Tag Archives: India Real Estate News

When consumer activism turns into blackmailing

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: With the growing spate of consumer activism in real estate, element of consumer blackmailing has also made inroads.

Consumer Activism, Consumer blackmailing, Homebuyers protest, Grievances of homebuyers, India real estate news, Indian property market, NRIs worry in property market, Track2Realty, Track2Media ResearchA Ghaziabad-based developer was approached by 20 customers en block. Prima facie there was nothing to suspect. The developer was rather happy that in a slow moving market he had a bulk buyer deal walking up to his sales table. However, he was soon exposed to the unpleasant reality of organized consumer blackmailing.

These homebuyers started accusing, demanding, arm-twisting, protesting before media and threatening to drag him to the court. Taking at the face value of consumer grievance, he later got to know that this is the modus operandi of some of the local influential people to get together and put the developer in a spot.

“I was told by some other developers that these people have got good media connection. So, even if they cannot harm you legally, they are influential enough to create an ambience that is not good for the brand image or the sales channel. So, I did what some other developers had done in the vicinity. I gave them exit with lucrative buy-back offer to save the reputation of my company in a market where the collective consciousness and media will make it believe that the builder is at fault in any case,” admits the developer on condition of anonymity.

Indian real estate, of late, has woken up to the new reality of consumer blackmailing. While in most of the cases the grudge of the homebuyers has been genuine; it seems there is an organised mechanism emerging that want to encash upon the homebuyers’ acrimony with the developers.

There has also been instance when the victims suddenly turned out to be crusaders; of course the gains (monetary and otherwise) not withstanding. A classic case in point is when the Competition Commission of India (CCI) imposed penalty of Rs 630 crore on DLF, for ‘unfair trade practices’ and ‘abuse of market dominance’ with project Belaire. The Belaire Owners’ Association had then suddenly became self-styled crusaders against developers. They started openly advising several Residents’ Welfare Associations (RWAs) from Gurgaon to Greater Noida how to resolve their flat-related problems.

The moot point remains as to whether homebuyers’ legitimate grievances being addressed can empower a group of victims to suddenly emerge as de facto consumer courts overnight?

Qubrex, the real estate brokerage firm that presented an expert report to the CCI on the market share of DLF to establish its dominance in Gurgaon, also got its hands full, with various buyers seeking its help against developers.

Madhrendra Sharma, a Supreme Court lawyer points out that some of the homebuyers approach the court with such flimsy grievances that there is no ground for any legal case. He believes the problem lies in the way real estate business has grown; it has arm-twisted the homebuyers; and in the way some smart homebuyers’ are finding an opportunity in adversity.

“I advised a builder client to expose the racket of some organized pressure groups in his project. They were arm-twisting the developer with demands that were neither part of builder-buyer agreement nor part of industry practice at large. But the developer instead settled it with them out of court as the case might have affected his overall reputation,” says Sharma.

Raj Gala Shah, Partner, Zara Habitats tries to put up a brave face when he says that consumer activism can turn into blackmailing only if the developer has failed to provide correct information to the said consumer from day one.

“If no information has been concealed from the developers team while selling /marketing the property then there seems to be no cause of worry towards any instance of consumer blackmailing. It would be inappropriate to term a consumer’s demand for his right as consumer blackmail,” opines Shah.

Consumer blackmailing might have serious consequences for the grievances of the legitimate buyers. It might lead to a perception gaining ground that all the consumer activism is handwork of vested interests. This can defeat the homebuyers’ cause the way it has been with the PILs (Public Interest Litigations) where the respective courts started objecting to the locus standi, motive and objective of many of these cases.

Media might be a party in fuelling the fire with consumers’ aspirations but in the court of law only and only the evidences will stand to scrutiny. However, the perception of consumer blackmailing as a prevailing reality will definitely hurt the legitimate consumer activism in the long run. 

By: Ravi Sinha

Coimbatore emerging as a lifestyle city

Posted on by Track2Realty
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Bottom Line: Coimbatore is no longer a property market for retired and budget conscious buyers; the lifestyle has gained ground in the city.

Coimbatore city, Coimbatore lifestyle, Coimbatore real estate, Coimbatore property market, Malls in Coimbatore, Multiplexes in Coimbatore, Coimbatore nightlife, India real estate news, Indian property market, NRI investment in Coimbatore, Track2Media Research, Track2Realty“Coimbatore is turning out to be a lifestyle city? You must be joking. Right?” Well, you will also have the same reaction if you are not keeping a close track of the developments in this part of the world. Contrary to the general perception that Coimbatore is a cost conscious city where realism is reflective at every level and per capita expenditure not very high; the city is slowly but surely emerging in an altogether different direction.

Coimbatore has today all the pre-requisite fundamentals of a lifestyle city that is high on the wish list of the corporate sector and the young professionals. The best part is that this development has happened in the last few years when the market conditions otherwise have been bearish; something that suggests the wave of change is here to stay.

Hence, it is important to understand that Coimbatore is no longer a city that can easily be defined by the given parameters of a tier II city. It is rather a hip and happening city where the multiple demand drivers are working in tandem to make sure it gives a tough competition to other metro cities of the country, most notably Bangalore and Hyderabad in the southern part of the country.

Developers active in the city are so confident with this growth of the market that they even suggest that Coimbatore has the potential to emerge as the best South Indian city and one of the best property markets across the country. An outside view may suggest otherwise, as the city still is an end user driven market and the demand drivers are need based and not speculative elements or investor groups.

However, a closer look at the upcoming projects across the major micro markets of the city suggests that the developers have already realised the change of mindset of the new age buyers. It is reflective in terms of the offerings also and affordable luxury as a concept that is a misnomer in other parts of the country is increasingly gaining ground in the city.

The residential offerings that always maintained the price band of below Rs. 5000 per sq feet has now breached that psychological barrier in the last over a couple of years. Coimbatore has been one property market which has been least affected by the overall economic slowdown. It has rather accelerated the pace of developments and the city clearly shows a tectonic shift in the market and reflects the buyers’ preferences for lifestyle driven apartments.

