Tag Archives: Investment in property

Can budget offer bonanza for real estate?

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Track2Realty Budget Exclusive

Bottom Line: The state of economy leaves little room for the Finance Minister to grant any budget wish to the real estate sector.

Union Budget, Union Budget 2016-17, Finance Minister, Housing demand in Budget, Fiscal Deficit, Monetary Policy, Repo Rate, NRI investment, India real estate news, Indian property market, Track2Realty, Budget disappoints real estateA budget bonanza is a wish that businesses across the sectors dream about and real estate is no exception. Real estate, as a matter of fact, has to its claim being the key contributor of GDP and job market, besides accelerating a number of allied industries through backward and forward linkages.

However, today on the eve of Union Budget 2018-19 the critical issue is whether the state of economy allows the government to grant a bonanza.  Forget any bonanza, the economists are even pondering whether the economy would allow the Finance Minister to address the legitimate concerns of real estate.

Beyond the routine optimistic overtones on part of the stakeholders of Indian real estate this is one question that is on the top of the mind of everyone. After all, the growth forecast has been corrected and subdued and the key indicators along with industries not picking up as expected.

The underline fact is that the Union Government has very little to offer substantive for real estate as far as the budget is concerned. The former Reserve Bank of India Bimal Jalan has stressed the need to have a balance between fiscal and economic growth.

Contradicting budget compulsions & expectations 

State of economy demands prudent fiscal policy with little populist incentives

Banks are flush with funds but NPAs also rising

Slow job market indicates liberal lending for home buying could be counter-productive

With General Elections 2019 in mind, Finance Minister would be tempted to incentivise middle class 

There is no denying that the focus of the Finance Minister would be to revive demand in the market. However, any largesse or grant to long-standing demands of the sector is highly unlikely. This also includes demands on behalf of the middle class salaried homebuyers.

The developers nevertheless have their own reasons to be optimistic. JC Sharma, VC & MD of Sobha Ltd feels that if the government offers calibrated incentives to the homebuyers, in addition to schemes such as Credit Linked Subsidy Scheme (CLSS) under PMAY, the customers who are fence sitters will be enthused to buy homes.

“If there are schemes or incentives for homebuyers who are single mothers, retirees, physically disabled and other vulnerable sections of the society, it will bring a larger section of people to invest in a property, augmenting the demand for housing. Idea is to address genuine demands of large section of the population by enabling a reasonable set of incentives. This will give fillip to the entire sector, which has been facing challenges for the past few years,” says Sharma.

Ashish R Puravankara, MD of Puravankara asserts that real estate is the second largest employer in India after agriculture. The sector is hopeful for the incentives as these incentives promoting growth will create employment opportunities across the sector and eventually be a catalyst to better the economy. A longer-term view must be maintained in terms of the ROI on the sops provided to the industry, he says.

Nikhil Hawelia, Managing Director of Hawelia Group believes it is not the state of economy but the state of banks that would encourage the Finance Minister to incentivize the home buying. According to him, though there are certain roadblocks in terms of the less than expected economic growth but on a macro level the fundamentals are loaded in favour of the homebuyers, if not the developers.

“Today, the banks are flush with funds and they need one or the other lending driven sectors to grow. Now real estate is the only sector that is appreciating asset class, unlike the automobile that is depreciating asset. The finance Minister has no choice but to incentivize the home buying where the risks are less since the product keeps appreciating constantly. My personal view is that if the homebuyers are incentivized with the Union Budget the business of real estate is resilient enough to bounce back,” says Hawelia.

The state of the economy, on a realistic level, leaves little room for the budget bonanza. Though there might be some relief for the homebuyers but that also is expected for the buyers at the bottom of the pyramid. With the government already looking forward to 2019 General Elections, some symbolic relief could also be expected for the middle class but the financial compulsions of the Finance Minister does not give hope of a budget bonanza. Balance between farm growth and infrastructure growth would be the key a year before the elections.

By: Ravi Sinha

 

Puravankara to invests INR 600 crores in affordable housing project

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News Point: Provident Park Square is Puravankara’ s first launch of 2018 and marketed through ‘Book Building Process’ to determine home prices through a transparent, scientific supply-demand model. 

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With an investment of INR 600 crores, Provident Park Square at Judicial Layout, Kanakapura Road, Bangalore, is a mixed development project which caters to the needs of the new age home buyer.

