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Virtual reality, AI, blockchain to radically transform Indian real estate, <a href="https://www.savidevelopers.com">Savi Developers</a>

Technology is increasingly playing an important role in the Indian real estate sector. Property technology, also known as ‘proptech’, made its presence felt in the Indian real estate market around 2005, when we saw the emergence of online real estate marketplaces such as 99 Acres, and more recently Housing.com, etc. These portals disrupted the way home buyers bought property, by allowing them to look for properties from the comfort of their homes and compare the specifications of different properties online. While these online real estate marketplaces have not completely replaced real estate agents, they have created opportunities for a more transparent and improved home buying process.

Typically, home buyers visit multiple properties, before deciding on the one they want to buy. However, this is a time-consuming process. Online marketplaces have started using 3-D modelling and virtual reality, which allows potential home buyers to do a virtual walkthrough of a property, without visiting it. A Goldman Sachs report says that by 2025, virtual reality will be a USD 80-billion market, with real estate accounting for USD 2.6 billion of it. In India, many technology start-ups and popular online real estate marketplaces, offer virtual reality tours of properties.

  How artificial intelligence can minimise costs in real estate

While the real estate sector has not always been quick to adopt technology, the changing nature of the industry is forcing it to re-examine the way business has been traditionally done. The industry is now a lot more open to adopting technologies, such as artificial intelligence (AI), which has the potential to improve many facets of the industry. AI is the ability of a machine to solve problems by learning, over time. It has the potential to replace many routine tasks in the real estate sector.

In the pre-construction stage, AI can be used to ensure that there are no flaws in the construction plan, to avoid frequent changes in plan during the construction process. Data analytics has assumed a lot of importance in real estate. Real estate companies can use AI algorithms, to make sense of vast realms of data and improve areas of business, such as marketing, finance, accounting, etc.

AI-powered ‘chatbots’ on websites, can be used to handle routine queries from customers about properties. Globally, many real estate companies are incorporating ‘chatbots’ into their websites, to engage with customers. This allows companies to save on cost of servicing customers and optimise time spent on answering routine questions.

Artificial intelligence can also make buildings smarter and safer. AI-enabled security systems offer automated voice and facial recognition, which can improve the security of homes. AI can identify temperature levels and energy consumption of a building, thereby, helping in saving energy. It can be used to analyse the data of a building, which can go a long way in reducing operational costs and improving efficiency.

See also: Can blockchain technology solve some of real estate’s major woes?

  What is blockchain?

Blockchain is another disruptive technology, which can make a big difference to the Indian real estate sector. Blockchain is essentially about sharing databases and processes. It uses concepts such as artificial intelligence and internet of things, to make processes run by integrating databases in real time. For instance, if a user is working and editing a document on the web, another user can simultaneously work on the same document, without disrupting either person’s work. The document can be updated by both users in real time.

In blockchain, sharing of data is seamless and non-corruptible, as it is transferred in an encrypted mode. It is less prone to virus attacks, because the data does not sit in one centralised location. Blockchain technology can be used in the real estate sector in many ways. It can help in standardising and securing real estate data. In fact, wherever data comparison, verification, authentication and assimilation are required, blockchain can be applied. The technology can be used over the entire life cycle of a project, from the pre-feasibility stage to the execution stage and maintenance of projects.

  Advantages of blockchain technology for real estate businesses

Many processes within the real estate development life cycle such as product specification, pricing, smart contracting, procurement, property registration information, project progress, customer profiling, product design, customer preferences, etc., can be processed through the blockchain technology to reveal realistic data, which can be used as business intelligence to drive sustainable operations.

The primary benefit of blockchain is that it can be a direct link from business to service and vice-versa, without any intermediaries, thereby, saving on cost, time and clutter. For instance, procurement of goods and services is always a complicated process for developers, because they do not know whether the price they are paying is the lowest and whether the source they are buying from is reliable. Blockchain technology offers real time transactional data on raw materials. This can help the buyer to choose the right source and the right pricing. The limitation of blockchain technology in real estate, depends on the user’s vision, which essentially means that it can have different implications for different users.

  Transparency in land records

Another example of blockchain’s application in the real estate sector, could be in making a central land title database for the entire country, which can store historical land title records. Land records are critical to the property market, as it decides the ownership of property. Land title records in India tend to be fragmented and unclear. Blockchain technology can help buyers, in determining the title of land, ownership details of the land, number of transactions that have happened on the land parcels, land disputes, etc. This information can save time, cost and avoid fraudulent land deals. This will lead to improved transparency and protect buyers.

Blockchain can even enable crowd ownership of property. For instance, a group of people who cannot afford to buy a hotel on an individual basis, can come together through an online process, to buy a part of the hotel, as a share. Let us assume the investors put in money, according to their investment capacity and the hotel is bought in physical form. The hotel could then be given on lease to a company such as Airbnb and the hotel can start generating revenue. This revenue can then be shared among investors as per their investment exposure. Blockchain can make this entire process seamless and eliminate the need for intermediaries.

Similarly, the application of blockchain can lower the overhead costs for REIT listings. Blockchain technology can radically change the way real estate business has been done, by bringing in more speed, efficiency and global benchmarking. Organisations, which adapt and adopt blockchain technology, can expect exponential growth, because of the information and transaction edge that they will have in real time.

Technologies such as virtual reality, artificial intelligence and blockchain, will transform business models in real estate and those who do not keep pace with the changes, risk becoming redundant.

