Tag Archives: Bangalore real estate market

Segment & geography defining consumer confidence: Jitu Virwani

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Track2Realty Exclusive

View Point: In a business that by and large lacks consumer confidence, Jitu Virwani, CMD of Embassy Group maintains that the challenges to meet consumer expectations leads to better quality and enhanced value. In an exclusive interview with Ravi Sinha, Virwani nevertheless disagrees about sector’s overall reputation and points out that consumer confidence is segment specific and geography specific.

Jitu Virwani, CMD, Ambassy Group, Embassy Group, Embassy Office Spaces, Embassy Industrial Parks, Embassy Boulevard, Embassy Lake View, Bangalore real estate news, India real estate news, Indian realty news, Indian property market news, Real estate news India, Investment in Bangalore property, Track2RealtyRavi Sinha: What has been the bigger challenge for the sector – market dynamics or the poor consumer confidence?

Jitu Virwani: The Indian real estate market is not a single homogenous entity. There are seven major metro markets, each behaving differently, with different supply and demand dynamics. There are many different verticals within real estate – residential, commercial, retail, hospitality – and within those there are segments focused on different customer bases. With so many permutations, there is no ‘one size fits all’ answer. The urban southern markets in commercial office sector, has seen consecutive years of positive sentiment, take up and consequently rental growth.

Ravi Sinha: This sounds more like an aberration. Why the developers are not seen as professional in the collective consciousness?

Jitu Virwani: The Indian real estate market has gone through a significant change over the last decade. Some of the largest developers have corporatized their business, strengthened corporate governance, identified lower cost of capital financing, increased customer focus and applied higher levels of transparency.

Continued focus on international best practices, technical advances particularly in the field of environmental and energy efficient design, improvements in construction management practices and people management are some of the changes which have had a positive impact on consumer confidence.

Ravi Sinha: What about the consumer confidence index?

Jitu Virwani: Well informed consumers and modern homebuyers continue to trust Grade A developers across cities. Today consumer’s confidence rests mainly on credibility of developers established over a period of time, often over decades. At Embassy, for the last thirty years, we have consistently focused on providing world class projects around the aspirations of both our corporate clientele from over 175 international corporations, as well as our residential homebuyers. Timely delivery, exceptional quality and locational advantages are some of the key USP’s of our products, making it a unique choice for our clientele.

Ravi Sinha: But isn’t the poor consumer confidence index affecting the market transactions today?

Jitu Virwani: Just as sentiment is linked to the industry vertical, and we have very positive sentiments in the commercial office markets; sentiment is also specific to geographies. The extent of oversupply in the residential market in the NCR region is not mirrored in the major South Indian cities in which Embassy operates, and hence sales volumes have quickly recovered to pre-demonetarization levels by mid-2017.

With the regulations and corporate governance that is being followed by most Grade A Developers in South India, it is clear that the old practices of small scale real estate developers are receding, as the top Tier players have been professionalized over the years. Focus on quality, timely delivery and transparency are among the best practices that are gaining ground in the sector.

Ravi Sinha: How do you cope with the changes in market dynamics?

Jitu Virwani: Change management, implementation of compliance and governance frameworks, attracting and retaining appropriate talent are all critical aspects of building a top class professional real estate organization. It is very encouraging that many developers have progressively started implementing these initiatives, and this also gets fast tracked with the participation of globally significant equity partners, who bring learning and best practice as well as more efficient capital frameworks.

Ravi Sinha: Do you feel recent policy changes like GST & RERA (despite of grey zones) would instill the confidence back into the minds of consumers?

Jitu Virwani: The Real Estate (Regulation and Development) Bill is an initiative to protect the interest of consumers, to promote fair play in real estate transactions and to encourage timely execution of projects. The proper implementation of the Bill will ensure accountability of all stakeholders, projects would be time bound, reduce delays in completion of projects and boost customer satisfaction. RERA will also establish a mechanism for speedy redressal of disputes and is expected to see renewed interest from buyers.

This will certainly reduce the number of developers who are in the market, properly funded and organized developers will deliver to the requirements of the regulations. This will surely enhance quality and support pricing as supply will reduce. Property pricing will firm up, quality will increase, and institutional funds will gravitate towards the well-established, trusted and proven developers such as Embassy.

With the implementation of GST, we have been able to further rationalize the tax structure for our customers, leading to an increase in consumer confidence. Overall, the unified tax regime is a positive sentiment booster for the industry, as it will revive both buyer and investor interest by bringing in more transparency.

Ravi Sinha: Will the new financial instrument like REIT help revive the consumer sentiment, despite of expected moderate ROI?

