Getting real about real estate

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Realty firms on hiring spree againDLF profit crumbles 77%Realty demand up 15% in Q2‘Property rates to fall 25% in 12-15 months’

: property area, time of delivery, penalties if failure to deliver, accounting and finances should be looked at very seriously. However, the reason this level has even increased over the last few years is due to an inflow of private equity money into the real estate sector.”

He mentions the need for black money transaction to be removed. The main reason for their occurrence is the high stamp duty one has to pay here, Aggarwal adds. The need for buyers to be more careful while transacting is now important, as there will be a lot of mouth watering deals coming your way, says a real estate agent.

Real estate investors need to be aware of several structural factors that could impact their wealth growth. Balaji Rao, managing director, Starwood Capital says “During the boom years had we concentrated on infrastructure, growth and development, rather than land banking, private banking and the likes, we would not have been in this uncertain position. Mumbai office property prices are comparable to New York's Manhattan. However, India's floor space index or FSI remains 1-2, while they have an FSI of 20-30 in New York". So Mumbai rates could be affected if there are changes in the FSI and rates could be impacted further. There are other areas as well, which could be impacted.

If you are investing in funds that are focussed on real estate, you might be presented with some amazing valuation numbers. A lot of land and property is being valued by future expected sales derivative modules. A property worth two crore will often be valued at 50, says an industry observer. “If the supply were to improve and meet requirements like it has the potential to do so, the norms ease up and become more practical and sensible, transparency were to improve, which in turn will bring in larger investments, one might finally see the real estate sector coming to some sort of global standards" explains Balaji as some of the reasons for our low rating.

Tread carefully

In a country where archaic laws, land banks, disappearing builders, high interest rates, ridiculous taxes, and swinging prices rule the roost, treading carefully in the world of real estate is advisable.