In­cen­tives to re­ju­ve­nate In­dia’s hous­ing sec­tor

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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

In­dia

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.

HRA in­crease

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

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