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Demonetisation was blessing for realty sector, RERA and GST will clean it up

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GST

By Vinod Behl 

Though the government’s radical measure of demonetisation has disrupted the economy and has hit the real estate sector — already reeling under prolonged slowdown — it will turn out to be a blessing in disguise in the medium-to-long term.

As an asset class, real estate has been a big source of generating and consuming black money. The cash component in real estate has been there at various levels, beginning with land transactions where it amounts to 30-50 per cent. The cash payout is quite high in luxury housing too. The consumption of cash has been as high as 30 per cent in secondary market transactions.

The primary market transactions, however, are by far bereft of cash component as home purchases are financed through loans from banks and housing finance corporations. It is another matter that even in primary market deals, developers have been encouraging cash payouts by luring property buyers with good discounts on property price.

The speculative buying by investors through offerings like underwriting and pre-launches has also been involving cash payout, leading to artificial price hike and in turn making homes out of the reach of masses.

Demonetisation, coupled with the government’s move to check benami transactions through legislation and curbs on cash transactions, was meant to clean up the system.

This sudden ‘shake up’ was, however, not without its adverse impacts. Demonetisation badly affected the liquidity in the capital-intensive real estate sector, deepening the problem of massive fund shortage/cash crunch faced by developers reeling under delayed deliveries, which deterred buyers from purchasing property.

The impact was more evident in markets like NCR and Mumbai which were largely investor-driven, compared to southern markets of Bengaluru and Chennai and even Pune in the west, which have been end-user driven. The premium/luxury residential segment, in which the cash component was more in transactions, got impacted by demonetisation.

Real estate experts’ belief that the impact of demonetisation is only short-term and will not have long-term impact, stems from the fact that developers who have been following transparent and fair practices have not been affected by demonetisation and instead it worked out to their advantage.

This also turned out to be a positive development for big global real estate consultants like JLL India which doubled its profits in 2016 over 2014-15, with 60 per cent revenue growth.

One key positive impact of demonetisation and RERA (Real Estate Regulation Act) has been that speculative investors deserted real estate and end-users/genuine buyers, who were all these years pushed to the sidelines, came out in large numbers. Now, it is the property consumers who are driving the real estate market, especially residential market, aided by the government’s pro-industry and pro-consumer initiatives.

The step to promote affordable housing and according real estate industry status for the purpose of making easy and cheap funds available to the sector also helps.

Demonetisation has particularly boosted foreign funding. The transparency brought in by demonetisation, aided by RERA, GST reforms and liberalisation of FDI norms, has boosted the confidence of foreign investors, which is clearly evident from the spurt in foreign investments, particularly from pension funds.

This will inject much needed liquidity in the sector starved of funds. Targeting consumers, the government under the Pradhan Mantri Awas Yojana (PMAY), is providing substantial interest subsidy to home buyers. The clampdown on floating cash in the system has contributed significantly to curbing inflation which, in turn, helped RBI in cutting interest rates, thereby boosting home buying.

The proposed measures to liberalise FSI norms and rationalise stamp duty, will give further fillip to the residential sector, particularly affordable housing.

Demonetisation had a salutary impact on property prices by curbing cash transactions and checking speculative pricing, in turn increasing affordability, which is a key to achieve the government’s flagship mission of ‘Housing for All’. RERA & GST are further aiding demonetisation to control prices.

The key provisions in RERA, to speed up project completion, by checking diversion of funds through mandatory escrow account, stringent penalties to check project delays, together with the government’s move to make all building sanctions online, will go a long way in checking time and cost overruns of real estate projects, thereby controlling home prices.

The ban on pre-launching of projects under RERA will also check artificial spurt in pricing. GST has come to tackle the flow of cash in the purchase of building materials by introducing input credit tax. Further, the government’s plans to liberalise FSI norms, especially for affordable homes, and rationalising stamp duty will have a sobering effect on property prices.

But for some little lingering effect, economists and real estate experts believe that the overall downside impact of demonetisation has faded and its impact is not going to be there in the next quarter.

Says Ashwinder Singh, formerly CEO of JLL India & now CEO of leading real estate consultancy, Anarock Consultants: “Other than in terms of the initial confusion-induced decline in sentiment, the trend that is emerging now, points towards a recovery in buying sentiment with serious buyers already returning to primary markets.”

The entire demonetisation exercise undertaken by the government and aided by other reforms, like Benami Property Act, RERA and GST, is to be looked at in the backdrop of the government’s multi-pronged policy to create institutional and regulatory framework for speedy and steady growth of the economy. And at the centre of all these initiatives is real estate, which is a key contributor to GDP. Going forward, these policy initiatives will help make real estate more organised, transparent, credible and affordable, making the sector investor and consumer friendly.