Like a micro mall, the property includes restaurants, retail stores and many more such lifestyle amenities. The property is being developed using state-of the art precast technology.

Provident Park Square is in line with Puravankara’s ambitious plan of developing 10 million sq ft of affordable housing projects through the next 13- 15 months.

Ashish R. Puravankara, Managing Director, Puravankara Limited says, “After some interesting times in 2017, we are optimistic about 2018 being a great year for the industry. The launch of Provident Park Square has kick-started our journey for 2018 and we are confident that the world class design and high quality amenities will truly be the first of its kind in the affordable space. The Government’s strategic initiatives and the country’s encouraging economic growth have fuelled greater interest in the affordable housing segment.  Affordable housing not only triggers a robust growth for the sector, but also enables a higher GDP for the economy.” 

The project is being taken to market through an innovative Quasi Book Building method, where the price discovery process is driven by data from fundamental ‘Demand-Supply’ metrics. The pre-booking process, currently open at this point of time, offers the complete product information to prospective buyers, along with a ‘Price-Band’ for each type of unit within the project.

Expressions of interest from prospective buyers help analyse the demand base for the project, which drives a data driven approach to the eventual pricing decision, which would be announced by mid-March 2018.

All customers during the pre-booking process will be allotted units of their choice, based on first-cum-first-serve queuing methodology. While early adopters / buyers will be at the top of the queue and hence get access to a wider choice of units, all buyers during this process will be offered a “Uniform Base Price”, there-by improving transparency in the customer buying process.

The Home buying process from time immemorial has depended on “Brute-force negotiation” between buyers and the seller. The Quasi Book building method eliminates this wasteful exercise and introduces a transparent yet competitive manner of price discovery and selling of real estate, which becomes even more essential in the “Low-Margin-High-Volume’ affordable housing space.

The first phase of Provident Park Square will be ready by 2021.

Price correction a reality in secondary market

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Bottom Line: The developers might be resistant to price cut but the price correction is a reality today in secondary 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 estateSwadeep Sharma was on a house hunt in Noida for the last two years. Last year he could find a house of choice at one of the newly delivered projects in Noida Expressway at INR 5600 per sq feet. He could, however, not manage his finances then. Now that he has managed his finances, he went to the same location anticipating shelling out more money. He was, however, taken by surprise. The apartment in the same society is today available at INR 4800 per sq feet.

Is this price crash? Can it be termed as market correction? Whether the investors are exiting with distress sale? Or the housing market has started getting rational with price point? Whatever the case may be, it definitely sounds like a buyers’ market today.

“First I thought I am getting the deal that is a distress sale. But on being probed I found out that this is the prevalent market rate in the locality. However, none of the developers in the micro market have reduced the price. I asked the first owner and he said he had bought at INR 3000 per sq feet six years back at the time of launch,” Sharma elaborates.

This homebuyers’ experience tells a reality of property market that the developers would feel comfortable to sweep down the carpet. A price appreciation of 60% in six years is not something that makes the property best investment instrument.

More importantly, the fall in price point in secondary market, ranging between 10-20%, sends a very strong message to the developers. It suggests they will have to keep waiting for the buyers if they don’t reduce the prices. Sitting over a record number of inventory the developers are trying their best to sale the inventory and serve at least the interest on debt comfortably.

Requesting anonymity, a Ghaziabad-based developer admits that there is a sharp correction in the secondary market transactions. According to him, for the developers there is no room for any price cut due to high input cost and the overhead cost. But the retail investors in the housing market are spoiling the market. 

“We are today paying the price for selling our inventory to non-serious homebuyers. They have turned out to be investors. They don’t have patience to wait and reports of price correction in the media is making them nervous to get into what at best can be described as the distress sale,” says the developer.

It is debatable whether a profit of 50-60% in the last five to six years could be dubbed as distress sale. The property market nevertheless stands today as a ‘no man’s land’ for the speculators who wish to make a quick buck.

The former RBI Governor Raghuram Rajan had also made a strong case for reduction in property prices given the high inventory of unsold flats across the country.

“If real estate developers, who are sitting on unsold stocks, start bringing down prices, that will be a big help to the sector because once there is a sense that the prices have stabilised more people will be willing to buy,” said Dr Rajan.

