Is Indian Real Estate Sector Going to Revive in 2020?

Feb 11,2020 / By Prahalad Singh / No Comment

Real Estate Sector in India

The real estate sector in India has been witnessing weak sales for the last few years, resulting in a sharp drop in its significant contribution to the country’s Gross Domestic Product (GDP). Overall, the year 2019 proved to be a mixed year for the nation’s realty sector as the commercial sector flourished but that was not the case with residential real estate. However, some positivity has been seen in the market as a result of various announcements made by the government last year. Government announcements like NHB raising liquidity for Housing Finance Companies, relaxation of External Commercial Borrowings (ECB) funds, and approval of a Rs 25,000-crore alternate fund have all been made at a positive pace.

Nation’s real estate sector saw a fall after banks limited lending activity post the NBFC crisis in 2018 and the situation worsened further in 2019 to a sharp demand crisis. Not just the real estate sector but a large number of other industries indirectly related to the sector have also suffered the heavy winds of low demand.

Real estate developers, consumers, and investors have been facing the burden of the fall in the housing segment for the last few years. From unsold inventories to incomplete construction to delayed projects, the segments had faced a lot of difficulties that have been pointing to negative sentiments.

In spite of the government’s measures to revive the weak realty market, there has been no positive result except limited growth of just 1% in the year 2019 but far from reaching its full potential.

According to the International Monetary Fund, India’s economy grew by about 4.8% in 2019, a sharp drop from 6.8% in 2018. Similarly, unemployment rose to 7.5% in the last 3 months of 2019.

There is an urgent need to approach the challenge of liquidity suffered by the sector, especially after the NBFC cash crisis. Liquidity will improve sentiment in the market with a regular supply of ready to move-in homes. If the challenge is not tackled on priority, it will block the confidence of developers as well as buyers which may seriously affect the realty sector as well as the economic growth of the country.

Few bold govt measures that could revive the real estate market in the year to come including tax rebate hike, personal tax relief, higher liquidity, better land reforms and fast infrastructure development for raising homebuyer sentiments.

The industry body has also suggested the government to reconcile the Insolvency and Bankruptcy Code (IBC), GST and individual taxes to help increase demand for unsold properties, which increased sharply in 2019.

The reviving real estate sector would also improve overall demand as the sector employs a large number of laborers belonging to lower-income groups. As a result, it could lead to a strong rise in rural demand.

However, it needs to be noted that the measures are not yet sufficient in size and will not be able to cater to real estate developers (small and big) and players in Tier 2 and 3 cities. Most importantly, the measures need to be backed by other factors mentioned below to bring in a proper resolution. Instant step in terms of implementation of several schemes and processes is expected to bring momentum into the sector in 2020.

Budget 2020-21 Fails to Address Major Concerns of Realty SectorFreal estate

It offers a few solutions to revive the nation’s weak economy. The government’s $428 billion budget for 2020-21 considered a series of modest initiatives, including planned investments in new roads and airports and personal income tax cuts, along with an increase in bank deposit insurance to encourage customers worried by high-profile bank failures.

But it offered no large incentive plan to produce more jobs or money in the pockets of India’s 1.3 billion residents, most of whom rarely get their food through farming or work in the informal economy. Nor did the budget offer any additional support for the country’s weak financial institutions.

Few Govt measures that may put real estate back on track in 2020 includes:

Industry Status

For a long time, the real estate market demands an industry status that can help it with finances at a lower cost, especially at times when the availability of funding is a major barrier for the industry.

Single-window clearance

The sector, which is struggling to deal with multiple government offices for project approval, wants a single-window clearance facility to initiate the project implementation faster.

Removal of Multiple Rates or Taxes

Multiple rates or taxes need to be removed into a single standard GST rate.

Incorporation of Stamp Duty under GST

The cancellation of stamp duty or its incorporation under GST.

Lowering Interest Rates

In 2019, the Reserve Bank of India (RBI) reduced the policy rates (Repo Rate) by 135 basis points. But the registered commercial banks didn’t follow the procedure. So the average marginal cost of lending rate (MCLR) of banks has decreased by only 64 bps. The lower interest rates will benefit to decide the existing liquidity crisis and boost housing demand.

Rebate in Income Tax

Rebate in individual income tax will be another help to the sector as it will decrease the financial burden of the buyers and improve their expendable income.

Housing Loan Interest Rates to be Reduced

Interest rates on housing loans also need to be reduced to encourage demand and sales. Restoration of income tax gains on a 2nd home can benefit homebuyers in a big way.

Notional Rental Income

We expect the government to release organizations involved in real estate business from the burden of tax on notional rental income or the period of 1 year should be extended to 5 years. This is pushing buyers away from the market and affecting the sector as well.

Restriction on Home Loan Interest Paid

The govt should also remove the restriction of an additional deduction of Rs 1.5 lakh paid on a home loan up to Rs 35 lakhs with total values not exceeding Rs 45 lakhs.

The government should implement land reforms and amend the acquisition process.

