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How the Budget 2016 affects property investors

With the Stamp Duty surcharge coming into effect today, we look back at the key points from the Budget 2016 affecting the UK property market.

  • The planned stamp duty surcharge on purchases of additional property, to include those who buy more than 15 properties. Previously if you owned more than 15 properties you were exempt from the surcharge.
  • An 3% surcharge will be applied to residential stamp duty rates on all purchases of property not intended as the buyer’s main residence, from today, 1st April 2016.
    stampduty
  • The threshold at which people pay 40% tax will rise from £42,385 to £45,000 in April 2017 and personal allowance up to £11,500.
  • 0.5% rise in insurance premium tax.
  • Commercial stamp duty
    0% rate on purchases up to £150,000,
    2% on next £100,000 and
    5% top rate above £250,000.
    New 2% rate for high-value leases with net present value above £5m

Other issues to consider from previous budgets

  • Withdrawal of interest relief

Under current rules, taxable profits are reduced by interest on money borrowed for the purposes of the letting business.  Phased in over a four year period starting with the 2017/18 tax year, UK taxpayers will no longer be able to deduct interest in calculating taxable rental profits.  Instead, landlords will obtain a reduction in tax equal to basic rate tax on any interest borrowed.

The changes will be introduced gradually, so that the amount of interest which is deducted from rental profits is 75% from 6 April 2017, 50% from 6 April 2018, 25% from 6 April 2019 and 100% from 2020/21.

On the same dates, a reduction in tax will be given for the interest which has been disallowed.  The tax reducer is the basic rate tax (currently 20%) multiplied by the disallowed interest.  In practice the tax reducer will be 20% of 25% of interest for 2017/18, 20% of 50% of interest for 2018/19, 20% of 75% of interest for 2019/20 and 20% of the whole interest from 2020/21.

By 2020/21, a landlord who is a higher rate taxpayer will effectively only receive basic rate tax relief on mortgage interest payments.

Conclusion

Overall the positives for the Budget 2016 are a few; higher income tax thresholds and allowances and lower corporation tax.

The negatives are greater with the surcharges on Stamp Duty, higher insurance, and removal of interest relief.

The impact of new investors is much higher with the increases upfront Stamp Duty expense, and for those who are heavily mortgaged on their buy to let investments.

However it will take some time to effect rents and house prices, these may balance some of the additional costs for buy to let and property investors.

With interest rates still so low, property investment still out weighs leaving your money in the bank.

 

Sources:

LRS Forum

Coman & Co

Where to invest in India: Rajkot, Gujarat

Where to invest in India: Rajkot, Gujarat

Why is Gujarat where to invest in India?

We have seen that compared to other states Gujarat under the leadership of Narendra Modi has experienced rapid double digit growth for the last few years. There are no signs of slowing down either with many new investments in infrastructure underway. The investment opportunities for NRI’s are huge, you just need to know where to invest in India.

Gujarat experienced 11% growth for 2011, higher than China

 Why is Rajkot where to invest in Gujarat

Where to invest in India: Rajkot, GujaratRajkot is the capital of the Saurashtra region of Gujarat and the 4th largest city of Gujarat.

Rajkot is ranked 22nd in The world’s fastest growing cities and urban areas from 2006 to 2020

Rajkot is well placed between the booming Jamnagar port and economic centre of Ahmedabad. In the future once the Dholera SIR is developed it will be within 170km distance.

Jamnagar is home of the Reliance Refinery. Rajkot is between Jamnagar and the motor hub that is developing in Sanand, home to the Tata Nano and other new facilities.

Therefore Rajkot will be a place with increasing commerce and activity, and will hold an increasing significance in region.

 OPPORTUNITY in Rajkot – ACE Riverside

Location:

  • Jamnagar – Rajkot Road
  • near the New Rajkot Cricket Stadium,
  • near the proposed New Airport.
  • Surrounded by 17 acres farm land and the Nyari River.

