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The upside of high residential inventory

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News Point: Supply/demand mismatch in terms of price and configurations has been the main reason for the rise in inventory levels.

realty news , india real estate , india realty news ,property news, JLL India, IPC in India, Track2RealtyFor the last 3-4 years, residential real estate market has seen sluggish demand, which has caused the unsold inventory levels to go up in some of the key Indian geographies.

From developers’ point of view, this has eventually resulted in:

1. Correction of prices in many markets in order to improve sales velocity of unsold products

2. Increased project launches with the right configurations to cater to existing demand

Interestingly, 2016 had started on a sunny note. The residential real estate market, which had witnessed a slump in project launches in 2015, showed a visible comeback in the first quarter.

There was a six-fold increase in launches of the affordable housing projects, as developers predicted greater demand in this highly price-sensitive segment.

One way or the other, factors have now transpired to make residential real estate a buyer’s market that gives buyers the upper hand. They have a lot of options to choose from, with the added benefit of flexible rates and attractive payment plans.

The advantages of a buyer’s market

Real estate prices usually drop as inventory increases – but even if they don’t, negotiation power goes up. Some realtors and refuse to understand the realities of a slow market and will not accept any offers less than what they feel they should get.

If a buyer feels that he is not getting the best possible deal, he should be confident enough to walk away and look at the next option on the list. Remember that in a buyers’ market, it is the buyer who has the power.

It pays to be aware of and confident about one’s bargaining power. If the home has been on the market for several weeks or months, has perhaps already undergone some price reductions and is still unsold, it strongly suggests that the seller is hoping to sell it as soon as possible.

In such a situation, it makes sense to ask the seller for add-ons such additional furniture or fixtures, apart from a heavy discount on the listed price.

Also, some real estate brokers may be more inclined to knock a percentage point off their commissions and pass on the benefit to the buyer to get deals done. However, the best advantage for a buyer will lie with property consultancies that do not charge any brokerage from buyers at all, but only from the sellers.

Avoiding confusion in a market saddled with heavy unsold supply

Another inevitable result of heavy housing inventory on the market is that prospective buyers are confused about which options to focus on. This ‘problem of plenty’ can be resolved by looking only at select projects by reputed developers – it is surprising how quickly the range can narrow down if one eliminates anonymous smaller players from the field of vision.

The lure of discounts and flexible payment plans that currently define the market should not obscure a developer’s track-record, on-ground construction activity on projects and the market’s response to these and previous projects. The initial choice should be made based on developer’s reputation, track record, project construction activity at site and locational advantages of the project.

Further guidelines for buyers

In the case of under-construction projects, buyers should only consider those which are likely to be completed over the next 12-18 months

Again, going with developers who have a healthy track record of delivery will mitigate the risks related to timely delivery

It is also essential to undertake good diligence in terms of the project’s market response and inventory sold, which will ensure that project is delivered

One should look only at established housing corridors where social and physical infrastructure are in place or visibly under development

Expected resurgence to benefit both developers and buyers

Both the RBI and the Central Government have taken certain key steps to revive the real estate market. Firstly, the implementation of Real Estate Regulatory Act will ensure transparency in the real estate transactions, which will help safeguard the interests of buyers.

RERA will not only help in expediting the completion of the ongoing projects but also immunize buyers from any fraudulent practices. The RBI has reduced interest rates, which will allow prospective home buyers to avail of cheaper home loans from banks.

These factors have infused renewed positive sentiment in the market, and will ultimately result in boosting demand for residential properties. An increase in demand will ultimately help developers improve sales velocity for their products, help improve cash flows to complete their ongoing projects and pay-off debts.

By: Santhosh Kumar, CEO, Operations & International Director,

Rate quo status bad news for housing

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

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

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

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

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

Quick bytes

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

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

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

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

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

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

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

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

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

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

By: Ravi Sinha

CDC partners Tata Value Homes and IFC

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News Point: CDC to invest $25 million in the platform created by Tata Value Homes and IFC to develop affordable housing in 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 PropertyTata Value Homes, a 100% subsidiary of Tata Housing Development Company has raised $25 million through CDC, UK’s Development Finance Institution (DFI).