(The writer is head of training and product development, RICS South Asia)

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New tariff model risky for greenfield airport developers: India Ratings, <a href="https://www.savidevelopers.com">Savi Developers</a>

The draft airport policy that seeks to shift tariff structure to the ‘price cap’ model, from the existing ‘cost plus’ model, exposes developers to traffic risks in general and is particularly risky for greenfield airports, a report has warned. The proposed changes in the approach towards greenfield airports to ‘dual till’, from the earlier ’30 per cent hybrid till’, leaves the entire non-aero revenues outside the ambit of price cap, which to an extent is a positive, India Ratings said in its report.

The draft policy also defines clearly aero and non-aero revenues, including clarity on the inclusion of cargo revenues under the aero banner. Of the four large private airports, historically, there were significant delays in fixing tariffs for control periods. “Despite strong passenger traffic growth, the introduction of traffic risks and limited flexibility on tariff revisions, combined with restrictions on real estate area, amplify the risk for a greenfield airport,” warned the report. However, the likely traffic risks can reduce the financeability of projects, compared to the current regulated return structure and the proposed policy will resolve the regulatory delays in the fixing of tariffs and reduce significant changes in tariffs across control periods, it noted.

Although managing traffic risks is the responsibility of developers, the report said some adjustments can be made to the maximum blended aeronautical yield (MBAY) – not more than 50 per cent of the base rate of MBAY for a year. This makes external support necessary, if passenger traffic growth remains subdued in a five-year control period, or any stress during the concession period against the original estimates, according to the rating agency. “In the current set-up, such circumstances are rare, despite the delays in obtaining regulatory approvals, given the return-oriented model,” it said.

See also: Jewar airport phase-I: Over 90 per cent farmers agree for land acquisition, say officials

As per the agency, in such a situation, an option to escalate MBAY up to 50 per cent of the existing fee, along with cuts on concession fee or a combination of both, can provide some respite. However, the base tariff and accuracy in forecasting traffic is crucial, for maintaining the developer’s credit profile and to avert reliance on financial support, it said. Although the new model hints at maximum five years of continuous support or no support, the report said the option of revenue shortfall loan is a positive. At the same time, should the concession-granting authority fix a floor price cap, based on passenger forecast, the model can be sustainable with minimal financial disruptions to investors and curb aggressive bids, it added.

Expecting a negative concession fee, the report said bidding parameter is altered to ‘concession fee/passenger’, with annual revisions linked 50 per cent to inflation. The proposed concession fee, which includes administration fee of Rs 20 per passenger, is fixed at Rs 400 for FY19. In case of a negative concession fee, the bidder can quote over Rs 400. “We see a possibility of the bids exceeding Rs 400. The FY18 average aero revenue/passenger across all four major private airports, is Rs 480. While major airports have a higher cost of construction/expansion, they command significant non-aero revenues, which is unlikely for a greenfield airport. Hence, we believe that bids will be higher than Rs 400. Given the expected higher non-aero revenues in brownfield airports, lower aero-revenues can be adequately compensated. The cap of 10 per cent on real estate area can increase the bids above Rs 400,” said the report.

On the positive side, the report said there is clarity on various parameters to reduce delays in the current model. For instance, the tariffs are fixed at the beginning of the control period, with no adjustments for increased costs due to higher inflation. The new model has a feature to escalate tariffs, based on the 70:30 ratio of headline inflations numbers. The inherent strengths of the current airport tariff model include rewards commensurate with risks and stable financials, despite delays in control period order, offer comfort to the debt metrics, according to the agency.

It can be noted that the hybrid annuity model in roads has reduced not only financial pains of developers but also difficulties faced by lenders with timely payments.

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No precipitative action should be taken on Salem-Chennai highway project: HC, <a href="https://www.savidevelopers.com">Savi Developers</a>

A division bench of the Madras High Court, comprising justices TS Sivagnanam and Bhavani Subbaroyan, on September 20, 2018, directed the state government and its officials to refrain from undertaking any precipitative action on land acquisition for the proposed Salem-Chennai highway project. The court’s direction came, during the resumed hearing of a batch of petitions from land owners and public interest litigation pleas, against the eight-lane project.

See also: Chennai-Salem Expressway: Madras HC upholds Land Act provisions as advantageous to land owners

The court was responding, after the counsel for one of the petitioners asserted that four people, who were assisting the public in submitting written objections over the land acquisition, had been arrested. “We have made a very pointed observation in several of our earlier orders that nothing should be precipitated by the state government or its officials,” the bench said. It also directed the government pleader to issue necessary instructions to the officers, more particularly those in the field level, not to precipitate any problem further, saying the court would view any such action very seriously.

On concerns over the impact of the project on wildlife, the state’s advocate general Vijay Narayan said, clearance had been granted by the Forest Department, strictly in accordance with the procedure and with the available technology. The bird sanctuaries falling along the corridor were situated well beyond the eco-sensitive distance of 10 kms from the point of land acquisition, he added. Recording the submissions, the bench posted the matter to September 24, 2018. The court had, on August 21, 2018, restrained the centre and the Tamil Nadu government, from dispossessing people of their lands to be acquired for the project, which has run into opposition from some quarters, including a section of farmers, till further orders.

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Infrastructure, affordable housing, make Greater Noida a sought-after realty market, <a href="https://www.savidevelopers.com">Savi Developers</a>

Recent developments in Noida Extension, also known as Greater Noida, have attracted significant buyer interest towards the region’s residential real estate landscape.

