Survival of the Fittest
According to Sanjay Shenoy, Joint managing Director, Legacy Global Projects, Indian realty is in the midst of some very exciting time sand only those players that are well equipped to master this changing spell, will be fit for the long run. He elucidates.
There is going to be a learning curve with RERA which could lead to a temporary dip in new project launches. But until we reach a point of clarity, it is difficult to predict how the market will react to the new situation at hand. However, the positive intent of the regulation policy will ultimately lead to a surge in demand, as buyers will have more assurance in investing in a property post RERA. Investors might go low key for a while, as they would prefer to witness a healthy trend on supply and prices before investing.
The GST regime is also a welcome move because of availability of input tax credit on products utilized for construction and elimination of cascading taxation. The availability of credit for taxes paid on inputs such as cement, steel, paints and other items might bring down the burden of construction cost, inversely benefitting the industry.
The reduced time in movement of goods, as the GST system will eliminate the menace of multiple check posts is yet another advantage of the initiative. This gives higher access to raw material purchase across India. However, there is a lack of clarity on the impact of the GST rate and classification of services under the real estate industry. The net impact of GST on prices will only unveil itself in due time post implementation.
Abolishment of Stamp Duty will make it even more convenient for first time home buyers to come forward and invest. Land value is largely influenced by a number of external factors but, stamp duty as a taxation criterion is under the purview of the government. Where land value is high, a stamp duty of 5-8% can make a huge impact.
Legacy’s business model
Legacy’s development has been primarily through a Joint Development (JD) Model. With a high entry barrier that capital investment brings in ownership and JV models, our approach will continue to be Joint Development. Land owners in Bangalore have more faith and are more willing to join hands with developers through JD. Besides, the taste of the city’s residents continues to be more aspirational which gives us ample room to explore more concepts in the luxury segment.
Real estate has long been one of the most assuring options of profitable returns on investments. However, investments dipped as the sector got tarnished by fly by night players. But now, with the support of a regulatory body, buyers will divert their investments into the market with more confidence.
The company has around 9.5 million square feet that includes completed, on-going and upcoming projects and it focuses for funding from Banks and NBFCs, considering the good rates they offer. Legacy’s nine centrally located projects range from Rs. 3 -14 Crore.
North Bangalore is the future with the tremendous growth as compared to other hot spots of Bangalore. The proximity to the International airport and presence of Manyata Tech park in Hebbal, that hosts some of the biggest MNCs has already led to an increase in housing demand in this area. Add to this proposed SEZ & IT parks, and easy connectivity, North Bangalore will rise to become the ‘Greater Bangalore’. Our investments will continue to be in the luxury segment in this area.
We will also opportunistically consider investment in the bottom pyramid as the initiatives in the affordable housing segment is very encouraging. However, there is a barrier to indulge in this segment considering land feasibility for low income segment, but PPP might pave the way forward for the same. Expansion will also be looked into in the mid-segment market where projects will range between 50 Lakh to One Crore.