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When father & son share the same business philosophy

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Track2Realty Exclusive

As Sobha Ltd stands at the top of Best Practices in Indian real estate, Ravi Sinha speaks to the father PNC Menon (Chairman Emeritus) and the son Ravi Menon (Chairman) to understand where they differ in perspective and what makes them stick to the core professional philosophy over such a long period of time.

PNC Menon, Ravi Menon, Sobha Limited,  Bangalore real estate, Bengaluru real estate, Bengaluru property market, Best practices in real estate, Clash of generation in business, Best real estate brand in India, Best business family in India, Best real estate family in India, India real estate news, Indian realty news, Real estate news India, Indian property market news, Track2Realty, Invest with reputed builderRavi Sinha: What has been the outlook of PNC Menon about best practices when he started the business?

PNC Menon: Coming from interior decoration business, I had always believed in delivering world class quality. When I decided to enter India’s real estate industry, I could clearly identify the gap in quality standards. As a result, I chose to build an organization that was more focused on creating a new, higher level of quality standards that India’s real estate industry had not yet experienced. Driven by our backward integrated business model, which is unique world-over, and timely delivery, we have achieved this objective.

Ravi Sinha: With market dynamics changing fast what are the recent changes you have introduced Ravi to sync the company with emerging best practices?

Ravi Menon: Market dynamics are changing and we are aware that urban population is rising, more so in India. There is massive shortfall in infrastructure and urban housing. Due to climatic change and rising environmental concerns, more resilient buildings which are environment friendly will be required. There is also a perceptible change in the way people live, work and play. People are living longer; households are getting smaller; there is increased mobility; and of course technology is transforming the way people think demand the kind of homes they want and carry on with their lifestyle. Keeping all these in mind, we have taken new initiatives at Sobha to stay ahead of the curve.

Ravi Sinha: How easy or difficult it was to manage your brand reputation in the initial days? Do you feel the burden of often unreasonable expectations today?

PNC Menon: I believe that any brand is established by consistent delivery of quality within committed timelines. There is no additional burden of expectation, except, of course, the ongoing passion to improve quality standards on a continuous basis. 

Ravi Sinha: In today’s digital world the buyers come together for mass campaigns. How do you differentiate between consumer activism and consumer blackmailing?

Ravi Menon: We welcome consumer activism and take up customer complaints/issues seriously and quite speedily as far as possible and deal with it with honesty and openness. We make efforts to understand their issues by adopting a personal approach and try to help resolve it. This signals to them that we value their opinions. This helps in managing expectations and reducing negative feedback.

In case of consumer blackmailing, we take the threat seriously but at the same time don’t allow it to cloud our judgment. In such situations, the key is to remain calm and professional. We try to look at options available and take steps to find a reasonable solution. However, if the consumer is unreasonable, irrational or fake, we leave them to get exposed amidst other stakeholders to draw their own conclusions. We value customer feedback and strive to accommodate as far as possible. However, we do not engage or encourage consumer blackmailing, if any.

Ravi Sinha: The buyer has changed today and so has expectations vis-à-vis transparency and communication at each and every level. What is your outlook on this change over the years?

PNC Menon: We have always believed in and practiced a philosophy of 100 per cent transparency and communication, regardless of whether we are interacting with our customers, investors, employees or any other stakeholders. This philosophy has not wavered. In fact, this approach has been embraced by our Board and as such, we have strengthened our communication channels across both Sobha India and Sobha Middle East.

Ravi Sinha: Dealing with informed buyers has its own challenges. What changes you had to make in terms of transparency and communication?

Ravi Menon: We want buyers to be more informed and rather strive to make more relevant information available to them. If buyers are truly informed, they will be able to discern better and can take a calibrated decision on parameters of quality, timeliness and transparency. They would also become aware about our uncompromising business ethics, values and transparency in all spheres of business conduct, which have contributed in making us the most admired and trusted real estate brand in India.

We have a two way communication with our customers through our various touch points such as customer care cell, a dedicated customer portal and our interactive corporate website. These help us in making available uniform and consistent information to the customers round the clock. Additionally, a dedicated Customer Relationship Executive (CRE) is available for any clarification/information at all times. Even after hand-over, facility management department provides valuable support to our customers in maintenance related issues. 

Ravi Sinha: During your early days fiscal management was simple game of profit & loss account. Do you find it too complex now with company being listed entity  and hence burden of compliances?

PNC Menon: Prior to our IPO in India, we had developed internal systems and processes to enable sustainable growth, which helped us to adequately meet the challenges of the industry. Our experience with the IPO has only further strengthened the organization’s ability to meet corporate governance requirements and stakeholder expectations.

Ravi Sinha: As the second generation did you ever feel the need to change the way fiscal management was traditionally being practiced?

Ravi Menon: We have been prudent in managing the finances from the very beginning by utilizing all our resources efficiently and keeping utmost transparency in our dealings. Post listing, we ensure that there is regular flow of correct information to all our stakeholders. 

Mastering the real estate cycles is key to our business as it is cyclical in nature. This has not changed fundamentally for us prior or post our listing. We have been able to use our capital wisely during different cycles primarily due to our integrated model which helps us to manage and control the supply chain to suit the changing conditions. 

Ravi Sinha: Scale to capacity mismatch is an inevitable reality of today’s market when every developer wants to grow bigger. How easy it was in the initial years?

PNC Menon: Sobha delivers a fully integrated model of real estate development spanning multiple activities of design, engineering, MEP, joinery, glazing, joinery, landscaping and infrastructure. We have also carefully assessed the market potential for real estate in India and accordingly have created the required organizational capabilities. Sobha currently delivers 7 million square feet delivery per annum across India, across all product segments.

Ravi Sinha: How easy or challenging has been the transition when you took a conscious call to expand the scale and geographical footprint? 

Ravi Menon: With over 7 million square feet of area for the past 5 years (including real estate and contractual business), the company has sufficient manpower and machinery to increase its delivery capability, if need be. In FY16, we did around 11 million square feet which was the highest execution done by us till date. We have the capacity to scale up further.

