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Fixed Maturity Plan

Mutual Fund houses have been forcefully pushing these plans to layman financial specialists promising wellbeing of capital and unsurprising returns.

The previous week, Essel Group of organizations (Zee) defaulted on the reimbursement of head on its obligation that had been bought in by numerous FMPs including Kotak MF, HDFC MF, Aditya Birla and ICICI Prudential. According to some reports close to Rs. 1,400 crores of such instruments are in default risk. As an investor how should one avoid such risks.

Invest only in debt issued by the Government of India or even from a pessimistic standpoint AAA appraised blue chip organizations, which structure some portion of the record like Nifty50 or Sensex 30. The distinction in yield between these protections and FMPs are in the tune of 150-200 bps, which isn’t proportionate with the dangers in question. Abstain from getting influenced by “deals talk” of the store houses who will utilize all way of past execution to get you to put resources into them. Thus it is less risky with Tier 1 Banks. Tier 2 Banks & Cooperatives should be avoided.

Invest in hard resources like commercial real estate where the consistency of incomes through lease is coordinated by the capital security managed by the land underneath. A business property won’t fail like an organization. There will consistently be a purchaser for it. Truly, the worth may vacillate and deal may require some serious energy, yet capital isn’t completely in danger.

Source: https://economictimes.indiatimes.com/wealth/invest/mutual-fund-fmps-hit-by-defaults-what-investors-should-know/articleshow/68860744.cms?from=mdr

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Commercial Property Interest Rates & Yields

The Reserve Bank of India has now raised financing costs by 25 basic points (1%=100 bps) second time in succession in their every other month money related arrangement audit. Yesterday’s expansion has taken the repo to 6.5%, which implies that it is currently costlier for banks to obtain cash from the RBI.

The entirety of a bank’s liquidity needs is met through current and investment account deposits or different types of capital. Banks obtain from RBI at short notification for a scope of liquidity needs much like a working capital advance that organizations take from banks. At the point when RBI builds the REPO rate, this expense goes up straightforwardly influencing the overall revenues for banks. RBI increases rates to flush out liquidity in the system.

A rate increment disincentives borrowers to obtain more, decreasing cash supply which in addition to other things helps in controlling swelling. A higher loan fee additionally pulls in outside speculation, which builds the interest for the household money. With rupee being one of the most exceedingly awful performing monetary forms in 2018, this is something that the RBI is hoping to oversee through higher loan fees.

Commercial Real Estate is an advantage class that exchanges on yields (likewise called ROI or capitalization rate or top rate). A yield is only Rent/Purchase cost. Notwithstanding, in contrast to a bond, the property additionally acknowledges in esteem (capital appreciation). A financial specialist, along these lines, needs to assess the absolute come back from the property as Yield + Capital Appreciation. The yield on any instrument is determined as the risk-free rate in addition to a premium. Since government securities are sans chance (the legislature can basically print more cash to pay and in this way conveys no hazard) the premium is zero. The hazard premium on different instruments relies upon the risk related with those specific instruments. For instance, a security given by an AAA appraised organization like HLL or Infosys will convey just a slight hazard premium though a security given by a BBB evaluated organization will convey a higher risk premium.

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MIDSEGMENT HOUSING WILL CONTINUE TO DRIVE INDIAN HOUSING MARKET

Union Finance Minister on November 6, 2019, announcement to set up a Realty AIF to the tune of Rs. 25,000 crore to complete stalled projects is likely to give a new lease of life to the sector. But some of the trends are unlikely to change. Real Estate experts are of the opinion that it is the demand for affordable housing, which will continue to rule the roost for the next few years as noticed over the recent past. “We have received tremendous response from customers during the festive season. In the 45 day season, our bookings have doubled as compared to the last festive season. The bulk of the demand is for affordable and mid-segment housing, which is also our strength. In the future too, we will continue to focus on this segment,” said Yash Miglani, Managing Director, Migsun Ltd. which is developing several projects across Noida, Greater Noida and Ghaziabad.

Not only Migsun, but the entire real estate seems to be focusing on the affordable segment.

According to a recent research report, real estate developers are expected to deliver over 4.5 lakh affordable housing units in the coming 15 months. While the Mumbai Metropolitan Region would get homes delivered to the tune of 2.45 lakh, the NCR is expected to deliver over 2 lakh units in the next 15 months.

