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A stable market for NRIs beyond rupee depreciation

Posted on by Track2Realty

Bopal, Ahmedabad, Gujarat, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyTrack2Realty Exclusive: When Prahlad Patel went on a property hunt in the city of Vadodara, the broker had a curious look at his face. Under the impression that Patel is one among the many NRIs looking to invest in the city property with the fall in the Indian currency he thought it is his duty to narrate how the property market is just ripe to enter for sizeable return.

However, the agent was taken aback when this UK-based NRI from Ahmedabad told him that he already has couple of properties in the city and he understands the local market much better. Prahlad Patel is not the only Gujarati NRI active in the property market in this part of the world. Rather he represents the pockets of affluence in the city where the expats interest in the property market here has been beyond the rupee depreciation.

While the NRI money has been much talked about and hyped about subject in the property markets across the country this year, for some of the cities of Gujarat, like Ahmedabad and Vadodara it has been old news.

Much before the depreciation of the rupee generating interest among the NRIs with the lucrative options in the Indian property market, Gujarat has being witness to the NRI investment in general and particularly in the property market. The expats from the state across the world find the market of Gujarat more stable than other speculative markets in the metro cities like Mumbai or Delhi.

Dhaval Ajmera, Director, Ajmera Realty & Infra who has seen the interest level of the NRIs in the city property agrees that NRIs consider Ahmedabad as a more stable market compared to other Indian cities. Over the decade, Ahmedabad has witnessed tremendous investment boost from the NRI market. Many developers hence are coming up with ultra luxurious projects to woo the NRI/ HNI segment.

“With the recent rupee fluctuation, Ahmedabad realty has fuelled a lot of interest and anticipation amongst the NRI’s to invest in this area. The scenario is a win-win situation and it is believed that the investment will fetch better returns, as the rupee is expected to appreciate in a couple of years’ time. Also specific locations like Vastrapur, old city of Shahibaug has seen a drastic transformation. The infrastructure has developed remarkably in these areas with supreme Commercial and residential properties making it a hotspot location for the NRI market,” says Ajmera.

The city of Ahmedabad and Vadodara is the home town to many expat Gujarati’s and with the recent wavering in the denomination of the rupee, they have additional interest in the property market. NRI Gujaratis with surplus wealth are yearning to buy good property in their hometowns. Analysts believe the rupee depreciation has made the homes cheaper for NRIs, compared to local buyers hence there is increase in the NRI transactions now.

Some believe with the current prediction of stability factor in the value of rupee will further lead to infusion of funds from NRIs. Ahmedabad is one of the fastest emerging and budding cities in India. The city is well-known for its vibrancy and its assertiveness towards the spirit of entrepreneurship. Due to the rapid infrastructure development like flyovers, commercial as well as residential boom in the real estate is inevitable. The market has continually been enduring with multiple dramatic changes and thereby facilitating new potential business opportunities for NRI population.

Sam Chopra, Chairman, RE/MAX India says it is seen that about 20 to 30% of all investments in real estate are funded directly or indirectly through NRIs in these markets of Gujarat. According to him, not only the primary market but secondary and rental markets are also influenced by NRIs.

“Yes depreciating rupee has had a positive influence on NRI looking to invest. However, for the NRIs looking to exit their investment and take money back, it has a huge negative influence. They have lost a lot of money due to slow market and rupee depreciation. Still, there are a lot of NRG (Non-Resident Gujaratis) who are from small towns and villages of Gujarat who are settled outside India since a long time. The most conducive city to live in for them is Ahmedabad,” says Chopra.

So, the expats from the rural pockets of Gujarat are also fuelling investment in the markets of Ahmedabad and Vadodara. They have a good reason to focus their investment in Ahmedabad so that they can conduct their business smoothly. Access to quality talent, excellent public infrastructure, low crime rate, high quality power, good governance are a few reasons why Ahmedabad could emerge as a business destination.

Therefore, analysts maintain that NRI investment in the markets of Ahmedabad and Vadodara are beyond the depreciating rupee against the dollar. It may have a catalyst effect in the short term, but NRI investment has always had the maximum share in the markets of Gujarat. What is all the more important form investment point of view is the fact that property markets across Ahmedabad and Vadodara are seen as the safe bets in terms of being stable.