We conduct our own market study and post assessment of demand, we launch projects. We have observed good absorption level in all our projects which almost gets sold out by the time projects get completed. Therefore, we are left with minuscule unsold inventory, if at all. In the last FY15-16 our unsold inventory in completed projects was only 0.18 million square feet; out of this, 0.08 million square feet comprised of the plotted development projects.

We do not wish to establish ourselves as an opportunistic developer and will never launch more than we can deliver. Rather, if projects and business opportunities do not fit with our overall values, we do not pursue it. For us integrity comes first. If we see that an opportunity may threaten our corporate values, we see it as an opportunity not worth taking. 

Ravi Sinha: The branding cost was peanuts during your early days, compared to today’s multimedia age. Do you ever feel the company is nowadays spending more than necessary for image build-up?

PNC Menon: Regardless of sector or geography, brands get established only with consistent delivery of the product with the best quality and as per the committed timelines. There is a  growing need for organizations, including Sobha, to be seen and heard at various consumer touch points. Technology and especially social media facilitates this “connect” with consumers. We are constantly exploring new and innovative ways to leverage multimedia in order to raise our brand equity, not only at an organizational or corporate level but also at the project level. 

Ravi Sinha: Quest to be a brand instead of advertising to sell the project costs more. What is your outlook on brand management and its inherent expenses?

Ravi Menon: For us, our brand is very sacrosanct. People trust what existing customers say about the product that gives credibility to our brand. We rely more on the word of mouth publicity and consider our buyers as our brand ambassadors. This not only strengthens our brand image but also helps us sell better. Most of our customers are happy and they recommend Sobha Homes to their acquaintances and friends.

To engage deeper with our customers, we recently launched “Sobha Connect Program”. We believe brand management does not entail a gloss of heavy advertisement alone. A brand gets made if the intrinsic qualities of the product are world class, guided by uncompromising work practices and ethics and has top end delivery excellence, peppered with transparency and trust. 

Ravi Sinha: Do you feel the heat of increasing peer pressure and competitive challenge today, compared to your initial days?

PNC Menon: No! From my perspective, the challenge has always been an endless pursuit of excellence. It is more of an internal challenge. As an entrepreneur, I have always believed in building a meritocracy-focused organization. This has enabled me to identify top talent from multiple geographies, industries and backgrounds. Furthermore, this selection of top talent at the management team or Board level has provided me with great comfort and confidence – and the transition thus far has been a smooth one.

Ravi Sinha: Ravi, being the scion of the family business, how much do you control the organisational decisions and to what extent you allow the professionals to take independent decision?

Ravi Menon: Sobha is known for being a process driven organisation which is run professionally. All our practices and processes have helped strengthen our bonding with stakeholders including our employees and build immense trust. We have at present about 2,800 professionals on rolls and we value and promote professionalism and merit. 

We adopt newer cutting edge management practices. The pack is led by one of the most able professionals in the Indian realty sector, Mr. JC Sharma, Vice Chairman & Managing Director, who is most respected name in the industry. We believe in empowering our people and there is enough freedom to innovate and add value to our existing processes. 

Ravi Sinha: Defining demand was not a challenge in early days with real estate being a micro market business. Now with the challenge of geographical expansion and destination development, do you feel the sector is clueless with due diligence mechanism?

PNC Menon: Real estate demand is primarily driven by population dynamics and economic growth. As each of our key markets in India have different demographic and social factors at play, real estate demand for each of our cities must be assessed independently.

Ravi Sinha: What kind of professional functioning you have introduced for decision making in terms of identifying market, defining demand and adopting technological and scientific processes?

Ravi Menon: We have adopted the most advanced construction technology and have followed scientific processes to deliver eco-friendly projects. Achieving the highest standards of performance in each of the three pillars of sustainability being the economic, environmental and social aspects is what we as a responsible organisation aspire for. Our buildings are designed to be energy efficient. The best green practices are followed in all Sobha’s properties.

Today, facilities such as water recycling plants, solar powered lighting systems and organic waste converters are provided by default in most of Sobha’s projects. These facilities help in significantly reducing maintenance expenses. Sustainable initiatives are taken not only at our construction sites but also at our manufacturing facilities where every attempt is made to keep the carbon footprint low by following the best industry practices.

Ravi Sinha: What is one desirable best practice that you find missing in the business today? 

PNC Menon: Real estate is inherently a cyclical business. Well planned financial engineering is a critical strategic element that enables real estate developers to be well prepared for downturns, which are bound to occur. Based on my experience, the real estate business should be structured with 60 per cent of the total capital as equity and the balance 40 per cent as debt. This discipline of maintaining a healthy and consistent debt to equity structure is what all major developers have come to appreciate. In my opinion, those that will achieve long-term success will treat this best practice as a top strategic priority.

Ravi Sinha: What is one desirable best practice that you would like to adopt to be first mover in the business?

Ravi Menon: We believe in honest, transparent, value-laden hard work. We wish all employees to become true brand ambassadors of Sobha, know our process, the way we do and why we do it. We believe if each employee becomes our brand ambassador, it will surely fulfill our twin objectives of strengthening the brand and help sell better. We are looking at ways to make each employee knowledgeable, innovative and committed. Rest we think, will follow logically.

 

Sobha’s Q3 net profit up 6% quarter-on-quarter

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News Point: The company’s revenue also increased by 6% quarter-on-quarter during the said period and stood at Rs 700.4 crore.

Sobha Logo. Sobha Ltd, Bangalore real estate, India real estate news, Indian property market, Track2RealtySobha Limited has reported a 6% quarter-on-quarter increase in its net profit during the Q3 FY18. Its profit after tax (PAT) increased from INR 50.3 crore in Q2 FY18 to INR 53.4 crore in the quarter ending December.

The company’s revenue also increased by 6% quarter-on-quarter during the said period and stood at INR 700.4 crore.

Interestingly, company’s revenue from real estate segment grew by mere 2% while its revenue from contractual and manufacturing increased by 25% during the quarter ending December.

Sobha has 48.54 million sq ft of developable area in progress, it said in a media release.

