As a non-resident, you are required to pay tax on the sale of the ancestral property in Mumbai, similar to a resident. Since the property has been held for more than 24 months, any profits from the sale will be considered long-term capital gains.

For the calculation of capital gains, the cost of acquisition is critical. In the case of inherited property, the cost is considered as the price paid by the previous owner. Since the property was acquired before 1 April 2001, the cost of acquisition for capital gain purposes is the fair market value of the property as of 1 April 2001.

To determine the fair market value, you can use the applicable rates or values such as the circle rate or stamp duty rate of the property on that date. If these values are unavailable, obtaining a valuation report from a registered valuer is necessary. It is important to note that the valuation report’s value should not exceed the prescribed rates or values.

The cost is then increased by applying the cost inflation index of the year of sale. The difference between the sale price and the indexed cost constitutes the long-term capital gains, taxed at a flat rate of 20%. To mitigate this tax, you have the option to invest the indexed long-term capital gains in a residential property or specified capital gains bonds within the specified period. As a non-resident, the buyer is obligated to deduct tax at 20% on the computed long-term capital gains if you provide documentary evidence of the cost. Failure to provide proof will result in the buyer deducting tax at 20% on the entire sale consideration.

If you do not have any other income taxable in India, you will be required to pay tax at 20% on the capital gains, as non-residents cannot offset the shortfall in the basic exemption limit against long-term capital gains.

Source : Mint

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NEW YORK — China’s property market troubles have global private credit investors looking increasingly toward India as Prime Minister Narendra Modi’s infrastructure push drives up real estate prices.

More than $4 billion flowed into India in the form of private credit during the first half of 2023, with over 50% going into real estate, Ernst & Young reports. This compares with $5.3 billion in all of 2022. Fund managers surveyed by the firm expect real estate deals to continue to increase in the next year and a half.

“It has a lot to do with the strong economic fundamentals, but India has also benefited from the shift of sentiment away from China,” said Edwin Wong, a partner at Ares Management and head of Ares Asia.

India surpassed China as the world’s most populous country this year, U.N. projections show, and also has overtaken China in economic growth. Last year the Indian economy grew faster than any other major market, a feat it is expected to repeat through fiscal 2024, when the economy is projected to grow 6.3%, according to the International Monetary Fund.

“When people look at India’s economic achievement in the past years, its favorable demographics and strong and stable government that has been pushing through reforms that are beneficial to foreign investors, the growth story of India does look quite promising,” Wong said.

Indian Prime Minister Narendra Modi is focusing on infrastructure spending to drive economic growth.   © Reuters

Private credit investors provide loans in deals where traditional bank financing is unavailable. They serve a niche market in India, where regulations limit banks’ ability to fund or lend in real estate transactions, especially in early stages of land development.

Following the pandemic, consumer preference shifted toward home ownership, and for larger homes, said Nishant Kabra, head of land and capital markets for North and West India at JLL Capital.

“That sort of flip has really continued, and it doesn’t seem to be abetting,” he said. “So you have residential setting new highs quarter after quarter. That has created more liquidity in the system, and real estate developers have become aggressive on land acquisitions.”

India’s real estate sector makes up 6%-7% of gross domestic product, a share projected to double by 2025, according to accounting firm Grant Thornton’s India branch. The country’s real estate market is expected to reach $1 trillion by 2030.

Modi has emphasized infrastructure spending to drive economic growth, and India’s capital investment increased 33% in its full budget laid out earlier this year.

This kind of capital investment into roads, railways and affordable housing will accelerate the country’s already rapid urbanization, which has exacerbated housing shortages.

“Much of the capital that is needed to fund the growth of India is going to come from the private sector,” Wong said.

A 2016 real estate regulation act and recent changes to bankruptcy codes have helped boost investor confidence in India, but navigating the complex web of land leasing and approvals remains daunting for outside investors, and working in private credit can help investors overcome some of those hurdles.

“Investors can work alongside many of the established players in the equity space,” said MSCI’s Benjamin Chow, who leads research on commercial real estate capital markets in Asia. “Private credit also targets a relatively safer portion of the capital stack, as investing via debt rather than equity provides a bigger buffer against losses.”