Analysts point out to the fact that Coimbatore is no longer just a retirement destination or the last choice of those buyers who could not afford the relatively costly markets of South India, like Chennai or Bangalore. As a matter of fact, the city has rather shaped up different than what it was actually thought of in the early stages of evolution of property market over here.

In order to understand the economy of the city in general and its property market in particular one has to find answer of certain pointed questions about the city. What has changed this thought process? Has the city’s economy reached its optimum level of boom? Whether there are more commercial activities in the city? Have big brands found a natural destination in Coimbatore the way they found cities like Gurgaon or Pune in the early stages of evolution?

The answer to most of these questions is behind the success of Coimbatore as an emerging lifestyle city. Most importantly, most of these answers are in affirmative, even though it may be just the first flush of aspiration for the city. The young expat professionals in Coimbatore coming from across the country have nevertheless changed the lifestyle choices and preferences in this rather conservative city.

Today, because of this working class expats Coimbatore no longer bears the look of a tier II city that has its economy dependant on the local small scale business. It is blossoming into a corporate city though the scale and volume has not reached to the peak level, compared to other big metro cities.

Ravindran P, a local property agent agrees that lifestyle choices are changing the city fast. He terms Coimbatore city as one of the new lifestyle cities which is growing at a fast pace. There has been a sea change in the kind of life people are living there. One of the recent trends which have risen exponentially is gymming.

“With numerous individuals looking to lead a healthy life, they have turned their attention to living a health life which has given rise to loads of new gymming enthusiasts. Secondly, various other activities like extracurricular activities and hobby perusal are also some of the new trends seen to be rising in Coimbatore. All these aspiration driven living are having their effect on the demand in the real estate market as well,” says Ravindran.

A spokesperson of CRISIL Real Estate Ratings finds a reason behind this growth of Coimbatore as the new lifestyle city. According to him, Coimbatore property market is tilting towards lifestyle options because the young professionals are opting for those.

“In recent times demand in the Coimbatore housing market has been triggered by the growth of the IT/ITeS and manufacturing industries in the city. Employees working in these companies, including migrants, are creating this demand, which is also paving the way for a lot of townships. Hence there are a number of townships under construction in the city. These young working professionals have fueled the consumption cycle of the city’s economy, which has had a corresponding effect in the growth of the property market, including retail outlets, malls and office spaces,” says the spokesperson.

The trend of lifestyle and aspiration driven developments are not confined to residential segment only. It is rather very much visible in the commercial properties as well. The growth of the business of the city beyond just Small and Medium Enterprises (SMEs) has ensured that quality office spaces are being developed and the mushrooming IT/ITeS sector has made sure that there are occupiers for these spaces as well.

The rental growth may not have been phenomenal but at least the spaces are being occupied at a time when the economy has been slow moving and commercial property has been worst hit in some other cities that are better positioned on the corporate aspiration level.

The brands across the segment are also nowadays flocking to the city; thus making sure that the growth of the retail space is steady, if not phenomenal. The young aspirational working class has made sure that these brands are not out of the business in the city. On a macro level it has made sure that the growth is heterogeneous and it is across the developments, including hospitality.

It is not just about the branded hotel chains but today there are entertainment and lifestyle options increasingly spreading in the city. Multiplex culture is also witness to a decent business. Coimbatore is increasingly scaling up on the index of aspiration level and lifestyle choices.

So, Coimbatore is no more a non-descript city on the real estate landscape that has only the occupiers driven by affordability. Nor is it a city which can just be termed as the tier II city waiting for its moment of growth.

The catalysts of the growth are already there and it is quite obvious that if the city could maintain its upscale momentum in a bearish market, Coimbatore can emerge as one of the key lifestyle markets once the overall economic sentiments are bullish. Coimbatore has indeed arrived with a bang on lifestyle and aspiration that is fuelling the corporate culture in the city.

Mumbai a natural market for rental housing

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: Isn’t it ironic that most of the urban centres of India, most notably Mumbai, which should have ideally been the market of rental housing has not been designed to be so with policies and incentives?

Rental House, Rental housing in India, Rental housing policy, Failure of rental housing, Tenancy rights, Rental laws in India, India real estate news, Indian property market, Track2RealtyA market like Mumbai has evolved as the rental markets by default due to the compelling dynamics of demand, supply & affordability where migrant professionals need a house without being forced to invest in home purchase.

Mumbai, as a matter of fact, demands rental housing to be promoted as the feasibility of such an option provides a broad choice of homes to both the investors as well as the expat professionals. The recent economic turmoil also underscored the many advantages of renting and raised the barriers to home ownership, sparking a surge in demand that has buoyed rental markets across the MMR.

Rental housing reality check 

To make Mumbai ideal for rental market like any other international city the infrastructure has to be improved at par with other global cities 

Mumbai needs a lot of value accommodation options like studio and serviced apartments to suit the needs of a varied customer base

Affordability and accessibility are two main factors people consider when renting a house

Major demand drivers are BFSI and IT/ITeS  

Market reality

Facts speak for themselves. In Mumbai, while the property transactions have been hit the increasing rental values in the last couple of years are testimony of the fact that the time has come for the policy makers to frame policies for the same. Developers, meanwhile, have their own reasons why they shy away from investing into rental housing.

Apart from the archaic laws in favour of the tenant, low rental income is cited as the reasons why the rental housing scheme could not gain ground in Mumbai. Track2Realty estimates suggest that in Mumbai rental housing is home to about 33 per cent of its population, as against the national average of 11 per cent. Bangalore has the highest share of 55 per cent people living in a rented house.

Analysts also lament the fact that rental housing as an independently catered-to market segment is not yet prevalent in Mumbai or for that matter in India, largely due to poor yields as against high capital appreciation. For instance, while annual rental yields in Mumbai are in the range of 3-5 per cent, annual capital appreciation is much higher at 10 per cent; thus forcing investors to focus on the latter.