Highlights of Sobha results: 

Revenues at INR 7 billion on a consolidated basis

EBITDA of INR 1.46 billion; EBITDA margin improves at 20.7%

PBT at INR 825 million; PBT margin at 11.6%

PAT at INR 538 million; PAT margin at 7.7%

Revenue, PBT and PAT are up by 26%, 54% and 36% Y-o-Y respectively

Cash inflow of INR 6.74 billion

Net operational cash flow of INR 553 million

Average Cost of Borrowings at 9.74%

Registered new sales volume of 0.93 million square feet

Registered new sales value of INR 7.51 billion (SOBHA Share of INR 6.11 billion)

Achieved average price realisation of INR 8,045 per square feet (SOBHA Share of INR 6,541 per square feet) 

J.C. Sharma, Vice Chairman and Managing Director, Sobha Limited said, “We are pleased to report that we have achieved highest ever revenue for the quarter and highest ever cumulative revenue for 9 months, backed by good operational performance across all categories and all regions. This reflects the confidence of buyers in the brand Sobha in post-RERA era. In a tough environment, Sobha has been able to achieve new sales volume of 933,365 square feet in total, valued at INR 7,509 million with an average realisation of INR 8,045 per square feet (Sobha’s share of sales value of INR 6,105 million with an average realisation of INR 6,541 per square feet) in the third quarter of the FY18. The sales volume and total sales value are up by 8.4% and 11.2% respectively as compared to preceding quarter. Additionally, the sales volume and total sales value have increased by 52% and 92% respectively as compared to Q3 FY17.”

“It is heartening to note that Sobha has been voted as Number 1 choice of homebuyers nationally in Track2Realty’s Consumer Confidence Report 20:20. This report is one-of-its-kind of comprehensive study on consumer confidence and psychology about the Indian real estate market. This is the 4th consecutive year that Sobha has won top rank in the consumer confidence survey, making it an exceptional and a rare feat achieved by any real estate brand in the country,” he added. 

Exceptional Execution

Sobha’s superior execution capability is its core strength. Since inception, Sobha has completed about 88.93 million square feet of area.

The Company currently has ongoing real estate projects aggregating to 41.37 million square feet of developable area and 28.48 million square feet of saleable area, and ongoing contractual projects aggregating to 7.17 million square feet under various stages of construction.

The Company has a real estate presence in 9 cities, viz. Bangalore, Gurgaon, Chennai, Pune, Coimbatore, Thrissur, Calicut, Cochin and Mysore. Overall, Sobha has footprint in 26 cities and 13 states across India.

 

Can Bengaluru’s infrastructure support vast real estate development?

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Bottom Line: Faster implementation and collective effort is the key to success in Bengaluru’s infrastructure supporting real estate development, says a Colliers Research. 

Bangalore, Bengaluru, Bangalore real estate, Bangalore property market launches, Infrastructure in Bengaluru, Investment in Bangalore infrastructure, India real estate news, Indian realty news, Real estate news India, Indiaproperty market, NRIs in Bangalore, Track2Realty Bengaluru absorbs about 13-14 million sq ft of commercial office space every year, which is approximately one third of the total space leased in India. As per Colliers Research, the trend is likely to continue in the coming years.

The data analysis reveals that about 26 million sq ft of Grade A office buildings are under various stages of construction in the city which will completed by 2020. Most of this upcoming supply is concentrated in Outer Ring Road (ORR), which is a major commercial hub in Bengaluru.

“As on today, within ORR and Whitefield, the commercial office space stock accounts for approximately 78% of Grade A stock in Bengaluru. With infrastructure projects like the ORR metro line, and planned road improvement projects in and around these areas; the market is likely to remain bullish with respect to overall office space absorption in next 2-3 years, driven by IT-ITeS, followed by Engineering & Manufacturing and BFSI sectors. However, with more office supply coming in these markets, the pressure on infrastructure and support sectors is to increase multi-fold,” says Ritesh Sachdev, Senior Executive Director, Occupier Services, Colliers International India.

Bengaluru being a host to the largest share of technology start-ups (26%) in India, is the testing ground for co-working spaces and has always invited new occupiers, such as Capiot, InnerChef, Knowlarity, Monkey Box, Artifact Design, and many others. Moreover, the residential market is also developing to support the vast commercial development.

The story is good as far as the real estate development of the city is concerned, however, the unwelcome news is that the city’s infrastructure is unable to keep pace with the vast real estate development.

Bengaluru has seen an increase of 47% in population during the last decade (2001-2011) and the vehicle population growth rate is even higher than the population growth rate. The state government has started various initiatives and is going in the right direction to solve the infrastructure issues; Namma Metro being one of the initiatives. Phase 1 of the project connecting Nagasandra to Puttenahalli (Green line i.e North-South) and Mysore Road to Bayapanahalli (Purple line i.e East- West) corridors have been completed. Phase 2A, connecting Mysore Road to Challegatta near Kengeri and Yelachenahalli to Anjanapura is set to be completed by December 2018. This will push the demand in micromarkets such as Mysore Road and Bannerghatta Road.

Further extension of Phase 2 includes stretch between Silk Board and K.R Puram which is set to be completed by 2020. This will further boost demand in ORR accounting for 75% of the total leasing activity in Q3 2017.

Construction of underpass and widening of flyover along ORR at Hebbal Junction will improve commute time within the city’s major employment hubs. The National Highway Authority has also notified land for widening of NH 209 (948) till Kanakapura. With good accessibility to other parts of the city, these micromarkets are expected to improve further.

Although the government has started taking initiatives, the pace of development is slow. In our opinion, the government should also look at making the city sustainable to natural calamities. The time and again flooding of the city, brings the city to its knees. Along with the introduction of new infrastructure projects, the government should also focus on retrofitting the existing infrastructure.

According to Colliers Research following initiatives can be undertaken at three levels: 

One, at the citizen’s level, where they are imparted civic sense to follow the set rules of transportation like following the signals, crossing at footpaths, etc. This will ease the flow of traffic to a certain extent. 

The second initiative should be in identifying and implementing key infrastructure projects at a faster pace to improve the quality of living, to make Bengaluru a world class city. We believe that occupiers, investors along with the developers should make an effort to pressurise the government for the same. 

Bengaluru requires a comprehensive integrated sustainable public transport system like London and Singapore. Widening the road itself might not be the optimum solution for the problem. Efforts by all involved stakeholders, from citizens to governing bodies should work towards achieving a common goal, that is making Bengaluru uphold its name of Silicon Valley. 

