Feldman Law Center – The Four Road Blocks That are Slowing Loan Modifications

July 17th, 2009 at 04:38am Under Estates Law

Hope and optimism emanating from the announcement of the Obama Administration’s “Making Home Affordable” plan have been replaced by the cold reality that the program has gotten off to start deemed by industry watchers as “anemic”. After almost four months since President Obama first announced the $75 billion mortgage rescue effort, the administration continues to tweak the program in an attempt to reach its originally stated objective of saving up to 5 million homeowners from foreclosure. Standing between the anemic start and lofty goals of the program are four roadblocks:

1) Overloaded loan modification processors – While the specifics of the plan were released in the first week of March, lenders couldn’t start handling applications until systems were re-programmed and processors were brought up to speed, which took an additional four to six weeks. Processors were immediately buried with stacks of applications that had been accumulating during the conversion to the new guidelines. Participants in the process report that servicers are still digging out from the initial rush as applications continue to flood their desks. Troubled borrowers, many backed up against the possibility of foreclosure, have become increasingly frustrated to the point where they have abandoned the process to retain their own legal assistance.  JP Morgan Chase spokesman Tom Kelly recently said of the ramp-up, “It’s an enormous task. We’re moving quickly, although not as quickly as an individual might wish.”

2) Investors – The massive sums of money that supported the real estate/mortgage boom came from investors on Wall Street, pensions, and other institutions. Servicers say those investors are now balking at some of the terms being presented when a loan needs to be modified. The net present value test, a little known aspect of the plan, allows for a calculation to determine whether the greater return for investors will be achieved via modification or foreclosure. In the modification versus foreclosure decision, investors have been threatening lawsuits against servicers when the servicers are deemed to not be acting in the best interests of their investors. The threatened legal action adds another layer to the home loan modification process and can draw out the approval process even more. The “safe harbor” bill recently passed by Congress was intended to alleviate that logjam by protecting servicers from investor lawsuits but it’s likely that lawsuits will arrive on the servicers doorsteps anyway, safe harbor or not.

3) Lenders – Lenders are caught in a three sided bind between the above mentioned borrowers/investors and their own capital structure. No longer required to mark their loans to market, they can carry the value of the loans in their own portfolios at values they can rationalize, whether factual or not. Loan modifications could generate reviews of portfolio values, and nobody wants to go there in the current environment.

4) Unemployment – According to John Taylor, head of the National Community Reinvestment Coalition, “Unemployment is becoming a bigger factor than almost anything.” When sub-prime mortgages started blowing up it was attributed to the risks inherent in lending to lower quality borrowers. Increasing unemployment, in addition to taking down the lower quality borrowers, is now hitting prime mortgages. In fact, primes are now going into default at a much faster rate than sub-primes as previously solid borrowers are now being affected by the contracting economy.

Of the four roadblocks, the toughest barrier is unemployment due to the fact that, regardless of credit scores, if a homeowner doesn’t have a job a loan modification isn’t going to help. Short sales, cash for keys, or foreclosure become the next options. At that point every side of the three sided bind ends up on the losing end.

