ICCPL PROPERTY NEWS

GST TO PRESENT REALTY WITH REALITY

    The Indian real estate sector is expected to grow and touch $200 billion by 2020. For over last one decade, housing sector itself has had a 5-6 % consistent contribution towards Indian GDP along with being one of the primary contributors towards employment generation. This sector can be broadly classified into four sub-sectors; housing, commercial, hospitality and retail. As the country moves towards urbanisation, this sector’s growth will be well complemented and the demand for housing and commercial divisions is bound to move north. The much awaited Goods and Service Tax (GST) is to be tabled in the upcoming winter session of the parliament commencing from 26th November, 2015 and ending on 23rd December, 2015; and if implemented it can prove to be a real game changer if formed and executed in a planned manner. Apart from GST, Land acquisition bill and real estate bill will be two key bills to look out for.

Looking at how much growth it can bring towards the realty sector of our country, Mr. Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz avers “Implementation of GST will basically work on three major elements for this sector; simplification of tax structure, reduction in construction costs and better transparency. Speaking about its contribution post acceptance, we are predicting a nationwide realty sector growth by almost 20 percent than projected in the course of next 5-7 years. There will be a quick reaction towards the sector by its customers as demand is bound to increase due to reducing costs and improving transparency in the sector that has been the hurdle making this sector suffer for long now”.

Simplification of Tax Structure

One of the major issues that GST can address is to present this sector with uniformity of tax practices. There have been countless instances where duplication and multiplication of taxes has somewhere dented the credibility of this sector. Presently, the realty sector has two key levies in the form of VAT and service tax, with overlay of tax base and continuous disagreements for the rate of tax, given the several options available for discharge of taxes across states. All these reasons have resulted in varied practices being followed by developers across different regions and within states. “With the dawn of concepts like hustling in service tax coupled with reductions and various mandatory charges collected by developers these days, highlights the importance of having a same tax base which can be only answered by GST. A single tax rate across the country will promote fair practices which will further encourage transparency and less evasion in the sector that supports in future growth of demand for real estate” states Mr. Ashok Gupta, CMD, Ajnara India Ltd. Adding to the view, Mr. Kushagr Ansal, Director, Ansal Housing says “Now days, there are developers and builders who are constructing projects in different states and thus have to abide by the state specific VAT laws, service tax and corresponding compliances. The presence of several indirect tax components faced by the developers at present are a major cause that bring tax inefficiency in this sector. Thus, the acceptance of GST will finally help in restricting these problems and create a simplified tax structure which can be followed by developers not worrying about which region or state they plan to construct and deliver at”.

Reducing the cost burden

Currently, the homebuyers of this sector are under the pressure of two forms of taxes; service tax and VAT on the purchase of residential units when booked prior to its completion. There are numerous components of non-creditable tax costs such as CST, entry tax, customs duty, excise duty, etc. which is duly paid by the developer on its procurement side which are basically ingredients for the cost pricing of the units. “All the non-creditable tax costs borne by the developer add upto almost 25 percent of the price of units. The proposed GST plan should replace these multiple taxes stinging the buyers through high cost price of units by a single tax thereby also ensuring smooth flow of funds through the chain. Thus, it is widely anticipated that inclusion of GST should either reduce the construction cost for the developer or if not reduce, then atleast help in maintaining the current price levels in the sector”, elucidates Mr. Ankit Aggarwal, CMD, Devika Group. Speaking on the other hand, Mr. Vikas Bhasin, MD of Saya Group does agree if the lower side of GST gets implemented then it will be a boom for the sector, but what if it’s the other way around. In that case he explains “There is no doubt that multiplication of taxes will be curbed through GST, but the only question will be what rate gets decided. The only dampener for this sector can be high GST rates, such as 27 percent GST that has been making the rounds as this will counterpoise any possible gains on incremental credits. Also, stamp duty is not proposed to be incorporated under GST and will thus continue to remain as it is at present. Therefore, decreased cost of construction will take place once a lower bracket of GST is applied as the developers will be liable to pay much less than today, thereby allowing cost of units to fall which will directly benefit the end users”.

