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Affordable housing to take a hit in the upcoming Budget

Affordable housing to take a hit in the upcoming Budget

Affordable housing to take a hit in the upcoming Budget

By 2030, the Indian real estate market is expected to reach the $1 trillion mark. The government established a strong foundation for the nation’s real estate industry by allocating Rs 11.11 lakh crore for infrastructure development in the Union Budget 2024. India’s real estate industry anticipates a more growth-oriented and inclusive approach from the government in the 2025 budget. On February 1, Finance Minister Nirmala Sitharaman will deliver the Union Budget 2025–2026.

However, there are differing opinions in the housing industry. Due to increased demand over the past two to three years, the upmarket segment, which includes premium and luxury residences, has seen a strong upturn in sentiment. Nonetheless, the Modi government’s goal of providing inexpensive homes is turning out to be problematic.

Affordable home sales have been declining sharply and consistently over the years, according to recent statistics from real estate research firm ANAROCK Property Consultants. The percentage of this group in total housing sales has decreased from 40% in the calendar year 2018 to 20% in 2024 among the seven largest cities from which data was gathered. Now, all eyes will be on the annual Union Budget 2025, which will include tax reductions and incentives related to the housing sector, such as interest subvention schemes or subsidies.

Some suggestions from the housing segment
The industry’s recommendations include a much-needed reinterpretation of what “affordable housing” is. There is an urgent need to update the current definitions of affordable housing, which are based on factors like size, cost, and buyer income. Most people agree that the 60 square meter carpet area needed to be eligible for incentives is reasonable, however, the INR 45 lakh price restriction is unachievable. Land prices have skyrocketed due to the increased demand for housing.

Additionally, experts believe that there is a transition from low to mid-income housing, especially among the paid class. According to the ANAROCK document, in order to reflect market realities, the cap should be increased to at least INR 85 lakh in Mumbai and INR 60–65 lakh in other major cities. The range of projects and purchasers who can take advantage of reduced goods and services taxes and other incentives will increase as a result.

Boosting Housing in Rural Regions
Implementing initiatives like first-time buyer incentives or even loans that allow people to transform “kaccha” homes into “pucca” ones is essential to increasing housing in rural areas.

In 2022, the PMAY’s CLSS for Low-Income Groups (LIG) and Economically Weaker Sections (EWS) came to an end. In order to encourage first-time homebuyers, experts are advocating for its restoration. Adding basic amenities like kitchens and bathrooms to existing homes or expanding incentives to loans for new development are other ideas. Subsidies could assist in transforming temporary dwellings into permanent constructions under PMAY (Rural), which would benefit a larger segment of the population.

Market Commentary on Budget Expectation
Elan Group’s Executive Director of Finance and Group CFO, Sandeep Agarwal, is hopeful that the next budget will offer a chance to address some of the industry’s most urgent issues. He asserts that in order to restore confidence among homeowners, the long-standing problem of stalled projects needs to be addressed first. reducing the impact of ineligible GST inputs on residential developments, redefining the criteria for affordable housing, and fixing discrepancies in the GST input credit for commercial buildings. Operational efficiency would be greatly increased by implementing a single window-clearing system for regulatory approvals within a specified timeframe.

According to Aman Sharma, Managing Director of Aarize Group, incentives and streamlined rules are anticipated to boost India’s economic trajectory and draw in foreign investors in the commercial real estate (CRE) sector. Measures like lower stamp duties and more tax breaks would be extremely beneficial to the luxury housing market, which is driven by changing lifestyles and expectations. With their expanding potential, Tier-2 cities need to strategically prioritize industrial and infrastructure development in order to open up new doors for investors and developers.

As stated by Saurabh Runwal, Director of Runwal Realty, it is imperative to implement legislative measures that improve liquidity, such as lowering long-term capital gains taxes, simplifying REIT rules, and raising interest rebates for home loans. With the luxury market experiencing a 51% increase in demand, these reforms will encourage both local and foreign investments, giving developers more competitive access to money and allowing homebuyers to fulfill their aspirations of becoming property owners.

Lower loan interest rates are necessary to make homes affordable for low- and middle-income households, according to BRIC-X INFRA founder Vijay Kamboj.

To maintain the sector’s pace, Mohit Goel, Managing Director of Omaxe Limited, argued for more funding under PMAY as well as financial incentives for both developers and customers.