CDC, wholly owned by the UK Government, will join the affordable housing platform created by Tata Value Homes and IFC to develop affordable housing projects across the country.

Founded in 1948, CDC is the UK’s Development Finance Institution (DFI) and is wholly owned by the UK Government.  Its mission is to support the building of businesses throughout Africa and South Asia to create jobs and make a lasting difference to people living in some of the world’s poorest places.

Announcing this development, Brotin Banerjee, MD & CEO, Tata Housing, said, “We are extremely happy to partner with CDC for the affordable housing platform created last year. Investment from CDC will help us further our commitment towards delivering quality living spaces to low and middle income groups in the country.”

Srini Nagarajan from CDC said, “We’ve made this investment because affordable housing in India is highly developmental sector because it creates a high number of construction jobs per dollar invested, and will increase access to housing for India’s emerging middle class.  . We’re delighted to be partnering with Tata Value Homes, because of their prioritisation of quality above all else, and their strong focus on innovation and sustainable development.”

The world’s oldest DFI, it has a long history of making successful investments in businesses that have had a positive impact on the private sector in their country and region and improved the lives of many, many individuals.

NB Group and BridgeStreet Global Hospitality partners with three developers

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

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

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

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

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

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

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

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

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

RICS and CREDAI collaborate to train middle managers in real estate

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News Point: Joint skills development initiative aimed at improving knowledge and skills of industry professionals.

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, Royal Institute of Chartered Surveyors, RICSRICS and CREDAI have announced the second phase of the ‘RICS-CREDAI Skills Development Initiative’ aimed at jointly working towards capacity building and skills development in the Indian real estate sector.

Amongst many challenges in Indian real estate sector, the immense shortage of skilled professionals leads to delay in project deliveries, cost overruns and compromised quality.

RICS has been offering specialized education and training programs – ranging across full time degree programs (through RICS School of Built Environment, Amity University), Executive education, Management development programs, Distance learning certificate courses etc.

CREDAI has taken the lead to ensure that development and construction firms upgrade the knowledge and skills of their staff and has thus partnered with RICS to offer Management Development Programs (MDPs) – i.e. short residential programs in metro cities.

Commenting on the importance of this initiative, A Balakrishna Hegde, Chairman, Training Committee, CREDAI said, “CREDAI and its members are at the forefront of building real estate in India. With this collaboration, we hope to enhance the professional expertise in order to execute complex real estate projects. We are happy to partner with RICS, the leading global professional and standard setting body in built environment. Being the global accrediting body for over 600 built environment university courses; we strongly believe their programs are unmatched in terms of curriculum and learning outcomes. We are sure that the courses offered under this Skills Development Initiative will enhance skills in order for our members and their teams to better deliver projects that are completed on time and at reduced costs.”

Commenting on the partnership, Sachin Sandhir – Global Managing Director, Emerging Business RICS said – “Although the real estate and construction sectors are key contributors to economy, there is a complete vacuum of education and training options available for professionals to up-skill. RICS launched distance learning programs a few years ago and there has been overwhelming participation of professionals from small and big towns. This partnership is a huge stepping stone to ensure that a majority of industry now has easy and economical access to education and training options of the highest standards, which in turn will help the sector become more professional and efficient. In this regard, CREDAI’s forward thinking and focussed effort in making sure all their members give due importance to up skilling their professional teams, is to be applauded.”

To begin with, MDPs will be offered in three priority areas namely – Construction project management, Quantity surveying, Real estate sales & marketing.

The programs are targeted specifically for middle management professionals and will be implemented by delivery partner – RICS School of Built Environment, Amity University.

Many catalysts to project delays and trust deficit

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News point: There are many reasons of project delays and both the builders as well as government officials are guilty of spoiling the eco-system of housing market.

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Track2Media, Track2RealtyWhen Kanabh Aggrawal shifted from Gurgaon to Mumbai he sold off his property and bought an newly-launched apartment in Mumbai. Five years later, he is yet to get the possession. Fed up with the project delays, a couple of years back he again bought a near completion project on bank loan. The IT professional who had thought that finishing the raised structure of the apartment would not take more than a year’s time is again disappointed. The project is getting delayed every time with an assurance of another six months.