IANS

Business

Petrol costs Rs 82.44/litre in Delhi, Rs 89.80 in Mumbai

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Petrol Price

Sep 22 : Fuel prices climbed to fresh highs across the metros cities on Saturday as in Mumbai, where the fuel cost is highest due to the highest VAT, petrol prices inched up to the psychological Rs 90 a litre-mark and sold at Rs 89.80 per litre.

In the national capital, petrol was sold at Rs 82.44 per litre, up from Rs 82.32 per litre on Friday, data on the Indian Oil Corp’s website showed.

As per rates released daily by state-run Indian Oil Corp, the depreciating rupee and expensive crude oil further pushed petrol and diesel to new record highs on Monday.

Fuel prices in the country have been rising almost daily since August 1. They fell only once on August 13 and have been on record levels for over two weeks now.

Sector experts say a weak rupee and high excise duty are major factors for the rise in fuel prices.

Inflationary risks along with broadly negative global cues depressed the Indian rupee to a new low of 72.91 against the US dollar.

Also, high global crude oil cost has become a major concern for the country, which imports over 80 per cent of its oil requirements. The UK Brent crude oil price hovers around $78 per barrel.

Since the start of the calendar year, the petrol price in Delhi has gone up by over 15 per cent from Rs 69.97 on January 1, 2018. The hike in diesel price has been even more steep. It has gone up by more than 22 per cent since January 1 when it cost Rs 59.70.

Last week, the West Bengal government reduced the excise on petrol and diesel by Re 1 per litre each.

The Karnataka government announced on Monday that petrol and diesel will be cheaper by Rs 2 per litre each across the state from Tuesday following the reduction in cess on these fuels.

As per the country’s pricing mechanism, the domestic fuel prices depend upon the international fuel prices on a 15-day average and the value of the rupee.

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Sensex swings 1,500 points, closes 280 points lower

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Sensex equity Nifty

Mumbai, Sep 21: High volatility, following a likely credit crisis in the infrastructure lending and development sector, dragged the market in the red, with the S&P BSE Sensex swinging in around 1,500-point range on Friday.

A plunge of over 1,100 points was witnessed on the BSE Sensex around 1 p.m, only to recover from the day’s low within few minutes. Similarly, the NSE Nifty50 also recovered after dropping below the 11,000-mark.

The sudden sell-off took place across the board with banking and financial stocks losing the most.

At 3.30 p.m, the wider NSE Nifty50 provisionally closed at 11,143.10 points, lower 91.25 points or 0.81 per cent from the previous close of 11,234.35 points.

The BSE Sensex, which had opened at 37,278.89 points, provisionally closed at 36,841.60 points, lower 279.62 points or 0.75 per cent from the previous close of 37,121.22 points.

The Sensex touched an intra-day high of 37,489.24 points and a low of 35,993.64 points.

The fourth consecutive session’s slide was triggered also by other factors, including lower possibility of the Reserve Bank of India cutting its key lending rates, analysts said.

IANS

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Man finds insect in cake at Ikea Hyderabad store, Tweets video

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IKEA Cake insect
The photo tweeted by the customer who bought a cake at IKEA's Hyderabad restaurant.

Hyderabad, Sep 21: Swedish furniture major IKEA’s first ever store in India in Hyderabad has again landed in controversy. Weeks after a customer had complained about finding a caterpillar in his biryani, ordered at Ikea’s store in Hyderabad, another customer has said that he found an insect in a chocolate cake that he ordered at the Ikea store.

The customer, Kishore, tweeted on September 12 that he found the insect inside a slice of chocolate cake while his daughter was eating the dessert at the IKEA store. He also posted a video in which an insect can be seen crawling over the chocolate cake.

The Greater Hyderabad Municipal Corporation has reportedly fined the Swedish furniture major Rs. 5,000 based on Kishore’s complaint.

IKEA on Thursday expressed regret over the incident. “In our Hyderabad restaurant when a customer was eating a chocolate cake which he bought, a fly was seen on the cake which eventually flew away. We regret this and apologise to our customer for the unfortunate experience. We are taking steps to avoid such occurrences,” an IKEA spokesperson said.

This is the second such incident that happened at the Ikea Hyderabad store that was opened on August 9. On September 2, a customer reported a caterpillar in the vegetable biryani supplied to him. Ikea India subsequently took vegetable biryani and samosa off its menu and apologised to the customer.

Read More: IKEA stops selling biryani, samosa after complaint

In the incident of the caterpillar in biryani, the furniture giant was fined Rs. 11,500 by the Hyderabad civic agency.

IKEA opened its first India store in Hyderabad on August 9. It has a 1,000-seater restaurant that serves a wide range of food, from Swedish to Indian snacks.

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