As Rupee falls, NRIs 'home’ in on realty in Mumbai

It appears that  a 15% decline in the rupee has lead to surge in NRI interest in property. While the rest of Indian economy slows down the NRI can sustain micromarkets in IT cities like Bangalore, Pune and Chennai

DNA Article followed by one in Times of India. The builders are in overdrive mode courting the NRI.

The record decline in the value of the Indian rupee and the sluggish realty market have proved to be a double delight for overseas Indians investing in property here.

Sunil Sequira, a resident of Kuwait, has zeroed in on a property in Thane at a rate nearly 30% lower than usual. “This is the right time to buy property,” he said. “Many of my friends have also decided to buy property in India. We are expecting an annual 10% to 15% appreciation.”

Sandeep Reddy, co-founder of Groff.com, a real estate brokerage firm, said it has been getting a good response from overseas buyers. At the recent property exhibition in Dubai, many people booked flats on the spot, and several showed interest in flying to Mumbai to check out property and finalise their decisions.

“NRIs are mainly interested in Navi Mumbai and Bangalore properties. This time, there was a slightly lower demand for the Delhi market. Going by this response, we have decided to organise and participate in exhibitions in Singapore and other international places that have a large Indian population,” said Reddy.

Niranjan Hiranandani, managing director of the Hiranandani Group, said, “The decline in the rupee value against the dollar/dinar in the international market has helped to attract more and more NRI buyers. If the cost of the flat is Rs1 crore as per the Indian market, the NRI has to pay only Rs85 lakh— 15% less, thanks to the record decline in the rupee value.”

Commercial opportunities in the West are on a downturn. So, people are looking at the Indian market for investment and business purposes, he added. “Once the RBI brings down its high interest rate, the city property market will surge again. There is a huge demand for houses, but the high costs and interest rates have discouraged buyers temporarily. People are awaiting the low interest rate loan.”

Times of India article

Hot Indian property destinations for NRIs in 2012
The Non Resident Indian (NRI) might as well remember 2011 as the year of the 'lazy investor'. For NRIs have gained 18% since August 2011, simply by remitting money to India; no effort at all. But as we approach 2012, NRIs must take stock of how best to use their remittances. The traditional favorite has always been real estate. But in this volatile market, how great an investment is it? Is this a good time to buy property in India? What kind of property is a good bet? Let's try to find answers.

What are the key locations for residential property?

"Suburban locations of every metro are great investment options. So for instance, you have Gandhinagar near Ahmedabad, Nalasopara, Dahisar, Panvel, Pen and Kalamboli near Mumbai," says Dutt.

Mahtani places her bets on GST road, Porur and OMR in Chennai, North Bangalore largely Hibbal, Saha Shivnagar, Sarjapur Road and Whitefield in Bangalore, Dwarka Expressway in Gurgaon, Bandra East, Goregaon, Panvel in Mumbai and certain select developments in Lower parel, Mahalaxmi and Parel in Central Mumbai.

Discussions with a big builder's sales guy

I was very ambivalent about posting this, but I am just pretty pissed how these big builders get away with semi-legal properties.

Me:

Do you still have any big 3 bedrooms on sale? What is the current price?

Is there katha for the land?

Sales VP:


S****a C*****c is completely sold out. I can offer you big 3bhk of 2100 sft.
in S*****a C******on. There are only two flats available in 3rd & 4th floor
facing the swimming pool. Total will be 1.1 cr. (app) all inclusive.

For every project there is a Khata.

Me:


OK.

Is this a "A" Khata or a "B" Khata? My lawyers forbid the "B" Khata saying that is illegal.

Sales VP:

Sir, to keep you updated S****a is not related to any illegal documentation. Our property documentation is done by Mr. Anup Shah's law firm, one of the biggest lawyer of the country. Moreover our all projects are approved by SBI, they have their own panel of lawyers without whose confirmation SBI don't approve any property. Also S****a C****n I is ready to move in & people has started shifting now.

I really don't know after staying in a S****a Flat also how come you are not confident of the builder. 99% of the S****a tenants end up buying in S****a only. We are the largest brand of South India and we are known for our transparency in clear legality of the documentation, doubting us is like doubting the engine quality of a Mercedes Benz car, for what they are famous in the world.
If you & your lawyer has still doubts, then you are most welcome to our office, there you can meet our legal team and clarify your doubts.

Me:

I saw apartments come up for sale in L******er and J*****ne and both have "B" Katha. The general consensus amongst lawyers (I talked to a SBI lawyer as well) is the "B" Katha is not correct.

Why is that other than Q*****z and one other property, no other S****a property in Bellandur area has a "A" Katha?

