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As the first half of 2010 comes to a close global property markets at the prime end have shown some improvements in response to the gradual healing of both world economy and the credit markets. In the US, the story remains one of steady improvement in-creasing availability of capital and a continuing flow of deals to market. In Asia Pacific economic performance is likely to outstrip the rest of the world but watch out for further interest rate rises. In Europe, while trading has been relatively strong austerity measures will keep confidence and activity in check with. Tough choices ahead for global policymakers can the second half of the year usher in further positive momentum.

Stronger business conditions could drive employment growth, assuming that fiscal stabilization in Europe and further economic recovery will flow through to higher take-up of space by expanding Corporate.
Asia pacific may attract more Corporate looking to capitalize on the region’s economic out performance and its cost saving potential (e.g. business process outsourcing firms in the Philippines and IT/FTES firms in India) More financial service firms could be drawn to the relative ease of doing business in regional financial centre (e.g. Hong Kong  and Singapore ) Activity in some of the region’s more buoyant real estate investment markets may quickly return to strength if concerns over higher price, financial market volatility and china’s overheating taper off.

A prolonged period of nervousness about the global economic recovery would impact the region’s financial markets confidence levels and the real economy occupational demand and investment activity could both suffer.
With increasing inflationary pressures and overheating risks in some parts of the region governments need to carefully manage the speed of stimulus withdrawal without compromising sustainable economic recovery.

Many commercial properties are technically in default with loans due in late 2010if regional banks take a more aggressive stance many more assets will come to the markets and available liquidity would be insufficient to absorb the additional volume and potentially depress prices. 

Investing in Commercial Property

Presently office spaces may witness yields in the range of 10.5% - 13%.  While owning and leasing out commercial property, one needs to consider the profile of the development and the developer’s brand name and reputation in the market.  The profile of The development directly correlates to the target clientele-corporate.  IT companions, multinationals back offices, etc.  This has its own set of risks and advantages in terms of tenant security, lease tenures or lease rentals.

Further, form a long-term perspective, one needs to see how the property would be managed and by whom,  For many corporates/MNCs and IT clients-facility management security and house keeping in the premises and other value added service are also critical inputs for the selection of the premise.

Investing in Residential Property

Residential properties currently witness yields in the rang of 2.5-5%.  As residential property yields relatively lower returns the variations in the rentals are relatively less as compared to other asset classes.

Similarly, the residential rental market observes relatively lower fluctuations in demand as compared to retail or commercial properties, which are more dependent on the overall performance of the economy.

A major feature of residential leases in the they are generally for a shorter period of 11 to 12 months.  While considering a residential property, one needs to take stock of the profile of the locality, its surroundings and other related infrastructure facilities.

Similarly, in case of under-developed properties, it is important to consider the project profile, the developer’s brand name and past track record.  These factors are crucial in determining timely deliver, ensuring quality construction and making user that all he legal prerequisites and other regulatory approvals are in place.

While owning and leasing out a residential property, one must consider issues like the management of the property itself.  There are various out-goings the one needs to account for like maintenance charges, property taxes and other municipal taxes, which are generally not charged separately to the lessees.

Legal Check!

Before purchasing any property, one most do a thorough legal check

  • Inspect the original document of title.
  • Ensure that ‘public notice’ has been issued in the newspapers.
  • In case you are interested in purchasing an entire plot of land, check whether there are any reservation or acquisition notices from the municipal authorities or any other relevant authority.
  • Check the property card and other relevant land document.
  • Investigate records of the Sub-Registrar of Assurance.
  • All Documents relating to immovable property are required to be registered with the Sub-Registrar of Assurances. Accordingly, a search must be taken of these records to ensure that you are dealing the correct party and the there are no claims in respect of the property or pending litigation.
  • The title should be traced as to how the present owner acquired the property.  This is vital because you do not want to discover other claimants to the land after you have completed the transaction.  For example, if the owner has inherited the land, find out if it was by way of testamentary succession, intestate succession or whether a probate or letters of administration was obtained. If not, then ensure that all the relevant people have agreed to the succession.
  • Check whether the stamp duty has been paid on the earlier transactions.
  • Often, a title may not be as perfect as one would like it.  Herein comes the dilemma.  Should go ahead anyway? It is a tough call since often land transactions in India do not have clear title, in such cases, in addition to the sale deed, insist on a declaration of title from the seller, a title certificate and an indemnity.  Also check the Powers of Attorney.
  • One should also take a declaration and indemnity to the effect that there are no outstanding tax demands.  Secondly, verify whether any ‘Attachment’ order has been issued by the tax authorities.  If possible, the seller should also obtain a Certificate under Section 281 of the Income Tax Act, 1961 to confirm that there are no proceedings pending, which may affect the title of the property.
  • Get an in-principle approval from the society in advance
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