Why rental housing could not succeed

Lack of institutional support

Low rental yield 3-5% against high capital appreciation 10%

Archaic rental laws

Market acceptance

The market is nevertheless mature to adopt rental housing in Mumbai, with or without institutional mechanism. However, the policy incentive to the developers will further bring clarity in the market as Mumbai has been and continues to be the destination of migrant professionals from across the country. This steady influx of people has also been driving perhaps the highest demand for rental housing in Mumbai than in any other Indian city.

Analysts advocating for rental housing in Mumbai maintain that there is an urgent need to classify the tenants’ location preferences which change according to levels of seniority within the organised (corporate) segment of Mumbai’s employment landscape.

For example, a senior executive would give high priority to quality of life, followed by family needs; whereas a junior executive would first consider budget constraints, followed by commute time. Based on these factors, they suggest that the rentals across various popular rental localities in and around Mumbai reflect the element of desire of each category of executives.

Advantages of rental housing

Built to suit for professionals with a tenure

Saves from over-investment

Flexibility to invest in preferred city while working in Mumbai 

Lack of vision

It was in the absence of this understanding that the rental housing scheme initiated in 2007 to decongest Mumbai failed to take off. While the Mumbai Metropolitan Region Development Authority (MMRDA) cleared 39 construction projects under the scheme, almost all fell into remote areas. Moreover, the decision to revise the scheme was taken in 2013 after recommendations made by a high-level government panel, which found the rental scheme unviable.

Under the new model, participating developers or land owners were eligible for a floor space index (FSI) of 3. FSI, which defines the extent of construction permissible on a plot, is the ratio of built-up area to the total plot area. An FSI of 4 was made available under the rental housing scheme. The high-level panel had found that a higher FSI was undesirable in several areas.

Thus, rental housing as a government policy could not take off in Mumbai despite of the market being ripe for the same.

Experts speak

Lalit Makhijani, Chief Marketing Officer Godrej Properties agrees that Mumbai has always been one of the prominent cities in terms of residential homes. Over the years, rented housing has given good returns. Mumbai has large number of migrant population and they come to the city looking for good jobs and a better life. This has a direct impact on the growth of rental housing segment in the city.

“The rental prices in the city are on the higher side due the growing purchasing power and changing lifestyle of the people. With the development of peripheral areas like Thane and Navi Mumbai, the rental housing market has been expanding in a big way. With better infrastructure and enhanced connectivity, today it is easy to find rental accommodation in almost any part of the city depending on one’s budget and preferences,” says Makhijani.

Niranjan Hiranandani, Managing Director of Hiranandani Group feels that Mumbai has evolved as an ideal rental housing destination only through being forced by the market dynamics. According to him, if Mumbai could shape up so well as a rental housing market without the policy incentive, that itself shows the potential of the city for rental housing schemes to incentivise the developers.

“Mumbai is a big market for rental housing but this has evolved by the increasing market demand. The city is a magnet to professionals from across the country. If institutional support is granted to the rental housing as a business module then I have no doubt that Mumbai will shape up as the best rental housing market in the country,” says Hiranandani.

Ravi Gurav, Member MCHI-CREDAI points out that the Mumbai rental market in 2016 is doing better compare to last two years of 2014-2015. Though rental income is still around 3 per cent of the property cost on per annum basis. It is less than the interest rates on bank deposit. In international market rental yield is around 5 to 7 per cent on an average basis. Due to low yield investors do not prefer to invest in residential property for long term basis.

“Major residential property available for rents are owned by individuals who own another house in city which is not in use so it is available for rent. Also, in Mumbai there is no incremental demand year on tear basis for property on rent. So considering these factors Mumbai can not evolve as rental market like other cities in world,” says Gurav.

Learning

In most of the developed countries, like the US, the rental housing properties are built specifically for the purpose of renting and are owned by Real Estate Investment Trusts (REITs) or corporate groups, and not by individuals.

There is no doubt that rental housing makes sense for an average professional in the metro city like Mumbai who may have otherwise invested in a property in some other city. It in no way goes against the age-old wisdom to own a property. But yes, it can save many from going berserk to buy a house at the cost of one’s credit reliability and credibility in a highly priced property market like Mumbai. 

By: Ravi Sinha

 

  

Reality of online property deals by NRIs

Posted on by Track2Realty
Track2Realty Exclusive

News Point: Online property search & buying by the NRIs might be a reality, the digital medium still has not scaled up to the level of providing seamless solutions to expat Indians.

NRI Online, NRI property search, NRI online property, NRI property investment, NRI laws, NRI buying property, NRI investment in India, India real estate news, Indian property news, Track2Media, Track2RealtySome facts that suggest the trend of online property search and buying has grown significantly among the NRIs:

Tata Housing claims it relies on online sales by NRIs & HNIs; sold a villa worth Rs. 5.5 crore online

Google’s Great Online Shopping Festival attracted many NRIs buyers

Majority of the NRI buyers connecting to developers directly through online ads 

These facts clearly illustrate that the digital medium is the best source for the NRIs to connect with the Indian property market and buy it online. Of course, even with a keen interest in the Indian property market it is not possible for them to physically come and see the property back home. The developers are hence nowadays increasing their online presence.

From online presence to virtual tour of the property, and digital advertising to sponsored games & other connecting platforms, the developers are not leaving any stone unturned to touch base with NRIs.

But the question that still stands is that to what extent they manage to communicate & connect. Whether the online flow of information and connect leads to sales transactions strictly on the basis of project being showcased in the virtual world? Can Online Reputation Management (ORM) of the developer and review of his property by existing buyers is being taken at the face value?

NRI Myth & Reality

Online search is first point to communicate & connect for NRI homebuyers

Developers are using online ads, virtual property tours, augmented realty, ORM and sponsored games to touch base with NRI buyers

NRIs cross check online searches with local contacts, friends, family & peer groups

A local agent is needed for hand holding and cross verification

Manju Yagnik, Vice Chairperson of Nahar Group says online communication is the need of the hour as the NRI community relies heavily in the online space for their home buying in India, as it is not physically possible for them to inspect the property, considering they are based abroad. They use the Internet as a medium to check the property and connect with the developer. Developers on their part connect with the Indians living abroad through the same media due to convenience and easy accessibility.

