RERA, BENAMI PROPERTY and DEMONETIZATION

25 Jul

Real estate sector has remained in headlines due to many policy level changes. Real Estate (Regulation and Development) Act 2016 (RERA), Benami Transaction Prohibition (Amendment) Act 2016, amendments in Real Estate Investment Trusts (REITs) regulations, Goods and Services Tax (GST) and Demonetization, are the ones that are considered to have the potential to change the way real estate sector work till now. Besides these, a couple of announcements seemed to be made in the passing but is extremely crucial to this sector. These were the intent to digitize land records, change in arbitration norms for construction industry and setting up of a government committee to look into the strategic sale of government assets that include land and manufacturing units.  All these changes are perceived to be the game changers for the real estate in coming years and the shift would begin in 2017.

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Residential sales dwindled and ready to move in inventory was the flavor of the year, 2016-17 – a trend that will continue at least in short term for the residential units in Patna.  2016 was not one of the best years as prevailing caution affected investors as well as end-users in the Patna real estate market, due to the predominant economic risks. Despite huge demand, transaction volumes remained low in 2016. Pressures of increasing unsold inventory, delay in passing of maps and a liquidity crunch resulted in fewer project launches in Patna. There was an increase in the incentives being offered to sell the property, such as innovative payment plans, discounts, and gifts with bookings. However, such incentives have not proved to be much of a booster and ready to move in apartment remain the most preferred one among end-users.

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Buy Sell Rent Patna

Overall Long-term outlook is positive! Although it’s hard to forecast the Patna real estate market that is highly sentiment driven. Several factors will drive the future trend in combination with each other. Recent demonetisation that became the front-page news and a most debatable topic of the year 2016 and now the GST in 2017 are the major factors that may drive the short-term trends.  While everybody agreed that the measure would help the economy in the long term, the short-term consequences were harsh for the residential real estate sector as the overall transaction volume come to a halt. Transaction volume in the residential sector will remain constrained, but the current oversupply in the market will be mitigated in the coming quarters, as very limited new projects are being launched in Patna. Yet, things are looking up in the coming year, with end users may start looking the market again.   Having said that, BuySellRentPatna.in is a firm believer of the positive impact of all these reforms and believe that these are just small hurdles and the overall Patna property market should come on the recovery path shortly and we will see a resurgent Patna real estate.

Residential Rental property market in Patna has Stabilised

1 Jul

Rental property market is flattening in Patna, with residential rentals in prime areas of Patna being stagnate since last two years. The residential property market across Patna has witnessed same average rental values for the year 2016. In Boring road for example a residential 2 BHK flat of about 1200 sq.ft is still available around Rs.15000 as it was in 2015.  Though, Real estate in Patna is bearing the brunt of the currency ban due to a high dependence on unaccounted cash transactions with residential sales taking a direct hit. Additionally there is RERA and new Benami property act. Home sales have come to a minimal across Patna. Still, the residential rentals in Patna are not moving.

The main reason for flat residential rentals is the increasing connectivity of western Patna, Shaguna Mode area with central area. The flyover from Golf Club to the End of Jagdeo Path on Bailey road has drastically reduced the travelling time. Secondly, all the new corporate offices are coming up in western Patna, in commercial complexes like Sai Corporate Park on Bailey road near Rukunpura. A number of good new schools and hospitals too have cropped up in this “mini Gurgaon” of Patna.

The supply of residential inventory in western Patna is great and is getting added every day. It is not only the higher supply but also reducing demand. With the Banking, Insurance, Pharma and Telecom sectors feeling the slowdown the demand for rentals have dwindled. The new jobs are less and less people entering the job market always adversely affects rentals.