“It is like a triple whammy to my finances. My money got stuck with the first apartment, I sort of over-leveraged myself with bank loan for the next apartment. Over and above this, I am paying very high rent also,” says Aggrawal.

To say that project delays are single largest cause of conflict between the builders and the homebuyers would be stating the obvious. Project delays are the most imprtant reason for trust deficit with the real estate sector. As per the data available with Track2Realty more than half, close to 55 per cent consumer cases against the developers are borne out of project delays. The situation is all the more problematic in a city like Mumbai where most of the homebuyers are expat professionals who are buying the houuse for the first time.

Quick bytes: Major reasons of project delay 

  • Delay in approvals and licenses  
  • Lack of Skilled workforce
  • Shortage in raw material supply
  • Government reforms lacking
  • Deteriorating market sentiments
  • Lack of standard guidelines

Sector accepts with defence

Vipul Shah, Managing Director, Parinee Group agrees that the main problem for trust deficit is the delay in delivery of the project, as most of the buyers are salaried employees and they depend on housing loan while buying a property. The delay in delivery puts extra burden on their finance in the form of extra pre-EMI interest and rent which they continue paying. This increases their landed cost for the house. The delay in project also tarnishes the image of the developers and hits their brand value considerably.

“Timely delivery is considered to be the highest contributor for the reputation of a developer. The core trust factor of real estate industry is delivering on time and if that is delayed everything goes haywire. In most of the cases the delay has been because of the delay in receiving approvals. Various approvals from various departments are required for construction of a building, which takes lot of time. Builders have to run from pillar to post to secure all the approvals and start construction. Also, if one approval is stuck at one department, then it has a cascading effect on all the other approvals,” says Shah.

Manju Yagnik, Vice Chairperson, Nahar Group, however, points out that majority of the delays are non-intentional. No developer wants to be in a situation that impacts his growth due to delay in project delivery. But fly-by-night operators cannot be ruled out. Litigation is one major cause of the delay in the project. Other common factor that delays the project are complications in obtaining necessary permissions which is a very lengthy process, abrupt policy changes that are retrospective, shortage in the supply of raw materials and the likes.

“Unlike yesteryears a consumer is well informed and well aware about the developer’s past performance and the details of the project he intends to invest in. A customer is also well informed about the prevailing market scenario and he does his homework well before taking the final decision of buying a home. If there has been consistency in timely delivery of the past projects by a developer, a single project delay does not contribute to trust deficit factor.  But a constant delay in delivery of multiple projects erodes the brand name and trust of a developer and in the sector,” says Yagnik.

Both buyers and developers suffer

Harjith.D.Bubber, M.D & C.E.O, Rivali Park nevertheless accepts that the delay in project has been detrimental over a period of time. He maintains that in a real estate sector the buyer invests his lifetime savings in buying a property and when everything of his is at stake, delay in delivery on committed date creates doubts in his mind. He also blames the factors beyond the developers control for the same.

“With lot of changes in government regulations and delay in receiving approvals and other unavoidable issues both buyer and developers are suffering due to which the buyers have become pessimistic with their investment in the projects. Suppose homebuyers take loan for their property which if in case is delayed they still have to bear the bank interest, rentals etc. that is an unaccounted loss for them. This way, they have steadily destroyed trust in the real estate sector,” says Buber. 

Sheer Majored Memo, Partner, Zara Habitats says amongst other reasons, endless and indefinite delays in completion and delivery of projects is undoubtedly the most significant factor that harbors trust deficit in the real estate sector specially in a city like Mumbai.

“There are numerous factors that either individually or jointly affect timely delivery or completion of construction projects. Lack or inadequate appropriation of funding for projects, undue and indefinite delays due to pending approvals, permissions and sanctions for projects to move forward, policy paralysis, court litigations, private disputes are some of the most predominant reasons that most often cause delays in construction projects in Mumbai,” says Memo.

Any way out?

Analysts hence suggest that a lot can be done to improve the eco system of project delivery. Old out-dated policies needs to be relooked at and updated as per current market requirements leading towards development. This will take care of abrupt policy changes as and when required and the system will be stream lined.

