Tag Archives: Jones Lang LaSalle Meghraj

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

Government easing approvals process for realty projects

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To improve ‘ease of doing business’ in urban areas, the Government has been streamlining many procedures. 

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 MeghrajDevelopers have something to cheer about this Budget season. After years of demanding quick approvals for their projects and removal of red tape from government departments, the central government has been taking steps in the right direction to address these concerns.

A decision to streamline approvals and enable time-bound clearances for construction projects in urban areas by empowering urban local bodies to settle a wide range of approvals and adopting appropriate technology was taken in November. The central government aims to reduce movement of files between central government ministries and local government bodies, which prolongs the time to give approvals.

According to a report by the Confederation of Real Estate Developer’s Association, it takes up to three years to start a project after land is acquired, on an average. By this time, the cost of land rises by 24-30% due to hefty interest payments as bank loans are not available for procuring important raw material in this sector. This cost ultimately gets passed on to the customer. A simpler and uniform process will help bring down the cost of each unit in a project by 20-30%.

Progress achieved so far:

  • In association with ISRO, The Ministry of Culture is developing colour-coded maps for 281 monuments that account for most of the construction-related approvals, using which municipal bodies can accord approvals in quick time.
  • The Ministry of Environment, Forests & Climate Change has come out with revised and simplified environmental norms, and these will be notified at the earliest after consultations with the Ministry of Urban Development. Urban local bodies and state governments will be empowered to accord approvals at their level, based on their willingness and ability.
  • The Ministry of Urban Development will soon issue Model Building Byelaws incorporating all revised and simplified norms and processes enabling urban local bodies to approve building plans in quick time.
  • The Ministry of Civil Aviation has reported that applications received by the Airports Authority of India for height clearances in airport zones have come down by over 200 per month further to development of Colour Coded Zonal Maps (CCZMs) for 12 airports that account for 58% of total such applications and making them available to respective urban local bodies.
  • CCZMs to be developed for another 28 defence airports that are used for civilian purposes also, to bring them in line with what is being done for civilian airports.
  • The Ministry of Civil Aviation also commissioned improved version of online NOCAS – No Objection Certificate Application System – eliminating human interface and enabling faster issue of NOC through automatic calculations of permissible heights in airport zones with applicants being able to track the status.
  • The Ministry of Culture has come out with a mobile-based app that enables online approvals for construction in the vicinity of monuments in just 72 hours through integration of websites of National Monument Authority and those of respective urban local bodies. The time taken at present is about 90 days.

It will be interesting to see to what extent these new steps can cut down the overall approval process. In any case, the Union Government will have shown the way to State governments and urban local bodies to follow in its footsteps and simplify processes to further improve the ease of doing business in urban areas.

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

Will the real estate bill finally become a reality?

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

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Anuj Puri, JLLM, Jones Lang LaSalle MeghrajSeveral amendments to the Real Estate (Regulation and Development) Bill, 2015, suggested by the select committee of Rajya Sabha, have now been accepted by the Union Cabinet. This is a major step towards introducing the amended bill in the Rajya Sabha. The bill will bring in much-needed transparency and accountability in the real estate sector.

It will create a much-needed consumer right protection umbrella for buyers of real estate, thereby increasing consumer confidence as well as creating lasting developer brands strong on quality and timely delivery of their projects.

Although there will be strict punishment for developers under this bill, the relevant government agencies and approval processes have not been brought under its ambit. Without achieving single-window clearance, there may be cases where bona-fide delays by developers may still result in an unfavourable penalty on the developer community.

Without ensuring that the approval process is not delayed by civic agencies’ inaction or bringing in single-window clearance, the regulator may inadvertently add another layer to the longer processes already delaying projects.

The government has indicated that it will streamline the approvals’ process and finally move towards a ‘single-window clearance’ system. This, in conjunction with the regulator, will provide a positive impetus towards achieving the housing dream while ensuring a level-playing field for developers and buyers.