The shift towards western Patna has further diminished residential rental demands of areas like Kankarbagh and Rajendra Nagar. Though there is expansion across the bypass and Sampatchak area but the modern Patna is coming up on western frontiers. Today, a flat in Boring Road, Ashiana Road has greater rental yields than a flat in Kankarbagh or Rajendra Nagar. The congestion and water logging are two common owes cited by tenants in Kankarbagh and Rajendra Nagar. Additionally the properties in these areas are older and demand higher maintenance.

As we mentioned that a 2 BHK flat of 1200 sq.ft is available for around Rs 15000 in Boring road, the same with better modern facilities is available for around Rs 8000 in areas like Gola Road, RPS mode, Ramjaipal Nagar. If you have to travel from Boring road to say Exhibition road during office hours and from Gola Road to Exhibition road during office hours the travel time will be only 15 minutes more from Gola Road. The properties too are newer in western Patna and for tenants it means less maintenance hassle.

These developments on western frontiers of Patna have rendered the residential rental prices in erstwhile modern localities of Patna like Boring road to stagnate. The preferences are changing and rentals are adjusting according to the new demand and supply equations in Patna Property Market.

Joint Venture Projects or Conversion as called in local Parlance will be Modified under RERA in Patna Real Estate

6 Feb

Pre launch offers will become extinct under the new Real Estate regulation Act (RERA) to be implemented by 2017 in Bihar. It has already been notified by central and many states government. Financial prudence and transparency have to be carried out under the Act. This will impound the “free” (according to whims of developers) flow of cash and the diversion of funds from one to another project will be a thing of past. Each project is supposed to have a separate ESCROW account. The developers in Patna will therefore have to change a lot of older ways in which they have been conducting business till now. A lot of consolidation will take place in Patna property market. Clear and transparent deals will be struck. RERA will compel developers in Patna to look towards Technology to control and lower costs. Project management and ERPs will be implemented and therefore the entry barriers will rise. It will be advantage for established and organized builders of Patna.

The crowded arena of Builders and developers will get organized into EFFICIENT few. In Patna real estate one has seen varied backgrounds of the builders. The jewelers, the churi (bangle)walas, confectionary, cloth merchants and who not diving in this pool to earn some quick buck. After RERA the plunge will need more planning and more long term commitments.

All this will also change the way the Joint ventures or conversion deals as it is called in Patna real estate is conducted at present. The tradition of paying a non-refundable amount popularly known as NON will have to be called off. In fact the NON amounts put pressure on the cash flow from the planning stage of the project and leads to builders compromising on essentials like marketing, consulting etc. The project management has lot to do with cash flows and a tightening by RERA will mean more scarce cash flow if not well managed from the very start. With fewer builders as buyers or takers of the land, the land owners too will have to wake up to the realities.

 A Joint-Venture (JV) OR CONVERSION works in a couple of ways in Patna currently..

  1. 50–50% ratio – Wherein investment and profit sharing is equally divided.
  2. 50% of the total saleable area: This is generally provided to the land owner, wherein the developer pays nothing for land, but the investment is entirely owned by him. In turn, the developer offers 50% of the total inventory to the land owner.
  3. Premium (NON) & Inventory Sharing: The developer pays a premium to the land owner (not the total value of the land, just some premium) plus a share in inventory, say around 40% or 50%
  4. 60–40%: In this scenario, the land owner wants to get associated with a brand in the construction industry and hence, is OK to offer his land for free. In turn, the owner gets to learn the know-how of the construction industry, gets a brand for his project plus a 40% stake in the entire inventory.

 

It is the number three; Premium (NON) and inventory sharing that will come under the lens after the RERA. The land owners in Patna will have to understand the new ways of business and the advantages of have a fixed turnaround time for projects. The lure of initial money delays the projects. A Project completed within the stipulated time is always more beneficial for all stakeholders, rather than delayed ones. The onus is also on builders to educate the land owners and show transparency in all works of the project.