Chow said there have been only a few explicit investment announcements regarding scaling down in China while ramping up in India, but overall appetite for China’s real estate from global institutional investors has waned.

“Against this backdrop, this is India’s moment to shine,” he said.

But the Indian rupee’s weakness against the U.S. dollar is dampening the appetite at least for some.

“Unless you’re a local operator looking to make returns in rupees and have difficulty exporting your capital, in which case on a relative basis it’s likely that property lending is more appealing than corporate [lending] right now, it is very hard to justify investing there relative to many other places in the Asia Pacific,” said Dan Zwirn, CEO of Arena Investors.

Source : NikkeiAsia

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Rental income: An attractive proposition

Earning a steady rental income via renting tops the list of several investors.

“It not only gives a sense of security to many buyers to own a property but also makes the property more lucrative with decent returns,” says Anuj Puri, Chairman, ANAROCK Group, a real estate services company.

The other reason why many investors nowadays prefer to buy for rental purposes is because besides providing them a steady rental income, it also helps in keeping the property under use and therefore can be maintained.

Investors can pay off a part of their mortgage with the rental income received from tenants and also enjoy both rental and property value appreciation in future.

There is a also good possibility of receiving tax benefits including municipal taxes, and deductions on payment of principal and interest.

Challenges to be aware of

One should keep in mind that purchasing a property is a substantial initial investment. One would need to pay a down payment and EMIs or Equated monthly instalments on the property and that may fall way short of taking care of the mortgage.

According to Global Property Guide, average gross rental yield in India stands at 4.54%. By definition, rental yield refers to the annual rental value received from an income-generating asset, as a percentage of the property’s value.

This means that there can be a big gap between the EMI you pay and the rent you receive. For example for a property in a prime location in Mumbai which costs ₹3 crore, your EMI would be around ₹2.5 lakh at 8.40% interest. The rental income on the other hand would be in the range of ₹50,000- ₹80,000.

Besides, rental demand and appreciations are subject to market fluctuations and local factors and property values may not always increase. In addition to this, you may run the risk of having vacant periods and finding good, reliable tenants can also be challenging.

Managing a rental property is also time-consuming as you may require to deal with tenants, maintenance and repairs. “Managing a rental property is also time-consuming as you may require to deal with tenants, maintenance and repairs,” says Altaf Ahmad, CBO & Co-Founder, Azuro, a rental and property management firm, owned by Square Yards, a real estate marketplace.

Besides, rental demand and appreciations are subject to market fluctuations and local factors and property values may not always increase. In addition to this, you may run the risk of having vacant periods and finding good, reliable tenants can also be challenging.

Rental growth across cities

1BHK

2BHK

3BHK

Source: Square Yards

What to keep in mind before buying for renting out?

“When investing in a home for rental income, one must consider the potential rental income the property can generate. Location is one of the most critical aspects to keep in mind while buying an asset for rental income, as that determines rental value and reaps a good resale prospect in the future,” says Anshuman Magazine, chairman and CEO, India, SEA, MEA, CBRE, a real estate services firm.

It is important to evaluate the neighbourhood, infrastructure, and accessibility. Another key consideration should be enhanced amenities like schools, hospitals, and retail spaces, which are significant for tenants and help maintain asset value in the long run. These features play a pivotal role in ensuring the success of an investment.

In a good location, the owner will also not find it difficult to find new tenants when previous tenants vacate.

“Besides , one should also look to buy from a large and listed developer because most of the time to capitalise on the best rates, an investor buys the property when either newly launched or when under construction. Since most large builders today focus on timely delivery it will eventually help the investor in putting up the property on rent on time,” says Puri.

However, getting a property by a prime developer in a good location will require a huge upfront cost in terms of down payment and also servicing large monthly EMIs.

Additionally, the return on investment may not be as high as other investment options, such as stocks or bonds. So it is a decision that one needs to take after carefully evaluating one’s finances and the pros and cons.

Source : BusinessInsider

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SINGAPORE — Singapore asset manager Keppel is looking deeper into emerging markets like India to drive investments even as China, long a source of business, struggles with a property crisis that threatens to dampen growth for the country.

