Bullish on Real Estate Sector

1. Interest rates are expected to fall in the short to medium term. Housing loans become cheaper and will encourage home buyers
2. Demand and Supply Scenario
Growing Middle Class

3. Tax Break for building home deadline increased from 3 years to 5 years
4. Tax Benefit for buying home up to INR 50,000 per annum as Per Section 88E (Limited to first time buyer up to 35 lakhs loan and cost of house not exceeding Rs 50 lakhs. This will benefit buyers in Tier 2 cities as houses in Metros are usually expected to cost more than 50 lakhs
5. Recent Real Estate Bill to benefit organized real estate sector and is expected to bring a lot of transparency which will benefit buyers
• Setting up a real estate regulatory authority which will regulate the real estate activity
• Bill does not allow developers to sell or launch projects until all the regulatory approvals are received by the developer
• 70% of the Funds collected for a project are to be maintained in an escrow amount and cannot be used for other projects
• Developers will have to sell projects or pricing has to be based on Carpet area not on the Super Built up area charging extra for common areas
• Builders cannot change the design of the project until and unless receives a written consent from two thirds of the buyers

UAE Interest Rates to go up in Short to Mid Terms

UAE Interest rates are expected to go up in the near term. 1 Year Eibor rate has reached 1.197 where it was 1.172 in the beginning of the Month.

Some of the factors contributing to the rise of Interest rates are
1. With low oil prices, Government and related entities are not making enough deposits in banks. Government deposits contribute nearly 25% of the bank deposits each year.
2. Low Economic growth across the region and globe is hampering the growth of deposits and cash inflows.
3. Many SME’s are facing cash flow problems due to rise in receivables which is making them to borrow short term in order to make payments. This is driving the demand for short term loans.

With Increase in demand for cash and decrease in deposits is creating liquidity constraints for banks which is driving the cost of borrowing in the short or medium term