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Encouraging budget for the housing finance sector and the overall economy: DHFL

Words: Kapil Wadhawan, CMD, DHFL


This year’s union budget has been encouraging for the housing finance sector and the overall economy. The proposal to introduce 100% deduction to undertakings for construction of affordable housing will help us in realizing honorable PM’s “Housing for all by 2022” scheme.


The proposal to introduce guidelines for renegotiation of PPP contracts and reform dispute redressal mechanism will encourage private participation in the development of affordable housing projects and road infrastructure.


Decision to exempt REITS from DDT is also a welcome move. This will ensure positive movement on real estate projects and will help in bringing the sector on a sustained growth path.
DHFL had recommended empowering the customer for greater affordability. In this context, the decision to give additional exemption of Rs 50,000 for housing loan upto Rs 35 lakh sanctioned in 2016-17 for 1st time home buyer provided the cost of house is not above Rs 50 lakh is praiseworthy and will definitely ensure that more Indians will fulfill their dream of owning a home of their own.


The decision to improve the ease of doing business in India by deepening corporate bond market and announce initiatives to reinvigorate private sector has come at the right time. This coupled with reduction in corporate tax rates from 30% to 29% from FY18 for companies with turnover less than  Rs.5 cr will boost the SME sector and help in economic growth.


DHFL welcomes government’s commitment to boost road infrastructure and address rural distress by skill development of rural population, allocating funds for MGNREGA scheme and providing support to agriculture. We are of the view that this year’s budget will enable the Indian economy to withstand adverse global pressure and move on the road to a more balanced, sustainable and inclusive growth. We will remain an attractive destination for investment over the medium and long term.


We also look at this Budget as one which has been quite responsible on the deficit and borrowings. Coupled with fall in crude prices which is a major input cost in our system, we can safely bet on inflation remaining benign. We see a very positive move on interest rate front as well as on bond market that will give a great fillip to financial services sector.

The budget places the realty sector on a good standing: Cushman & Wakefield

Words: Sanjay Dutt, Managing Director, India, Cushman & Wakefield


The Union Budget has adopted a multi-pronged approach toward strengthening the economy through reviving the farm economy, reforms in financial sector, spurring infrastructure development and increasing the ease of doing business in India. The budget aims to increase productivity and ensures timely flow of capital to farmers at a time when the country has faced monsoon deficit conditions. One of the most significant thrust has been on infrastructure development, with the government announcing allocation of INR 2.18 lakh crore for road and rail sector for the next fiscal.


The announcement to revive 160 airports and air strips across the country would lead to equitable development of newer cities by enhancing regional connectivity. Importantly, rejuvenating the country’s ailing banking sector that is burdened with high non-performing assets is likely to lead to better capital inflows into critical sectors.


Strengthening of the real estate sector depends on two significant factors – demand and capital inflow. The budget’s aim to revive infrastructure and enhance employment opportunities would likely have a trickle-down effect on the real estate sector to boost demand. Moreover, increased thrust on affordable housing through various tax sops and incentives to developers and individuals/home buyers would give a fillip to the government’s ‘Housing for All by 2022’ initiative. With regard to capital inflow, the government’s aim to increase the ease of doing business and streamline approvals would provide a conducive business environment for investors. Foreign investment in commercial office sector could be propelled through REITs and attractive yields seen in the market.


Affordable Housing

The Union Budget has placed greater thrust on Affordable housing and has brought about a much-needed cheer for the real estate sector. The finance minister’s announcement of 100% deduction in tax from profits of affordable housing developers would increase their focus on the segment that has been largely ignored owing to business viability issues. However, the caveat of housing space limits (30 sqm in 4 metro cities and 60 sqm in other tier II cities) should have been equitable, and the three-year window for project completion could have been for a longer duration as approvals and construction typically take a long time.


