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News

Affordable Housing v/s Luxury Homes
Today, in the last few months, a new distinct trend has emerged-that of rising demand for luxury homes. This was a segment that had emerged as an attractive proposition for developers in 2006-07. Dozens of projects were launched and sold. However, there is a qualitative shift in the buying patterns, as well as the buyers segment, for luxury housing. Earlier, investors comprised a large segment of the buyers.
They bought at launch, let the investment be for a while and then exited the project after paying a couple of installments. Completion of projects was not the primary concern. Value appreciation was probably the biggest concern.
However, today’s buyer is looking at the profile of the developer and his track record. More significantly, the buyer of luxury homes today is neither an investor nor a first-timer. He is the middle to senior-level executive or business man who has weathered the economic storm, emerged either unscathed or just marginally singed, but with renewed confidence in his buying power.
It is still too early to comment on the trend with any degree of certainty but it can safely be said that this buyer is an end user who is negotiating the sale of his property that was once adequate but currently inappropriate to his lifestyle and aspirations. He is probably in his late 30s or early 40s and has a good 10-15 years of working life left to pay off the loan he is securing to buy that luxury home.
He is also concerned about the delivery time and chooses to pay on construction-linked plans and seeks all the features that he was promised at the time of sale.
So what happened in this intervening period? To put it in a nutshell, the downturn happened. During this period, the developer did nothing more than what he had probably done for over a year since the wild boom of 2007-2008. Developers had been routinely launching premium projects, selling many units to underwriters who would sell on to short-term investors and then not really be in a rush to develop.
The biggest developers in the country will all stand up to be counted if a rollcall of developers who defaulted on timelines were called. But as a bulk of the buyers were investors who did not really mind if the project was delayed and since occupying that piece of property was never their concern, there was no real pressure on developers to build and deliver. In fact, a slow pace of progress actually helped the underwriters who got more time to sell the project.
Only projects that were nearing completion would be picked up by the end user, who was normally the seventh or eighth buyer in the chain – he entered at a higher price but remained invested and wanted to live there. Then came the global downturn and the Reserve Bank of India’s move to tighten the screws on lending to the real estate sector, which was perceived to be highly speculative.
Soon developers found population of buyers dwindling as they did not choose to spend their money in an uncertain market, even as investors turned hostile fence-sitters. This prompted them to start building instead of sitting idle or launching new projects in a market devoid of buyers. That led to some luxury stock hitting the market and markets getting their first taste of premium luxury living that had till then only been promised by developers and not delivered yet.
Then came the tight money situation where the best of developers defaulted on timelines. With an uncertain jobs market where professionals across segments lost their jobs, the buyers turned sellers and some amount of panic selling happened.
Today the market has completely changed. The survivors are now willing to spend on the luxuries of life but are picky about the developer they choose to buy form. Those developers whose projects continued to clock progress are today’s winners. The only assurance the buyer of today understands is delivery on his own terms.
So, is this a real estate bubble building up again? It actually depends on the developer community and to a large extent, upon the policy makers as well. During the wild run of real estate in 2006-2008, all developers were building in the premium segment only. That market is a tangible one, accounting for over 5% of the market. But in the hope of a quick buck, practically every developer chose to serve the 5% ignoring the needs of the rest 95%.
The government’s policy directive that loans below Rs.20 lakh will get tax incentives prodded most developers put their products where the lending was most active. The onus is on the policymakers to keep watching and moving to rein in market forces to meet the demands of the majority as every market segment gives out signals. The policy –maker’s antennae have to be turned to these changes to catch the right signals.

(Source: Real estate intelligence service, Jones Lang LaSalle Meghraj)


GHMC proposes 30% hike in property tax

Hyderabad, Aug. 18: The Greater Hyderabad Municipal Corporation has proposed a 30 per cent hike in property tax from the next financial year (2011-2012) and a five per cent increase every year thereafter. Thus, if a house owner is currently paying Rs 10,000 as property tax, he/she will have to pay Rs 13,000 if the hike comes into effect. The corporation proposes to raise an additional Rs 100-150 crore per year with the hike. The civic body collected Rs 470 crore property tax for the year 2009-2010.

The proposal, however, has to be first cleared by the standing committee comprising 15 corporators led by the mayor as its chairperson. It will then be placed before the GHMC general body meeting of 150 corporators. Subsequently, the GHMC will seek a final approval from government to affect a hike keeping in view the political impact it could have, though the GHMC Act enables it to hike the tax on its own. Officials say that taxes for residential buildings in the core city (i.e. the old MCH area) have not been increased for nearly 20 years while the tax in the surrounding 12 municipalities, which are now part of Greater Hyderabad, was revised in 2002. Property tax was increased for commercial buildings in 2007 but the government had imposed a cap of not hiking beyond 50 per cent.

