Incentives to rejuvenate India’s housing sector
established office corridors.
Even in Gurgaon, the NH-8 and MG Road office corridors are significant contributors, while in the SBD, office corridors such as Jasola, Nehru Place and Saket are the major contributors.
Mumbai is one of the prime tier- I office markets where ORCs are visible across modern office pockets of BandraKurla Complex (BKC), Andheri East, Powai and Navi Mumbai. Hiranandani Powai ORC has the highest rental premium of over 3X, possibly on the back of its added benefit of being an elite neighbourhood residential development.
While the old CBD (Nariman Point) does have a few retail outlets to talk about, it may not feature high on the list of retailers as buildings are of old design and may not offer amenities such as ample parking space, large display area, etc.
Also, Mumbai’s CBD area i s already proliferated by local food and beverages or F&B outlets and high streets, thereby making the ORC concept somewhat redundant. As a result, retail rents fetch a higher premium over office rents in modern office locations compared to the CBD.
F& B is the most dominant category, as it accounts for 46% of the total retail categories’ presence. Noticeably, this category has adapted to the culture that different ORCs have to offer.
For instance, at BKC, expensive fine dining restaurants have made maximum inroads while at Andheri East, most F&B outlets cater to the moderately- priced f i ne dining categories. Banks ( 16%) and electronics-mobile-telecom (12%) are the next big categories across Mumbai’s ORCs.
The Bangalore office market is predominantly driven by IT/ ITeS occupiers largely confined to huge campus developments. These IT developments only offer the opportunity for a captive audience for retailers, though such numbers may also be quite high as IT firms in Bangalore typically occupy entire towers/ wings of larger office developments.
The commercial developments i n Bangalore are largely in the city centre and surrounding areas. The city centre is itself a prominent retail hub and in such a scenario taking-up space in commercial office buildings in the vicinity makes perfect business sense for retailers as they not only cater to the shoppers but also make huge rental savings by opting for ORC formats over the high streets.
The proximity to the city centre is reflective in the tenant mix of ORCs in Bangalore. While generally, fashion does not figure prominently in the retailers who occupy such formats, in Bangalore, it is visible in the fashion category dominating. ORCs in Bangalore are a part of the shopping centre of the city than creating a standalone of f ice district. F& B follows a close second as this category has maximum traction with shoppers and office goers alike.
Given the lack of quality retail space across the top- 3 I ndian cities, ORCs would definitely see good traction at a time when many domestic and inter national retailers have made plans for expansion. The author is chairman and country head at JLL
The Union Budget for 2 0 1 6 - 1 7 p r ov i d e d a s i gnificant push t o t he housing s ector. The gover nment extended quite a f ew i ncentives t argeted at the Affordable Housing segment under the Pradhan Mantri Awas Yojna ( PMAY). It announced 100% tax exemptions for private players constructing affordable housing of 30 sq m in the four metros and of 60 sq m in other cities, approved during the June 2016 to March 2019 period, to be completed within t hree years of construction approval. Minimum Alternate Tax, however, will apply to these undertakings. Apart from the 100% investment-linked tax deductions for development fir ms l aunching affordable housing projects, service tax of 5.6% has also been exempted on services for the construction of such projects under t he urban Housing f or All Mission or PMAY. T h e s e m ove s at t e m p t t o address the supply side constraints of developing affordable housing to plug the significant demand gap in this realty segment.
Encouraging pri vate players
Hopefully, such tax incentives should encourage private players to participate in larger numbers in the construction of projects under the Affordable Housing in Partnership component of PMAY.
In addition, the government has also clarified that the unit sizes of such housing projects may not exceed a carpet area of 60 sq m. These broad guidelines have also been extended to low cost housing schemes of state governments.
The finance minister has, moreover, announced 100% excise duty exemption f or Ready Mix Concrete, which is also expected to aid in easing supply side constraints of the real estate sector by bringing down construction cost to some extent.
On t he demand end of t he housing spectrum, an additional rebate of ₹ 50,000 per annum has been announced on housing loan interest for first time home buyers in the affordable housing segment. This announcement, however, is applicable for home loans not exceeding ₹ 35 lakh, and for properties not exceeding ₹ 50 lakh. This move is likely to fuel affordable housing demand, especially among home buyers in the country’s tier II and III towns and cities.
The finance minister also provided a boost to the rental housing market with an increase in House Rent Allowance (HRA) deductions. Those not owning a house and not receiving any HRA from their employers previously, can now avail a standard deduction of ₹ 24,000 per annum; while for those already availing HRA, the limit has now been raised to ₹60,000 per annum towards rent paid for their homes.
The recent passage of the Real Estate ( Regulation and Development) or RERA Bill is also expected to have positive implications for the housing sector in India. It will hopefully help regulate the sector and promote transparency. If implemented in the right spirit, it could facilitate greater volumes of domestic as well as overseas investment flows into the sector. Above all, home buyer confidence in the property market is likely to revive with the Bill coming into effect. Moves such as incentivising t he developer community with tax exemptions, as well as incentivising the end-user by providing tax breaks will h o p e f u l l y r e j u ve n at e t h e sluggish residential market.
In Delhi-NCR tenant mix of ORCs are a heterogeneous mix of groceries, medical stores, property brokers, laundry etc