Jitu Virwani: The likely advent of Real Estate Investment Trusts (REITs) will be a watershed for all forms of real estate in urban India. A publicly listed REIT is an entity which distributes 90% of its income in the form of regular dividends to investors, it has strict limitations on any development in that 80% of its value must be in completed and income producing assets such as leased offices. The units in the trust are freely tradable, in a similar manner to units in mutual funds and so the investment is liquid for the investor, and provides liquidity for the original property developer/owner.

REITs have been in existence across the world for many decades and are a proven investment medium well known to international investors, both institutional and retail. This, in combination with international perceptions of India’s strong macro-economic status, makes future REIT listings attractive to international investment capital, and we are also seeing strong domestic interest in future listings. The potential for new REITs in India runs into billions of dollars, and this liquidity into the real estate market has the potential to kick start stalled projects, generate new growth and jobs while also continuing to encourage the trend towards a transparent, compliant framework for the industry.

Ravi Sinha: Has demonetization completely shattered the consumer confidence in the sector or has it just been affecting the cash investors?

Jitu Virwani: Bangalore, Embassy’s HQ, has one of the highest proportion of income tax payers of any urban center and demonetization would have had a limited impact. In addition, we are now close to a year down the road from the demonetization move and its effects have now been absorbed and the market has moved on. Sales are back to pre-demonetization levels since April 2017, and Bangalore being an end user market has been an added advantage.

Established players in the real estate industry were already moving towards increased transparency and governance, with demonetization being another step in the same direction. Several steps taken by the government combined with this announcement, will further improve transparency and increase investor confidence in the real estate market in the long run.

Ravi Sinha: What has been the learning of the last 5 years of market uncertainties?

Jitu Virwani: The learning is that the Indian market is resilient, it recovers quickly and the consistent upward trajectory is the trend for the next few years.

Ravi Sinha: Have the developers learnt the most important lesson of relationship management with the consumers?

Jitu Virwani: No business will thrive without an appropriate balance in the relationship between buyer and seller across all parameters – price, product, timeliness, quality and so on. The top Tier of the Indian real estate market players have known this for many years, and work to make long term customer relationships at the heart of their overall execution strategy.

Ravi Sinha: What is your market differentiator?

Jitu Virwani: Embassy Office Parks also runs the “Energize” programme which is a park user outreach programme, aimed to engage the 205,000+ park users throughout the year. The range of events include – Sports, Cultural, CSR and Lifestyle. The initiatives driven under the Energize Programme helps in engaging the workforce and providing a fun work environment, leading to better productivity, lower levels of attrition and a strengthened sense of community within the business parks.

Ravi Sinha: To what extent the confidence of PEs and other organized segment of investors has shaken with Indian real estate? 

Jitu Virwani: The various reforms and sector-strengthening measures adopted have been welcomed by international PE funds and the PE investments have been steadily increasing. The Institutional private equity capital committed to Indian Real Estate in 2016 is close to USD 7.2 bn depicting strong confidence from global players.

FDI inflows in the construction development sector are expected to increase in the medium term with the government’s easing of FDI policy, increasing focus on affordable housing, implementation of the RERA, smart cities plan, and the introduction of Real Estate Investment Trusts (REITs).

Ravi Sinha: Which are the segments of real estate where you feel meeting the consumer expectations is most challenging?

Jitu Virwani: If there is no challenge, we are not pushing ourselves hard enough for our customers. We work to deliver quality premises to our residential, commercial, industrial and hospitality occupiers across all our spheres of operation. We will continue to challenge ourselves to produce better quality and enhance value in a safe and productive manner, in our endeavor to delight all our stakeholders.

Godrej Properties adds two projects in Bangalore

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News Point: Godrej Properties will develop a residential project in Sarjapur, East Bangalore, and another one in Devanhalli, North Bangalore. 

Godrej Press Launch, 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, Track2RealtyIn a slow moving market where the focus of the developers is to clear the inventory than new launches, Godrej Properties has bucked the trend with two back-to-back launches in Bangalore.

Godrej Properties has entered into a Development Management Agreement with Manyata Developers Private Limited to develop a group housing project in East Bangalore.

The first phase of the project is spread over 16 acres and will offer approximately 125,000 square metres (1.35 million sq. ft.) of saleable area.

The total project is expected to offer approximately 437,000 square metres (4.7 million sq. ft.) spread over 53 acres.

The project will be developed as a modern residential development comprising of apartments of various configurations.

The location is well connected to key IT Hubs of Sarjapur Road, Whitefield, Outer Ring Road and Electronic City. This will be fourteenth project of Godrej in Bangalore.

Pirojsha Godrej, Executive Chairman, Godrej Properties said, “We are happy to add this new project in Bangalore. Bangalore is a key market for us and this project fits with our strategy of deepening our presence across the country’s leading real estate markets.”

Godrej Properties has entered into another joint venture with Royale Builders and Developers to develop a 13 acres land parcel on Bellary Road (NH-7) in North Bangalore.

