How beneficial is the increase in FAR for residential plots?

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According to reports, the Indian Government has given its approval to the proposal of increasing FAR in the state of Delhi. The rise in the FAR is for housing plots which measure 750 sq. m. or more where the FAR has been raised from 150 to 200. For plots measuring more than 1000 sq. m. the FAR has been raised from 120 to 200 while ground coverage has increased to 50% from 40%. Allotting higher FAR has been considered to be a good move as it would make apartments larger. Ticket sizes might increase too without any changes in the norms of density.

FAR or Floor Area Ratio is the ratio between the total floor area covered by the land and the total area of the plot on which a residential property is being developed. Unlike Mumbai, which is constrained for space, Delhi has abundant space spilling over to other areas of the NCR and hence rise in property prices may not be seen. Buyers can be in a win-win situation with this move.

Even though no clarity has been offered on the increase in the number of units permitted on larger plots, its provision has been made in the Delhi Master Plan draft for 2021. It allows for a rise in the numbers of residential units. Under the provision, the concurrent augmentation, cost of allied civic infrastructure has to be undertaken by developers and paid to the authorities. The provision made on the draft master plan could be used for increasing the numbers of dwelling units.

If the provision is used judiciously, then in conjunction with the rise in FAR could be used for raising the stock of housing on residential plots from now onwards. If this is implemented, then there would be some movement towards making more houses. An allied price reduction would be likely then. With restrictions in heights for individual housing plots not raised from the present 17.5m along with provisions of stilt parking, the developments are more likely to remain at the same height. 

The increase in FAR may produce an impact on plots for group housing, where coverage on the ground will be 50% now, which was previously at 33.3%. This shall allow developers to build bigger apartments, even though FAR was at 200 already under the master plan. No restrictions on heights have been applied to group housing plots, which is why no issue for these kinds of developments shall come up when it comes to provisions of heights.

A sizeable increase in stock prices of players listed on the various stock exchanges has been seen. Many companies hold prime properties in Delhi or other regions. Better evaluation of such lands on the grounds of rise in the FAR for housing plotted developments is a probable factor behind the rise in respective stocks. The impact could have been seen in the short term. However, more should be available when you go forward, when the middle term review of the 2021 master plan is completed and changes posted by the year’s end. 

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Important Vaastu Tips to consider before Buying a Home

 

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Vaastu is one of the oldest practices of home owning in India and a lot of it is based on scientific facts, even though we fail to recognise them often. The principles of Vaastu are based on the fact that the planet sustains like as it has water, air, space and fire that exist in harmony together. If one of these elements starts dominating over the others, then it would lead to discord and strife. Houses which do not comply with Vaastu principles often become centres of feuds and failure. Therefore, the tenets of Vaastu suggest that you can improve your life by building upon its principles which aim to bring together the harmony of natural forces for success and happiness.

Here are 5 most important Vaastu tips that should be followed when you buy a house.

Pre-construction

It is important that a Bhoomi Pooja is performed before the beginning of construction on a property. Bhoomi Puja thanks Goddess Earth for providing us with shelter and ask for her blessings for a successful, prosperous, healthy and happy life. It heralds a good start to the construction and subsequent smooth proceedings.

House Entrance

The entrance of a house should always be in the east as it is considered to be most auspicious. The sun rises in the east and it is said to infuse the house with light and positive energy. Another direction which is acceptable for the placement of the main entrance is the North East as it also considered auspicious.

Location of the Kitchen

The southeast part of the house is considered to be the best location for placing the kitchen in the house. Cooking has always been an activity which is considered best performed facing the east. However, you should bear in mind that your kitchen must not be directly in front of your house’s main door.

Master Bedroom

A master bedroom must be placed in the southwest corner of the east facing home. If you can follow points 2 and 3, then you can be sure about sleeping in peacefully without having to bear the sound of cooking or its aroma wake you up. A bedroom which is rectangular or square in shape is always recommended. You can always bring in modern architecture to other rooms of the house.