The Centre also announced service tax exemption for construction of affordable housing (as per prescribed limits) under state and central housing scheme. These incentives for developers would help them focus on construction of affordable housing projects across metros and non-metros cities. In order to increase affordability of homes for first-time homebuyers, an additional Rs 50,000 tax deduction on interest paid is applicable as far as loan amount is less than Rs 35 lakh and house value is less than Rs. 50 lakh.


While this is a welcome reform, the limit of Rs 50 lakhs as house value is on the lower side in most metros and could have been increased. The Union Budget also announced increase in deduction to Rs. 60,000 under section 80 GG for those who live in rented accommodation. All these exemptions and incentives would go a long way in increasing the affordability of consumers and incentivizing developers, in line with the government’s ‘Housing for All by 2022’ initiative.



While the Union budget did not address the issues of Stamp Duty and Capital gains, the exemption of Dividend Distribution Tax (DDT) for Special Purpose Vehicle (SPV) of REITS in the Union Budget is a welcome move. Till now DDT was applicable on SPVs, which was a huge hindrance in the introduction of REITs investments, making them less attractive. This move is likely to please the institutional investors who view India as an untapped market for this asset. REITs have a huge opportunity for developers and investors in India given the potential in the Indian real estate market. However, abolishment of DDT alone may not be sufficient enough for companies to launch REITs in the coming months.


Overall, the budget places the real estate sector on a good standing which could serve as a huge opportunity by developers especially in the affordable housing segment and commercial office sector.

Union Budget 2016: Below expectations, but with some major positives

Words: Anuj Puri, Chairman & Country Head, JLL India


To give him due credit, the Finance Minister has definitely made a concerted attempt to manage expectations with a balanced budget. While three of the real estate sector’s major expectations – increased HRA deduction, removal of DDT from REITs and boost to affordable housing by allowing 100% deduction on profits made by entities constructing them – have been addressed, the Budget offered no financial protection from project delays to home buyers.


Most first-time home buyers in the major metros will be left out of the additional Rs. 50,000 tax exemption announced today, as it is applicable only on houses worth up to Rs. 50 lakh with loans of up to Rs. 35 lakh for houses. This announcement will mostly benefit first-time home buyers in tier-III and tier-II cities. The infrastructure sector was a major beneficiary today.


The biggest announcement with implications for the real estate sector in India was removal of DDT from real estate investment trusts (REITs).

  • REITs could become a reality soon – The Dividend Distribution Tax (DDT) got exempted, clearing a final hurdle on the way of the successful listing of REITs in India. We expect a few listings to happen in the current year itself, either by financial institutions or developers. Currently, around 229 million sq ft of office space can be seen as REIT-compliant. If we assume that even 50% of these get listed, we are looking at a total REITs listing worth USD 18.5 bn.
  • Road infrastructure and new land opening up – Approximately 16-18 km of road construction per day has been achieved by the middle of the current financial year, and the Budget has adopted measures to significantly step up NHAI capabilities in this regards. Roads infrastructure has great influence on real estate development, particularly with the new land it opens up for development through highways and feeder routes.
  • Infrastructure creation – The Budget has outlined revival plans for non-functional airports in partnership with state governments, with a vision to spend around INR 100-150 crore on each airport to make them functional again. This will a boost to infrastructure in many tier-II and tier-III cities, and is without a doubt positive for their real estate markets. A select few projects that are commercially viable with good ridership could pick up pace in the near term.
  • Release of land – Going by today’s Budget announcements, Central PSUs are going to be encouraged to reduce their exposure to excess land holdings. While availability of land for development is definitely a constraint and the Land Acquisition Bill is increasingly difficult to implement, an alternative route is to make use of land holdings of central PSUs. We have seen this been done in the railways budget, as well.
  • Retail sector – The revamp of the Model Shops & Establishment Act is a welcome move and could help the retail sector considerably. Unorganised retail could receive a fillip as smaller shops will now also be given the option of remaining open for all seven days of the week, like organised malls. While this will make the high street retail real estate proposition a bit more attractive, we will have to wait and see the implications from a labour market perspective.
  • Office occupancy perspective – The Budget made a strong case for promoting start-ups in India with 100% tax rebate on profits announced for them for three years. In the recent past, we have seen successful start-ups (particularly in the technology and eCommerce sectors) becoming big and occupying a commendable share in office space. As more start-ups get encouraged to commence operations, we expect developers to offer more small mixed-use properties or arrangements for sharing of office space to cater to this segment.

