Tag Archives: Anshuman magazine

Budget impact on real estate sector

Posted on by Track2Realty

The Union Budget for 2016-17 has overall been a good one for the real estate and construction sector.

Anshuman magazine, CB Richard Ellis, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyThe Union Budget has attempted to encourage private sector investments into the Indian realty sector, while aiming to introduce banking reforms. The most encouraging announcement, however, has been the exemption of Real Estate Investment Trusts (REITs) from Direct Distribution Tax (DDT).

It is hoped that having cleared this hurdle, companies will now come forward to set up REITs, which is expected to be a game changer for the industry in India.

The corporate real estate space will also benefit from the announcement made by the Finance Minister on the sunset clause for Special Economic Zones (SEZs). According to the Budget 2016-17, the sunset date for exemption of fiscal incentives to SEZs has now been pushed forward to March 2020.

Although more could have been done to revive housing demand in the country, the Government has extended incentives on various fronts, especially for the Affordable Housing segment.

It has announced 100% tax exemptions for private players constructing affordable housing of 30 sq.m in the four metros and 60 sq.m in other cities, approved during the June 2016 to March 2019 period, and completed within three years of construction approval.

The Finance Minister has also announced 100% excise duty exemption for Ready Mix Concrete, which is expected to bring down environmental pollution at construction sites.

An additional rebate of INR 50,000 per annum on housing loan interest for first time home buyers in the affordable segment for loans not exceeding INR 35 lakh, and for properties not exceeding INR 50 lakh, was also announced. This move is likely to fuel affordable housing demand, especially in the tier II and III cities of the country.

The Finance Minister also provided a boost to the rental housing market with an increase in House Rent Allowance (HRA) deductions. Those not owning a house and not receiving any HRA from their employers can now avail a standard deduction of INR 24,000; while for those availing HRA, the limit has been raised to INR 60,000 per annum towards rent paid for their accommodation.

The infrastructure sector was particularly in focus in the recent Budget announcements, with a record allocation of
Rs. 2,21,246 crore for overall infrastructure development, including railways. There was also increased focus on Greenfield ports as well as on the upgradation of underutilized / unused airports and airstrips.

In addition, various schemes were announced by the Finance Minister to rejuvenate private sector interest in infrastructure investments, through Public‚ÄďPrivate Partnership (PPP) models.

The ease of doing business was in focus too. Changes in the Companies Act, and early registration of new companies and start-ups are expected to facilitate the business environment in the country.

By: Anshuman Magazine, CMD, CBRE South Asia

Expectations on way forward for GST Bill from Budget Session

Posted on by Track2Realty

Passage of Bill likely to fuel consumption in economy and facilitate growth of industrial/warehousing space.

Anshuman magazine, CB Richard Ellis, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyFor achieving 10% growth, India‚Äôs domestic economy needs to attract added investor interest, including that of overseas funds. Increased levels of foreign investments would be welcome for the Government‚Äôs recently launched ‚ÄúMake in India‚ÄĚ initiative as well.

To this end, the passage of the pending Goods and Service Tax (GST) Bill is of critical importance. More direction is sought from the Government on the GST Bill in the upcoming Budget session. In this connection, the Hon’ble Finance Minister has been optimistic of the Bill being passed in the next session of Parliament.

The Bill aims to create a single tax regime by doing away with multiple central and state level taxes such as the Central Excise Duty, Value Added Tax (VAT), Octroi, luxury tax, etc. Once implemented with a single taxation structure, GST will have positive effects on individual as well as industry taxation levels.

On the individual front, it will make products and services cheaper, because the cascading effect of multiple taxes from the levels of manufacturers and wholesalers that is ultimately borne by end-consumers will be avoided. This move may incentivize more consumption in the market from consumers, injecting overall economic growth including in the retail and logistics sectors.

From the point of view of the industrial and logistics real estate segment, a unified GST would allow industry players to surmount regulatory restrictions and focus on consolidation of industrial/warehousing space for maximum operational efficiencies.

Under the current regime wherein indirect taxes are levied by the Central as well as State Governments for the storage and transportation of goods, logistics and warehousing firms are forced to locate their facilities in regions to best accommodate multiple tax structures.

Players often end up paying higher rentals because industrial/warehousing locations with lower rental rates also pose various regulatory hindrances.

Once the Bill is implemented on ground, such industry players are likely to move towards consolidating their facilities according to their specific business needs, instead of being driven by regulatory concerns.

Along with the recently relaxed guidelines on Foreign Direct Investments (FDI), the likely passage of the GST Bill may prompt large scale foreign investments and sustainable growth of the country‚Äôs built environment, including warehousing and industrial space. The Government‚Äôs ‚ÄúMake in India‚ÄĚ initiative also would receive a significant boost from this move.

By: Anshuman Magazine, CMD, CBRE South Asia

A look at India’s housing market in 2015

Posted on by Track2Realty

By: Anshuman Magazine, CMD, CBRE South Asia

cb richard ellis, CBRE South Asia, Anshuman Magazine, NRI investment, NRI Property, India real estate news, India property news , Indian realty market, IPC, Independent Property Consultants, Track2Media Research Pvt Ltd, Track2Realty In many ways, the year 2015 was a defining one for the residential real estate segment in India. This was the period when the market began to evolve, along with customer expectations as well as market dynamics.

The most important change among these, perhaps, came about in the outlook of the homebuyer. Unlike previous years, we were no longer dealing with end-users who were satisfied with offers and property brochures alone.

The key words in customer satisfaction for home purchases in 2015 became project delivery, pace of construction progress, and product quality.

The inventory of completed and available housing units in most micro-markets of leading cities in the country helped home buyers to make their purchase decisions.

Much like the home buying process in evolved markets around the world, the residential real estate segment in India caught up with the going trend as well, by enabling investors and end-users to take informed decisions with ready products rather than on the basis of launch information and product literature.