Even during the worst of crisis and correction in many other property markets of India, there has been no visible sign of unrest in these markets. This is something that acts as a traction point for the NRIs who want a safer haven to park the investment and do business in the long term.

The seasoned property agents in these markets understand the buyers like Prahlad Patel who have tasted the market and can not be mislead either. Hence, across the micro markets of major cities of Gujarat, be it Ahmedabad or Vadodara, there is a realistic property listing with not enough room for speculation. Now that is something which acts like a magnet with the power to stand always on the top of the wish list of the NRIs.

Evolution of best practices in Gujarat real estate

Posted on by Track2Realty

Bopal, Ahmedabad, Gujarat, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyTrack2Realty Exclusive: It has often been argued that Indian realty needs to adopt best practices and improve brand image as the sector defends its rough ride on the learning curves. If adopting Corporate Social Responsibility (CSR), retaining employees, inculcating brand loyalty and earning buyers’ trust are some of the best practices that can address the perception issues of Indian real estate, then the sector has to walk a long road ahead.

Historically with a legacy of poor perception and projection the sector though has been going through the learning curves and some of the companies have initiated the best practices in their own way, like using the buyers as the brand ambassadors or rewarding the buyers who register properties in the name of the wife, as an industry practice.

The trend has mostly been adopted and applied in the major metro cities where the consumer awareness is pretty high and the developers are professionals. However, in Gujarat which has traditionally been known as the market for home grown developers where the business is mostly family run, the concept of best practices is increasingly gaining ground. It may be in the evolution stage but at least there have been some efforts to be seen as more professional.

The Gujarat real estate is also trying to send across the message that it is in no way behind the benchmark best practices. The entry of large developers from other markets like Mumbai seems to be raising the bar of professionalism within the sector.  

Deepak Prajapati, Deputy General Manager of Care Ratings maintains that the real estate sector across the country has evolved over the years and Gujarat real estate market is no exception to this process of evolution. Over the past 10 years Gujarat has been the fastest growing state with an average real growth rate of 10.42% and has witnessed the highest industrial growth rate of 12.65%. Also, Gujarat witnessed higher urbanisation rate of around 36% and has a higher urban population having more than 42.58% people residing in urban areas as per 2011 census.

The standard of living and consumer awareness amongst the people of Gujarat is high. This has lead to the need of adoption of best practices by the real estate developers as the realty market is highly competitive. Also, with substantial growth in the real estate sector in Gujarat over the past few years and cities like Ahmedabad being declared as mega city, reputed developers from across the country have entered the Gujarat real estate market. This has further lead to adoption of best practices by real estate developers to compete with the high standards of the reputed real estate developers,” says Prajapati.

Sachin Nigam, President, CRISIL Real Estate Ratings also agrees to the fact that the real estate market in India has seen major changes for the good over the past decade in many critical aspects. He cites some of the positive changes sweeping across the sector as incorporation of technology, heightened professionalism, corporatisation, greater focus on quality, and becoming customer-centric. The major cities of Gujarat have not bucked this trend and adopted these best practices.

“The state has used technology as a differentiating factor to bring in efficiency by taking the lead in e-governance and computerisation of land records. This has led to an increased availability of information for acquisition and registration. One of the areas which require impetus is greater transparency in customer communication for all aspect of a project. Developers should be more articulate on the details of project approvals, ensure fair and transparent customer agreements, display more information related to consultants, approval details, and construction status on their websites,” says Nigam.

Manan Choksi, Regional Director, RE/MAX MGM is of the opinion that the early adopters of best practices are the ones who earn more in a growing market, and hence there is a fast adoption of such improvements by the key developers across the state. According to him, in cities of Gujarat the market is seeing the development and not just the growth.

“Fast delivery of projects, clarity in total cost of the investment and no problem with municipal permission are things worth emulating for an overall eco system of best practices in the state. Sell on carpet area, commission to the broker on booking, return on investment, easy liquidity of investment are required in Gujarat. But yes, it may be slow but the wave of change is definitely there,” says Manan.