There is a lot of discussion and angst amongst S*****a J******ne owners in the internal mailing list about the lack of this "A" Katha. I am curious to know why Jasmine does not have appropriate Katha for the land.

I like living in a S*****a community, but I need to know why these properties only have a "B" Katha.

Sales VP:

As I told in the last mail you are most welcome to our office to have a detail discussion with our lawyers about all your legal clarifications.

Also to keep you updated majority of the. S*****a J*****ne residents have bought 2nd/3rd time in S*****a only. I have clients in J*****e block 1 who have bought three times in S*****a and also referred so many of their friend & relatives for S*****a only.

Me:


OK. Fair enough.

If I have to infer what you say, the land is all legal, but there are other things that have caused the "B" Katha. I will reach out to your legal department when I need help.

Do you have a pointer to your legal department?

For the record, I love S*****a J*****e.

Sales VP:

You can come to our office & meet Mr. Shivraj,from the legal time. But the main concern is C*****c is sold out , in C*****on only 2 flats are left. By the time you finish all your verifications there will be nothing to buy. Immediately block a flat first and then do all your queries.

Me:

Not really interested in C*****on. Don't like the location.

There are plenty of resale properties available in the existing S*****a properties, including C*****c. I am not in a hurry to rush and buy anything without proper legal checks.

Thanks for your help. I will take the help of Mr. Shivaraj as the need arises.

Sales VP:

We don't deal with resale as per our Company norms. Please let me know only if you are interested in new S*****a Property.
Mr. Shivaraj can only help you only if you are a buyer of our property directly from S****a.


And thus it goes. Unless the original buyer insists and gets clear documents and title from the developer, there is no chance in hell that you will get all the documents from the developer during subsequent years. And yet, people buy and sell properties worth many Crores.

Mumbai developers run for cover, cut property prices

Article Link

The developer has blinked. Prospective buyers who were waiting for correction in realty prices should rejoice, as city developers have started bringing down property prices by 10% to 30%.

Manohar Shroff, general secretary of the Maharashtra Chambers of Housing Industry, Navi Mumbai, admitted that developers had started reducing property rates to survive in the sluggish market. Higher interest rates, rising inflation and increasing construction costs have not only dampened demand but also investor desire to book and own more flats.

==
Pankaj Kapoor, managing director of Liases and Foras, the real research firm said, the cash flow in the realty market has dried up in the last two years, and this has spread panic among developers.

"Earlier, the investors were helping developers by pumping enormous amounts of cash in the property market. Now, the investors themselves are in deep financial trouble, as they could not sell the properties they had bought earlier. So, the market is quite tight," he said.

The "B" Katha

In my last blog post 'Third time unlucky', there was this comment which said most big name builders are trustworthy and if a bank approves such property, there is nothing to worry.

Let me provide you with the most obvious evidence to the contrary in this post.

Many new apartment complexes in the outskirts of Bangalore are sold with what's called the "B" Katha. This includes most of the Sobha apartments in the Bellandur belt (which is where I live). Only a couple of apartments in this belt have the "A" Katha.

Now these are apartments where a 3 Bedroom apartment sells for Rs. 1.1 Cr - 1.3 Cr and a 4 BR apartment sells for Rs.1.7 Cr to Rs.2 Cr. Most major banks provide loans for these properties.

I wanted to find out the difference between the two kathas and what it means.

A "katha" literally means an "extract". All it tells is, there's an entry for this land in the BBMP office and the katha is proof of that. The BBMP keeps two sets of registers - the "A" register for legal land (land legally approved by the Government for residential purposes) and the "B" register to keep track of all the "revenue land" (land not intended for residential purposes). It was created as a means to keep track of all buildings constructed on illegal land. Somewhere down the line, BBMP decided to issue an extract of this illegal register so that property taxes can be collected against these properties.

I have read all the comments to the blog posts, I am no fan of big Government myself, not to the extent of DhiMan :), but things like this prove his argument. It's clear that there is illegal construction done on un-approved land. There is no reason the Government should bless this in any which way. If anything, they should be levying heavy fines for providing civic amenities. Instead, they start issuing a "Katha", which confuses the lay-buyer.

The developers, of course, take this as a go-ahead to go berserk on constructing illegal multi crore properties on such illegal lands. What people believe is that the "B Katha" is some proof that this is a valid property. On the contrary, the "B Katha" is a Government issued proof that your property is built on illegal land. Look no further.