Property Tax Implications Of Purchasing San Diego Real Estate

July 16th, 2009 at 10:38am Under Estates Law

Below is general discussion of various factors impacting property taxes in San Diego, California. The reader should consult their tax advisor for definitive guidance about property tax issues and not rely soley on the informaton below.
Property tax rates are capped in California due to the passage of Proposition 13 in 1978 (”Prop 13″). Prop 13 was a ballot measure approved by the voters of California to limit property tax increases. The legislation also mandated that any future increases in property tax rates have the support of two-thirds of the Legislature for approval. This provision dramatically limited the ability of the legislature to increase taxes.
The property tax rate in California is 1% of the assessed value of real estate, plus any bonds, fees and special charges. Properties can only be reassessed when there is a change in ownership or when new construction is completed. Unless one of these reassessment conditions exists, Prop 13 allows for annual increases of up to 2% of a property’s value.
The passage of Prop 13 dramatically limited the legislatures ability to increase taxes. Despite this, municipalities desired a mechanism to subsidize the building of infrastructure for new developments, so in 1982, the Capital Facilities Act was passed. The act is better known by its legislative authors, Senator Henry Mello and Assemblyman Mike Roos (i.e. Mell-Roos Assessment).
According to the San Diego County Assessor, “Mello-Roos districts are established by local governments at the request of a developer to finance specific public facilities and services such as schools, roads and libraries. Mello-Roos districts were authorized by state law in 1982. This law allows any public agency to establish a Mello-Roos district, which then can issue the necessary tax-exempt bonds and impose fees to pay off these bonds.” Communities or districts that impose a Mello-Roos fee are distributed throughout the County but are most common is large new subdivisions.
In addition to the 1% tax rate allowed by Prop 13, Mello-Roos fees are a separate charge on the property tax bill. The duration of Mello-Roos fees are linked to the amount of time needed to pay off the bond, which is typically 20-25 years. Mello-Roos fees range from $174 to over $3000 annually, and the average fee for San Diego communities was $1,488 in 2006.
To get a general idea about the amount of property taxes you would owe annually on a property, multiply the purchase price of the property by 1.2%. For example, if you purchased a $400,000 home, your annual tax due would be around $4,800, plus special assessments (if applicable), and Mello-Roos fees (if applicable).
Consumers should be aware that tax rates for a particular area can increase as news bonds are added or decrease if bonds are paid off. In addition, Special Asssessments (if any) for new infrastructure can also impact tax rates.
When considering the purchase of real estate, single-family homes, condominiums or townhomes in San Diego (particularly in newer communities), propspective buyers should find out if the property has Mello-Ross or other Special Assessment fees, how long these fees will continue, and if the fees increase annually.
Over 1 million tax bills are sent out every year in San Diego County by the County Tax Collector. The tax period in San Diego covers the period from July 1st to June 30th. The amount owed is based on the assessed value of the property as of January 1st. The tax bill is mailed out in September or early October, and is due in two equal installments; first payment is due December 10th and the second payment is due April 10th. State law does not allow for extensions to pay the tax bill and late payments are subject to a penalty of 18% APR. For those wishing to pay by credit card, the Discover Card is the only option at this time.
For more information about property tax issues in San Diego or to obtain a definative answer to your property tax questions, contact the San Diego County Assessor or your tax professional.

The Benefits of a Good Faith Estimate and Pre-approval When Buying Real Estate

July 16th, 2009 at 04:37am Under Estates Law

Most real estate purchases are bought with loans so getting a good faith estimate and pre-approval letter from your lender helps the process start off on the right foot. The good faith estimate, or GFE for short, is required by law to be provided by lenders when you are seeking a loan. It lists out the estimated closing costs, monthly payments, and interest rates for the loan program you are looking at getting. The pre-approval letter is provided by lenders once they have run your credit and get your income / debt information. By getting the GFE and pre-approval letter, you can be confident that the loan will get processed with no surprises. There are also additional benefits to getting pre-approval and GFE before you even begin the property search. For one, by discussing your debt to income ratio with your lender and obtaining the GFE, you can determine your maximum price. It helps to know the maximum sales price when shopping around so that you do not waste time and energy looking a over-priced properties, and also vice verse, you do not waste time and energy looking at under-priced properties. You can find an area in your price range that fits your needs and narrow down your search. You also will determine your monthly payments with the GFE. The monthly payments should include the property taxes, insurance, principle, and interest plus any private mortgage insurance (PMI). If the monthly payments are higher than you wanted, then you can adjust your sales price to be lower. Another reason to get your pre-approval and GFE before starting your home search is that you may find out some issues with your credit or financial situation that you could clean up before moving forward with a purchase. For example, the first time I bought a house, I found out that I had a $50 charge on my credit report from 3 years ago, which brought my credit score down. And with a lower credit score, I would have gotten a worse interest rate on the loan. I say ‘would have’ because I was able to pay off this collection and clear up the ding on my credit before going into the loan underwriting process. Finally, by getting a pre-approval letter, you have proof for a seller that a lender has confidence in being able to fund the purchase on your behalf. This helps with presenting offers and negotiating. Many sellers will not even accept an offer unless it is accompanied by a lender’s letter. Furthermore, if you do not have a letter, the seller may counter higher given that he feels he is taking on more risk that you may not be qualified for the loan amount. Also, if you happen to get into a multiple offer situation, your offer will be much stronger with a pre-approval letter.

