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V Nagarajan: Indian real estate sector witnessing prolonged sluggishness
October 15, 2017
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I am owning both commercial and industrial properties in India. What are the regulations while mortgaging such units to a financial institution? Is there any approval needed from any authorities in India? Please advice. Shailesh Tripathi, Dubai.
You can mortgage residential or commercial property to an authorised dealer or housing finance institution in India without the approval of Reserve Bank of India (RBI) or to a party abroad with prior approval of RBI.

In case of a foreign national, he can mortgage the property only with the prior approval of RBI. Whereas if it is a foreign company that has established a branch office or other place of business in India in accordance with FERA/FEMA regulations, it has general permission to mortgage the property with an authorised dealer in India.

I am planning to return to India shortly. I invested in real estate in Dubai and US. Can I continue to hold such properties after my return to India? Chetan, Sharjah.
You can continue to hold immovable properties acquired outside India after returning to India for settlement. Such properties can be rented out; rentals can be credited to overseas bank accounts. Such properties can be sold/transferred and the sale proceeds credited to overseas bank accounts. Expenses relating to such properties like maintenance, insurance premium etc. can be paid out of overseas fund balances.

As an NRI, can I receive immovable property in India by way of gift? Please clarify. Pankaj, Al Ain.
Yes. You can receive immovable property in India by way of gift from either a resident Indian or another NRI/PIO. Nevertheless, you can only acquire residential or commercial property and not plantation land, agricultural land or a farm house.

Notes

Indian real estate sector has been witnessing prolonged sluggishness over the last 6-7 years. Absorption of new homes in top 10 cities (Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai, Delhi NCR and Pune has slipped at a compound annual growth rate of 8 per cent in the last six years, according to CRISIL survey. The sector has witnessed a decline in area booked and area launched over the last few years.

Developers have been majorly focusing on mid-category/luxury/premium housing projects. This has created a wide gap in demand-supply dynamics, resulting in pent-up demand for affordable housing units and a huge unsold inventory of unaffordable units across most micro markets. Respite is unlikely in near future as investors are out of the market and end users continue to wait for the right opportunity.

Pressure on residential real estate prices across top 10 cities was clearly visible during H1 2017. While several developers offered upfront per sqft discounts, a few developers bundled financing schemes and reduced interest schemes to offer ‘all inclusive house prices’. Homebuyers, in many cases, were also offered indirect benefits such as reduced floor charges or premium location charges. Taking into account these aspects, the effective price correction was 5-10 per cent.

Office Mart

India’s office space take-up was dominated by small and medium sized transactions. Small-sized transactions (less than 10,000 sq. ft.) comprised of about 40% of all the transactions reported during the quarter; while half of the deals concluded ranging between 10,000 -50,000 sq. ft. The share of largesized deals (greater than 100,000 sq. ft.) remained the same (as compared to the previous quarter) at about 5 per cent, according to CBRE.

Bangalore and Mumbai dominated large-sized deal closures, along with a few deals closed in Gurgaon, Chennai and Hyderabad. These were mainly from occupiers belonging to sectors such as IT/ITeS, research, consulting and analytics and infrastructure, real estate and logistics. Key large-scale transactions included, space take-up by corporates such as Lowes, Atos, Tata Consulting and XM Software.

Office space take-up continued to be driven by IT/ITeS corporates, garnering about 34 per cent share in the overall space leased during the quarter.

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The author is a business analyst
covering Indian property markets

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