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Is real estate a good investment in 2021?

December 4, 2020April 16, 2021 Buy Property

Is real estate a good mode of investment?

The best investment on Earth is……Earth
Louis Glickman

Louis quoted these words about 60-70 years ago. Are these words true for today as well? If you are a first-time investor then you would surely have plenty of queries about it.

Is it really profitable?
Am I going to make money from it?
Is it worth the effort?
If there are so many people doing it, should I start too?

What is Real Estate?

In the term ‘Real estate’, real means actual or genuine and estate refers to the Land. Real estate is the property, land, building, air rights above the land, and underground rights below the land. For the real estate domain, initial capital is a must. Unlike stocks and mutual funds, real estate investment is a hard tangible asset that comes with the minimum risk. Additionally, it is adulteration free and provides a zero fraud guarantee compared to gold investment.

Types of real estate

Residential real estate includes both new construction and resale homes. These are mostly single-family homes like townhouses duplexes etc

Commercial real estate includes shopping centers, malls, medical and educational buildings, hotels, and offices.

Industrial real estate includes manufacturing buildings and property as well as warehouses. These buildings can be used for research production storage and distribution of goods

Land typically refers to undeveloped property and vacant land.

Why Real Estate?

In the real estate domain, area, location, and type of property are the most important aspects. Initial capital is a must for this type of investment.

In India, rental returns and capital appreciation are the two benefits of purchasing a residential property.

Rental Yields

Let’s talk about rental yields first. Based on the percentage of rent associated with its price, any property can be classified into rental or a buying opportunity. The following table would make it more clear to the readers,

Residential Property	Commercial Property	Type
less than 3%	less than 5%	better to rent
3% to 4%	5% to 7%	can be rented or bought
more than 4%	more than 7%	can be bought

Rental Yield

Now, let’s also compare a Real Estate Investment with a Term (Fixed) Deposit.

Case1: Investment in Real estate (considering a rent of 25k per month)

Case2: Fixed deposit in Bank ( considering interest rate at 6%)

Comparing the above two cases, we can easily observe that the P/E ratio for saving in a bank is much lower which means we need to spend ₹16 to earn ₹1. So, the bank seems to be a much better option here.

Capital appreciation

But, there is a crucial fact that we have missed above.

Real estate is an appreciating asset (not liability) as it goes up in value; apart from the emotional factor of a personal home providing a sense of security and pride. To understand this much better, let us consider a general example if someone bought a commercial property in a city whose value for different years are:

Year	Price(₹)
2001	x
2003	3x
2007-2009	12x
2009-2014	14x
2014-2019	15x

So, this is very clear from this example that within 20 years, the future value of a property becomes 15 times of its initial value which can never be in the case of a fixed deposit in a bank.

For shorter durations, the price appreciation might not be significant but as you widen your horizon, you will notice that the returns will start becoming tremendous. And that is the real lucrativeness of this investment.

For eg, in the crisis year of 2008-2009, there was a huge increase in the price due to the great demand. Post that, we see modest increase due to the governement changes, demonetization, RERA, benami laws and laws on cash payments etc. Talking about today, the Covid crisis might again subdue the high appreciation.

But then, as any seasoned investor will tell, the best time to be bullish is not when the prices are skyrocketing, but when the prices are falling or stagnant. So today might be the perfect time to get into a real estate investment.

Advantages of Real Estate Investment

Tax Benefits
This is one of the main benefits of investing in real estate. Governments really like real estate investors and they treat them differently when it comes to tax paying. Real estate investors pay less tax than almost any other citizen real estate investors are called developers because they provide housing for the general population and increase its value over the course of time. Some of the tax deductibles received by real estate investors are Depreciation deduction from income, Mortgage interest tax deductions from income, Cost of repairs and maintenance, Cost of services, Travel cost associated with the property, and property tax deductions, etc.

Appreciation in value
The population is constantly increasing. People need places to do business. Most businesses are concentrated in hotspot cities. These three factors drive the demand for housing constantly plus increasing the value of property bought. Putting a fresh coat of paint, fixing the roof, interior designing, and inserting other advanced technologies could add to the appreciation of the value.

Predictable in nature
It’s hard to tell what the stock market will do from day to day real estate investment works much differently. Instead of any hustle and bustle, real estate investment is much more steady and predictable. Real estate investment covers much lower risk and is one of the safest investments you make as the value of the property rarely goes down. In India, that has happened never.

Passive income
It is literally making money from money with very little effort. As a world-famous investor, Warren Buffett once said, “If you don’t find a way to make money while you sleep, you will work until you die”, spending money on quality gives us many ways to earn profit from it. By simply renting it to quality and stable tenants we may clear our remaining EMIs with the rent and enjoy the positive cash flow.

Easily insurable
Insurance companies are active all over the world. Every piece of land can be and should be insured. Insurance companies are competing with each other to provide better rates with higher coverage. Rent from the tenant is going to cover that cost as well. Protection from property damage, reimbursement for lost items, protection from lawsuits are some of the coverages that come with the insurance.