Importantly, clarity is expected on GST implementation. The House got adjourned today when the Financial Bill came up but the FM had earlier said the government will strive to get it passed.

CREDAI expects concrete measures from the Union Budget 2016-17

Words: Getamber Anand, President, CREDAI National


CREDAI expects concrete measures in the Union Budget 2016-17 to achieve the goal of Housing for All by 2022 such as the following:


Robust and Uniform Definition of Affordable Housing

The definition of affordable housing must reflect the totality of the  vision of housing for all.  In CREDAI’s view, restricting  the definition of affordable housing to 25 square meters or 40 square meters amounts to scuttling of the vision. The Budget would do well to adopt a  uniform definition of affordable housing comprising dwelling units with carpet area up to 90 square meters in non-metros and up to 60 square meters in metros.


Tax Relief to Individuals for home ownership

Present limit for deduction of interest under section 24(b) is INR 200,000 for self-occupied property and present limit for deduction under section 80C is INR 100,000 need to be revised to a composite limit of Rs. 6 lakh for both principal and interest.

Section 24 of the Income Tax Act, allows for tax deduction on payment of interest. However, the proviso in the section states that if the property if not acquired or constructed within 3 years from the end of the financial year in which capital was borrowed when the loan was taken, the deduction of Rs. 2 lakh would not be available. This is a restrictive provision that curtails the flow of benefit under the Section. Delays on account of approvals and other procedural impediments, warrant that the time period be extended from 3 to minimum of 5 years.


Benefit under Section 80 IA B to Affordable Housing

Section 80 IB allows deduction of profits from infrastructure undertakings from the total income. Affordable housing is considered infrastructure internationally because affordable housing projects  include roads, sewer, drainage, lighting, greens and other utilities which are in their character and impact are absolutely infrastructural.


Capital Gains on affordable housing

Section 54F provides that capital gains are exempt from tax if invested in construction of a house within three years which is unreasonable given long approval processes. Limit of 5 years would be more reasonable.


Removal of Tax anomalies

A number of anomalies in Income Tax law are inhibiting investments into housing sector. Some of the prominent ones which Union Budget 2016-17 may remove are as follows:

  1. Under Section 43CA property transactions are being taxed at the guideline values where as the market price is much lower.
  2. Joint Development Agreements are being taxed as though income accrues at the time  the agreement is entered into. Budget is expected to remove these anomalies.
  3. Under Section 22 applicable to taxation of house property on the basis of Annual Letting Value, property which is held as inventory by developers is also being taxed.

Tier-I cities lead the convergence of retail and office spaces

Words: Anuj Puri, Chairman and Country Head, JLL India


While retailers have identified the Office Retail Complex (ORC) format as a good alternative, they are more than ever, willing to look at this format with much more interest in the absence of quality retail space. ORCs offer a higher bang for their buck with comparatively lower rents despite being offered prime ground floor spaces in comparison to premium malls and with weekday footfalls as well as viewership guaranteed to be higher than comparable malls.


With the added benefit of nearby residential nodes, such ORCs at their optimum have the potential to operate as standalone retail malls in respect of the lower floors and generate similar footfalls and business incomes for retailers. This format also offers institutional investors a potentially higher revenue across a diversified tenant base while providing them the key differentiator which may be the ultimate weapon in commercial occupier retention and future rental upside potential. We look at the how this format is shaping up in the tier-I cities.