Location of the Washroom

The washroom’s location is an important aspect, from the point of view of the health and hygiene of residents, aesthetics and Vaastu. Washrooms must always be located in a building’s North West corner or in North West corners of rooms in the house. If you cannot get the restrooms made in the North West direction, then consider having them in the southeast direction. It has also been recommended that the kitchen, restrooms and Puja room in the house should not be one beside the other. Not only is it recommended from the point of view of Vaastu, but also from the point of visual aesthetics.

There are quite a few other conditions that you must adhere to for getting a perfect Vaastu compliant apartment. However, in today’s times, it is a bit difficult to match all the requirements of Vaastu to the house you have selected. Nevertheless, you should try to follow the above mentioned tips of Vaastu for prosperity and happiness.

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What’s bringing the investors to the Indian real estate market?

All You Need to Know about Pre-approved Housing Loans

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What’s bringing the investors to the Indian real estate market?

real estate, real-estate, investmentThe Indian real estate sector has become the cynosure of investment for foreign and domestic investors alike. With housing demand in cities and urban zones shooting through the roof, developers, property sites and sponsors are looking to rake in piles of cash within a short span of time. Ever since 100 percent FDI has been allowed in the property market, foreign investors such as Warburg Pincus, Morgan Stanley Real Estate Fund, Tishman Speyers, JP Morgan Partners and some funds from Berkshire Hathaway have been showing keen interest in the Indian realty market.

Domestic funds such as SBI, HDFC and ICICI Venture are also expecting to diversify in the realty market. With the expansion of IT services in the country, most people have enough money to be able to afford comfortable apartments which support a plush and pleasant lifestyle. Companies which are investing in the realty market from abroad are expecting a 16 to 20 percent return. Indian developers expect to raise $100 million at least from these companies when they go in for construction.  Developers nowadays hardly invest more than 10 percent of their own money. Even NRIs have started investing in real estate in India and they have already raked in $1.5 million.

Because real estate markets in India such as Bangalore, Pune, Hyderabad, Chennai, Mumbai, Gurgaon and Delhi are booming, investors are looking to pump in funds into the operations of renowned builders of these markets.

A lot of companies have realised the importance of property advisory companies and websites which help buyers find the right property for their budgets for investment. Seeing the scope of growth of these companies, funds from abroad also get channelled into these websites. For instance, IndiaHomes has received private equity funding from US companies such as New Enterprise Associates and Foundation Capital along with Helion Ventures. Worth Rs 250 crores, IndiaHomes has a net worth of Rs 250 crores and has satisfied 10 million home buyers over 50 cities.

The Indian real estate scenario is set to boom in the coming future and foreign private equity funds are not missing a single opportunity to become a part of the companies (be it property sites like IndiaHomes or builders) that could make them rich. 

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DDA Housing Scheme 2014 Results Out

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The much awaited results of the DDA's (Delhi Development Authority's) mega housing scheme are out. The draw was held on 25th November 2014, Tuesday at the headquarters of the DDA in Vikas Sadan, INA, New Delhi. The complete list of allottees is now available on the DDA website. Balvinder Kumar, the Vice Chairman of Delhi Development Authority stated that the apartments would be handed over to all the lucky winners once they are fully constructed, along with all the facilities.

These flats are estimated to be ready by the end of March 2015. Earlier this year, as per the housing scheme 2014 DDA offered 25,000 of residential units to the interested buyers while sparring the projected plan to reserve 80% of the flats for the city residents.

The apartments range from Rs. 7 Lac to Rs. 1.2 Crore under several categories such as— EWS, LIG, HIG, MIG, Janta flats as well as one-room apartments which were rolled out from 1 September. The DDA would refund the registration fees of Rs 1 Lac to the unsuccessful applicants via their bank branch in which they had put their application forms. The bank would further dispatch the refund cheques to the property applicants.

The real estate market in India is at its peek. In between the sky-scrapper prices and highly lavish lifestyle, the DDA flats act as a perfect option for the lower middle class people to buy a home for themselves in or nearby the capital region of the nation.

