Tag Archives: Arvind Nandan

NBFC credit crunch could jolt Indian realty sector

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View Point: The ongoing Non-Banking Financial Companies’ (NBFC) cash crunch can hit close to home as it could have a cascading impact on the somewhat improving residential real sector, writes Arvind Nandan, Executive Director – Research, Knight Frank India.  

Arvind Nandan, C&W, Cushman & Wakefield, 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, Ravi Sinha, Track2Media, Track2RealtyFor last few years, developers had been availing term loans from NBFCs and Housing Finance Companies (HFCs) and any turmoil in the latter is bound to impact the Indian realty industry. Further, at a time when the festive season fervor and loan melasare expected to boost residential market sales, the state of financial markets is likely to play a vital role.

The Indian residential market volumes spiraled down in terms of demand and supply almost every successive year in this decade. From a high of 480,000 units in 2010, the supply last year stood at mere 103,000 units across the top 8 cities.

Investor frenzy in the initial part of the decade and focus on premium projects propelled prices to stratospheric levels, which were not in harmony with buyer affordability. Subsequently, with end-user demand cracking up and investors progressively receding from the scene, markets adopted a somber mood and prices witnessed moderation.

Preceding the recent financial turmoil, a wave of structural calibrations had swept the landscape, beginning in 2016. Starting with Benami Transactions (Prohibition) Amendment Act, 2016 and demonetisation of high value currencies, coupled with measures of integrated indirect tax structure brought by GST and the unified realty sector regulator, Real Estate (Regulation and Development) Act (RERA), 2016 have been significant landmarks, which have transformed the DNA of the country’s realty.

Together, while these measures have created much-desired and long-awaited reforms in the industry, they have also heightened the participation-threshold of stakeholders. The intent is clearly to balance the scales with consumers becoming paramount in the overall transaction process.

However, as the impact of these reforms crystalises, the challenges are still quite there for market players. In fine balance as of now, but any blip on the financing side of the eco-system could send a strong ripple effect on demand, supply and more consequently, the price.

The recent NBFC crisis, triggered by a near explosion of debt-pile in IL&FS, is one such development. The jury is still out whether it could have been contained, but the resultant cascading impact on several NBFCs, has caused a stir in residential markets. 

There had been some early signs of improvements in the residential sector, for which the hope still remains, but the path appears more contoured now. For some years now, developers had been availing term loans from NBFCs and HFCs, which in turn raised money through commercial paper from Mutual Funds, Banks and Corporate treasuries.

Mutual Funds also had a dream run in terms of subscription to their short-term debt and liquid schemes during this period. However, just as the market appeared to be gaining some strength, the aforesaid financial shake-up has caused a rewind-like situation amongst the financial community. 

Now, with investors pulling out money from the debt schemes of Mutual Funds and lack of confidence about the repayment ability of NBFCs, the Mutual Fund credit line appears to have turned gray. The banking segment, despite recent RBI attempt to prop-up credit line by allowing leeway for lending, has been cautious with its share of Non-Performing Asset (NPA) issues.

It does appear highly watchful and will take far greater precautions before actively participating in the process. In such a liquidity scenario with NBFC segment, even the sanctioned credit lines to realty projects face the risk of a temporary freeze, putting project completions in jeopardy.

It is estimated that more than half of financing to realty industry in recent years has been contributed by the NBFCs including the HFCs. With such a lopsided dependence on this financier segment, a large number of projects must align themselves again.

The supply side remains in a highly sensitised zone, with consistent efforts and offers to resuscitate the demand. Especially at a time when the festive season fervor and loan melasprovide the customary boost to residential market sales, the state of financial markets has a deciding role.

As observers and analysts of the marketplace, we remain highly watchful and hopeful of the measures by all stakeholders to continue clearing the roadblocks, for a much-anticipated rejuvenation.

It can be said that the revival of the market has been slightly slowed on account of the recent financial stress, which was practically out of reckoning till a couple of months ago. 

The step taken to contain the complete crash by bailing out of IL&FS is a commendable one, in the absence of which, we could have hurtled into the darkest of pits. The saving of situation under the circumstances, at least leaves us with better controls for survival and recovery.

In mapping the path forward, we will also factor-in a series of upcoming events like the state-elections, followed by General Elections in 2019, which will have a usual short-term impact on market-processes. However, we would take that up in another piece subsequently. As of now, we continue to watch the unfolding of financial reverses and their impact on realty in India.

What is right property in right market & right price point?

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Bottom Line: An average homebuyer always has this dilemma of what is right property in the right market and at the right price point.

Professional Stress, Real estate professionals, Client demand, brokers pressure, NRI investment, real estate salary, real estate depression, unprofessional real estate, Track2Media Research, Track2RealtyIn the absence of any scientific research that could help the homebuyers to make an informed choice one either concentrates on the short term wants to overlook the long term needs or is confused between the end use necessities and quest for appreciation. More often than not the homebuyers’ wants and needs contradict; there is no clarity on economic rationale and emotional urge; and a clear view of the parameters that collective form the livability index is missing.

There is definitely underline need for more research on the subject to help both the developers as well as the homebuyers which could lead to bridging demand & supply mismatch as well. Analysts point out that it depends on which location suits me and at what value is that available to me.

Unfortunately, there is always a confusing as to what is right value and people misread it with right price point. There is a need to look at the overall value of the house. A homebuyer may be paying an extra premium for the said property if he is getting the right value addition with the house.