Keppel, which counts Singapore state investor Temasek as a major shareholder, will send a management team to India in November to “examine the market more closely” in order to establish a foothold.

Louis Lim, chief executive officer for Keppel’s real estate division, told Nikkei Asia in an interview that this is being done as the company aims to balance its portfolio across the region, with India “looking attractive.”

“This is a good time for India,” he said. “There’s a lot of impetus for growth across sectors, not just real estate. … We see opportunities there to grow our infrastructure and our connectivity businesses.”

In Mumbai, Keppel and Indian real estate developer Rustomjee Group in May jointly launched high-rise apartments in a project named Lavie. The condos form part of the Uptown Urbania integrated township in the city’s Thane West.

Uptown Urbania sprawls over 100 acres (40 hectares), with the Lavie project spread over 8.5 acres with eight high-rise towers. It offers amenities for residents such as a swimming pool, gymnasium, business center, yoga deck and whirlpool baths.

In China, Keppel in early October announced an agreement to divest a 35% equity stake in Chengdu Taixin Real Estate Development. This joint venture between Keppel and mainland real estate developer Vanke Enterprise owns V City, a 16.7-hectare residential project in Chengdu.

Vanke is paying out about 94 million Singapore dollars ($69 million) for Keppel’s divested stake. Keppel said the V City development was completed in 2020, and all 5,399 residential units and 356 street-front shops have been fully sold.

“In the case of the more recent Chengdu divestment, that is an amount of money that we can deploy because actually the project is almost completed,” Lim said. “In terms of the value that we’ve been able to capture, the profits have already been banked and we felt it was time to take those monies and deploy them elsewhere.”

In China, Lim noted that the property sector has been through a rout and assessed that it is unlikely that the real estate space will experience a fast recovery.

The world’s second-largest economy, after the U.S., has of late been pressured by troubles from beleaguered property developers.

For instance, China Evergrande Group, once the largest developer in the country, is struggling under heavy debts accumulated over a number of years, and a sales slump has hit its cash position following a government crackdown on the sector.

In August, Evergrande filed for bankruptcy protection in America. At the same time, Country Garden Holdings, the mainland’s largest property developer by revenue, experienced a worrying cash crunch.

The World Bank in October cut its growth forecast for China into next year as Asia’s largest economy struggles with the brewing property crisis, which has spelled bad news for its gross domestic product.

Growth is now pegged at 4.4% for 2024, down from the 4.8% figure the institution forecast in April. Oxford Economics, in an August report, noted that property-related debt accounts for at least 43% of China’s GDP by estimates.

Keppel’s Lim noted that industry watchers do not believe China will see a turnaround from its property troubles next year, with his company “hunkered down” to focus on spaces that are a priority.

“We do have a residential program for China that we will continue to invest in,” he said. “We work with the local partners to buy into attractive micro-market real estate opportunities in residential.”

Keppel has a China Urban Development Investment Programme that backs residential developments in Chinese gateway cities alongside co-investors. In 2022, through this program, Keppel invested in a residential site in Shanghai with another partner.

Lim said that Keppel has been in the Chinese market for over 30 years, and it will continue to be an important place for his company in the future, even though the real estate sector is currently laden with uncertainty.

Apart from this, the company is also eyeing opportunities in ASEAN members, including countries like Vietnam, Indonesia and Malaysia.

Diving into sustainable developments is a key aspect of Keppel’s approach, Lim highlighted, and this has been seen in a few projects that the company has within its portfolio.

International Financial Centre, located in Jakarta’s central business district, is a Keppel-developed project that comprises office space and retail outlets. The development uses energy-efficient technologies and has management systems to minimize power consumption.

Over in Vietnam, the company has a stake in Saigon Centre, a mixed-used development located along Le Loi Boulevard in Ho Chi Minh City’s central business district. The project uses energy generated from solar panels to reduce carbon emissions.

“We have demonstrated that sustainability produces financial results,” Lim said. “You may be paying more in rent, but you may be paying less in energy … [if] we are able to provide technology to help your office space run more efficiently.”