Fairly easy access to home loans
Anywhere in this developed world, there is access to banks. Banks give credit easily if you are employed and have proof that you can pay the money back. Also, you’ve to pay a nominal amount as a down payment and have enough time as well. Read how to get a home loan from the bank of my choice

Refinancing
Let us understand this with the help of an example. Suppose you have to purchase a property worth ₹ 80 lacs. You pay ₹ 20 lacs as a down payment and take 60 lacs from the bank as a loan. You spend ₹ 5 lacs more to redesign and redecorate the property. Now, now you rent this to a quality tenant. Again, ask a different Bank to refinance the property by offering up to ₹ 1 crore 30 lacs by looking the property and quality of the tenant. Now, you pay ₹ 60 lacs to the previous Bank to clear up your loan, and still, ₹ 70 lacs are left in your hand. This is called Refinancing.
Alternatively, you can also get personal/business loans very easily with your property as a guarantee.

Diversification
Diversification is an extremely important process for investors. In order to reduce the overall risk from different markets, many investors spread their money in different types of investments. If someone already has investments in stocks and mutual funds, investing money in real estate will help you survive any storm that the stock market is hit by.

Easily transferable to kids
When someone wants to own a property that can also be useful for his/her next generations then real estate investment is an excellent choice. These properties can be easily transferred to future generations without any taxes.

Limitations of Real Estate investment

Like all the other investments, there are some risks involved and we should be prepared for that.

Entry Barriers
Real Estate is an expensive investment, and having that kind of capital ready is not easy. You will also want to put only a part of your savings into real estate, because of the next two factors.

Illiquidity
The real state isn’t known for being a liquid asset which means one can not sell it and convert it into cash quickly. Usually, the real estate sales process is very long. If you want to sell, you must be prepared to wait for months. As the asset value is very high, high demand in the market is required to sell it. Before investing in any kind of property, you should double check the area, location and future demand.

Management and maintenance of assets
Sometimes rental properties remain vacant for a long duration and become a headache for the investor. Maintaining and managing properties according to the demands of tenants becomes great responsibility. Getting quality tenants might be a big challenge as well.

Specialized Knowledge/Expert advice
You should have a clear idea of the worth of property, market cycle, and goal of purchase etc, before buying any property. It demands a real estate consultant who gives specialized investment and financial advice.

Conclusion

To summarise,

Real Estate is a very good investment, if you,

have surplus capital, and
want to diversify your portfolio, and
have a long term (5+ years) horizon

You plan to settle and want to buy a home for your own use.

The next question is when to invest in real estate and where. If you want to invest in real estate for personal use, future market trends analysis is of no use but if you want to earn profit from your investment you must have the proper market knowledge, future demands for the property, and management skills for renting the property.

The following blogs may be of help once you have decided on investing.

How to buy a home in 6 easy steps

Why should you buy your home through settlin

Also, with the growing population, India is emerging as an important business location. Its favorable demographics and strong economic growth make the country an attractive place for property investors. In recent years, the real estate sector in India has exhibited a trend towards greater organization and transparency, accompanied by various regulatory reforms.

If all the above factors are in your favor, a big thumbs up for real estate investment from our side. If you are looking for a property in Bangalore, feel free to search within the maximum number of options.

How to get a Home Loan from the Bank of my choice?

November 23, 2020November 23, 2020 Buy Property

We all dream of having our own home. A home provides security, control, belongingness, identity and privacy. To fulfill this dream, home loan is a great form of financial assistance.

Home loan is mainly taken for a new purchase. It can also be opted to renovate, repair, or construct a home. Home loan is a secured type of loan in which the property to be purchased/constructed serves as the collateral.

As per RBI guidelines, no lender (Banks or NBFCS) is allowed to offer 100% home financing. We are required to make a down payment of at least 10%-20% of the total property’s purchase price.

For example, if one wants a loan amount of ₹50 lakhs then he/she have to make a down payment of ₹5 lakhs to ₹10 lakhs.

Home Loan Eligibility Criteria

Any individual, who wants to avail a home loan, must fulfill the following conditions:

Particulars	Salaried Professionals	Self-employed Professionals
Age	18-65 years	18-65 years
Employment	Min 2 years of Experience	Min 5 years of Experience
CIBIL score	750 or above	750 or above

Loan Eligibility Table

Loan Eligibility amount (in lakhs)

$$\frac{Monthly\;fixed\;income\;\times\:50\%\;-\;Other\;EMIs}{Per\;Lakh\;EMI}$$

Per lakh EMI is a pre-decided EMI value by the bank. It mainly depends on the tenure and interest rate. Assuming an interest rate of 7% per annum and tenure of 30 years, it may be in the range of ₹ 650 - ₹ 700.