Well, the developers may not be paying heed to the advice of the RBI Governor, but the market forces active in secondary transactions seem to have learnt their lessons ahead of the developers. As a result, the price correction in the secondary market becomes indicative of what is inevitable in the housing market. The price rationalisation can only be delayed but not denied, it seems.

By: Ravi Sinha

Provident Sunworth a case study of affordable luxury

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Bottom Line: In a housing market where affordable luxury is a suspicious segment due to over promise and under delivery, Provident Sunworth promises to be a case study for both homebuyers and developers in the segment.  

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A look inside the project nevertheless suggests the developer has gone into too much detailing and research into this project. It seems there has been a conscious effort to minimize the demand & supply mismatch that most of the housing projects are weathering today.

As I enter inside the under-construction project with less than 6000 apartments spread over 60 acres to be built in four phases, the first visual impression is that the project is a premium or luxury housing. The sports theme-based landscaping, elevated walkways and greenery beneath does not give the impression that the ticket size in this project starts with INR 55 lakh only.

And it is here that the real estate critic in me could not resist appreciating the project. Even with a moderately priced product, Provident Sunworth is definitely not a housing project meant only for roof over the head; something that has been the bane of most of the affordable housing projects.

I am conscious of the emerging market realities in this part of the world where today’s homebuyer, howsoever constrained with budget, has certain aspirations when it comes to buying a house. One would wait for a year or two to make sure one ends up buying an aspirational house. 

The reason is quite simple: the fact that most of the middle class Indians buy a house only once in their lifetime, they know it could hurt them in few years time if the house could not match their aspirations. The emergence of affordable luxury as the fastest selling housing segment is a result of this change in taste and aspirations of the middle class homebuyers.

Provident Sunworth seems to have this research and realization in its very DNA. The project has the potential to be a case study in how an affordable luxury housing should be conceptualized.

The sports theme has been centered around the kids, even though the project could not be called a child centric project. I feel the marketing strategy of the developer should have realised the advantages of positioning the project as a child centric housing project. Provident Sunworth has a number of sports amenities like cricket, tennis, swimming, hockey, kabaddi, boxing, archery etc. There are also cultural activities that have been planned as an integral part of the project.

With a land parcel of 60 acres and given FSI of 2.25, the developer has actually done well to make sure that the project does not come across as a high-density project. Its Master Plan comprises of 62 Wings arranged in the shape of a crescent or half-moon.

On a visit to the project site, I am being told that in the given space of ‘affordable luxury’ the focus has been as much on the ‘luxury’ side as the ‘affordable’ side. To meet that challenging job the developer has reduced the size of the apartment, instead of cutting corners on other specifications of the apartment.

What makes this affordable luxury property an attractive proposition is also the fact that it is not a project that is on the periphery of the city, meant only for the retired homebuyers. As a matter of fact, the project has easy access to various job catchment areas within 10-15 kms of its radius. IT employment hubs in close vicinity to the project are Global Village Tech Park and Electronic City (30-40 minutes drive).

The project also has an added advantage of having proximity to key manufacturing hubs like Bidadi, Toyota Kirloskar Motors and Coca Cola plant. The other catchment areas are Bannerghatta Road and Tumkur Road.

The region is already well connected through local bus terminals and metro rail. As a matter of fact, the latest metro line extension will terminate at Kengeri (Challaegatta) which is at close proximity to Provident Sunworth, making the nearest metro station at 10-15 minutes drive from the project.

With Provident Sunworth located 3.5 kms from the NICE Expressway, it has a distinct locational advantage of signal free connectivity to Hosur Road and Tumkur Road. Furthermore, the project is located on Mysore Road and hence addresses the major concern of water scarcity in Bangalore as it falls under phase 3 of the Cauvery water supply project.

The developer has also been smart to not throw an inventory of around 6,000 apartments in one go and then sit over the piles of unsold inventory. The project is split into four phases and that marketing strategy seems to have resulted in a decent launch to sales ratio. First phase is almost sold and sales velocity of the second phase is also quite satisfactory. The third and fourth phase has yet not been launched.

Ever since Mysore Road Metro got operational there has been lower inventory overhang in this catchment area. Provident Sunworth has the first mover advantage in this market and today this market is dotted with a number of affordable housing projects. Despite this, new launches have fared well in this region and as per a conservative estimate the market has an average absorption rate of 42 per cent in the first year post launch.