What future it holds?

“The first and foremost decision has to be on a single GST structure as the situation may get further complex with states having power to notify differential SGST rate, as the present model indicates a separate tax rate schedule for both, centre and state levels, that is CGST and SGST respectively. In such cases, local developers will have a tough time in the middle and isolation is bound to happen for states opting higher tax bracket. Thus, realty markets for such regions will fumble if single GST structure is not made applicable”, illuminates Mr. Rupesh Gupta, Director, JM Housing. It has been correctly pointed out that a single GST will be the real need of hour in order to create smooth functioning of this sector. “A well-defined GST implemented for the country will bring about a relief for this sector and its customers. Commercial realty players will be hugely benefitted as all the lost Cenvat credit, which is in current regime a cost to commercial developer can be availed if GST is applied in a free flow manner that will also help in reducing costs. A much simplified single tax rate, reduced construction costs and better transparency in the sector will be much welcomed by the developers and its customers”, shares Mr. Mukesh Khurana, MD, Rudra Buildwell.

With increased limpidity and streamlined tax procedures, most small and mid-scale developers will also come into picture, as in order to control corruption; filtration process will make many developers visible. “In a nutshell, GST seems to be a benefactor for the realty sector, provided a single tax rate gets followed and increase in the margins moves into the hands of the developers. Now whether this benefit will be rightfully passed on to the customers will be a question remaining to be answered, as this sector is driven more by market dynamics than costing principles. Although, fair tax practices will pave way for greater transparency which will allow real estate transactions to form an integral part of the proposed GST design”, concludes Mr. Vikas Sahani, CMD, Property Guru.

ICCPL PROPERTY NEWS

WHAT’S IN A NAME?

“What’s in a name? that which we call a rose,

By other name would smell as sweet.”

— William Shakespeare, Romeo and Juliet

  As perfectly quoted by Shakespeare makes us believe the fact that no matter the name, the essence remains the same. But in India, names make a huge difference in how we perceive somebody. Be it a living personality or even a non-living entity, names play a major role in describing. Real estate sector in India and across the globe are very selective when it comes to naming their properties as it allows the potential customers to connect and understand better. Naming  also allow in selection of a valid theme for the project which further enhances the look and feel for the project thereby increasing the chances of being accepted by the customers.

“The act of naming and significance behind those names is an intrinsic part of every culture and that they are of enormous importance to both, the one who is receiving it and those who undertake the task of naming. Real estate sector is no different and is extremely particular in naming their projects as they are considered no less than a company’s child and provide a distinct identity to their product. For the customers and the society, naming of projects allow them to understand what it might hold and what is being offered to them”, enlightens Mr. Rajesh Goyal, Vice President CREDAI-Western U.P. & MD, RG Group. The company has several projects in NCR with highly thoughtful names. For instance, its luxurious project named as ‘RG Luxury Homes’ speaks for itself and what it offers to its customers. Adding to the view, Mr. Vivek Gupta, Director, Vardhman Estates & Developers (P) Ltd. states “In the realty sector, logical naming has been extremely popular as it lets the customer to effortlessly understand the offering by the developers. Modern day developers have been offering varied projects with unique themes and consequently select a name for their projects. This allows the customers to recognize the project better and for the developers, this strategy also makes the project stand out in the region amongst others”. Vardhmans also follow this strategy of naming smartly with its quite a few projects named on the basis of the regions and its offerings. For example, its project ‘Alpha Square’ is a name based on a location, sector Alpha in Greater Noida. Also, its project ‘i Valley’ signifies the presence of IT park in the project with architecture looking much like a valley.

