As per industry estimates, Mumbai office rentals have declined significantly over the past two years. Rentals in Nariman Point declined by a maximum of 14% from 2008 peak levels, and currently range from Rs 200-400 per sq.ft. per month. In the IT hubs of Gurgaon and Noida, rentals declined by almost 25% from 2007 peak levels, but have since stabilised. Hyderabad was one of the worst affected, as rentals dipped over 35% from peak-levels.
Investors who want to invest in rental yield funds should re-focus their investment strategies
around rental income rather than property appreciation, which has been the case for most investors up till now. However, experts point out that the tax implications of investing in rental yield funds may turn out to be cumbersome.
“Rental yield funds have huge tedious tax implications. Investors will have to pay tax on income generated by way of rental yields. Moreover, expenses are high on such funds and are payable upfront to the fund manager,” said independent financial planner Gaurav Mashruwala. According to Mr Mashruwala, such funds will do well if asset are bought at lower price levels or just after a deep correction.
Source: Economic Times
With the economic slowdown about to end, experts are suggesting people to invest more into Real Estate which is showing positive signs of comeback. If you want to buy Commercial property, then this is the right time. For just Rs 5 Lakh there are commercial office space available at one of the best corporate locales in India - "Nariman Point, Mumbai". The 30-40% decline in property prices(from peak levels), coupled with firming interest rates have resulted in private equity (PE) funds eyeing investment opportunities in real estate rental space. A few fund houses have already begun seeking investment commitments from investors, indicating 16% to 22% as annualised portfolio returns.
PE funds investing in real estate rental space follow a simple investment strategy. These funds are suited for investors who are risk-averse and prefer returns similar to those from fixed income schemes. According to PE industry officials, Milestone Capital Advisors, Xander Real Estate Partners, Indiareit Fund Advisors and an investment arm of Delhi-based real estate company DLF are planning to launch rental yield funds in India.
“Real estate rental funds are launched when property rates are close to their troughs. This helps funds to buy property at lower prices. Moreover, yields of investments increase in a rising interest rate environment,” said Ashish Joshi, managing partner, Milestone Capital Advisors, which raised money for a second fund investing in rental assets.
A ‘rental yield PE fund’ only invests in properties that are either occupied or under long-term lease or rent. In simple terms, the money collected from investors is used to buy out the property from the current owner. Once the property is acquired, the PE fund becomes eligible to receive rent from tenants. The rent portion is restructured or re-negotiated regularly in order to meet the return profile of the investor. The fund (and its investors) gain by way of rent recovery and appreciation in property prices. PE funds, normally, invest in commercial property. The managers route a major chunk of the pool into office properties and the remaining into IT/ITeS parks, shopping malls and warehouses.
“The segment looks good as rentals are likely to go up 10-15% over the next few months. Demand for commercial real estate space will go up as supply has come to a standstill post the economic slump. This will not only improve yield for investors but also increase overall commercial property value,” said Kamal Khetan, vice-chairman & MD, Piramal Sunteck Realty.
Rental returns from real estate investments have been traditionally higher in India compared to other Asian countries. This is mainly due to the restrained capital flows and the lack of an organised institutional investment market. According to real estate experts, a sharp correction in rentals during 2008 and first half of 2009 will result in rentals surging over the next few months. The rental market usually reacts to the surge in equity market with a 5 to 8-month lag.
The city-based state-run United Bank of India (UBI) has launched an eight percent home loan scheme available till March 31 next year, a release said here on Tuesday. The bank would charge eight percent interest on home loan for the first year and nine percent for the second to fourth years. From the fifth year onwards, it would charge interest on a floating basis, which would be two percent less than the benchmark prime lending rate (BPLR) prevailing at that time, the release said. Under fixed rate, the bank would charge one percent less than the BPLR and the interest rate would be revised every five years, it said. ‘United Bank of India announced reduction in interest on ‘Car Loans’ by one percent on the card rates up to December 31, 2009, and to add to the toppings, it also announced waiver of processing fees on car loans during the period,’ the release added.
Source: Indian Real News
Valuation of real estate, agriculture, industries and machinery and plants, marine properties etc. is under the consideration of Parliament. In June 2007, Delhi Government has also approved new property valuation rates for registration of property aimed at correcting undervaluation of property in the city, which affects taxes raised. Property will not be registered at values below the minimum value set for different locations and areas.
Initiated by the Ministry of Company Affairs, the draft bill to recognize, regulate and frame rules and regulations is under examination by different agencies and very soon will be tabled in Parliament, according to S S K Bhagat, Vice-President, Institution of Valuers-IIV (India).
He told PTI that the ministry had elicited views from various institutes and submitted its recommendations. Rationalization of valuation techniques is also under the purview of Institute of Chartered Accountants, Institute of Company Secretary, Institute of Cost and Works Accountants of India, Institute of Insurance Surveyors, The Indian Council of Arbitrator's.
The Department of Company Affairs, Government of India (www.mca.gov.in), had also convened different rounds of meetings among various bodies and the draft bill is also under circulation with the ministry of finance, company law, as per PTI.
Efforts to inculcate professional and academic touch to the concept of valuation has been coordinated with leading educational institutions as well, report added. Currently, Periyar Maniammai University, Thanjavur, Annamalai University at Chidambaram, both in Tamil Nadu and Sardar Valabhai Patel University at Anand in Gujarat offer post diploma courses in valuation with focus on real estate, plant and machinery and relevant topics.
The Bengal Engineering and Science University at Shibpur near Kolkata also plans to commission a MBA programme with six semesters on Real Estate Valuation. Similarly Sivaji University at Kolapur in Maharasthra is to offer Master's Degree Programme in Real Estate Valuations. Mysore University is also planning to to start similar PG Degree programs on valuation.
Sources: Livemint, Business Standard, PTI
Taking into account the future property prospects of real estate sector in Indian capital, Dubai-based Sherwoods Independent Property Consultants has set sights on New Delhi property sector and will open an office over there shortly.
Property adviser in Dubai, with a strong presence in the UAE as well as Europe, foresaw New Delhi's buoyant housing market with rising demand among the burgeoning middle class as India's economy booms.
Sherwoods estimated that there is a supply It also aims to beef up its presence across other major Indian cities. As well as showing signs of recovery from the global crisis, interest rates in India have from fallen from 11.5 per cent to 9.25 per cent, making mortgages cheaper.