The Delhi Development Authority would hold a special camp at the Vikas Sadan after a period 15 days, wherein the allottees may collect their allotment letters and submit their documents. Overall 3,914 flats are allotted in Rohini and 2,840 flats in Siraspur. To know the complete results, visit DDA website and click on to the Housing scheme 2014 draw.

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Things to remember while selling your home

Selling one’s home is never an easy task, even if it is a second one. A lot of emotions are attached to one’s home, which makes selling it all the harder. However, irrespective of whether it is a first home or a second one, you would want to make a profit from it.

The profit available from selling your home is actually not as high as you would expect it to be. Here’s why

Capital Gains

Property is believed to be an asset by the department of income tax. Profits that have been earned from selling property can be considered to be capital gains tax. If the property is held for less than 3 years, then a short term capital gains tax is attracted on it, which is more than longer term capital gains tax, which can be applied after 3 years. Therefore, if you sell off a purchased property before 3 years, then you are liable to pay short term capital gains tax, which would erode your profit.

Duties payable

If you buy a property of Rs 50 lakhs, then you would have to pay at least 8 percent more because of stamp duty, brokerage and registration fees. Therefore, the cost price of your apartment goes up. If you hold a property for a short period, then you do not allow the profit margin to climb enough to cover for these expenses. Also, if you need to pay brokerage for getting the property sold, then you profit would be lowered further.

Wealth Tax

If the house you are selling is a second one, then you have to pay wealth tax. The wealth tax payable is 1 percent of your total wealth that comes up more than Rs 15 lakhs. Your total wealth includes gold, cars, and other kinds of assets, and it may well take the tally more than 15 lakhs. Hence, you will have to pay wealth tax on the property.

Consider these factors while you decide to sell your house in order to get maximum returns out of it!

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How & when should you start planning for buying a home?

home buying planning, start early for home buying planning, apartments, villa, rent, buy, home loan, savingsAlmost 9 out of 10 people dream about buying a home, even if they have a comfortable and plush one already. Buying a home is tricky as you have to work out the payment schemes a couple of years before you actually down pay on property in India. The real estate market has a lot of offers which ease the burden of payment for homes yet you need to think in advance.

There is no fixed age or time as to when you should jump into the property market. If you have the resources, then buying a home is always a good option. Not only does it offer you a sense of belonging and security, but owning multiple homes also acts as an investment avenue. The planning bit is actually more important than simply having the desire to buy a home.

You may also like this: Real Estate Investment Guide for Metro Cities

As soon as you become independent, you should start planning for buying a home. A person’s starting salary is never too high (unless you have a fancy degree from a hot shot B-school or highly ranked university) which is why spending it needs to be careful. For instance, if your starting salary is around Rs 25,000 at age 23, then it would take you almost 7 years to be able to buy a house which costs around Rs 50 lakhs or so. To save the amount for down payment, you have three to four years almost.

There are quite a few debt linked savings schemes such as recurring deposits and debt linked mutual funds that are secure and can be pulled out from quite easily. The interest rates offered are healthy and you can save a part of your salary in them. Ideally, you should have 70 to 80 percent of your salary in equity linked mutual funds and have the rest in cash and debt linked plans.

Once you have reached a position to be able to pay the down payment and continue paying the EMI on your home loan, you should start looking around for good home loan schemes. Duration of  home loans is usually 20 to 30 years and require collateral to be deposited with the bank. You can opt for a flexible or fixed interest rate plan depending on the home loan term. The real estate market in India has been modified to the extent that some builders are offering to pay the EMI of your home loan till you possess the property and you should consider such options too. Compare the policies offered by different banks to see which one offers the most competitive interest rate for property in India.

To get your home loan processed quickly, reduce the number of outstanding uncovered loans (personal loans and credit card). Furnishing your CIBIL credit history is a good idea because banks accept it as a sign of a credit worthy customer. If your score is more than 75, then you stand to get swift approval and a good interest rate.

It is better to have a home loan approved in your kitty before you start hunting for properties as it can take a couple of months. Armed with the finances needed, you can start looking for your dream home.  

