Wednesday, July 30, 2008

Will Real Estate go up or down? A contrarian, positive outlook on the market conditions...

We've been hearing mainly bad news about how Real Estate prices are going to crash and the going will get tougher. Reproduced below is a post from BDASites, an MSN forum. Is this is a signal of a shift in India's economic fortunes? Is there some light at the end of the tunnel?

These macro factors (which have extremely negative in the previous quarters) have seen positive shifts (coincidentally in the last fortnight, give or take a few days). Whether they will have a bearing or not on market dynamics, depends if they'll sustain and needs to be seen over time.

1. The Nuclear pay-off

The 123 deal isn't just about global security and energy security for India. The word in economic circles is that it is also about financial security for major corporations in the nuclear tech/supplies space (and, in turn for the beleaguered US economy). Markets expect FIIs to react positively to this development going forward.

2. The political pay-off

UPA stays. Left is out, SP is in. The exit of Left leaves UPA with room to initiate long deferred finance/insurance/pension reforms and FDI in retail. Markets clearly see this a positive and it explains the rally post-vote (the biggest in some time).

3. Oil slide

From the peak of $147 per barrel, oil has shed $24 to tumble below $123 a barrel. That'll ease fuel led inflationary pressures. Experts suggest we may be nearing the end of the oil bubble. Oil at $100 a barrel isn't too far-fetched. Even if it stabilizes at these price levels, we could see inflation/interest rates stabilize.

4. Food looks good

We have had record production of food grains - 230 million tons. That'll ease food led inflation and consequently EMIs won't further eat into household budgets.

5. Good IT earnings

Contrary to expectations against the backdrop of a likely US recession, results of IT biggies have been fairly good (though guidance going forward is conservative).

The inclusion to this list (as posted in message 23):

6. House OKs US housing market rescue

After months of deliberation, an unprecedented rescue package has been voted in that could have a positive bearing on the battered housing market 

Sunday, July 27, 2008

The Ahmedabad Blasts

70 minutes.
17 blasts.
30 dead.
150 injured.
1 billion shocked, disgusted, and angry.
A bunch of crackpots that call themselves 'Indian Mujahideen' and think that placing bombs in public places will make Hindus and Muslims shed their prejudices.

And the 542 - 'Those 542' - continue to play merry-go-round.

The press, the airmchair critics, the intellectual masturbators and the socialites petulantly weep on TV: "When will this country get the leaders it deserves?"

I think it already has.

Buying land in Bangalore - what to keep in mind

What I've learned about buying land in Bangalore:

DC converted and Gram Panchayat Approved are two different things. And BDA NOC is again totally different.

To buy any land, the following steps are necessary:
1. Conversion of land from 'Agricultural' (farmland) status to 'residential'. This has to be done by the farmer himself before you
conclude your deal and get the property registered. Non-farmers are not allowed to purchase agricultural land in Karnataka.
Definition of farmer: (1) You or your family need to possess agricultural land in India already, and must have been continuously owning agricultural land since 1974. (2) Your income from non-agricultural sources for the past 5 years should not have exceeded Rs. 2 lakhs per annum.

2. The plan of the layout on such land needs to be approved by the relevant town planning authority. There are 6-7 such authorities, and you have
to find out which authority has jurisdiction over the survey number of the property that you want to buy. The authorities are Corporation/BCC
(areas in interior Bangalore), BDA (areas inside city limits, except corporation areas), BMRDA (areas upto 40-50 km around the city, except
BDA areas), BIAPPA (areas near airport), Lake Development Authority or LDA (areas close to designated lakes), and respective village
Panchayats (for areas far away from the city - basically those areas where BMRDA jurisdiction has not yet become applicable)
(There is also an authority called DTCP - Department of Town and Country Planning - but I'm not clear what is the jurisdiction of this department.)

3. 'No Objection Certificate' or 'NOC' from BDA. 
BDA gives two types of NOC. The first is, that so far they have not tried to acquire the land with that particular survey number. The second is,
that they do not have any objection to the coming up of a residential layout on that land in future. Both these NOCs are important and

4. A few other approvals - I will keep updating this post as I get more information on this.

In brief: DC Converted means the conversion of land from 'agricultural' (i.e. land that can only be used for farming according to the government, and hence assessed for tax accordingly) to 'residential' (a different status, which means that tax assessment will be done differently for this land, and it is no longer used to derive 'revenue' for the state from agriculture. The government authorises the owner to stop cultivating this land and build something on it if he wants). DC stands for District Commissioner, the officer who has the authority to approve such conversions.
DC converted sites are usually eligible for bank loans. Moreover, nowadays DC conversion requires that the layout plan has been approved by a town planning authority, like BDA, BMRDA, BIAPPA etc to ensure that proper space has been allocated for roads, parks and other amenities as per government rules. Without their approval, DC does not give the conversion order. 

Also, nowadays the DC conversion has been put on hold indefinitely due to an order of the last government.

'Gram Panchayath Approved' means that the layout that has been formed on this land, has been approved by the local 'Gram Panchayat' in whose
jurisdiction the land lies.

As mentioned above, DC conversion requires that the layout / building plan (in case of building) has been approved by a proper town planning authority like BMRDA, BDA or BIAPPA. Whether Gram Panchayat has the authority to approve the layout plan, has to be checked with your lawyer. However once BBMP, BMRDA or BIAPPA has jurisdiction over the specific layout, as per my knowledge Gram Panchayat is no longer the competent authority to approve the layout.

One type of BDA NOC is given by the BDA as of a particular date, and states that the BDA has not issued land acquisition notice for that land as of that date. i.e. as of that date, the BDA has not tried to acquire that land. This is just a safety precaution to prevent the seller from
defrauding the buyer by selling him a land at a high price, which the BDA has already issued acquisition notice for at a low price. It does
not guarantee, that the BDA will not acquire that land in the future. The other type of BDA NOC is that they do not object to a residential
layout coming up in that land. This is a safety precaution and makes your case stronger in case of future move by BDA to acquire your land. Any time you buy a non-BDA site, you are running the risk of acquisition by the BDA in future, and there is basically no guarantee. But usually, if
you build a house on that site and start living there, the BDA may on compassionate grounds decide not to acquire your site as and when it
plans a layout in your area. 

Trust this helps atleast some of us 'look before we leap' into the Realty whirlpool.

(Caveat: I am not a legal expert - what is given above is my understanding based on months of searching for a good site in Bangalore. If there are other experts and I have gotten something wrong here, please feel free to correct. I would also keep updating / correcting this page as and when I get more).