Many house owners are paying taxes that are less than 20 per cent of their annual rental value whereas GHMC is supposed to get over 33 per cent of the annual rental value, officials said. The GHMC additional commissioner (finance/revenue), Mr S. Hari Krishna, said the per capita property tax in Hyderabad is less than Rs 400 as compared to over Rs 800 per capita property tax of Bengaluru, Ahmedabad and Surat among other cities.When contacted, the mayor, Ms Kartika Reddy, who chaired the standing committee meeting, said the ďtax issueĒ had been deferred to the next meeting.

Hyderabad 26th Aug: Multiple land use allowed in core city areas

With growing need for multi-pronged development in the erstwhile Municipal Corporation of Hyderabad (MCH) area, also known as core city, multiple land use has been introduced in the revised master plan for the city. With the flexible land use policy, all uses are permitted in residential, commercial and public and semi-public zones except hazardous and polluting industries. Even at industrial estates like Azamabad and Sanatnagar, plots can be converted into multiple use but with some rider. Along with development, special emphasis has been given to environment protection by creating open space. If any plot owner in any land use creates, develops and maintains open space on the sites of 1,000 square metres or above, they will be given 25 per cent concession in property tax and, if the land belongs to registered societies, they will get 50 per cent exemption.

Giving a big relief to land losers in road widening, HMDA has increased the transferable development rights (TDR) from 100 per cent to 150 per cent for those who give their land free of cost for road widening. Under TDR, the owners get additional built-up area, which they can either use it for themseleves or sell it to others.

The Hyderabad Metropolitan Development Authority (HMDA) has prepared revised master plan for the core city after 35 years which was approved by the Municipal Administration and Urban Development (MA&UD) a couple of days ago. The master plan was prepared by consolidating earlier master plans and zonal development plans. After inviting objections and suggestions from people - 2,053 objections and suggestions were received by the HMDA.

"Seventy per cent of the objections and suggestions were considered in the master plan. Most of the objections pertained to reduction of road width from 200 feet to 100 feet. For instance, residents of Erramanzil raised objections over a proposal to widen the Taj Krishna-KPC guest house road to 80 feet. They claimed the road was widened to 60 feet a couple of years ago and further widening would affect their properties," a senior HMDA planning wing official said.
Some residents of Makta, located opposite Raj Bhavan, also raised objections over the proposal to make their area a recreation zone, but keeping in view of the objections, the land use of that area has now been converted as residential zone, the official said.
On the request of APSRTC to allow multiple use in bus depot and bus station areas like Ranigunj to construct commercial complexes under Public Private Partnership (PPP), HMDA agreed for multiple use except Imliban bus area.
The rider is five per cent of the built-up area or 10 per cent of the plot should be handed over free of cost to GHMC for public facilities like eSeva or citizen service centres or parks, a city planner said.
To encourage transit-oriented development, a special category Transit Oriented Development zone, a 300-metre belt on either side of the proposed metro rail routes has been created for multiple zone. However, the minimum plot size should be 500 square metres for sites in GHMC circles IV and V, 1,000 sq metres in circles VIII, IX and X VIII and 2,000 sq metres in circles VII and X. But all such plots abutting the MRTS corridors have to leave six metres common building line or road.
The revised master plan has also provided redevelopment on government land, public and semi-public land usage plots of 4,000 sq metres or above. Redevelopment will be allowed if 15 per cent of the total extent be left as open space in single block and five per cent built-up area or 10 per cent of the land be handed over to the corporation for public facilities.
HMDA has listed out 29 infrastructure and facility nodes (Infans), mainly government properties with large tracts of vacant land in the city such as Government Printing Press, Chanchalguda, ITI, Musheerabad, Gudimalkapur market yard and surrounding land, parts of Punjagutta government quarters, Hyderabad district collectorate, AP Dairy Development Corporation in Lalapet and parts of government land on the premises of Women's College in Koti.
With several industries either shut down or shifted to surrounding areas of the city, HMDA has created Work Centre Use Zone. LPG godown areas, electronic industries, banks and computer units could come under this land use. For industries, conversion of land use from industrial to other would be allowed only after getting `No Objection Certificate (NOC)' from the Andhra Pradesh Industrial Infrastructure Corporation ( APIIC) and the industries department.
"Conversion of land use will be allowed only if the land is a minimum of 4,000 square metres (earlier in the draft plan it was proposed for 8,000 sq metres), 15 per cent open space and mandatory setbacks, five per cent of land should be handed over to the GHMC," an urban planner said.
On the request of the Hyderabad Metro Rail Limited, roads abutting the proposed metro rail roads would have minimum 100-feet roads.
HMDA also identified some specific areas as special area development projects at various locations like the Secunderabad railway station for detailed planning and development.
Though the master plan has been created, it is now for the implementing agencies, including GHMC, to ensure development takes place as per the plan.
 
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