In terms of social infrastructure and amenities, there are educational institutions, hospitals, eateries and entertainment park around its periphery. Film city, water park and other entertainment hubs are within the travelling distance from this project.

Track2Realty assigns this project with ‘A Rating’ and recommends it to be seen as a case study of affordable luxury. The project has just completed the phase-I and it is yet a work in progress, but if the overall execution goes the way it has been conceptualized, the project would definitely be a case study for other developers looking to foray, or have already failed to deliver, an affordable luxury project.

By: Ravi Sinha

Aarey deforestation result of official apathy

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Bottom Line: In a classic case of official apathy and negligence leading to a grave danger to Mumbai’s climate and ecology, 3500 trees are set to be cut at Aarey forests for commercialization.

Aarey Forests, Ecology of Mumbai, Sanjay Gandhi National Park, Aarey deforestation, Commercialisation of Aarey forests, Metro car shed in Aarey forests, Save Aarey, India real estate news, Indian realty news, Real estate news India, Indian property market news, Track2Realty, Investment in propertyAarey forests are lush green oases in a sea of grey; not only tackle pollution and floods but also help bring down temperatures. The upcoming projects, most notably a car shed for the upcoming Mumbai Metro 3, has been allowed to crush and compromise with the natural ecological cover in the city.

Environmentalists have raised serious concerns over the devastating consequences of climate change. Calling it irresponsible, they question how could a parking lot service area for metro trains being allowed to destroy a critical green lung.

As a matter of fact, the government records also show that Aarey is an integral part of Sanjay Gandhi National Park (SGNP) and thus protected under forest laws. It has over 5 Lakh trees; is home to 7 resident leopards and has a rich biodiversity of flora and fauna. Even today, original adivasis live in 27 tribal hamlets in Aarey. It offers a unique experience for urban dwellers to experience nature at its best.

In a petition to the Prime Minister and Maharashtra Chief Minister through change.org the environmental activists protesting against the commercialization of Aarey have also questioned why in the name of development, only tribals suffer. The Save Aarey Campaign has been requesting the government to relocate the car shed to an alternative location. Relocation will not affect the metro 3 alignment in any way. Common citizens from all walks of life, professionals, students, school children, celebrities have all supported this issue.

In what appears to be a classic case of official apathy and negligence, the government’s own assessment study has also suggested many viable options, which have no environmental destruction involved. Experts from NEERI and IIT have suggested Kanjurmarg, Backbay and Kalina as an option. They have clearly warned of the consequences Mumbai will have to face in terms of flooding and loss of open space & wildlife, if the depot is built in Aarey.

Green compromised for faulty planning? 

Green cover of Aarey forests being compromised for creating car shed of Mumbai Metro Line 3

3500 trees at Aarey to be cut, causing grave danger to Mumbai’s ecology

Government’s own study suggested not to compromise with Aarey trees for creating car shed

NEERI and IIT have suggested Kanjurmarg, Backbay and Kalina as alternative options which could let stay Arey Safe 

Even the built environment of Mumbai real estate that has often supported urbanization at the cost of nature seems to understand the consequences of the uprooting of trees this time around.

Aditya Kedia, Managing Director – Transcon Developers admits that there is a constant conflict between development and maintaining a green cover in the city. To find open spaces in Mumbai is a challenge. The only green open space in the city of Mumbai is Sanjay Gandhi National Park and Aarey.

“A car shed, which is spread over 28 hectares for the upcoming Mumbai Metro 3 is nothing but a parking lot and service area for metro trains. We need to understand that Mumbai is not a planned city and infrastructure is not yet supporting the daily increase in the population of Mumbai due to which the government would have to take some immediate calls to fulfill the infrastructure need without affecting green cover in the city,” says Kedia.

Parth Mehta, Managing Director, Paradigm Realty points out that Aarey, in Goregaon, one of Mumbai’s rural areas, is renowned among nature fans for being the green lungs of the city. It has more than 5 lakh trees. MMRDA and the Mumbai Metro Rail Corporation (MMRC) has proposed for developing a metro car shed over a zone of 28 hectares. leading this to uprooting the 2,298 trees. As indicated by MMRDA, 2,044 of these trees could be re-planted.