Conclusion
Critics believe that with the real estate cycle in its upswing, rising land prices, and high interest rates, it may be difficult to meet the affordable criterion on the value of the dwelling units and the income profile of buyers. However, some industry experts believe that a tax holiday for developers of affordable housing may be beneficial.

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Strong Consumer Sentiment Boosts Automobile Dispatches by 12% in 2024

Indian Land Deals Surge 47% in 2024, Residential Sector Leads

Indian Land Deals Surge 47% in 2024, Residential Sector Leads

Indian Land Deals Surge 47% in 2024, Residential Sector Leads

The number of land deals in the top eight cities increased by around 47% year over year in CY 2024, totaling over 2000 acres. Compared to over 90 land deals in CY 2023, roughly 135 were closed in CY 2024, mostly in large cities like Delhi-NCR, Bengaluru, Mumbai, Chennai, and Pune. The demand was highest in the residential segment.

With almost 40 land transactions, Delhi-NCR was the clear leader. More over 60% of the share went to Gurugram, with Noida/Greater Noida coming in second at about 25%. According to a CBRE South Asia report titled “Market Monitor Q4 2024—Investments,” this increase highlights the region’s appeal for residential and warehousing expansions.

Nearly 30 land transactions were registered in Bengaluru, with Mumbai and Chennai contributing roughly 25 and 15, respectively. Strong economic growth, supportive policy initiatives, and rising demand for residential projects are all responsible for this increase in activity across regions.

Asset-wise distribution of the total volume of deals
Over 60% of the overall volume, or about 1,190 acres, came from deals in residential assets, which also represented a 70% increase over 2023. Bolstering investor sentiment was seen in the data centers’ 10% transaction volume share (about 200 acres). Over 5% of land deal volume (approximately 580 acres) was made up of industrial and logistics assets, which showed steady expansion as a result of the growing need for manufacturing and storage space.

Diverse asset preferences were demonstrated by the other categories, which made up about 15% of the overall volume and included hospitals and mixed-use properties. Due to changing market dynamics and the rising demand for contemporary workspaces, the office and retail industries each contributed about 5% of the total.

Strong investor confidence in India’s real estate market is demonstrated by the notable increase in land deals across a variety of asset classes. According to Anshuman Magazine, Chairman & CEO-India, South-East Asia, Middle East & Africa, CBRE, the residential market is flourishing as a result of growing urbanization, advantageous regulations, and improved affordability.

At the same time, the expansion of office buildings and data centers highlights India’s position as a center for corporate and digital infrastructure. According to Magazine, this momentum places India as a top real estate investment market in 2024.

India’s potential as a strategic investment destination is demonstrated by the interest shown by investors in both established and rising sectors, such as logistics and data centers. Strong local and foreign investments are nevertheless drawn in by robust demand, creative advancements, and policy assistance. Further, Gaurav Kumar from CBRE India stated that this trend will continue to solidify, solidifying India’s standing as a robust and expansion-oriented real estate market.

Vestian Report on Real Estate Investment Surge
Global uncertainty may make it difficult to attract capital in 2025, according to Vestian, although institutional investments in Indian real estate increased 61% to USD 6.8 billion last year.

In 2023, institutional investments totaled USD 4.3 billion, according to a statement from real estate consultant Vestian. Despite a sluggish start, the real estate industry saw large institutional investments in 2024, exceeding pre-pandemic levels, according to Vestian CEO Shrinivas Rao. However, Rao stated that rising inflation, a slowdown in the global economy, and growing geopolitical tensions are all predicted to make 2025 difficult. 30% of institutional investments were in the residential sector, which recorded USD 2 billion in investments.

In 2024, investments in the housing market increased by 171% over the year before.
Of the overall institutional investments, 35% went to commercial assets, which include office, retail, co-working, and hospitality developments, while 28% went to industrial and warehousing parks. Of the overall investments, 54% came from foreign investors, 30% came from domestic funds, and the remaining 16% came via co-investment. Vestian added that in 2024, co-investments became more popular as foreign investors turned to domestic investors’ local knowledge in the face of ongoing macroeconomic uncertainties. Rao stated that if the RBI lowers the repo rate in 2025, institutional investment in Indian real estate may increase.