Ten metrics to determine what is right property 

Physical infrastructure

Social infrastructure

Location & Aspiration

Appreciation potential

Competitive advantage

Rental potential

Launch2sales ratio

Construction quality

ROI cycle

Livability index

Naushad Panjwani, Managing Partner with Mandarus Partners maintains that very much like the beauty, the value of a project lies in the eyes of a beholder; something that the other person does not understand. According to him, the mistake most of the homebuyers make is to look at the self-use house as an investment and this is where they compromise on both the aspect. First, they compromise on the quality of the house because they want to invest in a place where there will be appreciation and then they would compromise on the basic needs that has to be there.

“In a market where the rent is just two or three per cent, even one per cent in a place like Noida, why should one buy a house for investment. I mean you can live on lease at walking distance from your house and have a better property at 25 kilometers distance. I think this is where we often fail to differentiate between investor and end user,” says Panjwani.

Arvind Nandan, Director – South Asia with Colliers International says from a homebuyers’ perspective what matters is that how do you conduct your life. To conduct your life what comes first is your professional life and then there is personal & social life, and these two things matter the most. So, other than the job catchment area, I have to see if there is enough social support in the vicinity; if there is enough healthcare support in the vicinity; are my daily needs going to be fulfilled.

“Once I know that these conditions are met then I will think whether I will afford it or not. It cannot be the other way round where I first start looking for the affordability and then see whether these conditions match or not.   So, by these two filtering I do most of my basic search that whether it is livable place from where I can work and manage my daily life. And then I come to which all projects match my price band, and then which unit etc. So, there are four layers of home search,” says Nandan. 

Right property, in the right market and at right price point is quite subjective and it depends on person-to-person and market-to-market. However, what cannot be denied is that what differentiates between the right product in the market and way-too-ambitious project are – job catchment area, median income of the population and their social needs. 

By: Ravi Sinha

Delhi-NCR to command corporate confidence in 2013-II

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By: Arvind Nandan, Executive Director–Consultancy services, Cushman & Wakefield India

Arvind Nandan, C&W, Cushman & Wakefield, 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, Ravi Sinha, Track2Media, Track2RealtyTrack2Realty Exclusive: IT/ITeS and BFSI firms continue to be among the largest occupiers taking up spaces in excess of 200,000 sf each across Gurgaon and Noida. Close to 7.8 msf of under construction developments are expected to get completed in the fourth quarter, of which 70% comprise of IT SEZ developments across Gurgaon and Noida.

Commercial Grade A office developments of over 10.5 msf, along with about 6 msf of new mall space is planned to become operational across the city in the next one year. However, a great deal depends on the micro-economic factors in the domestic markets and global economic climate during the course of this year.

The notified Special Economic Zones (SEZ) in NCR for Textiles, Multi-services, IT/ITeS, Engineering, Agro & Food Processing and Biotechnology are likely to create demand while promoting the ‘walk to work’ culture for working population in such zones.

However, rising costs and challenges in land acquisition are likely to dampen new residential real estate developments in many suburban locations. On account of this and a few other aspects, capital values in NCR may witness a gradual rise, depending upon local market dynamics.

Gurgaon is expected to remain a favored destination for commercial office and residential activities as compared to the other satellite cities of Noida and Greater Noida.

Overall, the outlook of realty sector in the NCR is stable, with promise for future. The much needed global economic recovery, if it takes place, along with an improved domestic environment, would be the biggest factor for a movement on the path of recovery. In any case, the inherent strength of the market is well-acknowledged, and that is a key reason for corporate confidence in the capital city.

Delhi-NCR to command corporate confidence in 2013-I

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By: Arvind Nandan, Executive Director–Consultancy services, Cushman & Wakefield India

Arvind Nandan, C&W, Cushman & Wakefield, 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, Ravi Sinha, Track2Media, Track2RealtyTrack2Realty Exclusive: The capital city is witnessing a face lift with various infrastructural initiatives, increasing prominence of satellite towns and emergence of new business districts. The Master Plan 2021 aims at making Delhi “a global metropolis and a world class city” for which necessary initiatives are being undertaken by both the Government and the private sector.

The Private Public Partnership (PPP) model is being actively propagated by the government to build and improve infrastructure facilities and for the development of land.

The Delhi Master Plan 2021 entrusts large-scale acquisition and development of land to the Delhi Development Authority, which plans to construct 65,000 houses for the urban poor in the next four years.

Further, the Central Government announced various incentives in the Budget 2012-13 for involvement of private sector for affordable housing in the country, which would have a positive effect on the NCR.

Planned infrastructure developments coupled with measures to improve connectivity, with emphasis on developing the mass transport (MRTS), for the capital city and the satellite cities, bodes well for planned concentric development.

Some of the currently under development highways/expressways such as the Kundli-Manesar Panvel expressway, Northern Periphery expressway connecting Dwarka with National Highway 8, and the recently opened Yamuna expressway Noida – Mathura –Agra are expected to propel real estate developments in the adjacent locations, resulting in the emergence of new urbanized locations.

Former Finance Minister Pranab Mukherjee (currently the President of India) also stressed on the importance of Delhi-Mumbai Industrial Corridor (DMIC) being developed on either side of the Western Dedicated Rail Freight Corridor.

Demand in the residential segment will be largely derived from the growth of commercial centers in suburban locations. With a relatively stable global economic condition, the pace of these developments should remain on course.

NCR is expected to witness office supply close to 43 million square feet (msf) in the next 5 years (2012 – 2016). Absorption for the same period is expected to be around 27 msf, which means approximately 64% of the upcoming supply is expected to get absorbed.

…to be continued