Initiatives for housing sector revival

The Government has been trying to revive the housing market by inducing monetary easing measures; and in this regard, with the  Reserve Bank of India (RBI) having  already pared key interest rates four times this year to 6.75%.

The Central Bank‚Äôs proposal to reduce the minimum risk weightage on individual housing loans for low cost homes will also hopefully lend support to the Government‚Äôs ‚ÄėHousing for All‚Äô scheme. Once implemented, this move is likely to provide an impetus to sales in the affordable housing segment.

As of last year, builders as well as banks had been offering attractive terms to homebuyers during the festive season in a bid to revive the market. Apart from the usual gift vouchers and overseas trips, developers had also planned new project launches, discounts and finance schemes for the period.

During 2015, however, due to the sales slowdown in the housing segment, various festive offer schemes like the subvention scheme, were extended by developers to homebuyers throughout the year. New launches also remained subdued during the year.

Despite reduced home loan rates, relaxation in loan-to-value (LTV) ratio in the housing sector, and significant discounts and attractive offers from developers on completed projects‚ÄĒinvestors are yet to return to the market in comparison to demand in previous years.

Major reasons for this sluggish demand, as highlighted earlier, are home buyer expectations on project delivery, the pace of construction progress, and ultimately, product quality.

An introspective year: 2015

This has been an introspective year for India’s housing market, for development firms, property construction contractors, as well as homebuyers. While homebuyers’ primary demands have been on-time delivery and quality of construction, developers too have been transitioning towards new and innovative methods to attract end-users, with a focus on quality product delivery.

The residential market has been gradually shifting from a pure price mechanism this year towards a more qualitative change in terms of commitment to delivery and right pricing strategies. On the funding front too, there has been a change towards a debt structure from an equity structure.

Apart from becoming more realistic with property pricing, developers and landlords have also become more accommodative of homebuyer requirements.

Currently, developers are more flexible with property price points and are ready to offer better payment plans and structures to get the buyer to return to the market. The focus is now on clearing ready inventory rather than on launching new projects.

Outlook for 2016

The property market in 2016 is expected to see a qualitative change. While homebuyers will continue to remain discerning in terms of quality products delivered without delays; development firms will likely turn their focus on quality construction and on timely delivery of their projects. Monetary easing, meanwhile, is expected to be fully passed on to end-users by 2016. It is hoped that the Government will continue to provide incentives to sectors such as construction materials, while aggressively driving urban infrastructure projects.

Overall outlook for real estate positive in 2015

Posted on by Track2Realty

By: Anshuman Magazine, CMD, CBRE South Asia

Anshuman magazine, CB Richard Ellis, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyTrack2Realty: The economic growth rates in Asia are likely to lead the world‚ÄĒcreating demand for built spaces, triggering business expansion, and inducing businesses to occupy retail premises and office properties.

India‚Äôs recent growth has been a bright spot in the region, topping even China‚Äôs performance. Encouraged investors are continuing to look Asia-wards‚ÄĒincluding towards India‚ÄĒfor an advantageous real estate market likely to offer long-term returns.

Driven by rapid urbanization, demographic growth, an expanding middle-class and increasingly wealthy households, CBRE forecasts that economic growth in Asia Pacific will remain ahead of the world average in the coming years, which will translate into stronger demand for high quality property‚ÄĒespecially suburban retail malls and residential housing.

The region will continue to outperform in 2015‚ÄĒwith Oxford Economics projecting 4.4% economic growth, compared to 2.9% globally. CBRE estimates that the overall investment turnover in Asia Pacific will increase by five per cent year-on-year to US$118 billion in 2015.

The region’s investment growth is supported by a number of factors, including newly raised private equity real estate funds; an increase in institutional investors’ allocations to Asia Pacific; growing activity by Asian institutional investors and adequate debt financing.

Furthermore, the combination of high liquidity and the lower probability of interest rate hikes provide landlords holding prime assets the support to maintain pricing at current levels. Landlords will be reluctant to dispose of assets at discounted prices.

Much of Asia is a growing market, however, with some of its locations having seen a surge in fresh real estate supply‚ÄĒindeed even oversupply in comparison to markets in Europe and the Americas‚ÄĒand such a scenario can sometimes dampen rental growth for a couple of years. By and large, though, there is unlikely to be any change in the region‚Äôs growth pattern, going forward.

India realty market outlook 2015

According to official data released in early February, India‚Äôs GDP surged to 8.2% and 7.5% in the last two quarters of 2014, respectively‚ÄĒtopping even China‚Äôs performance.

For the current fiscal, the Government expects India’s GDP to grow to 7.4% from 6.9% in the previous fiscal. Focused firmly on its reform-led agenda, the new Government has made a slew of proposals to relax guidelines for foreign investment, implementation of Real Estate Investment Trusts (REITs), and increased funding for affordable housing and infrastructure projects. These are all expected to offer some much needed impetus to the real estate sector.

The positive outlook for the Indian market this year includes an increasing demand for IT/back-office space; the emergence of new sectors such as e-Commerce; as well as the rising demand for SEZ space. Other silver linings for 2015 are the likely commencement of REIT-led investments in India’s commercial real estate; new workplace strategies; and rising rents in supply-deficient core markets.

Recent interest rate cuts in January and March 2015 have also been positive steps for boosting housing demand and improving investment sentiments in the country.

The housing market is likely to see a shift from luxury towards affordable housing projects, with affordable price points hopefully leading to higher absorption levels. Developer emphasis on clearing inventory levels and meeting construction deadlines is seen as an encouraging step for the segment.

In terms of retail real estate, new supply addition is expected in tier-II cities during the year. Consumers in tier-II and III too are set to benefit as well from the further expansion of online retail. Improved consumer spending and better economic prospects are expected to fuel retail expansion too.