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Railway Sector’s Budget Allocation and Stock Performance: Insights for Investors

Affordable housing to take a hit in the upcoming Budget

Upcoming Budget: Real estate Industry seeks Stamp duty cuts and revised home loan limits

Upcoming Budget: Real estate Industry seeks Stamp duty cuts and revised home loan limits

The Indian Real Estate Industry is seeking stamp duty cuts, revised home loan limits and improved affordable housing norms in the upcoming Union Budget 2025-2026. The realtors are seeking these changes through Pradhan Mantri Awas Yojana (PMAY), eco-friendly policies, single-window clearance, and more.

Some of the industry leaders and consultancy firms in India such as Raheja, Gaurs, Kanodia, Anarock, Justo, Reach, Urban Space and Eros have put forth their expectations for changes to real estate sector norms in the upcoming budget.

Affordable housing
President of CREDAI-NCR and Chairman and Managing Director of Gaurs Group, Manoj Gaur stated that one of the crucial demands of the real estate sector is adjustment of stamp duty. The reason for this is that the stamp duty rate has increased significantly in recent years. It is adversely affecting home buyers giving them financial pressures. He also emphasised on considering changing the current tax deduction limit of Rs. 1.5 lakh under Sector 80(c) to Rs. 5 lakh as it will help in easing home ownership.

He recommends changing the affordable housing criteria of price limit of Rs. 45 lakh to carpet area-wise criteria. In this, the focus should be on the carpet area of 60 square metres in metro areas and 90 square metres in non-metro areas. He also advocates reintroduction of the 100 percent tax holiday for affordable housing projects before 31st March 2022. This will promote both affordable housing and also India’s mission of ‘Housing for all’.

Commercial Real-estate Sector
The vice-president (Sales) of Raheja, Mohit Kalia stated that the needs for reforms in the commercial real-estate sector. The government’s actions to encourage entrepreneurship promotes the start and growth of business. It not only helps in boosting economic growth and creation of job opportunities but also aids in thriving the business of commerical real-estate sector. Along with this, the sector requires policies that will support in sustaining the growth and success of the sector. He also states that the adjustment in interest rates in a way that makes advances affordable will help in increasing demand in the sector. Also, the implementation of the single-window clearance system can make approval processes faster and easier. These steps will help in strengthening the overall real estate ecosystem.

Tax Relief on Construction Materials
The Kanodia of Delhi-NCR advocates tax relief and GST reduction on construction materials in order to achieve lower project costs and also encourage developers to initiate new ventures with better efficiency.

The Kanodia Group’s founder Gautam Kanodia stated that the upcoming Budget 2026 has a strong prospect to strengthen the real estate industry and also to play a more crucial role in the development of the country’s economic framework.

Revision of Home Loan Limits
The founder and Chairman of Reach, Harinder Singh Hora advocated raising the deduction limit in home loans to Rs 5 lakh from the current Rs. 2 lakh in order to encourage investment opportunities and to attract more investors.

Changes in PMAY
The chairman of Anarock Group, Anuj Puri recommends reintroduction of Credit-linked subsidy Scheme (CLSS) under the PMAY scheme for economically-weaker section (EWS) households, which has ended in the year 2022. This would give financial incentives to first-time homebuyers to purchase affordable homes by providing subsidies on loans for construction of new houses or essential addition to existing properties.

As per the eligibility criterias of PMAY for rural regions provide subsidies to convert ‘kaccha’ into ‘pucca’ homes. The real estate industry players believe that there is a need to update the definition of affordable housing needs, particularly in high-cost cities such as Mumbai. They also advocate raising of current price caps reflecting the higher cost of living and property prices prevailing in these areas.

Given data from Anarock, the sales share of affordable housing decreased to 18 percent in 2024 compared to 38 percent in 2019. This significant decline indicates the pressing need for government intervention. He further stated that there is a need to be more focused on affordable housing and targeted benefits, which was not given much attention for the past two years.

The reason for slowdown in the Indian real estate sector in the year 2024 is the general elections and state elections conducted in the year. The top seven cities in India observed a fall in housing sales by 4 percent which accounts to around 446,000. While, the new launches of properties declined by 7 percent which accounts to around 413,000 units. Despite this, implementation of appropriate steps taken for affordable housing in the year 2025 could lead to revival of growth and also promote the residential segment to regain the high sales and launches achieved in the year 2023.

