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Team iPropUnited

Team iPropUnited
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Tax Troubles: Mangaluru City Corporation Fights Back as Property Owners Face Soaring Burden

MANGALURU: In response to numerous complaints from citizens and corporators regarding the significant increase in property tax for the fiscal year 2023-24, the Mangaluru City Corporation (MCC) has decided to address the issue by writing a letter to the government.

The property tax calculation was modified by the state government through an amendment to the Karnataka Municipal Corporation Act in 2021. According to the amendment, property tax is now determined based on the prevailing guidance value of the property, including vacant sites. This change places a substantial burden on property owners, particularly those who possess large tracts of vacant land within the city.

During the council meeting held on Friday, the MCC discussed the implementation of the amended act, specifically focusing on the collection of the SAS property tax.

Under the amendment, property tax is calculated as 25% of the guidance value of the property. Vacant land measuring up to 1,000 square feet, which is attached to a building, is exempt from taxation. However, vacant land exceeding 1,000 square feet will be subject to property tax ranging from 0.2% to 0.5% of the prevailing guidance value.

Opposition leader Naveen D’Souza, along with Congress corporators Praveenchandra Alva and A C Vinayraj, raised objections to the amendment, citing the financial burden imposed on property owners.

Alva expressed concern that even individuals with vacant plots would be required to pay a substantial amount of tax. He mentioned families who owned approximately 50 cents of vacant land in the city’s interior areas, emphasizing that the property tax on their vacant plots would be exorbitant. He further added that middle-class families might be compelled to sell their property to meet the tax obligations related to vacant plots.

Vinayraj pointed out that the tax on vacant plots increases by one and a half times when 25% of the guidance value is considered for property tax calculation.

Highlighting the significant increase in property tax on vacant plots following the revision, MCC council’s chief whip, Premanand Shetty, stressed the importance of bringing this matter to the government’s attention.

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Illegal Farmhouses Discovered in Aravali Plantation Area: Forest Department Takes Action

GURUGRAM: In a significant development, the forest department has uncovered the presence of illegal farmhouses spanning approximately 50 acres within the protected Aravali plantation area across seven villages in Gurgaon.

According to officials, the department has issued 50 notices, granting the violators until the end of this month to dismantle the structures. Failure to comply by May 31 will result in the department carrying out a demolition drive next month. Following a survey, it was discovered that unauthorized construction had taken place in Manesar, Shikohpur, Sahrawan, Naurangpur, Sakatpur, Ghata, and Behrampur.

Range officer Karmaveer Malik (Gurgaon) stated, “Illegitimate houses and farmhouses have been identified on land designated for the Aravali plantation project. Showcase notices have been issued, mandating the removal of these illegal structures. Failure to comply with this order will result in the demolition of these houses.”

Areas encompassed by the Aravali Plantation project are classified under the Forest Conservation Act of 1980, which strictly prohibits tree felling and non-forest construction.

This survey by the forest department was initiated following a report published by TOI on May 13, revealing that 35 acres of Aravali forest area, also part of the Aravali Plantation project, had been leveled to construct farmhouses near the Golf Course Road Extension in Behrampur village. The presence of construction workers within the fenced-off compounds and satellite imagery depicting the area’s significant loss of greenery over the past five years further confirmed the findings.

Experts expressed concern over the blatant disregard for laws protecting the Aravalis. Forest analyst Chetan Agarwal remarked, “The scale of construction in the Aravalis is alarming. We hope that the forest department can promptly remove these encroachments, allowing for a plantation drive during the upcoming monsoon.”

Ecologist and wildlife expert Sunil Harsana highlighted that the forest area in this region forms an essential wildlife corridor. “Engaging in non-forest activities not only impacts forest coverage but also disrupts wildlife distribution patterns. Consequently, the region is prone to increase human-animal conflicts,” he warned.

The Aravali plantation project, initiated in the 1990s to restore approximately 33,000 hectares across six districts of Haryana, was notified under the Forest Conservation Act (FCA) following a Supreme Court ruling in 2004. With merely 3.6% of its total land classified as forests, Haryana has one of the lowest forest cover percentages among all states in India.

