Tag Archives: Chairman & Country Head of JLLI

The BREXIT effect

Posted on by Track2Realty

News Point: Post BREXIT investors will now be in a risk-off mode, meaning more number of investors would either pull out investments or stay put without investing further until clarity emerges. 

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, Anuj Puri, JLLM, Jones Lang LaSalle MeghrajUntil today, year 2016 was looking seemingly positive for real estate sector in terms of investment inflows (read PE or FDI inflows), but now that is somewhat at risk.

The real estate sector in India will continue recovering on the back of a resilient Indian economy and strong capital inflows. BREXIT will not disturb that recovery much, since India’s office market leasing is dependent only by 5-7% on UK-headquartered companies, and investments and activity of PE Funds from EU countries is more in India than in the UK.

Investors in the UK looking to invest in residential properties outside UK will have to study and compare returns and risk assessments for real estate in India versus real estate in the EU. After exiting EU, locations like Greece, Spain and Portugal may not remain as attractive to UK investors, and India may benefit from that.

However, investors will refrain from making plays for some time as they will want to develop a good understanding of the comparative risks- returns scenario.

The first reaction of investors to a situation like this is to exit from sectors that are perceived risky. Given the Indian stock markets’ recent performance, real estate was considered risky until recently; it had only begun to emerge out on the back of policy reforms like RERA and other factors providing a positive market momentum.

Given a risk-off sentiment, realty stocks could witness selling pressure as investors scramble for safe-haven sectors such as FMCG or pharmaceuticals.

Several major IT firms such as Infosys, TCS and HCL Tech earn a third of their revenues from the EU. A possibility of EU slowing down will have an adverse impact on their revenues. The IT sector is a leading occupier of office space in India every year.

Year 2015 saw many European retailers entering India as part of their expansion strategy to new markets. We had anticipated this trend to continue in 2016. However, if the EU economic outlook weakens, their expansion strategies may be reconsidered.

India could be an anchor of stability, given that a proactive government has carried out reforms at a satisfactory pace and that its inflation has remained controlled over the last one year or so. Also, given a normal monsoon forecast for this year, even food inflation could be kept in control in the near-to-medium term while triggering a healthy growth of agriculture and rural economy.

Given that BREXIT has happened, we foresee US Federal Reserve to defer their decision to hike interest rates, which is positive for the emerging world, including India.

India’s bi-lateral trade with Great Britain is export surplus, which is good for India. However, compliance cost for India’s exports will rise. At the same time, India can negotiate more favourable trade terms with Britain. After losing out to free trade with the EU, Britain will be under pressure to look for balanced trade with big emerging economies like India, which is the fastest-growing economy.

When economic recession hit the US, Indians took up a leading position among investors keen to take advantage of the falling property prices there. The British Pound is currently at a 31-year low, which itself provides an attractive rationale for foreign investors with an appetite to do so to acquire properties in the UK.

There is no doubt that the UK – particularly cities like London – has always held a special attraction for Indians, particularly HNIs, with business interests or families there. Such individuals will certainly keep a close watch on the effect of Brexit on UK’s property prices, and it is very likely that many more Indians will seek to invest there.

By: , Chairman & Country Head, JLL India

A checklist to remove affordable housing bottlenecks

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Bottom Line: Large-scale affordable housing in cities is the greatest necessity of urban India today.

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Large-scale urban developments – the only way to create affordable housing in the required magnitude in our major cities – are becoming increasingly difficult due to lack of land parcels, congested transit routes, lack of finance, rising input costs and regulatory hurdles.

If we take a birds-eye view of the problems plaguing this sector, the vision of Housing for All by 2022 becomes a hazy one at best. It is vital that these issues are addressed on a priority basis urgently so that a comprehensive framework can be established for ensuring the development of affordable housing.

On analysing the bottlenecks that currently hold affordable housing in India to ransom, it emerges that any approach towards a workable solution will have to encompass at least seven important functions. These are:

1.    Formulate guidelines for identifying right beneficiaries:

It is important to formulate guidelines that will identify the appropriate beneficiaries for affordable housing projects. This is critical, as the involvement of speculative investors in such projects defeats to whole purpose. The National Population Register and issuance of unique identities via the Unique Identification Authority of India will become crucial elements in identifying the right beneficiaries if they are linked with income levels.

2.    Innovate on micro-mortgage financing mechanisms to ensure a larger reach:

Effective financing through micro-mortgages by utilising the reach of self-help groups (SHGs) and other innovative financing mechanisms can ensure that housing finance is available to large sections of lower income groups (LIG) and economically weaker sections (EWS). Flexible payment mechanisms should be put into place, as households in low-income groups typically have variable income flows.

3.    Incentivise developers to enter affordable housing segment:

Urban local bodies can develop guidelines by giving free sale areas, extra floor space index (FSI) and other policy-level incentives to real estate developers, thereby attracting them to develop affordable housing. Schemes for redevelopment and slum rehabilitation should be developed with incentives that generate sufficient returns for the developers, while simultaneously controlling the development density. A cost-benefit analysis of regulations should be carried out from a development perspective to ensure that schemes to facilitate affordable housing development are actually realistic and feasible.