However, given the quantum of projects that the state regulator will have to cover now – due to norms on size of projects having been relaxed further from 1,000 sqm to 500 sqm – the onus on the state regulator will be huge, particularly for realty-heavy states like Maharashtra, Karnataka, etc. In such a scenario, the regulator could operate through a hub-and-spoke model, with separate districts having a dedicated branch.

The major amendments okayed by the Union Cabinet now include:

  •        The money collected from buyers is to be deposited within 15 days. It is to be maintained in an escrow amount, which will be 70% of the construction cost, and is meant to be used only for the specific project.
  •         The term of imprisonment of three years recommended by the government has been upheld for all contraventions and even in cases where the developer does not abide by the decision of the appellate tribunal imprisonment has been recommended.
  •          The bill will be applicable on commercial or residential properties which are more than 500 sqm in size or have eight flats or more.
  •         Carpet area has now been defined as the net usable area
  •         All financial statements have to be audited within six months of financial year closure by a practicing chartered accountant.
  •         The interest payable by defaulting parties (developer or buyer) has been brought at par for both in case of default by either. 

The bill will have far-reaching positive consequences for the sector in terms of its operating procedures as also create a comprehensive consumer redressal mechanism. Overall though, the real estate industry is waiting with bated breath for the Rajya Sabha to finally pass this bill. It will prove to be a year-end bonus by the government to the struggling sector.

Reputed developers who have been following financial best practices and corporate governance have welcomed the move. At best, they may have differences of opinion as far as certain nuances are concerned.

Modi government largely on track with fulfilling poll-time promises

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

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Anuj Puri, JLLM, Jones Lang LaSalle MeghrajAs the Modi Government completes its first year in office, there is no dearth of bouquets and brickbats for the NaMo regime in the media. On analysing the Modi government’s electoral assurances, the actions taken so far and the respective timelines being followed to achieve these, I would say that it is reasonably on track with fulfilling its short-term, medium-term and long-term promises.

Importantly, the continuation of the previous government’s policies like Land Acquisition and Rehabilitation and Resettlement (LARR) Bill, Real Estate (Regulation and Development) Bill will have significant impact on the real estate industry once these are passed by the Parliament. India’s historically opaque real estate sector will move towards more transparency with the introduction and implementation of these key policies.

It is worthwhile to reflect on the grassroots-level transformation we can expect to see when:  

  • Millions of home buyers in towns and cities and farmers across the country (the latter being landowners affected by infrastructure projects) are empowered with the clauses in the real estate regulatory bill and LARR
  •  Investment opportunities in office spaces open up for small retail investors thanks to REITs
  •  The quality of life of millions of Indian citizens is upgraded when the proposed 100 smart and sustainable cities come to life.
  • ‘Benami’ transactions, which have for the longest time been a bane of the real estate sector, are eliminated

Let us take a look at the progress on some of the promises Narendra Modi’s party made in its electoral manifesto. Specifically, we will isolate promises which have direct bearing on enhanced governance and reinforced democratic fundamentals, which are important for India’s development and future-readiness:

Promises on track 

  • Transparency: Re-auctioning of coal blocks earned the government huge revenues
  • Efficiency:  Real-time effort towards rendering the existing institutional frameworks more efficient; a good example being the change in Food Corporation of India’s food procurement and storage mechanisms.
  • Productivity And Accountability: Narendra Modi has been directly involved in monitoring and raising the productivity as well as efficiency of his ministry officials. He is clearly bucking a chronic trend of bureaucratic unavailability and aiming to increase public access to government officials
  • Black Money: The Black Money Bill has given a moratorium period to bring back unaccounted money into the system by paying normal tax. The ongoing dialogue with the Swiss financial authorities to disclose secret accounts of Indians abroad is reaping results
  • Corruption: Wired (online) transactions are now being encouraged for property transactions. This is a major step forward for curtailing black money in the sector
  • Investor Confidence: Market confidence has improved with the strengthening of the Indian equity, debt, currency markets and equal tax regime that was promised to both domestic as well as international investment companies
  • Positioning India: Via a series of international tours, the PM is helping India rid itself of its anti-investor image and is opening up new avenues of foreign business in India, especially under the ‘Make in India’ campaign

 Decentralisation and cooperative governance

  • Gradual increase in the financial autonomy of states
  • Farmers get real-time information on Minimum Support Price through digital channels and Kisan TV. Drastic price movements have been largely under control. A focus on citizen outreach programmes as well as leveraging social media have bought people closer to the governance process.

