PropertyWala.com™: Financing articles.

Property Investment Check List.

Fri, 25 Apr 2008 12:36:00 GMT

Property Investment Check List.

Money invested in real estate, for income and capital growth, grants stable and expected returns, parallel to bonds. Like other investment option, this too, has certain threats attached to it. Following are the elementary factors affecting the value of a particular property.
Location: The location of a building is a important factor in determining its market price. A property investment is likely to be held for some years and the attractiveness of a given location may change over the holding period. As such, part of a city may be undergoing regeneration, in this case the perception of the location is likely to improve. In contrast, a shopping center development may affect the appeal of an existing residential property.
Physical characteristics: The type and utility of the building will affect its value. Utility refers to the benefits an occupier gets from using the building. The risk factor is depreciation.
Tenant credit risk: The value of a building is a function of the rental income that you can expect to receive from owning it. If the tenant defaults, the owner loses the rental income. However, it is not just the risk of outright default that matters.
Lease length : The length of lease is an important consideration. If a building is let to a good tenant for a long period then the rental income is assured. This is one of the attractive features of property investment. It is important to consider the length of lease.
Liquidity: All property investment is relatively illiquid to most bonds and equities. Property is slow to transact in normal market conditions. In poor market conditions, it will take even longer to find a buyer. There is a high cost of error involved.
Tax implications: Apart from income tax, which is to be paid on rental income and capital gains, there are two more levies to be borne by the investor — property tax and stamp duty. These levies vary from state to state and can effect on investment returns.
High cost of investment: Real estate values are high with respect to other forms of investment. This puts it out of reach of the common people.
Risk of single property : Purchasing a single property exposes the investor to definite risks related with the property and does not provide any profit of diversification.
Official issues: While stock exchanges promise to a certain extent, the legitimacy of a trade in equities or bonds and thus protect against bad delivery or fake and forged shares, no parallel safety net is offered here.

Predicted Features Of The Budget.

Tue, 19 Feb 2008 09:24:00 GMT

Predicted Features Of The Budget.

The key feature of this budget is that this is the last budget to be presented by the present government before it faces the general elections next year. For that reason, it will be targeted at getting votes. This means that it could well be a populist budget with pay-off for voters in terms of lesser taxes. Another possibility is that tax rates are left unchanged for corporate, but there are a host of announcements on increased outlays to social sectors like education and health.
The major challenges that this budget also needs to address certain areas:-
(a) Inflation.
(b) The reduced speed in the GDP, mainly in the manufacturing sector.
(c) A much tougher global environment and its impact on growth through the external sector in the months ahead
(d) A rising subsidy burden, which does not fully reflect in the fiscal deficit.
As a result, on balance, the entire broking house’s expects that the key features of this budget will be as given below:
1. Reduction in direct tax rates for individuals but not for corporate Some reduction or elimination of dividend distribution tax.
2. Rationalization of excise duties, including the auto sector.
3. Rationalization of exemptions for corporate.
4. Lower customs duties for commodities to contain inflation and rationalization of inconsistencies.
5. Enhanced credit availability for the agriculture sector.
6. A sharp increase in the outlays for social sectors like health and education

So it can be expected that the sectors to be positively impacted by the budget are auto, capital goods, cement, construction, FMCG, logistics, oil and gas, metals, fertilizers and pharmaceuticals. However, it expect largely neutral for the sectors like media, telecom, information technology and the real estate.

NRIs Ride High On Stocks and Real Estate.

Fri, 15 Feb 2008 05:43:00 GMT

NRIs Ride High On Stocks and Real Estate.

Indian Stock Market and Real Estate sector is attracting NRI attention in a huge way. Non-resident Indians are more and more tending towards investment in these two sectors. This is primarily due to the fact that India is growing at a faster pace than other countries and the equity market has outperformed those of developed nations.