People’s Expectations:

It is expected that the real estate sector will hopefully observe a growth story in 2020. Covering 1,600 projects with 458,000 housing units under the center’s announcement will help in raising buyer confidence and is expected to generate significant employment. We expect the govt to give full support to the sector not just in terms of the announcement but also implementation. The year 2020 needs a device to protect developers from the existing liabilities and stuck projects. It also needs to incentivize stressed projects in various ways.

At the same time, the central government has projected that the economic growth would rebound to as much as 6.5% for the current fiscal year.

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Modern Kitchen Trends 2020

Feb 4,2020 / By Supriya Mogarala / No Comment

Modern kitchens are one of the best alternatives for many reasons. Our lives are full of chaos and chores where we have really less time to spend in our house. Modern kitchens will let you dedicate yourself to other tasks and activities that you cannot usually do in your house. The kitchen must be simple, practical, organized and functional but without leaving aside a beautiful design, this space will never fail to transmit the warmth of home that you will find in these kitchens of past years.

Modern kitchens will serve as an inspiration as one of the spaces of the house that is being modernized and updated in recent times. The design of your kitchen is one of the most important decisions that you must make while you design your house because the appliances require a lot of choices and installations.

Modern white kitchen:

The white colour is one of the main colours in interior decoration, it will never fail to provide your kitchen with a very powerful visual effect by increasing the reception of light and will bring you a sense of cleanliness with amplitude. Ideally, combining the white colour with other colours that will bring vibrancy to your kitchen will be a good idea. The white color can be combined with as many colours as possible since it has the power to blend with any colour around it. White colour has very good compatibility to get blended with all types of materials also. Wood, granite, vinyl are the materials that will make a perfect combination with white. With vibrant colors like white present in your kitchen, you can choose any decorative style for your kitchen. It can be in Nordic look or in retro style by matching it up with lacquered furniture and the white pickled wood. You can combine your kitchen with aluminum accessories to obtain a modern result. And when it comes to walls, you can choose smooth walls or tiles. White color is perfect even for the ceilings.

Appropriate colours for modern kitchen:

It is true that colours we choose to design our home interiors will have a great impact on us. The area in the house must contain the colours that transmit creativity, sociability and enhance calmness in the environment.

If you choose to use a range of cool colours such as purple, green or blue, these colours will make sure that they transmit the kitchen to be clean, efficient and all the above. These colours are meant to provide beautiful aesthetics and professionalism in the kitchen.

You can also choose warm colours such as orange, yellow or red, these colours create more welcoming spaces. These shades of colours will make your kitchen transmit all the warmth. You gain a lot of positivity because of these colours. One of the best options is also to combine your kitchen with cold and warm colors.

Modern kitchen in contrast colours:

One of the best options is to combine the colours to achieve a neutral look is to combine it with various shades of green, red, blue, and beige. Of the colours you choose, one should be the main one that serves as the base and another one will serve as a secondary shade, and the third one will be the most striking colour that will be used only in small strokes in the smallest elements of the kitchen. And based on this, the first two colours will be similar and belong to the same branch of colours. Shades like pastel pink, lavender, pale pink have the strongest compatibility that has a white base.

What advantages do modern kitchens have?

Currently, there are different designs for modern kitchens. Its popularity has indicated that users who want to have one have a huge variety of models, colours, features and various functionalities to decide from. But, in common, what are the qualities that will make modern kitchens so welcoming?

Firstly, it is the creative design that draws consideration of the potential buyers. Currently, the kitchen has winded up to be a separate space apart from the eyes of guests and is frequently blended with the rest of the house, so you have to attract people who see it as much as the rest of the decor. Therefore, the kitchen not only has to comply with the purposes linked with it but must also present a style compatible with the rest of the house.

Thus, this kind of modern kitchens, with their thoughtful design, bright surfaces, and global thought directed both at remaining functional and gratifying to the eye, develop as a great option when it comes to understanding the overall decor of your house.

Kitchens are not those spaces anymore which are just dedicated entirely to perform functions related to food, but also are places of friendship and other social activities. Therefore, modern kitchens are also defined by the presence of items like stools and chairs that let you cook, eat and store different objects in the most unique way. In this way, the attention that these types of design plans lend to the function of the kitchen as a place for socialization has won the hearts of many people, who have preferred this type of kitchen to be included in their house.

The surfaces of modern kitchens are wear and tear-resistant and, particularly, very easy to clean. With the fast-paced life we are living now, we are very appreciative that one of the dirtiest spaces of the house can be cleaned instantly and easily. Therefore, the substances that modern kitchens are usually made of are characterized by being ready to be easily cleaned and be much more repellent to stains, bumps, and humidity than the more traditional design, such as wood.

The modern style also provides the chance to have kitchens with integrated furniture and appliances, which makes them ideal and perfect for small houses where you have to take benefit of every last crack possible. Modern kitchens are hugely versatile and adaptable, which makes them a perfect choice for those houses where a shortage of space is a major problem. The islands, that ordinarily substitute conventional tables in the designs of modern kitchens not only improve their storage space but also add a new place to keep appliances that sometimes do not fit in the usual design, such as an oven or a dishwasher.