Promises that may see progress soon 

  • States with similar problems will be able to form councils under Niti Aayog to discuss common concerns
  • Niti Aayog, along with other national agencies, will help individual states in mobilisation of resources.

Promises that saw little or no progress 

  • Relaxing clauses in the Land Acquisition and Rehabilitation and Resettlement Bill (LARR), Real Estate Investment Trusts (REITs) and Foreign Direct Investment (FDI) policies that investors find difficult to follow
  • Increased credit facilitation to start-ups
  • Initiation of employment exchange programmes with other countries
  • Obsolete laws to be scrapped or modified
  • Online dissemination of court cases for better monitoring and creation of specialised courts to fast-track delivery of justice.

In short, the Modi Government has a fairly balanced list of hits and misses so far. The trend does seem to lean more towards action than inaction. It definitely seems that Modi has every intention of living up to the larger part of his electoral promises in the future.

I agree with Reserve Bank of India (RBI) Governor Raghuram Rajan when he says that the expectations from the new government when it came to power last year were ‘probably unrealistic’, and that it has in fact taken steps to create an environment for investment and is sensitive to concerns of investors.

Source: Track2Realty

Project delays, project deviations and other customer woes

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

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Anuj Puri, JLLM, Jones Lang LaSalle MeghrajTrack2Realty: Reams of newsprint have been dedicated to discussing the sufferings of consumers in the Indian real estate sector. Particularly, homebuyers’ woes related to late delivery of projects, deviation of housing projects from promised quality, additional payments due to change in apartment area and inadequate protection of their rights have been well-documented.

The question that invariably arises is whether the developer is at fault, or whether larger market forces beyond the control of developers are at play.

Construction delays – by developer or by approval authority?

Technically speaking, the time consumed in obtaining all approvals adds to the total time expended in completing the project. Any approval which is needed between the launch to the actual start of construction up till handover of the apartments to the buyer will be an additional time factor. Delays here will cause cascading delays in delivering the project as per the promised time.

Before a project is officially launched in the market and offered to buyers, there are myriad approvals that a developer needs to obtain from the state and central agencies and ministries. In any business, the longer raw material is held, the higher is the holding cost – which, in addition to interest costs in case of borrowed funds, causes an increase in the overall price of the finished product.

This analogy, when extrapolated to the real estate sector, considers land as the basic raw material for real estate development, with construction materials being the variable costs. The longer a developer has to hold his land without getting any receipts through the sale of proposed apartments, the higher his project costs escalate.

This can, in fact, be a very costly proposition all around. In the current scenario, obtaining the 57-odd permissions to begin construction of a project can take as much as two years. During this time, the cost of acquisition or even just holding the land for a project rises. Builders already have to cover external and internal development charges, license costs and often charges for change of land use from various departments, which have also risen. Cost of construction has gone up by more than 50%, as well.

However, this is only one side of the picture. Many developers intentionally undertake a slower pace of construction if sales in their project are sluggish or a larger part of the project is unsold. They may have diverted a sizeable chunk of the revenue generated from pre-launch sales to another project, or utilized it to pay off a pressing bank debt. At other times, the authorities can be blamed for not granting timely projects approvals.

Project quality and deviations

A major concern has been the difference in the promised quality and actual delivery status of the apartment, which remains a concern for real estate buyers. A change in the apartment area after buying from the developer can occur if a change in project plan is necessitated due to a design or approval issue.

A deviation of up to 10% is usually acceptable – for a higher deviation, a customer must definitely seek legal recourse. That said, project deviations can also happen because of structural deficiencies of the overall system, wherein rules are being made by the governing authorities in a reactive manner rather than on a proactive basis.

