Investing In A ‘Luxury’ Flat by Mr. Om Ahuja, JLL India

In Indian real estate, 'luxury' is by far the most-abused word by residential project developers/ promoters.

Any project offering basic amenities is classified as 'luxury' in marketing materials, advertisements & pitches. We have actually seen projects wherein 1 BHKs are being offered along with 2 BHK  & 3 BHK units being touted under the luxury tag.

What is wrong with this picture..?

In the first place, luxury living in any context must necessarily involve generous living spaces. Going by that alone, a one BHK can not qualify as 'luxury' by any stretch of imagination.

Secondly, the interpretation of luxury in the Indian context also includes an element of exclusiveness.

 In other words, the buyer of a luxury apartment - apart from superior amenities and facilities - also expects to live in a project which offers a certain socio-economic standard as a neighbourhood.

Therefore, when a project offers 1 bedroom apartments, it automatically disqualifies itself from the 'luxury' classification.   

Returns on Real Estate Investments..

Given that developers / promoters will continue to call every project luxurious, it is important for buyers to understand the definition, context & meaning of luxury in Indian residential real estate.

But, before this, let us first examine the investment dynamics of genuine luxury houses.

Buying a luxury apartment for self-use already involves the need for multiple checks & validations in any case. However, when it comes to buying such a flat for investment, the need for 360-degree due diligence is even higher.

After all, the final objective is returns on investment. If one is considering investing in a luxury apartment, one must understand what the hallmarks of genuine luxury in residential real estate are:

Ø  Location Very Important..

Mr. Om-Ahuja
This is one of the most crucial parameters. Though central location is certainly an important qualifier for the luxury tag in India, a project that stands at a central city junction beset with traffic congestion does not provide a luxurious experience.

No matter if a project is 'normal' or / 'luxurious', it is not house if one can not reach it or get out of it. Investors need to look at many location parameters, such whether the project benefits from approach roads that allow for convenient vehicular egress & ingress.

Also, very few people buy luxury houses & then hide them from the rest of the world. Most owners of such a house want others to see & admire their properties, and to entertain people there.

Noise & air pollution apart, this purpose is not achieved if the project lies in a chronic traffic gridlock zone. Finally, the owners themselves must have ready access to markets, schools, colleges, hospitals & their offices.

And before we forget - the most spectacular edifice of luxurious living falls flat on its face as an investment bet if it is located in a crime-ridden area.

The view available to the project’s occupants is also very pertinent. A project may be genuinely luxurious in its internal specifications & amenities. However, if it overlooks a slum or / congestion-prone highway, a graveyard or / a hospital, both rental & resale potential take a beating.

The availability of a rooftop swimming pool and a Jacuzzi in every bathroom will not make a difference - a very basic ingredient of the luxury experience is unavailable.

Ø  Floor - to - Ceiling Height..

This is one of the most important parameter to evaluate a project's true 'luxury' value. If the floor - to - ceiling height is less than 12 feet, the luxury feel is severely compromised.

Moreover, apartments with low ceilings do not lend themselves optimally for tasteful interior decoration.

Ø  Project Density..

This means the number of people living in the project. There is no ideal thumb-rule for this parameter,  however, it is generally understood that a one-acre project should not house more than 60 families.

Anything more means that the project does not qualify as 'luxury'. This is because the available amenities are shared by too many people, destroying the project's ambience, exclusiveness, convenience & charm.

Ø  Parking Area....

Again, there is no specific yardstick by which to measure parking sufficiency. The commonly followed norm is that the number of bedrooms in a project should equal the number of available car parks. A 3 bedroom apartment should therefore have three (3) parking spaces within the project.

Though many luxury projects in the larger cities now offer puzzle-type mechanized parking, the fact is that HNI (High Networth Indiviuals)  buyers and tenants actually prefer normal or / stack parking.

Ø  Elevators..

The mere provision of branded elevators does not suffice in a luxury project. The project must also have service elevators with separate entries, to ensure that domestic help & external suppliers do not populate the elevators & lobby being used by residents.

Investors must also ensure that the elevators are spacious enough to accommodate a stretcher.

Ø  Security..
Inhabitants of a luxury project do not expect to have to install ugly security grilles over their front doors & windows. They expect to have the assurance that their families and property are safe in all respects. A genuine luxury project has uncompromising human security as well as electronic surveillance & safety measures firmly in place.