Useless Real Estate Middle Men and How to Avoid Them!

July 15th, 2009 at 10:38pm Under Estates Law

How do HomeGain, Realtor.com, Service Magic and other companies like this make money? These companies are called lead generation companies. They spend vast amounts of money advertising on TV, the Internet, radio, and in print so that you’ll go to their website to find information about real estate. When you click on a property and request information the company then either sells the lead at a fee ranging from $20-$50 for an unqualified lead or up to a 35% referral fee for leads that are more valuable.What does the company do for the fee charged? The answer might be pretty surprising. They don’t do anything, but forward the lead to a service provider. Yep, that’s right. You can search the MLS on any number of free websites so the website they provide is little more than a mechanism to get your information. Some people think agents, contractors, or other service providers are overpaid for what they do. Take a look at these companies and ask yourself if forwarding an email is worth $1500 (That’s the commission split they would receive on the sale of a $150,000 home.).Who pays the fees that these companies charge? For the most part, the Realtor, mortgage broker or other service provider pays for these leads. The laws of business provide that you can’t get something for nothing. This is very true. So by adding no value to the transaction and taking up to 35% of the payment for service, the middle-man is taking value from both the consumer and the service provider.Why is this bad for consumers? In real estate like many other service industries, the best Realtors obtain their business through referrals. The weaker, newer, less experienced agents typically buy leads from sources such as these. The next time you visit a site like these lead generators, think twice about giving them your information and go directly to the source. You’ll cut out the middle-man and get a better agent for your hard earned dollar.

Feldman Law Center – Loan Modification – The Truth, The Whole Truth, And Nothing But The Truth!

July 15th, 2009 at 04:38pm Under Estates Law

 

Loan modification and stop foreclosure services should be provided by a reputable attorney and NOT a loan modification company that boasts “in house attorneys” or “attorney based”. Most so called Loan modification experts are misleading, giving home owners false promises and misrepresenting their services. We have seen many of these loan modification companies send home owners loan modification examples similar to the way they sold mortgages. Making statements and emailing examples with guaranteed or proposed principal reductions and charging up front fees as well as trying to collect monies at the close if they obtain a loan modification agreement. Honestly, these types of loan modification companies should be reported to the DRE and the Attorney General’s Office.

 

We have reviewed several loan modification agreements from loss mitigation companies offering to help stop foreclosure and found they all highly recommend you have “your attorney” review ALL documents including their contract before signing. Why would a borrower hire an attorney just to review a loan modification company’s agreement before signing? In addition, why would they then again hire an attorney to review the final loan modification agreement? The simple truth is, this is advised so you fully understand what you are signing. You must read the fine print and know how to interpret the agreement.

 

Why not just hire an attorney in the first place to negotiate with your lender and review ALL the documents as well as counsel you with a plan of action. Attorneys providing loan modification services and real estate negotiations are not as easy to find. The Feldman Law Center offers a flat fee for loan modification services that is much less than most loan modification companies. We have reviewed several loan modification service agreements from companies that charge up front fees and found them poor at best. DO NOT PAY UP FRONT FEES TO A LOAN MODIFICATION OR LOSS MITIGATION COMPANY THAT OFFERS STOP FORECLOSURE OR LOAN MODIFICATION SERVICES. THESE COMPANIES SEND THEIR FILES TO OUTSIDE LOAN PROCESSING COMPANIES PRAYING FOR A RESULT. OUR LOAN MODIFICATIONS TAKE 3 TO 6 WEEKS, NOT 3 TO 6 MONTHS!

 

Loan modification services should be provided from a Law Office that has experience negotiating with mortgage loan servicing companies for a multitude of reasons. The Feldman Law Center in California has long standing relationships and a sophisticated approach with all the major lenders and mortgage servicing companies and proven results. To see for yourself or for more information about loan modifications call us today or visit www.feldmanlawcenter.com .