The developer plans to develop a modern residential group housing project of approximately 1,25,000 square meters (1.34 million sq. ft.).

Pirojsha Godrej, said, “We are happy to add this new project in a great location in Bangalore. Bangalore is a key market for us and this project addition fits well with our strategy of expanding our presence across the country’s largest real estate markets.”

The Bellary road micro-market has emerged as one of the fastest growing markets of Bangalore with a lot of infrastructure developments and real estate projects coming up in the area.

The site is in close proximity to Bangalore International Airport, Aerospace SEZ and IT & Hardware Park, Devanahalli.  It offers good connectivity to the key commercial and industrial catchment areas of Devanahalli, Hebbal and Yeshwantpur. This will be GPL’s fifteenth project in Bangalore.

Bangalore likely to remain India’s top corporate real estate market

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Bottom Line: As India’s technology sector expands its horizons, Bangalore has emerged as a dominant growth frontier offering the country’s new economy sectors such as information technology, biotechnology, aerospace, research and development, clean energy and other services sectors, a new growth paradigm.

Bangalore City, Bangalore real estate market, India real estate news, Indian property market, NRI investment in Bangalore, Housing demand in silicon valley, Track2RealtyAccording to CBRE’s latest major report—Bangalore: The Star That Shines the Brightest—the city has led the country’s corporate real estate market among leading cities over the last five years in terms of office space stock as well as office space absorption trends.

Sustained demand for office space has consistently driven commercial real estate growth in the city that crossed a milestone in mid-2013—by becoming the first Indian office hub to join the global club for 100-million-sq. ft. office markets.

Furthermore, the year 2015 recorded the highest quantum of new office space supply of nearly 12.7 million sq. ft. The city’s overall commercial office stock stands at approximately 127 million sq. ft.; compared to other prominent commercial hubs such as Delhi National Capital Region (NCR) (95 million sq. ft.) and Mumbai (87 million sq. ft.)

Commenting on the report, Anshuman Magazine, Chairman and Managing Director of CBRE, South Asia said, “Buoyed by improved economic sentiments, steady corporate occupier interest, and its intrinsic strengths as a pioneering hub for technology, R&D, and shared services platforms—Bangalore is likely to maintain its leadership position in the country’s corporate real estate market in the long term. The successful implementation of the Government’s policy schemes, such as Digital India, Skill India, and Make in India, will be critical for the further development of the city’s business environment.”

As per an office occupier sentiments survey conducted by CBRE in India during 2015, Bangalore emerged as the most preferred market among Indian cities for occupier expansion strategies over the next two years. The city’s successful corporate space has been primarily driven by political stability over the years, the country’s largest expatriate population, and availability of top talent for business.

Other advantages offered by Bangalore have been its connectivity with other parts of the country, an extensive public transport system including its efficient bus network and partially operational Metro Rail (Phase I). Its well-established social infrastructure and good climate are other advantages that attract and retain businesses in Bangalore.

“Bangalore will continue to offer technology firms and allied sectors a stable business environment and access to a large, skilled labor pool. Consequently, while technology sectors and back-office operations will continue to remain the principle demand drivers, new sectors such as e-commerce, online start-up ventures and biotechnology will increasingly contribute to building the city’s commercial real estate skyline. These will play a positive role in supporting the long-term expansion of the city’s commercial office sector,” said Ram Chandnani, Managing Director – Transactions Services, CBRE South Asia.

In a little over two decades, prominent corporate firms have established a large footprint in the city and driven Bangalore’s commercial market forward. The availability of good quality office spaces at affordable rents as compared to office markets in Mumbai and Delhi NCR, and the cosmopolitan nature of the city, has further stimulated office space demand in recent years.

With the completion of numerous larger sized technology parks and Special Economic Zones (SEZs), Bangalore’s investment grade office stock grew exponentially from less than 20 million sq. ft. in the early 2000s to 127 million sq. ft. in 2015—at a compound annual growth rate (CAGR) of 13% over the last 15 years. This has placed the city well ahead of other leading Indian office hubs.

At present, corporate occupiers remain focused on the Outer Ring Road (ORR) stretch between Marathalli and Sarjapur Road; going forward, an incremental shift towards newer locations such as North Bangalore is expected. This is mainly owing to factors such as attractive lease rents, improving social / physical infrastructure and residential developments in the vicinity of the office clusters.

Bangalore rental yields defy national trend

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Track2Realty investigates what makes Bangalore rental yields highest in the country.

