RBI rate cut may boost demand for real estate

The rise in demand will be mainly in tier II and tier III cities where prices are still affordable, say analysts

Banks have a 67% share of the housing finance market, estimated at `7 trillion as of 31 December. Photo: Hemant Mishra/Mint

New Delhi: The Reserve Bank of India’s (RBI’s) monetary easing could prompt a rise in real estate demand, leading to prices firming up after having dropped around 4% in the recent past, said R.V. Verma, chairman and managing director of National Housing Bank (NHB), the regulator for housing finance firms.

Builders with unsold stock may raise home prices, Verma said on Thursday.

“The Residex (index of property prices in various Indian cities) for January-March could reflect this trend. We are watching it closely,” he said.

RBI cut the key policy rate by 25 basis points (bps) in its 29 January review of monetary policy, and analysts expect it to follow an easy money policy to boost economic growth. Following the RBI rate cut, many banks announced cuts in lending rates, fuelling expectation of a pick-up in retail housing demand. NHB also reduced its prime lending rate, or the rate at which it it lends to other banks, by 25 bps to 9.75% the same day. One basis point is one-hundredth of a percentage point.

The rise in demand will be mainly in tier II and tier III cities where prices are still affordable, said Verma.

“There has been a position of oversupply, which has had a moderating effect on prices. Prices are down 3-4%, primarily in tier II and tier III cities, because this is where the demand for housing loans is concentrated under the slab of Rs.10-25 lakh,” Verma said. “However, because of the increase in positive sentiments and the likelihood of lending rates going down further, the demand may pick up again leading to a price rise in houses by developers which have been under pressure till now.”

Banks have a 67% share of the housing finance market, estimated at Rs.7 trillion as of 31 December. In the Trend and Progress of Housing in India 2012 report released on Thursday, NHB said the housing finance industry could see around 20% growth in 2012-13 from the previous year.

Industry experts said prices are likely to rise in some areas.

“In markets like National Capital Region (NCR) or Mumbai, there have been fewer launches, but pricing has not taken that much of a hit. Prices have been stable or have seen a marginal increase,” said Neeraj Bansal, director, real estate, KPMG. “However, in other parts, where demand has gone down significantly, the developers have been offering good discounts on available prices for ready properties.”

The outlook has become more positive following the cut in interest rates. “There is an increase in positive sentiment, which may lead to an increase in prices in select cities,” he said.

The industry also expects the budget will contain steps that will boost the industry.

“If the industry receives a stimulus, the following quarters post the budget can see more buying from end-users, which will invariably lead to a rise in housing prices,” he said. Bansal said Andhra Pradesh, Mumbai, NCR, Chennai and Bangalore may see house prices increase in the near future. According to some industry estimates, house prices could rise 5-10% in the next few quarters .

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Resale property market turning hot in Chennai

COIMBATORE, MAY 9: As the property prices are on the rise and new apartments at affordable price ranges are difficult to secure within the city, resale market for existing properties is becoming hot in Chennai.

What is driving their demand, apart from the gap in the rates of new and old properties, is their location and HDFC, which organised a two-day event in Chennai recently, only expects this demand to grow.

Speaking to Business Line, Mr Mathew Joseph, Senior GM and Regional Business Head, Tamil Nadu and Andhra Pradesh, HDFC, Chennai, said around 400-450 people visited the programme organised at HDFC's branches in the city on April 28 and 29.

Enquiries were coming in even after the event ended. He said this was for the first time HDFC had sponsored such an event and it was able to ‘create a standard'.

He said apart from the difference in rates between new and old properties, what was creating demand for re-sale properties was their location. New properties might not be coming up at desired locations to meet the demand or high prices could be a barrier.

Explaining the purpose behind the HDFC initiative, he said the event was organised by HDFC with the ‘objective of assisting and counselling customers' who wanted to buy resale properties. The focus was on advising customers on the ‘intricacies of the legal and technical aspects of buying resale properties'. HDFC held the show on the basis of the feedback from customers who have regularly sought its opinion on these critical aspects.

