BOMBAY, 4 February — The stock markets remain unpredictable, interest rates are hovering at pathetically low levels and bullion is soon becoming more or an "ornament" than the asset which it was perceived to be. And in this scenario, the Indian real estate market is showing sure signs of picking up. Property developers from all around the country are reporting a definite perk up in the business.
People with surplus funds are now once again turning back to real estate as the most feasible source of investment option. A cursory inquiry at most of the real estate "site offices" revealed that buying has most certainly gone up and so have the rates.
This week, we are not looking at the real estate rates but at the various new laws and amendments which have been ushered in. This way, you can buy your dream house in India, armed with the latest laws.
There is most certainly a lot for the non resident Indians (NRIs) to cheer about. NRIs are now permitted to invest upto 100 percent in the new issues of equity shares/convertible debentures of Indian companies engaged/proposing to engage in real Estate covering construction of residential and commercial premises including business centers and offices, development of township, development of serviced plots and construction of built-up residential premises, manufacturing of building materials, financing of housing development. The government has also allowed on "non-repatriable" basis, investment in proprietary or partnership firms engaged in real estate development.
Even overseas corporate bodies (OCBs) have been permitted to enter the sector, either forming a partnership firm or investing in a company incorporated in India.
Some amendments have also been made to the repatriation rules. The Reserve Bank of India (RBI) has now permitted limited repatriation facility to the interest or income portion on the investment subject to the terms and conditions that capital invested shall not be repatriable.
Repatriation of the original investment in foreign exchange made by NRIs/OCBs is now to be permitted with prior permission of RBI, only after a lock in period of three years from the date of issue of shares/debentures. In addition, OCBs will be permitted to repatriate the net profit (upto 16 percent) arising from the sale of such investment after the lock in period of three years.
This is not all. Government-owned Housing and Urban Development Corporation (HUDCO) has also entered into retail financing for NRIs and is expected to announce an NRI-oriented scheme offering credit up to Rs.5 million. The loans are given for purposes involving purchase of plots, improvement of existing property and construction on plots with a repayment facility in both, Indian currency and foreign exchange.
And inorder to give more impetus to the Indian real estate business, there is news that the government is likely to extend the benefit of a 10-year tax holiday to housing projects in the forthcoming budget in line with the rationalization of such facility given to core sector projects last year.
As part of the sops to the housing sector, the government is also in favor of relaxing the already-expired April 1, 2001 deadline for commencement of housing projects. The twin benefits will bring housing at par with other infrastructure sectors in terms of Sections 80IA and 80IB of the Income Tax (I-T) Act.
The government had in the last budget reworked the provisions doing away with the two-tier benefit of a 5-year tax holiday and a deduction of 30 percent of the profits for the next 10 years.
Instead, it had clubbed the benefits under an omnibus 10-year tax holiday. The justification for the move was that infrastructure projects needed a longer gestation period to become profitable and hence a 30 percent profit deduction after five years of commencing work did not make sense.
There is now news on the oft ambiguous rules of registration too. The government has now made registration of immovable property compulsory and restricted this to the area where the property is located.
This is expected to streamline the system and significantly curb malpractices and black money generation. Moreover, any person executing a document will have to affix on it a passport size photograph and finger prints. Previously, it was possible to register property transactions taking place anywhere in the country in a presidency town. This enabled property buyers to register in a metro with a lower rate.
Over the past few weeks there have been umpteen number of "property fairs" which were conducted all over the country. Apart from that, huge full page property advertisements which had disappeared during the lull, have once again resurfaced.
These are the biggest pointers to the fact that the Indian property markets are indeed showing sure signs of recovery. One will not see the boom which was witnessed three-four years back but the rates in the Indian property markets would be now at more realistic levels, with better quality of construction and more amenities being given by the builders.
Prices are expected to remain stable and if you have been putting off the decision to buy your dream house, expecting the prices to go down further, then be assured, the Indian property markets have tested the rock bottom and now, it has bounced back.