Also read: Everything About Tax & Housing Loans

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All You Need to Know about Pre-approved Housing Loans

 

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The concept of home loans has become quite popular nowadays because they make it easier for you to clinch your dream property. Banks often call  individuals, encouraging them to take a pre-approved home loan which offers lower interest rates and are approved within 48 hours, thanks to faster processing and minimum documentation.

Preapproved loans are typically loan approval given in principle to you on grounds of your profile by a financial institution or bank. When calculating your equated monthly instalment (EMI), a bank looks at your history of payback, net worth, current level of income and the EMI outflow currently. Upon reviewing your profile, the bank approved of a particular sum which you can borrow as a home loan, with a stipulated period, normally 6 months.


Holding a letter of approval for a loan can be much helpful even before finalising the property you want to buy. However, there are several fine prints which you must look for prior to opting for housing loans that are pre-approved.

Unguaranteed status of Pre-approved loans

Pre-approved loans usually come without guarantee. Banks and financial institutions reserve the power of final decision about the disbursement of the amount approved. For instance, you have chosen a property, but the bank doesn’t lend for apartments that fall in the locality chosen by you. All in all, banks have the veto power over the final application approval.

Also read: Everything About Tax & Housing Loans

Terms associated with pre-approved loans remain uncertain

Even though banks claim to have given loan approval, the interest rates and terms and conditions of these housing loans are still foggy and indicative at best. You would not be informed about the payback amount or the time frame of payback. Certain banks may spell out terms and conditions prior to pre-approval of housing loan. However, they may be subject to changes based on bank’s discretion.

Moreover, you would have to resubmit your documents at the time of loan disbursal. Unless the documents are submitted, your loan is liable to be rejected for property in India. This means working out additional documents.

Differences between approved and disbursed amount

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You should always consider the fact that there may be a difference in the disbursed amount and the amount that was approved. If the final sum is higher you have to pay a larger down payment because you have limited scope of negotiation with the bank and your budget may be upset. You should also carefully consider the indicative rates of interest in the letter. The interest rates mentioned are usually on a floating basis and if you want to take a fixed interest rate loan, then you should skip a pre-approved loan for property in India.The processing fee for a pre-approval loan is non-refundable, irrespective of whether you take the loan or not. The loan approval is valid only for a specific time period. Unless availed within that time, the pre-approval shall become void and you will have to reapply. If you keep applying for pre-approval loans a number of times, then you will be marked as someone looking for credit constantly and this could adversely affect your credit score.

Opt for a pre-approved loan only when you have shortlisted a property. Pre-approved loans expedite the housing loan process. Moreover, if you negotiate with the builder based on the fund available to you, he may bring down the price for you. Builders would rather negotiate with a person who has cash on hand rather than someone who has to raise money.

You may also like: To Buy or To Rent Property – Explained!

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To Buy or To Rent Property – Explained!

 

buy or rent, rent house, buy house, rent apartment, buy apartment, own a house

Should you buy property or rent  is a question that is there in the minds of each individual. Currently, the demand for purchase of real estate is quite slow and unit inventory is piling up in each city. Contrasted to this situation is the rental value, which is steadily rising in every quarter across all cities. With rents becoming sky-high, one would consider buying properties rather than renting it. Is it as easy a decision as it seems?

To compare between the two, you need to consider the following aspects:

  1. Cost of EMI for Home Loan
  2. Rental Rates for Property
  3. Your Current Income
  4. Current Savings

Why do experts recommend you to rent than buy?

Mumbai, Bangalore and Delhi have been touted as the most expensive property markets in the country while Hyderabad has been observed to be the cheapest. Given the current scenario, most market experts recommend that you rent a house rather than buy it because of the expenses involved despite the high rent.

You may also like this: Real Estate Investment Guide for Metro Cities

To explain this, let us consider an example.