This was the first in-house event of its kind at HDFC, Chennai. Three years ago it had conducted a re-sale show at an external venue where HDFC had invited leading property consultants to showcase re-sale properties. But this time it organised a ‘Resale Weekend' at its four city branches — Anna Salai, Adyar, Anna Nagar and Kodambakkam — to offer legal and technical guidance only for resale properties.

GROWING TREND

Asked whether there was any spike in demand for re-sale properties, Mr Mathew Joseph said there was an increase in demand year-on-year for resale properties. At present, approximately 10 per cent of the loans advanced by HDFC in Chennai was for purchase of re-sale properties.

He expected this trend to grow. One of the reasons for home buyers looking at this option was the pricing of such properties and a greater possibility of negotiating terms with the sellers. That the properties are ready-to-move-in homes was another attraction.

But a more important factor that drives the growth of re-sale property market was they are available at locations where the buyers want to live because of proximity to educational institutions, health care facilities, places of worship or music sabhas or as the buyers could live closer to their older parents.

He did not notice any particular preference for geographical areas among the buyers and the demand was for all prime locations in Chennai, with the choice being driven by need.

On factors on which HDFC would decide to clear a loan proposal, he said HDFC would approve loans for properties that complied with the rules of CMDA or the relevant applicable authority.

BUILDING AGE

With regard to the age of the building, while there was no specific restriction in terms of the age, on a general basis it considered properties which are up to 20 years old for funding.

However, HDFC's in-house technical experts would inspect these properties to ensure they are in good condition from a technical point of view and are marketable.

Mr Joseph said HDFC would fund a maximum loan of 80 per cent of the cost of a re-sale property and for a maximum term of 20 years subject to the borrowers' individual creditworthiness.

He said HDFC itself may not have a separate portal to list re-sale properties for prospective customers to choose from as it has two subsidiaries — HDFC Red and HDFC Realty — that list online properties available for sale.

Source: http://www.thehindubusinessline.com/industry-and-economy/article3401421.ece?homepage=true&ref=wl_home

CMDA plan to digitize Chennai land records on the backburner

Chennai

A project to digitize all land records and documents in Chennai has been pushed to the backburner. It was proposed in 2007 and a Madras high court appointed monitoring committee sent a reminder in November 2011 but the Chennai Metropolitan Development Authority (CMDA) is yet to move on it.

The project, based on studies of similar models in foreign countries, was mainly aimed at making land-use systems and policies more transparent and efficient, ensuring that there would be no loopholes. The HC panel asked the CMDA to digitise all documents to ensure easy access to the public.

A highly-placed CMDA official admitted that no move was taken in this regard. “It was mainly to avoid delays in carrying out punitive measures against illegal structures. All documents, including those relating to land sites, dimensions and surrounding areas in detail, were to be in electronic form,” he said.

CMDA sources said a study would be undertaken on the quantity of documents and the quality of decades-old records. “Technical help from an external agency is a must as it will be a massive project involving lakhs of pages,” said the official. He added that a group of officials was purposefully delaying the project due to political pressure.

In 2001, Andhra Pradesh took up a digitization project and completed the pilot programme, digitizing records based on cadastral surveys, employing modern instruments and techniques. In October last, the Centre asked states to initiate digitization of land records. The National Council of Land Reforms suggested computerization of records, setting a two year time framefor a survey.

Source: The Times of India, Chennai

Tamil Nadu awaits clearance to set up waste management plant

Chennai

The environmental clearance granted by the Tamil Nadu government to the Chennai Corporation’s to set up an integrated solid waste management plant at Perungudi has been set aside by the National Green Tribunal. Times Property has more on the case that will see a new beginning under the jurisdiction of the Union Ministry.

The unending debate surrounding the issue of waste management and garbage clearance in the city, in the past few years, has involved environmentalists, activists, city planners and government officials. While suggestions have been made in the past to shut down the dumping yards at Perungudi and Kodungaiyur and replace them with integrated solid waste management plants, no concrete solution has been arrived at. The Corporation’s suggestion to set up an integrated solid waste management plant at Perungudi was strongly opposed and the case been facing legal hurdles, finally came to a close.