According to a recent report by ANAROCK Property Consultants, with more than 50 per cent of the supply (since 2015) in the under-Rs 40-lakhs price segment, Greater Noida has been rightly tagged as the ‘affordable hotspot’ of the entire National Capital Region (NCR). The increasing focus given to affordable housing, by the central government and developers alike, has also helped.

Backed by major infrastructure developments, the region is set to be one of the most promising affordable real estate investment destinations in the NCR. Major projects envisaged for the region include the Noida-Greater Noida Metro extension, the proposed international airport at Jewar, the upcoming Faridabad-Noida-Ghaziabad (FNG) Expressway and further development of social infrastructure in the vicinity. Furthermore, commercial developments in and around Greater Noida, have also given a significant boost to the realty market.

  Can affordable housing drive Greater Noida’s real estate market?

Sunit Sachar, senior vice-president, marketing, CRM and advertising, Parsvnath Developers, points out that the affordable housing segment in Greater Noida, has come up during a period when there has been a decline in demand in the real estate sector. “Affordable housing is always favourable for the buyers, while it is not as profitable for the developer. Developers can rake in much better dividends, from projects other than affordable housing projects. Unless the developer sees profits in venturing into affordable housing, they will not come forward to develop the desired quantum. Hence, concessions in the form of taxes, etc., may be considered,” says Sachar.

See also: Is the Greater Noida property market gaining preference over Noida realty?

Moreover, the affordable housing that has mushroomed in the NCR, is not exclusive to Greater Noida. So, how it impacts real estate development in the satellite city, remains to be seen. Nevertheless, given the recent infrastructure developments, affordable housing is likely to bring some positive attention to the otherwise cautious real estate scenario of Noida Extension.

  Impact of infrastructure developments in Greater Noida

In the past, litigation issues over land discouraged investors from the Greater Noida market. However, the news of infrastructure developments, like the Delhi-Noida-Greater Noida Metro connectivity, have generated a lot of interest in the residential property segment.

“The news of the metro connectivity, has indeed had a very positive influence. Once developers come up with more profitable projects in the region, there is a chance that people will get attracted towards the city and invest in it,” adds Sachar.

Delays over the proposal to develop a second international airport in the Delhi-NCR, may have also disappointed property seekers who were keen to invest in Greater Noida, in the last decade or so. However, there now seems to be some progress being made, vis-à-vis the Jewar International Airport, in Gautam Buddh Nagar district. This, along with the government’s push towards bringing in transparency though policy changes and laws like the Real Estate (Regulation and Development) Act (RERA), are likely to bring about a strong perception change, resulting in positive buyer sentiments towards Greater Noida.

Sudipto Chatterjee, business director, Mediacom, feels that there is very little on-ground awareness regarding the affordable housing segment in Greater Noida, or elsewhere in and around Delhi. “However, there is awareness that development, especially with respect to connectivity to the prime locations in Delhi, is happening at a rapid pace in Greater Noida. This adds a lot of interest towards Greater Noida as a residential location,” he concludes.

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15th Finance Commission: Maharashtra seeks Rs 50,000 crores for infra development in the MMR, <a href="https://www.savidevelopers.com">Savi Developers</a>

In a meeting with the 15th Finance Commission, the Maharashtra government, on September 19, 2018, sought Rs 50,000 crores, as a special support for Mumbai city and the Mumbai Metropolitan Region (MMR), which includes surrounding townships. “Mumbai is the backbone of our economy. We must strengthen Mumbai’s infrastructure. We need to acknowledge the importance of Mumbai in the nation’s GDP,” chief minister Devendra Fadnavis said, in a memorandum to the Commission.

He also sought special grants of Rs 32,327 crores, for various other development projects. Of the Rs 32,327 crores, Rs 25,000 crores would be needed to improve living standards in the economically backward Marathwada and Vidarbha regions, he said. The demand for special grants included Rs 1,400 crores for environmental management, Rs 200 crores for ecosystem conservation and protection and wetland conservation, Rs 1,000 crores for conservation and protection of rivers and Rs 200 crores for coastal biodiversity conservation.

See also: Marathwada to be biggest beneficiary of Samruddhi Corridor: Maharashtra CM

The chief minister demanded Rs 825 crores for preservation for culture and heritage, Rs 600 crores for conservation, repairs and development of protected monuments and museums, Rs 100 crores for conservation of forts and Rs 125 crores for upgradation of auditoriums and theatres. He demanded a special grant of Rs 1,177 crores for the conservation of forests, wildlife and for increasing the green cover and mangrove development. The government also sought Rs 1,700 crores for strengthening judicial administration, including renovation of court buildings.

“Maharashtra is the growth engine of the nation and so, we need more share (in tax revenue) for India to grow fast,” Fadnavis said. The chief minister also demanded an incentive for the state, which boasts of the highest tree cover in non-forested areas in the country. He suggested the use of rural data from the Socio-Economic Caste Survey, to measure deprivation and factor it in the devolution formula of the Finance Commission.

Apart from Fadnavis, state finance minister Sudhir Mungantiwar, revenue minister Chandrakant Patil and other ministers Sambhaji Patil Nilangekar, Ram Shinde and Deepak Kesarkar, also attended the meeting with Commission members. The Finance Commission is set up every five years, to decide the sharing of tax resources between the centre and states. The 15th Finance Commission, headed by NK Singh, was on a three-day visit to the state from September 17, 2018.