There are readily recallable examples of how abrupt changes in regulations governing real estate development can work against both developers and buyers. The revisions made in the DCR regulations in the Mumbai Metropolitan Region a couple of years ago caught the industry unawares, and added to development costs by about 15%. This included the fungible premium payable if the builder opted to take the additional 35% FSI option. These cumulatively accounted for a 20% hike in construction cost. This move has led to an increased pressure on the developers’ margin – which, in turn, resulted in price increases across most projects in MMR.

The fact that developers had to re-work their project specifications (upcoming as well as on-going unapproved projects) resulted in significant project delays. The result was an exacerbation of the cash-crunch on developers, and an outcry from their buyers.

This is not to say that developers do not tamper with overall project quality or make arbitrary changes in their project designs with a clear intent to maximize profit. By pinching off space from designated open spaces, children’s play areas, compound perimeters and guest parking areas in an originally approved plan, an unscrupulous developer can make a limited plot yield more saleable space.   

Recourse for consumers

Regardless of what causes delays or abrupt changes in project blueprints, consumers must be able to get justice. Many examples of customers obtaining favourable decisions upon approaching consumer courts exist, and the power of these forums should not be under-estimated. However, the larger and less wholesome truth is that the current legal dispensation is ill-equipped and under-regulated to offer complete consumers protection in matters related to real estate.

The Real Estate Regulation and Development Bill – long languishing on the policy drawing board and still under consideration by the government – was intended to offer vastly enhanced protection to buyers. However, after the most recent revisions to RERA, it seems that it will in fact now be less protective towards buyers. While the bill aimed at providing an alternate redressal mechanism, the new provisions are talking of no recourse to other consumer forums. This can, in fact, lead to pressure on this regulatory body in terms of an increased log of cases, though it will reduce instances of multiplicity of suits.

Consumers should be aware that a certain degree of due diligence and awareness about their rights can protect them against unscrupulous practices by developers. In the first place, due attention should be paid at the time of drafting the sale agreement. A property buyer should fully understand the contents, if necessary with the help of a lawyer, and make a clear note of what the developer has agreed to deliver.

Developer’s sales team will usually present a buyer with a readymade agreement format, and a buyer must ensure that this captures every relevant detail. If it does not, the buyer is fully entitled to ask for missing details to be included, and potential grey areas to be clarified. A copy of the final agreement must be retained under any circumstances, as this will serve as the primary evidence in a legal action filed for agreement violations.

Government passes Land Acquisition Bill in Lok Sabha

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

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Anuj Puri, JLLM, Jones Lang LaSalle MeghrajTrack2Realty: The Central Government managed to get the amended Land Acquisition Bill passed in Lok Sabha. The ruling dispensation enjoys brute majority in the Lok Sabha and hence had no problem getting the Bill passed through it. This Bill is an amended version of the original Bill introduced and passed in 2013 by the previous government.

Due to a long-standing demand from industry to relax some provisions which made land acquisition difficult, expensive and time-consuming and thus harming industrial growth, the ruling party brought in some changes by the means of an ordinance. Normally, any ordinance has to be brought to the parliament within six months of it being issued to be passed again by the Parliament to make it a law.

The new Bill introduced and passed in the Lok Sabha had nine additional amendments or concessions, plus two additional clauses made by the government to appease its allies and the opposition to some extent to gain some consensus before introducing it in the Rajya Sabha. The amendments made are:

1.     Limiting the industrial corridor to 1 km on both sides of highways and railway lines. This is limited to industrial corridors being set up by the government only.

2.     Employment for at least one member of farm labour families which are affected due to displacement and land acquisition

3.     Removal of exemption from consent clause extended earlier to five sectors has been taken away from social infrastructure projects under PPP model. SIA will be conducted for such projects also.

