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Does It Make Economic Sense To Invest In Real Estate Sector In Tier-2 Cities?

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Almost 52 Percent Of Residential Units Registered Under MahaRERA Remain Unsold: Report

Tier-2 cities can potentially offer two important advantages — price and growth potential, according to experts.

As Indians, we love our real estate. We can see it, stand on it and experience it. It also generates income, and if held long enough, helps grow our money. But the sector has been in the doldrums for the past few years, taking away much of the popular interest.

Yet, some die-hard enthusiasts remain bullish about this asset class. Some consider investing in tier-2 cities lucrative. What should you consider before investing? Here are some pointers:

Should you invest?

“Tier-2 cities can potentially offer two important advantages — price and growth potential,” said Ramesh Nair, CEO and country head, JLL India.

But not everyone agrees. “From an investment point of view, tier-1 cities should be considered over tier-2 cities,” said Mir Jaffer Ali, founder and CEO at PropUrban, a Bengaluru-based global real estate investment advisory.

There are also many whose views fall in the middle of these two extremes.

Amit Oberoi, national director, knowledge systems, Colliers International India, said: “It’s all the same whether one invests in a tier-1 city or a tier-2 city. Returns from investing in real estate depend on the intrinsic characteristics of the property and its location.”

He believes investment in residential real estate should take into account factors such as amenities in the project, developers’ track record and location—such as proximity to a centre of employment. However, in the current market scenario, Oberoi is not optimistic about investing in real estate, be it in a tier-1 or tier-2 city.

“Currently, the market is subdued and no appreciation is expected in the next six months or so. One should look to invest in real estate only if one has an investment horizon of 5-10 years,” he said.

If you are still enthused by the tier-2 story, you need to be careful while selecting the city. “Hitting the bull’s eye with property investment in a tier-2 city depends a lot on the city and whether one has selected a viable micro-market and property typology within that market,” Nair said. “If one has to invest in tier-2 cities, consider cities that are emerging; cities in the list of 100 smart cities may be better options,” Ali said.

Due diligence

If you are planning to invest in tier-2 cities, you need to take precautions. “Due diligence of property titles and developers is more difficult in tier-2 cities, and one should take utmost care in doing it,” said Ali. Besides, investing in cities other than the one in you reside in brings its own set of responsibilities.

“Investing in a property in cities or towns other than those of one’s residence can mean that one will not be able to inspect them regularly,” said Nair.

If it is tenanted, there are certain duties that a landlord must fulfill, and rent collection also needs to be reliable. The property needs to be maintained and all statutory charges need to be paid to local authorities.

Therefore, apart from keeping in mind other criteria, if you want to invest in a tier-2 city, look to do it in a city or town that is close to where you live, or one that you can visit often.

Source: Hindustan Times

Residential

Under A New Affordable Housing Policy, Assam To Build 83,000 Houses

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Assam To Build 83,000 Houses

Under a new Affordable Housing Policy, Assam government said it would build 83,000 houses in urban areas for the financially weaker section of the society.

CM Sarbananda Sonowal directed the Urban Development Department to prepare the policy at the earliest.

According to an official release, “Government of Assam would soon adopt an Affordable Housing Policy in the state taking into consideration the specific needs of the financially weaker section of the society and effecting suitable modification of the existing by laws.”

The decision was taken at a meeting in which proposed projects of the Assam State Housing Board were discussed.

During the meeting the CM said, “Our government is committed to ensure housing for all and we would construct 83,000 houses at urban areas for the Lower Income Group (LIG) and Economically Weaker Section (EWS).”

The Assam State Housing Board was asked to to complete survey of its assets and conduct their valuation in a time bound manner so that bigger projects could be taken up by the CM.

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Jaypee Group Sets Target Of 24000 Flats By 2020

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Jaypee Group

2020 is targeted by the debt-ridden Jaypee group for the completion of pending 24,000 flats in Noida. The construction has been started with a cost of about Rs 8000 crore. Out of this amount, Rs 6000 crore would come from the home buyers and the rest would have to be infused, says the Jaypee advisor Ajit Kumar. Jaypee group started the construction of 32,000 flats in its township at Noida in 2007, out of which 8,000 units have been delivered so far.