Let's say that a person has a monthly income of ₹50,000. He/she has an ongoing EMI of ₹10,000. Then he/she will be eligible to get a loan amount of ₹ 23 lakhs at a rate of 7% for a tenure of 20 years.

Factors affecting Home Loan eligibility criteria

Loan Tenure
It is the length of the loan contract. For home loans, it may vary from 10 years to 30 years. The longer the tenure, the higher is the interest that the bank earns from you.

Monthly income
If income is high, one can comfortably opt for a shorter tenure as capacity to repay will be higher. A person with low income should opt the longer tenure so that the EMI amount fits his/her pocket.

Interest Rate
The home loan interest rate can be fixed or floating throughout the tenure . Floating interest rate changes depending on the prevailing market conditions. Currently in India, no lender offers a fully fixed rate. We can say that 8.3% variable means 8.8% to 9% fixed rate of interest.

Other EMIs
Ongoing loan repayments may decrease the loan approval chances and loan amount.

Type of property
Ready to move properties will have a one time release of the loan amount. Under construction properties will have a stage wise release of loan amount.

Credit Score
TransUnion CIBIL is a organization which provides a 3 digit credit score to an individual that indicates his credit worthiness. This score is called CIBIL score. CIBIL score is mainly based on Repayment history, high credit utilization, multiple enquiries and credit mix. Better CIBIL score means cheaper loans and faster approval and vice-versa.

Qualification
Qualification like B.Tech, MBA, CA or MBBS ensure a faster and cheaper loan. Unstable job profiles like BPO/KPO may have a negative impact on the interest rate and approval process.

Family Background and expense pattern
If the candidate belongs to a financially unstable family, availing loan becomes a tough option. Lesser number of dependent family members benefit in faster loan approval at a cheaper interest rate.

Steps involved in throughout loan approval process:

STEP 1: Finalize Property

Ready to move in Property: Loan is disbursed in one shot. There is a benefit of immediate possession and zero rent liability. The cost of property is higher and the risk associated with buying is lower.

Under construction Property: Loan will be disbursed in stage wise manner. Buyer will have to wait for 3 to 5 years to move in. It becomes tough for buyer to manage both EMI and present rent together at the same time. These properties are cheaper and has higher associated risk.

STEP 2: Loan application

Enquiry:
- Comparing interest rates online
- Make an enquiry online or visit directly at the bank.
- One should negotiate for the optimum (best possible) interest rate

Processing Fee and other charges:
- Processing fee:- 0.25% - 1% of loan amount.
- Legal and technical due diligence charges:- Investigation of financial records is performed by lender to confirm the facts of the transaction under consideration. One should have knowledge about these charges as well.

Documents:

Documents	Salaried	Self Employed Professionals	Self employed un-professionals
Application form with photo duly signed	✔	✔	✔
Identity, residence and age proof	✔	✔	✔
Last 6 months bank statement	✔	✔	✔
Last 3 months salary slip	✔	✔	✔
Processing fee Cheque	✔	✔	✔
Form 16 / income tax return	✔	✔	✔
Proof of business existence	⤫	⤫	✔
Business profile	⤫	⤫	✔
Educational qualification certificate	⤫	✔	✔
Last three years income tax returns with computation of income	⤫	✔	✔
Last 3 year certified slash audited balance sheet and profit and loss account	⤫	✔	✔

STEP 3: Due diligence by bank

Financial Check:
- Bank statement is scrutinized for transaction related to business activity, savings, credit and investment
- Average bank balance
- Cheque returns and cheque bounces
- Other loans and liabilities
- Net income to calculate loan eligibility
- CIBIL score: Credit and repayment record. 750+ score is considered good.

Field investigation:
- Verification of residential address and contact details.
- Employer credentials like company address, organizational stability

Technical due diligence:
- Physical visit to property to assess condition, construction quality, encroachments etc.
- Property valuation by an approved valuer (third party).
- For under construction property,
- (a) stage of construction and satisfactory progress (b) quality of construction (c) approved layouts and building plans.

Legal due diligence:
- Title check-legal ownership and no encumbrances
- Property documents like title document (sale deed), possession certificate, agreement for sale
- For under construction properties, Land title check of builder, allotment letter, builder buyer agreement, if project already approved by bank (APF code)

STEP 4: Credit appraisal and loan sanction

After the due diligence, maximum EMI repayment capacity is decided
Maximum loan eligibility is calculated based on LTV ratio (80%-90%), credit score, income, age, experience, employer, nature of business etc.
Sanctioned loan amount is now communicated to the buyer.

STEP 5 : Offer letter and Acceptance

With the completion of all enquiries and verifications, the bank sends the offer letter with following details:

Sanctioned Loan amount
Rate of interest (fixed or variable)
Tenure of loan
Sanctioned Loan amount
Rate of interest (fixed or variable)
Tenure of loan
Mode of repayment-ECS (electronic clearance system) or post dated cheques.
Special Scheme (if any)
Validity of offer
Terms and conditions

Acceptance: This includes final mentioning of the loan amount. The buyer needs to sign the offer letter and send a copy back to the lender.