Property:

  • Two towers of 10 Floors,
  • Each with 4 x 2BHK condos on each floor.
  • Each condo is 1360 sq ft.
  • FREE House Keeping
  • Fully furnished option

Complex

  • Swimming pool and Jacuzzi
  • Multipurpose Hall with AC
  • Party Lawn
  • Mini Golf
  • Cafeteria

Prices: from INR 32 Lacs

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Read our other articles on Why invest in India over the UK, Special Enterprise Zones and cities such as Jamnagar and Ahmedabad

ACE Riverside was exhibited very successfully at the HDFC India Homes Fair recently

Trends in the Indian Property Market: Where to invest in India -Part two: SEZs, Special Economic Zones & Jamnagar, Gujarat

As mentioned in part one of this series of articles Trends in the Indian Property Martket: Where to invest in India, PropVestment spent some time recently in India and in particular in Gujarat. We wanted to analyse the Indian property market and find out where to invest in india, for the most secure and profitable investments.

Here are some facts we found out.

What is an SEZ, Special Economic Zone

SEZ Jamnagar: Reliance Refinery

Special Economic Zone is a particular area inside a state which acts as foreign territory for tariff and trade operations. Government provides tax exemption (IT, Excise, customs, sales), subsidised water and electricity.

SEZ helps in the development of infrastructure of the area around the SEZ, provides employment to people, makes the exports more viable. All this will helps the country’s products to become more competitive vis-a-vis providing all round development of region.

If 100 acres are allocated for SEZ, then only 30-35% of area is used for setting up plants. rest of the area is used to provide housing facilities, malls, multiplexes etc.
Tax exemption is for specific period say for 10 yrs or so.


FACT:
Gujarat has developed a reputation as the fastest developing state in India, especially since the reign of Narendra Modi and huge amounts of FDI that has been attracted to the state.
Here in the UK there are many NRI Gujaratis that often try investing back home in the state or wish to have an asset base back home in Gujarat. This is not to say that this is only an investment option for Gujaratis, but rather for anyone looking for strong secure returns on their investment.

 

Where to Invest in India: Jamnagar, Gujarat

WHAT DOES THIS MEAN:

Why Jamnagar is where to invest in India

  • Jamnagar is one of the most significant cities in the state of Gujarat. The city’s real estate sector  has got a massive boost, bolstered by a handsome investment of Rs 45,000 crore in development of Special Economic Zones

  • It is coined as the “Oil City of India” with Reliance and Essar Oil refineries and associated industries.

  • Jamnagar real estate is expanding with ground breaking projects, which makes the city an ideal place to invest and live in. Noticing the promise in Jamnagar, a multitude of property developers are eyeing the plots in Jamnagar for construction purpose.

  • Rental returns are equally healthy in the city which can range from Rs 8,000 to Rs 15,000 per month for 2BHK (two bedrooms, hall and kitchen) & 3BHK units.

  • The increasing employment opportunities in the city are also pushing up property values in rentals in Jamnagar.

  • Gujarat is also grabbing attention from the NRI populace settled in different overseas locations. The property developers in Jamnagar are designing exclusive schemes, and establishing overseas marketing offices to tempt the deep pocketed NRIs

  • Jamnagar is seeing breakneck industrialisation which has sent the rates for commercial and residential land in the city rise dramatically. Areas on the outskirts of the city like Khambhaliya Road and Lalpur Road are talking of land prices in the range of Rs 500 per sq metre — a 100 per cent jump in a year and still rising.

  • Residential property prices in Jamnagar have doubled in the past 18 months. The surrounding areas of the city will also boom.

  • Residential property in the city boasts of an exceptional “quality of life” for the residents. This is one of the reasons why it is selling fast. The rental market in Jamnagar is also looking promising.

CONCLUSIONS

Like many other cities in Gujarat, Jamnagar is a very promising prospect especially due to the economic progress made due to the SEZ and the major oil refineries. However with most developments in India you must take caution and vet the project appropriately.

Many UK residents do have links in the region so that is advantageous too.

When looking at a project analyse the future development prospects, proximity to transport links and employment opportunities.

Also maybe some part of Jamnagar, its a little too late, the capital appreciation has already occurred, look out instead for neighbouring areas, or other towns where huge infastructure or industrial projects are getting approved.

Like Jamnagar there is also great opportunities in Rajkot, Vadodara, and in particular Gandhinagar where it is dubbed as the new capital of Gujarat.

READ our Part One of this Series : Where to Invest in India: Satellite Urban Villages