As is evident, it takes more than a mere word like 'luxury' to place a project head & shoulders above the rest - and thereby make it a worthwhile investment option. While one can not stop developers from misusing the luxury tag, it is certainly possible to understand what true luxury - even in the Indian context - really is.

About the author..
Mr. Om Ahuja, CEO - Residential Services, Jones Lang LaSalle India

For Media Contact

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Funding for HIV /AID, Domestic Exceeds International Investment: UN report

1 December - World AIDS Day 
According to a UN (United Nations) report, The BRICS nations  Brazil, Russia, India, China &  South Africa, have increased their domestic public spending on HIV by more than 120% between 2006 & 2011,

In fact, domestic funding for HIV exceeded international investments, said the Joint UN Programme report on HIV / AIDS (UNAIDS), ‘Together we will end AIDS’.

Low and middle income nations invested $ 860 crore for their response in 2011, an increase of 11% over 2010. International funding however remained flat at 2008 levels, $ 820 crore, it added.

Mr. Eric Goosby, Coordinator, US Global AIDS said, “It is clear that this is no time for the world to slow down efforts on global AIDS, rather, we must seize the moment to build on the progress we have made and achieve an AIDS free generation”  

Highlights of UN Report..!
* On the BRICS response, India has committed to increase domestic funding to more than 90% in its next phase of the AIDS response.
* Brazil & Russia already fully fund their AIDS response with domestic resources.
* The BRICS countries now fund, on average, more than 75% of their domestic AIDS responses.
* Domestic sources already account for above 80% of resources spent on AIDS in South Africa.
* China & the Chinese government have pledged to fully fund its response in the coming years.
* Funding from the United States accounts for about 48% of all international assistance for AIDS.
* While domestic investments in AIDS are increasing, there is still a large shortfall in global funding for HIV.
* By 2015, the estimated annual gap will be $ 700 crore.
* At the 2011 United Nations High Level Meeting on AIDS, countries adopted a Political Declaration on HIV / AIDS in which they agreed to increase investments for HIV to between $ 2,200 crore to  $ 2,400 crore by 2015.
* 81 countries increased their domestic investments for AIDS by above 50% between 2006 and 2011.
*  As economies in low and middle-income countries grow, domestic public investments for AIDS have also grown.
* Domestic public spending in sub-Saharan Africa for example, (not including South Africa) increased by 97% over the past 5 years.
* South Africa already spends above 80% from domestic sources and has quadrupled its domestic investments between 2006 and 2011.
* Although total resources for AIDS have not significantly increased, record numbers of people are accessing antiretroviral therapy.
* In 2011, 80 lakh people had access to life saving treatment in low &  middle income countries, an increase of 14 lakh over 2010.
* Despite the substantial numbers of people newly starting treatment, it is only just over half (about 54%) of the 1.48 crore people eligible.

Mr. Michel Sidibé, Executive Director, UNAIDS said, This is an era of global solidarity & mutual accountability. Countries most affected by the epidemic are taking ownership &  demonstrating leadership in responding to HIV. However, it is not enough for international assistance to remain stable, it has to increase if we are to meet the 2015 goals.”


First Ever Pill for Prevent HIV Infection: Approved By United States Regulators

World AIDS Day December 1 

A daily pill to help prevent HIV (Human immunodeficiency virus ) infection was approved recently by United States (US) regulators for use by healthy adults who are at risk for getting the virus that causes AIDS. (/ Acquired immunodeficiency syndrome)

Truvada, made by Gilead Sciences in California, has been on the market since 2004 & was approved by the FDA (Food and Drug Administration) for a new use as a tool to help ward off  HIV, in combination with safe sex & regular testing.

The pill as PrEP (pre-exposure prophylaxis) has been hailed by some AIDS experts as a potent new tool against human immunodeficiency virus, while other health care providers are concerned it could encourage risky sex behavior.

In addition, the regimen is estimated to cost about $ 14,000 per year, making it out of reach of many.

 Mr. Debra Birnkrant, Director of the division of antiviral products at the FDA said, “Truvada alone should not be used to prevent HIV infection. Truvada as PrEP represents another effective, evidence based approach that can be added to other prevention methods to help reduce the spread of HIV.

 The FDA said, '' Truvada should be used as “part of a comprehensive HIV prevention strategy that includes other prevention methods, such as safe sex practices, risk reduction counseling, and regular HIV testing.”

Truvada was previously approved as a treatment for people infected with HIV to be used in combination with other antiretroviral drugs.