4.    Streamline land records to improve planning and utilisation of land:

Adequate availability of land for housing and infrastructure can be ensured by computerisation of land records, use of geographical information systems, efficient dispute redressal mechanisms and implementation of master plans. The central government and some state governments have already begun work on this front, but there is still a lack of required pace.

5.    Include mass housing zones in city master plans:

Additionally, ensure that these zones are developed within a pre-determined schedule, accounting for the future requirement of affordable housing. Some cities have already dedicated zones for development of affordable housing in their master plans. This needs to be replicated in other cities and towns – with a sharp focus on development timelines.

6.    Deploy well-researched rental housing schemes in urban areas:

Authorities like the Mumbai Metropolitan Region Development Authority (MMRDA) have experimented with rental housing schemes in the past. However, these have not been very successful as a proper framework for such schemes was missing. The most visible limitations were that development of rental housing took place in far-flung areas which are not suitable for affordable housing, and the lack viable means to identify the right end-users.

7.    Formulate policies for greater participation from private sector:

The private sector can play a big role in affordable housing, most notably in terms of providing technological solutions, project financing and delivery. Disruptive innovations on these fronts, with a specific focus on affordable housing, are the need of the hour. We need imaginative, workable solutions to reduce the costs of construction in the face of rising input costs. As construction costs account for a significant portion of the selling price of affordable housing units, savings accrued on the back of such innovations can immensely benefit the occupier.

It bears mentioning that none of these solutions will work well in isolation. Given the complexity of the affordable housing conundrum in India, only a multi-pronged approach with equal weightage given to each element can hope to break the deadlock.

The Housing for All by 2022 is indeed a workable vision if a determined and focused effort based on these solutions is employed – and it will definitely yield the desired results.

By: Anuj Puri, Chairman & Country Head, JLL India

Housing for All by 2022 – far-fetched or feasible?

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By: Anuj Puri, Chairman & Country Head, JLL India

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, Anuj Puri, JLLM, Jones Lang LaSalle MeghrajViewed dispassionately, the current government’s ‘Housing for all by 2022′ promise seems a bit unrealistic at the moment, as the modalities and concrete steps needed to be undertaken to achieve this goal have not been spelled out. Making 2 crore urban houses and 4 crore rural houses available is a huge undertaking in itself, and will require not only sustained government interest and investment but also substantial private sector investment and involvement.

In the previous budget, the announcement of Housing for All was accompanied by increased allotment to the National Housing Bank for both rural housing and for extending credit to the urban poor/EWS/LIG segment. There was also talk of setting up a Mission on Low Cost Affordable Housing, which was to be anchored in the National Housing Bank. However, the track record of government-built housing in terms of quantum and delivery timelines has been as abysmal as that of the private sector. The last budget did not indicate any further steps on the ‘Housing for All by 2022′ initiative.

If this very ambitious goal is indeed to be met, there needs to be a clear, well-thought out policy document outlining the exact deliverables and accompanied by methods/initiatives to streamline the development process. This entails reducing approval times while providing specific incentives to build such houses on time.

Considering that the government has seven years in all to achieve this target, it fundamentally involves construction of 30 billion square feet of housing stock, or approximately 4 billion square feet per year if we assume an average of 500 square feet per house (this is in line with creating smaller houses for the rural population and urban poor).

To state that this is an ambitious objective is perhaps an understatement. Without a clear roadmap in place, it is likely to remain unachievable. The roadblocks remain in ensuring land availability, easy credit and involving construction experts, town planners and the private sector to expedite this target.

The problem is not merely a function of making land available and increasing the FSI to incentivise developers undertaking low-cost housing projects. There is a need for systemic change in how the government perceives the entire issue of housing for the urban poor. Regulatory changes, faster approvals, removal of red tape and resolution of land litigation issues need to be adequately addressed to improve stakeholder participation. While the consent clause for the affordable housing segment has been done away with in an ordinance, the government is still struggling to get it passed through parliament.

A three-pronged approach involving the state, regulatory bodies and the executing agency/private player is of the essence. The respective state governments will also play a major role in synergising their own housing policy with that of the Centre and revitalising the role of the development authority as more a facilitator with contracts being awarded to private players/semi-government agencies such as HUDCO and NBCC utilising the Budget’s ‘plug and play’ mechanism, where all approvals and linkages are already in place.

Execution penalties will be deterrents, but it is essential to have the right development partners who will not put their hands up in the middle of project execution citing financial viability. Suitable fiscal incentives to the private industry as well as financial support through cheaper industry loans will also be required to ensure healthy participation.

Even if all these fall in place, the government’s target remains a stiff one and its agencies’ track record of delivery or assisting industry through removal of multiplicity of time-consuming approvals in the past does not provide a lot of confidence.

The only positive has been the intent of the current dispensation to move ahead with definite thought. The slogan has to move from the drawing board to an actionable plan where stakeholders at each level are clearly identified and made accountable for facilitating real, ground level development of low-cost housing. The issues which need to be resolved before the private sector will be a willing partner in this initiative have been documented earlier.

Other aspects such as granting of infrastructure status to such projects should be explored. This will provide easy and cheaper finance aiding faster development. The plug and play approach for infrastructure as enumerated in the Budget makes for an ideal blueprint to begin with for the Centre and the states so that the entire focus is towards timely delivery of housing units, which after all is the  result everyone hopes and expects in the next seven years.