STEP 6 : Loan agreement

All borrowers need to sign the loan agreement.
PDCs: Post Dated Cheques equivalent to loan amount are collected by the bank as security.
For under construction property,
- tripartite agreement between Bank, borrower and builder is signed.
- Loan disbursement as per the construction stage is paid directly to the builder.
- Original documents are to be handed over to the bank.

STEP 7 : Sale deed and DD handover (for ready to move in property)

Lender ensures that the individual has paid down payment amount (eg. 20% of the total loan amount).
Sale deed is registered at Sub-Registrar's office.
Loan amount DD is handed over to the seller.
Bank collects original property documents and provides receipt for the same.

REFERENCES

Hope this article would be helpful for your future home purchase/construction plans. If you are looking for your next home in Bangalore to settle into, please look for the options at settlin.in. If you have any queries about the process, we will love to sort it out for you. Feel free to ask in the comments.

If you have already availed a home and would want to share your experience, do tell us about the same in the comments section.

Happy Settlin'!

How to buy a home in 6 easy steps

August 23, 2020September 12, 2020 Bangalore

Are you looking for a home to buy? You are at the right place then. Even if not, please read further and let us know if we were able to excite you enough to look for one :).

Note: We operate in very limited area of Bangalore for now

Sadly, in India, it takes 18 months on an average to buy a resale property from saerching options to getting the final sale deed in your hand. Settlin gets it done in 4 months. Let’s tell you how.

Any property search consists of the following steps.

1. Discovering Options

Did you know?
Any online platform does not give you more than 24% of the inventory options. These platforms are basically classifieds and make revenues out of these listings. So, a seller gets free listing for only 2 months, when it’s going to take 17+ months^# to sell his property. If you do not keep on searching regularly, you are bound to miss on properties. It is the reason why it takes more than a year^# to just search for the right home.
# Settlin Research

Don’t worry, we are here

We are here to save your time. Our listings never expire unless the property is sold, and yes, we are in regular touch with the sellers. So,

We have 3x more options than anywhere else
Every option is unique and curated at 82 parameters.

We promise you – no duplicacy. No fake information. No unavailable homes.

Just hop on to settlin.in, and start searching.

24 Filters

You can put as many filters as you want. Unlike other platforms, you won’t miss out any listing. Each and every property listed with us has complete data on all 82 parameters.

Multiple requirements

You can save multiple requirements. We understand that it takes time to refine your search and we want to make the journey easy.

Still if you are unable to find anything, just ping us. We have a huge offline database too, in which we will find you the home that matches your needs.

Liked a property? Request a visit. Unsure? Just shortlist it for a comparative look later.

2. Visting the properties

We know you won’t buy a home without visiting it. But we also know how valuable your time is. So we do not want you to make random visits. That’s why we provid all the quantifiable information before you decide to visit. If everything suits your needs, you can chose to visit.

Did you know?
Even the most honest of the brokers will not have the resources to help you find a resale property because the options are many. Hence they are forced to switch to primary where they can show multiple options with many varieties at a single location.
This is the reason agents have always been seller/builder centric and try to coerce you, a buyer, into visiting and then buying any home you visit.

Purely Informational Visits

Our visits are done by non-agent professionals.

Yes, you read it right. Professionals – people who are analysts, consultants, accountants, programmers, in various MNCs. They have a strict 4-point KRA and they will never step over the line to force “sell” you a property. Even though we know that lots of emotions are involved, and not just yours, while you buy a home, we do not play with them.

We are here as your informant. Our greeter partners are there just to equip you with all the information about the property and sort out your queries. Feel free to give them the feedback about the property and more information about your requirement. It will help us to provide you much relevant suggestions later.

3. Negotiating & Token Advance

If you are interested, you can request a negotiation and talk to the seller directly. If you want us to mediate, it’s our pleasure. We will help you get the best value out of this deal. We are here to empower you, because only then you will be happy, and we thrive on the happiness of our customers.

Your token will be kept in an escrow with full refund guarantee. We will be there with you throughout the transaction and never will you have to worry about the advance that you paid.

4. Verifying Legality

This is probably the hardest part for you, while you try to buy a home. Well, we made it the easiest. We will help arranging all the documents, and get a legal advice from accredited lawyers within a week. Apart from making it easy, we also make it completely free so that you never have to feel the pinch again.

Still, if you want to have your own lawyer, we will work with him as well. We know that it is hard to earn your trust and we are ready to suffer those hardships.

5. Getting a Loan

Yes, we will help you here too. We have tied up with all prominent banks and will make sure you get a loan through the bank of your choice, even if it is SBI.

6. Registering the Deed

Throughout the transaction, we will be there with you, till you get the property in your name, and even beyond (interiors, khatha transfer, electricity account transfer etc), if required.

We will help you sort out all the documentation, TDS payments, challans, DDs and NOCs, and cruise you through the government corridors and officials.