4.     Acquisition to be of bare minimum land

5.     Survey to be undertaken of wastelands

6.     Hassle-free grievance redressal to be undertaken at district level and creation of a quasi-judicial authority

7.     Social Impact Assessment has been made a prerogative for the state governments

8.     States can create land banks of vacant land for development projects

The changes above are in addition to the earlier amendments moved through an ordinance where the government had added five sectors (defence, rural infra, affordable housing, industrial corridors, infra and social infra projects including PPP) to a list that would not require owners’ consent while acquiring land as well as exempted them from submitting a social impact assessment (SIA) and removal of restriction on acquisition of multi-crop lands for these sectors. The last social infra projects including PP have been removed from the exemption list.

The changes above have managed to appease the allies to some extent, but questions remain whether the opposition is willing to relent as most of them walked out during the vote in the Lok Sabha. In the Rajya Sabha however it is a different story as the ruling NDA does not enjoy a majority there and where the amended Bill is likely to be defeated by an united opposition. The earlier changes or removal of consent clause has been termed anti-farmer, though they are definitely industry-friendly, while removal of SIA will save costs and time both. The main point is that the process should be fair to both farmers as well as the industry.

The government has the option to either pass the bill in a joint sitting of the two houses where it will have the requisite numbers to get it passed in case it gets rejected in the Rajya Sabha or it will have to re-promulgate the ordinance again to give itself breathing space. There is also the option of setting up a parliamentary panel and referring the bill to it, though it is likely to delay passage of the bill by a further six to eight month period.

High confidence index of MNC office space occupiers challenging trends

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Vigneshwara Developers, Sunil Dahiya, SOHO, Smart Office Home Office, Gurgaon Cyber Greens 2, Delhi NCR real estate, Bangalore Real Estate, JLLM, Jones Lang LaSalle Meghraj, Track2Media, Track2Realty, ravi sinha, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, KP Singh, DLF, Unitech, Emaar MGF, ndtv.com, ndtv, aajtak, zee news, india news, property news, real estate news, 99acres.com, 99 acres, indianrealtynews.com, indianrealestateforum.comIndiabulls real estate, BSE, Bombay Stock Exchange, Mumbai Real Estate, India Property, Track2Media, Track2Realty, ravi sinha, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, KP Singh, DLF, Unitech, Emaar MGF, ndtv.com, ndtv, aajtak, zee news, india news, property news, real estate news, 99acres.com, 99 acres, indianrealtynews.com, indianrealestateforum.com, Indiabulls real estate, BSE, Bombay Stock Exchange, Mumbai Real Estate, India PropertyTrack2Realty Exclusive: Sales model in commercial office spaces that was only recently seen as an indicator of distress on part of the developers has, of late, turned out to be a smart business model by the MNCs. These multinational companies seem to have confidence in the Indian growth story and with long term plan they are investing into the purchase of these properties. Track2Realty Focus 2015 finds that it is not a distress sale of developers since the capital values and rental yields have both appreciated sharply in the last three years despite of impending slowdown. The shift of these commercial spaces beyond the IT/ITeS is the most significant trend. 

The multinational companies (MNCs) as occupiers of office spaces across the country are indicating optimism and this high confidence index is actually challenging the way developers used to build and occupiers used to operate. A segment that has traditionally preferred the leased spaces to have asset light model as a business philosophy has suddenly gone into buying the office spaces across the major cities. Beyond this lease model versus the sales model there are also other trends emerging out of the market transactions which indicate that the market is not just entering into next level of experiments but is also bullish on the long term growth prospects in the country.

What is all the more surprising, however, is the fact that the tectonic shift in sales model is not borne out of the slowdown. This may otherwise give the impression that the occupiers’ preference with the office spaces is a result of the developers’ inability to hold and hence distress sale. But that is not the case since none of the major business cities have been witness to the sharp drop in either the capital or rental values of the commercial spaces; it has been rather increasing. Moreover, a significant trend emerging out of the transactions is that the office market is no more driven by the IT/ITsS sector alone.