Protect Your Deposit When Buying Real Estate

July 15th, 2009 at 10:37am Under Estates Law

When you start the process of buying a home or any type of real estate, you’ll no doubt hear the term “earnest money deposit” (EMD). So what exactly is an EMD?
An EMD becomes relevant when you are ready to make an offer on a property. In most states, your Real Estate Agent prepares the offer on your behalf. The offer usually takes the form of a written contract that is submitted to the seller by way of their agent.
In addition to the offer document, sellers typically expect an EMD. An EMD is a monetary deposit submitted via check to demonstrate to the seller that you are a serious buyer. In some regions of the country, only a photocopy of the check is submitted with the offer, and the original check is delivered to the appropriate entity if the offer is accepted. Ask your Real Estate Agent to clarify how deposits are handled in your region of the country.
The check is usually made out to an independent third- party such as a Title Company, Escrow Company, Real Estate Attorney or your Real Estate Broker. Ask your Real Estate Agent to clarify who will hold the EMD.
The amount of the EMD sellers expect varies by region. The EMD amount is based on the customs and practices for a region, but is generally from 1% to 2% of the purchase price. In a competitive market place where demand exceeds the supply of homes, some buyers may offer a higher EMD than expected to impress the seller of their intent. In determining the amount of your EMD, consult your Real Estate Agent and balance the need to demonstrate your serious intent, against the good business practice of minimizing the deposit amount.
The amount of the EMD is usually applied to reduce the purchase price of the property or to cover closing costs, as you dictate. For example, if you are purchasing a $300,000 property and you give an EMD of $3000, then the remaining balance owned at closing is $297,000 (plus closing costs). Alternatively, you may direct that the EMD be applied toward the closing costs.
Once a valid contract for purchase is created, an independent third-party usually holds the EMD until the purchase is either completed or cancelled. At this point, the money belongs jointly to both the seller and the buyer.
In cases where you make an offer that is accepted but later decide to cancel the offer, the terms specified in the contract (or state law) will dictate if, and under what circumstances, the EMD is returned to you. Be aware that you could loose your deposit if you do not not comply with the terms of your contract. Your Real Estate Agent can provide you information about how EMDs are dealt with if a contract is cancelled.
Since state law varies by region and practices can differ even within the same state, be sure to consult your Real Estate agent about the rules that apply to EMDs in your region of the country. You should also be aware that the EMD is not related to any down payment that you make toward your home loan.

Indian Real Estate Investment Policy India – Part I

July 15th, 2009 at 04:38am Under Estates Law

- Opportunities – Applicable Laws/Regulatory Policies. – Tax Benefits/ Incentives- Current Projections in the Budget. I. INTRODUCTION. Due to LPG policy particularly liberalized Foreign Direct Investments (FDI) regime the India’s explosive economic progress has captured the world’s attention and its property market has indeed emerged as one of the most appealing investment destinations for both domestic and foreign investors.

Indian Real estate is on the high growth path and the boom is mainly due to mall culture, multiplexes, hypermarkets and retail sector are growing in India and retail brands from all over the world are showing their keen interest to even setup their base in India especially MNCs apart from retail outlets coupled with rising demand for commercial and residential boosting the industry. It is expanding its wings even in remote towns. Leave aside metro cities, smaller towns have attracted construction activity from big developers. Shopping malls, skyscrapers and new infrastructures are shaping new India.