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Indian IT Services Sector Embraces GCCs as Real Estate Demand Slows Down

The IT services sector in India is experiencing a slowdown in real estate absorption due to several factors, including weakening business conditions, the adoption of hybrid work models, and the reallocation of talent to tier-2 satellite offices. However, this decline in demand is being offset by the growth of global capability centers (GCCs) operated by multinational corporations (MNCs) and product firms. GCCs are offshore units that provide support services such as IT, finance, and analytics to their parent organizations.

According to data from property research firm Anarock, the share of IT-ITeS (IT-enabled services) firms in total office space across major Indian cities decreased from 42% in 2019 to about 24% in the first quarter of 2023. At the same time, the share of GCCs has been on the rise. Anarock chairman Anuj Puri stated that currently, GCCs occupy over 200 million square feet of commercial space in India, and around 500 new MNCs are expected to establish capability centers in the country.

Among IT services firms, Cognizant has been particularly proactive in reducing real estate costs. Cognizant’s CEO, Ravi Kumar, announced plans to reduce 80,000 seats in major cities and repurpose a portion of the space for tier-2 cities. The company anticipates that not all employees will return to physical work, hence the need for a real estate optimization strategy. Real estate major DLF revealed that Cognizant has given up 30-35% of its space in Chennai over the past few years.

Analysts emphasize that cost savings in real estate play a significant role for IT firms, especially in the current challenging business environment. Real estate typically accounts for 15-20% of costs at major IT companies, and reducing these expenses can have a positive impact on their profit margins. Lower or flat real estate costs are often expected by clients to make the business case more attractive.

The changing dynamics in the IT sector are also reflected in the office space demand in India. Ritesh Sachdev, SVP & Head of Commercial Leasing and Asset Management at Tata Realty and Infrastructure, noted that IT firms no longer require the 30-40% additional real estate they used to keep for bench strength. Ritwik Bhattacharjee, Chief Investment Officer of Embassy REIT, stated that the demand for office space in India is now primarily driven by global captives.

Anarock’s Anuj Puri also highlighted a reduced dependence on traditional IT players and the emergence of opportunities in manufacturing and industrial segments. The sentiment of diversifying beyond China, often referred to as “China plus,” has encouraged companies to explore India as a manufacturing and investment destination. As a result, the share of real estate absorption by these two sectors has more than doubled, according to Puri.

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BJP Government in Madhya Pradesh Announces Regularization of Unauthorized Colonies Ahead of Assembly Elections

BHOPAL: In a significant move preceding the Assembly elections, the BJP government in Madhya Pradesh declared on Tuesday that all unauthorized colonies established until December 31, 2022, would be regularized. Chief Minister Shivraj Singh Chouhan made this announcement during a program at his official residence in Bhopal.

With the state’s Assembly elections scheduled by the end of this year, the decision carries significant political implications.

Under the regularization plan, residents of these colonies will be exempt from paying any development charges, and their houses will be regularized in their existing condition, stated Chouhan.

Chouhan affirmed, “All unauthorized colonies that emerged before December 31, 2022, will be regularized. Adequate funding will be allocated for the development of these colonies, particularly for the creation of essential infrastructure such as electricity and water supply.”

However, the chief minister cautioned officials that they would be held accountable for any illegal colonies established after December 31. Following regularization, the residents of these colonies will have access to bank loans, and allocations can be made for them from the MP/MLA Local Area Development Funds, he added.

Chouhan urged people to establish resident welfare associations for the comprehensive development of their colonies, emphasizing the importance of cleanliness. Bhupendra Singh, the Minister of Urban Administration and Development, revealed that approximately 6,077 colonies existing prior to December 31, 2016, were already undergoing regularization.

He requested the chief minister extend the cut-off date to December 31, 2022, allowing 2,500 additional colonies to benefit from the regularization process. The Principal Secretary of the Urban Administration Department, Neeraj Mandloi, stated that building permissions for 1,122 such colonies would be issued starting Tuesday, with 500 letters currently being distributed to beneficiaries across the state.