Source : NikkeiAsia

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A push to build cities for the world’s most populous nation is attracting private credit investors to India just as troubles in China’s property sector weakens the appeal of investments there.

Apollo Global Management Inc. is exploring where it can put more cash after spending $1 billion on property investments, while Ares Management Corp. says more money will flow into Indian real estate. Rules restrict bank lending to the sector and India’s rapid urbanization has caused an affordable housing shortage.

The reasons to be bullish are stacking up, and Prime Minister Narendra Modi has pledged to spend more money on roads, trains and airports. Along with manufacturing, fund managers expect real estate to record the strongest deal flow in the next 12 to 24 months relative to other sectors, according to consultancy EY.

With China’s property market mired in a years-long crisis, some debt investors are favoring India. At $5.9 billion in March, India-focused capital yet to be deployed was more than twice as large as the amount of money allotted to China, the most recently available data from research firm Preqin show.

“Some of our global peers who used to operate in a big way in China are increasingly looking at India as a large market to deploy capital,” Manish Jain, partner and head of India at Ares, said in an interview.

India has become a particular hot spot in the $1.6 trillion global market for private credit, thanks to a rapidly growing economy and a ban on banks funding transactions such as the acquisition of land. A 2016 Indian real estate law to protect home buyers raised capital requirements for developers but again disallowed bank funding, opening the door for private credit.

Ares, which invested next to nothing in real estate from 2014 to 2019, has deployed nearly $1 billion of private credit in the sector since 2020, Jain said.

HDFC Capital Advisors Ltd., which has already invested the $2.1 billion it raised across two funds last year, is back in the market pitching its latest $2 billion private credit real estate fund, Bloomberg reported earlier this year. TVS Emerald Haven Realty Ltd., House of Abhinandan Lodha, Signature Global and Eldeco Infrastructure and Properties Ltd. are among the developers who’ve already won investments from the private credit arm of India’s biggest bank.

Much of the optimism stems from the official push to improve infrastructure. Modi’s government said it would lift investment by about 33% to around $120 billion in the financial year ending in March 2024. Better transport links are boosting demand for housing, especially in smaller cities and their surroundings.

Vipul Roongta, managing director and chief executive officer at HDFC Capital, said his firm is now committing capital for cities such as Lucknow, Pune and Nasik after previously focusing on six large metropolitan regions including New Delhi and Mumbai.

“A lot of developers are beginning to understand the value of a tier 2 in the 200 kilometer radius of a tier-1 city,” he said. “Ideally a homeowner will want to buy some land in an emerging area and then construct later when the highways ensure better connectivity.”

Real estate is expected to contribute 13% to India’s gross domestic product by 2025, roughly double the current level, Grant Thornton Bharat LLP estimated in an April report. Developers have turned to private lenders to provide bespoke loans to fund the increased construction activity following a surge in demand for bigger and spacious homes as a result of the pandemic.

“We are a 3 trillion dollar economy that needs significant amount of capital to grow,” Kanchan Jain, head of BPEA Credit Group, said at a Bloomberg New Voices event in Mumbai last month. “Private credit is plugging the hole of capital needed in the Indian economy. Private credit loans in India look like bank loans and generate phenomenal returns.”

But the run up in land prices, as India’s economic growth outstrips China’s, is also a source of risk. It could depress companies’ profit margins, and impact their ability to pay off debt.

“Real estate is a cyclical industry,” said Vikas Chimakurthy, chief executive officer at Kotak India Realty Fund. “With those kind of prices, what kind of returns developers will make” remains to be seen.

Back at Apollo, which has put about $1 billion into 10 transactions involving about 40 developers in India in the past two and half years, there are more gains to be made, according to Nipun Sahni, a partner.

“We will probably repeat what we have deployed,” Sahni said. The strong returns recorded so far, augur “well for Indian real estate as an asset class in Asia.”

–With assistance from Harry Suhartono.

(Updates to add to BPEA’s Jain quote in 13th paragraph. A previous version of this story was corrected to clarify in the seventh paragraph that Ares deployed nearly $1 billion in the sector, not country, since 2020.)