India’s first dedicated environmental court, the National Green Tribunal (NGT) in its first ever hearing in the city on February 24, set aside the environmental clearance granted by the Tamil Nadu government to set up the plant at Perungudi. Hearing the appeal by V Srinivasan against the Tamil Nadu State Level Environment Impact Assessment Authority and others, the tribunal headed by Justice C V Ramulu, passed the judgement stating that the site of the proposed plant was less than 10km from the Guindy National Park and that the project fell within Category A and the Union government (Ministry of Environment and Forests) alone could issue environment clearance (EC).

The appellant, V Srinivasan of the Save Pallikarnai Forum, said, “Following a public hearing in 2010, a case was filed against the Tamil Nadu Pollution Control Board (TNPCB) and a stay order was issued on the commissioning of the plant by the National environment Appellate Authority, which was in-charge prior to the constitution of the NGT.” He explained further, “The Environmental Impact Assessment (EIA) notification of 2006 classifies industrial projects in two categories – A and B.

Any project site within a 10-km radius from a national park or a protected area, falls under category A, such as the case at Perungudi, and permission for a clearance could be obtained only from the Union Environment Ministry.

However, following an incorrect EIA report, the project was considered in category B all along.” The demand of our forum, is to close down the dumping yard as it affects the Pallikarnai marshland and has led to its deterioration over the years. “As per the wetland rules of 2011, ay landfill has to shut down within a period of six months, but no action has been taken against the facility,” he added. Unless the Corporation does not devise a concrete source segregation policy and set up Zonal level plans, the issue will persist.

Ritwick Dutta, counsel for the appellant, strongly argued against the clearance granted by the State Government and proved the EIA report, commissioned by a private consultant, concealed critical facts relating to the commissioning of the plant. “The issue needs to be viewed in terms of environmental governance and the consultants have concealed critical information in the EIA report, which is biased. The report should be nullified under charges of concealment of information,” he argued and appealed to the bench to frame criminal charges against the consultants.

On hearing both sides of the issue, Justice Ramulu, said, “When we entertained a doubt about the distance of this project from the Guindy National Park [GNP], we directed the Principal Chief Conservator of Forests/Chief Wildlife Warden to get the aerial distance [between the project site and the GNP] on October 18, 2011. Following which, the Principal Chief Conservator of Forests (PCCF) and the Chief Wildlife Warden (CWLW) submitted a report on November 25, 2011, stating that the distance between the two nearest points of project site and GNP to be as 5.6 km and 6.2 km.”

“Though the TNPCB tried to justify the distance to be beyond 10 kms and (distance measured along the road connecting the two areas), the case will be heard by the Union Ministry (Moef). The bench is in full agreement with the appellant that the report prepared and accepted by an authority with no jurisdiction cannot be accepted blindly to grant an environmental clearance (EC),” he added.

What is the National Green Tribunal?

The NGT, a multimember judicial body comprising of Judicial and technical members was set up in 2010 and became operational from July 4, 2011. The Chennai Bench has jurisdiction over the States of Tamil Nadu, Kerala, Karnataka and Andhra Pradesh. At present the NGT has two judicial members, Justice A.S Naidu, acting Chairperson and Justice C.V Ramulu, Judicial Member. In addition it has four technical members, Vijay Sharma, Devendra Agrawal, Professor N Nagendran and Dr G K Pandey.

The NGT has jurisdiction over Forest (Conservation) Act, 1980, the Environment (Protection) Act, 1986, the Air Act and Water Act besides the Biological Diversity Act. Among the most significant powers of the NGT is with respect to the power to award compensation and damages to victims of environmental disasters and cost for restoration of the ecology.

Since its inception, the NGT has delivered significant orders/ judgments in a number of cases such as the order requiring mandatory radiation impact assessment for thermal power plants, the need for cumulative impact assessments for dams and proper cost benefit analysis. The NGT is presently hearing appeals against some of India’s most controversial and talked about projects such as Posco’s Steel plant in Orissa, the Lavasa project in Maharashtra, the Jaitapur Nuclear power plant at Maharashtra, the Lower Demwe Project in Arunachal Pradesh.

Nidhi Adlakha, Times Property, Chennai

Source: http://content.magicbricks.com/tamil-nadu-awaits-clearance-to-set-up-waste-management-plant