A Cushman & Wakefield (C&W) report says 43 per cent of office spaces were purchased in India by MNCs since 2012. As per the report, the MNCs are increasingly investing through purchasing offices in India with Rs. 2,470 crores worth office transactions in the last 2 years. There is a seismic shift in the traditional approach of leasing space that such companies have had for years while considering overseas investment. MNCs in the BFSI, ITeS, FMCG & Pharmaceutical sectors are among the lead commercial office buyers in these markets.

According to the C&W report, in 2010, foreign MNCs contributed negligible to the sales of commercial office space. But the report finds that in 2012, 2013 and during the 1st quarter of 2014 foreign MNCs contributed 43 per cent to the total sales value of commercial offices.  

Explaining this Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield says that the companies that have established operations in India and are confident of their projections and potentials in the country are now tailoring their real estate requirement so that they can be more cost-effective. Companies in specific sectors such as Pharmaceuticals and IT & ITeS are looking to consolidate their research and development divisions with their front-end divisions in a single set-up and are looking for assets to purchase as it proves to be a cost effective strategy for companies.

“There are other factors too, namely the tax implications for US based companies. Another factor compelling especially the US-based companies to switch from ‘Leasing strategy’ to ‘Buying strategy’ is that corporate profits earned outside the US are not subject to federal taxes unless they are brought back to US shores. This makes these companies cash rich and they are able to re-deploying hefty profits earned back in the emerging markets rather than loose the earnings to taxes” says Dutt.

Devina Ghildial, Deputy MD, RICS South Asia also maintains that the trend is significant as it indicates that a number of multinational companies are now establishing their operations in the country and are hopeful of a potential growth of their businesses in India. According to her, from the point of pricing, rates have remained stable all through the one-year period.

“Having understood the trend, companies are now looking to invest and buy instead of taking space on rent. This would give them capital appreciation and will help them gain profits by increased asset pricing. While capital values across commercial real estate are expected to rise in the next 12 months, rental rates in the office segment is expected to be the strongest as compared to other segments such as retail and industrial segments, according to the latest RICS Commercial Survey for the second quarter (April-June), of 2014. With rental rates going up in coming quarters, established companies will stand to gain if they purchase the office they occupy,” says Ghildial.

The C&W report also indicated that majority of the companies investing through purchase are from the BFSI (Banking, Financial Services and Insurance) sector, given their strong presence and long term plans of companies in this sector. The other sectors that have shown keen interest are IT, Pharmaceuticals and Engineering companies. The report deduced that over long-term buying offices always make greater economic sense than renting premises. With the new pro-business government there has been a positive sentiment in the market and this reflects in the volume of buying that has been executed by foreign companies.

Arvind Jain, Managing Director, Pride Group finds the trends very encouraging. He believes many corporates now prefer having an owned office space reflecting on their balance sheets. While the capital expense involved is purchasing commercial space is considerable, this is quickly offset by the savings on rental outgo. We are seeing the trend of MNCs increasingly preferring to buy rather than lease office space reflecting largely in Mumbai. MNCs in cities like Delhi, Bangalore, Pune and Chennai still show more preference to leasing their offices.

“The fact that the share of IT/ITeS is decreasing in office spaces is a god sign that indicates the market is witnessing healthy diversification. A city should not be overly dependent on IT/ITeS in the first place because this sector has shown marked fluctuations over the years. Having a diversified occupier profile indicates that a city is better insulated against downturns. Mumbai and Pune are excellent examples of such healthy diversification in occupiers. BFSI is in any case in a growth mode in India, but there is also more and more absorption by logistics, manufacturing, telecom, biotech and pharma companies,” says Jain.

Maintaining that buying than leasing reflect the confidence of office occupiers in the Indian growth story, Kishor Pate, CMD, Amit Enterprises Housing says it all boils down to how individual MNCs perceive their operations in India. An increasing trend towards buying rather than leasing office space definitely indicates that confidence is high. Confidence in the India growth story is returning in force, and this is one of the many factors that reflect this fact.