“This is also a very cost effective way of creating awareness about your offerings and most importantly reaching out to a wider global audience. The Internet also offers developers an opportunity to showcase their products to customers across the international markets with virtual reality and augmented reality tour of the project. Digital medium not only provides a complete insight of the project but also can show you the actual apartment from inside along with furniture placement and with options,” says Yagnik.

Kaizad Hateria, Brand Custodian & Chief Customer Delight Officer, Rustomjee Group adds that once made their mind what the NRIs do first thing is to Google for having an understanding of Indian property market and from there they find contacts of various property development companies and channel partners.

“Once they register their interest on any website then only their education starts for different locations, developments, companies etc by phone calls and meetings done with various property advisors & consultants available in different countries and regions. Even after closing transaction they rely on online searches, local property advisors and consultants to follow up on investments made,” says Hateria.

However, Nikhil Hawelia, Managing Director of Hawelia Group has a caveat here when he says that online exposure is effective medium only for communicating & connecting with the NRIs. This is first point of information and definitely not the most important criterion to choose a specific property.

“With my experience in dealing with the NRI buyers, I must say that normally their online leads get translated into sales only if there are friends, family or peer group to endorse the project and the developer. Online advertising or Online Reputation Management is not enough to freeze the deal. Once they finalise the deal basis the recommendations then also they need a local agent for hand holding,” says Hawelia.

Well, the dynamics of property hunt may be similar to what the resident Indians have, but the online penetration and impact has suddenly grown over the last few years. The Internet savvy generation of today takes to social media in a big way and therefore developers do all possible for the online presence and manage their reputation in the cyber world.

But at the same time they also need the local channel partner who can advise the NRIs on the brand, the past performance of the developer, actual projects as against the digital and virtual promises, various property options available to him considering his budget. Most importantly, the NRIs need a local contact who could help in making an informed decision considering infrastructure projects, connectivity and social infra available in and around the project.

By: Ravi Sinha

 

Why Noida commands lowest rental in India?

Posted on by Track2Realty
Track2Realty Exclusive

News Point: Due to the absence of sound economy in the region, Noida property commands lowest rental yields among the major property markets of India. 

Noida, Noida Skyline, Noida Property market, Noida real estate, Rental value of Noida property, India real estate news, India property market, Track2Realty, Track2Media, Noida newsSome harsh realities of Noida property market that would scare any investor. It may nevertheless tempt the tenants due to affordability:

Noida commands the lowest rental value among the top 10 cities

In some of the locations the rental yields are even less than 1 per cent

The tenants are renegotiating with landlords to reduce the rent or include maintenance in the rent

Investors in Noida are struggling as the tenants are commanding the rent which has taken 5-15% hit in recent times 

Rakesh Sharma, a retired doctor spent his lifetime saving to buy an apartment on the Noida-Greater Noida Expressway. With already having a house in Delhi he had it in mind that the rental income of the property would be enough for him to lead a comfortable life post his retirement.

Today, he repents his decision after having spent INR 1 crore for the said property. With only INR 13,500 as the rental return, including the INR 3,500 as maintenance outgo, he feels he has made the biggest investment blunder of his life. This income, after paying the EMI and inflation adjustment, is making this investment more of a liability than asset.

Welcome to Noida reality! Contrary to the dynamics of property market where lesser transactions lead to skyrocketing of rental values, in Noida this conventional wisdom of market does not hold true. Noida, as a matter of fact, is a classic case in contrast where the supply is huge, transactions are less and the rental values are the lowest. Reason: imbalance of demand & supply in the same catchment area.

Why low rental yields? 

Absence of economic infrastructure & job market

No takers for Grade A office space due to absence of international airport

Perceived to be cheapest market of Delhi-NCR

Over-supply in select pockets without proper development of catchment area

Demand-supply mismatch leading to tenants controlling price point 

What actually makes Noida one of the worst markets for the rental yields? There are many contributing factors but the single biggest stumbling block is the absence of economic activity in the district that makes it a last choice of those tenants who can not afford in any other part of Delhi-NCR.

Ashok Sinha, a local property consultant believes the low rental yield of Noida is a reality and will continue to be so in the foreseeable future. He feels unless there are quality Grade A offices and quality occupiers in the market that could add to jobs, the residential segment will not be witness to the high priced rental transactions.

“I recently negotiated for an office space with much difficulty. On an extended lease of nine years the occupier accepted to pay only the maintenance part for the first three years, followed by 50 per cent rent in the next three years and full rental only for the last three years. My point is that unless the quality employers will not come to this market the affordability and its offshoot with low rental yield will continue to be a reality,” says Sinha.

Developers, on their part, are mostly in denial about their own miscalculation to add to the demand & supply gap. After all, premium housing and bigger housing units in a market that is the last choice of the buyers defies the conventional wisdom of economics.

Nikhil Hawelia, Managing Director of Hawelia Group candidly points out that the developers themselves have to introspect why the rental values have gone down over the years. According to him, the more one goes up the value chain, either with luxury elements or with size, the least are the chances of commanding decent rental yields.

“I do not think affordable houses are not commanding the rental yields of around 2 per cent, like other parts of the country. The problem is with the premium housing and projects with bigger units where the supply far exceeds the demand. The owners have no option but to compromise with even 1 per cent rental yields or lesser because there are hardly any takers,” says Hawelia.

Analysts believe in the absence of an international airport the multinational companies are reluctant to set-up base in this part of the Delhi-NCR and hence Noida continues to be affordable and low-cost market. This is reflected in both the property sales velocity as well as in its rental yields. All that the property owners are left with in Noida is a wish that one day the property rally will compensate them for their stuck up investment.

By: Ravi Sinha

Crowdfunding different from organised REIT

Posted on by Track2Realty
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News Point: Crowdfunding in real estate is different from the organised model of REIT and it is yet to gain ground in Indian realty due to lack of trust & transparency.