Serving with smile, for a smile

We will make the best of efforts to put a relaxed smile on your face while we are working for you. By God’s grace, we have been successful in our efforts so far.

We are not your regular agents or classifieds. We are your true end-to-end one-stop solution to buy your home. Surely, these terms have been overused and sound so cliche, but what we lack in words, we compensate in our service.

If we were able to entice you into looking for your next home through us, let us know at hello@settlin.in. Even if not, still let us know why at improve@settlin.in and we promise to work on our shortcomings asap.

P.S.

Sellers, please don’t be disheartened. While we do focus on the buyers, ultimately we are facilitating your sale. We are a marketplace and the sole aim is to provide an easy way to transact a property. Please visit settlin.in to find all the benefits.

Why should you buy your home through Settlin

March 19, 2020March 19, 2020 Bangalore

When you are planning to buy your home, you have a lot of options. But have you ever thought that all those options can be actually categorized in 2 simple groups:

Online portals, which are classifieds, and
Offline brokers, who are working for a few sellers

Is there a proper marketplace like Amazon wherein you can get lots of options, check out the products and do a COD? There is. Settlin. Let me get down to the reasons on why you should buy your home through Settlin.

4x more inventory than any other website

We guarantee you much better availability of inventory. Classifieds have a limited business model that forces them to have hardly 5-12% of the entire inventory universe at any given time. Our list-till-it-is-sold service ensures that you have the maximum options.

7x more search parameters

We provide you filters on more than 24 parameters.

Need duplex? Done.
Need Rental value more than 30k? Done.
Cauvery water is a must. Done.
OC should be there. Done.

Think of a parameter and you will find it.

Most websites boast of 4-10 filters, but they do not really deliver the results. Because despite the filters, the listings do not have most of the data and you will not get accurate results.

80+ parameters on each and every listing

We curate each and every property by a physical visit from our executives. This ensures that each listing has a floorplan, photographs, and data on more than 80 parameters. This, in tandem with our 24 filters, ensures that you get what you want.

Each listing is unique

Unlike classifieds which are marred by duplicate listings, our each and every listing is unique. We go to great lengths to remove duplicacy in our system.

Visit Requests and Scheduling

We support not just shortlisting, but one click visit request. A dedicated RM will be assigned to you and will manage your visits, suggest you further properties and provide you with any and every consultancy that you may require for buying your dream home.

Visits facilitated by non-broker professionals

Once the visits are scheduled, you will be escorted to the property by our non-broker partners, who are just working for us on the weekends. They work on a per visit fee model and have a complete professional non-partisan approach towards your visit. In simple terms, no one is going to force you towards making a decision.

You will be given all the information that you need. We know how important this decision is for you, and we are here to assist you to reach it, not decide it for you.

Negotiation & Pricing assistance

We are the best experts in the localities that we operate in, just by the virtue of the amount of data that we have and the number of transactions that we close per month.

We will help you with the current market trends and the ongoing prices. Instead of positioning as a seller agent or a buyer agent, we proudly position ourselves as mere match-makers trying to bring two interested parties on common grounds.

We believe on three fundamental tenets,

Negotiation must be based on facts and not emotions
If there is negotiation, it must be rooted in mutual respect and concern for the rights of others – John F. Kennedy
The true success of a negotiation, is a solution where both parties win

We will be there by your side till the end

We provide you with complete transactional assistance, from token amount safeguarding, to legal verification of the property, to loan procurement, to sale agreement, to tax deductions, to property registration.

All this at a jet-speed. More than half our customers close the entire transaction in 2 months, when the average in Bangalore is 6.

Whoa! All this sounds great. But what does it cost?

Do not worry. We have got your back, here too. Check out our pricing and I am sure you will be very happy.

What’s more, for you to buy your home through Settlin, there is a post-paid package, which means you pay us only when you get your papers. To add an icing, your first legal verification is completely on us.

So what are you waiting for, go settlin’.

Demonetization will not devalue properties in Bangalore

November 17, 2016May 28, 2020 Home Buyers

The general consensus is that the real estate prices will correct themselves owing to the death of black money. But will that actually happen in Bangalore?

How is black money involved in Indian real estate?

0–50% of the transactions are done in cash

The municipality guidance value/property rates are much lower than the actual sale price. So, if you are buying a property of 80 lakhs, you may be doing a registry for just 40 lakhs so that you can save on the stamp duties and registration charges. The remaining 40 lakhs is typically paid in cash, enabling consumer black economy.

For Bangalore, this figure is close to zero. Details below.

Investments in builder projects

Bulk or business black economy is boosted by huge back door investments in realty projects — similar to us buying groceries without receipt. The money invested is kept off the records and in return, apartments are written off in dirt cheap “on record” prices.
This kind of involvement has no direct relationship to the apartment prices though. The prices are mostly driven by the demand, which is bolstered by 1, i.e. the consumer black money.