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Union Budget 2020- Real Estate Highlights

Feb 1,2020 / By Supriya Mogarala / No Comment

Real Estate Sector Highlights of Union Budget 2020:

Nirmala Sitharaman, Finance Minister of India has announced the Union Budget 2020-21. In the second term of the current government, this is the second budget. Fundamentals of the economy are strong enough to assure the stability of the micro-economic growth of the country. Banks had cleared up and recapitalized the accumulated loans of the past decade. Numerous steps have been taken on the formalization of the Indian economy.

Infrastructure:

Infrastructure was a principal focus for the Finance Minister as she presented her Budget speech. She made various important announcements on infrastructure like setting up 100 new airports for the UDAN scheme by 2024. The presence of an airport will enhance the city’s image as a business destination and will directly augment the scope of rental housing. She also announced that large solar plants would be set up on land owned by the Railways along the railway tracks. 148 km long Bengaluru Suburban transport project at a cost of 18600 crores, would have fares on the metro model. Central Government would provide 20% of equity and facilitate external assistance up to 60% of the project cost.

The government has proposed to provide about 1.70 lakh crore for transport Infrastructure in 2020-21. Proposal has been given to set up a project preparation facility for infrastructure projects.

The National Infrastructure Pipeline was launched on 31st December 2019 of ` 103 lakh crore. It consists of more than 6500 projects across sectors and are classified as per their size and stage of development. These new projects will include housing, safe drinking water, access to clean and affordable energy, healthcare for all, world-class educational institutes, modern railway stations, airports, bus terminals, metro and railway transportation, logistics and warehousing, irrigation projects, etc. The National Infrastructure Pipeline envisions improving the ease of living for each individual citizen in the country. It will also bring in generic and sectoral reforms in the development, operation, and maintenance of these infrastructure projects.

Accelerated development of highways will be undertaken. This will include the development of 2500 Km access control highways, 9000 Km of economic corridors, 2000 Km of coastal and land port roads and 2000 Km of strategic highways. The budget plan had also focused on the completion of the Delhi-Mumbai expressway by 2023 and the construction of the Chennai-Bengaluru Expressway would also be started.

FASTag mechanism encourages us towards greater commercialization of our highways so that NHAI can raise more resources. I propose to monetize at least twelve lots of highway bundles of over 6000 Km before 2024.

Affordable Housing:

In line with the government’s initiative “Housing for All” and Affordable Housing, it has been announced that the tax holiday is granted on the profits earned by developers on affordable projects approved by 31st March 2020. In order to ensure that more people will avail of this benefit, Sitharaman has proposed to extend the date of loan sanction for availing this additional deduction by one more year. The government also plans to extend the additional reduction of INR 1.5 lakhs for interest paid on home loans taken for the purchase of affordable housing by one year in order to boost the supply of affordable houses in the country. The interest deduction of up to INR 3.5 lakh for affordable housing priced below INR 45 lakh as against INR 2 lakh earlier for loans availed until March 31, 2021.

Personal income tax and changes in income tax slab:

In order to minimize the hardship in real estate transactions and provide relief to the middleclass taxpayers who are willing to let go of certain deductions can now make the switch to new rates. The new and simplified personal tax regime, wherein income tax rates will be significantly reduced for the individual taxpayers who refrain certain exemptions and deductions.

Taxable income slab	Existing rate	New rate
Rs 0-5 lakh	No tax	No tax
Rs 5-7.5 lakh	20%	10%
Rs 7.5-10 lakh	20%	15%
Rs 10-12.5 lakh	30%	20%
Rs 12.5-15 lakh	30%	25%
Rs 15 lakh and above	30%	30%

Making Indian real estate “green”:

Eco-friendly or green buildings segments have witnessed a huge growth in the Indian real estate segment. Reports suggest that the Indian green building market alone is poised to increase by 10 billion sq ft. by the year 2022, driven by factors such as increasing awareness level, environmental benefits, and government support.

Concession to real estate transactions and tax rates for co-operatives:

While taxing income from capital gains, business profits and additional sources in favor of transactions in real estate, if the consideration value is more than 5 percent by less than the circle rate then the difference is counted as income both in the hands of the purchaser and seller. In order to reduce hardship in real estate transactions and provide relief to the sector, FM proposed to increase the limit of 5% to 10%. Co-operative societies perform a remarkably significant role in our economy in promoting access to credit, procurement of inputs and marketing of products. These cooperatives are currently taxed at a rate of 30% with surcharge and Cess. FM proposed to present an option to cooperative societies to be taxed at 22% plus 10% surcharge and 4% Cess with no exemption/deductions.

Non-banking financial companies (NBFC’s):

To address the liquidity constraints of the NBFCs/HFCs, post the Union Budget 2019-20, the government formulated a Partial Credit Guarantee Scheme for the NBFCs. To further this support of providing liquidity, a mechanism would be devised. The Government will offer support by guaranteeing securities so floated. The government will allow NBFCs to extend invoice financing to MSMEs. The limit for Non-banking financial companies (NBFCs) under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 to be eligible for debt recovery is proposed to be decreased from Rs 500 crore to asset size of Rs 100 crore or loan size from subsisting Rs 1 crore to Rs 50 lakh.

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