The recent, sixth edition of the CBRE report‚ÄĒHow Active are Retailers Globally?‚ÄĒexamines the global expansion ambitions of retailers based in Europe, the Americas and the Asia Pacific. As global economic recovery progresses and consumer sentiment strengthens, retailers are expanding their networks worldwide. Among key global target markets for retailers in 2015, about 6% of international retailers are likely to target India‚Äôs retail markets this year.

APAC markets outlook 2015

Growth will continue to diverge across the region with markets undergoing different economic cycles. CBRE does not expect most of these markets to experience significant upward pressure on interest rates this year due to the fall in inflation and the continued Quantitative Easing (QE) programme implemented in the Eurozone and Japan.

The recent steep decline in energy prices has also diminished the pressure for short-term interest rate hikes. Policy makers are more inclined to lower interest rates to support their economies, with notable recent examples in China, India, South Korea and Australia. Securing low-cost financing will give investors ample opportunities to invest in realty.

Current corporate and investor confidence in the region remains intact and supports firm demand from both real estate occupiers as well as investors. CBRE expects rental and capital value growth of around two to four per cent for commercial office, retail and industrial sectors in 2015.

Housing demand from home buyers in 2014 fell byapproximately 30% y-o-y

Posted on by Track2Realty

By: Anshuman Magazine, CMD, CBRE South Asia

Anshuman magazine, CB Richard Ellis, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyTrack2Realty: Residential sales declined by approximately 30% y-o-y by the end of 2014 in the seven leading cities of the country, largely due to high price points, sticky interest rates and cautious buyer sentiments. The decline, which was noted across all major cities, was particularly steep in the DelhiNCR (National Capital Region).The slowdown was reported in the premium/luxury as well as the high-end/mid-end housing segments.

The general slackness in residential sales was primarily triggered by the Affordability Index going down in certain cities. Housing sales remained muted even during the festive season, as a cautious buyer sentiment rode over discounts and attractive marketing offers. This is perhaps a signal that prevailing high property prices need to be rationalized in tune with average per capita income rates of Indian home buyers.

Keeping in mind subdued end-user/investor sentiments, many developers in major markets abstained from launching new projects, andinstead directed their focus towards reducing the existing inventory pile-up. Consequently, new supply addition declined by approximately 25% y-o-y, with a strong rationalization reported during the second half of the year.

This was particularly prevalent in the markets of Delhi NCR, Bangalore, Chennai and Pune. Despite the decline in new project launches, tier I cities continued to dominate the housing landscape, with DelhiNCR, Mumbai and Bangalore accounting for about 70% of the entire supply addition reported during the year.

Housing market across leading cities

Residential sales across most major housingmarkets witnessed a slowdownduring the latter part of the year, which was particularly noticeable in the premium/luxury and mid-end/high-end segments. On a bi-annual basis, all major markets witnessed a slowdown in sales with the exception of Mumbai The city saw residential sales inch up marginally by about 7% over H1 2014‚ÄĒalbeit a decline of about 2% on an annual basis.

At the same time, new project launches were largely concentrated in the mid-end/affordable housing segments. Prominent locations that saw residential supply addition during the second half of 2014 included Noida Extension, Gurgaon and Noida in the DelhiNCR; Borivali,Kandivali,Chembur and Powai in Mumbai; Whitefield, Kanakpura Main Road and Hebbal in Bangalore; Southern and Western locations of Chennai; and Baner, Viman Nagar and Pimple Nilakh in Pune.

Affordable housing

Although the Union Budget 2014‚Äď15 announcements supporting affordable housing was welcomed by the real estate industry, the segment has a long road ahead to traverse. A key push was given to the segment with an allocation of Rs. 4,000 crore through the National Housing Board (NHB) for providing cheaper loans for low cost housing to support the ‚Äėhousing for all by 2022‚Äô scheme. Consequently, developers have become increasingly focused on affordable housing, keeping in mind the huge gap between demand and supply in that segment.

The Government, moreover, has recently effected certain amendments to the Land Acquisition Act, 2013, to make the process of land acquisition hassle-free for key sectors that inter-alia includes affordable housing. The same is expected to contribute towards augmenting the supply of affordable housing and curtailing the bridge between the demand and availability of affordable ‚Äėhousing for all‚Äô across the country.

Yet another welcome regulatory move was the amendment in Foreign Direct Investment (FDI) norms in the housing sector, reducing the minimum capitalization from US$10 million to US$5 million for wholly-owned subsidiaries; and trimming the minimum area of construction projects from a carpet area of 50,000 sq. m. to 20,000 sq. m.

Such relaxation in entry norms is expected to provide a fillip to the quantum of investments going into the housing sector, particularly in India’s tier II and III cities. The regulation is likely to widen the base of investors, especially mid-sized financial institutions, while encouraging new development projects in prime areas of large cities and tier II/III towns.

Outlook: 2015

The fundamentals are in place for the global economy to move ahead in 2015.There are signs of business conditions turning the corner and I anticipate better news ahead for India’s realty sector, which will take time to recover. The factors most likely to impact the real estate market positively are stronger and sustained GDP growth; and more relevant reforms, such as the recent amendments made to the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

The recent instance of monetary easing implemented by the Central Bank is expected to boost housing demand and also improve sentiments in the sluggish property market. With positive business sentiments, improvement in economic situation and further reduction in interest rates, housing demand is likely to pick up in the forthcoming months.

Developers, of late, are increasingly focused on supply of affordable housing keeping in mind the huge gap between demand and supply in that segment. This trend is expected to continue in the near future. Even as they focus on the mid-end to affordable segment of housing, overall project launches across cities are expected to remain low. Troubled by subdued demand developers are expected to defer new project launches, and focus mainly on the completion of under-construction projects.