 Mumbai: New business districts drive the trend

Mumbai is one of the prime tier-I office markets where ORCs are visible across modern office pockets of Bandra-Kurla 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 is already proliferated by local 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 fine dining categories. Banks (16%) and Electronics-Mobile-Telecom (12%) are the next big categories across Mumbai’s ORCs.


Delhi-NCR: Gurgaon steals the show, followed by Noida & SBD

Delhi-NCR ends up throwing totally different results. While this geography outstrips all others in terms of size of the ORC retail format, the tenant mix is also quite at variance. The dominant category here comprises of Others, which is a heterogeneous mix of groceries, medical stores, property brokers, laundry, courier services, jewellery stores, printing services and stationary outlets.


BFSI makes up for the next highest tenant presence, closely followed by F&B. The remaining categories remain peripheral players who take up space based on the potential value they can derive from their store locations. It is interesting to note that most of such formats and consequently stores are located in destinations which are well-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.


Bangalore: The only city where ORCs thrive in the CBD

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 in 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 office 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 Indian cities, ORCs would definitely see good traction at a time when many domestic and international retailers have made plans for expansion. Each ORCs have their unique characteristics making them discerning amongst select categories of retailers. It is only a matter of time before we witness a wide range of retailers expressing their intention to have their presence felt in ORCs. Increased demand and rising premiums could potentially attract a lot more office developers to offer mixed-use developments in the future.

The upcoming union budget can strengthen the housing finance sector

Words: Harshil Mehta, CEO,  DHFL


DHFL welcomes the steps government is taking to ensure “Housing for All by 2022” and develop smart cities. The schemes and policies that are implemented by entities including HUPA, HUDCO and NHB at the center and various authorities at the state level will promote development of houses for the EWS and LIG categories which have largely been left out earlier. Credit risk guarantee for home loans up to Rs 5 lakhs, project finance for affordable housing developers and refinance for housing finance companies by The National Housing Bank is also significant in this context.


  1. Strategic initiatives for further impetus -Success of the Housing for All by 2022 scheme will depend on investment in the affordable housing projects and timely execution of such projects. It is therefore imperative for the government to consider extending infrastructure status to Housing and Real Estate Sector. This will enable them access to funding from banks and other financial institutions at a much lower cost. DHFL also recommends formation of a nodal agency to coordinate efforts of various stakeholders and ensure faster decision-making.


  1. Make strategic investments– Housing for all by 2022 requires development of about 11 crore housing units and this will need investment of more than USD2 trillion. This translates to about USD250 to 260 billion annually, more than double the annual investments witnessed in FY14. We recommend exploring PPPs as an alternative additional source of funding to infuse higher funding in urban housing. It will also facilitate introduction of private sector technology and innovation in providing better public services through improved operational efficiency.


  1. Simplify structural and procedural framework – For long, the growth of India’s affordable housing segment has been hampered by many procedural and policy related challenges, the most important among them being the delay in approvals which escalates project development costs. It is therefore imperative to empower urban local bodies to expedite the process at local level. Single window clearance mechanism for affordable housing projects with faster turnaround time should also be implemented besides making available advanced technology which will lead to low cost with faster completion of the affordable projects.


  1. Introduce legal and regulatory reforms – Modification in FSI / FAR / density norms especially from EWS / LIG housing perspective has been hanging fire for long time. Optimal FSI / FAR / density norms will help in reducing costs per unit and increase the economic viability of Affordable Housing. FSI can also serve as a cashless subsidy, the benefits of which can then be passed on to end users/customers. Rental housing should also be promoted to meet the grand vision of Housing for All by 2022.


  1. Empower the consumer for greater affordability – Priority Sector Lending (PSL) should be redefined as for now only housing loans below Rs 25 Lakhs in metros qualify for PSL. DHFL is of the view that limit of the PSL should be increased to Rs 35 lakh and the annual increase be automatically pegged to the WPI will empower customers and incentivize HFCs to lend to affordable housing projects thereby giving boost to the real estate sector.

