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Guidelines for Cherry-picking Real Estate Investments in 2017

Monday, January 09, 2017
By Anuj Puri

Anuj Puri
Chairman & Country Head,  JLL India

The year 2016 has been an interesting one in more ways than one for real estate markets. A number of initiatives like the passage of the Real Estate Regulatory Bill in March 2016; amendments to REIT guidelines in Budget 2016-17, which exempted levy of dividends distribution tax paid by SPVs to a REIT; notification of the Benami transactions bill in August 2016; announcement of the third list of Smart Cities in September 2016 were just some of them.

18 states ratified the Goods and Services Tax (GST) and the GST Council and Secretariat was constituted, the efforts towards incentivizing affordable housing continued with the Budget 2016, allowing for additional INR 50,000 tax exemption for first time home buyers. The most recent move, on demontisation re-emphasized the government’s war against black money across all sectors and specially so for real estate.

All these initiatives set the tone for what is in store for the sector and for the mid-income buyer/investor in 2017. A more transparent, better regulated, less cash dominated real estate sector holds the promise of low risk and stable returns. However, even as the sector moves towards consolidation, to cherry pick an investment in 2017, the buyer must keep in mind certain key parameters related to the asset class, geography as well as investment horizon.

A check on the status of the land title to understand if the builder owns the land or has development rights for it will be advisable. And most importantly, in 2017 too, try negotiating across the table for a better price, whether it is a primary sale or a secondary market one. And do keep in mind a longer investment horizon of at least five years, as we see the days of fast churning of investments are now gone.

With the government’s recent demonetization move, cash transactions, especially in resale will take a hit, and we hope to see a gradual revival of genuine buyer interest in residential markets across key geographies. Buyer affordability and revised seller expectations, will help dictate a new market determined pricing. In such a scenario, selecting the correct micro-market within a geography will be of immense importance as value picks will be found in these micro-markets.

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