Colliers Research says the infrastructure planned along commercial hubs such as ORR is likely to provide impetus to the real estate sector in ORR and nearby micromarkets, such as K.R. Puram and Hebbal. However, development of office assets without timely completion of infrastructure will leave the city in a chaotic state and may impact the office market adversely.

LOGOS India launches logistics venture

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News Point: LOGOS India is increasing its Asian footprint by launching a new logistics venture with commitments from Ivanhoé Cambridge and QuadReal Property Group (QuadReal).

Logos India, Assetz Property Group, India real estate news, Real estate news India, Indian property market, MNCs in Indian real estate, JVs in Indian real estate, Indian real estate joint ventures, Foreign funds in Indian real estate, Track2Media Research, Track2RealtyThe strategy of the venture, to be known as the LOGOS India Logistics Venture (the Venture), is focused on developing and owning high-quality, modern logistics facilities in targeted cities across India and will have up to US$800 million in investment capacity. Final closing of the Venture is subject to certain regulatory approvals.

LOGOS India, a partnership between LOGOS Group and Assetz Property Group announced in August 2017, has identified a strong pipeline of opportunities across the key logistics hubs of Mumbai, Pune, Chennai, the National Capital Region (NCR), Bangalore, Hyderabad and Ahmedabad to meet the increasing demand for modern facilities.

Supported by India’s compelling macroeconomic fundamentals, rapidly urbanising population, progressive government initiatives and growing e-commerce sector, these markets are in a prime position to capitalize on India’s emerging consumer base.

Commenting on the Venture, Trent Iliffe, Joint Managing Director, LOGOS Group, said, “We’re pleased to be expanding our relationship with Ivanhoé Cambridge to India and welcoming QuadReal as a new partner. India is the next step in our Pan-Asian real estate strategy. We are focused on meeting the strong demand from our customers and ensuring we can help them grow to address the challenges of the India supply-chain market.”

John Marsh, Joint Managing Director, LOGOS Group, added, “Our expansion into India will see us leverage our significant regional experience and our global development and design standards to deliver the highest-quality logistics facilities in the market.”

Ben Salmon, Chairman, LOGOS India and CEO, Assetz Property Group, said, “India is one of the fastest-growing economies in the world and the combination of LOGOS India’s local expertise and Pan- Asian management and development capability means we are well-placed to capitalise on the many opportunities we are seeing in this market.”

Rita Rose Gagné, President, Growth Markets, Ivanhoé Cambridge, said, “We are pleased to invest in the logistics space in India, a promising high-growth real estate sector. India is a strategic market for Ivanhoé Cambridge and we are continuing to grow our presence and our footprint there. We fully support the LOGOS India team that has deep market experience and we are delighted to be partnering with QuadReal, a leading global real estate investor.”

Jonathan Dubois Phillips, President, International Real Estate, QuadReal, noted, “After extensive due diligence to understand the economic, demographic and government forces driving growth in India, we are delighted to be partnering with Ivanhoé Cambridge and LOGOS India to invest in the logistics sector in strategic Indian markets.”

Macquarie Capital (Australia) Limited (together and through its affiliate, Macquarie Capital) acted as exclusive financial adviser to LOGOS India for the transaction and as sole lead manager and arranger for the Venture’s capital-raising.

Property market potential of top 5 cities

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Bottom Line: The realty markets of Mumbai, Pune, Chennai, Bengaluru and Hyderabad are proving to be magnets that attract potential home buyers from all over due to their massive infrastructure development, affordable rates and good job catchment opportunities.

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However, a closer look at some of the leading property markets of the country, like Mumbai, Pune, Chennai, Hyderabad and Bangalore, clearly suggest that the market is poised for an upswing in the next few years. More importantly, it is not just the analysts but also the home-buyers who are today; ready to bet high on the long term growth story of the property market in these leading cities.

City realities

Home-buyers are bullish over the medium-to-long-term growth story of the property market

Cities that are mostly being preferred are Mumbai, Pune, Bangalore, Chennai and Hyderabad

Infrastructure developments and job catchment are the investment magnets in these cities

Mumbai

“I don’t really subscribe to the view that Mumbai is saturated and hence, is facing a slowdown. The same was opined before the emergence of BKC (Bandra Kurla Complex) as well but the new destinations for both, residential and commercial spaces changed this outlook,” says Jessy Kutty, an NRI, who is soon planning to invest in the city’s property market.

After all, the kind of infrastructure upgrading, like the Eastern Freeway and Western Expressway, the metro rail, Jogeshwari – Vikhroli Link Road (JVLR), Andheri Kurla Link Road, etc, have had, they have changed the outlook of the city.

Add to it, the upcoming infrastructure projects like the Mumbai Trans Harbour Link and an international airport in Navi Mumbai, has suddenly given birth to a twin city that is ready for investment. Needless to add, these developments are on the stretches of high business corridors and hence, are all set to fuel the housing demand in the city.

Advantage Mumbai

Mumbai 7th most promising city in the list of target cities in APAC due to growth prospects in commercial office activity-Cushman & Wakefield

Impressive investment along the new growth corridors of upcoming MTHL and Navi Mumbai International Airport

New corridors of development emerging as the government pushes for Rs 46,000-crore expressway to connect Mumbai-Nagpur with Samruddhi Expressway

Pune

The story is no different in the neighbouring city of Pune as well where the Pune Municipal Corporation (PMC) has set up five special funds for urban projects. The PMC has set a target of raising:

INR 55 crore for the Pune Infrastructure Fund;

INR 23 crore for Critical Infrastructure Funds for Information Technology and Enabled Services (ITES);

INR 2 crore for Heritage Conservation Funds;

INR 20 crore for Urban Transport Land Development Charges and;

INR 40 crore for Urban Transport Building Development Charges.

“Pune is no more just a hot destination but the best market for investment today. Even in the wake of a slowdown, the performance of the IT industry in the city has been phenomenal. Even Cushman & Wakefield has placed Pune among the top 10 markets across the Asia Pacific region. For me, this is the market to bet on for a long-term growth story,” says Gaurav Gupta, an IT professional.