“Even if we manage to replant trees, what are the chances to the layers of intricacy in the habitat environment that renders Aarey uniqueness? There are several  alternatives where no environmental maceration is possible, as the  NEERI and IIT have suggested Kanjurmarg, Backbay and Kalina as an options which could let stay Arey Safe. Due to these mistakes and wrong steps taken of destroying arey, it would  result to  Mumbai with  floods and open space and natural life in Aarey and neighboring Mumbai getting destroyed,” says Mehta.

The environmentalists demand that the government experts need to pay a  regard to their recommendation since this could help to save the nature & environment. This destroying of Aarey for construction would lead to destroying the trees and the natural beauty of Aarey. This would lead many animals homeless and destroy the nature. The destroying of trees in Aarey for road widening will also lead to the trees from both the side of the road being cut.

By: Ravi Sinha

 

Optimistic 2018 for Kolhapur

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Bottom Line: Kolhapur seems to be awaiting for its defining moment in 2018.

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The reasons of this optimism in the city property market are not misplaced. It is rather well grounded in realism where the city property market has fared well even in the worst of slowdown. This is one city where the property rates in the last 12 months have either been stagnant or have gone up, depending upon the locality and the projects on offer.

The best part of the property rally in the city has been the fact that it is an organic growth and the market has not been hyped by the investors. Even the scaling from affordable housing to affordable luxury and luxury in certain pockets of Kolhapur is end user driven momentum and quite sustainable.

Moreover, since the city centres of Kolhapur are getting saturated the focus is not shifting on the periphery locations. There are a number of quality projects coming up on the periphery locations and this is also helping the city grow to its full potential.

Some urban planners in this part of the world even maintain that there are no less than 19 villages on the outskirts of Kolhapur that could be developed as happening urban centres to capitalize on the growth demands in the city.

What is also helping the city real estate is the upcoming infrastructure projects that promise to change the urban landscape of the city. With the Regional Plan (RP) being approved by the State Government, the district is now expected to change and the growth trajectory would be upwards for the next at least 20 years. The last regional plan was drafted around four decades ago. 

As per the plan, there are proposed business complexes around the city to attract more investment and commercial activities in Kolhapur. The district that already ranks among the top five in Maharashtra in terms of per capita income is expected to compete with Tier I cities once these developments take place on ground.

Kolhapur district is no longer considered as just rural and agrarian. Today, the demand for good quality residences has increased with improvements in jobs and other economic activities. This has also led to the increasing demand for commercial real estate. Some of the companies are increasingly evaluating the city for business establishments, as the cost of doing business per square feet in Kolhapur is much cheaper than Mumbai or Pune.

There are also plans to develop six more industrial centres for which supporting infrastructure of roads and rail routes have been planned to be developed. The efforts are also on to decongest the ring road.

This growth in Kolhapur’s economy has invited many big brands to open stores in the district. As a result, today the quality retail spaces are much in demand and the rental values are increasingly going upwards.

The social infrastructure of the city has also changed in recent times. With quality schools, medical facilities and entertainment options the district has today emerged as a desirable place to live where the livability index is higher than many other Tier II cities in and around Maharashtra.

In a nutshell, at time when many other cities are grappling with multiple issues, ranging from slow real estate to infrastructure bottlenecks, and demand slowdown to policy lethargy, Kolhapur is on its way to growth. The year 2018 is hence seen as a defining year for the district.

A confusing year ahead in 2018

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Bottom Line: Beyond the overtones of a large section of developers calling the year 2017 as the year of consolidation, the fact remains that 2018 would herald with lot of confusion.

New Year, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Track2Media, Track2RealtyThe changing dynamics of the market, certain policy interventions and the overall market forces are compelling for developers to change in the year ahead.

Despite these changes, the year comes as a confusing year for both the builders as well as the homebuyers. While the developers are confused with streamlining the processes after the regulatory changes of 2017, the buyers are confused because all the reports of transparency in the sector is not visible on the ground.

What would hurt both the buyers as well as the builders is the fact that the property buying and selling would continue to be at standstill. The job market is not picking in any given industry and it would hurt the overall business.

The developers, on the face value, sound optimistic and cite many reasons for optimism, ranging from RERA, demonetization, GST, Benami Transaction Act, and infra status to affordable housing.