Additionally, demand is also expected to be mainly concentrated in the peripheral and suburban locations. Though property prices have remained largely stable during the year, developers are offering flexible payment options, add-ons and incentives to clear their unsold inventory, which along with lower interest rates in the economy should encourage buyers to finalize their purchase. 

Reviving economy expected to instill consumer confidence

Posted on by Track2Realty

By: Anshuman Magazine, CMD, CBRE South Asia

Anshuman magazine, CB Richard Ellis, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyImproving economics

Track2Realty Exclusive:Following nearly two years of sub-5% growth due to currency volatility, high inflation and fiscal deficits, poor investment and market sentiment scenario, India’s economy bounced back with a growth rate of 5.7% during the April‚ÄďJune period of FY 2014‚Äď15, up from 4.6% in the preceding quarter. With business prospects improving across key sectors, the economy is expected to display further improvements in the next quarter.

Consensus forecasts by global institutions such as the IMF and World Bank have projected a growth of above 5% for FY 2015; while according to Deloitte’s projections (using the Oxford industry model) India’s GDP growth for the current fiscal stands at around 5.9% (Deloitte India Competitiveness Report, November 2014).

Policy support and improved sentiment drove faster growth in the first quarter, following the election of the new government in May 2014, when market sentiments improved and boosted transactions and investments. Foreign Direct Investment (FDI) alone saw a dramatic 34% y-o-y increase during Q1 2014‚Äď15 as multinational firms reacted positively to the new government‚Äôs reform agenda.

Moreover, consumer price inflation (CPI) dropped to a record low in October 2014, and wholesale price inflation (WPI) also edged down. One implication is that interest rate cuts could soon come onto the agenda. Going forward, faster infrastructure approvals and corporate decision-making look likely in the coming months, which will support investment and demand for commercial real estate.

On the regulatory front, the realty sector saw two major developments‚ÄĒthe Securities and Exchange Board of India‚Äôs(SEBI‚Äôs)announcement of final guidelines on the setting up of Real Estate Investment Trusts (REITs), and the revision in FDI norms for the construction sector.

SEBI‚Äôs recent move of issuing the final guidelines for Infrastructure Investment Trusts and Real Estate Investment Trusts (REITs) in India signalled a positive move for India‚Äôs capital markets as a whole, and its realty sector in particular. Reducing the minimum requirement for commercial real estate asset sizes permitted to be listed in India REITs from Rs.1,000 crore to Rs.500 crore is likely to generate more investments and also encourage mid-sized development firms to consider this new funding channel. Although the government has already clarified that REITs will be given ‚Äėpass through taxation status‚Äô, clarifying the tax structure is of high importance at the moment.

Meanwhile, the Central Bank’s move of keeping base rates unchanged in its latest policy review was widely expected as consumer price inflation remained a concern and the impact of the Union Budget was yet to be felt across sectors. Any reduction in base rates in the coming months will be a positive indicator for the sector, spurring housing demand and construction activity across the country. Yet another positive policy initiative saw the government clearing upto 100% FDI in railway infrastructure segments such as electrification, signalling, high speed and suburban corridors; while permitting upto 49% in infrastructure and defence.

The month of October saw the government easing FDI norms to boost India’s construction sector. The announcement is expected to widen the sector’s investor-base by allowing FDI in smaller projects of 20,000 sq. m. instead of 50,000 sq. m. from firms with capitalization of US$5 million instead of US$10 million. Likely to encourage more FDI, especially for mid-sized financial institutions, the decision will also encourage new projects in prime areas of large cities and in tier II towns.

By making smaller-sized initiatives more feasible, the FDI rule revision might also increase developers’ investment options and drive development in smaller cities, where investors previously found it challenging to source suitable developments sized 50,000 sq. m. and above. The real estate and construction industry is starved of funds. What it requires at the moment is an injection of capital for infrastructure and development. All central government efforts to increase capital flow in these areas can only help the real estate and construction sector in particular, and the economy in general.

Rising business confidence

According to industry surveys conducted by CII and FICCI, corporate India‚Äôs business confidence indicated an improvement in investor perception during the July‚ÄďSeptember quarter. While the CII Business Confidence Index shot up to 57.4 in the quarter (from 53.7 in the previous quarter), FICCI’s Overall Business Confidence Index moved up to 72.7 (over69in the last quarter)‚ÄĒthe highest in 15 quarters.

The key industry bodies are of the opinion that the management of inflationary expectations would hold the key for ensuring a continued momentum of economic revival through supply-side measures. A slow pick up in global demand, high inflation and rising borrowing costs were cited to be their top three concerns.

Market reality

The market reality, however, is that the recent festive season failed to boost property sales, despite discounts and freebies from development firms. Traditionally a period when property sales usually witness a sales rise of about 20‚Äď25%, the period this year failed to clock in anticipated sales volumes. High property prices and interest rates kept home buyer demand on a short leash.

Although inflation has come down in recent months, real estate demand is yet to revive, with home buyers perhaps awaiting a more consistent period of low inflation levels and interest rate cuts before investing in properties. The flipside of this demand scenario has been that property markets in Mumbai and Gurgaon‚ÄĒtwo of the country‚Äôs largest real estate markets‚ÄĒhave been witnessing prolonged stagnation.

In the case of Gurgaon, especially, there is significant inventory of housing units available in the secondary market at more affordable price points than the primary market, making them attractive options for end-users. Till such time that the RBI does not let go of its current interest rates, it will take the real estate market a couple of more quarters to leverage the recovering economy.

The good news in this scenario, however, is that consumer sentiments have improved in recent months, with India having topped the quarterly index of the Nielsen Global Survey of Consumer Confidence and Spending Intentions (October 2014).