The decision by the FDA followed the advice of an independent panel in May, 2012 that supported Truvada for prevention in uninfected people, after clinical trials showed it could lower the risk of HIV in gay men & heterosexual couples.

One study of men who were sexually active with other men but were not infected with the virus that causes AIDS found about 45% fewer infections in those taking Truvada versus a placebo. Those in the study who took the drug regularly had almost 73% fewer infections.

Common Side Effects..!

A second study on heterosexual couples in which one partner was infected with HIV and the other was not showed that Truvada reduced the risk of becoming infected by 75% compared with a placebo.

Common side effects were the same as experienced by people with HIV who were taking Truvada, and included diarrhea, nausea, abdominal pain, headache, and weight loss.

However, the adherence rate  - meaning how often people in the study actually took the drug daily - was low in the study of men who have sex with men, at just 30%, Birnkrant said.

In the study of heterosexual partners, adherence was much higher, at between 80 and 90%. Therefore, the drug label must include special instructions for health care providers on how to counsel potential users of the drug.

The drugmaker must also include a warning that Truvada for PrEP “must only be used by individuals who are confirmed to be HIV negative prior to prescribing the drug & at least every 3 months during use.”

Decrease Condom Use ..!

As to concerns about whether the pill might boost risky sex practices &  lead people to abandon condoms as a first line of protection, Birnkrant said the studies have not shown that so far.

“We don’t really have any strong evidence to show that condoms were not used or that there was a decrease in condom use when Truvada was used,” she said. The goal of the approval is to eventually cut back on the rate of new infections in the US, which have stayed steady in recent years at nearly 50,000 annually, she said.

A key goal of the US strategy against  HIV / AIDS, set forth in 2010, is to decrease the number of new infections by 25% by 2015.

Ray of hope US strategy against HIV / AIDS, set in 2010, is to lessen new infections by 25% by 2015 The FDA approval drew the support of amfaR, the Foundation for AIDS Research Truvada was previously approved as a treatment for people infected with HIV


Why India Needs Real Estate Investment Trust ?

By Mr. Rajiv Luthra, Ms. Geeta Dhania, Luthra & Luthra Law Offices

Make real estate investment trusts even better mass money magnets by liberalising rules

Novel Investment Method..

A Real Estate Investment Trust (REIT) is a novel investment mechanism being contemplated by the Securities and Exchange Board of India (SEBI).

A REIT owns and manages income-generating developed property and is designed to offer common units to the public as an investment option. Such units represent ownership in the business of managing income-producing properties.

REITs will provide an avenue to real estate developers to commercialise developed property, providing an exit avenue. It will also provide overleveraged companies an opportunity to deleverage. It will increase the depth of the Indian real estate market & provide additional liquidity.
Mr. Rajiv Luthra

REITs would also enable people to channelise their investments into Indias real estate sector through a regulated mechanism. Since the investment in REITs is asset-backed, it is ideal for investors wanting to invest in real estate without the hassle of checks on property titles & the plethora of regulatory approvals.

Considering the current economic slowdown & paucity of funds, REITs are expected to infuse a fresh lease of life into an otherwise choppy market.

Uneven Road to REITs

The draft SEBI (Real Estate Investment Trusts) Regulations, 2013, seem well thought out. However, much is desired to make the REIT structure commercially viable. The obvious & much-discussed road blocks are taxation of REITs, foreign investments in REITs and stamping of agreements relating to transfer of property to the REITs.

In addition to these stumbling blocks,there is a need to fix the following issues to make the REIT regulations workable.

One of the basic premises of the draft REIT regulations is the need to provide an exit avenue & liquidity.However,the definition of real estate seems rather constricted.

The definition of real estate or property should be broadened to include all commercial and residential property and completed infrastructure assets like roads and highways that have a regular income flow.

Policy Marshland..

This will widen the coverage of REIT regulations to cater to the funding requirements of not just real estate but the wider infrastructure sector in India. Further, the sponsor eligibility condition of five (5) years experience in the real estate industry on an individual basis should be widened to enable non-core real estate players such as hotels,hospitals & other corporate houses with real estate to participate in REITs as well.

The draft REIT regulations provide that a REIT can not undertake an initial public offer (IPO) without the prescribed minimum asset value.
However, it may not be commercially viable for a sponsor to first transfer the assets & then approach the market for listing.

Our lawmakers should amend this requirement & may consider a requirement to have the initial portfolio identified and tied in by way of definitive documents prior to the IPO and offering proceeds can be utilised to purchase the assets.