An individual earns an income of Rs 50,000 in Mumbai and lives in a 2BHK flat in Mira Road with his family. The rental rate of such a flat is around Rs 25,000 in a month. If the same flat is to be bought, the individual would have to spend Rs 75 lakhs. The down payment for the flat is around Rs 15 lakhs, i.e. 20 percent of the property’s value. The remaining Rs 60 lakhs has to be borrowed from a bank at 10.15 percent (subject to change). It comes to a payment of Rs 889 per lakh rupees (current rate may fluctuate based on fluctuation in bank rates) borrowed for 30 years. Therefore, the EMI payable every month is Rs 60X889= Rs 53, 549, which is more than what the individual makes in a month, as a sole bread winner. Therefore, it would be better for him to rent property rather than buy it.

real estate, rent or buy, buy property, rent property

The down payment required on the property is also quite high. To buy a property worth Rs 60 lakhs, you have to make a down payment of Rs 15 lakhs. With a saving of Rs 10,000 in a month, it could take you almost 10 to 12 years to accumulate the corpus (considering the fact that you have invested in a recurring deposit or debt instrument, rather than ULIP. For ULIP or ELSS, the time taken to accumulate the corpus may be lesser of 7 to 8 years). The down payment for renting a property is three to four months’ rent, which comes to approximately Rs 1 lakh; an amount that can be easily managed.

Analysing the phenomenon in different cities

The buy to rent ratio of most cities such as Chennai (0.25), Delhi (0.20) and Bangalore (0.27) indicate that it would be better to rent property rather than buying it. Kolkata on the other hand has a buy to rent ratio of 0.41 which indicates that it would be better to buy property instead of renting. However, to buy properties in cities like Hyderabad and Kolkata, one would still have to have an income of 12 lakhs per annum or more in order to afford a good property in a prime location.

Pitfalls of renting property

When you rent property, you are giving away a part of your income to the landlord which you will never see. Besides, owning property has a certain satisfaction associated with it which renting does not offer. The difference in sum between EMI and rent payable would also be shrinking as rental rates are revised every year. Most cities see a revision of 6 to 10 percent in rental rates of property. With rental rates rising faster than capital values annually in recent times, that day is not far when rent payable would be more than the EMI for buying property. When you buy property, you can always rent it out for a neat monthly income.

 

Also read: REITs…What is in there for common man?

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Latest FDI Relaxation & Guidelines To Fuel The Real-Estate Growth

FDI, FDI in real-estate, real estate, govt relaxes FDI norms, property investmentThe optimism among real estate market participants has gone with the ascent of a stable central government. Buyer sentiments are looking up as evident from the escalating conversion rates in the various markets. Developers and experts are also expecting the inflow of foreign direct investment to increase in the real estate sector.

In the past few years, the realty sector has witnessed declining sales and piling on inventory apart from piling-up debt and cash crunch. Both investors and buyers are expecting a positive outcome post the General Assembly elections. The new central government is expected to adopt measures which would revive the realty sector of different cities. The revival has been predicted to be noticeable within 6 to 12 months. Positive buyer sentiments should return to this sector.

Also read: Property Market Overview – Post Maharastra Elections

FDI inflow in Real-Estate Sector

As per the data released by the Department of Industrial Policy and Promotion (DIPP), inflow of Foreign Direct Investment in the construction sector- housing, townships and built-up infrastructure had reduced to roughly $1 billion in the period between April 2013 and February 2014 from $3.1 billion received between April 2011 and March 2012. From 2000 to 2014, the cumulative foreign direct investment received was around $23.1 billion, of which 11 percent was channeled into property investment.

Permissible levels of FDI in realty sector

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At present, 100 percent foreign direct investment is allowed via the automated route in this sector. It covers housing, townships, hotels, commercial premises, hospitals, resorts, and recreational facilities, educational institutions, regional and city-level built up infrastructure. Recently FDI norms in the construction sector were relaxed for accelerating the fund flow into relatively smaller realty projects which had earlier been restricting factor for foreign investors.The investing company now requires bringing in $5 million worth of FDI within 6 months of the project’s commencement rather than $10 million which was the previous requirement. Subsequent instalments of FDI may be brought in till 10 years from the beginning of a project or prior to completion, whichever is earlier.

For development-construction projects, the minimum floor area with which FDI can be introduced is 20,000 sq. m. against 50,000 sq. m. which used to be the threshold. FDI in realty shall be permitted fully subject to these conditions.