Advantage Pune

Pune 8th most promising city in the list of target cities in APAC due to growth prospects in commercial office activity-Cushman & Wakefield

Pune sells India’s first municipal bond since 2007 worth $31 million for 10 years for smart city project and aims to modernize the city

A detailed project report (DPR) for the ring road proposed by the PMRDA will be ready by September and civil work will start by October-November. This eight-lane 128km ring road will connect places on the periphery of Pune and Pimpri Chinchwad

Bengaluru

Bengaluru has always been an aspirational city for the average home-buyers. Now, with the boost of infrastructure projects, like the metro rail and Periheral Ring Road, this job magnet destination appears to be even more desirable.

The influx of global corporate occupiers, infrastructure deployment in the peripheral areas, rapidly improving connectivity and unleashing of large land parcels by the government for commercial and industrial growth, promises the emergence of newer nodes in the peripheral districts of Bengaluru.

Since land in these areas comes at a lower cost; the expat workforce that is employed in the numerous automotive, engineering and other industries located on the outskirts of Bengaluru, would continue to drive the property market.

Ashish Puravankara, managing director of Puravankara Ltd, finds reasons to suggest why Bengaluru is a huge investment magnet. The companies are also realising the cost of doing business here; the average rental cost of office space per sq feet in Bengaluru is about INR 45 and that works well for companies. Then look at the customers’ point of view. The average cost of housing in Bangalore is INR 5,500 and that works well for their workforce too.

“So, it is all supporting each other and it is not that only one factor alone is driving the market. If the prices have become unaffordable due to the high demand in the city, people would have started looking at other cities but Bengaluru continues to drive the major share of investment in the property market,” says Puravankara.

Advantage Bangalore

Bangalore 6th most promising city in the list of target cities in APAC due to growth prospects in commercial office activity-Cushman & Wakefield

A Colliers report suggests Bangalore market maintained its top position across nine cities despite low vacancy and recorded an overwhelming share of 37% of total absorption

Bangalore is the only Indian city that has now scaled up to global level of consumption of office space per household, an impressive 65 sq feet as against the national average of 25 sq feet 

Chennai

Chennai seems to have moved ahead from its flood disaster of 2015. Today, it is the biggest manufacturing hub in India. The city has more industries coming up and it is termed as the Detroit of Asia. Almost every manufacturer has a facility there. It has attracted more investments and has more industrial corridors in almost every nook and corner of the city.

The IT sector here is also booming and growing at a rapid pace. Top Indian IT majors have a considerable chunk of employees operating out of Chennai.

“The best part about Chennai is the price point that hovers in the range of Rs 2500-5500. Premium projects are located in Nungambakkam, Egmore, Anna Nagar, Nandanam, Mandaveli, RA Puram and locations in ECR such as Muttukadu, Uthandi and Injambakkam. Low and mid-segment projects are coming up at Perumbakkam, Ottiyambakkam, Thalambur, Mevalurkuppam, Avadi, Padappai, Mogappair, Thirumazhisai, Navalur, Manapakkam, Padur, Kelambakkam, Thaiyur and Velappanchavadi,” explains Ravikiran Donthamsetty, a local broker.

Advantage Chennai

Chennai 9th most promising city in the list of target cities in APAC due to growth prospects in commercial office activity-Cushman & Wakefield

Vision 2023 of State Government aims to boost infrastructure and industrial growth in the city

Expansion of Chennai airport, laying of Chennai peripheral ring road, widening of East Coast Road, and setting up of Chennai-Bangalore Industrial Corridor promises to alter the investment climate of the city

Hyderabad

Parth Mehta, managing director, Paradigm Realty agrees that markets like Hyderabad have been outperforming their peers in larger metro cities. The city is improving currently with respect to the infrastructure and government policies for doing business.

“Also, due to the IT and e-commerce boom, there would be a lot of start-ups that would prefer to operate from low cost office spaces at these locations,” says Mehta.

Probably, no other city looks as promising as Hyderabad from a medium-to-long-term perspective. The continuous growth of the IT sector in the city has had a cascading effect on the housing market in corresponding hubs as well. The residential activity in north Hyderabad is now driven by the presence of industries such as pharmaceutical, bio-tech, electronics, etc.

“In 2016, Hyderabad witnessed strong office leasing, registering a 109 per cent y-o-y growth during the year. In the January to March 2017 quarter, the city witnessed an uptake of more than 1.3 mn sq ft of office space. This growth in office leasing activity, coupled with robust infrastructure development and competitive pricing, positions Hyderabad as one of the most affordable residential markets for buyers in the region,” says Rami Shetty, a local property agent.

Most of the homebuyers in the city also agree that the metro connectivity and transit hubs will fuel further demand in the housing segment in the near future. Due to the lowest office rentals across top markets in southern India, corporates are increasingly looking at Hyderabad while planning their expansion strategies in the region. With the demand going up for office space, the city is experiencing a demand-supply gap at present and its organic effect on the housing market is a logical conclusion.

Advantage Hyderabad

Hyderabad tops the list of target cities in APAC due to growth prospects in commercial office activity-Cushman & Wakefield

With political stability the city is high on the wish list of corporates due to low cost of doing business

The upcoming metro connectivity & transit hubs fuelling investment climate in the city

In Conclusion

In a slow moving housing market at present, these cities are displaying exemplary resilience to suggest that the medium-to-long-term outlook is pretty bright. The best part is that the home-buyers and other investors are ready to believe the long term growth stories of these cities.

Why Bangalore commands highest rental yields?

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Lines: The fundamentals that make Bangalore command the highest rental yields in India are sustainable and realistic.

BangaloreMayur Shah, an NRI from Boston wanted to invest back home on the residential space. His first choice naturally has been the hometown Ahmedabad. However, he was advised by the local agents to instead go for a Bangalore property.

His first impression has been that he was being taken for a ride as the property prices in India’s Silicon Valley has been a bit higher than the Ahmedabad market. However, a closer look at the Indian property market made him realize the rationale and prudence of investment in income producing city like Bangalore.

“Purely from the standpoint of ROI (Return on Investment) Ahmedabad or many other cities of India do not make any sense when compared with Bangalore. The rental yields in these cities are hovering around a meager 1-1.5 per cent, depending upon the location. However, Bangalore property promises to give almost three times higher,” says Shah.