These 28,000 units from the total flats were taken up by the Jaypee Infratech, which has already gone into insolvency, while the remaining 4,000 units were with Jaypee group’s flagship firm Jaiprakash Associates. Now under the orders of Supreme Court and National Company Law Tribunal (NCLT), Jaypee group intends to complete and deliver all 32,000 units by 2020.

6,300 flats and 1,500 plots have already been delivered by the group, aiming for a target of 5000 units by the June. Applications for 1,500 occupational certificates have been submitted, whereas additional certificates for 3,500 units are in the process.

Jaypee group is in the hold of enough assets, including vacant land parcels, if in case they have to pay all bank dues and a heavy compensation to home buyers for the delays in possession of flats. As the group is investing about Rs 20-30 crore a month on construction by the funds coming from toll collection of Yamuna Expressway and home buyers.

An IDBI Bank-led consortium application was submitted to the National Company Law Tribunal, seeking resolution for Jaypee Infratech under the Insolvency and Bankruptcy Code, later getting a successful admission.

A few months later, an NCLT-appointed Insolvency Resolution Professional (IRP) took over Jaypee Infratech, for the recovery of bad loans. As Jaypee Infratech faced huge protest from home buyers, due to a major delay in the deliveries of the real estate projects.

While handing over the management of Jaypee Infratech to IPR, the court placed a restraining order on its real estate promoters, directors and managing director, barring them from any kind of international travel, without court’s prior permission. Solely concerned about the home buyers, the court assumed a non-lenient behavior in this matter.

On September 11, the Supreme Court appointed senior advocate Shekhar Naphade as an external supervisor to assist the proceedings of the IRP, which will submit a resolution plan indicating how to safeguard the interests of home buyers and secured creditors.

On October 27, a public notice was issued by IRP Anuj Jain, seeking applications from entities with regard to the resolution of Jaypee Infratech Limited. Several expression of interest (EOIs) got submitted under it, as the resolution plan needed to be approved by the creditors and the NCLT.

The Yamuna Expressway, connecting Delhi and Agra, is one of the major constructions done by the Jaypee Infratech in the field of road construction and real estate business.

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Drafting A Rental Agreement

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Rental Agreement

The rent agreement is a document that seals the arrangement between a landlord and the tenant, it is to help them, forming a good healthy relationship. However, all the provisions and necessary laws should be mentioned clearly in the document as it can be a potent instrument that can be used and misused. With an aim to create a mutually beneficial relationship, these agreements are made to avoid any kind of disputes between the tenant and the landlord.

The basic necessity for an agreement is the background check, a crucial element for tenants as well as landlords, which must be completed before entering into a rental agreement. As the sole purpose of a background check is not only security but it is also important for a perspective of evaluating the advantages and disadvantages of renting.

For the tenant, applying for a rental agreement is like a job interview. As there is need to become presentable in a mature, trustworthy and financially responsible manner. Similarly, the landlord should make sure that the tenant presents the right credentials. Therefore, the agreement calls for a thorough background check. From the tenant’s employment history, contact information and the proof of income, everything has to be taken care of.  

Almost all of the rental agreements are made on notarised stamp papers. There exist some chances of violation from either the parties, despite the document being a legal contract. Therefore, to avoid these violations, the agreement must be registered at the local sub-registrar’s office. Sound clauses and provisions in a lease agreement, only add to the integrity of the document, protecting the interests of both the parties.  

With a proper definition of the roles and responsibilities of the tenant and the landlord. A proper format for the provisions, emphasizes on the mentioning of the tenancy period, the renewal time of the lease, the clause of repair and responsibilities, the frequency and the date of rent payments. All the repairs and maintenance should be completed before taking up a property on rent. All the electrical wiring and plumbing must be checked before occupying, as it will safeguard the tenant from unnecessary expenses that may crop up in future. Pending dues such as electricity and development charges must be checked beforehand.

During the signing of the rent or lease agreement, the presence of two known witnesses is a must. Due to the deterioration of the law stature and the order situation in major cities, the authorities are pressing for the verification of the tenants. The landlords are also asking for the copy of employment letters from the tenant’s employer. A Landlord must insist on a police verification for a tenant, who is a non-native of the city.  

In general, there are ready templates being used by most of the lawyers, who assist in framing the rent agreement. But it is not necessary that these provisions can’t be changed. All the needs can be tailored in the agreement, according to the requirement, with clauses that are mutually acceptable to the tenant and the landlord.

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