Even though no minimum plot area is stipulated for service plots, for combination projects which include construction projects and serviced plots, either of the 2 conditions of floor area and capital shall apply. Foreign investors may exit after a project has been completed or post 3 years from the final investment date depending upon trunk infrastructure development. Indian investors in projects funded by FDI shall be allowed only to sell developed plots.

No restriction on capitalization or area shall be imposed if thirty percent of the cost of the project is earmarked for affordable houses.

Expectations of Real Estate Market Players

Realty experts are optimistic about an improvement in sentiments for near-term investment. Currently, home money is on the lookout for viable investment options. Investors are positive about striking deals at lucrative valuations.  Moreover, foreign money too has been biding its time and waiting for political stability prior to entering India. The ascent of a stable government in the parliament shall ensure the best scenario possible.

The amount of funds that were being raised was to the tune of $1.8 million. With a stable government in power, real estate market players expect much more traction in the market and a lot of investors to enter the Indian property market. The stable government has uplifted the investor community’s sentiments considerably, which shall in turn impact office space and housing sales. Therefore, growth of the property sector in India expected to be fuelled by corpus derived from both investors and end-users.

Some of the other issues that are plaguing the realty sector that need to be addressed immediately are policies for affordable housing, fast-tracked approval processed, and allotting real estate with infrastructure status and establishing a regulator of the sector. Unless these measures are adopted, property prices shall not see an upward rise immediately.

As the demand improves, the present stock of commercial and office space may prove to be insufficient for catering to demand which could result in higher rental rates. 

You may also like: Factors To Consider While Buying Property

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Property Market Overview – Post Maharastra Elections

Mumbai real estate, Mumbai property, Bombay property

The poll results may have been declared in Maharashtra but the new government is yet to take charge. Once it does, it has a mammoth task of reviving the Mumbai realty market which has been slow for the past couple of months. Till September 2014, demand has been stable in the real estate Mumbai market while addition to supply has been limited. In the first half of 2014, the numbers of residential units constructed in the city were 17,500. Prior to the elections, the Maharashtra government had adopted a few measures to restructure the realty market such as increasing the floor space index or FSI for residential properties, removing the “heritage” tag from Chembur to allow redevelopment and declaring the salt pan area in Waddala as a residential property area. Roughly 266 files were cleared by the department concerning FSI and land use policies.

Experts opine that the succeeding Government of Maharashtra would have to review some of the clearances passed by the erstwhile government to make them friendlier for the development of realty in Mumbai. Infrastructural projects such as widening of roads and expansion of Metro Railway and Mono Rail have to be undertaken for improving access to Thane and Navi Mumbai. The measure taken to increase the floor-space index for residential properties has met with scepticism from various quarters as the pressure of population in Mumbai is too high and may elevate per square feet rate above Rs 1 lakh for certain areas. Affordable housing should be the mantra of the new government especially targeted towards the low and middle income housing group.

Maharashtra real estate, Maharashtra property, election and property rates in MaharashtraCurrently the real estate in Mumbai is stable, although it is yet to pick up. The mechanism of price correction has already been put into force in the city. The stock of property inventory in Mumbai can take up to 3 years to be cleared. Developers have slowed down construction, waiting for the market to pick up.

The faster the new government takes charge, the more would be the benefit to the realty Market. There are certain state laws governing Mumbai realty which, if modified or eliminated, could boost real estate considerably. The combined effect of Diwali and the Maharashtra poll results may help to buoy the real estate market. The festival period is considered to be an auspicious time for people to buy property and favourable poll results would certainly boost buyer interest in the market.

A faction of developers opine that the real estate market in Mumbai would not be swayed over by the poll results because buyers hardly consider the government in house as a deciding factor for purchasing residential and commercial properties.

Participants of the real estate market in the financial capital of the country agree that there will be negligible effect on the Mumbai realty market in the short term. However, once favourable policies for boosting commercial and residential real estate are undertaken, property dealings in Mumbai would pick up pace. 

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