Crowdfunding, Real estate crowdfunding, Organised funding in real estate, REIT, Indian real estate investment, India real estate news, Indian property market, Track2Realty, Track2MediaAt a recent seminar in Delhi on financial planning and investment in Indian real estate, someone from the audience asked a pertinent question as to how is crowdfunding different from other organised and institutionalised form of investment in the sector. Another investor was curious to know as to how is crowdfunding different from Real Estate Investment Trust (REIT).

With real estate giving better ROI than any other investment vehicle in the country the investors in the India are today exposed to what is happening in the global market. The investors are hence curious to explore what has been tried and tested format in other matured markets – crowdfunding.

However, though crowdfunding the world over has been about peer to peer funding, there are many challenges in the Indian real estate market in absence of any organised trust/agency that make crowdfunding a non-starter.

So, what makes crowdfunding different from REIT. Rattan Hawelia, Chairman of Hawelia Group tries to explain it in simple terms. According to him, REIT is an investment option where the investors can put their money in large-scale properties which is open to everyone by buying stocks. But with REIT the investors only know the portfolio and not the properties. However, in crowdfunding, individuals can single out a particular building or builder to invest in.

“Crowdfunding has more flexible underwriting norms than probably what REIT can offer. That makes it a high risk and high return game. After all, REITable properties are established income producing assets while crowdfunded projects are mostly newly launched and start-ups that need early stages of funding,” says Hawelia.

David Walker, MD, SARE Homes finds another difference between the two when he says REIT has already gained official sanction, while crowdfunding is still not officially recognised in India, unlike in the emerged economies. “Once approved and regulated, crowdfunding has the potential to become more popular than REIT and other organised investments. The latter are cumbersome for retail investors, who prefer customer-friendly investment avenues, as crowdfunding happens to be in the West.”

Sandeep Ahuja, CEO, Richa Realty says in REIT usually many properties are pooled together and the investment is listed and can be transacted. Crowd funding, is mostly done on a single project. It is also not traded on any exchanges and thus not as liquid as a REIT investment.

Requesting anonymity, a developer who has successfully formed a loose alliance of initial investors to get the crowdfunding tries to explain a method in the madness. He asserts that in a market like India where all the legitimate funding options are increasingly drying up there is absolutely no harm in getting crowdfunding as long it is not violating the law of the land.

“Any investor at any given stage of investment through any means knows his consumer rights. So, there may not be a regulating agency like the REIT for crowdfunding in India, yet it is a legitimate business transaction between the willing parties concerned. Many private deals, both debt and equity, happen without the regulator coming into the picture” says the developer.

There is no denying that the ROI would be higher than the REIT for the parties interested to lend to the developers through crowdfunding. Yet, the risks are also much higher in a market like India where access to right information is challenging and transparency is lacking.

Moreover, crowdfunding is definitely very different from REIT – be it with the operational methodology, nature of investable properties, legal framework or the alliance between the concerned parties. And hence, in the absence of any prescribed guidelines the few and far between crowdfunding (if at all they can be called crowdfunding in the conventional sense of the term) is always covert than overt in the Indian real estate.

By: Ravi Sinha

Mumbai property on top of NRI’s wish list

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Track2Realty Exclusive

News Point: The demographic profile of the Non Resident Indians (NRIs) may not do justice to conclude why Mumbai is always on top of the wish list of the expat Indians.

NRI, Non Resident Indian, Indian Diaspora, NRI investment in property, Property market for NRIs, India real estate news, Indian property market, Track2Realty, Track2Media, Indian Diaspora investmentThe major demographic profile of the NRIs is from the states of Gujarat, Kerala, Punjab and other parts of North and South India. Going by what the traditional investment pattern of the Indians, the cities that should draw the maximum NRI investment should be Kochi, Ahmedabad and Chandigarh. But then it is the Mumbai city that has over the years commanded the maximum premium from the NRIs.

The slowdown of the Indian economy and the resultant effect on the property pyramid where the high-end investors started scaling down their portfolio size gave the impression that the NRIs who were fuelling the luxury property of Mumbai would be skeptical with the dream city. However, this proved to be an outside view as the NRIs who have travelled in developed cities of the world still find opportunity cost of Mumbai pretty high. In their cost & benefit analysis, Mumbai continues to be an investment magnet.

Critics who pointed out that the NRIs are exiting the luxury properties probably failed to differentiate between the NRI investors and the NRI end users. It is true that the investors are wary of ultra luxury projects across the country and Mumbai is no exception. But equally true is the fact that the kind of business opportunities, lifestyle and livability index that the NRIs looking to settle down in India want, no other city can match their aspiration level as Mumbai.

Mumbai magnet for NRIs

Mumbai a top pick among the NRIs professionals; retirees prefer hometown

 Mumbai still offers the maximum ROI on property investment

No other city offers the NRIs quality of life and business opportunities like Mumbai

Connectivity of Mumbai with other global cities act as a magnet for NRIs

Satish Dwivedi, and NRI from Western Uttar Pradesh now working in Yemen is coming back to India. The financial consultant was advised by the broker that Noida is a better option for settling down in India and exploring his business. The ticket size of the Noida market is not even 30 per cent of the Mumbai real estate and hence the advice prima facie looked very convincing. In terms of the cost of doing business per square feet, Noida was peanuts compared to Mumbai.

“With the impression that I was given I was pretty much convinced in favour of Noida since it is very close to my home town in Moradabad. The physical infrastructure of the place also is far superior. But then I soon realized that it could only be my retirement destination. In terms of conducting my professional and social life, no city can match Mumbai,” says Dwivedi.

The built environment of Mumbai real estate that deals with the NRI buyers do understand this wish list of the expat Indians. “The first consideration for any home-buyer is how will he conduct his professional life. Then after he has to look for conducting for social life. Then comes the question of budget and affordability which is very relative. For the NRIs since there is no budget constraint like an average salaried class in India, they would go for a city where they get the lifestyle choices along with professional opportunities,” says Arvind Nandan, Director – South Asia with Colliers International.

Ravi Gurav, Member of MCHI points out that Mumbai real estate market has been getting some good support from NRI sales since the last two years. The share of enquiries by NRIs on real estate portals are over 30 per cent in today’s times. Whereas the local buyers are still considering the property prices as high, at the same time NRIs are buying the best deals available from Mumbai market. From the month of August 2016 we are witnessing a lot of new launches along with existing launched properties offering better deals with relaxed payment schedule or free biz such as furniture and home appliances.