Facts speak for themselves. As per the data available with Track2Realty, the real estate think-tank group, Bangalore rental yields are highest in the country. It is range bound between 3-4 per cent, depending upon the location. The property prices are still much lower than many other cities, including the financial capital of India, Mumbai, or the Delhi-NCR market.

Another report by Global Property Guide suggests 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.

What sustains highest rental yields?

While rental yields in other Indian cities are in the range of 1-1.5%, Bangalore rental yields are around 3-4%

The 2007 level indicates the yields had been in the range of 7.16 per cent to 9.92 per cent, as per Global Property Guide

Reason of highest rental yields is consumption of office space per household that is competitive in Bangalore with global cities like London, Singapore, New York, Tokyo

In major global cities the consumption of office space is around 60-65 square feet per household and in Bangalore absorption is 50 square feet 

Analysts believe the credit for highest rental yields in Bangalore goes to its robust economic activity. Consumption of office space per household in the city is a testimony of the fact. Data available with Track2Realty shows consumption of office space per household in Bangalore is competitive not only in India but also internationally in London, Singapore, New York, Tokyo etc.

In major global cities the consumption of office space is around 60-65 square feet per household. In India the ratio per household even in a city like Mumbai is 25 sq feet. Kolkata has a dismal only 14-15 square feet office space per household. In Delhi-NCR it is again 20-25 square feet per household. However, Bangalore has the impressive absorption is 50 square feet office space per household which means the volume of office space and houses being supplied have been in equilibrium.

In London despite of so much population pressure it still has 50-55 sq feet per household. Singapore has 60-65 sq feet per household; New York has 160 sq feet per household. Now since Bangalore maintains that global demand trend it is attracting the expat professionals who are always on the look out for rented property.  

Ramesh Nair, CEO & Country Head, JLL India seems to agree with the theory when he says that among the seven major office markets in India, Bengaluru continues to have the lowest vacancy levels at slightly less than 4 per cent. At a pan-India level, the average vacancy in commercial real estate stands at 15 per cent, as of 4Q16.

“From these figures, it is clear that IT hubs continue to see a good supply-demand equilibrium compared to other markets in the country. Developers in these IT hubs, especially Bengaluru and Pune, need to look into addressing the existing space crunch before the situation forces occupiers to consider some other cities,” says Nair. 

JC Sharma, VC & MD of Sobha Ltd sums up the debate when he says that the rental values of Bangalore also appear to be high because the capital values are realistic.

“Bangalore is the only city that is truly demand driven and the increasing exodus of corporate sector in the city only indicate the trend of high rental yield will further gain momentum. As of now, we are looking up to Bangalore rental yields on an international benchmark and not national average,” says Sharma.

The big question is whether Bangalore rental yields can actually touch the major cities of the world where 7-8 per cent rental yields are the norm. Well, it has already breached that mark in the past and once the macro economy improves indications are that Bangalore rental yields will yet again be at par with the major cities of the world. 

By: Ravi Sinha

Nitesh Estates to grow commercial and rental portfolio

Posted on by Track2Realty

News Point: Bangalore-based real estate developer plans to pan out over 5 million square feet in the next 3 years.

Nitesh Mall, Indiaranagar, Bangalore, Nitesh Estates, Nitesh Developers, Delhi NCR real estate, Bangalore Real Estate, JLLM, Jones Lang LaSalle Meghraj, Track2Media, Track2Realty, ravi sinha, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, KP Singh, DLF, Unitech, Emaar MGF, ndtv.com, ndtv, aajtak, zee news, india news, property news, real estate news, 99acres.com, 99 acres, indianrealtynews.com, indianrealestateforum.comIndiabulls real estate, BSE, Bombay Stock Exchange, Mumbai Real Estate, India Property, Track2Media, Track2Realty, ravi sinha, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, KP Singh, DLF, Unitech, Emaar MGF, ndtv.com, ndtv, aajtak, zee news, india news, property news, real estate news, 99acres.com, 99 acres, indianrealtynews.com, indianrealestateforum.com, Indiabulls real estate, BSE, Bombay Stock Exchange, Mumbai Real Estate, India PropertyBangalore-based Nitesh Estates plans to grow its commercial & rental assets to more than 5 million sq. ft. of space in the near future. This includes locations in the central business districts and significant micro markets of Bengaluru. Nitesh Estates will develop and acquire A-Grade commercial & rental assets with an investment of around Rs. 1500- crore across multiple projects.

To spearhead the vertical Nitesh Estates has appointed Mahesh Laxman as its Chief Executive Officer of Commercial and Rental Business.

Mahesh Laxman says, “Nitesh Estates will diversify the portfolio mix with a well balanced commercial & rental asset class. Our plans in Bangalore to build 5 million sq ft of A grade office space will also set the pace to establish a footprint in a number of cities within the next 3 to 5 years.”

Nitesh Estates has forged a strong partnership with Goldman Sachs to acquire ready-made commercial assets on a pan India footprint. In this endeavor cities like Pune, Chennai, Hyderabad and Mumbai have been identified for such acquisitions.

Its first buy under this partnership was an impressive purchase of 1-million sq.ft. shopping mall – Nitesh HUB in Koregaon Park, Pune. Nitesh Estates aims to deliver upscale projects in both, the commercial and retail asset classes.

Affordable homebuyers must know their wants & needs

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: Affordable homebuyers must understand their wants and needs to not get duped by the fancy marketing jargon of builders.

- india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Delhi NCR real estate, Mumbai Real Estate, Bangalore Real Estate, Pune Real Estate news,Track2Media, Track2Realty, ravi sinha“Let’s face it! We all have unrealistic expectations when buying a house. We often forget about our budget and end up stretching it to fall into debt trap. It happens because we want the best of everything even though we are in the property market to buy a budget home or affordable home. I am not sure to what extent it is human tendency or to what extent we fall into the fancy trap of developers. But today when I look back I think I should have been more realistic when buying my house. There is no point paying almost all the salary in the EMI now,” says a repentant homebuyer in Mumbai.

Well, not many would like to admit it as openly as this homebuyer but the fact remains that the buyers of affordable homes often forget their wants and needs when they enter the property market. The temptation to have one’s home is palpable and many of the first time homebuyers make the mistake of stretching beyond the financial limits.