Rental housing and infrastructure growth
In the year 2024, institutional funding in real estate registered a record of 6.5 billion dollars. It indicates strong investor confidence. The introduction of increasing liquidity measures will help to ensure that real estate projects are completed on time. This is crucial to maintain the growth momentum in the sector. The Director of Eros states that while entering in the year 2025, the policies pertaining to expansion of rental housing and infrastructural growth should be taken for driving urbanisation.

The founder and director of real estate fintech firm Justo, Pushpamitra Das advocates the adjustments in GST on under-construction residential and commercial properties, tax benefits for REITs, extension of SEZ benefits. He also stated that India’s real estate sector plays a significant role in driving economic growth by boosting GDP and employment levels.

Home decor Industry
The co-founder of Urban space, Radhika Koolwal stated that the home decor industry is positive about the measures undertaken to boost growth and innovation. The industry expects the policies undertaken will focus on encouraging domestic manufacturing such as subsidies on raw materials and machinery, tax benefits for MSMEs and startups, reduction in GST rates on home furnishings and decor items in order to achieve more accessibility to quality products to the middle class.

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Copper holds near five months low as weak demand outlook dominates

Equity Right Honored as “Best Wealth Management and Investment Banking Firm” at Times Leading Icons Awards 2024

Equity Right Wins "Best Wealth Management and Investment Banking Firm" at Times Icons Awards 2024

Equity Right Wins “Best Wealth Management and Investment Banking Firm” at Times Icons Awards 2024

Equity Right, a distinguished boutique Portfolio Management Services (PMS) firm, has added another feather to its cap by winning the prestigious “Best Wealth Management and Investment Banking Firm” award at the Times Leading Icons Awards. The award was presented to Mr. Gaurav Daptardar, Founder and Director of Equity Right, by Miss World 2017, Manushi Chhillar, at a grand ceremony held at Novotel, Andheri.

This recognition is a testament to Equity Right’s unwavering commitment to excellence, innovation, and delivering personalized financial solutions that empower clients to achieve their financial aspirations.

About the Times Leading Icons Awards
The Times Leading Icons Awards celebrate entrepreneurial excellence and achievements across diverse industries, spotlighting individuals and organizations that shape the future. The 2024 edition brought together leaders and innovators who have made significant contributions to their respective sectors. Among them, Equity Right was lauded for its stellar performance in wealth management and investment banking, solidifying its reputation as a trusted name in the financial services industry.

A Rigorous Selection Process
Equity Right’s achievement was the result of a meticulous and transparent selection process led by Advance Insights. The assessment combined secondary research, factual surveys, and feedback analysis to identify the most deserving winners. The evaluation criteria encompassed:

  • Growth trajectory and business performance
  • Customer feedback and satisfaction
  • Social media presence and engagement
  • Industry recognition and thought leadership

Nominees were assessed through detailed questionnaires, telephonic interviews, email correspondence, and personal visits. Social media profiles and client reviews played a pivotal role in validating the firm’s eligibility. Based on a comprehensive scoring mechanism integrating factual data and qualitative insights, Equity Right emerged as the top performer in its category.

A Decade of Excellence in Wealth Creation
Over the past decade, Equity Right has established itself as a leading player in the financial services industry. The firm’s impressive 27% compound annual growth rate (CAGR) on client portfolios highlights its ability to deliver superior results while prioritizing long-term value creation.

Operating across several key verticals—Investment Banking, PMS, Merchant Banking, and Investor Relations—Equity Right has consistently demonstrated its commitment to client-centric strategies. Its expertise in equity research and financial market navigation has enabled clients to achieve sustainable growth, reinforcing the firm’s standing as a trusted partner in wealth creation.

Looking Ahead
This recognition underscores Equity Right’s role as a frontrunner in the financial sector and its dedication to excellence. As the firm continues to innovate and expand its services, it remains committed to helping clients achieve financial success through bespoke strategies, cutting-edge solutions, and unmatched industry expertise.

“This award is a reflection of our team’s hard work, dedication, and passion for delivering exceptional value to our clients,” said Mr. Gaurav Daptardar. “We are grateful for this honor and remain steadfast in our mission to empower clients in their journey toward financial growth and stability.”

About Equity Right
Equity Right is a boutique Portfolio Management Services firm specializing in wealth management, investment banking, and equity research. With a focus on personalized financial solutions and sustainable growth, the firm has become a trusted name in the financial sector, consistently delivering outstanding results for its clients.