“NRIs are especially bullish in Mumbai real estate market due to two reasons. First is that they understand the gradual correction that taken place in Mumbai real estate market. Even if we consider the inflation from 2013 to 2016 at the rate of 5 per cent per annum then overall inflation is 15 per cent in last three years. But if we get the property in 2016 at the price of 2013 means it is at 15 per cent correction. Secondly, Indian Rupees against US Dollar depreciated almost 20 per cent from 2013 to 2016. The Indian Rupee against US Dollar was 55 in April 2013 where as in April 2016 India Rupee was 66 against US Dollar. Which is like the 20 per cent depreciation of Indian Rupee against US Dollar,” says Ravi.

As per this calculation, if we consider the consolidated effect of 15 per cent gradual correction and appreciation of US Dollar up to 20 per cent in last three years, it is as good as Mumbai real estate market poised at 35 per cent corrected price for NRIs and hence they are bullish.

Devang Trivedi, Managing Director of Progresive Group finds a sound financial rationale in the Mumbai property investment of NRIs. He points to the fact that the NRIs are used to low returns on investment in their country. So, in Mumbai rental income is equal to the appreciation in their country and whatever appreciation in property price rise they are getting is a bonus. Moreover, they have a long term option of returning to Mumbai  and have a self use option.

“Among all the different investment classes that is gold, silver, diamond & stock market, property investment is the most tangible & common sensible investment. Long term perspective in Mumbai remains a safe market because of limited supply  and ever increasing population. Ten times growth in Mumbai between 2003 and 2008 is giving encouragement to all the NRIs to invest in Mumbai, as back in their own country the property is the same with only 2 to 5 percent maximum growth,” says Trivedi.

Beyond all the cost & benefit analysis, the fact lies that Mumbai still offers the high livability index and the reasonable cost of doing business to NRIs. So, any NRI who is returning back to the country and wants to continue the professional life prefers Mumbai for investment. Despite the slowdown of the last few years, which has hit the property markets across the country, everyone understands that in terms of the ROI no city can match Mumbai. Add to it, the quality of life and the business opportunities, and Mumbai acts as a magnet to the NRIs. Last, but not the least, the kind of connectivity that Mumbai offers to all the major international cities is a magnet for NRI professionals returning back to India to set up business here.

By: Ravi Sinha

Single tenants face discrimination in the city

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News Point: Metro cities might project to be cosmopolitan and liberal but are conservative with single tenants who face discrimination.

Single tenant, Single & the city, Bachelor tenants, Discrimination in housing, India real estate news, Indian property market, Track2Realty, Track2Media“Being single is a lifestyle statement. It is not a crime by any stretch of imagination. But then my liberal thought was constantly challenged when I left Kolkata and came to Gurgaon for the job. It suddenly seemed to me that my choice of living a single life was a crime that debarred me to get an apartment on rent,” says Ramneit Mukherjee, a copywriter.

Ramneit is not alone in having faced this kind of apartheid in rental housing market for being single. Across the major cities of India, the singles face the challenge to explain to the landlords as to why have they preferred to be single. Many suspect them to lead an indecent life and lifestyle choice and hence not eligible to rent out the house.

As per a Track2Realty pan-India survey, no les than 82 per cent single professionals have found it challenging in one way or the other to get a house on rent. This is not a reality of small towns but in the top 10 cities of India known to have metropolitan culture & lifestyle, singles are finding it hard to get n apartment on rent.

Challenges galore for single tenant 

Singles are the most ineligible set of tenants for the landlord and the society

Uncomfortable questions about personal choice, life, lifestyle & personal life confronts single tenants

No BF/GF allowed to getting registered entry of only one BF/GF is how metro cities react to single tenants

Legal safeguards are few for single tenants because no landlord/society denies them in writing for single status

In the housing societies where ‘No Single’ policy is spelt out, Society by-laws defends it as restriction to convert apartment into hostels 

In many of the housing societies, with the North India having the worst track record, there is a by-law that the landlord can not rent it out to singles. When the mandate is challenged, the society on record only says that the policy is meant to curb apartments being converted into hostels.

“We have framed this by-law for restricting the apartment owners to run hostels. These students often create ruckus for other apartment owners. Moreover, even the payment of apartment owners is at risk because these students with a bag or two at possession can leave the society anytime without even paying the rent,” says the RWA President of a housing society in Noida.

The situation is even worse for the single women. They are more often than not turned off with a suspicion in the eyes of the landlord. Many landlords bluntly ask them that for what kind of privacy do they even need an apartment instead of working women’s hostel.

“I had to struggle a lot and finally I gave in to stay with a family friend as the paying guest. The problem with me has been manifold – a single, a woman and a journalist. All these three tags are a big ‘No No’ for the landlords. But I am still looking for an independent apartment so that I can have the privacy to write my novel and lead life in my own way,” says Priya Varshney in Gurgaon.

Legal opinion on the subject is quite clear but hardly being followed because the denial to singles is never on the record. Madhurendra Sharma, a consumer right advocate clearly says that the law of the land does not allow any landlord to discriminate the tenant on the basis of his/her being single. But then there is a grey zone that makes them stigmatise the singles while renting out the property.

“The problem is that no law can force a landlord to rent out the property to singles, unless one has in writing denied the tenant on the said basis. A landlord always has the first right of refusal; and one can avail it without clearly mentioning that the single status of the tenant is the reason of refusal. A single can not challenge and prove it in the court of law. The mindset of the society is at fault,” says Sharma.

‘Single in the City’ might be very fascinating in the movies but in the context of urban Indians looking for a rented apartment it is a horror story. The Indian cities despite of their cosmopolitan outlook are still not inclusive with the singles living on rent the next door.  Frivolous excuses to stringent regulations, and no BF/GF to restricting the entry of only one BF/GF registered with the society, the life of a single tenant only indicates that the Indian cities are yet to grow up.