Bangalore City, Bangalore real estate market, India real estate news, Indian property market, NRI investment in Bangalore, Housing demand in silicon valley, Track2RealtyRamakant Sachdeva was recently transferred to Bangalore by his IT firm. The bachelor who had been living in a rented accommodation in Noida did not bother much. He had it in mind that he has to pay the rent more or less the same as he used to pay in Noida. As a matter of fact, he rather enjoyed his Bangalore transfer thinking that it is an opportunity to see a new city. However, his house hunt in the new city gave him a financial shock.

A man who was paying Rs. 12,000 as house rent for a 2BHK flat in Noida could not believe that he was asked to pay Rs. 35,000 for the same kind of apartment. An increase of 300 per cent in house rent threw his whole financial plans haywire.

“The cost of this flat is around Rs. 1 crore and they asked for Rs. 35000 as monthly rent. This is close to a rental yield of 3.5 per cent. I am not sure any other city in India is giving more than 2 per cent rental yield. This is unreasonable in a place like Sarjapur and the apartment is quite far away from the main road,” says the young IT professional.

Market analysts are not surprised. They are witness to the fact that Bangalore market has been defying the rental returns of other Indian metro cities for so many years now. They maintain that the absorption of office space is a true indicator of the rental yields of the given city.

As a matter of fact, the rental yield of 3.5% is on the lower side as per Bangalore standards. As per a report by Global Property Guide the rental yields in Bangalore are anywhere between 3.7 to 4.4 per cent. The report adds that this seemingly higher rental yields are nevertheless long way below the 2007 level where the yields had been in the range of 7.16 per cent to 9.92 per cent.

Trivita Roy Associate Director-Research & REIS, Jones Lang LaSalle India categorically says that if you compare it with other cities, the rents are far more affordable in Bangalore. “For similar projects if you go to any other city you will have to pay more. Also, from the owners’ standpoint since the prices are on lower side the rental returns are in the range of three to four percent.”

In Bangalore the absorption of office space has been more than 80 million square feet in the year 2015, which is way higher than other cities of India. It has been 50 million square feet in Gurgaon. In terms of the office space consumption per household Bangalore happens to be the only Indian city that is closer to the major global cities.

Ashish Puravankara, Managing Director of Puravakara Projects points out that in the last one decade the rental yields have taken a hit across the country, even touching one per cent in many places. The lower rental yields actually indicate tow things – either the capital values shooting up or the rentals not picking up at all. For me, the rental value represents the true nature of the housing demand.

“Somebody who has to live and cannot afford to buy a house will go for rental house. So, rental values are the true indicators of housing demand in the given market. The rental have grown at a steady rate but it is the pumping of money to buy a house in markets like Delhi or Mumbai that has led to rental returns shrinking up. In Bangalore it is higher because the capital values are more realistic,” says Puravankara.

In conclusion, there are strong economic fundamental behind the high rental yields of Bangalore that defy the average national rental yields. It may not be as high as some of the other global cities and may also not be at its peak today, yet the rental yields of Bangalore are more promising to any other key metro cities of India, including even the financial capital of Mumbai.

 

Sobha City gets A+ in Track2Realty Investment Magnet Report 2015

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Location: Thanisandra Main Road, Hebbal Ring Road

Project type: Apartment & Villas in Township

Price: Rs. 85 Lakh-3.8 Crore

Project execution lifecycle: June 2011-May 2018 

Sobha City Bangalore, PNC Menon, JC Sharma, Bangalore real estate market, Indian property market, Neighbour home, NRI real estate investment, Indian property market report, Real estate newsmagazine, Track2Realty Investment Magnet Report 2015, Track2Media Research This is one of those projects that can elevate the attraction quotient of the location. Based on the Mediterranean theme, this 36 acres township has the kind of amenities that could make any developers’ marketing brochure a temptation to buy.

This is the kind of luxury living offering that has made Sobha standout as India’s leading real estate brand today with luxury being their calling card. All the residential apartments here are based on the Mediterranean themes, like Casa Serenita, Casa Paradiso, Santorini and Aristos.

The traction point and aspiration level with this project has been so high that despite of some bad press to the project in early days (due to cremation in the neighbourhood) the launch2sales ratio of the apartments in Sobha City has been higher than the competing projects in and around the location.

After all, the area is surrounded by the magnet called employment where IT SEZ located on the Outer Ring Road and close to Hebbal is home to companies like IBM, Target and Cognizant. This micro market has many attraction quotients today and Sobha City is on top of the aspiration level of high-end homebuyers.

Track2Realty Rating: A+

  • Location & Aspiration: 8/10
  • Physical Infrastructure: 6/10
  • Social Infrastructure: 5/10
  • Appreciation Potential: 7/10
  • Competitive Advantage: 8/10
  • Rental Potential:6/10
  • Launch2Sales Ratio: 8/10
  • Construction Quality/Timelines: 8/10
  • Livability Index: 7/10
  • ROI Cycle: 7/10

For full report grab a copy of Track2Realty Investment Magnet Report 2015