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West Bengal government to formulate new fire safety policy, <a href="https://www.savidevelopers.com">Savi Developers</a>

The West Bengal government is planning to formulate a new policy on fire safety for commercial buildings in the city, in the wake of the massive fire that gutted Bagree Market in Kolkata. Commercial buildings would not be granted trade licenses, if they fail to follow fire safety rules, a senior minister, who did not wish to be identified, said.

“We are planning to come up with a policy soon. We are formulating it and the final decision will be taken, once the chief minister returns from her foreign tour,” he said.

See also: West Bengal real estate act: Hardeep Singh Puri says states have to conform to central law

“There are several commercial buildings in the city and we must have better fire safety measures for them,” he said. Trade licenses would not be granted, if such buildings fail to follow the fire safety norms specified by the government, the minister said.

Many commercial buildings are quite old and there are no proper fire safety measures there. They are functioning with the same infrastructure for all these years, without paying heed to the advice of the fire department and the city municipal corporation, he said.

They take money from the business enterprises, who have shops in those buildings, the minister said.

As per the proposed policy, all commercial buildings should have separate water reservoirs for emergency purposes only, he said. The massive fire at Bagree Market on September 16, 2018, gutted at least 1,000 business establishments inside the G+5 building.

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Factors to consider, while opting for a PG accommodation, <a href="https://www.savidevelopers.com">Savi Developers</a>

The rental landscape in India is undergoing a slow transformation, with the influx of people into metro cities, in search of jobs. The rental market has also benefited from the surging real estate prices in India, which have made home ownership unaffordable to many. Growth of the rental market, has meant that paying guest (PG) accommodations have also gained traction. People from all walks of life, especially bachelors, are now opting for PG homes, as they offer an easy rental option and stringent rental agreement rules. Moreover, there is better awareness about tenant and tenancy rights and searching for a PG accommodation is quite easy nowadays, with multiple online sites. This has led to mushrooming business, making PG rentals a consumer-led market.

  Advantages of living as a paying guest

“India’s urban population rose by 31.8% in 2016 and this requires better rental infrastructure. PG accommodations are a convenient way to fulfill the needs of bachelors, vis-à-vis rental options. At the same time co-living options, like flat mates, support independency, lifestyle and resemblance to your home in a new city,” says, Sanchal Ranjan, co-founder and CEO, ZiffyHomes.

See also: Dos and don’ts for tenants sub-letting their apartments

“If you plan to move into your own apartment, prepare yourself as it will be expensive to rent a semi-furnished or a fully-furnished home. With PG, you can have peace of mind, as the owner will fix you up with the basic facilities, such as furniture, electronics and most importantly, food. Most PG owners in Delhi, provide you with a meal plan and it definitely helps. Also, in a PG home, you will be sharing the space with like-minded people, which will help in your personal development,” explains Harshit Takkar, manager, business intelligence, FellaHomes.

  Cost of a PG accommodation

PG accommodations are also ideal for individuals, who are new to a city and are looking for rental options at an affordable price. “An average person spends one-third of their earnings on accommodation, which includes rent, electricity charges, groceries/food, maintenance charges, maid, cook, etc. A PG accommodation provides all these components in a single option,” Ranjan elaborates.

Nevertheless, one needs to consider several important factors, before selecting a PG accommodation. These include security arrangements, availability of power backup, distance from the workplace, access to transport options like metro, buses, etc., and presence of market places, convenience stores, hospitals, shopping malls and entertainment centres, nearby, as in the long run these will affect your monthly budget, adds Ranjan.

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Five points that home buyers need to keep in mind, about the Insolvency and Bankruptcy Code, <a href="https://www.savidevelopers.com">Savi Developers</a>

Owning a home, for an average Indian, is a lifelong dream. There have also been numerous instances, where thousands of aspiring home buyers have suffered, owing to poor financial management on the part of developers, especially the unregulated ones. Insolvency proceedings initiated against such developers, also left home buyers in the lurch. As a result, a reform that was long overdue, was protecting the rights of house buyers, whenever a developer faced financial insolvency, as many developers relied on the funds collected from buyers to make progress on their projects. The funds collected from the home buyers, in fact, was the basic foundation on which several developers, who did not have access to credit and institutional investments, actually began work on the project.

The complexity arises, when there is a delay in the delivery of the apartment, leading to uncertainty for the anxious buyer. If this situation prolongs, which can potentially lead to an insolvency situation for the real estate developer, the buyers are their wits’ end. In order to protect the rights of the buyers, the government brought an amendment to the Insolvency and Bankruptcy Code (IBC), which put them into a category of creditors. It essentially means that the buyer will almost have equal rights, like any other creditor to the real estate developer. This new law is laudable, as it protects the rights of creditors. However, there are certain key points that buyers need to be cautious about.

  1) The IBC law is still new

One must remember that the law is still new and one really does not know how it will actually come into force. While every legal case has a precedent, there is no example for this law which has come into force. There are also other specific laws, which govern the real estate sector. Hence, one does not know how this will have a bearing on the IBC.

See also: Government promulgates IBC ordinance, home buyers to be treated as financial creditors

  2) Clarity on the legal status of various creditors under the IBC

Even though the buyers come under the umbrella of creditors, there is no clarity on what exactly their position will be. In short, it is not clear who gets the higher priority. There are already certain voices, which say that if the buyer is placed above the financial creditors like the banks, then, the sector may find it difficult to get funding.

  3) The legal cost of cases under the IBC

While the law has been amended to protect the buyers, one must realise that the legal costs of deriving the benefit from the law, may turn out to be high. In legal cases, there are always expenses involved. Moreover, legal cases in the country are always a lengthy procedure. The other key point is that the battle is between the individual and a group, where the former is at a severe disadvantage in courts.