Jitu Virwani, CMD of Embassy Group says the year 2017 has been a positive year despite the short-term turmoil, but is surely part of the positive long-term transformation of the Indian business ecosystem. It is imperative that we continue to have a larger vision of 3-5 years to see significant outcomes, of the key measures being implemented this year. This time horizon will help businesses, investors and consumers to continue investing in the India growth story. 

“In terms of reforms, compliance to RERA will reinforce the trend for timely delivery, accountability and transparency. It will certainly add costs and in the short-term, delay project completions and also launches, however once this supply/demand mismatch catches up, RERA compliant homes will boost consumer confidence in the sector,” says Virwani.

Bijay Agarwal, Managing Director, Salarpuria Sattva Group maintains that the recent initiatives and policies introduced by the government like RERA, REIT and GST, transparency and subsequently the buyer’s confidence will only increase in the realty market. 2017 trends like the affordable housing segment, co-working spaces and the transformation of the office sector will only continue, and be further strengthened.  

“If you are transparent, loyal and honest, you will be rewarded by the customers. One thing to be avoided is that you don’t stretch yourself for debt, avoid debt as much as possible,” says Agarwal.

Rattan Hawelia, Chairmn, Hawelia Group admits that many of the developers had undergone the tough period in 2017 which had ben the news highlight of the year, particularly due to over scaling their scope of work without proper planning. Today, because of the government initiatives the real estate buyers have better knowledge and are well informed of their rights. They have better medium to choose the right property fulfilling their requirements as all the private developers are on a single platform of their offerings. 

“Developer fraternity are streamlining their professional intent and adopting transparent & clear mode of dealing with their customers. They have understood that instead of being only the product & promise-based industry, real estate is more about services and addressing the concerns and issues of consumer on realistic ground. The intent is to prioritize the customer needs and focus on their actual problems,” says Hawelia.

Beyond the optimistic overtones of the developers, a Track2Realty research concludes some of the defining trends for the year 2018. These are not very comforting for the developers, and definitely not for those who are resisting the changes in the emerging market dynamics.

Over-supply kills affordable market: Affordable housing, of course, is the buzzword in the market today but any project of mass housing won’t work for the developers. The case in point is markets like New Rajarhat in Kolkata and Noida Extension in Delhi-NCR where the houses at the rate of around INR 3500 have few takers.

Research to define demand: Developers are left with no choice but to get into serious research vis-à-vis the demand in the given market. Only right property, in the right market, and at the right price point would sell. One can even sell luxury housing in Tier-II cities, if the developer knows his audience, their purchase parity and customizes his offerings.

Affordable luxury: Affordable luxury, a very relative concept, would be the market driver in the year ahead. In some of the non-descript markets with over-supply of mass housing, the projects that are selling are the ones where the developer has tried to add aspirational elements to the otherwise affordable projects, since affordable segment is extremely competitive today due to over-supply.

Smaller projects: The developers are today left with no choice but to go for smaller projects, or to split the large projects into phases. This would not only save them from RERA penalties, but would also take care of cash flows and course correction, if needed. Developers would avoid inventory overhang in the year ahead.

Focus on execution: The year 2018 would be year of execution. With a large number of projects running behind schedule, the year could see good supply of houses across the major markets of India. The developers would also prefer to deliver first than going for the new launches. Land bank has already turned out to be land liability for many, and hence no one would be willing to invest in pipeline visibility of next 10-20 years anymore.

JV/JD & consolidation: JV & JD model would be the market trend of the year and there will be major industry consolidation. Some of the distressed and fiscally mismanaged developers will be taken over by the larger players. The trend could possibly clean up the market to some extent.

Emergence of Cities: With traffic bottlenecks killing productive time, cost of doing business per sq feet, and reality of more compensation to migrant workforce in the metro cities, the corporate sector would evaluate the prospects of operating out of Tier-II cities. The demand would thus force the commercial developers towards Tier II cities.

By: Ravi Sinha

Facelift of Indian real estate- vision 2018

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View Point: Niranjan Hiranandani, CMD of Hiranandani Group feels the Indian Economy and indeed, real estate have experienced a ‘Systems Reboot’. 