There should be fast track judicial system to dispose of the litigations that delays the development and delivery of the project. This will create more clarity in the planning of a project and bring in more transparency. It is demanded that the government should introduce single window clearance for granting construction approvals. This will also improve the situation of project delivery to a large extent.

The requirement for obtaining various NOC’s from different Government departments should be done away with and a single authority should be appointed for construction approvals. The Authorities should also implement more digital initiatives to fasten the approval process and increase transparency levels. This will also help in standardization of processes.

A well-conducted and intensive due diligence on part of developers, tenants and other parties involved in a project is a must and thorough legal check should be a serious consideration for all projects. Chalking out a realistic and practical financial feasibility of projects is imperative as often due to uncertain and unforeseen events economics of projects tend to fluctuate, thus developers should be equipped to cope up with such volatility.

Streamlining of permission and approval process is one of the most important factor that could save a lot of time and revenue both for the developers and the authorities as, commitments for completion and delivery of projects would be more realistic, achievable and certain.

Rate cut multiplier effect on homebuyers’ psychology

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Bottom Line: After regulator, rate cut is another confidence booster for homebuyers. 

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Delhi NCR real estate, Mumbai Real Estate, Bangalore Real Estate, Pune Real Estate news,Track2Media, Track2Realty, ravi sinhaIt may have been a very marginal rate cut by the Reserve Bank of India (RBI) and definitely not anywhere close to what the RBI has done in the past, but yet this rate cut promises to have substantive impact than mere symbolic discussion for both the homebuyers as well as the real estate sector. As a matter of fact, this rate cut promises to have multiplier effect on the fortunes of the sector, along with the goodwill generated with the decks being cleared now for a real estate regulator in the sector.

For the records, the RBI Governor Raghuram Rajan in his bi-monthly monetary policy review has cut the repo rate by 25 basis points to 6.5 per cent; thus clearing the decks for home and auto loans, among other loans, to become cheaper. The policy interest rate has been now lowered to more than five-year low, while indicating the prospect of another cut later this year if inflation trends stay benign.

From the standpoint of homebuyers, this definitely has a multiplier effect on the psychology which had been subdued for quite some time due to high interest rates and trust deficit with the sector. The industry has hence given its thumbs up to the RBI’s gesture.

Anshuman Magazine, CMD, CBRE South Asia feels that on the back of moderating inflation levels, controlled fiscal deficit and cautious economic sentiments, the RBI’s decision to pare key interest rates in its latest monetary policy review was largely expected by the industry.

“The rate cut is likely to help lower borrowing costs and support growth further in 2016. For the real estate sector this is particularly critical. It is expected that this benefit will be completely transferred to the borrowers, which will result in lower lending rates, thus helping to revive housing sales,” says Magazine.

Ashish Raheja, MD, Raheja Universal calls it a welcome step. He believes the move will surely have a positive impact on the economy as well as across sectors at large. “More specifically from the real estate sector perspective, we believe that there will be some renewed interest from prospective homebuyers who were hit recently by the ready reckoner rate hike across Maharashtra. While this move is positive it is left to be seen whether banks will pass on these benefits to their customers.”

Deepak Joshi, President and Chief Business Officer, Religare Housing Development Finance Corporation says this coupled with Marginal Cost of funds based Lending Rate – (MCLR) on which SBI has already taken a lead, will further reduce the lending rates in the market and increase credit off take. “Also, EMIs on retail consumer loans will further soften which will increase demand for auto and home loans.”

However, it would be pertinent here to note that though the RBI Governor sounds optimistic with the direction of the economy and signals more rate cuts in near future, the move will only have its affect when the banks pass on the benefits to the consumers. Failing this, it would be another symbolic gesture on part of the policy makers that will have no impact on the fortunes of the sector or the pocket of the homebuyer.

A large section of economic analysts are hence giving a word of caution on this. They are conscious of the fact that now is the right time to revive the fortunes of the sector. While the confidence on the part of the fence sitting homebuyers is somewhat back to the market with seriousness of the policy makers to clean the functioning of the sector and assure the delivery process, this rate cut can have a multiplier effect if the benefits are immediately passed on to the buyers.

