assume that the developer must have calculated all the factors — raw materials, labour, approvals etc. If he thinks he can finish the project in three years he may very well declare four to be on the safer side. But then the Bill also provides for an extension of 1-2 years. This should not be open to all and should be on case-to-case basis especially during circumstances beyond control as the regulator may feel fit. If the extension is allowed to all there would be no point in declaring the time-frame. Projects will be delayed officially, with permission from the Regulatory Authority.

Conveyance: This is a very important legal status, which every housing society must have. Most of the societies in Mumbai do not have conveyance despite laws mandating it. There are several court cases on this issue. After giving possession with garden and open spaces to the society, the developer delays conveyance.

Later, he begins construction on the open spaces or garden claiming it to be his land as it is not conveyed to the society. Residents are just owners of the flat and the society has only the building under its control is the usual ploy. There are laws that the conveyance must be done within a stipulated period once the society is formed but like many other rules, this time-frame is mostly neglected and then misused. The proposed Bill should reaffirm or establish a new time-frame within which the conveyance must be done by the developer.

Area Measurement: The proposed Bill is not specific about the space measurement requirement. Most developers mention carpet area in the agreement of sale but in reality make the buyer pay enormous amounts for the super built-up or saleable area. Developers include staircases, dry areas, open areas, flower beds, common areas – areas that have not consumed Floor Space Index (FSI) – in the flat area and extort payments.

For example, a flat in an upcoming project on the out skirts of Pune mentioned around 700 sq ft carpet area in the agreement with the buyer, but actually demanded payment for 1,100 sq ft. The situation in Mumbai is particularly worse. Here a flat of 650 sq ft carpet area was sold on payment for twice the area.

The proposed Bill expects every developer to declare the carpet area of the flat but does not specifically restrict them from adding up other areas into it. The developer has already charged a high rate for those extra amenities and common facilities. Therefore, charging for them in the form of additional area should be stopped on an all India level.

Payment Schedule: The major reason for the helplessness of the flat buyer in case of delay in possession is that the developer drafts the agreement in a manner that he takes away almost 80-90 per cent of the payment on completion of the skeleton of the structure. This is the stage, where many developers are allegedly diverting the funds keeping the home buyers in lurch. No fund, no work, no possession. The customer is very vulnerable as he cannot withdraw, he cannot move court. He is at the mercy of the developer. The Bill should consider this aspect and regulate the demand schedule as well. For example, at the last stages of the construction, a developer can demand payment of 15 per cent of the cost on receiving Occupation Certificate (OC) and the last 15 per cent of the amount on possession.

One Agreement: The Bill makes it compulsory for the developer to deposit 70 per cent of the funds collected from the buyers of the particular project in an escrow account so that the funds can be used to for the project in question. There is a potential loophole here. Some developers may begin making two agreements with the buyer, one for the flat and another for the amenities. Indeed, the practice already exists to save stamp duty and other taxes. Now, this will be used to split cash flow. As per the Bill, only sale agreement is a must for all declaration. The Bill must ensure that only one agreement is made for the entire transaction along with amenities etc.

INDUSTRY VIEW

Anuj Puri, chairman & country head, Jones Lang LaSalle India lists three lacunae. First, unless further safeguards are in place, the mandatory registration and licensing of projects may increase the scope for corruption. Second, it is also not certain how a central regulatory body will address land acquisition at the state level, with different laws in different states. Third, streamlining of approval procedures into a single window system is necessary for they are burdened with NOCs from multiple departments at the state and central levels. Lalit Kumar Jain, national president, CREDAI said, “The regulator should look into delays that are not in the hands of the developer and should have control over all stake holders including approval authorities, and financial institutions. We do not want licence Raj.”

The proposed legislation makes it mandatory for all state governments to set up a Real Estate Regulatory Authority in every state but difference in state laws will create variations in enforcement of the proposed law. Only pro-active state governments can remedy the situation. All eyes are on Maharashtra now. Source: Financial Express