Fees and taxes should also be rationalized to reduce housing cost as taxes and fees account for 30 – 35% of housing cost. Reducing this burden could enable developers to provide cheaper houses.


    • To further improve financial inclusion through HFCs – Housing finance companies providing credit to low-income customers and grant credit to affordable housing are an important part of the financial ecosystem and help a previously excluded set of people to participate in the mainstream financial system. We recommend the following steps to help them work towards the cause of financial inclusion more effectively.
    • Refinance to HFC’s – Given that HFC’s operate at a higher cost structure, these companies should be permitted to offer loans at a higher spread, for better operational viability. Steps should also be taken to bring about a level playing field between private HFCs and universal banks. NHB could work with RBI to regulate, develop and meet the capital requirements of HFCs so that the purpose of disbursing finance at an affordable rate for housing can be achieved instead of just growing outstanding loan book. HFC’s currently do not carry any tax benefits on the Fixed Deposit unlike Bank FD’s which enjoy tax benefit under Section 80C of the Income Tax Act for FD’s of 5 year tenure. We recommend extending such benefit to HFC’s to bring them at par with Banks.


    • As HFCs serve both serve formal and informal low-income customers, we recommend leveraging these firms catering to LMI customers to disburse interest subsidies. Government could also consider bringing parity in norms for both HFCs and Universal banks for disbursing funds.
    • The credit risk guarantee trust fund ensures that the loan amount, not exceeding Rs. 5 lakh per loan, shall be made available both new or existing individual borrowers from the economically weaker sections (EWS) and LIG without any collateral and/or third party guarantees. As per the scheme, loans can be taken for purposes of home improvement, construction, acquisition and purchase of new or second hand dwelling units of size up to 430 sq. ft. carpet area. We recommend enhancing thislimit from the current Rs. 5 Lakhs to ensure easy access to funds to LMI customers and ensure affordable housing to them.

    In our fourth decade of operation, were main committed to the vision laid by its founder chairman Late Rajesh Kumar Wadhawan to enable every Indian to own a home of his own. We look forward to extend all possible cooperation to the concerned Ministry or Department in formulation of effective policy framework to strengthen the housing finance sector which is critical to realize the vision of Housing for All by 2002 and development of smart cities.

How the union budget can impact home buying sentiment

Words: Arvind Jain, Managing Director – Pride Group


The Finance Ministry’s annual Union Budget is will be announced on February 29, and every Indian will be following the announcements closely to understand how individuals and industries alike will be affected. The real estate industry in particular is extremely sensitive to many announcements made in the annual budget, since they can have a direct impact on home buying sentiment. Almost every Indian plans to buy a home as and when it becomes financially feasible to do so, and every year brings a new section of Indians who enter the stream of employed, salaried individuals harbouring this aspiration.


These individuals are just beginning their careers, meaning that their purchasing power is at its lowest point. In other words, they are very sensitive to every factor that influences their finances. Simultaneously, there are those who have already progressed a little further in their careers and have been hoping to purchase a home for a longer period of time. Such individuals have been studying the property market for suitable options and are more or less sure of what they want, and are now looking for the right combination of factors to encourage them make their final ‘buy’ decision.


For the Indian property market, this amounts to a very large number of ‘fence sitters’ – or individuals who are potential buyers but are still indecisive and not yet ready to make a purchase commitment. The real estate industry’s expectation every year is that once the the Union Budget is announced, many of these individuals will go ahead and buy their homes on the back of encouraging announcements. Favourable changes in direct and indirect taxation on individuals, as well as direct incentives related to property purchase, can infuse them with increased financial confidence.


For example, if the finance ministry raises the individual income tax exemption limit, it will have positive impact on long-term spending and saving patterns. More disposable income increases investment appetite, and property is the foremost investment instrument of choice for every Indian, Likewise, if the annual budget increases the tax deduction on home loans, it becomes an additional incentive for people to buy homes.