  4) Other creditors coming into play

It is not possible that the IBC will be looked at, in isolation in the court of law. There will always be other laws, which will also come into force in a case. As the real estate industry requires the approval of multiple laws, it may not be a simple ‘open and shut’ case.

  5) Availability of alternative consumer forums

It will also be important for the buyers to look at alternative forums that could provide similar relief, like the IBC. The consumer courts in the country are very active and have proved to be an important platform, to resolve the various grievances of consumers. This is an avenue that troubled apartment owners should actively explore.

(The writer is managing director, Salarpuria Sattva Group)

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Register projects to avoid penalties, Telangana warns builders, <a href="https://www.savidevelopers.com">Savi Developers</a>

The Telangana government, on September 18, 2018, asked all builders and developers who have obtained permissions for real estate projects on or after January 1, 2017, to get their projects registered with the concerned authority, immediately. “All the builders/developers who have taken permission for real estate projects on or after January 1, 2017, having about 500 sq metres plot area or more than eight units, are requested to get their projects registered with Telangana State Real Estate Regulatory Authority (TS RERA) immediately through online, to avoid penalties. The official website is rera.telangana.gov.in,” an official release said.

See also: Telangana CM seeks detailed project report, for new ring road in Hyderabad

As per the Real Estate (Regulation and Development) Act, 2016 and Telangana Real Estate (Regulation and Development) Rules, 2017, notified by the state government, all the real estate projects approved on or after January 1, 2017, having above 500 sq metres plot area or more than eight units, have to be registered with the authority, it added.

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RCom to exit telecom fully, to focus on realty: Anil Ambani, <a href="https://www.savidevelopers.com">Savi Developers</a>

The first priority for Reliance Communications (RCom), which is credited with democratising telecom services through cheaper offers in the early 2000s, is to resolve its over Rs 40,000-crore debt, Anil Ambani told shareholders at the company’s 14th annual general meeting in Mumbai, on September 18, 2018. We have decided that we will not proceed in this sector and many other companies have taken a similar call. This is very much a writing on the wall, the future, he said.

“As we have moved out of the mobile sector, we will monetize, at an appropriate stage, our enterprise business. Reliance Realty will be the engine of growth for the future of this company,” Ambani said.

Pointing out to the 133-acre Dhirubhai Ambani Knowledge City (DAKC) on the outskirts of the financial capital, he said there is huge realty play opportunity that RCom’s erstwhile corporate headquarters possesses and pegged the potential value creation at the site, at Rs 25,000 crores. Reliance Realty is a wholly-owned subsidiary of RCom, which will develop the DAKC in Navi Mumbai, he said, adding that it is already a registered IT and Fintech park. The company already has three million sq ft of built up space, which will be leased out to multi-nationals, Ambani said, adding that he expects revenue accruals through it this year itself.

See also: RInfra-Astaldi and MSRDC ink pact for Versova-Bandra Sea Link

RCom owes over Rs 40,000 crores to a group of 38 lenders, including Chinese banks and was resolving the debt through a strategic debt restructuring (SDR) process. Ambani said he is confident of getting a resolution in the next few months and added that other monetisation measures, including the sale of its telecom infrastructure and fibre to Reliance Jio, are at an advanced stage of closure. He said the company is awaiting final approvals for spectrum sharing and trading, from the Department of Telecom.

Anil Ambani also thanked his elder brother Mukesh Ambani, who is credited with conceptualising the undivided group’s telecom foray and also bought the assets, as part of the beleaguered RCom’s monetisation efforts. “It would be most appropriate for me to thank and acknowledge the support (and) guidance extended to RCom and me personally, by my brother Mukesh bhai Ambani,” the younger sibling told shareholders. It can be noted that Mukesh Ambani re-entered the telecom sector by buying out a company, which had successfully bid for 4G spectrum, along with which he also announced the end of a no-compete pact. His company Reliance Jio’s aggressive play, is widely blamed for wrecking the telecom sector, which has seen an erosion of profits, asset sales, bankruptcies and consolidation, following the entry of the deep-pocketed new entrant.

Anil Ambani said that there has been a ‘creative destruction’ of the telecom sector that has resulted in the creation of an oligopoly, which is going towards a duopoly and may be even a monopoly in the future. Banks are saddled with over Rs 7.7 lakh crores in debt and the financial troubles of operators have resulted in over 20 lakh job losses, he said. He said the residual company will serve 35,000 businesses through the enterprise, data centres, undersea cables and international voice calling verticals and will get half of its revenues from abroad.

RCom is ‘committed’ to exit these verticals, as well, to pay-off banks and will take a call on the same, at an appropriate time, Ambani said.

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Bullet train: Gujarat farmers write to Japanese government, alleging violation of guidelines, <a href="https://www.savidevelopers.com">Savi Developers</a>

A letter sent by farmers in Gujarat, whose lands will be acquired for the Mumbai-Ahmedabad bullet train project, has asked the Japan International Cooperation Agency (JICA), which is providing a soft loan for the Rs 1.10-lakh-crore project, to withhold disbursal of funds to the Indian government, until the agency’s guidelines are complied with, said a lawyer. Advocate Anand Yagnik, who represents five petitioners, who have challenged the land acquisition for the project before the Gujarat High Court, said the petitioners and 1,000 other affected farmers, led by the Gujarat Khedut Samaj, have written to the Japan government.