Analysts believe that best practices like use of overhead cranes for fast development, adoption of advanced fire safety measures, adoption of best labour safety standards, development of earthquake resistant structures, use of fly ash bricks and concrete blocks for construction, development of rain water harvesting system which ensures good water table level etc are being adopted by real estate developers across Gujarat. Also, many developers are adopting to the concept of green buildings wherein designing is done in such a way that it leads to better air ventilation, better space usage, waste recycling and better usage of natural lights.

Legal documentation is now done for full/higher value of the property which is leading to more transparency regarding the true value of a real estate property. Although there is substantial evolution in the real estate market in Gujarat there are still many areas wherein there is scope for improvement. Investors play a big role in the Gujarat real estate market which drive the prices and create artificial demand. Thus, regulations like compulsory registration of property deals on 20% payment as in cities like Mumbai should be adopted.

Since these are early stages of evolution, for many developers there is lack of clarity on various issues. For instance, with regards to the tenure of the accountability of the developer for maintenance of the property there is no industry accepted benchmark. Due to the lack of understanding some additional charges like car parking charges are still being collected by many developers under different names. The mandatory provisions like the property delivery date being explicitly mentioned in the Sale Agreement which needs to be incorporated to ensure accountability of the developer is also an area where the bigger developers are nowadays being more careful for their brand reputation.

However, with some of the new developers operating only in the select local market Sale Agreements constitute only one-sided clauses for penalty on the buyer for delay in payment. However, there is no penalty clause being observed for the developer for delay in delivery of the property. The real estate developers in Gujarat must adopt to these best practices for a collective image makeover; something that will lead to more investors’ confidence towards the sector.

What can be vouchsafed at this point of time is the fact that the adoption of best practices by real estate developers in Gujarat has been in line with the pace of adoption across the nation. In fact, with the higher growth that Gujarat has witnessed over the last decade and major upcoming infrastructure projects in the State, the adoption of best practices by developers in many cases has spread faster in Gujarat compared to many other states.

Majority of developers in Gujarat have understood the fact that if they want to lure the potential service sector companies and the growing cosmopolitan customers they need to offer the best. This, however, is only the beginning and on the learning curves of best practices the sector has a long way to go before Gujarat emerges as a ‘model case’ of being a market with best practices followed in letter and spirit.

Entry point attractive for end-users in Gujarat

Posted on by Track2Realty

Bopal, Ahmedabad, Gujarat, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyTrack2Realty Exclusive: Statistics only tell half the story and this old adage is all the more relevant in the property market where the transactions and appreciation/depreciation may or may not have a direct co-relation. In Gujarat real estate market the prophets of doomsday had a field day in the last over a year time due to slow pace of growth. They cited the National Housing bank’s Residex that shows Ahmedabad witnessed only 6 per cent growth in property prices in last one year.

The property price index in the city has remained volatile in last one year. The index was at 180 points in July-September quarter 2012, which increased to 191 in October-December quarter. Residex went down to 186 points in April-June 2013 quarter and reached 191 in July-September quarter 2013.

However, what this raw statistics does not reveal is the fact that during the same period many of the cities that Residex tracks down did witness either no change or downward change. Out of the 26 cities that it covers across the country, only 12 cities witnessed marginal appreciation, and two cities of Gujrat-Ahemdabad and Surat-registered 6 per cent and 5 per cent growth respectively. More importantly, the transaction rate in the cities of Gujarat did not dip. That reflects the property markets of Gujarat had been moving, even though the pace of movement has been slow.

Analysts tracking the market at ground zero seem to be bullish on the prospects of Gujarat real estate market. They maintain moderate property appreciation is actually indicative of the market’s resilience and the fact that speculative buying is not happening in this part of the world. That also means entry point is extremely attractive for the end users and the right time is now. After all, the state has seen a booming rise of big infrastructure and industrial projects coming up with rapid growth.

These factors definitely contribute in ensuring good returns on property investment. What has hampered the growth of the real estate sector is the negative sentiments borne out of negative macro-economic factors. The fundamentals of the property market are quite grounded to realism across the cities of Ahmedabad, Vadodara and Surat.