II OPPORTUNITIES Indian real estate has huge potential demand in almost every sector especially commercial, residential, hospitality, healthcare, retail and industrial etc. This is growing at a dizzying pace of almost 30 percent each year. The bulk of construction activity – 80 percent is dedicated to housing, while the rest is commercial, including offices, malls, hotels and hospitals.The Real Estate market is projected to grow to US$60 billion by 2010 at a CAGR of 40% Several factors are expected to contribute to the rapid growth in Real Estate Large demand-supply gap in affordable housing, with demand being fuelled by tax incentives and a growing middle class with higher savings. Increasing demand for commercial and office space especially from the rapidly growing Retail, IT/ ITeS and Hospitality sectors etc. Investment opportunities exist in almost every segment of the business as per the estimates of Investment commission of India particularly in the following sector. Over 20 million new housing units will require in next 4 years. Office space for IT/ITeS: Five-fold increase in office space requirement over the next 3 years Commercial space for organized retailing: 200 million sq. ft. by 2010. Hotels & Hospitality: Over 40,000 new rooms in the next 5 years Investment opportunity of over US$75 billion in will require in the next four years. Working Group on Urban Housing pertaining to the 11th Plan made assumptions on unit cost of construction of houses in million plus cities and other urban areas for estimating the investment required for overcoming the housing shortage. The total estimated investment for meeting the housing requirement upto 2012 was estimated to be of the order of Rs.3,61,318.10 crores consisting of Rs.1,47,195 crores for mitigating housing shortage at the beginning of 11th Plan and Rs.2,14,123.10 crores for new additions to be made during the 11th Plan period (this includes construction of pucca houses & upgradation of semi-pucca and kutcha housing units.Apart, India in the next two years period is estimated to require investments worth US$60 billion by 2010. This again has opened up opportunities for foreign investments in the realty sector. FDI liberalization in year 2005 has thrown open the lucrative parts of the Indian realty market to global investors. Foreign Direct Investments in the real estate sector in India would also contribute towards making the sector more organized. Besides increasing professionalism in the sector, it would bring in advanced technology and help in the creation of healthy and competitive market environment for both domestic and foreign investors.Real Estate companies have been successfully tapping the country’s booming capital markets for funds. Commercial office space requirement is led by the burgeoning outsourcing and Information Technology Industry. The leaders of the IT/ITES world have set up or are setting up their centers in India. Estimated demand from IT/ITES sector alone is expected to be 150mn sq.ft. of space across the major cities by 2010. In residential sector there is housing shortage of 19.4 million units out of which 6.7 million are in urban India. High demand growth has led to prices doubling over 3 years in many cities. The increase in purchasing power and exposure to organized retail formats has redefined the consumption pattern. As a result the country has experienced mushrooming of retail projects across the cities.Growth is expected in the all following sectors and Foreign Direct Investment is encouraged and permitted these sectors subjected to certain conditions. • Hotel Development• TourismIf you want to read article go to second part of this – Indian real estate investment policy India – Part II.

Indian Real Estate Investment Policy India – Part I

July 15th, 2009 at 04:38am Under Estates Law

- Opportunities – Applicable Laws/Regulatory Policies. – Tax Benefits/ Incentives- Current Projections in the Budget. I. INTRODUCTION. Due to LPG policy particularly liberalized Foreign Direct Investments (FDI) regime the India’s explosive economic progress has captured the world’s attention and its property market has indeed emerged as one of the most appealing investment destinations for both domestic and foreign investors.

Indian Real estate is on the high growth path and the boom is mainly due to mall culture, multiplexes, hypermarkets and retail sector are growing in India and retail brands from all over the world are showing their keen interest to even setup their base in India especially MNCs apart from retail outlets coupled with rising demand for commercial and residential boosting the industry. It is expanding its wings even in remote towns. Leave aside metro cities, smaller towns have attracted construction activity from big developers. Shopping malls, skyscrapers and new infrastructures are shaping new India.