How many affordable homebuyers who leave to work early morning and come back late night actually need amenities like free Wi-Fi, amphitheatre, club, tennis court, swimming pool etc? Are many buyers in the average salaried class in a position to avail these facilities even though the developer has created e everything within the project? How long such fancy amenities are maintained once the project is over and the monthly maintenance charges are a huge issue?

The critics of this theory might question as to why not the buyers of affordable property be given these amenities. The reasons are many – ranging from the increase in loading percentage vis-à-vis the usable carpet area to cost of maintenance of these amenities every month. In a housing market like Mumbai where the majority of the homebuyers in the affordable segment are expat professionals having both time and budget constraints it simply defies logic to expect fancy amenities.

With the reasonable expectation of a roof over the head not very long ago, the real estate boom in this part of the world has scaled up the liberty of choice for the average homebuyers. While the aspirations of even the middle and lower middle income with moderate budget have gone up, there are very many residential projects launched in recent times that seem to fill the gap with the promise of hi-tech amenities, luxurious lifestyle, lush green surroundings.

Analysts therefore recommend that the average homebuyers must know their budget and needs to avoid the additional financial load. What you may want does not necessarily fit into your budget segment and the quest to have something more is endless. The smart builders do understand this temptation of gullible homebuyers and in the absence of homebuyers’ education in this part of the world their temptation is what sells the fancy marketing offerings of the developers.

Developers, on their part are conscious of this homebuyers’ temptation. The point out that the developers are just catering to what the market is looking for. Harjith.D.Bubber, M.D & C.E.O, Rivali Park agrees that nowadays a homebuyer expects gated community as a part of affordable housing. “External amenities like club house, swimming pool, open areas for children to play, minimum one car parking is the basic expectation of the homebuyer today even in budget housing.”

Parth Mehta, Managing Director, Paradigm Realty, on the other hand, suggests caution when he says that when a person is buying an affordable housing with budget constraints one should keep in mind some basic things. His suggested checklist is more about basic sanctions and clearances than amenities to ensure the timely delivery of the project.

“To invest in a property where developer has complete approval like IOD, CC is more important for someone who is spending his lifetime savings. The title of the property should be clear and marketable. One must also check the credentials and standing of the developer in the market,” says Mehta.

Some of the developers try to find a method in the expectations of affordable homebuyers. They feel it is more to do with how the developers define the demand of affordable housing. Affordable homebuyers too should be given liberty of choice as far as upgrading the lifestyle is concerned.

Nikhil Hawelia, Managing Director of Hawelia Group says there is nothing wrong for a low-ticket buyer to expect the quality experience. According to him, instead of compromising on the quality of amenities that the modern homebuyers want (and often also need) the budget segment should be determined by the distance from the main city and the work place. If one is ready to travel an hour or so for getting a luxurious feel at home, the market should be ready to respond to this set of buyers as well.

“I believe in today’s market place where most of the young buyers are aspirational, even when they have budget constraints, their budget should be a criterion only for location and the size of the apartment. They should not be devoid of modern amenities and that is how a new emerging segment of affordable luxury can meet the market expectations as well during the slowdown. This is how urbanization has evolved the across the world,” says Hawelia.

Analysts for quite sometime are pointing out to mismatch between homebuyers’ preference and the ground realities. While value addition is something that drives homebuyers across the segment of housing, in affordable housing this value addition has an altogether different connotation. More usable spaces, since most of the affordable housing units are smaller in size, is a better value addition than lowering the usable carpet area for the sake of badminton court or amphitheatre kind of fancy offerings. 

As a thumb rule, if the budget is just for the affordable home and the homebuyer is moving from a rented flat to his own, one should first of all look at the location and distance from the work place. Since most of such projects are on the periphery of the city, one must also look for the infrastructure within the project. Usable carpet area is next and the fancy offerings & amenities are definitely the last in the checklist of affordable housing. 

By: Ravi Sinha

Rate quo status bad news for housing

Posted on by Track2Realty
Track2Realty Exclusive

News Point: The RBI Governor’s concern with rising crude prices, inflation, bad monsoon and downward inflationary pressure post 7th Pay Commission is bad news for housing market.

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Delhi NCR real estate, Mumbai Real Estate, Bangalore Real Estate, Pune Real Estate news,Track2Media, Track2RealtyMohini Ahlawat, a prospective home buyer has been waiting for the last six months in anticipation of interest rate cuts. The media reports that had by and large anticipated the drastic rate cut in the last fiscal of the previous fiscal year did not happen. She was yet again disappointed in the first quarter of this fiscal year but everyone told her that growing GDP, lower crude prices compared to last few years and negative inflation indicate that in the second monetary policy by the Reserve bank of India (RBI) rate cut is on the cards. She is yet again disappointed.

“See, I am not an economist; nor do I understand the financial jargon. But what I fail to understand is that if the GDP is indeed growing, oil prices are low in the global market and over an above that the inflation is low, then why the interest rates are not coming in the range of 7 to 7.5 percent. This is the level at which an average home aspirant can think of buying a house,” Mohini shares her concerns.

However, the concerns of the RBI Governor Raghuram Rajan are more at macro level picture of the Indian economy, ranging from slight rise in retail inflation to anticipated more rise in crude prices, and not so positive monsoon to overall upside risk to inflation after the implementation of 7th pay commission recommendation.

And hence, the RBI Governor kept repo rate unchanged at 6.5 per cent, reverse repo rate stays at 6.00 per cent. Cash Reserve Ratio (CRR) also remains unchanged at 4 per cent. The RBI said April inflation reading makes its future trajectory somewhat more uncertain. The central bank has also retained growth projection at 7.6 per cent for 2016-17 citing corporate profits and surge in consumption. RBI said it will soon review implementation of marginal cost lending rate framework by banks.

