India Insight

Real estate offers lure some Indian buyers

For around a year, Girish Kale was flirting with the idea of buying his dream house. His budget of 3.5 million to 4 million rupees ($56,000-$64,000) wasn’t going to work for Mumbai, where the kind of house the auto industry professional wanted would cost upwards of 10 million rupees.

Kale, who currently lives in a rented flat in Kandivali suburb, turned instead to Pune, a university city 150 kilometres away, with a plan to opt for a so-called 80:20 payment scheme. Such schemes allow the buyer to pay 20 percent of the property’s cost initially and the remaining amount on possession after construction.

However, when the Reserve Bank of India issued a directive on Sept. 4 restricting some of these schemes, Kale’s broker put them on the back burner. The central bank’s directive might have disappointed buyers, but some still want to invest in property.

“Maybe when in six months I would like to get married … my expenses will go up. That is why I was interested in 80:20,” said Kale, who is still on the lookout for a similar offer that will fit his budget. “It will be difficult but still I will go for it. I want to invest in real estate … if I delay it for maybe one or two years further, the price will go up”.

In an 80:20 scheme, the buyer pays 20 percent of the total property value. As construction progressed on the property, the bank would pay the developer, which then would pay the equated monthly instalment or EMIs on the buyer’s behalf.

The RBI said it was concerned because in certain cases, the developer received the entire amount upfront from the lender, making it a non-construction-linked loan and exposing the buyer’s credit profile to higher risks in case the builder defaults.

Connaught Place: As ugly as it gets in Delhi’s expensive heart

(Any opinions expressed here are those of the author and not necessarily of Reuters)

New Delhi’s Connaught Place is home to the fourth-most expensive office space in the world, ahead of such usual suspects as New York and Tokyo. If you’re one of the people who has to walk through it every day, the one question you’d ask yourself is: why?

The occupancy cost in Connaught Place is $162 per square foot, compared to $156 per square foot for Tokyo’s central business district in fifth place, according to an annual survey released by global real estate service firm Cushman & Wakefield. In New York city’s Midtown, the equivalent cost is $128.85. (London is most expensive, $262 per square foot, which includes taxes and charges for cleaning and other services)

U.S. consulate for sale, in India’s daily paper

For sale: a spacious, well-built Mumbai townhouse with beautiful views, well-heeled neighbours and one considerate, well-respected former owner.

Lodged between an advert for hair loss treatment and an article on illicit after-hours drinking in India’s commercial hub, the U.S. government consulate in Mumbai invited bids for its two consulate properties in Tuesday’s Times of India newspaper.

The consulate building, located at a much sought-after address in the exclusive Breach Candy neighbourhood in the south of the city, has long been outgrown by its inhabitants, who already have a new location in Mumbai’s northern business district.

from Summit Notebook:

A bubble in the real estate market?

INDIA-URBANISATION/Have you tried buying or renting a house in Mumbai recently? If so, then I won’t be surprised if you think real estate prices are plain expensive, and incredibly so. But that’s almost always been the case in India’s commercial capital. After all, when was the last time someone told you they got a cheap house in the city?

So is the real estate market in a bubble? We asked Adi Godrej, the man who controls Godrej Properties, if things could get bubblicious. This is what he had to say: “I don’t think we are in a bubble, because demand is strong, but we could get into a bubble.”

Godrej, whose family fortune is estimated to be about $5.2 billion, doesn’t really care if prices go up in south Mumbai’s old-money neighbourhoods such as Malabar Hill or Altamont Road, where Reliance Industries chairman, billionaire Mukesh Ambani, is building a 27-storey $1 billion home.

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