II OPPORTUNITIES Indian real estate has huge potential demand in almost every sector especially commercial, residential, hospitality, healthcare, retail and industrial etc. This is growing at a dizzying pace of almost 30 percent each year. The bulk of construction activity – 80 percent is dedicated to housing, while the rest is commercial, including offices, malls, hotels and hospitals.The Real Estate market is projected to grow to US$60 billion by 2010 at a CAGR of 40% Several factors are expected to contribute to the rapid growth in Real Estate Large demand-supply gap in affordable housing, with demand being fuelled by tax incentives and a growing middle class with higher savings. Increasing demand for commercial and office space especially from the rapidly growing Retail, IT/ ITeS and Hospitality sectors etc. Investment opportunities exist in almost every segment of the business as per the estimates of Investment commission of India particularly in the following sector. Over 20 million new housing units will require in next 4 years. Office space for IT/ITeS: Five-fold increase in office space requirement over the next 3 years Commercial space for organized retailing: 200 million sq. ft. by 2010. Hotels & Hospitality: Over 40,000 new rooms in the next 5 years Investment opportunity of over US$75 billion in will require in the next four years. Working Group on Urban Housing pertaining to the 11th Plan made assumptions on unit cost of construction of houses in million plus cities and other urban areas for estimating the investment required for overcoming the housing shortage. The total estimated investment for meeting the housing requirement upto 2012 was estimated to be of the order of Rs.3,61,318.10 crores consisting of Rs.1,47,195 crores for mitigating housing shortage at the beginning of 11th Plan and Rs.2,14,123.10 crores for new additions to be made during the 11th Plan period (this includes construction of pucca houses & upgradation of semi-pucca and kutcha housing units.Apart, India in the next two years period is estimated to require investments worth US$60 billion by 2010. This again has opened up opportunities for foreign investments in the realty sector. FDI liberalization in year 2005 has thrown open the lucrative parts of the Indian realty market to global investors. Foreign Direct Investments in the real estate sector in India would also contribute towards making the sector more organized. Besides increasing professionalism in the sector, it would bring in advanced technology and help in the creation of healthy and competitive market environment for both domestic and foreign investors.Real Estate companies have been successfully tapping the country’s booming capital markets for funds. Commercial office space requirement is led by the burgeoning outsourcing and Information Technology Industry. The leaders of the IT/ITES world have set up or are setting up their centers in India. Estimated demand from IT/ITES sector alone is expected to be 150mn sq.ft. of space across the major cities by 2010. In residential sector there is housing shortage of 19.4 million units out of which 6.7 million are in urban India. High demand growth has led to prices doubling over 3 years in many cities. The increase in purchasing power and exposure to organized retail formats has redefined the consumption pattern. As a result the country has experienced mushrooming of retail projects across the cities.Growth is expected in the all following sectors and Foreign Direct Investment is encouraged and permitted these sectors subjected to certain conditions. • Hotel Development• TourismIf you want to read article go to second part of this – Indian real estate investment policy India – Part II.

Indian Real Estate Investment Policy India – Part I

July 15th, 2009 at 04:38am Under Estates Law

- Opportunities – Applicable Laws/Regulatory Policies. – Tax Benefits/ Incentives- Current Projections in the Budget. I. INTRODUCTION. Due to LPG policy particularly liberalized Foreign Direct Investments (FDI) regime the India’s explosive economic progress has captured the world’s attention and its property market has indeed emerged as one of the most appealing investment destinations for both domestic and foreign investors.

Indian Real estate is on the high growth path and the boom is mainly due to mall culture, multiplexes, hypermarkets and retail sector are growing in India and retail brands from all over the world are showing their keen interest to even setup their base in India especially MNCs apart from retail outlets coupled with rising demand for commercial and residential boosting the industry. It is expanding its wings even in remote towns. Leave aside metro cities, smaller towns have attracted construction activity from big developers. Shopping malls, skyscrapers and new infrastructures are shaping new India.