De-monetization effect

Once the black economy is restricted, this 0–50% of the cash transactions (above and beyond the registration value) will definitely decrease. The new houses are quoting random figures, which may not be correct, but a decrease will be there, in general.

The key factor here is the guidance value. The price correction is all about the money that is being paid in cash during a sale transaction.

What will happen in Bangalore

Bangalore (the city area), will largely remain unaffected.

Factor 1

We have been involved in quite a few transactions in Bangalore, and we can tell you for a fact that the cash part in a sale transaction in main Bangalore, on an average is just 4%.

Let’s churn some data,

So you can see how close the guidance value is to the actual quote price of the sellers. In cases, it even is lesser than what people are willing to sell at.

Factor 2

Another factor to be taken into account is the cost price for the sellers. A seller who invested in a property post 2012 has hardly gained anything today. We have had clients selling for a profit of less than 1% year-on-year. So from the buyer’s perspective if someone hopes for the prices to fall by 10%, when the current quote of the seller is hardly 8–10% over his original investment, hopes will remain hopes!

Factor 3

Many banks provide loans on 80% of the Sale Deed Value (Registration) and not the actual Sale Value. Due to which, many buyers in the metros go for the full amount registration and hence avoid any cash transactions.

The Truth

If you want a property for investment purposes, do wait.
Look for newly developed/under-development areas in the outskirts where the guidance value is much lesser than the market value. Price corrections will happen, and 6 months down the line you will be able to afford a much better property than today.

But if you are looking to settle, do it today.
These prices will not decrease. They will follow their normal growth trajectory of 2–5%, and even more if the BBMP focuses on its whims. The 20–25% guidance price increase this year in April was focused on more taxation [source], and the same may happen again next year.

More truth

People are afraid. Sellers are ready to sell their properties at a price lower than they were willing to yesterday. But tomorrow, once people see that the prices are not decreasing, they will regain confidence. Today is the day. Carpe diem!

Addendum:

People have started analysing these trends more. See:
http://timesofindia.indiatimes.com/city/thane/Price-correction-in-realty-market-not-a-possibility/articleshow/55532361.cms

Should I sell my Bangalore property?

November 6, 2016May 28, 2020 Investing

The current market is disheartening. The prices have been stagnant in the last couple of years. What is better then — holding on to a property or selling it off?

Facts

The stagnancy is here to stay, at least for 2 more years.
Rental yields are 2–4%. They are consistent with the yields across the world, and won’t increase.
The fixed deposit interest rates are (and will be) around 7-7.5%.
Mutual Funds can give you a 10–20% interest rate on a 3 year term.

Options

Keeping the property for the next 3 years

You get consistent 2–4% return from the rentals. If the market takes the turn after a couple of years, may be you can get a 5–10% return in the third year from its sale. Not a bad option.

Selling the property

Let’s assume that you only get your principal (I know it sounds bad, but please, keep reading). Capital gains are negative. No taxation. Minimum returns on any financial instrument — 7.5%. Minus TDS, ~6%. Not bad again, right.

So, what now?

More often than not the wiser choice would be the latter. But soon we will launch a tool to help you with it. Till then, read further.

Our take

The World Bank paper shows that the housing markets behave more or less in the same fashion across geographies. The natural order of demand-supply economics suggests that the real estate prices have a direct correlation with the development dynamics. The question then is, as India is the fastest growing economy, why is this not translating in to price growth?

Growth has shifted its home

The answer is simple, the growth is not because of the growth in inner Bangalore. Entire Bangalore had a GDP growth rate of 6.8% in 2015, while India grew at a higher rate of 7.5%. We can safely assume that the inner city would have hardly witnessed a growth of mere 3–4%. It is the Tier II cities and outskirts of Metros that are bringing in the growth figures.

So have real-estate investment opportunities

The city real-estate is mostly driven by residential and commercial demand (thanks to the startups!). But it is highly unlikely that the main city will see a >5% growth in realty prices. When we say ‘main city’, we mean an area where 85% or more of the land has been constructed upon.

Hence, if you have any apartment (bought as an investment opportunity) in the heart of Bangalore, we would suggest to offload it, in any price that you are getting today. Investing it elsewhere (financial instruments or even real estate in outskirts, other cities) will give you much better return.

Luxury residential prices will rise

Our tip: While the real-estate’s main focus is on affordable housing, it is the luxury real estate that will prove to be a great investment, especially in the city pockets.

[Source: For the past 10 years or so, we have more or less following the growth trajectories of China, especially in real-estate. See for your self.]

As a proof, see the trends in Indira Nagar, Richmond Town etc. in the following image [source: NHB].

So, if you have some spare change, invest it in a villa in the heart of the city. Let it rest for 10 years, and then the magic should enthral you.

Conclusion

Sometimes, the best gain is to lose.
- George Herbert

Do not lose sleep over the low price that you are getting for your apartments in the city today. Offload it.
Normal financial instruments will give you more returns than your apartment in the heart of the city.
Real-estate investments in houses/villas in the city, or land/apartments in the outskirts, may yield good returns.