“The largest chunk of demand is for affordable housing, not just in tier II and III cities, but even in metros. This is one of the reasons that we are focusing and building our strategy around the affordable housing segment.” Signature Sattva, which is one of the latest entrants in the realty sector is developing an affordable project in Alwar (Rajasthan) and is also set to foray in the Mumbai Metropolitan region soon.

“Affordable Housing is undoubtedly the key driver of housing sales, but the National Capital region being the hub of new-age entrepreneurs and wealthy people, we are witnessing robust response to our luxury offerings too,” Mr. Jain added.

Rise Group is a leading name in the realty arena in Delhi-NCR and is developing several projects in the region including luxury villas in Greater Noida West.

The Government has announced a slew of measures in the last couple of months in the favor of Real Estate sector which includes realty AIF of Rs. 25,000 crore, linking home loan rates to repo rate or any other external benchmark approved by RBI and upfront capitalization of PSBs.

The government had also announced an additional income tax deduction of Rs. 1.5 lac from Rs. 2 lac to Rs. 3.5 lac for properties up to Rs. 45 lac in its budget. Following these important measures initiated by the Government of India, the real estate sector is hopeful of a strong showing in the coming months.

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RISE OF COWORKING SPACE ON 2020

As Business Keeps Growing, A Shared Office Can Become A Viable Option For Your Scaling Team. A Flexible Workspace or Co Working Site Gives You the Benefits of a Centrally-Located Business

The growth of co-working space sector is set to spread to new geographies in 2020. The co working sector has ridden the peak of a wave for the past two years with demand increasing by almost 100% and market supply more than ever before. 2018 and the 1st Qtr of 2019 showed significant shifts in the trend with an increasing demand by corporate clients showing their interest flex space. Simultaneously, real estate developers and landlords are also taking a greater interest in the sector in the face of this rise in demand. A combination of new ways of working, multi-location access, and activity-based settings are taking over the traditional offices, paving way for modern workplaces.

The Indian real estate market reaction to the advent of co-working spaces will result in a greater demand for office spaces focused on flexible leasing terms. So in the coming time, real estate developers, property owners, and managers would prefer to rent out a major part of their total space as flex workplaces. As per a recent survey report, the total space leased by shared workplace operators is expected to stand at 10-12 million sq. ft. by 2020.

The co-working space nowadays more automated than before. Access cards, management software, attendance system, automated invoices, etc. have minimized the human interface in the management of the co-working space. By 2020, workplaces will be designed as technology integrated space. Millennial are always looking for high quality, high speed, reliable and covetable products and collaborative technology is required to meet these needs of today’s generation. New Technologies like The voice-activated assistant, wearable technology connected with the Internet of Things, will enable seamless connection, alliances, and accessibility from any place at any point in time.

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REAL ESTATE CHANGES IN 2020

The real estate landscape over the world is at another significant junction of progress. The real estate industry worldwide has a great deal of idleness and course rectifications are in every case moderate and regularly costly. Yet, innovation will disturb land financial matters totally, potentially in any event, making a few types of land excess later on. Advancement, upkeep and conveyance of land will become less fatty, because of tech fuelling that additional weight reduction. Maintainability and effectiveness evaluations will get required for ventures to be saleable and less-comprehended proptech players will be the go-to people for developers. The following decade will observer a market size extension of 50 percent: A back of the envelope estimation will explain that among 2010 and now, the amount of speculation commendable land over the world has dramatically increased. Rising urban movement, solid developing economies and expanding per capita earnings will just guarantee that this market extension rate proceeds with directly through the following decade, beginning 2020. 

Investors will think about advancement as prime resources become rare. As the fight for prime resources increases further, shortage of investable prime properties will prompt financial specialists building up their very a lot of prime undertakings, to keep their venture portfolios performing at ideal levels. New riches from the rising economies will either go into new improvements in business sectors which are still at earliest stages or other developing subsectors like retirement towns and agriculture drove rustic lodging plans.

Urbanization in rising economies will require uncommon development movement. Over the world, urban focuses in rising economies are as of now showing occasion skyline like gravitational draw for country vagrants. This lone implies that interest for lodging is shooting through the rooftop, while in correlation, the stockpile of moderate lodging stock is nearly non-existent. Land interests in metros of created nations will display generally safe and low yield openings, while high hazard and exceptional yield openings will exist in the sprouting urban areas of the developing economies.