II OPPORTUNITIES Indian real estate has huge potential demand in almost every sector especially commercial, residential, hospitality, healthcare, retail and industrial etc. This is growing at a dizzying pace of almost 30 percent each year. The bulk of construction activity – 80 percent is dedicated to housing, while the rest is commercial, including offices, malls, hotels and hospitals.The Real Estate market is projected to grow to US$60 billion by 2010 at a CAGR of 40% Several factors are expected to contribute to the rapid growth in Real Estate Large demand-supply gap in affordable housing, with demand being fuelled by tax incentives and a growing middle class with higher savings. Increasing demand for commercial and office space especially from the rapidly growing Retail, IT/ ITeS and Hospitality sectors etc. Investment opportunities exist in almost every segment of the business as per the estimates of Investment commission of India particularly in the following sector. Over 20 million new housing units will require in next 4 years. Office space for IT/ITeS: Five-fold increase in office space requirement over the next 3 years Commercial space for organized retailing: 200 million sq. ft. by 2010. Hotels & Hospitality: Over 40,000 new rooms in the next 5 years Investment opportunity of over US$75 billion in will require in the next four years. Working Group on Urban Housing pertaining to the 11th Plan made assumptions on unit cost of construction of houses in million plus cities and other urban areas for estimating the investment required for overcoming the housing shortage. The total estimated investment for meeting the housing requirement upto 2012 was estimated to be of the order of Rs.3,61,318.10 crores consisting of Rs.1,47,195 crores for mitigating housing shortage at the beginning of 11th Plan and Rs.2,14,123.10 crores for new additions to be made during the 11th Plan period (this includes construction of pucca houses & upgradation of semi-pucca and kutcha housing units.Apart, India in the next two years period is estimated to require investments worth US$60 billion by 2010. This again has opened up opportunities for foreign investments in the realty sector. FDI liberalization in year 2005 has thrown open the lucrative parts of the Indian realty market to global investors. Foreign Direct Investments in the real estate sector in India would also contribute towards making the sector more organized. Besides increasing professionalism in the sector, it would bring in advanced technology and help in the creation of healthy and competitive market environment for both domestic and foreign investors.Real Estate companies have been successfully tapping the country’s booming capital markets for funds. Commercial office space requirement is led by the burgeoning outsourcing and Information Technology Industry. The leaders of the IT/ITES world have set up or are setting up their centers in India. Estimated demand from IT/ITES sector alone is expected to be 150mn sq.ft. of space across the major cities by 2010. In residential sector there is housing shortage of 19.4 million units out of which 6.7 million are in urban India. High demand growth has led to prices doubling over 3 years in many cities. The increase in purchasing power and exposure to organized retail formats has redefined the consumption pattern. As a result the country has experienced mushrooming of retail projects across the cities.Growth is expected in the all following sectors and Foreign Direct Investment is encouraged and permitted these sectors subjected to certain conditions. • Hotel Development• TourismIf you want to read article go to second part of this – Indian real estate investment policy India – Part II.

Acquiring Real Estate in Israel

July 14th, 2009 at 10:38pm Under Estates Law

The Type of the Land

There are two main types of real estate properties in Israel, (i) privately owned land (“Private Land”); and (ii) State owned lands (“State Lands”), also referred to as “Minhal” land. Israeli laws and practices regarding State Lands differ from those regarding Private Lands.

The main difference between the two is that while the title to Private Land is registered under the name of the purchaser in the land registry, title to State Land as a rule does not pass on to the purchaser. Rather, the purchaser of State Land acquires a long-term lease to the property, (usually for 49 years with an option to extent for an additional 49 years) which may be registered under the name of the lessee in the land registry. Extending the lease for a State Land property may require payment to Israel Land Administration (“Minhal”). Consequently, the first thing that should be confirmed prior to purchasing a real estate property in Israel, is whether the property is registered as Private Land or State Land, and in the latter case the date of renewal of the lease should be ascertained.

It is worth noting that only 10% of the land in Israel is Private Land; however, most Private Land is situated in urban areas.

Verifying Title to the Property

Unlike in the U.S., where it is customary to obtain title insurance from an insurance company, in Israel, in order to verify the title to the property, one must rely on the registration in the Land Registry as well as on the Seller’s representations and warranties in the Sale Agreement. In other words, one must ensure that all necessary inquiries regarding the Seller’s ownership in the property are made prior to entering into a real estate transaction.

Purchase of a New Apartment from a Contractor

Prior to finalizing a contract for the purchase of a new apartment (i.e. an apartment which has yet to be built) from a contractor (or, alternatively, from a private owner of an apartment, who acquired the apartment from the contractor for resale purposes), the purchaser should carefully review the Specification and the Blueprint of the planned apartment. Under the Sale (Apartments) Law – 1973, the contractor is obligated to append the Specification to the contract. These documents set forth a salient part of the contractor’s commercial commitments regarding the apartment, and without them there may be material differences between what the purchaser was expecting to receive and what is actually received.

A few important verifications should be made regarding these documents:

1) It is important to insist that the contractor lists the apartment size in the Specification in net rather than gross terms (i.e. excluding the “common property”, wall areas, etc.).