India had ranked at #2 and #3 positions in the previous quarterly surveys, hence consumer spending has obviously improved lately. Additionally, according to the credit rating agency, ICRA, India‚Äôs corporate sector saw more rating upgrades than downgrades in April‚ÄďJune 2014 for the first time in four years. Although the real estate and construction sector remained excluded from this assessment, faster economic growth, more employment creation, higher salary increments and lower interest rates are some of the ingredients expected to pull up sagging demand in the real estate sector.

Another silver lining this year has been the slew of realty fund launches (mainly in the residential segment) of much larger transaction sizes as well as transaction volumes in this fiscal over that of the previous fiscal. Investment firms to have launched such funds this year included Centrum Capital, Indiareit Fund Advisors, and ASK Property, among others. The Indian real estate sector continues to be a favoured sector for investments from overseas as well as domestic investment firms.

In conclusion

There is optimism in the market about an improving economy and expectations that the new government will usher in a period of significant fiscal and economic reforms. Consequently, improved investor confidence is also likely to be reflected in higher capital inflows and higher business investment in the near term. A relaxation in interest rates is required to revive sagging demand in the housing sector and generate investor confidence. With this in mind, the onus will be on the government to follow through with the reforms outlined in the Union Budget 2014‚Äď15 to support the economy. It now remains to be seen how the government implements progressive structural reforms to bolster this anticipated growth.

To support sustained, overall economic growth, India will need to develop its infrastructure and construction sector, which has been identified as a key long-term growth driver of our national economy along with sectors such as BFSI, retail, automobile manufacturing, pharmaceuticals, and information and communication technology. Growth in the construction and real estate sector will not only generate substantial direct employment opportunities, but also fuel growth in a large number of ancillary industries.

The new government‚Äôs latest policy announcements indicate plans for improving infrastructure and construction activity in the economy through the creation of a ‚Äė100 smart cities‚Äô and the planned achievement of ‚Äėhousing for all by 2022‚Äô.Such government initiatives are anticipated to bring about growth opportunities in the infrastructure and realty sector. Growing income levels, rapid urbanization, and the growing requirement for urban infrastructure will be the key factors for triggering off growth in India‚Äôs real estate sector in the long-term.

Mumbai attracted highest investments in real estate sector during first nine months of 2014

Posted on by Track2Realty

By: Anshuman Magazine, CMD, CBRE South Asia

Anshuman magazine, CB Richard Ellis, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyTrack2Realty: The completion of several large transactions‚ÄĒincluding a couple of deals worth overUS$ 500 million each‚ÄĒpushed up the total real estate investment volume in the Asia Pacific region in the June‚ÄďSeptember period to US$ 35 billion, a quarter-on-quarter increase of about 40% (as per the CBRE APAC Capital Markets MarketView Q3 2014 report).

By the latest estimate of Oxford Economics, the year-on-year economic growth of Asia Pacific in 2014 stands at approximately 4.4%, slightly up from its June forecast of 4.3%. The 2014 real estate investment forecast for India, meanwhile, also indicate an improvement due to government stimulus efforts.

Institutional investments in India’s real estate sector

Institutional investments and capital market transactions in the India realty market during the first nine months of the year stood at approximately US$ 4.5 billion. Out of this, land and development stage transactions attracted the highest quantum of investments (nearly 60%) from domestic as well as foreign entities during the period, indicating perhaps a significant amount of investment in Greenfield andBrownfield development.The commercial office segment, meanwhile, attracted more than 20% of this total investment amount during the period in question.

In terms of investment locations, Mumbai’s realty market attracted the highest investment, followed by Delhi and Bangalore. In terms of total real estate investments made in Mumbai and Delhi during the period, land and development stage transactions spelt nearly 70% and more than 60% of total realty investments in the cities, respectively. In the case of Bangalore, more than 50% of total investments during the period were attracted by the commercial office segment.

Office space transactions, in fact, increased by about 20% year-on-year in the first nine months, with more large-scale space leases and higher lease volumes on an average over the previous year across leading cities in India.The periodsaw significant investor interest in completed and well-leased core commercial office assets and IT parks across key cities. Investment highlights during 9M FY2014 also included GIC announcing the formation of a joint venture with Bangalore-based development firm, Brigade Enterprises, where the two firms plan to invest approximately US$ 250 million in residential and mixed-use development in cities across southern India.

Government stimulus spurs capital markets in India

While investor interest in India and Southeast Asia steadily increased over the first nine months of the year, this interest is yet to translate into an increase in investment turnover. India, recorded a sizeable uptick in business confidence following the coming of a new government earlier in the year. The new government is expected to implement policies to attract Foreign Direct Investment (FDI) and develop the Real Estate Investment Trust (REIT) market.

FDI alone saw a dramatic 34% y-o-y increasein India during Q1 2014‚Äď15 as multi-national firms reacted positively to the new government‚Äôs reform agenda.On the regulatory front, India‚Äôsrealty sector saw two major developments‚ÄĒthe Securities and Exchange Board of India‚Äôs(SEBI‚Äôs) notification of final guidelines on the setting up of REITs and Infrastructure Investment Trusts (InvITs), and the revision in FDI norms for the construction sector.

Funding avenues

The lending environment remained mixed in the geography during the first nine months of the year, with India having to address challenges such as inflationary pressures (which has since begun to ease off gradually). Capital markets in India saw the growth of non-banking lending activity as property firms continued to find it difficult to obtain project financing from commercial banks.

At a time when the country‚Äôs realty sector has been struggling for alternate avenues of funding‚ÄĒother than traditional banks and financial institutions‚ÄĒprivate players have been sourcing institutional capital. At such a juncture, permitting REITs and InvITs is expected to act as a key enabler for capital markets in the country, and provide investors with exit options.