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TCS Unveils Pace Studio in Philippines to Boost Digital Innovation

Indian Land Deals Surge 47% in 2024, Residential Sector Leads

Budget 2024 Anticipations: Real Estate Industry's Wish List

Budget 2024 Anticipations: Real Estate Industry’s Wish List

Budget 2024 Anticipations: Real estate consultancy firm Knight Frank India reported on Wednesday that the sales of residential properties priced at Rs 50 lakh and below declined to 97,983 units last year from 1,17,131 units in 2022. Consequently, the share of affordable homes in total housing sales has decreased to 30% from 37%.

The decline in sales of affordable homes is attributed to subdued demand due to the combined impact of rising property prices, increased home loan rates, and the disproportionately adverse effects of the pandemic in this category, according to the consultant.

On the contrary, JLL, in its report, anticipates an improvement in affordability for home purchases in 2024. This expectation is based on the anticipation of a 60-80 bps repo rate cut in 2023, which is expected to keep buyers’ affordability within a comfortable range and sustain market momentum in the coming year.

During this period of various growth figures, the industry expresses its expectations, hoping for them to be addressed in the upcoming Union Budget scheduled for presentation on February 1st. The upcoming budget is an interim one, typically presented when there’s insufficient time for a full budget, often due to upcoming elections or the end of a government’s term, serving as a bridge until the new government presents a full budget.

The real estate industry routinely presents an ambitious wish list to the Finance Ministry before the annual Union Budget.

Anticipations for Budget 2024: Real Estate
Anuj Puri, Chairman of Anarock Group, stated that the residential real estate market experienced extraordinary growth in 2023, with record-high new launches and home sales. In 2023, sales of housing in the top seven cities reached an all-time high of about 4.77 lakh units, while sales of newly launched homes reached almost 4.46 lakh units. Puri added that the outlook for the real estate industry in 2024 is positive, but the results of the upcoming general elections will also significantly impact the demand for and growth in residential real estate.

Industry status for the housing sector and single-window clearance for housing projects remain standard expectations this year as well. However, given the generally slow pace at which issues in the real estate sector are resolved, these expectations persist, though they remain as urgent as ever. That said, reasonable expectations are necessary for the interim budget before the general elections.

Maximum Deduction for Home Loans (under Section 24)
It is imperative to raise the Rs 2 lakh tax rebate on home loan interest rates provided under Section 24 of the Income Tax Act to at least Rs 5 lakh. This move could stimulate a more robust housing market, especially in the budget homes segment, which has seen a decline in demand since the pandemic.

Decisive Boost for Affordable Housing
The affordable housing segment has been severely affected by the pandemic, with a decline in overall sales to approximately 20% in 2023 from over 30% in 2022 and nearly 40% in the period before the pandemic, according to Anarock Research.

Several interest stimulants for developers and consumers in this market have expired in the last one to two years. To encourage developers to construct more affordable housing and enable customers to acquire such homes, it is essential to revive and extend significant benefits, such as tax breaks.

Modifying the qualifying standards for affordable housing to make more buyers eligible for additional deductions is necessary. The Ministry of Housing and Urban Poverty Alleviation defines affordable housing based on the buyer’s income, property size, and price. The government needs to reconsider the qualifying cost of properties within the affordable housing segment in cities, as the current definition of up to Rs 45 lakh makes them unaffordable for a significant share of the target clientele.

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Strategic Partnerships Fuel One97’s Financial Turnaround

DLF Ltd posted a consolidated revenue of Rs 1516 Crores.

DLF Ltd posted a consolidated revenue of Rs 1516 Crores.

DLF Ltd posted a consolidated revenue of Rs 1516 Crores.

DLF Ltd’s consolidated revenue in the first quarter of the fiscal year was Rs 1516 crores, a 22% increase year on year. Gross margins continue to operate in the 50% plus range. The Q1 23 margin stood at 53%. EBITDA stood at Rs. 488 crores. There is a drop in this quarter due to the scaling up phase and investing in the growth of the company. The increase in staff costs is driven by organisation scale up, and other expenses are driven by business scale up costs of marketing and brokerage Reflecting a 39% increase year on year. This was largely driven by a significant reduction in the financing costs, along with growth in the JV profits.

Demand continues to exhibit sustained momentum.