Changes in the taxation aspect of JDA (Joint Development Agreement) in the budget of 2017 that tax liability will kick in only on project completion will greatly encourage more land owners to partner with developers in Patna that will benefit the real estate developers in Patna and in turn likely to benefit end consumer. It allows the project to manage its cash flows in a more optimal way. Better project cash flows will also help home buyers in Patna get better deals and pricing.

It may take time to sink in but the Joint Ventures will no more be the same in Patna Real Estate. It will be for better, more transparent and will save Patna’s real estate from a number of ills.

What makes a neighborhood in Patna, great?

25 Oct

What distinguishes a great neighborhood from the merely livable areas in Patna? It’s a difficult question, encompassing everything from physical attributes such as good design to the right number of parks and public gathering places. Is it a charming Main Street, good schools or an abundance of interesting shops, restaurants and other diversions? What elements conspire to create great neighborhoods?

People and place

Surprisingly, its people not developers, who create the next big place. It’s always a bunch of individuals coming in who think the potential for their community is bigger. They have this feeling that something has happened there and start to do little things that collectively add up to a big thing.

That might include a shop owner sprucing up his storefront, adding an attached coffee shop or a resident putting in a park bench on the corner to allow people to stop and talk.

These twists give a signal that something is going on here. Pretty soon other people join, revitalization is born. “People attract people,”  so when businesses triangulate in one place, such as a theater, bookstore and art gallery, they give people reason to stick around. These are the places you take friends and family when you want to show them the neighborhood.

Location, location, and location
Of course, few people are going to settle in a neighborhood if it doesn’t have access to well-paying jobs. The places that have the most value and that blooms first are those closest to, or have access to, high-paying jobs. They raise the fastest and the farthest.

Indeed, access to good public transportation can turn even some suburbs into hot areas.  Home values perform better on average if the homes are within a kilometer of public transportation. Residents in those areas had better access to jobs and lower transportation costs, leaving them with more money to enjoy neighborhood amenities.

Let’s not forget schools
By and large, the highest-value home prices in Patna are found in school areas of very high quality, and those with access to high-paying jobs.

These areas are the blue-chip stocks of neighborhoods, even for people without kids, because they attract people with higher levels of education, who tend to be more active in preserving community value.

Change is Constant & Continuous

24 Aug

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Change is constant & continuous, there is no aspect of our lives that hasn’t evolved over the last decade and so in Patna and Real Estate Marketing in Patna could be one of those that too can evolve the most. Driven by changes in technology, appetite for innovation and changes in lifestyle, Real Estate Marketing in Patna can become more targeted, context and personal than ever before.


The key features in the changing face of real estate marketing in Patna can be listed as – emergence of digital marketing, improved targeting, convergence of lifestyle into marketing, event-based marketing and contextual marketing.


The emergence of digital mediums can quite simply revolutionize the real estate space in Patna. Digital marketing has brought in better targeting, improved personalization and contextualizing of real estate marketing.


With increasing competition, real estate companies in Patna do not have the luxury of investing precious advertising rupees on an audience they know that might not be interested in their product. Inventories can be segmented to suit audience and marketing campaigns drawn to suit each segment according to their taste.


Lifestyle is a term that is one of the most oft used in today’s marketing jargon. Real Estate is one industry that truly sells a lifestyle when it sells a product. Your home defines most of your social activities. The amenities on offer define your level on the social ladder and the address that you reside in is often a statement in itself. And therefore, often Real Estate Marketing is as much about the lifestyle that you can expect for yourself when you are looking to buy a property in Patna.


Marketing in the real estate space can also become quite contextual with homes now located in enclaves with all sorts of modern amenities. This helps marketers create contextual campaigns that resonate with the audience. Properties in Patna are now being developed for certain communities (for example doctor’s communities, armed forces communities etc.,) this allows for campaigns to be executed in those ecosystems for better resonance and returns.

 

All these benefits on a hyper local platform increases the rate of returns by 40% and in the long run of 2 to 3 years is the most effective way to create a BRAND IMAGE.

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