Source : Bloomberg

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Unsold stock declines

In the reported quarter, unsold housing stocks in Tier 1 cities in India decreased to 508,464 units, down from 526,497 units in Q3 2022, marking an 11% decline, according to research data by PropEquity, an online real estate data and analytics platform.

While Hyderabad saw a 6% increase in unsold stock among the country’s top seven cities during the same period, Delhi-NCR region experienced a 7% drop in unsold stock in Q3 2023 compared to Q2 2023, with residential property sales maintaining their positive momentum post-pandemic.

Indian developers are strategically focusing on reducing older unsold inventory, leading to a decrease in unsold stocks, while also launching fewer new projects.

Source: PropEquity Research

Says Samir Jasuja, Founder & CEO of PropEquity, “Housing prices have been climbing in major Indian cities in the post-COVID years. While this upward trend in capital values is attracting investors to India’s key real estate markets, there is reduction in unsold housing stock. However, due to appreciation in both prices and mortgage rates, housing demand is currently facing challenges. Going forward, if interest rates on home loans remain stable or even soften in the coming months, we anticipate an increase in housing demand.”

However, bullish trend continues

The bullish trend in the real estate market, which began in 2022, has continued into 2023. An analysis of the first three quarters shows that new property launches in Tier 1 cities have remained consistent with 2022 levels. However, what stands out is an unprecedented surge in demand, projected to reach a decade-high of 5 lakhs units.

With an 8% increase in absorption compared to the previous year, the market’s resilience is evident. As we approach the upcoming festive season in the next quarter, the real estate market is poised for a surge in new property launches.

Source : BusinessInsider

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MUMBAI: Amid the luxury towers and expansive villas of Mumbai’s most exclusive postcode, a crumbling apartment block exemplifies the risks some people are willing to take to live in one of the world’s most expensive property markets.

Some 600 people, mainly middle-class civil servants and their families, live in the government-owned, dilapidated block, located across the Arabian Sea in the same Worli neighbourhood where the daughter of India’s richest man Mukesh Ambani lives.

Children play outside their units along corridors with rusted, broken railings held together with rags and the steel bars reinforcing the structure are visible from where the cement has fallen off the floors and ceilings.

“Anything can fall here, especially during the monsoon,” said Anil Aiwale, a government employee who has been living in the block with his family for the past five years. “The lack of affordable living options causes people to continue to live in high risk structures.”

Mumbai, capital of Maharashtra state, is India’s most populous city, and the nation’s most expensive place to buy residential property, according to data from Anarock Research.

Prices for prime property, such as that in Worli, saw the sixth fastest year-on-year growth globally in the first quarter of this year, a survey by international property consultants Knight Frank shows, just behind global financial hub Singapore and ahead of China’s financial capital Shanghai.

Some families living in the Worli block, which is particularly vulnerable to the monsoon rains that lash Mumbai from June to September every year, say these statistics reinforce their determination to stay put, despite the risks.

Because the block faces the sea, the walls and doors of many units are waterlogged and mouldy. Resident Rahul Makwana, who moved to a lower floor, said the entire fourth floor was going to be demolished because of structural issues.

“It’s dangerous, especially with parents and children,” added resident Sumit Shinde. “But it’s not possible for me, or any middle class family, to purchase a new home in Mumbai. It’s very expensive.”

Depending on their unit’s size, residents pay between 8,000 and 13,000 rupees (US$97-US$158) a month in rent to the state government. That rent would cover a property on the fringes of the city, but not anything more than a unit in a slum near Worli.

A state government official, who declined to be named because they were not authorised to speak to the media, said the bloc’s residents had not been served an eviction notice, but the state has offered them alternative accommodation in the suburbs.

Several residents, however, said transport to and from their offices in Worli would cost too much and take too long.

“The location of this building is great, it’s very convenient for me to go to work,” resident Aiwale said. “Affordable housing is impossible to find in a city like Mumbai.” ($1 = 82.2500 Indian rupees) – Reuters

Source : NewStraitsTimes

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In India, overall occupier demand remained strong and stable with a net balance of +52, with this positivity is broadly equal throughout each commercial sector (office, retail and industrial). Looking towards the future, India’s commercial property market displays many positive signals, with capital value expectations in each sector (office, retail and industrial) all expected to rise over the next twelve months. This is mirrored by rent expectations for the next three months which all strongly expect rises.