The outlook for capital markets in India‚Äôs realty sector continues to look positive and transaction activity is expected to improve further in forthcoming quarters.September 2014 saw global credit rating agency, Standard and Poor, raising the outlook for India from ‚Äėnegative‚Äô to ‚Äėstable‚Äô, with the rationale that the country‚Äôs new government mandate and improved political situation offered a more positive environment for much-needed reforms.

India realty market update: October 2014

Posted on by Track2Realty

By: Anshuman Magazine, CMD, CBRE South Asia

Anshuman magazine, CB Richard Ellis, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyTrack2Realty: The month of October saw the government easing Foreign Direct Investment (FDI) norms to boost India’s construction sector. The announcement is expected to widen the sector’s investor-base by allowing FDI in smaller projects of 20,000 sq. m. instead of 50,000 sq. m. from firms with capitalization of US$5 million instead of US$10 million.

Likely to encourage more FDI, especially for mid-sized financial institutions, the decision will also encourage new projects in prime areas of large cities and in tier II towns.

By making smaller-sized initiatives more feasible, the FDI rule revision might also increase developers’ investment options and drive development in smaller cities, where investors previously found it challenging to source suitable developments sized 50,000 sq. m. and above. The real estate and construction industry is starved of funds.

What it requires at the moment is an injection of capital for infrastructure and development. All central government efforts to increase capital flow in these areas can only help the real estate and construction sector in particular, and the economy in general.

Office space update

The month of October saw healthy leasing activity, with back office operations leading office space demand at almost 90% of the total office space leased for back-office or a combination of back-office and front office requirements of various corporates. Although the majority of occupier demand was for small to medium-sized office spaces, a few big ticket transactions took place in Bangalore, Chennai and Delhi too.

Leasing activity remained upbeat with Bangalore leading the pack, accounting for almost 60% of the overall space transacted during the month. A few large-sized transactions (above 1,00,000 sq. ft.) were finalized in the city by leading corporates from sectors as diverse as IT/ITeS, banking, healthcare and manufacturing/engineering.

All of these transactions were for SEZ spaces in the micro-markets ofthe Outer Ring Road (ORR) and North Bangalore. Delhi National Capital Region (NCR) and Pune were other leasing markets that saw strong transaction velocity. As a matter of fact, Bangalore, NCR and Pune accounted for about 75% of the total space transacted during October 2014.

Occupier interest remained strong in the micro-markets ofthe ORR and off-central areas of Ulsoor Road and Koramangala in Bangalore; Gurgaon in the NCR; Andheri East, Bandra‚ÄďKurla Complex, and Thane in Mumbai; IT Corridor in Hyderabad; Viman Nagar, Yerawada, and Hinjewadi in Pune; and at Ambattur and the IT Corridor of Taramani, Perungudi and Sholinganallur in Chennai.

Demand was mostly driven by IT/ITeSfirms for their expansion and consolidation requirements. Rental values remained largely stable across all micro-markets of leading cities. Sectors such as IT/ITeS, banking/financial services, manufacturing and engineering, construction, and consulting and research continued to drive demand for office space.

India‚Äôs fledgling e-commerce segment also saw two large-sized transactions from e-retail majors,Snapdeal and Myntra, in Delhi and Bangalore‚ÄĒtaking office space consumption by this sector to an all-time high in the Indian market.

Housing market update

The month saw a decline in the number of new project launches across leading cities. Developers focused on completing existing projects and delayed new launches owing rising unsold inventory. Housing sales remained muted even during the festive season, as a cautious buyer sentiment rode over discounts and attractive marketing offers. This is perhaps a signal that prevailing high property prices and high interest rates may have prolonged the stagnation in the residential market.

On the supply front, Kandivali, Malad, and Thane in Mumbai; the micro-markets of Off-Hennur Road,Yelahanka Main Road, and Sarjapur Road in Bangalore; and the peripheral markets of Kharadi, Wagholi and Kothrud Annex in Pune, attracted new launches in the mid-end segment. Restrained demand, coupled with supply pressures, led to stableproperty prices across most housing markets across the country.

Organized retail space

October saw a healthy mix of expansion and new store openings from domestic and global retailers. Retailers from the F&B, apparel, accessories and electronics segments continued to remain active during the month. High streets remained the favored destinations for leading retailers for their entry/expansion strategies across leading cities.

Mumbai, Pune and Hyderabad saw robust expansionary demand; however, sentiments remained cautious in other cities during the month. Owing to limited space availability in the established highstreets of MG Road and Camp in Pune, most retailers actively explored options in the Western Corridor of Aundh, Baner, Hinjewadi and Pimple Saudagar.

In terms of new brand entrants, F&B retailer, Krispy Krème, and luxury apparel brand, Stefano Ricci, forayed into Mumbai; while apparel retailers Mustard and Kudos, and footwear retailer,Rocia, opened their first outlets in Pune. Kolkata also saw the opening of Café Story on Eglin Road during October.

Starbucks strengthened its presence in southern India with the opening of its flagship store at Jubilee Hills, Hyderabad, totaling its retail presence to 58 outlets across six cities in India. In addition, Starbucks plans to open another store in Bangalore in the coming months. Rental values remained stable across major markets of leading cities, with the exception of Central Mumbai, where mall developments saw a slight rise owing to an increase in retailer demand during the month.

Demand for office space improves by more than 30%

Posted on by Track2Realty

By:Anshuman Magazine, CMD CBRE South Asia

Anshuman magazine, CB Richard Ellis, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyTrack2Realty: Positive market sentiments and a gradual global as well as domestic macro-economic recovery may finally be signaling the beginning of a revival in India’s corporate real estate segment. Various corporate firms, who had put their office space consolidation and expansion plans on hold over the previous couple of fiscals, finally began their transaction processes; and many concluded the same during the penultimate quarter of 2014.