Dhaval Ajmera, Director, Ajmera Realty & Infra asserts that this is the right time to buy property in Gujarat. According to him, Gujarat as a state has seen remarkable growth in various verticals, real estate being one of them, which also is indicative of a healthy economic activity in the state. It is a known fact that Gujarat is acknowledged as the most industrialized state in India. The state currently is one of the fastest-growing states in the country and definitely has huge potential in terms of real estate investment due to industrial growth. The prices of properties and land will see a good return of investment in the forthcoming years.

He, however, does not think that discounts and freebies are way forward to entice the buyers. Many other analysts also feel that discounts and freebies that have been used as a marketing methodology only in those projects that have failed to take off. The right project in the right market at the right price point does not need to offer discounts as there are enough takers in the market.

“Developers are more focused towards rendering the buyers with value added services. Buyers are no longer wooed to discounts. The services and amenities offered to the investors through the projects play a significant role in translating into sales. These enhanced services are the driving force that bequeaths the end users for investments,” says Ajmera.

Manan Choksi, Regional Director, RE/MAX MGM also believes it is a good time to buy property in Gujarat. The prices are at the lower side and there seems to be positive sentiment from the political standpoint. He believes this is the right time for end users to identify his right entry point since inventory is easily available with decent room for negotiation.

“The discounts by various developers are translating into sales but all depends on the segment of property. There is a good movement in three, four and five BHK apartments. However, there is a total slowdown in plotting schemes. Offices of smaller footprint are getting sold but large spaces have few takers. In fact, discounts have acted counter-productive to sales in some of the cases. The builders providing discounts/freebies have usually not been able to sell 100 per cent of inventory in last six months,” says Choksi.

Property brokers active in the market assert that it would be safe to call that the Gujarat property market is a buyers’ market to a large extent as of now. But it would not be right to say that the price correction in the state has been a uniform pattern across the micro markets. In fact, semi urban market has seen more correction. There is no correction in the prime market. In fact in a few high end properties there is an increase in market price.

So, it seems ‘one size fits all’ solution may not be available in the property market of Gujarat; reasons why correction in certain markets are being projected as the overall slowdown when the data is collated for taking out average. But the right project in the right market at the right price point is still selling at a brisk pace. More importantly, since there is enough ready to move inventory available now in many of the prime localities across the state in general, and Ahmedabad, Vadodara and Surat in particular, it is turning out to be boon for the end users.

The property markets across the state of Gujarat may not be truly buyers’ market in the conventional sense of the term, but what can be vouchsafed is the fact that this is the right time to buy the property. The market is attractive not just in terms of the price point but also the kind of ready apartments with even discounts on offer in some of the cases; it may not be the same in the time to come. Post the General Elections it is anticipated that the economy at the macro level will start coming back on the track, and then there onwards the property market across the state of Gujarat will once again turn out to be red hot. Does not that sound tempting for the buyers who have the liberty of choice as of now to opt for ready to move apartment with prospects of handsome appreciation ahead.

Gujarat real estate to deal with new challenges

Posted on by Track2Realty

By: Ravi Sinha

Bopal, Ahmedabad, Gujarat, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyTrack2Realty Exclusive: The Gujarat real estate has by and large reasons to feel satisfied with its better-than-national average performance during the year 2013. It would be safe to maintain that the property market in the state has weathered the slowdown blues better than many other matured property markets across the country and the developers are better off now than in 2009. As per rough estimates 50 per cent of top companies in the state have improved on their debt servicing while 30 per cent will see a fall in debt from next fiscal. Analysts claim that channel checks done by them in different markets suggest that sales have not plummeted in a meaningful way across the micro-markets, even though there is stress both at the buyers’ as well as developers’ level.

Analysts believe with better cash management strategies of leading developers companies are in a better position now than before. Sanjay Dutt, Executive Director, Cushman & Wakefiled agrees that the worst is getting over but it would still take six to twelve months for things to turn around. “The window of opportunity to buy at a good price is between now and the next monsoon,” he says. Buyers are hoping that political uncertainty will end with elections next year and with that the economy will also start to look up.

Manan Choksi, Regional Owner RE/MAX Ahmedabad has a different view point when he says that ever since the new GDCR (General Development and Control Regulation) of Ahmedabad–Vadodara have been released, the primary sale market has stagnated. The transactions are happening in resale and rental segment.