Impact of 100% FDI in e-commerce on Indian real estate

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Bottom Line: 100% FDI in Indian e-commerce will open the floodgates to a host of other players in this segment.

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 MeghrajIndia is already host to some of the largest global e-commerce players. The announcement that 100% FDI will now be allowed in e-commerce is going to open the floodgates to a host of other players in this segment. The impact that this development will have on Indian real estate will be significant. In the first place, the new players – like their predecessors – will require large office spaces to house their back-end teams. They will naturally direct this requirement to the country’s top 7 cities.

The second impact will be on the demand for warehousing and logistics real estate. Unlike the demand for office spaces, this additional requirement will be spread fairly evenly across Indian cities. E-commerce players need to be able to deliver quickly to their customers, and one of the most important clientele segments for them are in the tier 2 and tier 3 cities. We will therefore see a significant step-up in demand for warehousing spaces in and around these cities.

On the flip side, there has been a rider clause attached to the FDI liberalisation on e-commerce. This is that e-commerce players now will be unable to sell below market prices and not more than 25% of sales will happen via one vendor (this proviso does raise a question about the term ‘market price’, given that there is fairly broad accepted range for most products). In any case, this announcement brings brick-and-mortal retailers on a more level playing field, and would help to still the outcry over unfair trade practices to an extent.

Overall, this is positive for the retail industry; more rational behaviour will now prevail in terms of market trade practices, and mounting of losses by most e-commerce companies will be curtailed. Online sales may reduce as deep discounts disappear, although losses will also be capped.

If we look at the West, e-commerce and brick-and-mortar players coexist happily, and this dynamic can definitely reflect on the Indian terrain as well. With e-commerce in India still at the nascent stage, the base being low even now and the growth rate very high, there is enough scope for both e-commerce and brick-and-mortar retail to flourish.

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

Selling on carpet area case study in best practices

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Bottom Line: Carpet area in proportion to the super built-up area or saleable area is something that has been a bone of contention between the builder and the homebuyer.

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After all, carpet area is the space that a homeowner is going to use. In a market where the homebuyer education is not much in public discourse, the understanding about carpet area, covered area including internal walls, built up area and super built up area is pretty confusing, if not outright poor.

All that most of the homebuyers understand is the carpet area that one is going to use and call it their home. And hence, there is always acrimony with the builder about what percentage of carpet area vis-à-vis the saleable super area, irrespective of the percentage of loading.

Now, speaking from the real estate standpoint there cannot be standard definition of the percentage of loading in the name of super built up area. This is because super built up area is subject to many variables, including the FSI norms, amenities on offer and others. Most of the analysts therefore are struggling worldwide to suggest an industry-accepted method of property calculation.

 As Manju Yagnik, Vice Chairperson of Nahar Group says that there cannot be standardisation on loading unless all the structures are planned in the same way and of the same design. She also makes it clear that loading depends on numerous factors and features of a building, may it be residential or commercial. As long as these features vary, loading will also differ. Percentage of loading depends on the type and size of the project and differs from project to project. A lot depends on the plans of the building and the extent of amenities provided in it. Loading also depends on typical circulation core and the wall areas in an apartment.

“Lack of clarity on loading percentage does play a role in creating a bad reputation to the sector. The customer has the right to understand the loading factor from the developers and developer will explain the same. Customer should buy only if they are convinced. The real estate sector has undergone sea change over a period of time in terms of modernisation and amenities and space provided by the developers. Also, the consumer today is better informed and well aware on the aspects of development and what he wants. He can evaluate better now than ever before the value for the money while buying a home,” says Yagnik.

What is the way out to bring the builder and the buyer on the same level of understanding? Well, developers in Mumbai striving to come out of slowdown have taken the challenge upfront as far as consumer complaints and perception management is concerned.

As a result, they are now selling on the carpet area. A homebuyer can actually measure his carpet area that the developer is promising. This may not reduce the loading share per se but at least puts to rest other apprehensions like what actually the buyer will get in terms of usable space.

Shailesh Puranik, Managing Director, Puranik Builders accepts that it is a new trend that has emerged where the developers are selling as per the carpet area in Mumbai. He nevertheless adds that it is to follow the guidelines of the government which has advised real estate developers to sell as per the carpet area.