It is clear that the new period of multi-localism—basically the inclination for neighbourhood networks, lodging, businesses, items, societies, and customs—is turning into the new worldwide standard. As worldwide understandings become less attainable the world over, nearby governments are intensely riding performance, introducing change as well as could be expected. To contend in this condition, fundamental understanding, combined with a portion of these devices should make exploring the moving sands simpler.

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Evolution Of Rental Housing Market In India

Over the years, the evolution of the Indian national average of  the rental housing market has been curiously lop-sided, even as the trends driving it has changed considerably.

Interestingly, residential rental yields in India are higher than in Beijing, Singapore and Hong Kong but lower than cities like Manila and Jakarta. However, the Indian rental yield average of 3% is lower than that of other Asian countries that are pegged at 3.5 – 4% and European countries at 4.5%-5%.

According to the survey found that more than 53% of respondents looking to invest and preferred to earn a steady rental income while only 39% would focus on capital profit on the sale.

If we look at the city-wise performance for rental yields, Hyderabad tops the list with a highest rental yield of 3.7%. In Bengaluru it is 3.6%, Pune 3.3 % and in entire MMR – surprisingly – it is just 3%.

For the salaried population, the demand for rental properties is mainly driven. A maximum proportion of tenants in cities like Bengaluru, Hyderabad, Pune and Mumbai are from the salaried section and belong to IT/ITeS, BFSI, Pharma and services. In fact, the IT/ITeS sector, BFSI, and Engineering & Manufacturing were the other sectors the key drivers for commercial space in cities such as Bengaluru, Hyderabad, Pune and Chennai   have caused a stable migration to these cities. 

Performance as an investment asset class

Peoples think that increasing demand for rental housing would also improve its performance as an investment asset class. Still, as the rental market grew steadily across major cities, rental yield (the annual rate of return an investor can earn from his capital invested in a property) has long since cease developing to a national average of 3%.

 

However, the lower the property cost, the higher is the rental yield. Therefore, investing in affordable or mid-segment properties will yield better rental returns (depending on external factors like location, project type, developer’s brand, etc.) For the same reason, luxury and super-luxury homes are not at all rewarding from a rental yield point of view.

 

 Cities                                              Rental Yield (in %) in 2014                       Rental Yield (in %) in 2019

Gurugram                                                             3.4                                                                              3.5

Noida                                                                         3                                                                               3.2

Greater Noida                                                     1.8                                                                                 2

Delhi                                                                           2                                                                               2.2

Pune                                                                           3                                                                                3.3

Bangalore                                                            3.15                                                                               3.6

Hyderabad                                                            3.2                                                                               3.7

Mumbai                                                                  3.3                                                                               3.5

Navi Mumbai                                                       2.5                                                                               2.8

Thane                                                                      2.4                                                                               2.7

Rental rights

The leasing and renting of residential property currently still fall under the purview of the Rent Control Act, but each state has its own version. The Act primarily secures the rights of tenants while curbing the power of the landlord to evict tenants.

 

Some of the basic rights of tenants and duties of landlords in India:

A tenant has the right to a safe and secure house and the onus to ensure basic standards of accommodation are on the landlord. The landlord cannot bar essential service such as power and water to recover rental dues. In such a situation, a tenant can register a complaint against the landlord with the Rent Control Court. In order to evict a tenant; the landlord must file a petition before the Rent Control Court. The tenant has the right to privacy and the landlord cannot enter the premises without prior permission or intimation. The landlord must reimburse the tenant for any repairs that he/she carries out. The tenant must be served notice of the termination of tenancy and is entitled to receive the deposit at the end of the lease term. Legal heirs of the tenant are also considered tenants and are covered by the Rent Control Act of various states.

 

Policy reforms

The need for rental housing was first mentioned in the National Housing Policy, 1988, but little has been done to expand the scope of rental policy. Many local laws need to be revisited as they are heavily skewed in favor of tenants. In many ongoing instances, tenants have been paying low rents for decades and landlords have not been able to either revise rent or evict them.

The proposed Model Tenancy Act, 2019 aims to make simpler the complex dynamic of the tenant-landlord relationship. The initial draft of the policy was released in October 2015 and aimed to encourage rental housing through public-private partnerships.  The housing ministry announces a new public-private partnership (PPP) policy to support private investment in affordable housing, including rental housing, in September 2017. 