The office markets of Bangalore, the Delhi National Capital Region (NCR) and Mumbai attracted more than 70% of such office space requirements during the third quarter of the year; while Chennai saw a strong quarterly growth of more than 50% in Grade A office space take-up, followed by Mumbai (~15%).

This trend reflected a sustained improvement in office space leasing sentiments across most cities. With the expected increase in India’s GDP growth, the commercial real estate market is likely to witness accelerated activity in forthcoming months.

Office space transactions on an upswing

The third quarter of the year saw stable, yet significant demand for office spaces on a quarter-on-quarter basis across the country‚Äôs leading urban centers‚ÄĒclocking in a total absorption of about 8 million sq. ft. during the period‚ÄĒsignaling the generation of steady employment opportunities.

On an annual basis, investment-grade office space take-up also rose by around 31%. New Grade A office space addition, meanwhile, fell by about 3% q-o-q across key cities, to stand at about 6.7 million sq. ft. during the same period‚ÄĒhelping to balance out the supply/demand dynamics across the country‚Äôs key corporate real estate locations.

The period attracted incremental demand from corporate occupiers seeking office space in the Delhi NCR. The region accounted for more than 25% of the total space transacted in the third quarter. Mumbai’s office market attracted an upswing of enquiries from corporate space occupiers in the third quarter of the year.

The overall market sentiment in the city remained more optimistic over the previous quarters, which was the main trigger behind the significant absorption rates seen during Q3 2014.

Going forward, absorption rates in Mumbai are likely to get better in subsequent quarters. The Kolkata market also saw favorable traction during the period, experiencing significant demand growth for office space across most commercial districts. With quite a few transaction closures anticipated in the city in forthcoming months, the market sentiment is likely to remain positive in the remaining quarter too.

An exception to this trend was the Bangalore market, which saw absorption rates declining by about 21% q-o-q. The micro-markets leading demand for Grade A office space in the city remained the Outer Ring Road (ORR) stretch and Whitefield. Other locations, such as South Bangalore and Electronic City displayed healthy absorption levels too.

The quantum of absorption in the Central Business District (CBD), however, was negligible as strata-sold commercial properties posed a major hindrance to space take-up. Although the city experienced a drop in absorption rates in the third quarter, a significant quantum of large transactions is expected to reach closure in the coming quarter.

Office space demand drivers

The IT/ITeS sector continued to lead demand-drivers for corporate real estate across major cities. The IT sector in Bangalore continued to remain the key demand driver, followed distantly by the pharmaceutical sector, financial services and back-end office requirements.

In the NCR too, the sector accounted for the majority of space take-up in Gurgaon. Demand for Grade A corporate real estate in the city was dominated by the IT/SEZ space, largely led by small to medium sized transactions during the third quarter of 2014.

Meanwhile, Noida continued to be perceived as a cost-effective option for the IT/ITeS sector in the region. Major office space occupiers in Chennai and Hyderabad also remained the IT/ITeS sector. Even for Mumbai, where the banking/financial sector has been a traditional stronghold, its peripheral micro-market has emerged as the preferred choice of large IT firms.

Market trends to watch out for

Although the IT/ITeS sector continued to remain the main demand driver for commercial office space during the quarter, the fledgling e-Commerce segment was seen to be the newest addition to the usual mix of corporate real estate occupiers across the leading cities.

Investment-wise, meanwhile, the Securities and Exchange Board of India’s finalization of norms for Real Estate Investment Trusts in India is likely to lead to fund flows into Grade A office space. The move is expected to arouse enhanced interest levels from institutional investors as well as development firms towards buying into income-generating real estate funds and core assets.

Stable rental values across markets

Rental values for commercial office space remained stable for the most part across cities such as Delhi NCR, Bangalore, Pune and Kolkata; while appreciating across select micro-markets of Chennai and Hyderabad. Sustained occupier interest in prominent SEZ developments of Chennai led to rental rates rising in the range of 12‚Äď15% during the quarter.

Similar demand trends also led to rental appreciation in select developments along the IT Corridor in Hyderabad. Conversely, subdued demand levels and existing vacancy pressures caused values to dip by 2‚Äď3% q-o-q in Mumbai‚Äôs Nariman Point and Bandra‚ÄďKundra Complex.

Rentals across the NCR maintained their equilibrium over the previous quarters in most prominent office developments in the Central Business District of Connaught Place. Most locations in the secondary business district of Nehru Place, Saket and Jasola saw stable rental movement as well.

The quarter also saw stable rental values across commercial office as well as IT/SEZ segments of Gurgaon and Noida. Rental values across Pune’s office districts remained stable too. Going forward, rentals are likely to remain stable across most markets due to a significant pipeline of under construction projects.

Effective policy implementation key to bridging India’s urban housing shortage

Posted on by Track2Realty

By: Anshuman Magazine, CMD, CBRE South Asia

Anshuman magazine, CB Richard Ellis, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyTrack2Realty: Despite the significant residential unit inventory and fresh housing supply, most of the urban housing projects across major Indian cities are unaffordable for our economically weaker sections (EWS).¬†This is primarily because developers are by-and-large focused on launching luxury, high-end and mid-end housing projects that are considered ‚Äėsafe‚Äô from the perspective of risks and returns in the capital market.

To address the issue of housing shortage, particularly for EWS/low-income groups (LIG), who constitute the bulk of the housing shortage, affordable housing is the need of the hour.

The number of impediments to the formulation of an effective affordable housing policy are manifold, however, which inter-alia include escalating land prices, archaic building bye-laws, regulatory hurdles resulting in delay of project approvals, and reluctance of formal financial institutions to lend to low-income sections.