Since the REIT would work akin to a mutual fund model, we can borrow afew concepts from the SEBI (Mutual Fund) Regulations,1996, to make REITs more viable.The mutual fund regulations have a concept of co-sponsors that is conspicuously missing in the draft REIT regulations.

Open Realty to Reality..

Currently, the minimum asset value of a REIT is marked at Rs. 1,000 crore. While there is a need for ensuring financial soundness of the trust, one can not dispute the fact that such a threshold will eliminate many small players.This can be reconciled by providing for the concept of co-sponsors, much such as the mutual fund regulations.

This would enable companies with a smaller portfolio to come together & set up a REIT. Further, clarity should be provided on the pricing & repurchase of unit along the lines of mutual fund regulations.

In recent years, limited liability partnership (LLP) has emerged as a preferred vehicle for real estate developments owing to the various benefits due to it. The investment conditions with respect to REITs should be relaxed to permit investment in LLPs that house real estate assets, and the definition of special purpose vehicle & body corporate can be modified to include LLPs, thereby enabling real estate investments in LLPs that own real estate assets.

Since REIT is a new product for the Indian markets,there may be an initial hesitation by the investors to explore REITs.Therefore, participation by anchor investor in REITs may be considered to inspire confidence among other investors to participate in the REIT.

Additionally, discounts on the price of units to different investor categories may be considered to make investment more attractive.


In conclusion, while the draft REIT regulations is definitely a step in the right direction for the Indian real estate industry, it will not be a successful effort in mobilising real estate in India unless some of these key concerns are addressed.

About the author..

The writer Mr. Rajiv Luthra is Founder and Managing Partner, Luthra & Luthra Law Offices.

Co-authored with managing associate Ms. Geeta Dhania

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December 2013: National Awareness Days and Weeks..

Awareness days and weeks taking place this December 2013 month..

Awareness Days..

 World Aids Day : 1 December  2013   

 Tree Dressing Day : 1 December  2013         

 International Day for the Abolition of Slavery : 2 December 2013          

 National Mutt Day : 2 December 2013

International Day of Persons with Disabilities : 3 December 2013          

Day of the Ninja : 5 December 2013    

International Civil Aviation Day : 7 December 2013 

International Anti Corruption Day : 9 December 2013        

Human Rights Day : 10 December 2013         

International Animal Rights Day :  10 December 2013        

International Mountain Day : 11 December 2013      

Awareness Week..

Festival of Winter Walks : 21 December 2013 to  5 January 2014           

Awareness Month..

Childhood Cancer Awareness Month : December 2013    


What You Must Know About Estate Duty by Mr. Anil Rego, Right Horizons

An Estate duty or /  inheritance tax is a tax paid by a person who inherits assets (cash & Non-cash) or a tax on the estate (total value of the money & property) of a person who has deceased.

It does not matter if the person has a legal Will or /  not, the assets are still subject to estate duty. The deceased person's assets, as a sum, are called an estate.

Inheritance taxes started in India with the motive of bridging the gap between the rich & poor on a more long-term basis and to start to deliver on a more inclusive development path but in 1985 it was trashed by the government due to increased costs of collection.
Mt. Anil Rego,
Right Horizons
According to the Estate Duty Act, 1953 at that time, the limit was only Rs. 1.50 lakh of exemption and the rate of estate duty was on a progressive basis, with a maximum rate of 85 % for estate exceeding Rs. 20 lakh. There was significant legal process on a variety of aspects, including valuation, which forced govt to discontinue the same.

The hike in the levy of inheritance tax in the US and target of reducing fiscal deficit has now impelled the Indian government to reconsider the introduction of the tax again.
There were high predictions that finance minister will introduce the estate duty in the current budget session but it was not put forth with the fear of potential flight of capital offshore by domestic investors.

Few problems involved in levying estate duties are difficulty in determining fair value of assets for the tax purpose, deciding tax rate, exemptions on few assets and conflict with other existing tax rules like gift tax etc.

With the Indian economy in a process of accumulating wealth, a bulk of which is in the form of physical assets like real estate or shares in listed companies, the levy of an estate duty cause a sell off of those assets & prove to be counter-productive for economic development.

The time is not correct to plan for the reintroduction of an inheritance tax or an estate duty and for the time being proposed wealth tax regulations under direct tax code will suffice the purpose.

About The author..
Mr. Anil Rego is CEO and founder at Right Horizons

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