“There are a slew of launches and hopefully the market will move in 2014. Yes, it is about time that investors return to the market as it is a good price to buy real estate as of now. In Gujarat we have seen a lot of companies from out of state entering to do various types of businesses. This has increased the property consumption. The investors are bargain hunting right now for a distressed builder to sell at lower than market prices,” says Choksi.

This raises a fundamental question as to whether over these turbulent years, real estate has learnt its lesson from past mistakes and developers are delivering projects on time. Scale of most listed companies have improved over the years even if it has come at the cost of higher debt. Analysts believe increasing debt for growing operations is healthy provided operational cash flows remain positive. Moreover, as the key markets are getting saturated the companies are now utilizing cash to deleverage and acquire more projects in newer markets. This helps companies diversify and spread risk while the boundaries of property market in the cities like Ahmedabad and Vadodara are stretching to outskirts.

However, there are some real issues to deal with that are likely to impact real estate market in 2014. Many of the issue are inter-related and impact the economy in general as well. The idea is to take a broad view and provide a context and perspective that can assist in making informed decisions in the sector.

With the State Chief Minister Narendra Modi being the Prime Ministerial candidate, all eyes in the Gujarat market are on the General Elections in 2014 as it affects the sector in various ways. The elections are going to aggravate the overall slowdown in economy, delayed approval processes, affect buyers’ psyche but, above all, divert the black money from the sector to the political process. The prospect of an unstable government scares the sector as it would amount to all legitimate demands of the sector put on the back burner in the absence of consensus.

Regulator Bill is something that everyone within the built environment of the business, including the buyers, has been waiting for long. However, the prospect of a fractured mandate makes the future of Regulator Bill hang in balance as even if it is cleared in 2014, the lack of political consensus and centre & state imbroglio is expected to keep the regulation and reforms waiting for quite some time. Of course, the endeavour to create a consensus over the Regulator’s jurisdiction and draconian powers would be one of the major talking points of the year ahead. Many states, including Gujarat, have certain reservations with the provisions of the bill.

After the Regulator Bill, Land Acquisition Bill has weathered the most resistance by the developers and the year ahead may see some industry/political mobilisation once it becomes a law. With land being a State subject and the election year expected to bring around political uncertainty the developers with deep pockets may get into land purchase before the new legislation is in place. Those who cannot afford land bank will still have an excuse of price hike in the name of land getting costlier ahead. Will Gujarat Government’s industry friendly policies translate into states getting more investment post this Act is something that keep the sector curious.

The new RBI Governor has made it clear that he intends to tame the inflation and check the slide of Indian currency than infuse excess liquidity in the market and appease the home buyers and the developers. The year ahead promises to have no change in this stance and the sector will have reasons to feel the heat before every quarterly monetary policy review by the RBI. Unless there is a new Government with strong intentions to safeguard the interests of real estate, there seem to be no respite for the sector; chances of which are very less.

Probably the only hope of the cash starved sector is the SEBI’s endeavour to revive the Real Estate Investment Trust (REIT). When the banks are not willing to lend to the sector, PE funds deserting and capital market pretty scary, REIT is the only silver lining for the cloudy financial weather of the developers. The optimism also stems from the fact that even the big-ticket private equity players who want to invest in the Indian realty but are apprehensive of opaque market are now planning to set up REIT. This is also good news for the retail investors since the real estate continues to be an attractive investment instrument, even for those who can not afford to buy properties. REIT is expected to generate good revenue from the retail investors of Gujarat. Will this help the Gujarat-based developers is something that the year ahead will reveal.

FDI in retail was supposed to be a game changer for the commercial real estate, but has hardly made any difference in 2013. The government provided the much awaited clarity on 50 per cent investments to be made in the back-end infrastructure from the FDI being brought in by international multi-brand retailers. Analysts maintain once macro-economy stabilises and new government is in office, this may spur international retailers who were keen on operating in India, but were looking to understand the restrictions imposed by the government on their investments and operations. Gujarat emerging as a mega commercial hub, the developers have also set their eyes on more commercial projects in the year ahead.