Niranjan Hiranandani, Mumbai real estate, Powai, Hiranandani Group, India real estate news, Indian realty news, India property market, Track2Media Research, Track2RealtyThe new paradigm includes various encouraging initiatives by the government, along with a new regulatory regime. This has completely changed the face of the Indian real estate sector. The positive effect is expected to become apparent in the upcoming years.

Initiatives by the Indian Government have created the ideal foundation for real estate to look ahead at a positive future, with the promise of potential growth.

The new regulatory regime is largely about steps, which include streamlining approval processes, simplifying taxation (GST), building institutional capacity, as also introducing urban planning and real estate-related reforms (RERA and REITs).

The, initiatives, such as ‘100 Smart Cities’, the Delhi–Mumbai Industrial Corridor (DMIC) and Pradhan Mantri Awas Yojana (PMAY) offer the perfect platform which will create investment opportunities across projects, across the country. Transparency, financial discipline and customer safety mechanism is in place with reform-led policies will attract investment back to the sector.

As we enter 2018, the time is right for positives of the initiatives by the Indian Government as also the new regulatory regime to have their effect on Indian Real Estate, especially for the homebuyer. 

I foresee 2018 as year when Indian real estate will build a growth story, based on the ideal foundation which has been created, and look ahead at a positive future. For Indian real estate, 2018 comes with the promise of growth amidst home seekers getting their ‘dream homes’ while for investors, it should reflect enhanced attractiveness as an asset class.

The one change that we expect, moving into 2018, is about attractive investment options in Indian real estate: no longer just from the residential segment; commercial spaces have come up as attractive alternatives. In terms of growth trends, if 2017 witnessed commercial real estate doing better than in the past, industry pundits suggest this positive will continue well into 2018 and beyond. These include retail, warehousing and logistics parks. Given that the new regulatory environment enhances safety and security for investors, the new investment options should create newer success stories in Indian real estate investments.

These are largely, macro factors, but even at the individual investor level, the picture, going into 2018, is just as positive. In a country where there are other asset classes that offer alternatives to investors, Real estate is back to being preferred option to grow wealth.

The investor protection which the new regulatory regime offers has enhanced its attractiveness as an investment class. Real estate, as an investment class, has always delivered consistent returns to investors, and has largely seen repeat investments by investors over the years.  As we enter the new year, 2018, I would position Indian real estate as the best asset to invest in, with better ROI in the long run.

If one looks at the Indian economy, real estate needs to learn from the aviation and telecom sectors, where enhanced availability of the product has a direct effect on the selling price. A surplus scenario as regards production and creation has the ability to bring down the cost, and fulfill the needs of everyone. 

The Prime Minister’s initiative, ‘Housing for All’ is a step in the same direction, and its successful implementation is imperative. In cities, we have seen mushrooming of unauthorized homes and in effect, across cities we find unauthorized development having mushroomed all over.

This brings out the importance of development of peripheral towns and twin cities, as also the ‘100 Smart Cities’ initiative. The issue of ‘housing for all’ is directly linked to growth of connectivity and Infrastructure, and ‘Housing for All’ will flourish in such locations.

One aspect where 2018 will build on the growth trends of 2017 is Affordable Housing, which emerged as the driver of real estate growth through 2017. The Indian Government has given this segment initiatives and support, and we expect these to not just continue, but grow in 2018.

Home Finance being at record low interest levels has provided the extra ‘boost’ needed to ensure that a home seeker finds a ‘dream home’ becoming a reality, with a home loan – and this should continue in 2018 as well.

The Indian Real Estate sector, going into 2018, looks very bullish and I expect it to grow at a CAGR of 15 per cent, YoY basis. I foresee the dream of ‘Housing for All by 2022’ becoming a success with proper infrastructure and connectivity. Infrastructure will be focal point of not just job creation but also a high trajectory growth rate. Infrastructure growth will bring in a radical shift and a paradigm change in the real estate scenario.

In a country where there are other asset classes that offer alternatives to investors, 2018 should see Real Estate being back as the preferred option to grow wealth. The protection which buyers and investors will get in the new regulatory regime will enhance its attractiveness as an investment class.

Property the real asset class

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Bottom Line: Real estate has stood the test of times and has emerged as the ideal investment asset class when compared to gold, equities, MFs, etc.