The annual budget also impacts the financial confidence of individuals in indirect ways. For instance, if duties on consumer goods are hiked, it affects how middle class people will plan their budgets for the year. If the budget announces additional subsidies for utilities such as cooking gas, it will translate into more disposable income. Changes in service tax and sales tax are also directly related to the annual expenses incurred by middle class households, and therefore affect financial planning of families.


In other words, the announcements made during the annual Union Budget can play a big role in moving undecided property buyers off the fence. It is not surprising that everyone from developer to end-user will be paying close attention to what Finance Minister Arun Jaitley has to offer this year.

A festive season briefing for homebuyers

Words: Anuj Puri, Chairman & Country Head, JLL India


As we look at how the residential real estate market is behaving this festive season, developers and the consultants are on the same page while accepting that it continues to go through a slow time. Many developers still have their backs against the wall financially, and have been challenged to complete or show convincing progress on their under-construction projects.


Unfortunately, fact this has been overly hyped by the media, and even developers who are well capitalized and fully able to complete their projects have been tarred by the negativity brush. This has resulted in a drop in overall confidence from buyers, who are worried that they will commit their money into properties which will not be delivered on time.


Economic Signals

The economy has not shown the kind of perk-up which everyone had hoped for. However, matters have definitely improved over what we were seeing this time last year. All in all, the market’s outlook is improving. The RBI’s recent interest rate cut has helped improve sentiment, which is an important driver on the real estate market.


With this rate cut, the RBI sent an important signal to the market that inflation is under control, and that it is confident about economic growth. Such signals definitely have a positive effect on buyer sentiment. However, in terms of actual pertinence on property purchase, the impact may not be very significant – especially in expensive inner city areas in cities like Mumbai. If property prices are in any case unaffordable, a marginal reduction in the cost of borrowing will not make a difference. The reduction in interest rates will have a bigger impact on buying behaviour in less expensive markets, such as peripheral locations of the larger cities and tier 2 / tier 3 cities.


Pricing & Correction Outlook

In the last four quarters, the prices in Mumbai increased by 3.7%, prices in Chennai increased by 1.5% and no change recorded in the prices of Delhi-NCR. This presents a more or less stable scenario, which is likely to continue for another two or three quarters. Though many fence-sitting buyers have been waiting for real estate prices to correct, it is unlikely that any large-scale ‘shock disruption’ is imminent.


Corrections are very location-specific as well as developer- specific, and will happen where nothing else will work to encourage buyer activity. In cities and locations where there is still sufficient demand and prices are more or less affordable, there will be no correction, while they will certainly happen in areas where affordability is a deterrent to buyer sentiment.


However, much is already happening to make real estate more affordable. Across cities, developers have been actively re-configuring their projects to align with market demand, in the process saving on costs and passing on the benefit to buyers. Also, a majority of the new housing project launches have been at lower rates than those of earlier projects launched in the same locations in such category projects.


NRI Investment Action

If we take a step back from domestic real estate consumption and look at demand coming from across our borders, the outlook looks very upbeat. Currently, non-resident Indians (NRIs) are extremely active in investing into Indian real estate. In fact, NRIs are among the top five investor communities in the country’s property sector. Apart from their natural affinity to India and the fact that NRIs see a higher intrinsic value on Indian real estate over property owned elsewhere, purchase decisions are also being spurred by the Indian rupee’s ongoing weakness against the US dollar.


To Summarise

It is at best a mixed bag of market readings this festive season – but is it a good time to buy? Definitely, considering that buyers have never been more spoiled for choice – and, for that matter, bargaining power. Also, we are seeing hard discounts as well as offers to waive stamp duty and registration charges, VAT, service tax and floor rise premium – all of which translate into an actual saving on the cost of the property. More than in many of the preceding years, this festive season is an ideal time to zero in on the best deal and make that dream home a reality.