The high demand for luxury homes has been a key trend that is expected to continue. In addition, the residential business maintains its consistent performance, with new sales bookings of Rs 2040 crores, representing a 101% year-on-year increase. The Camellias company’s luxury product offering remained the preferred destination across the super luxury segment and delivered a healthy sales booking of Rs 350 crores during the quarter. The company’s new product remains to continue contributing to the sale of Rs 1532 crores during the quarter, which was approximately 75%.

DLF Cyber City Developers Limited consolidated results for Q1 Financial Year ’23.company witnessed steady performance across the portfolio. The retail business continued its growth path and delivered healthy growth. Rental income grew by 20% year-on-year, driven by a strong growth in retail revenue. Consolidated revenue of Rs. 1,260 crores as compared to Rs. 1,041 crores last year, reflecting a21% year-on-year growth. EBITDA at Rs.961 crores, reflecting a year-on-year growth of 18%, and net profit at Rs.323 crores, reflecting a year-on-year growth of 60%
.

Retail businesses continue to exhibit steady growth with an improvement in consumption trends. Organized retail is expected to gain further share with a strong preference for quality assets at established locations. Given these tailwinds, company remain committed to growing the portfolio across multiple geographies and retail presence in the next few years. Companys strong balance sheet and healthy cash flow generation, coupled with a diversified pipeline of quality offerings, provide a unique opportunity to leverage this up cycle.

VALUATIONS:

The EPS was Rs. 1.90, compared to Rs. 1.36 in June 2021. The ROCE and ROE were at 4.84% and 4.61%, respectively. The stock was trading at a P/E ratio of 54.3x. The company’s asset turnover ratio was 0.11x. The scrip is trading at Rs.395, up by 2.61% on Tuesday.

 

Astral Pipes posted a net profit of Rs. 96 Cr.

Aurum Proptech will deliver a strong growth

Aurum Proptech will deliver a strong growth

Aurum Proptech will deliver a strong growth

Aurum Proptech recorded revenue of Rs. 14.64 Cr. in Q1 FY23 compared to NIL in Q1 FY22 and reported 8.1 Cr. in Q4 FY22 with a change of 78.9%. The company realised a loss of Rs. 6.85 Cr. in Q1 FY23 compared to a loss of Rs. 4.89 Cr. sequentially. EBITDA was at a loss of Rs. 5.69 Cr for the quarter compared to a loss of Rs. 6.22 in March 2022. Up by 9.3%, they managed to reduce their losses. The SAAS segment contributed revenue of Rs. 5.11 Cr. and the Real Estate as a Service (RAAS) contributed Rs. 9.53 Cr. The company reported other expenses of Rs. 11.27 Cr., which is a main negative point for the company.

 

Robust growth is expected from Helloworld in FY23.

Aurum Proptech now has five subsidiaries. K2V2 contributed around 9.8 Cr of the total revenue, whereas Helloworld recorded a total of 2.34 Cr. in the 15 days of its incorporation and is expected to give revenue of Rs. 15 Cr. of its own by the end of the current fiscal year. The management is optimistic about its future growth and has already tied up with the top developers. The company is operational in 15 cities and is currently mainly focused on Pune, Mumbai, Bangalore, and Delhi.

They received approval for two wholly owned subsidiaries, namely the Aurum software and solutions. The company calls for money from its rights issues by the end of FY23. We believe the stock at CMP still offers a risk-free upside of about 20% return (in three months) for any funds that do not pay any taxation on dividend income and thus offers a good special situation opportunity.

 

Valuations:

The ROE is at -6.50 % and ROCE at -9.04%. The debt to equity ratio is 0.04, which is a good sign as the company won’t have any short-term or long-term liquidity problems. The current quarter’s EPS was Rs. 1.93, with a P/E ratio of 14.74. The scrip was trading at Rs. 109 on Monday, up by 0.51 points. 

How to minimize taxes when selling real estate.

How to minimize taxes when selling real estate.

How to minimize taxes when selling real estate.

 

On the off chance that you sell your home at a cost more noteworthy than the purchasing value, at that point you will be eligible to pay tax on the income that you make by selling your home. Whether you sell a rental estate or land after owning it for more than 2 years, you become eligible to pay 20% LTCG tax upon indexing. However, if you’re making a Rs 50 lakh income, you will probably pay Rs 10 lakh as taxes. An assessee can re-invest the sum of LTCG in residential estate and assert an exemption under sections 54 And 54F of the Income Tax Act.