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“Even in times of an economic slowdown, the real estate sector has emerged as the only safe investment instrument when compared to other asset classes. Those who invest early on in their career, earn more in terms of appreciation of property than what they otherwise earn in their lifetime. During one’s old-age, property appreciation ensures better pension and security than even government schemes,” a panelist in a financial planning seminar recently said.

Dilkhush Shah, an interior decorator had only Rs 25 lakh to invest and she was advised to opt for mutual funds and gold rather than real estate. However, her research made her realise that real estate stands as the best asset class beyond the emotional urge to just own a home. The statistics, over a long period of time, clearly indicated how no other asset class had given the CAGR (Compounded Annual Growth Rate) as high as property, despite the short-term drop in sentiments.

Leverage

“Many of my friends suggested that this is a small amount for a piece of real estate that I will end up calling my own. I was even told that this is not the time to invest, as the real estate market is going through turbulent times. However, I preferred going in for this asset class which has been a time tested investment haven across the world. Yes, with such a small amount, I could only afford a property in a far-off location of Palghar but the way the development has been happening in and around and beyond Thane, I feel this is the best investment bet,” feels Shah.

Returns

The back of the envelope calculation suggests that in terms of returns in equity, gold, residential flat, commercial shop and finally currency, property scores over the other asset classes over a long period of almost a decade. If gold has given returns of 12 per cent, then residential apartments have given returns of 16 per cent and commercial shops have given even higher returns.

Inflation hedging

Real estate is the best bet against an inflation hedge as it is the only asset that loses little value in periods of rising prices. Thus, it holds its value and purchasing power even during inflation. Normally inflation has a co-relation with the booming economy and an investor also buys this asset to hedge against inflation. 

Tax savings 

A house is the only asset class that is majorly covered for the tax benefits. In other investments like the mutual funds or insurance only a limited amount of investment is covered for the tax saving purposes. In some other investment instruments like the gold there is no tax saving benefits.

Lower  risk

The fact remains that gold has seen unexpected fluctuations, the stock market has historically been on a roller-coaster ride and mutual funds, etc, have given nightmares to investors. As against this, there has been absolutely no reason why a home buyer would have anxiety pangs with respect to investment in this asset class of real estate.

High control 

In recent times, the high degree of volatility across asset classes, has definitely raised the debate over which is the best asset class to invest in for a layman. However, the statistics over the ROI, over a long period of investment, have always been tilted in favour of real estate. In the cyclic ups and downs, other asset classes like gold or equity may look more attractive for a given time frame, yet none can match property, which has stood across generations as the first preference of investment.

“I had invested in some of stocks that fell down from Rs 300 and are currently at Rs 45. Since the company is constantly on a downslide, there is absolutely no hope of recovering my losses. I don’t think it has ever happened with any property like this. Yes, there can be cyclical ups and downs but if you are determined to stay invested and are a short-term trader, you will not only recover but make gains as well in the process,” says Anupam Agarwal, a homebuyer who has also invested in a commercial shop.  

Financial freedom 

An investment in property also ensures financial freedom for average Indians. While this is true in the sense that one can earn regular rental yields, it is all the more true for the commercial real estate. Now with REITs becoming a reality, real estate definitely scores over other asset class for providing an investor financial freedom.

Portfolio Diversification

On a comparative scale of the last couple of years, fluctuation in gold prices added with the fact that depreciating rupee adds to the gold stress, does not evoke confidence in the yellow metal any more. Similarly, despite markets being at a two year high, only a few stocks are at similar highs, while most of them are still languishing well below their historical highs and are down anywhere between 80-90 per cent. In contrast, the momentum in real estate may have slowed down, yet there has been a constant appreciation in the range of 5-20 per cent, depending upon the location and the property.

Stability & peace of mind

Analysts advise that beyond the data points what is even more relevant is to back the statistics with ground intelligence and base the assessment on multiple parameters. For instance, in the ROI calculation, dividend yield on stocks and rentals on property is often not factored in. Moreover historically, during a low inflation period (say 2004-2008), equity returns are higher, vis-a-vis hard assets whereas, during a high inflation period (2009 – onward) returns from hard assets are higher.

Advantage real estate

Only asset class after gold that has been risk free

Back of the envelope calculation of the last three decades suggest that real estate has outperformed all other asset classes

Real estate has the additional advantage of impressive rental returns
The only asset class that can be either consumed for self-use or earned for recurring returns

 

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

 

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