Names to match Themes

Modern day concepts of naming are much different. Today, names are being followed on the basis of regions, themes, offerings and even religion. Western culture has had a mammoth influence on our country which has provoked the developers to offer entire project based on unique themes. For instance, NCR realty major with over two decades of experience, Ajnara India Ltd. has several projects based on country themes. Its project, ‘Ajnara Ambrosia’ with Spanish theme makes this project look like a little Spain in itself. ‘London Square’ another project by the group offers lavish theme based on English way of living. “Theme based construction is presently trending in the Indian realty sector with developers offering a series of theme based projects and townships. Even we are a part of this boat with all 3 of our current projects based on a unique floral theme. But at the same time, we make sure that this theme is prominently visible and felt throughout the premises as we offer beautiful landscaped gardens, massive green covers and much more”, expresses Mr. Rupesh Gupta, Director, JM Housing. Another NCR realty major Shri Group has been known for its noticeable presence in the city of Lord Krishna, Mathura & Vrandhavan. The company has numerous projects in the region and follows a religious theme for its projects with ‘Radha’ word attached in names of the projects such as ‘Shri Radha NRI greens’, ‘Shri Radha Valley’ and ‘Shri Radha Florence’ to name a few.

Promoting recall ability

The best feature of smart naming is that it increases the retention and recall ability. Theorists and researchers have always promoted the value of selecting names that have a related meaning to the identity so as to promote the recollection ability. Words with direct meaning and derived from a direct word are able to hold a greater recall value. For instance, the word ‘Pentium’ is derived from a Greek word ‘pente’ which means five. Also, shorter names have better retention ability than longer ones. “Even in real estate sector, names have to be carefully selected to make sure that the correct message reaches in the ears and minds of the customers. This sector usually chooses names that match the theme of project, region of deliverance or even the philosophies through which the company promotes itself. Such names are suitable for the general as well as targeted audience in order to achieve the proper retention and recall of the brand name”, explains Mr. Rakesh Yadav, Chairman, Antriksh India.

A developer highlighting their project as a sports theme based must not name it as ‘kid’s paradise’, or a kid’s theme based project shouldn’t be named as ‘sports ground’ as this will only become misleading for the audience which will further lead to confusion and lowered sales. “Name is an integral part of describing an entity, be it living or non-living, even for tangible assets like real estate. This sector has used naming as a part of its strategy to make the customers not only understand about the product that it is offering, but also to connect for long term. Correctly choosing the name allows customers to connect better with the property and understand what is in offer for them. For the developers, the attractiveness and style quotient increases drastically. Hence, naming of a property has been in roots of the realty sector from the very beginning and will continue to remain as the time progresses”, concludes Mr. Ajay Rakheja, Co-Founder & CEO, Creindia.com.

ICCPL PROPERTY NEWS

SECTOR PUSHING FOR CORPORATE SOCIAL RESPONSIBILITY

   As the festive season is nearing its end with Diwali and the winter season to commence thereafter, it is crucial to understand the importance of health during the entire winter season which must not be ignored at any cost. Fortunate segment of population which is able to beat the cold waves in the country are able to take care of themselves; but India has a majority of population which is unfortunate and looks for shelter, clothing and food to sustain the winter season. Real estate sector is largely employment driven as being one of the major contributors to generating job opportunities in the country. Also, there is employment generation from bottom to top of the hierarchy. Hence, this sector plays a vital role during the winter season to provide much needed relief and perks for its pillars and serves ‘Corporate Social Responsibility’ towards the nation.

“Every year India reports maximum health ailments and loss of life cases during the winter season. It is therefore most important for every corporate to fulfil their duties towards the society by providing any and every means of assistance to its manpower through shelter, food, clothing or others” states Mr. Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz. Gulshan Homz is a pretty prominent name in the realty sector of NCR’s corporate social responsibility which has always been doing its bit for the society through different activities. Blood donation camp, distribution of blankets, free medical camps, adopting a school, are a few activities that the company has undertaken. Adding to view, Mr. Rupesh Gupta, Director, JM Housing says “It is imperative to understand the value of human life and accordingly provide them with benefits that are unavailable to them. Every winters we undergo a series of health awareness campaigns along with several activities for the labour to make sure that not only do they stay fit but are also able to perform at work with utmost efficiency and effectiveness.”