Short-term capital gain:

STCG ‘s property is seen to be a profit by the selling of property possessed by you for less than two years. As an investor, you are eligible to pay tax on STCG on properties as per the relevant marginal tax levy.

 

Long-term capital gain:

If you sell the property that has been held by you for more than three years, the benefit resulting from this sale will be called an LTCG. LTCG is measured as the gap between net sales and adjusted property costs. The advantage of indexation is to reduce the effect of inflation on the profits generated by selling land in such a manner that the real earnings on the land are taxable. It is focused on the premise that the valuation of capital is gradually decreasing as a consequence of inflation and thus, it is unjust to charge the long-term owner of the land on the cumulative profits that have accumulated to him purely as a result of inflation.

 

Exemption:

1. Section 54, where interest is rendered in the acquisition of a new property:

Under section 54, you can claim an exception from capital gain when you contribute a few or the entirety of the benefits by selling a home in India into another real estate.

Rules:

HUFs and individuals are exempted and are available for one residential real estate. The capital income from property selling will be balanced against purchasing a new residential building. The property which has been sold and bought will be in India. The current residential property should be purchased either one year before selling the existing property, or within 2 years after the sale date of the old real estate. If you intend to build a house, the development of the house should be done within 3 years from the selling date of the preceding home. When you purchase or build a new home, you may not be willing to sell it in less than 3 years. When you sell it within 3 years, you won’t receive the capital gain depreciation advantage and the sales profits will be taxable. Those 3 years are measured from either the day the new house acquires or finishes its function. The value of exemption claimed is smaller than the sum of capital income or the expense of purchasing a new home.

 

2. Section 54F, in which the transaction will be made on the acquisition of new land or another house:

Rules:

Exemption for HUFs and individuals. The new property will be acquired either one year before the selling of the existing property or within 2 years from the date of selling of the previous home. The exemption is valid only if the taxpayer does not possess more than one property on the day of sale of that estate, rather than the one the homeowner purchased to obtain the exemption under Section 54 F. When the whole selling concern is not invested but only a part selling concern is spent on the acquisition of new estate, the sum of the exemption must be correspondingly given.

 

Investment after selling property:

The new property will be the perfect place to spend your capital after selling your property. This could be your new property, or you could lease it to produce income. In the event of re-investment, there is still some uncertainty as to how to use the whole. Thus, you just need to spend the sum of capital gains to avoid the tax on LTCG. The most elevated estimation of capital benefits which you can put resources again is into some other property to make sure about a full exclusion is Rs 2 crore. When your capital gain is large, you will be forced to pay tax on surpassing Rs 2 crore. Note that you can use this right just once in your lifetime. Therefore, you should be cautious to make sure you don’t use this choice in the future.

 

Two properties:

Already, the assessment reasoning was just appropriate when you spent your capital gains in a single house. Nevertheless, it has now enabled citizens to spend their capital gains on two real estate properties, either by acquisition or development. In any case, this reinvestment decision will likewise need to remain under the complete top of Rs 2 crore.

 

 

 

Real estate equity waterfall

Real estate equity waterfall : How they work and what to look for.

Real estate equity waterfall : How they work and what to look for.

 

Equity Waterfall:

When we buy a property, we choose a combination of equity and debt to fund it. In exchange for their equity investment, our buyers are entitled to the profit and revenue of the real estate. The waterfall determines how earnings and profits are split between you and our investors.

The layout of the waterfall may vary from one contract to another, and it is necessary to look at the specifics of each agreement to evaluate if the separation is equal and fair for all the parties concerned. All information is presented in a contract called an operating agreement, that will be thoroughly and carefully reviewed in anticipation of the allocation of capital to the real estate deal. A waterfall, also known as a waterfall model, is a legal term included in an operating agreement which specifies how money is paid out, where it is paid out, and to when it is paid out during real estate equity transactions.

 

Waterfall Features:

1. Preferred Returns:

Preferred returns are described as the first claim benefit of the project before the target return is achieved. Preferred return simply generates another cash fund stream, and after the cash flow has been allocated to preferred owners, the remaining stream capital transfers to the next stage and divides as decided.

 

2. Lookback Provisions:

Lookback clauses are used as cash flow is distributed before the asset is disposed of. If the Limited Partners do not get a guaranteed rate of return decided upon settlement, the General Partner is forced to offer up a percentage of the cash income that was allocated to them before the transaction.