Note: If you have thought about selling your property but are having some trouble, read Problems-I-faced-in-selling-a-property-in-Bangalore.

Amazing sale on resale

November 6, 2016May 28, 2020 Buy Property

Resale properties are on high demand since the downfall of realty industry. Still they can be bought at a lot cheaper prices.

Housing is down, but Settling is up

Properties were a sought after investment commodity not more than a year ago. They still are in many Tier III pockets of the country, but people in the metros are shying away from them.

Delays by builders.
Everyone hopes Real Estate Act will do something about it.
Decreased returns on investment. A flat in a city like Bangalore hardly gives you a 5% year-on-year price growth trajectory. Rentals were always low earning (2–4%).
On the other hand, the home loan interest rates are still the same at around 10%.

While the investment sentiment has been shattered, the utility segment is still on the track. It will always be. Everyone can afford to take his/her salary a week later, but not his food. Need will always win over entertainment, obligation, or investment.

We may stop buying houses and apartments, but we will always buy a home.

Resale is cheaper than you thought

While people are doing that, they must be given the knowledge that they can spend a lot less than what the market is telling them. While builder may be selling a flat at 6000 INR / sqft, the some owner might be selling his at 4500 or less. Builders can not decrease the price because they have already put a lot into making it. Early stage investors though, put merely 3000–3500 and are still getting a good profit at 4500.

This is specially for people who think that the builders will give them good 2–3% discount, while brokers will cheat them for a 1%. Go to agents, they may help you find a much better deal.

Settlin optimises the price

Believe it or not. We are the best at what we do. And what we do is ensure that a property is sold at the right price. It is beneficial for both the seller and the buyer.

Say, a seller bought a property for 80 lakhs a couple of years ago, and now wants 1 crore for the same. That is what he puts on the classifieds. Lots of people visit it. But no one buys. Because there are cheaper properties in the market, and its actual worth is just 90 lakhs. Seller generally does not know about that (but, we, at Settlin, have the data and analysis to figure out the current worth).

Generally, it takes months before he can realise his folly and slash down his prices. Or better for him, prices increase in a year and he can sell his property now for 97 lakhs. Awesome, right?

No. Had he sold his house in 90 an year ago, he could easily get an 9+% interest on any of the investment products in the market (FD gave 8.5% in July, 2015). He could have easily invested the money in another property at a lesser rate (mind you, the property prices have increased a year later). So he is not benefiting anything from a delayed sale.

So it is in the best interest of a seller to bring their rates to the market value, and we ensure that they understand that. So, a buyer always gets the best price.

RESALE — The Reality of Realty

July 31, 2016May 28, 2020 Bangalore

I have subscribed to Google news on real estate. I get around 6 news items daily. But since the last 6 months, of the 1080 articles, I have not seen more than 3 articles on the secondary markets.

Secondary market — what and why?

Secondary real estate market comprises of everything that’s not primary. It is an anti-definition, but a lot easier to understand. Primary market is the market of all newly built apartments which are being sold by the developer himself.

So secondary market is everything else. Any house, plot, apartment, villa, sold by any individual owner constitutes a secondary or resale transaction.

That sounds big, doesn’t it? It is.

In Bangalore alone, 60% of all the transactions are resale. Now think of the Tier II, III, IV….. cities, where there are hardly any developers.

How is resale in real estate different

The simple truth is that land is a finite commodity. Builders can buy ( a resale transaction in itself! ), build and sell. But it will again be sold by the owner. In the end, during the lifetime of a property, while a primary transaction happens once, the secondary transaction may be done at least 3 times.

Additionally, real estate is the only commodity where resale prices are higher!

This means that if a flat is being sold at ₹ 100 by the builder, in its lifetime, it will further attract at least ₹ 1000 investment.

Still resale is neglected

Because 100 is lot more easier to track and invest than the 500.

Lack of organization
Builders have lobbies, individuals don’t.
No institutional investment
All resale properties are localized single entities.
Scattered data
The sales are huge, but non-uniform and scattered. Most of the state governments have e-records for land, but in different formats and not integrated.
Data is unavailable to public
An RTI will not get you the data from sub-registrar offices. They keep records as isolated transactions, and it will cost a fortune to organize them.

The outcome of neglect

A resale transaction becomes extremely difficult. While primaries are being done at a button click, the resale takes months to happen. A resale transaction is 100 times more effort and time than a primary one.

Restore the balance!

Let’s bring resale in the limelight.

Thank you media, builders, brokers and classifieds! You have deliberately left a space that has so much potential. We, at Settlin, will definitely leverage it.

Data and transaction, both are equally crucial for this market. We are handling them both in an innovative way. By June 2017, entire Bangalore will experience hassle-free resale transaction at their finger tips.