Buying distressed properties through bank auctions

Words: Anuj Puri, Chairman & Country Head, JLL India


Distressed properties are those where the owner has taken a loan against property to acquire the asset and been unable to service his debt obligations. Due to the owner’s falling behind on the EMI payments for 4-5 consecutive cycles, the property has been seized by the bank as collateral, and will be sold to recover the interest and unpaid principal amount due to the bank. Such properties are sold through a bank auction and can be acquired at prices which are often well below market value.


Distressed properties are rare, since less than 5% of Indian borrowers default on their obligations for periods long enough to warrant a bank auction. There is also limited scope for getting these properties at throwaway prices, since the base price for the auction is determined by the loan amount outstanding – the further along the owner is in the loan term, the lower the base price. Property owners who have only a few cycles left to repay would prefer to restructure the loan rather than default on payment,


Banks will invariably release an advertisement in all leading local newspapers when they intend to auction off a property or set of properties, so this is the best source of information. A bank’s annual report will always mention a provision for bad debts, and the schedules/annexures would reflect if and when any distressed properties will be coming up for auction.

One may also reach out to a property consultant with expertise in the location and specifically inquire about distressed asset opportunities. The consultant can also represent investors in discussions with the original owner, or directly with the bank.


When a bank places the property for auction, one needs to read the bid document carefully to understand the status of unpaid dues. The bid document is like a prospectus of a IPO, where all the facts covering legal title and responsibility for pending dues are stated. Basis the bid document, one can form an opinion on the status of unpaid dues. Most of the time, the property is sold on a ‘as is where is’ basis and till  the date of auction, dues are cleared.


Risks and Opportunities  

  It is difficult to know of all the distressed assets available, which by themselves are a smaller portion of all properties in the market


In an auction, one has no way of knowing what the highest bid will be, so there is no guarantee of securing the property


The original owner may sue the bank, resulting in legal delays for the buyer

Properties offered at lower cost than existing market prices


Potential to secure a property in a premium location


Generally, there is less need for legal due diligence, as the bank will have inspected documents before giving a loan


No risk of non-delivery by the builder


Bank Auction: Of both possible processes, this is lengthier one, with the bank releasing an advertisement, setting a date for the auction, inviting bids, collating the offers and then finally deciding who to sell the property to. It can be even more cumbersome if the buyer himself wants a loan to purchase the property either through the same bank or a different bank. The process also takes longer because the bank has to conduct a thorough due diligence search on the incoming buyer and then draw up contracts to transfer the property along with a go-ahead from the owner, and a society NOC.


The bank will obtain an NOC from the society or condominium before conducting the auction. Many societies and their members have first right of refusal, or its members can match the highest bid to buy the property. At the time of obtaining NOC, the society will highlight any liabilities that the new owner will have to bear, and if if any neighbour has been impacted. The banks and its legal counsels will capture such aspects in the bid document, and the bidder can refer to them to assess the liability.


Directly from the actual owner: In this case, the owner and the new buyer would agree on the commercial terms, exchange a token deposit and then complete the bank process to continue with purchase before signing the agreement and accordingly taking possession. The entire bank process of releasing the property, granting the NOC and acquiring the society NOC, as well as repaying the bank loan, can take as long as 2–3 months. The price available here is generally higher than it would be in a bank auction, since the seller will try to recover as much of his initial investment as possible.


Precautions buyers must exercise to avoid risks: Buyers must read the bid document carefully to understand the status of unpaid dues or other liabilities, and should be fully aware of what they are getting in to while buying a distressed property, and aim for a win–win for the bank and the original owner so that there is a limited scope for a legal challenge. They must focus on understanding the history of the property under discussion and also get any historical papers for title due diligence.

Malls are reviving themselves in the e-commerce period

Words: Kulbhushan Talwar, General Manager, Shipra Mall


Mall culture in India and especially in Delhi & NCR has grown with an incredible pace. Just a few years back, people had to make a choice among shopping, movies or hanging out on a holiday but thanks to our malls, all these jobs can be performed at the same time, under the same roof and that too with an amazing experience. And it is basically the experience and not the intention that counts when it comes to malls.