 

3. Catchup Provisions:

A catch-up clause ensures the Joint Partner 100 percent of the profits of the agreement before the negotiated rate of return is reached. If the specific rate of return has been met, all the residual earnings should go to the General Partner before the defined rate of return has been reached.

 

Operating agreement:

1. Members:

The partners of the agreement are those who are eligible to benefit from the successful transaction of the real estate. In certain instances, there seems to be a variety of limited partners and general partner. The GP is liable for identifying the opportunity, reviewing it, acquiring it, completing it, and handling the asset until the sale is complete. Usually, the GP will invest a limited portion of the total equity used to fund the deal. The LP’s are purely individual investors. They put their money with the GP and hope to obtain it back, plus a profit, from the cash flow produced by the real estate. The LPs offer the remaining of the capital required to finance the transaction.

 

2. Capital:

If the cash flow generated by the estate fails to reach the necessary return threshold in a specified period, the cash flow shortfall can or can not be carried forward to the next year. If the investor ‘s financial flows are accumulated, the deficit will continue over the following cycle before the cash flow is adequate to clear it. Cumulative cash holdings are beneficial to the LPs as it ensures that the GP does not obtain any funds before the deficit is erased. When the capital investments are not combined, they are more beneficial to the GP.

 

3. The Return Hurdles:

Return hurdle is the rates of return at which the capital investment divides between the LP and GP varies. These are designed to enable the GP to manage properties as profitably as practical. The better the profit that the property makes, the more income the GP gets to earn compared to their original investment.

 

4. Calculating Returns:

The return hurdle can be evaluated using several different approaches, although the two most popular are the multiple of equity and the internal rate of return. The internal cost of the return is the average discount rate, which determines the net present value of the potential cash flows, equal to zero, negative, and positive. The capital multiple is measured as the ratio of the capital received to the money invested and represented as a sum out of the second decimal point.

 

5. Simple Split:

The final way of deciding the configuration of a waterfall is a straightforward break and might have no desired return to investors. For example, 50 percent of all capital investment and profit is paid to LP and 50 percent of all capital investment is paid to the GP. This is popular in purchases where there might not be a high degree of complexity or a lot of costs, so the goal is to make distributions very easy.

The profitability of an investment from the investor’s point of view of return can rely on well-defined allocations that are properly distributed to the appropriate entities also during the investment holding period.

 

 

 

Can’s Q2FY25: Profitability Boosted by Enhanced Operating Efficiency

Oberoi Realty reported a decline in Book Value.

Oberoi Realty reported a decline in Book Value.

The Mumbai-based realty developer reported a decline in book value of 18.7%. The book value currently is at Rs.750Cr. which was at Rs.925Cr. in March 2022. The firm sold around 164 units during the last quarter. The volume of the sold houses in the first quarter is nearly 4.01 lakh square feet area which was over 0.92 lakh sq. ft. in the equivalent period for the earlier year.

The net profit of Oberoi Realty  fell by 19% to Rs.232.35 Cr. on a 4.2% increase in net sales to Rs.823.46 Cr. in Q4FY2022. Analysts are bullish on the stock and expect an upside of 40%. The dip in the book value is primarily due to seasonality, stamp due hikes accompanied by an increase in the interest rates. The sales are mainly driven by Elysian, Goregaon, Sky City, Borivali, Eternia, and Enigma in Mulund. The sales will pick up post receipt of OC. Promoters hold a 67.7% stake in the company, while the FIIs own 20.26% and DIIs have around 9.09% as of March 2022.

The trend is likely to continue because of cost inflation and an increase in the cost of capital and favor top developers. Many companies have mitigated cost impact through price hikes in FY23. There could be further increased in the prices, to improve the profit margins. The rise in interest rates was forthcoming. Conversely, despite this, developers assume that it won’t have a significant impact on demand. Any increase in the interest rate above 8% might have to dampen future demand as it is an end-user-driven demand.

The management expects the business to continue for looking at a few large redevelopment projects outside Mumbai. The company has entered into MOU and will confirm once closed. The company is optimistic about launching recent projects in FY2023. A transformed concentration on business development is a positive sign to provide further growth to the company.
It is one of the leading real estate developments Company. The realtor mainly focuses on premium developments in office spaces, hospitality, residential and social.