CSR in India has been gaining popularity as the presence of MNCs and corporates have increased over the years. “The culture of CSR is extremely popular in the western hemisphere which has gradually gained prominence in India as well. An act of CSR does not only signify the value of human life or society, but an act of respecting others and providing the unfortunate with something of value. Real estate sector in India has taken up CSR as a priority since it is heavily employment driven”, avers Mr. Mukesh Khurana, MD, Rudra Buildwell. Highlighting how real estate does its bit for the society, Mr. Amit Chaudhary, MD, Rhythm Ccounty explains “During the winter season, examples of most important deeds are usually providing shelter, clothing, food and medical assistance in case of health. In this sector during winters, developers offer clothing in form of blankets and warm clothes, food in form of dry fruits and other eatables, shelter in form of temporary houses around the project sites so as to reduce travel and provide cosy shelter. For medical aid, frequent doctor visits, medical camps and health awareness camps are implemented”.

Thus, as the winter season kicks in, developers in the sector become proactive to secure their employees and the habitat, by performing various CSR activities. “CSR has become an integral part of modern day work culture in India. It shows a company’s dedication and devotion towards its employees and the society who is the real backbone for them. On the other hand, because this sector caters to both; product and service industry, it becomes vital that society is not ignored at any cost. Any good deed done for the society and its people helps in direct brand building as well, which is most important for any company to perform in the long run”, concludes Mr. Rakesh Yadav, Chairman, Antriksh India.

ICCPL PROPERTY NEWS

INFRASTRUCTURE AND CONNECTIVITY: THE BACKBONE OF REALTY

     For any real estate region to perform and grow, infrastructure and connectivity serves as the backbone. Every resident and user thrives for a habitat which is able to meet there daily needs and, infrastructure and connectivity plays this role of fulfilling the need. For any resident, a decently developed infrastructure in the neighbourhood allows them to live a peaceful life and those who are not the residents of a region are dependent upon good connectivity to commute hassle free and meet their respective needs, which can be official commutation, recreational travelling and others. Thus, real estate sector can only succeed once there exists sound infrastructure and connectivity for its users.

“History has been a witness to how well-developed infrastructure and connectivity shapes up the real estate prospects of a region. There exist a direct relation between real estate in a region and the region’s development with respect to infrastructure and connectivity. You talk about India and other countries, everyone’s real estate performance bets upon decent infrastructure and connectivity in the region to make sure that target audience is grabbed for short term which can be carried till long term as well”, explains Mr. Vivek Gupta, Director, Vardhman Estate & Developers (P) Ltd.

Integral part for commercial real estate:

Who likes to travel for hours on busy roads with long hauls to reach office or a place for recreation? Thus, a commercial property can never be a hit if the region does not get support of good connectivity. Mr. Ajay Rakheja, Co-Founder & CEO, Creindia.com explains the importance of connectivity and infrastructure for commercial real estate, as he elucidates “Localities with better road connectivity always get picked first in case of buying or developing the property. Efficient road network maximizes the economic and social benefits for the country. On the other hand, once connectivity is attained, infrastructural development is bound to take place. This feat once achieved, allows companies and offices to get setup thereby enhancing employment and economic growth opportunities in a region. We hope that the government takes up Commercial For All parallel to Housing For All”. Agreeing and adding to the fact, Mr. Kushagr Ansal, Director, Ansal Housing states “Commercial real estate majorly requires good infrastructural arrangement in vicinity such as metro stations, bus stands, taxi stands, parking lots, etc. so as to aid the daily commuters. Also, it is very important to have a belt of commercial properties in one region to support the residents need and based on this concept, currently many regions are been developed with majority of commercial presence”.