They have also sought an appointment with Japan’s ambassador to India, Yagnik said. The letter invited the Japanese ambassador to Gujarat, for understanding the farmers’ plight, he said.

See also: Bullet train project delay: Railways mulls opening shorter 50-km section by 2022

The letter alleged that JICA’s guidelines for such financial assistance ‘are being flagrantly violated’, so it should ‘withhold any instalment to be given to the government of India’, till the guidelines are complied with, he said.

Among other things it alleged that while the JICA’s guidelines seek the setting up of an advisory committee, for environmental and social considerations, no such committee has been formed.

The environmental impact assessment and social impact assessment reports for the project, date back to 2010 and in the meantime, other projects such as the Delhi-Mumbai Industrial Corridor, Western Dedicated Freight Corridor and Express Highways were planned, the letter said. Hence, the cumulative impact of all these projects in the region must be considered, it said.

For the project, around 1,400 hectares of land will be acquired in Gujarat and Maharashtra, of which 1,120 hectares is privately owned. The project was launched by prime minister Narendra Modi and his Japanese counterpart Shinzo Abe, in September 2017.

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Income tax rules for cooperative housing societies, <a href="https://www.savidevelopers.com">Savi Developers</a>

As housing societies are not apparently engaged in any income earning activities, there is a perception that they are not required to comply with any income tax provisions. This impression is heightened by the fact that housing societies are managed by honorary office bearers, who are generally not well-versed with the laws. A housing society is a legal entity and therefore, is treated as separate from its members. It has to comply with various legal laws, including income tax laws.

  Status of housing societies under the income tax laws

Section 2 (31) of the Income Tax Act defines the entities that are treated as persons, for the purpose of income tax. A person is the basic entity under the income tax laws, which has to comply with various income tax provisions, including filing of return, payment of taxes, deduction of tax at source, etc. The definition includes ‘an association of persons or body of individuals, whether incorporated or not’.

All housing societies are registered under the cooperative society laws of their respective states. In Maharashtra, housing societies are registered under the Maharashtra Cooperative Societies Act 1960. Being an association of persons registered under a law, a cooperative housing society has to comply with the income tax laws, wherever applicable. As it is a tax entity under the income tax laws, it needs to have a Permanent Account Number (PAN), even for opening a bank account.

  Tax benefits available to a cooperative housing society

Section 80 P of the Income Tax Act, allows certain deductions to cooperative societies, including cooperative housing societies.

While computing the total income of a housing society, any income derived by it by way of interest or dividends from any other cooperative society, is fully treated as exempt. As housing societies are mandated to keep their deposits with cooperative banks, all of the interest received by it on its deposits with the cooperative bank, shall be fully excluded from the income of the housing society. However, in case the housing society invests its funds with other entities like public sector banks or private banks, income from there shall become taxable in its hand.

  Liability of housing societies to file income tax returns

Unlike an individual and HUF, for whom the law provides a basic exemption limit beyond which they are required to file their income tax returns (ITR), there is no such basic exemption limit for cooperative societies.

See also: Victory for cooperative societies, as Supreme Court approves the principle of mutuality, for CHS income

Hence, all housing societies are required to file their ITR by the due date, which is September 30 of the year following the financial year, as the accounts of the housing society are required to be audited under the provisions of their respective cooperative society laws. If the housing society fails to file its ITR by the due date, it has to pay interest on the outstanding tax liability in case the liability is not already discharged by way of TDS or by payment of advance tax, for the period of delay, in addition to interest liability on the shortfall in payment of balance tax after adjusting TDS and advance tax. In case the housing society fails to file its ITR by the due date, it can still file the same by March 31 of the year next to the period for which the ITR belongs. For the delay, the society has to pay a mandatory fee of Rs 5,000 if the delay is up to December but the fee will be Rs 10,000 if the delay goes beyond December of the next year. The mandatory fee for delay in filing of the return shall be restricted to Rs 1,000, in case the taxable amount of the housing society does not exceed Rs five lakhs.

The society needs to pay advance tax, in case its advance tax liability exceeds Rs 10,000 for a year in four instalments on June 15, September 15, December 15 and March 15, in the ratio of 15 per cent, 30 per cent, 30 per cent and 25 per cent of the aggregate advance tax liability.

  Taxation of housing societies

The tax rates and slabs applicable to housing societies, are different from those of individuals and companies. Since there is no basic exemption, every rupee of the taxable income of the housing society suffers income tax.

For the first Rs 10,000 of the taxable income, after excluding the items discussed above, the society is required to pay income tax at the rate of 10 per cent. For the next Rs 10,000, the applicable rate is 20 per cent. On the income above Rs 20,000, the society has to pay tax at 30 per cent of the income. In addition to the above, the society will have to pay a surcharge of 12 per cent on the tax, in case the income exceeds Rs one crore in the year. The tax calculated shall also attract an education cess of three per cent.

  Liability to deduct tax, deposit and file TDS returns

Like the liability to have a PAN, pay advance tax and file its income tax returns, housing societies are also required to deduct tax on certain payments, like salaries to its staff, payments to contractors for carrying out any activity in the society’s buildings, on interest on money borrowed, etc. In order to fully comply with the TDS requirements, the society is required to obtain a Tax Deduction Account Number (TAN), so that it can deposit the TDS to the credit of the central government and also to file the TDS returns periodically.