The BBMP commissioner Siddaiah recently created a major ruckus by declaring B Katha is a bogus. This kick started a whole range of discussion around the "B Katha" and puts the major builders in a spot. This ruckus led to "betterment charges to give permanent Katha"

"As the Bruhat Bangalore Mahanagara Palike (BBMP) gears up to implement betterment charges, citizens may heave a sigh of relief as ‘B’ khata owners can now get a permanent title deed, ‘A’ khata, by paying the same.

However, senior BBMP officials have placed a rider by stating that ‘A’ khata alone cannot be considered as regularising the property. “Even if they pay the betterment charges and get their ‘B’ khata converted into ‘A’ khata, property owners will still have to get their land regularised under Akrama-Sakrama,” informed a Palike official."

Say what?

You can now take an illegal "B Katha" and get it converted to an "A Katha" - but it's still illegal. i.e, the Government has now taken an obviously clear indicator that this property is illegal (B Katha) and have confused the legal document (A Katha). Earlier, if you owned a "A Katha", that was an indication that it was a clear property. Now, if you own a "A Katha", it "may be" clear.

Nice.

But then, isn't there an exit through the "Akrama-Sakrama"?

According to

"AS PER THE AMENDMENT TO THE KTCP ACT FOR REGULARISATION, 31-12-2008 WAS THE LAST DAY AND ALL THE CONSTRUCTIONS, ILLEGAL BUILDINGS, UNAUTHORISED LAYOUTS, REVENUE SITES ETC FORMED OR CONSTRUCTED BEFORE 31-12-2008 IS ELIGIBLE FOR REGULARISATION."

Ah, so it's time bound.

But has even this been implemented? Not quite. It was announced in 2007, but it still hasn't been made legal by the Government yet.


In the meantime, all builders use this legal mess to forge ahead in the construction of illegal property hoping that some day all of this mess would be regularized.

Till that happens, your Rs.1.5 Cr pent-house from the big name developer that has a "B" katha - remains illegal; and you even have a Government issued document to prove it.

Third time unlucky.

Originally posted in R2IClubForums.

I am back to entertain you all with more amusing stories of Bangalore Real Estate.

After ReddyGate and CEOGate, one thing was very clear to me. It's very difficult to get the correct legal documents for a resale property. So I decided to narrow my attention to under construction brand new properties. I mean the builder must be eager to sell these, right? The project is progressing well and some blocks have been built and some others are coming up. The project is scheduled to end by Fall 2012, so give or take 6 months, by Summer 2013, the property should be ready. [Yeah, I know the risk of the project never being completed, but at this point I would buy it if the legal papers are clear and live with *that* risk.]

I went with this mid-tier builder who is building their first "villa" project. They have coined this new term called "villament", it's essentially an apartment, but with fewer floors. So instead of a 10 story behemoth, these things are 1x two story apartment built on top of another two story apartment. So there are totally 4 floors split between 2 apartments. I had seen this property way back in August and I couldn't agree on a price. We went back and forth on the price and we settled on a price, just in time as CEOGate was winding down.

The one thing you hear in Bangalore Real Estate - if a project is blessed by "State Bank of India", it's golden. SBI is the top tier bank of the lot and supposedly they have the most anal lawyers in town. If they clear a project, it's absolutely clear. There's nothing to worry.

This project was approved by SBI. Further to that, State Bank of Travancore approved it, so did Corporation Bank, HDFC Bank, Axis Bank, ICICI Bank and the lot. Hell, my bank loan got approved pronto since this was a pre-approved project.

Easy peasy I thought. Finally I can be done with the Real Estate mess in Bangalore. And then it started.

Since this is an apartment type deal, you own a small portion of the undivided share of the land. Since this property was 3 acres and 108 apartments, they divide the undivided land and you have the ownership of it. What this also means is that your lawyer is now going to check the land for all the 3 acres and make sure it's clean. If it is a "villa", typically they verify that one survey number where your property is located. [Typically, big projects are split across multiple survey numbers.]

I tried to find a lawyer who is aware of the intricacies of the project. One of the learnings I had from the past is when a lawyer starts digging up past history, often there are documents that are difficult to "trace". Giving the benefit of doubt to the developers, people quit, they misplace documents and it's a chore to find them. So I thought if I find someone who is aware of the legal issues, things would be easier.

I joined the Yahoo Group of the owners of the "villas" and asked them who used a lawyer to verify the land. Of the 30 odd people in the mailing list, not one had used an external lawyer. They all depended on the fact that the bank they borrowed money from clearing the land. Since the land was cleared by the bank, they assume the land and the project should be clean.

I had little choice but to go with the lawyer I have worked in the past.