The regularization process is set to conclude by June 30, according to Mandloi. In addition, the chief minister instructed that food be provided at a subsidized rate of Rs 5 per person under the Deendayal Rasoi Yojana to the underprivileged individuals migrating to cities.

Notable attendees at the announcement included Tulsiram Silawat, the Minister of Water Resources, Vishvas Sarang, the Minister of Medical Education, and Malti Rai, the Mayor of Bhopal.

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Gautam Budh Nagar District to Auction Wave Mega City Properties for Unpaid Dues of Rs 136 Crore

The Gautam Budh Nagar district administration has taken the decision to auction the attached flats and shops in the Wave Mega City project on May 29, following non-payment of dues amounting to Rs 136 crore, according to officials familiar with the matter, as reported by Moneycontrol.

These properties were seized after the Uttar Pradesh Real Estate Regulatory Authority (UPRERA) issued recovery certificates (RCs) against the developer. Despite receiving several notices, the developer has failed to clear the outstanding dues.

An anonymous official revealed, “A total of 38 shops located in Wave Silver Tower, in Noida Sector 18, are scheduled to be auctioned on May 29. This action is part of the district administration’s strong measures against defaulting builders.”

The shops to be auctioned vary in size from 165 square feet to 1,240 square feet, with reserve prices ranging between Rs 50 lakh and Rs 2.6 crore, depending on factors such as size and other considerations, stated officials.

At the time of publishing, no response was received from the company after emails were sent seeking comment. The article will be updated once a response is received.

Following the auction, the successful bidder for each shop will be required to immediately pay 25 percent of the final amount. The funds generated from the auction will be used to settle the recovery certificates issued by UPRERA against the defaulter.

This auction is part of a larger initiative. In case other builders with pending dues fail to clear their debts, the attached properties of those developers, who also have RCs against them, will be auctioned off.

The UPRERA issued these recovery certificates after receiving pleas from homebuyers and investors seeking refunds from developers who failed to deliver housing projects.

Since the regulatory body issued RCs against nearly 100 builders with a combined debt of Rs 502 crore, the district administration has taken recovery action against defaulting developers with pending dues. The action began on April 7, with the district administration forming 40 teams consisting of clerks and tehsildars to identify defaulter builders’ properties and initiate measures, including public shaming, sealing of offices, and seizing their properties.

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Bollywood Star Salman Khan to Build a Luxurious 19-Storey Hotel in Mumbai

Salman Khan, one of Bollywood’s most prominent actors, has unveiled plans to construct an impressive 19-storey hotel at a prestigious location in Mumbai, according to exclusive information obtained by the Times of India.

The Brihanmumbai Municipal Corporation (BMC) has granted approval for the construction of the hotel on a picturesque sea-facing plot in Carter Road, owned by none other than Salma Khan, the actor’s mother.

The Khan family, renowned for their significant investments in the real estate sector, joins the league of Bollywood families who have capitalized on the thriving property market. In a 2011 interview with TOI, Salim Khan, Salman’s father, disclosed his penchant for acquiring properties on a regular basis, catering to the needs of his family, including his superstar son.

Initially intended for residential redevelopment, the plot formerly accommodated the Starlet Cooperative Housing Society. However, the Khan family has opted for a change in plans, as revealed by Sapre & Associates, the architectural firm representing the Khans. They have submitted revised blueprints for a “commercial centrally air-conditioned building with a height of 69.90 meters.”

According to the proposed plans, the magnificent 19-storey structure will feature a café and a restaurant on the first and second floors, respectively. The third floor will be dedicated to a state-of-the-art gymnasium and an exquisite swimming pool. The fourth floor will serve as a service floor, while the fifth and sixth floors will house a sophisticated convention center. From the seventh to the nineteenth floors, the building will serve as a luxurious hotel, as reported by the Times of India.

In April of this year, reports surfaced that Salman Khan had leased a flat in the sought-after neighborhood of Bandra West, Mumbai, at a monthly rent of approximately Rs 1.5 lakh. In addition to his rented property, the actor owns a splendid residence at Galaxy Apartments, where he currently resides, along with a splendid farmhouse in Pavel and a delightful beach house in Gorai.