(The author is a tax and investment expert, with 35 years’ experience)

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Marathwada to be biggest beneficiary of Samruddhi Corridor: Maharashtra CM, <a href="https://www.savidevelopers.com">Savi Developers</a>

“Marathwada region is going to be the biggest beneficiary of the Nagpur-Mumbai Super Communication Expressway, especially Aurangabad and Jalna districts. These districts will be the magnets of development,” Maharashtra chief minister Devendra Fadnavis said, on September 17, 2018. The Rs 49,250-crore Nagpur-Mumbai Samruddhi Mahamarg, alternatively referred to as a Super Communication Expressway, will be 700 kilometres long and will pass through 392 villages, spread over 11 districts.

“The development of Aurangabad Industrial City (AURIC), as part of the Delhi-Mumbai Industrial Corridor (DMIC), is in progress with a total investment of Rs 11,000 crores, with an estimated job creation for three lakh people,” Fadnavis added. AURIC, formerly called the Shendra-Bidkin industrial area, located near Aurangabad, is a planned and greenfield smart industrial city being developed across 10,000 acres, as part of the DMIC.

Speaking further on government initiatives to help Marathwada, Fadnavis said that the region was home to about 35 per cent of farm ponds, created across the state in the last two years. These ponds in Marathwada had a capacity to irrigate 60,000 hectares of agricultural land, he said.

See also: Russian firm keen to invest Rs 1,000 crores in Maharashtra industrial city

The Maharashtra CM said that the proposed Marathwada water grid project, would see the linking of 14 reservoirs for enhanced irrigation. “Green cover in the Marathwada region is very limited. The state government’s mass sapling plantation drive has realised into five crore plantations, as against the target of two crore this year,” Fadnavis said.

Fadnavis was speaking at the Marathwada Liberation Day organised at Aurangabad, about 335 kilometres from Mumbai. The arid region was part of the Hyderabad Nizamate, at the time of independence. A violent struggle ensued after the Nizam turned down a plea by the local populace, for separating Marathwada from Hyderabad. The region finally got separated from the Nizamate on September 17, 1948.

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Banks’ provisions for NPAs to remain high till FY 2020: India Ratings, <a href="https://www.savidevelopers.com">Savi Developers</a>

Banks are witnessing a spurt in asset quality stress in the non-corporate segment and the overall loan loss provisions for lenders, are expected to stay elevated till fiscal year 2019-20, a report said.

The outlook on private sector banks, along with SBI and Bank of Baroda among the state-run ones is stable, while all the other state-run banks carry a negative outlook, India Ratings said in its mid-year outlook on banks, on September 17, 2018.

Banks will continue with credit costs or provisions of up to three per cent for both, the ongoing fiscal, as well as the one after, according to the rating agency. It attributed the higher credit costs to the ageing of NPAs (non-performing assets) recognised earlier since the asset quality review of FY16, accelerated provisioning and slippages, especially from non-corporate accounts.

See also: SBI, ICICI hike benchmark lending rates by up to 0.2 per cent

In what can be a worrying sign, the agency said it has observed a spurt in asset quality stress building up in the non-corporate loans, even as the same in the corporate segment had plateaued. It said there has been an increase in the share of smaller corporates and small and medium-sized enterprises and personal/retail loans, in the special mention accounts (SMAs) pool in FY18 over FY17.

The share of loans under Rs five crores in SMA1 accounts, or those cases where there has been no loan repayment for 31-60 days, had increased to 40 per cent at the end of FY18 from 29 per cent the year-ago, the report said, while the same for SMA2 where loans have not been serviced for 61-90 days had risen to 68 per cent as against 12 per cent earlier.

Even as the asset quality troubles continue, there are rising headwinds for credit availability, according to India Ratings. “The prevailing stressed financial conditions could intensify credit tightening, unless liquidity of financing channels is at least partially reinvigorated,” it said.

The agency said adverse interest rate conditions, increasing risk aversion by state-run banks, which leaves 35 per cent of the banking system unable to serve the lower rated borrowers, volatile external environment and lack of alternatives for financing, are ‘critical’ to corporate credit quality in FY19. Bank exposures of nearly Rs four lakh crores can be impacted, by the absence of favourable liquidity/market conditions and refinancing pressures, which will give the large, non-bank players and private banks to up their market share, it said.

With the tightening in rates, some of the financing done by corporates, through the bond markets, can shift back to the banks, which will help increase corporate books for well-capitalised banks and also jack-up their earnings, it added. On the stress from corporate loans, it said the total corporate assets under stress had stayed between 20 per cent and 21 per cent of the overall bank credit, for the two years to FY18.

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NRI investments in India: The essential checklist, <a href="https://www.savidevelopers.com">Savi Developers</a>

Presently, Indian real estate is a very popular investment option for most NRIs. However, since they live abroad, it becomes more important for them to do proper due diligence before risking their money.

  Important checks for NRIs

Nowadays, many Indian developers conduct roadshows abroad. NRIs should not be entirely convinced by impressive presentations and glossy brochures. They should have someone trusted visit the property’s site and check the ground realities. Like all real estate investments, the location of the project should be attractive and should enjoy good connectivity.

Pricing is another important issue. “Often, the prices quoted by builders to buyers abroad, are higher than those quoted to domestic buyers. Also, builders don’t offer discounts when selling abroad,” points out Sanjay Sharma, managing director, Qubrex Realty, a Gurugram-based real estate consultancy. In such a scenario, the international buyer must learn the rate at which the project is being sold in India. Furthermore, they should avoid paying a large part of the cost upfront. In fact, they should opt for either a construction-linked payment plan or the 80:20 or 70:30 scheme. In such schemes, a small portion of the cost is paid upfront at the time of booking, and the balance is paid on possession. Better still, they should opt for finished apartments to avoid the risk of delay in possession.