Quick bytes

  • The RBI Governor concerned with rising retail inflation, anticipated more rise in crude prices, not so positive monsoon and upside risk to inflation after the implementation of 7th pay commission recommendation   
  • Repo rate unchanged at 6.5 per cent, reverse repo rate stays at 6.00 per cent. Cash Reserve Ratio (CRR) also remains unchanged at 4 per cent
  • The RBI retains growth projection at 7.6 per cent for 2016-17 citing corporate profits and surge in consumption
  • RBI will soon review implementation of marginal cost lending rate framework by banks 

The industry is therefore as disappointed as the home buyers. Shishir Baijal, CMD, Knight Frank India says the sector is disappointed with no change in policy rates and it will take the real estate sector much longer time to come back on the rails. The residential property market has not been doing well and there was expectation that RBI would reduce the policy rates that would have given a boost to the residential property market.

“On a broader note the RBI’s stance of not reducing the policy rates could have emanated from the banking regulator’s move to reduce inflation to below 5 per cent by March 2017. The fact that CPI moving up to 5.39 per cent and wholesale inflation turning positive could be the factors that may have prompted the banking regulator to leave the policy rates unchanged. Crude prices moving up exponentially is expected to further add to inflationary pressures,” says Baijal.

Ashwin Sheth, CMD, Sheth Corp feels the RBI has played it safe and has been more cautious about the monsoon and its impact on inflation. Although, a rate cut at this stage would have helped in lowering the home loan interest rates making home buying a reality for most buyers who have been eagerly waiting for the rates to cut down.

“The Government has taken the lead in trying to implement policies that will boost growth of the real estate sector. In the same vein, RBI too should have looked at the real estate sector with new optimism. The central bank has reduced its policy rate by 150 basis points until now since January 2015. But banks have cut their rates only about 70 bps. In short, economy is yet to get the full benefit of the rate cut. The banks should pass on the benefit to the home buyers as this will encourage the buyers to buy their dream home,” says Sheth.

Vineet Relia, Managing Director of SARE Homes also feels that the RBI Governor Raghuram Rajan’s decision to keep the repo rate unchanged at 6.5 per cent is disappointing, though not unexpected. As the RBI had already announced a 25 basis point repo rate cut in its April policy review, and with retail inflation rising to 5.39 per cent in April from 4.83 per cent in March, expectations of a rate cut were extremely muted.

“Since retail inflation is expected to rise due to the rally in crude oil and other commodities prices and implementation of the 7th Pay Commission recommendations, it is clear the RBI is focussed on lowering retail inflation to 5 per cent by March 2017. Nonetheless, since demand in real estate and allied industries remains sluggish, a rate cut could have improved liquidity and created renewed interest in property purchase. But with the RBI stating its monetary policy stance is ‘accommodative’, one is hopeful a rate cut may be in the offing in the latter half of 2016,” says Relia.

Manju Yagnik, Vice Chairperson, Nahar Group, on the contrary, welcomes the RBI Governor Raghuram Rajan’s announcement to keep the repo rate unchanged at 6.50 per cent. She asserts that the last RBI bi-monthly announcement had reduced interest rate which were not passed on to customers by the banks. Now banks should pass on the benefits to the customers by lowering interest rates which will result in home buyers coming forth and buying property.  This has the potential to spur property sales and inject fresh capital into the market.

“The Indian economy grew by 7.9 per cent in the March quarter and ranked as the world’s fastest growing economy. This move will create jobs and create positive sentiments within the country. Also, keeping rates unchanged will help control inflation which presently is at 5% with an upward bias,” says Yagnik.

The home buyers and the developers have their own reasons to criticize the quo status. The RBI too has its own reasons not to lower the rates this time. However, what can definitely be vouchsafed is the fact that the this is definitely not a good news for the overall health of the housing market; something that contributes substantially to the Indian GDP.

By: Ravi Sinha

NB Group and BridgeStreet Global Hospitality partners with three developers

Posted on by Track2Realty

News Point: Global hospitality major enters Indian market for serviced residences; developers sense big business. 

Real Estate Fund, Delhi NCR real estate, Bangalore Real Estate, JLLI, Jones Lang LaSalle India, Track2Media, Track2Realty, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, indianrealtynews.com, indianrealestateforum.com, Property, Track2Media, Track2Realty, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, indianrealtynews.com, indianrealestateforum.com, Mumbai Real Estate, India PropertyJNB Group and BridgeStreet Global Hospitality have forged partnerships with three Indian real estate developers; IDI, AIPL and CHD.  This collaboration will provide quality assurance, marketing and global sales benefits for guests, developers and investors.

With these new partnerships, JNB and BridgeStreet will be co-branding 183 units of IDI in Noida, 100 units of AIPL in Sector 66A, Gurgaon and 364 BHK units of CHD in Sector 106,Gurgaon.

BridgeStreet has already signed with developers like Silverglades, V Square, Homestead and Logix for 1600 units in Delhi and the National Capital Region of India and will have 500 functional units by the end of 2016.

“We plan to have 5000 fully operational units within five years in pan India, adding to the 50,000 BridgeStreet units worldwide,” said Sean Worker, president and CEO of BridgeStreet Global Hospitality.

JNB and BridgeStreet have been working together in India since 2012.  “This collaboration is key to BridgeStreet’s development of franchise and management opportunities, “ said Sean. “We are working together with JNB to build further investment and development projects in India.”

Elaborating about BridgeStreet’s brands, Worker explained, “Our family of brands includes six-star Exclusive, five-star Residences, four-star Mode Aparthotels and Living, three-star Places and two-star Studyo—offering the convenience of apartment living with a variety of service packages to match guest needs based on location, price point and individual preferences. We are looking to replicate the same experience here in India.”

“We feel that the Indian real estate market is one of huge promise as there is little in terms of supply of serviced apartments.  Increasing demand from IT, consulting, banking, financial and automobile sectors will only create more opportunities. What is required is the right branding, quality assurance and on-time delivery. This will not only lead to price appreciation, but will also ensure growth,” says TJ Barring, President, JNB Group.

“Pure commercial and residential projects won’t do well in the coming years, a hybrid version which supports serviced apartments would have a much higher demand,” says Taran Kaur, Director JNB Group. “The benefits of JNB Group and BridgeStreet are regular rental income,  high occupancy,  fully-furnished apartments with contemporary décor, well-equipped kitchens to prepare your own meals, personal service  with 24/7 emergency support, convenient monthly invoice that includes utilities and housekeeping, Internet access and concierge service.”

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