Stay tuned for updates as Salman Khan ventures into the world of hospitality with the construction of his opulent 19-storey hotel, promising an unrivaled experience of luxury and comfort in Mumbai’s thriving metropolis.

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Brookfield Asset Management Announces $1.4 Billion Deal, Selling Indian Real Estate to Brookfield India REIT and GIC

Brookfield Asset Management has finalized a deal to sell 6.5 million square feet of commercial real estate in India to Brookfield India REIT, its listed real estate investment trust, and Singapore’s GIC, for a total enterprise value of $1.4 billion. The properties in question are located in Gurugram’s Candour TechSpace and Powai’s Hiranandani Gardens, according to a regulatory filing.

Although Brookfield REIT had the right of first offer for these assets, the ownership structure has been modified to enable the current transaction, which involves a partnership between the REIT and GIC. Kishore Gotety, co-head of real estate, Asia ex-China, at GIC, expressed optimism about the India office sector’s growth, citing the established IT industry, increased global corporate interest in digital adoption, and the availability of skilled talent. He emphasized that these acquisitions reflect GIC’s confidence in the Indian market and will contribute to the diversification of its global office portfolio.

This deal will significantly increase the gross asset value and net asset value of Brookfield India Real Estate Trust to US$3.5 billion and US$2 billion, respectively. The acquisition will greatly expand the Brookfield India REIT portfolio, increasing the total leasable space by 35% and the operating area by 44%, as stated in the filing.

Ankur Gupta, managing partner and head of real estate in the APAC region at Brookfield, expressed enthusiasm about the long-term strategy of growing and diversifying the India REIT portfolio through value-enhancing transactions. Gupta highlighted the addition of market-leading properties and the substantial increase in the REIT’s size. Furthermore, he noted that this unique partnership with GIC further solidifies their global collaboration in India and underscores the quality of the portfolio they have built in the country.

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Ind-Ra Revises Outlook for India’s Commercial Real Estate Sector to ‘Neutral’ for FY24

India Ratings and Research (Ind-Ra) has revised its outlook for the commercial real estate sector (CRE) in India to ‘neutral’ for the fiscal year 2024, shifting from the ‘improving’ rating assigned in FY23. The revision is based on the agency’s anticipation of positive growth in absorption and steady rentals.

According to Ind-Ra, the total leasing (excluding renewals) in FY23 reached 32 million square feet (msf), compared to 26 msf in FY22. The significant increase in leasing demand can be attributed to occupiers returning to the office and the pent-up demand following the pandemic.

The agency expects the aggregate supply to remain stable, ranging from 7 to 9 percent on an annualized basis in FY24. Similarly, the total absorption is projected to be around 6 to 7 percent year-on-year, showing a decline from the estimated 24 percent in FY23 due to the base effect.

Based on data from real estate analytics firm Liases Foras, Bengaluru and Delhi-NCR are identified as the largest micro markets, with estimated absorptions of 10 msf and 8 msf, respectively.

Ind-Ra predicts reasonable growth in leasing and pre-leasing activities for Grade A office providers, as indicated by listed players. The implementation of return-to-office policies by technology companies and the pent-up demand mentioned earlier are expected to drive this growth. Furthermore, India’s global competitiveness in leasing rates and employee wages is considered a long-term structural driver.

Ind-Ra highlights a robust recovery in leasing activity within the office space segment. FY23 witnessed strong demand, making it one of the best years for leasing activity following the subdued FY21 affected by the COVID-19 pandemic.

The growth in India’s commercial realty sector has led to an increased focus on real estate investment trusts (REITs). Both developers and funds stand to benefit from REITs, as they provide higher cash flow visibility. However, Ind-Ra notes that elevated interest rates may reduce financial flexibility due to lower valuations, coupled with the mandatory distribution of 90 percent of the qualified cash surplus.

Ind-Ra emphasizes that multinational corporations account for 50 percent of the leasing demand. Concerns over a potential demand slowdown, as indicated by weak guidance from IT players for FY24, could impact the demand for new office spaces and hiring in India.