“The loading factor is not completely absolved by this. Developers are taking into consideration the total cost before finalising per sq ft pricing of the apartment prior to initiating sales under carpet area. Defining carpet area and selling real estate as per the carpet area makes a great difference to the customer as well as the real estate developer. Selling carpet by all or a majority of developers has strengthened the trust and confidence levels between the real estate developer and his customers,” says Puranik.

Dhaval Ajmera, Director, Ajmera Realty says the developers are selling only on carpet areas today due to the rules and regulations. For carpet area, it is completely transparent because the charges are only for the carpet area received by the customer. Hence, the trust and transparency is at the forefront.

“The trend of selling is now being accepted by the buyer also because they understand that the charges are applied on the area being used. Yes, the selling rates go higher in terms of carpet area but ultimately the ticket size remains the same,” says Ajmera.

Adhering to the carpet area also enhances transparency in real estate deals. Selling as per the carpet does not make any difference in the ticket size of the apartment. But it does a world of good for the homebuyers’ understanding and hence they are quite happy with this emerging trend.

Mohan Tharwani, Managing Director, Tharwani Infrastructure also admits that selling on carpet does not in any way absolve the loading factor. But he adds that defining carpet area and ticket size makes much of a difference as far as trust factor on the developer is concerned.

“Yes, it is always good to declare the carpet area at the very first go, so that the client (buyer) is aware about the value against the actual size of the flat,” says Tharwani.

The selling on carpet area may not make any difference on the loading over and above the usable area, it nevertheless would be seen as one of the emerging best practices. There are many reasons to believe that selling on carpet helps the sector in its quest for image makeover.

It kills the possibility of mismatch between expectations and delivery; buyer knows before hand the amount that one is paying and the actual size that one is getting; it reduces the chances of litigations; and the practice overall helps in the perception management of the sector.

The Mumbai-based developers would like to admit that ever since they have adopted the practice of selling on the carpet area, it has activated the sales channel and at the same time reduced the number of dissatisfied customers in a significant manner.

It might give the impression that the practice of selling on carpet area would be more welcome in the affordable housing but that is just an outside view in Mumbai property market today. As a matter of fact, the practice has been well received across the housing segment, whether it is affordable or mid segment or even luxury housing projects. Analysts therefore are evaluating it as a case study in best practices adopted by Mumbai real estate.

No alibi of delays after Model Building By-laws

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: The New Model Building By-laws (MBBL) promises to reduce human interface and provide a structural framework to create an online single window system, thereby reducing corruption. 

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Delhi NCR real estate, Mumbai Real Estate, Bangalore Real Estate, Pune Real Estate news,Track2Media, Track2RealtyOne of the fundamental reasons of delays in real estate projects has been the number of clearances.  The issue gets all the more problematic when it comes to obtaining the mandatory clearances at the Centre as the developers have to rush to Delhi.

The developers’ defence, grouse and often alibi of project delays have been that they are running to Delhi for environmental, height and other such clearances and there is neither any clarity over the policies nor any structural mechanism for time-frame. Single window clearances have been the wishful thinking on part of the developers and the homebuyers were left with a wing (house rent) and the prayer (EMI).

Not anymore! If only the New Model Building By-laws (MBBL) announced by the Union Urban Development Minister M Venkaiah Naidu is followed in letter and spirit, it will reduce the human interface and provide a structural framework to create an online single window system, thereby reducing corruption as well.

The new set of guidelines under the MBBL also makes it mandatory for states to provide all building clearances within 30 days. As per the guidelines, one does not require to come to Delhi to get green clearance for the projects involving built up area of up to 1.5 lakh square meter.

Currently, there are over 35 different kinds of clearances required from various agencies before initiating any new project. Besides getting clearances from the State-based agencies, the developers in many projects require clearances from Central ministries, including Defence, Civil Aviation, Environment and Forests, Culture and Consumer Affairs.

The MBBL provides for integration of various types of environmental considerations. MBBL provides for three categories of buildings based on the built-up area – 5,000 to 20,000 square meter; 20,000 to 50,000 square meter and 50,000 to 150,000 square meter – and different set of environmental conditions are provided for each category.