B Khata may be a great investment

July 16, 2016May 28, 2020 A Khata

The ABC of A and B Khatas

Khata = Account (hindi, kannada)

When mentioned in reference to a property, it means that the property is registered with the Municipality, for the purposes of property taxation.

The A and B

Well, normally there is just a single type of Khata. But Bangalore is an exception. When BBMP was created by merging various municipal councils, it had to take tax from many properties which were “not legal”. So it created a separate type of account, calling it the B Khata. Consequently, the non-B Khata became A Khata.

Thus, A Khata property means that the property has complete documentation with the BBMP (even if those documents are not with the owner). It is a Municipality verified legal property.

B Khata property on the other hand may not have all its legal documents registered with the BBMP. Whenever it does, it is eligible to be converted into an A Khata property. It’s the BBMP way of warning a naughty kid,

I know you have misbehaved, still I will let you attend the classes. But I can change my mind and put you in detention whenever I want *smirk*.

Land and Construction have different accounts

Accounting is done for the land and the construction differently. So, when you buy a DC converted (non-agricultural) land, it is readily eligible for an A Khata. But then the construction plan is to be submitted, got approved and the construction is to be done. This construction may deviate from the floor-plan. Unless, BBMP verifies that it matches the floor-plan, the construction, and hence the property, remains in B Khata.

BBMP has very few resources to verify each and every property. This leads to numerous B Khata properties, despite the High Court ruling to ban the issuance of such Khatas.

Most of the independent houses are B Khata

No denying that. It is Murphy’s Law. Planning can rarely be perfect. People tend to not get the re-approval of the actual construction plan. It takes time and effort.

Hence, apart from the investment reasons, Bangaloreans prefer the developer flats in order to get a fully legal property. But here is the caveat.

90% of the developer projects are B Khata too

What? The? Floor?

Well, its true. When they say they have an A Khata, they simply mean that the land is registered as an A Khata. But once they complete the buildings, they need to get the Completion and Occupancy Certificates. These certificates are only issued if the construction plan has been properly followed. Many builders build more than the stipulated number of floors, or penthouses that were non-existent in the plan. So they do not get the certificates and the apartments become B Khata apartments. It is a huge issue, in Bangalore at least.

Why should I go for B Khata property then?

A-Khata is definitely awesome. But, you can also go for B Khata, depending on the number of other documents of the property are available. Because then you will get it cheap and with some minor effort on your part, you can convert it into A Khata.

Update Apr 11, 2018: UPOR (Urban Property Ownership Records) soon to be launched in Bengaluru. Once implemented, the A and B Khathas will have no meaning, there will be only one type of tax account, similar to most other states.

Single card to determine property ownership in city
After a delay of almost six years, the Revenue Department has started creating and maintaining Urban Property Ownership…www.deccanherald.com

We are here to help

At Settlin, we help you (both sellers and buyers) with all the documentation hassles, and advise you to your heart’s content in such matters. Bangalore is our home, and we would love to make it yours too! Do Settl In.

Pocket dictionary for Bangalore Real Estate

July 16, 2016May 28, 2020 Documentation

Settlin has ensured that I know the basics about the Bangalore real estate. I would love to share my learning with the world.

Property Documents

Following are the most crucial documents that you need to have for your property (or a property that you want to buy).

Title deed

A document entitling the property to an owner. The most important document for any property. Without this, property is government’s.

Completion certificate

A document confirming that a building, house or project has been completed, in compliance with the existing regulations and submitted floor-plan. It precedes an occupancy certificate.

Occupancy certificate (alias Possession Certificate)

A document confirming that a property is ready to be occupied. Applicable for certain residential complexes, viz. buildings

consisting of more than one basement floors
consisting of more than five floors
has a development plan approved by BDA (hence, all builder flats)

Occupancy certificate is now a mandatory requirement for securing A Khata for apartments.

Encumbrance Certificate (alias No Encumbrance Certificate)

An NOC document ensuring that there are no encumbrances, i.e., outstanding loans/charges on the property.

A Khata — B Khata

Type of accounts (registrations) issued by BBMP for the purpose of property tax. It simply means that if you want to pay the tax for a property, you can quote the account and do so.

The most common cause for a property being a B Khata is that the construction has not been according to the sanctioned plan, or BBMP has not yet verified it.

Share certificate

Only applicable in case of a co-operative society, when the society issues share certificates to owners of the flats. An outgoing member transfers his shares to buyer signifying transfer of ownership of the flat.

Miscellaneous

Akrama-Sakrama

A BBMP scheme to ensure easy conversion of B Khata properties to A Khata, by simply paying a nominal penalty for the construction and sanctioned plan differences. The scheme officially ended in March 2016.

The conversion is still possible if all the required documents are there. This scheme was more like a VDS for income tax. To regularise properties with a penalty.

The scheme has never been approved by the courts as a legal option. But considering the demand, there is a high chance that such a scheme will soon find its place in the BBMP offices again.

Ref: Hindu