Development of rental housing

 At least on paper, the government has stated its intention to promote ‘Direct Relationship Rental Housing’ by providing land to developers to build rental housing. On his part, the developer would recover the cost of construction through rental income. However, due to lack of clarity on rental policy and other regulations, developers have not shown much enthusiasm to join the initiative.

 

Draft Model Tenancy Act, 2019

As per this newly-proposed Act, intended to replace the Rent Control Act, the government has laid down the following new proposals:

  • It aims to cap security deposits at two months’ rent for housing and one month’s rent for other properties. However, this cap may hurt landlords in cities where much larger security deposits have been the norm. 
  • The landlord is entitled to a compensation of double of the monthly rent for two months and four times of the monthly rent thereafter if a tenant does not leave the place after tenancy has been terminated by order, notice or as per agreement.
  • The landlord heir rent in mid-term, cut off or withhold essential supplies or services (electricity, water, etc.)
  • Before revising the rent value the property owner must give prior notice.
  • A tenant without the prior consent in writing of the landowner won’t be able to sublet whole property to someone else. It is the landlord’s responsibility to rectify structural damages and undertake measures like whitewashing walls and painting doors and windows.
  • An officer of the rank of deputy collector will act as rent authority to adjudicate any issue arising out of a rental disagreement.

While the proposals of the Model Tenancy Act have been widely welcomed, their implementation is not so simple. The Act is not binding on the states as land and urban development remain state subjects, so states and Union Territories can still repeal or amend their existing Acts.

Like in the case with RERA, states may choose not to follow guidelines and dilute the essence of the Model Act. Moreover, the Model Act is prospectively applicable and will not affect existing tenancies. The repeal of rent control acts can be governed by political exigencies and can be very complicated in cities like Mumbai, where tenants have occupied residential properties in prime areas for a pittance.

Another pain point could be the cap on the security deposit which is not likely to find favour with many landlords. In cities like Bangalore, the norm is a ten-month security deposit as a two-month deposit is unlikely to cover any damage to the property or a default in rent payment by the tenant.

Despite these challenges, The Model Tenancy Act is a step in the right direction. It provides a clear roadmap for states to follow, but it remains to be seen to what extent the states will toe the central government’s line. The state of Tamil Nadu had already come out with its Tenancy Act in February 2019 and may or may not follow the Model Act.

Still, a fair and balanced tenancy law protecting the rights of all parties will go a long way in formalizing and stabilizing the Indian rental market – and making it a more profitable investment route. If enforced by states in letter and spirit, it could revive the fortunes of not just the rental market but the housing sector at large.

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NO FUTURE WITHOUT TECHNOLOGY IN REAL ESTATE

Mostly all industries in the world are looking at technology to flourish in the market. Real estate is no far behind & is trying to innovate its process using the power of technology. Real estate is the biggest asset, worth more than all stocks and bonds consolidated. Running such a big industry at full steam in the 21st century requires innovation and imaginative brightness.

Rising development patterns, recognizing shopper desires and client experience with regards to purchasing land, fuelled the property division’s exigency to get innovation ready. Add to that the developing significance of information and the requirement for shrewd innovation got unavoidable. Proptech occurred and changed the financial aspects of the land business. It won’t be too self-important to even consider saying that the future strength of land is helpless before innovation. From improving the home pursuit procedure to anticipating right property estimations, shrewd innovation including AI, AR and Big Data will assume an excellent job for shoppers and realtors the same. 

Consecutive rushes of advancement behind proptech and its splendid possibilities in the years to come have provoked the premium of financial investors who are keen on investing in the technological marvel. Glancing back at 2008, a unimportant $20 million was put resources into Proptech. Quick forward to 2018, this figure swelled to an incredible $10.2 billion and the numbers continue tumbling. 

One of the territories where Proptech is making extraordinary commotion is maintainability. Sustainable buildings are being proclaimed as the eventual fate of the land business. The market for feasible structures is picking up prominence in the development and the renting fields. With the appropriation of new innovations, the real estate industry is practicing its effect on supportability. Decrease of asset usage and expanding productivity of structures to improve the well being of human social orders are the key center zones for this area today. 

Innovation today is assisting land properties with plan, material creation, well being, the board and development procedures crosswise over both private and business resources.

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