A risk-based matrix for different types of buildings has been introduced in the by-laws. The objective of this analysis is that small buildings with low risk criteria should be approved on a fast track and the high risk buildings like mall, multi-story or big commercial complexes should be examined in the required detail. 

What is New Building By-laws?

  • The Union Government has framed a Model Building Bye-Laws, 2016 for granting permission for construction of buildings
  • The last time the Model Building Bye-Laws were issued in 2004
  • It seeks to provide an online single window framework for approval process
  • Model Building Bye-laws, 2016 intends to improve ease of doing business regarding issuance of construction permits
  • The time limit for all kinds of single window approvals is 30 days and if it is not done by the concerned agencies within this time frame then it will be deemed as approved
  • Different set of environmental conditions is provided for each category of building ranging from 5000 square meters to 1.5 lakh square meters
  • Urban local bodies (ULBs) will have the power the monitor the environmental concerns in their region 

Welcoming the MBBL, Anshuman Magazine, Chairman & MD, CBRE South Asia says this will go a long way in improving ease of doing business in the construction sector. A single-window clearance mechanism, reduction in time for approvals, environmental considerations, and the added influence of Urban Local Bodies and Development Authorities are all steps in the right direction.

“Coming on the back of the passage of the RERA Bill, this has been among key measures the government has been trying to implement for the development and regulation of real estate in India,” says Magazine.

Homebuyers have their own reasons to welcome the MBBL. They nevertheless have a query: Homebuyers want to know that when the approvals will be less time consuming and less costly will it affect the property prices. After all, the developers for long have maintained that approval delays are one of the major reasons of cost escalation.

“I feel the new guidelines should not be a symbolic ease of doing business for the developers. It should rather have a substantive effect on the whole eco-system. When the government is facilitating the time and cost reduction then it should reach to the common buyers as well. Failing this, it is a transaction between the builder and the government,” says Swati Khandelwal, a homebuyer.

Nikhil Hawelia, Managing Director of Hawelia Group agrees that post the implementation of the MBBL the developers will have no alibi for project delays, as clearances will be on time and any delay is developer’s own mismanagement of the project or the funds. He nevertheless maintains that the new guidelines have more pragmatic vision than just the project delays. The ball is now in the court of States to frame their own By-laws in line with MBBL.

“Finally we are heading to a sustainable and progressive eco-system of real estate development. The New Model Building Bye-laws also focuses more on building adequate number of toilets in buildings, particularly for women, keeping in mind their participation at work place. What is most farsighted is the fact that it offers incentives to real estate developers for adopting smart energy solutions. Provision for rainwater harvesting, roof top solar energy harvesting and smart metering have been proposed in the new bye-laws,” says Hawelia. 

Applauding the announcement of the Model Building Bye-laws by the Ministry of Urban Development Vineet Relia, Managing Director, SARE Homes says this could not have come at a better time considering that this was the next big reform in line after the Real Estate (Regulation and Development) Bill passed by the Parliament recently.

“The decision will streamline approvals and enable time-bound clearances for construction projects. It will also ensure ease of doing business by making the application process much faster and transparent and also lend responsibility and accountability to the whole system. A simpler and uniform process will also help reduce project costs by cutting down on project execution delays,” says Relia.

There is no denying that the New Model Building By-laws seems to be very pro-active regulation for the interests of both the developers as well as the homebuyers. But, as they say, the devil lies in the detailing. If only the States also implement it with the same spirit it will go a long way in easing the approval process and the timelines of the project. After all, there are as many approvals needed at the State level as with the Centre.

Where the industry is silent as of now and the homebuyers are curious is over the pricing factor of the product if the timelines are reduced. After all, less human interface also means less corruption, which is one of the input costs of the developers.

Will they pass the benefit to the homebuyers? Will speedy clearances mean the homebuyers will get the houses on time? Will it lead to an eco system where the speedy clearance would not amount to the developers flouting the norms and the government agencies having no time to check it? As of now, there are more questions than what the New Model Building By-laws could answer. 

By: Ravi Sinha

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