Highlighting the significance of connectivity for the commercial real estate, Mr. Ankit Aggarwal, CMD, Devika Group avers “If the commercial properties are not well connected, it becomes nearly impossible to sell them. It is extremely important to have good connectivity and transportation facilities available nearby so that it becomes easier for users and buyers to buy, lease and use a property. At times it is better to develop commercial property in regions with connecting roads and highways. There we have lot of land parcels available plus it becomes easily accessible for the people and also avoids nuisance in the compact residential areas”. Extending on the same but with a different outlook, Mr. Sushant Muttreja, CMD of Cosmic Group is of the view that commercial real estate has lost its lustre over the time as regions in India are still much short on the connectivity front. He says “It’s very crucial to analyse and access the demand of a commercial property versus a residential property. Once a commercial property sets up in a region, it banks high on external catchment and if the location is well connected with decent infrastructure, it becomes 50 percent easy for the commercial property to meet its supply. This sight has been greatly missing in Indian real estate sector, where the residential real estate has been immensely worked upon and commercial real estate is still to receive its due; something which has recently started to gain importance after the ‘Make In India’ initiative”.

Correct push for Residential front:

Another side of real estate sector is residential, which presently is under a series of governmental pushes especially through Housing For All initiative. But the main question is; what is the point of owning a house which is neither well connected nor is in proximity to vital infrastructural facilities such as schools, hospitals, education institutes and other such civic regional amenities? Therefore, connectivity and infrastructure hold a key place in shaping up residential real estate in a region. Looking into the micro factors which actually make a huge difference in one’s lifestyle, Mr. Rajesh Goyal, Vice President CREDAI-Western U.P. & MD, RG Group explains “Connectivity and quality of roads reduces the travel time between places hence increasing the approachability between them. Connectivity improves the social meetings with friends and families with low fuel expenses, low travel time and low distance. Travelling to workplaces also gets improved as the amount of time taken for reaching workplaces is reduced. As the time taken to travel to workplaces is reduced; hence people can enjoy their life apart from the office and spend more time with friends and families thus enhancing their lifestyle”. Adding further, Mr. Vikas Bhasin, MD, Saya Group states “In a country with shortage of housing, the ready and purchased residential units today are either put on rent or end use. In both cases, the property being used requires a good habitat in vicinity without which, residing becomes out of question. Hence, to answer this question, good connectivity and presence of strong infrastructure are two crucial factors to meet this requirement thus highlighting there importance”.

There are two ways of properly connecting a property; one, choosing an already well-connected location and other, developing the property and then waiting for connectivity to improve. But speaking off infrastructure, it will always become crucial to meet the initial and continuous footfall in a region. “Several emerging destinations across the country are unable to make an impression on the potential buyers due to the absence of proper infrastructure. A residential property buyer will always buy once the region where he’s investing has a sound infrastructure in place. This not only allows residents to receive a good habitat but at the same time, receive future capital appreciation which is only possible with developing or developed regions”, enlightens Mr. Ashok Gupta, CMD, Ajnara India Ltd. Explaining further, Mr. Vikas Sahani, CMD, Property Guru adds “Why real estate regions are categorised into various tiers? Different tiers demonstrate the development and acceptability of the region. A buyer planning to reside immediately in tier 4 regions will face problems of poor infrastructure and connectivity, whereas tier 1 region will meet those demands instantly. The reason of differentiation is nothing but the infrastructural development of the regions and hence, even for residential demand infrastructural development is a necessity”.

Commenting upon how these two parameters have always acted as the backbone for the sector and will serve keep on serving in its future to come, Mr. Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz concludes “For the development of a region, infrastructure and connectivity go hand-in-hand and are of utmost significance. Without either one of them, the region can only witness growth at snail’s pace which in present time, won’t be considered suitable for development and returns. Finally, with government’s ongoing pushes like Smart Cities, AMRUT and Housing For All; it will be most crucial to ready the country with stunning infrastructure and strategic connectivity so as to provide the perfect platform for unstoppable growth of the realty sector”.