NRIs know the potential of investments in India very well but find it difficult to execute a comprehensive plan. Most green card holders have not capitalized on the Indian growth story because of their poor evaluation of the market. NRIs rarely find time from their hectic professional life, they lack proper advice or find handling and monitoring investment transactions inconvenient, says Anand KS of Nile Financial Planners.

Another point of concern felt by NRIs is the transparency level on charges in various trading sites and other investment options. Remember to ask for details regarding time horizon of investment, risk and return before starting off and opening accounts.

To invest on a repatriable basis, the person must have an NRI or FCNR bank account in India. In this case, the net income or capital gains after tax is eligible for repatriation subject to regulatory guidelines. In the case of investment on a non-repatriation basis, only the net income the dividend arising out of investment is eligible for repatriation.

Indian construction sector outlook positive for 2007-08 – Fitch.

Fri, 15 Feb 2008 05:41:00 GMT

Indian construction sector outlook positive for 2007-08 – Fitch.

MUMBAI - Fitch Ratings said it sees the outlook for the Indian construction sector in 2007-08 as positive, boosted by increased investment in infrastructure projects and real estate.
The ratings agency noted that while Indian construction companies have witnessed sharp growth in their order books and revenue with the increase in investment projected over the next five years, the majority of the profit in terms of revenue and earnings will start accumulating from fiscal year 2009.
Fitch also said it imagines that the industry to exhibit negative cash flow from operations due to increased working capital requirements. Substantial investments in real estate will also put pressure on the industry credit profile, it added.
The ratings agency warned that credit profiles are likely to deteriorate, with increased debt required during the mobilisation phase to complete the massive projects but will get better substantially over the long-term once these projects achieve the stable revenue phase.

RBI's judgment has spooked real estate cos

Sat, 02 Feb 2008 13:29:00 GMT

RBI's judgment has spooked real estate cos

MUMBAI: The Reserve Bank of India’s (RBI) assessment not to slash interest rates has spooked real estate business facing the brunt of a housing business slowdown caused by the high cost of mortgage financing. RBI, on Tuesday, decided to keep interest rates unchanged in its third-quarter monetary policy review. Real estate companies were expecting a cut, especially in the background of slowing home sales in most important cities in the past few months.

”High interest rates are a serious concern as far as property market is concerned. There was some hope that the rates would be lowered today. However, the impact will depend upon the section and the demand-supply scenario there. The effect on Mumbai where the supply is limited will be minor,” Godrej Properties managing director Milind Korde said.

Buyer fighting and a sequence of interest rates hikes previous year put the brakes on home sales last year. Middle-class family put off purchases after considering prices break all records in most important metros. ET’s report, on Tuesday, cited RBI data to illustrate that home loan sales fell 39% in April-November 2007 while loans to developers eased by a fourth to Rs 12,563 cr.

Real estate shares fell after the policy. Lower rates help the real estate industry by spurring consumers into buying houses. Realty stocks like DLF, Puravankara Projects, Indiabulls Real Estate fell slightly at about 1%. The hardest hit were companies such as Unitech, HDIL and Omaxe whose shares fell down 5.59%, 5.47% and 2.12% respectively. Sobha Developers on the other side, closed at Rs 772.75, up 2.02% from the previous close.

“We were expecting at least a 25 basis point rate cut on Tuesday so that the feeling of possible home buyers turn positive, which in turn will help the developers to sell more residential units. The home sales are currently down now, but it doesn’t indicate that the developers will slash the prices,” said Director, Runwal group, Sandeep Runwal.

Jones Lang Lasalle Meghraj, chairman & country head, Anuj Puri said as the rate remain sluggish, high levels in interest rates will carry on and the impact will be felt mostly in the residential sector. This may also compel developers in some regions to sell their products at lower rates.

“Because of the subprime disaster in the US, US Fed (the Federal Open Market Committee) reduced the interest rates by 75 basis points. This naturally has created a wide gap between US and Indian interest rates, leading to arbitrage chances in the economy. US investors not only get the currency approval returns, but also higher interest income,” he said.