By: Ravi Sinha

 

Can Mumbai turn into global financial destination?

Posted on by Track2Realty
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News Point: The plans are to transform Mumbai into global financial destination.

Reserve Bank of India, RBI, Taxation, Direct Taxes, SEZ, DTC, Track2Realty, india real estate news, track2media, real estate news india, ndtv, ndtv.com, aajtak, 99acres, 99acres.com, 99 acres, india property news, property news india, india realty news, realty news indiaMumbai has been the undisputed financial capital of India. The emergence of other business destinations, like Bangalore, Gurgaon or Pune could not take the sheen out of the city, even in the wake of infrastructure deficit and other urban problems plaguing the peninsular city. Now the Mumbai city is poised to elevate itself to the next level of business destination. The MMRDA (Mumbai Metropolitan Regional Development Authority) plans to make Mumbai a major global financial hub.

The MMRDA has announced that it has received three bids for preparing a master plan of an International Financial Services Centre (IFSC) at Bandra-Kurla Complex. MMRDA’s approval for building IFSC in Mumbai will favorably contribute in developing Mumbai as a Global Financial Centre (GFC).

Mumbai on way to global financial hub

MMRDA received 3 bids to prepare master plan of IFSC at BKC

The MMRDA has received bids from a consortium of Tata Consulting Engineers and Townland Consultants of Hong Kong; INI Design Studio of Ahmedabad; and Ramboll and Henning Larsen Architects of Denmark

GFC will attract FDI and domestic investment into the city

Entry of foreign financial companies to make Mumbai more business competitive 

Mumbai already is the primary financial center for India, housing the major Indian stock exchange like the BSE, brokerages, asset management companies (including majority of the mutual fund companies), headquarters of most Indian state-owned and commercial banks, as well as the financial & monetary regulatory authorities of India (SEBI and RBI among other institutions). Mumbai has a cosmopolitan flavor and offers a much better culture for financial services than other cities in the country.

On the other hand, lack of physical infrastructure and the developments not keeping pace with rise in population has been a major problem faced by the city. Also government regulatory policies need to be streamlined and become more business friendly if Mumbai is to make rapid strides in its development policies. Further liberalization is requires if the city is to attract global investment and business to this part of the world.

Thus, while there are inherent strengths of the city as GFC, there are shortcomings which need to be considered. This strengths and loopholes include:

Strengths:

Facilitating FDI: Recognized as GFC, Mumbai will attract many international corporations to set up their base in the city proportionally providing efficient services to the consumers. This will also facilitate foreign direct investment in the city, thereby accelerating the state’s economical position and its contribution to the country’s GDP.

Venture Capital/Investment Banking: Establishment of IFSC will give a major boost to venture capital and investment banking domain. This will result in financial sector expansion, new products and services in the market, smart technological innovations and new investment portfolios enhancing the lifestyle of the consumers.

Weaknesses:

Threat to local industries: While GFC will boost many sectors and industries, it will also pose a threat to small domestic industries. With the entry of global players with their technology and investments, local players might not be in a position to compete with them after a given point, especially in a market like Mumbai which is already saturated with other prominent players.

Though the shortcoming of the city as GFC will have a substantial impact to the small businesses but positive implications and a slew of constructive changes will result in bringing optimistic implications to all the stakeholders.

Opportunities:

Chain of financial centres: Developing one successful GFC can pave the way for more such financial centres since Mumbai has many pockets of economic influence. After BKC, more such GFCs can be developed in places like Nariman Point, Parel, Andheri and Navi Mumbai. This will make Mumbai the global financial destination in true sense of the term.

Threats:

Infrastructure bottlenecks: Since the financial centres attract more human movement and demand for residential spaces in and around, it may prove to be an infrastructure nightmare, if the existing infra is not upgraded on an urgent basis.

Escalation in property prices: More demand of property in and around the GFCs means more pressure on the demand side, thus leading to property price hike. This can lead to uneven urban growth since this has a chain effect on the lower demand in other areas beyond the GFC.

Sector optimistic

Manju Yagnik, Vice Chairperson of Nahar Group maintains that the MMRDA has a Master Metro plan in place, with regards to which it had already got Maharashtra State Government’s approvals for Metro 3 (Colaba-Bandra-SEEPZ) and Metro 4 (Wadala-Ghatkopar-Thane-Kasarvadavli). With the help of World Bank, MMRDA has formulated this project in order to improve the traffic situation in Mumbai, through better transport connectivity.

There will be a fast corridor project built from CST (Chhatrapati Shivaji Terminus) to Panvel, along with a connection to the planned new airport (at Navi Mumbai). This also includes a traffic dispersal model for efficient mobility and connectivity.

“The infrastructure planned would develop North-South road links in the suburbs including a Mass Rapid Transit connectivity, Facilitate safe and convenient movement for pedestrians (Subways/FOBs/Footpaths including Skywalks), strengthen and augment East-West connectivity in the suburbs. It will also provide for efficient and fast public transport corridors, provide high capacity uninterrupted road connection to both the Airports, provide bus terminals and create facilities for passengers,” says Yagnik.

The MMRDA has already planned to make Mumbai a smarter city by having five new business hubs in Kanjurmarg, Kalyan, Bhiwandi, Kalwa and Vasai-Virar which will be well connected in terms of transport through metro and road. The efforts are clearly seen, and one could expect Mumbai to become a very well organized city in the next decades. 

Kaizad Hateria, Brand Custodian & Chief Customer Delight Officer, Rustomjee Group points out that ever since its formation in 1975, MMRDA is immensely contributing to make MMR a business hub through extensive infrastructure development enhancing the lifestyle of Mumbaikars. Constant development of groundwork projects across the sectors like housing, transport, water supply and environment have made Mumbai globally recognized for its relentless contribution in country’s economy.

“In alignment of on-going developments, MMRDA is also focusing to take Mumbai a notch higher through the development of International Financial Services Centre (IFSC) thereby developing the state as a global financial hub (GFH). Working towards the dream project of Devendra Fadnavis, MMRDA had set the ball rolling long back in February 2016 by setting up a process for establishing IFSC. Though the path is difficult in the current scenario with regards to other infrastructure projects in pipeline, MMRDA will be in a position to draw a feasible solution at the earliest,” says Hateria.