The twelve-month expectation net balances for rentals and capital values saw that then countries India, Saudi Arabia, and Singapore share similar places which encompasses those countries where projections for both variables are positive majorly but not specifically made up of APAC and MEA markets. On the opposite side of the comparison, countries like the United States, France, and Belgium acquire places where expectations are negative for values and rents.

Deben Moza, FRICS, MCA, Senior Executive Director ‑ Head of Project Management Services, Knight Frank (India) Pvt Ltd., said, “The latest Commercial Property Sentiment Index (CPSI) presents a mixed picture of the global real estate environment. Despite increasing interest rates in many countries, a stronger macro environment and robust labor markets have balanced the trend. CPSI in APAC has shown a significant improvement, primarily driven by a shift in sentiment in China and a stable growth environment in India. However, credit conditions continue to deteriorate across the globe due to more restrictive lending standards. In contrast, the Indian market appears to be picking up and remaining stable due to changing policy landscape, budget allocations for infra and related sectors, and other initiatives as a boost to business. Additionally, with the world’s largest population and the growth of the online economy, the segments of Retail, Data Centres, Industrial & Warehousing, and associated areas are experiencing heavy growth. Also, the rise of the Indian middle class is pushing the residential demand in India.”

Source: The Economic Times

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The company, which focuses primarily on luxury residential sales and large capital market property transactions, had facilitated property transactions worth $300 million in the previous year.

Real estate consultant India Sotheby’s International Realty also announced that Amit Goyal has been designated as managing director for India, Sri Lanka and Maldives; and Ashwin Chadha designated as CEO for the region.

“We have achieved 50% growth in transactions value closed by us during the last fiscal. Post-Covid, there has been a surge in demand for luxury properties and prices have also appreciated,” Goyal told reporters here. He mentioned that investors have also returned to the market, seeing a rise in prices.

Asked about the company’s own revenue in terms of consultancy fees, Goyal did not disclose the number but said that it also grew by 50%.

Out of the total property transactions, Chadha said around 92-93% were in residential segment while the rest in commercial properties and capital market property transactions. He highlighted that 85% of the transactions concluded by the company pertained to secondary (resale) property markets.

Geographically, the company said 60% of the transactions were in Delhi-NCR market followed by Mumbai, Goa, Kolkata and Bengaluru. International markets contributed around 10% to the business.

Some of the big-ticket sales achieved in FY23 include a Kautilya Marg bungalow which was listed at Rs 150 crore, luxury floors at Malcha Marg listed at Rs 80 crore, two farmhouses on the outskirts of South Delhi with listing prices of Rs 110 crore and Rs 85 crore, a bungalow at Friends Colony West (Delhi) with a listing price of Rs 70 crore, luxury floors at Golf Links with a listing price of Rs 70 crore, a villa in Goa listed at Rs 42 crore, and a super luxury flat in Mumbai’s Bandra West with a listed price of Rs 45 crore.

“Large business families, CXOs, professionals, and startup founders looking for a bespoke lifestyle make up the customer profile for luxury homes marketed exclusively by India Sotheby’s International Realty,” Goyal said.

Additionally, India Sotheby’s International Realty grew its workforce by over 40% with a current team of around 80 professionals from private banking, luxury, hospitality and real estate. The firm has a presence in New Delhi, Mumbai, Kolkata, Bengaluru, and Goa, along with Colombo in Sri Lanka.

Chadha said “the company recognises the importance of having a professional, highly skilled, and diverse team that can bring valuable insights and expertise to the table for the discerning wealthy client. We are also on the lookout for aligned businesses and verticals to invest in as a strategic partner, or to venture into some of them by ourselves”.

Born from the rich heritage of the Sotheby’s Auction House, The Sotheby’s International Realty network is present in 81 countries and territories with 1,075 offices and 26,000 sales associates and has achieved a record real estate global sale of $167 billion. India Sotheby’s International Realty established its presence in July 2014.

Source: BQ Prime

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