See also: Dos and don’ts for NRIs investing in Indian realty

It may also be wise for NRIs to take a small bank loan, even if they don’t need the money. “When an NRI takes a loan, the bank will do the due diligence on their behalf,” explains Sharma. “It will check whether the builder owns the land on which he is developing the project and has obtained the requisite licenses. This will avoid a lot of trouble,” points out Sharma, adding that he has witnessed quite a few examples of NRIs investing in small builders’ projects and then regretting not having done timely research.

  Indian laws governing NRI transactions

NRIs investing in India must understand the laws that govern real estate transactions. There are, for instance, restrictions on how quickly the profit from a real estate transaction can be repatriated. NRIs also need to learn whether their gains will be subject to double taxation.

  Market research for NRIs

The real estate sector in the developed markets is better governed and more evolved, unlike India. Here, buyers are often subjected to a lot of hassles. Unless an NRI has a trusted person running errands in India, buying real estate in India could be challenging. Then there’s the management of the property as there are not many companies in India still that offer such services. This makes it all the more essential that an NRI has an agent to collect the rent as well as look after its maintenance.

  ROI expectations for NRIs

“The theory of mean reversion suggests that returns from real estate, are likely to be lower than they have been in the recent past,” explains Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors. “Therefore, NRIs investing in residential real estate at this point of time, should have reasonable return expectations over a long-term period,” he says. Finally, NRIs also need to be aware that the depreciation of the rupee against their home currency, will also have a bearing on their returns.

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How to choose a home insurance policy for your house, <a href="https://www.savidevelopers.com">Savi Developers</a>

In India, most home owners do not bother to insure their homes, even though it is often the biggest asset that one can own. Neeraj Prakash, managing director of Shriram General Insurance Co Ltd, attributes the low demand for home insurance, to ignorance, saying that Indians are not even aware of the risk associated with their lifetime investment.

“Even the people who are aware that a home can be insured, are not doing so, as they consider it a waste of money. They feel that any threat to their house is rare and may happen once in 10 years. In many places, people may have not experienced any threat to their home in their lifetime. This ignorance can expose them to high risk, which can be avoided by paying a small annual premium,” Prakash explains.

  What is home insurance?

Even though India witnesses natural calamities each year, home insurance remains a low priority.

“Currently, unlike a car insurance, home insurance is not mandatory. However, banks are making it mandatory for a borrower to obtain home insurance, while opting for a home loan. In home insurance, the cover is provided for the structure and contents. There needs to be more awareness about such products, as a lot of people are not even aware of home insurance,” points out Surabhi Arora, senior associate director – research, Colliers International.

See also: What is title insurance and why do housing societies need it?

“A home insurance is a safety net that provides cover, in case of damage. It protects the house from unwanted, unforeseen causes that can damage it, such as fire, smoke damage, floods, earthquakes, lightning strikes, storms of all kinds, explosions, riots or civil commotion, burglary, break-ins, vandalism, etc.,” adds Navin Chandani, chief business development officer, BankBazaar.com.

People generally believe that home insurance is expensive and the process of settlement of claims, is complicated. Prakash, however, maintains that the scenario has now changed, with the entry of many insurers and the regulatory authority keeping a strict vigil on the operations of these companies.

“The premium payable towards insuring a home is around Rs 50 for coverage of one lakh rupees and when the policy is taken for a long term, then, the insurance premium can even come down to Rs 25 per Rs one lakh coverage,” explains Prakash.

  What does a home insurance cover?

In home insurance, the coverage is generally limited to the construction cost and contents of the apartment. “For the structure, the insurance cover is based on the area of the apartment and the approximate construction cost. Thus, one should avoid taking excessive insurance, as one will not get the claim for more than the construction cost of the company. Check the claim history and track record of the company, before buying the home insurance. Check the inclusions and exclusions of the policies,” Arora advises.

Not all types of damages are covered by all home insurance policies. Different types of home insurance policies provide cover for different types of damage. Hence, it is essential to do one’s homework, before selecting a home insurance. Check the list of risks and natural calamities that are included in the policy. “Read the policy carefully and understand the terms and conditions. Make note of the exclusions. Get all doubts cleared, before buying the policy. Check the financial ratings of your home insurer. An ‘A’ by CRISIL, is a good indicator of strength,” says Chandani.

  Claiming home insurance

Ensure that you have all information, like policy number, name, address and ID proof ready, if required. “When filing a claim, mention the type (theft/fire/water damage, etc.) and the description of loss or damage to the personal belongings and home. Call the concerned authorities, in case of fire or pipeline burst. If possible, take photos of the damaged area and also keep the receipts from services used or purchases made, because of the damage/loss. The insurance company will deploy a surveyor and have the damaged goods inspected thoroughly. The claim is settled, after the losses are assessed,” Chandani elaborates.

It is advisable to do an online search and compare different policies and their scope, before buying. Check everything, including the extent of cover, the exclusions and increase in annual premium.

  Points to consider, while opting for home insurance

The policy should only be taken for an adequate sum, because under home insurance the claim payment is limited to the cost of construction.

Always take a home insurance policy for the long term, so that the premium can be minimised.

Opt for add-on covers like earthquake/terrorism.

In order to hedge the inflationary impact on construction price, always opt for the escalation method of insurance.

The inclusions and exclusions are treated differently by each insurance provider. Therefore, one must carefully go through the policy document, before selecting any insurance.

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