Opportunities galore

The professionals in Mumbai are also optimistic. Javed Iqbal, a marketing professional with an MNC points out that of late the job opportunities in Mumbai were not as good as it used to be. He feels the emergence of GFC will change the dynamics of job market as well, thus reviving Mumbai as a job market once again.

“The emergence of other job market locations like Pune or Nashik had taken some sheen out of Mumbai which used to hold the traction for professionals. With more global financial centres in Mumbai, the city will yet again be first choice for professionals due to more employment opportunities and better salaries,” says Iqbal.

Mumbai is naturally blessed with a natural and safe port with fair weather much of the year round. The city has been a center for trade and commerce over the centuries; which have now grown to be regarded as the commercial capital of the country.

Mumbai has traditionally owed its prosperity largely to its textile mills and its seaport till the 1980s. These are now increasingly being replaced by industries employing more skilled labour such as engineering, diamond polishing, healthcare and information technology and many more diversified industries. Now is the time to take it forward to the next level of economy. 

While developing Mumbai as GFH, positive implications have already started rolling in with more FDI pouring in different sectors and international brands and conglomerates are establishing their base in Mumbai. With the current efforts by MMRDA to develop IFSC, it will be soon that Mumbai emerges as a home to many international companies, further branding MMR as a global financial hub.

RERA realities & homebuyers’ concerns

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Legal Hammer, Judicial Review, Real estate regulator, Regulation in property market, Builders cheating, real estate fraud in India, Track2Media Research, Track2Realty“I read it in the newspapers that after the real estate regulator RERA we buyers will not be charged hefty delay penalty by the builders. It says from now onwards there will be equal penalty for both the builder and the buyer in case of delay. Over and above that there will be defect liability on part of the developers,” says Priya Sanghvi in Pune.

However, beyond the optimism of Priya she is still not clear about many of the RERA compliances, including whether the delayed penalty is applicable to the existing under construction projects or not. And she is not alone to not have full information about the various clauses of RERA. But they are all happy that a welcome beginning has been made.

Similarly, Rakesh Apte, another homebuyer, is confused to find many ongoing projects without the Occupation Certificate (OC) and the Completion Certificate (CC) still being advertised. He believes the market is still not clear as to what precisely to expect with the new set of rules.

“I was clarified by my property agent that my under construction project need not wait for registration to advertise. They can continue all their activities as usual. However, those projects for which application for registration is not made even by July 31 to the regulatory authority cannot market their projects,” says Apte.

Vivek Tomar, a trader in Pimpri, has another query. He wants to know whether the regulator can send the homebuyers to jail if he defaults on payment. He feels such reports would deter a homebuyer like him to ever approach the regulator.

“I have read the newspaper reports that the regulator has the powers to penalize the homebuyers also in case of delay in payment. My worry is that such provisions can be grossly interpreted in favour of the developer, even if the consumer defies the regulator’s order due to financial duress,” worries Singh.

Concerned buyers 

Whether there would be equal penalty on delays in current under construction projects

Till when the under construction advertisements without OC & CC will continue

Whether the homebuyers can be sent to jail for delay in payment

Whether regulator can force the government agencies to grant approval on time

Industry is nevertheless clear that such apprehensions are just teething problems. Jaxay Shah, President, CREDAI maintains that even though most states have not been able to implement it immediately and are in the process of doing so, yet both consumers and developers need to look at it optimistically. There will be teething problems initially, but as the regulatory mechanism sets in place, we will see a smoother transition into the new administration.

For the moment, avoid any hasty conclusions and false assumptions for they will only serve as a hindrance. Engaging and diligently moving towards the common goal of building a professional, accountable, transparent and innovative sector should be the objective of all stakeholders.

“There has been a long standing call for a regulation like RERA, both from the industry as well as the consumers. The purpose of such a regulation would be to build equity amongst the stakeholders, create accountability, promote delivery driven project execution and facilitate financial and administrative transparency. The present RERA requirements fulfill all these needs. Though the compliance burden is heavy, the Act has provided the right impetus on ensuring that all due diligence which any and all consumers may require are fulfilled. This will go a long way in restoring consumer faith in the real estate sector,” says Shah.

Confident builders

Defect Liability Clause: 5 years defect liability clause is something that does not affect the organized segment of the market as defect clause is limited to defect in architecture, design & construction; but not defects due to wear & tear

Date of delivery sacrosanct: The date of delivery is the prerogative of the developer and one can always factor in external factors, including the delay in approvals before committing the timelines

Clear title of the land: It also protects the organized developers as one would know the clear title of the land before acquisition

Escrow account: It may be a problem area for cash strapped developers but one can always factor in the additional cost of borrowing from the market in the project cost itself

Selling on carpet: It doesn’t mean that the project will not have amenities and super built up area. It only means that the developer has to tell the buyer how much is the carpet area and one can accordingly charge the psf rate 

That said, the discerning homebuyers in the city are convinced that the RERA will definitely restore the confidence in the property market. As a matter of fact, many of the fence sitters are now ready to take a plunge in the housing market and that promises the market to bounce back. 

Moving forward, the moot point is whether the builders would decide to postpone their new launches keeping RERA in mind to avoid mid way issues. Within the built environment of real estate it is increasingly being questioned as to whether penalising builders for delays in the projects is justified given they rely on so many external factors.

There is a general feeling that at one point government is coming up with consumer friendly RERA and on the other hand government does not have any system or mechanism to give time bound permission to real estate sector developer. Developers question how will the government be successful in implementing the real estate regulation.

In a nutshell, RERA protects the interests of homebuyers and would drive out unscrupulous builders from the realty market. RERA is a landmark legislation that is about to change real estate into a more customer centric industry. It focuses on increasing accountability of the builders and their agents and on boosting buyer confidence. But till the time there is more clarity every stakeholder has own set of apprehensions.  

By: Ravi Sinha

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