This developer gave us a file containing of all the latest sale deeds and "katha" of the 3 different survey numbers. My lawyers went through this and came up with a list of documents that have to be investigated. Each of the survey numbers had 7-8 portions of land parcels and each land portion had multiple buyer and seller. The lawyer said this land is very "fragmented" so he needs to spend a lot of time.

Every land sale deed comes with what's called a "Mother Deed", which lists the history of the land. Typically any developer hands over the mother deeds along with the latest documents to a lawyer check. This developer refused to hand over these documents to my lawyer stating that the originals are mortgaged with SBI (since they pledged the land with SBI and borrowed money against it) and they only have one copy. They refused to make further copies of the documents.

So I beg my lawyer to send a person over to their office. Five such visits and nearly 20 hours of pouring over a few thousand pages of documents, my lawyer goes back in time for all the three survey numbers and investigates all the purchase and sales of the lands.

At the end of it, he lists about three dozen gotchas in the land. A few listed below for a sampling:

- Survey number "C", which forms nearly 50% of the apartment land was acquired by the Government in 1992 for "hitech" purposes. All the land was an agricultural land to start with and it was converted to "industrial" purposes when this happened. In 2007, apparently this document was converted to "residential". The developer had no documentation available for either the conversion to "hitech" land nor has documentation for conversion to "residential". When we asked about it, they said they have applied to the Tahsildar for this and they will get back to us. It's pretty bizarre that there isn't clear paperwork for a majority of the land, as late as 2007.

- There exists a middleman (John Doe) who has been the GPA owner for many pieces of the land in this lot since 1990. He has been the buyer and seller of this land many times over from 1990 to 2007. In 1995, on a single day, many sites were registered. All the sites were sold by John Doe. The GPA number mentioned in the sale deeds is different from the GPA provided to us. The original GPA, of course, is not traceable.

- When a piece of land is sold, the sale deed mentions the site number, and boundaries. The boundaries would say something like "bounded in the east by site x, in the west by site y, in the south by site z and north by 30 feet road". Now, when the sale happened in 1995, for ALL the sites, the boundaries are the SAME. The site numbers differ, but the boundaries remain the same. This is as if the same site was sold many times over on the same day.

The typical answer given by the developer for such cases is that this is a typographical error. While reasonable, the Government provides a solution to fix it. You can apply for a "rectification deed" and correct the errors in the sale deeds. This developer has not done it so far and refuses to do this since it's too late to do the changes.

- None of the original sale deeds for the 1995 sale is available. All that exists are certified copies of the sale deeds. The excuse given here is that the originals were lost. If that is the case, then the process is to file a police complaint, post an ad in the newspaper regarding this and save those as reasons to go with a certified copy. Of course, none of this is available.

Depending upon the lawyer you use, they either check 30 years of land documents or some go as back as 60 years. Here, I was getting stuck with improper documentation within the last 15 years.

The developer is unwilling to fix any of the errors in the sale deeds. I may get to see the RTC for the Government acquisition and release, but even that, we aren't sure.

But I wonder, how is this possible? These are obvious errors that SBI should have caught. So, what gives?

To cross verify, I find a lawyer who works often with SBI to approve these types of documents. He goes over the list of questions and confirms whatever my lawyer has raised are all valid questions and there's nothing out of the ordinary. When I ask him how SBI would approve such a project, all I get back is a smile and an answer that says "anything is possible in India".

I don't understand why the buyers in India don't go for an independent legal opinion when it comes to Real Estate. Shouldn't these things be caught up-front before 90% of the project is sold out? Isn't that the only way you can get a Real Estate developer to fix these wrongs before it's too late?

HDIL sells off prime plot at 42 crore loss

Well, so much for real estate always goes up.... Even pros at HDIL could stump, how come novice investors can make money...

Article Link


MUMBAI: In the clearest sign of where the realty market is headed, leading developer Housing Development and Infrastructure (HDIL) has sold a 15.5-acre Eveready Industries plot at Turbhe-which it had bought for Rs 115 crore from the B M Khaitan group in 2008-for Rs 86 crore to Thyrocare Group, a medical diagnostic group. The hush-hush deal which is Rs 29 crore less than the purchase price has shocked realty experts.

Sources say HDIL has sold it at a much higher loss than Rs 29 crore. When it bought the land, HDIL paid MIDC Rs 4 crore towards differential premium, Rs 5.8 crore towards stamp duty and registration in addition to the land price of Rs 115 crore. Over Rs 2 crore was paid as consultancy fees. So, the total cost came to Rs 128 crore. The sale price included stamp duty, registration and differential premium pricing to MIDC. "So, the loss effectively works out to Rs 42 crore,'' a consultant said.