2) “Joint buildings” (meaning buildings containing two or more apartments), are required to have a set of By-Laws, which regulate the relations between the tenants. A standard set of By-Laws is annexed to the Real Property Law – 1969, and applies automatically, unless the apartment owners have duly adopted a different set of By-Laws.

3) It is important to ensure that there is a precise definition of the building’s “common property” that will be attached to the purchased apartment.

4) The Law requires a contractor to provide the purchaser of an apartment with at least one of five (5) different types of guarantees, prior to receiving from the purchaser a sum exceeding 15% of the purchase price:

(a) Bank Guarantee ;

(b) Insurance Policy –This type of guarantee is rarely granted;

(c) Lien – This type of guarantee is likewise rarely provided by contractors;

(d) Caveat – registered at the local land registry, and grants the purchaser preference over any later conflicting transactions;

(e) Transfer of Title to the Property under the Purchaser’s Name at the Land Registry – contractors will almost never agree to the transfer title prior to receiving payment in full from the purchaser.

The two commonly used types of guarantees are the Bank Guarantee and the Caveat. It is imperative to demand from the contractor both types of guarantees.

The Bank Guarantee provides the purchaser with a money back guarantee, while the Caveat grants a preference over later transactions and protects purchaser’s rights to the property from encroachment by contractor’s creditors.

The bank financing the project often has a lien registered in its favor over the entire property, thus necessitating a waiver from the bank in order to allow registration of the Caveat. The waiver granted by the bank, is usually conditional waiver stating that in consideration for full payment being made by the purchaser, the bank will discharge the lien over the relevant apartment.

Following full payment, the bank should provide a final and irrevocable waiver, confirming that its lien over the relevant apartment has been discharged. It is important to demand that the contractor produce and append to the purchase contract a signed conditional waiver from the bank, as well as a draft of the final waiver to be provided by the bank upon full payment by the purchaser.

Purchasing a Second Hand Apartment

When purchasing a second-hand apartment, it is important to carefully review the registration documents of the apartment building, including the building’s registration extract, and the By-Laws (mentioned above). These documents regulate the reciprocal rights and obligations of each of the apartment owners.

These documents should address issues such as: sanctioned uses of the building’s common property; is the parties entitled to use the remainder of the unused building rights; the share of each apartment in the maintenance of the building; etc.

Furthermore, if upon purchase of the apartment the building has yet to be registered as a “joint building” in the land registry office, then it is important to realize that the “attachments” of certain parts of the building to specific apartments (for example: roofs, parking spaces, backyards etc.), have as well yet to be registered, and thus, it is imperative to check if every exclusive usage/attachment of such property has been approved by all of the neighbors.

If the apartment is acquired from a contractor who has entered into a “Development Agreement” with the Minhal, under which the contractor is obliged, within a set timetable, to submit plans, to commence building and to complete the project, it is imperative to verify with the Administration’s offices whether the contractor has satisfied all of its obligations in accordance with the Development Agreement, and is entitled to receive the property from the Minhal

Leasing a “Minhal” Apartment under a Long Term Lease

As aforementioned, State Real Property can only be leased and not purchased.

The “purchaser” is rather granted the right to enter into a long-term lease with the “Minhal”.. In the past, most apartment lessees were required to pay annual rent to the Minhal, however, the majority of apartment leases nowadays are “capitalized”, i.e. the developer/ contractor pays the rent for the entire lease term in advance and the lessee is exempted from annual payments.

Practically, once the lease agreement is signed, the lessee has no further dealings with the Minhal until the expiration of the lease, unless he wishes to modify the existing structure or change its designated use. In such case, approval of the Minhal, as the owner of the land, is required, and if the property has not been “capitalized”, such process may involve payment of transfer fees to the Minhal.

Therefore, when leasing property from the Minhal, it is imperative to verify that the property is capitalized and that in the event of transfer of rights in the lease there will not be any transfer fees due to the Minhal.

To sum, engaging in a real estate purchase transaction in Israel may be complex. One needs to be familiar with the different types of property, the law affecting each type and the measures that need to be taken in the course of such transaction.