Although the Union Budget 2014‚Äď15 announcements supporting affordable housing was welcomed by the real estate industry, the segment has a long way ahead as yet. To begin with, there is considerable supply shortage in this arena‚ÄĒpegged at 18.78 million for the 12th Five Year Plan (2012‚Äď2017) by the Ministry of Housing and Urban Poverty Alleviation Ministry (HUPA), of which 96% is in the EWS and LIG categories. Housing shortage for the EWS stands at almost 11 million homes, while that for LIG stands at 7.41 million homes.

The erstwhile government had set up a committee to develop a slum index at the city, state and national levels to sharpen policy focus on the urban poor. Slum data (source: HUPA) released in March 2013 for Census 2011 had pointed out that around one out of every six households in urban India (17.4%) lived in a slum. It had also shown that well over a third of all slum households (38%) were in cities with a population in excess of a million.

A key push was given to the housing sector in the recent Budget, with an allocation of Rs. 4,000 crore through the National Housing Board (NHB) for providing cheaper loans for low cost housing to support the ‚Äėhousing for all by 2022‚Äô scheme. Additionally, Rs. 8,000 crore was allocated for the rural housing scheme under the NHB.

A relaxation of Foreign Direct Investment (FDI) norms in the housing sector was also announced in the Budget, with major policy revisions including the reduction in the minimum capitalization from US$10 million to US$5 million for wholly-owned subsidiaries; and trimming the minimum area of construction projects from a carpet area of 50,000 sq. m. to 20,000 sq. m. Such relaxation in entry norms are expected to provide a fillip to the quantum of investments going into the housing sector, particularly in India’s tier II and III cities.

With a substantial amount of funds, however, already allocated for the creation of affordable and/or low-cost mass housing in the previous fiscal left unused, the effective utilization of fund allocation for affordable housing cannot be stressed enough. According to HUPA, as of February 20, 2013, as against a target of 3.10 lakh beneficiaries with a total outlay of Rs. 1,100 crore, approximately 13,485 beneficiaries had been benefitted with a net present value (NPV) of interest subsidy of Rs. 16 crore. Additionally, although about Rs. 2,000 crore had already been allocated to the Urban Housing Fund by the erstwhile government, the National Housing Bank (NHB) was yet to set up the fund.

Provision of low-cost housing or affordable housing solutions has been predominantly the domain of public authorities. Over time, the Government of India has undertaken a number of initiatives (provision of taxation benefits or opening up funding channels) or formulated policies towards addressing housing needs of the economically weaker sections.

With the passage of time, these policies and initiatives have evolved, with the role of public sector transitioning towards a ‚Äėfacilitator‚Äô from being a ‚Äėprovider‚Äô, increased focus on private-sector participation, provision of fiscal incentives and concessions, as well as promoting an enabling environment for channelizing affordable housing finance and cost-effective technologies.

Housing being a state subject, a number of state governments have formulated and implemented housing policies to address the housing shortage and enhance affordability among our teeming masses. This is a daunting task in itself; and keeping in mind their limitations, state governments are encouraging public‚Äďprivate partnership models where the private sector is playing a key role in offering solutions to low-income households.

While some of these housing policies are implemented with assistance from the center, others are totally supported by individual state governments. States such as Rajasthan, Haryana, Odisha, Andhra Pradesh and Gujarat have implemented housing policies to address affordability issues for home buyers.

At the risk of reiterating the same point, although the government has put in place various funds and bodies to bridge the enormous housing shortage gap in urban India, much more needs to be done as far as implementing these policies are concerned. Despite the total outstanding housing loan portfolio with Housing Finance Companies (HFCs) in 2012‚Äď13 increasing by 30.69% to Rs. 2,90,427 crore (NHB Annual Report, March 31, 2013)‚ÄĒout of the total housing loans disbursed by PSUs in 2012‚Äď13, those of less than Rs. 5 lakh barely stood at 10%. Furthermore, housing loans as a percentage of Gross Bank Credit for Scheduled Commercial Banks (as of March 31, 2013), stood at just about 9.25%.

A major reason for this might be inaccessible financing options for the EWS/LIG segment of urban India. Almost 70% of potential low-income home buyers have informal income avenues, but need access to housing loans to buy a home. Needless to say, traditional financial players do not service this vast group. Growing interest in low-income housing finance is a very recent phenomenon; and it‚Äôs taken till 2011‚Äď12 for new entities, private players and established financial institutions to make an entry into the market.

For all intents and purposes, therefore, government funds and schemes for mass housing are perhaps the only recourse for India‚Äôs urban populace. Recent developments have seen the NHB planning to refinance banks and HFCs for rolling out long-term fixed rate loans of upto Rs. 10 lakh to borrowers for a period of 15‚Äď20 years. The intent behind developing this product is to specifically protect low and moderate income households against prevailing volatility in floating rates on housing loans.

Keeping in mind the proliferation of informal urban settlements and urban sprawls across the country, the development of affordable housing on a mass scale is imperative. Keeping in mind the fact that a significant proportion of the population requires access to affordable housing, there is a need to formulate guidelines that would help in identifying the right beneficiaries for such housing.

There should be concerted efforts towards devising innovative financing models which would be effective in addressing funding constraints of the EWS/LIG segments. From a supply point of view, however, developers and lending institutions need to be incentivized and the regulatory process needs to be streamlined to provide the required impetus to spur affordable housing supply.

As the housing market evolves in the country, the new government is pushing for greater private sector participation in providing housing for the economically under privileged sections of the society. Developers have also begun to look at new techniques such as pre-cast construction to bring down construction costs.

Concepts such as green homes and senior homes are also catching up as developers are trying to replicate trends observed in developed markets and create products that are environmentally more sustainable. The government on its part is also trying the bridge the demand/supply gap by offering incentives such as subsidized land, and relaxed development control regulations, among others, to make way for increased housing ownership in India across various socio-economic segments.

1 2 3