Homebuyers going for ready to move in flats
GST has resulted in reduced tax burden on buyers purchasing readymade apartments.
Homebuyers in DelhiNCR are preferring ready to move flats in the wake of recent developments in which thousands of investors were not handed over their units by the builders.
While more than 32000 investors are facing uncertainty following Jaypee Infratech becoming bankrupt, the process for corporate insolvency resolution under the insolvency and bankruptcy code is likely to be initiated against Amrapali group companies.
Though figures are not available as to how many ready to move flats were sold, realty experts un- equivocally say that most of the property enquiries are now related to ready to move projects. According to property firm Jones Lang Lasalle ( JLL), in the first half of 2017, out of the total investment of Rs 16,008 crore, the top seven real estate markets in the country received an investment of more than Rs 13,500 crore. Among these, Delhi-NCR received the highest investment of over Rs 5,800 crore, followed by Mumbai ( Rs 3100 crore), Bengaluru (Rs 2100 crore) and Chennai (Rs 1,700 crore).
Samantak Das, chief economist and national director (research) of Knight Frank, a leading property consultancy firm, said that people’s preference has changed in view of the recent developments. “Commitments made by builders are not kept. In many cases, the timeline is not followed. Moreover, the final product is not as per specifications, which were offered at the time of booking the residential units. There is total lack of confidence among the buyers for incomplete projects,” he said.
According to Ashwinder Raj Singh, CEO of Anarock Property Consultants, though ready- possession projects are costlier than under-construction projects, buyers are now more willing to purchase properties on an immediate basis rather than wait for the construction to be completed.
“Moreover, the new RERA (Real Estate (Regulation and Development) Act strictly prohibits builders from advertising their underconstruction projects while allowing the freedom to attract buyers for projects which have Occupation Certificates (OC ready). With the new rules, buyers are naturally showing increasing interest in such properties, which are essentially ready to move in,” he said.
Another factor which has led to this trend is the fact that more and more people feel that paying a little extra to acquire a house right away is a better option rather than paying rentals and EMIs together for a long period.
In any case, under construction projects are infa- mous for delays in completion which leads to buyers paying double the cost – paying EMIs as well has high rentals while awaiting possession of their property.
According to Vikrant Thakur, a property consultant, fly-by-night developers will be out of picture in the wake of RERA coming into reality. Strict RERA guidelines will ensure that only serious and genuine players operate in the market. However, for the time being buyers feel that only completed projects would be better in terms of security.
In many cases, according to property experts, projects are coming up on the peripheries of major cities which lack supporting infrastructure like roads, elec- tricity, water connections etc. Thus under-construction projects have to wait much longer for deployment of basic this infrastructure. This discourages buyers, who want to move into their new homes and also start living life with decent facilities instead of waiting indefinitely.
According to Singh, the implementation of GST has resulted in reduced tax burden on buyers purchasing ready-to-move-in apartments. “The tax on the entire cost of the project, including the land, will be levied at 12%. This should be enough for the builder to claim input credit, thus making OC-ready projects more economical for buyers,” he added. As the economy grows, the country’s energy needs and demand for natural gas also grow rapidly. With the Indian economy expected to grow five times in the next two decades and its population expected to surpass China in the near future, there should be a huge demand for energy. India is heavily dependent on energy imports and thus almost 70% of its energy needs are imported, with natural gas making up about 7% of the total energy consumption. A study has forecast that the demand for gas in India could reach up to 746 MMSCMD in the next 15 years as pipeline networks expand and increase consumer connectivity. The total gas consumed in 2016 was 135.87 MMSCMD, up from 133.37 MMSCMD in 2015. The only reason gas consumption in India is so limited is due to a limited pipeline network and last mile connectivity issues, with an existing pipeline network of 16,121 km and a design capacity of only 383 MMSCMD. A total of 13,821 km of gas pipeline is under construction in India, with 12 pipeline projects, but only one project has been completed, which is awaiting commissioning. The low utilisation is due to declining domestic production, as the expected output from the KG Basin could not fructify due to technical issues and also no major discoveries could be made. LNG is the only other alternative and India being a cost sensitive market has an economic limit to it. Currently, the gas consumption in the country is very uneven, as 80% of the gas consumed is in the northern and western regions, whereas the southern and eastern regions account for a minuscule amount, as they do not have the gas pipeline network. The current gas transmission projects in India, when completed, will establish the network in the east and south to encourage gas consumption. The present government is keen on increasing the share of gas in India’s overall energy basket due to air pollution in its cities and also to reduce crude oil imports by around 10% in the next few years. Petronet LNG Limited has been set up by Government of India to import LNG and set up LNG terminals in the country. It is one of the fastest growing world-class companies in the Indian energy sector, with terminals at Dahej in Gujarat and Kochi in Kerala. While the Dahej terminal has a capacity of 10 MMTPA [equivalent to 40 MMSCMD of natural gas], the Kochi terminal has a capacity of 5 MMTPA [equivalent to 20 MMSCMD of natural gas]. The company is in the process of building a third terminal in Andhra Pradesh. At the current market price of Rs 225, the Petronet LNG stock trades at a price earnings ratio of 18.31 times FY18 earnings and 16.78 times FY19 earnings, respectively. The earnings per share of the company for FY18 and FY19 are seen at Rs 12.51 and Rs 13.65, respectively. The stock is an excellent fundamental buy for investors with less risk appetite and hence from a nine months’ investment horizon, the Petronet LNG stock can give a 30% price appreciation.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.