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Sebi’s Proposal for Self-Sponsored REITs and InvITs to Enhance Asset Management

The Securities and Exchange Board of India (Sebi) is contemplating the introduction of self-sponsored Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) to bolster asset-management capabilities and offer alternative exit opportunities for sponsors.

A consultation paper released by Sebi on May 16 highlighted the potential benefits of establishing a framework for self-sponsored REITs and InvITs, enabling the emergence of independent professional managers, and providing additional options for sponsor exits.

If approved, this proposal would render the existing norms governing sponsor declassification (Regulation 7A of REIT and InvIT Regulations) irrelevant. Sebi had previously permitted sponsor declassification under specific conditions in 2020. However, if the new proposal is accepted, sponsors would only be able to exit a REIT or InvIT by introducing a new sponsor or transforming the entity into a self-sponsored one.

The proposed manager/investment manager of the REIT/InvIT must meet certain eligibility criteria, subject to Sebi’s approval. These include a minimum of five years of listing, consistent distribution of income to unitholders for at least twelve periods, an AAA rating from a Sebi-registered Credit Rating Agency for five consecutive years, compliance with leverage thresholds, adherence to net worth criteria for sponsors, mandatory unitholding requirements, independence from the sponsor or its associates as the investment manager, absence of under-construction projects or non-operational projects acquired from the sponsor, and other stipulations.

The disassociation of the sponsor requires consent from the trustee and unitholders. The consultation paper states that approval from seventy-five percent of unit holders by value (excluding units held by related parties) must be obtained, and dissenting unitholders should be provided with an exit option if the required approval is not received.

In cases where the manager/investment manager fails to meet the mandatory unitholding requirement for a self-sponsored REIT/InvIT, shareholders of the manager/investment manager may contribute their own units of the REIT/InvIT to fulfill the minimum unitholding requirement.

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Mumbai Surges to 6th Place in Annual High-End Property Price Growth

According to the latest report by Knight Frank, Mumbai has secured the 6th position among 46 cities worldwide in terms of annual price growth for high-end residential properties, with a notable appreciation of 5.5 percent.

The renowned real estate consultancy, Knight Frank India, published their findings in the ‘Prime Global Cities Index Q1 2023’, revealing positive trends for Mumbai, Bengaluru, and New Delhi, with an increase in average annual prices during the period of January to March 2023.

The report highlighted Mumbai’s impressive ascent from the 38th rank in Q1 2022 to the 6th rank in Q1 2023, specifically attributed to the growth in high-end or prime properties. Bengaluru and New Delhi also experienced an upward shift in their index rankings, reaching the 16th and 22nd positions respectively, compared to their previous ranks of 37th and 39th in the first quarter of the calendar year 2022.

Knight Frank India further elaborated on the figures, noting that Mumbai recorded a 5.5 percent year-on-year (YoY) increase in average prices, while Bengaluru witnessed a 3 percent YoY rise, and New Delhi saw a 1.2 percent YoY growth, all compared to Q1 2022.

On a global scale, Dubai secured the top position with an impressive surge of 44.2 percent in the values of prime residential properties.

The Prime Global Cities Index serves as a valuation-based indicator, tracking the movement of prime residential prices across 46 cities worldwide. The index monitors nominal prices in local currencies.

The remarkable rise of Mumbai on the international index can largely be attributed to the surge in demand within the city, as stated by the consultancy.

While the demand remains robust across all segments, Knight Frank highlighted an increase in the sale of higher-value products.

CMD of Knight Frank India, Shishir Baijal, commented, “Despite concerns surrounding global growth and inflation that characterized most of 2022, the Indian economy showcased steady performance.”

Baijal further emphasized that the Indian real estate market demonstrated continued momentum in demand, even in the face of an inflationary environment and a steep rise in home loan rates over the past year.

“In particular, we have observed a consistent demand for prime residential properties due to three key factors: firstly, these consumers are less reliant on mortgage support; secondly, the sustained economic growth has led to increased income stability, and lastly, there is a prolonged trend of purchasing larger homes,” added Baijal.

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