There is also the cost benefit in the long term as rents have been increasing every year from 2011 to 2013 in most of the prime markets where MNCs have typically leased office spaces. Though rentals have been more stable this year, there are expectations that they will start increasing from next year. Capital values have also increased moderately during the period. Hence, companies stand to gain financially if they decide to deploy capital to acquire the spaces they occupy.


Is e-commerce replacing physical retail in India?

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

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Anuj Puri, JLLM, Jones Lang LaSalle MeghrajTrack2Realty: India’s retail market value was estimated at $520 billion in 2013, and is expected to grow to $950 billion by 2018. With a CAGR currently pegged at 13%, the Indian e-commerce market is expected to grow the fastest within the Asia-Pacific Region – with its market size doubling every 2-2.5 years. This certainly gives us reason for deep introspection. While the global growth rate of online shoppers is estimated at 8-10%, India currently has more than 10 million online shoppers.

Though 70% of India’s e-commerce market is related to travel (flights, hotel bookings, etc.), electronics and apparels are by far the most important categories in terms of sales. The key driver Indian e-commerce is the rapid increase of broadband internet penetration, which is growing at a whopping 20% every year. The rising standards of the mushrooming middle-class with high disposable incomes, coupled with the urban influence on rural aspirations, have led to an exponential growth of the internet culture in India.

This is very pertinent to the Indian retail sector. The internet has given Indian consumers access to a wide spectrum of products and services, even in places where brick-and-mortar shopping complexes have not reached. Also, the availability of a much wider range of products when compared to physical retail stores, coupled with relatively lower prices, is driving demand for online retail. With the evolution of the online marketplace, sites like Flipkart, Snapdeal, OLX and Jabong are thriving and more and more Indians are buying goods online.

E-commerce in India took off with a deluge of portals, including many focused on travel, media and jobs. The governments’ drive to open the sector for FDI in B2B business via the automatic route and bring e-commerce to the centre stage has caused a number of major players to venture into India. Today, Ebay, Amazon, Expedia and some serious Indian players are giving these physical retailers a run for their money.

Flipkart and Snapdeal’s recent fund-raising exercise put paid to the argument that investors are moving away from Indian e-commerce. The change in government and the stride of positive sentiment across the nation has led to growing faith in India and Indian business models. The governments’ initiative to simplify regulations and make India a business-friendly nation is definitely benefiting e-commerce.

Today, manufacturers and retailers running brick-and-mortar stores are anxiously asking the government to intervene with the creation of a regulatory body to stop e-retailers from undercutting prices. Physical retailers are definitely feeling the heat by the marketing blitz of their online counterparts, and the question of whether e-commerce is pushing out brick-and-mortar retailers looms large.

Many big companies are rising to the challenge and adopting smarter strategies to guard their turf. The likes of Tata, Future Group and Reliance are expanding their reach by foraying into e-commerce via alliances with leading online players. Indian retailers have clearly read the writing on the wall. As the competition grows, an omni-channel approach to delivering a unified and consistent customer experience is the new watchword.

Improving the overall experience is the avenue to success. Regardless of whether we’re talking about e-retailing, traditional brick-and-mortar retailing or a combination of both, the winners in this new steeplechase will have to evolve their offering to meet the needs, wants and desires of consumers. Retailers will increasingly have to offer services through various mediums.

However, e-commerce is still unlikely to completely replace or even seriously dent physical retail in this country. For Indians, malls are more than just shopping destinations – they are getaways from the humdrum and constraints of their day-to-day life, and mall developers have been catering to this dynamic by creating shopping complexes that offer retail, entertainment and dine-out option under a single roof.

This is not a combination of offerings that even the slickest e-commerce operator can hope to compete with. ‘Experiential Retail’ is the holy mantra of the Indian shopper, and in the years to come, every mall across the country will do everything it can to turn the whole shopping experience into an entertainment experience.

Real estate’s expectations from Budget 2015-16

Posted on by Track2Realty

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

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Anuj Puri, JLLM, Jones Lang LaSalle MeghrajTrack2Realty:Provide on-ground impetus for affordable housing In the previous nine-month Budget, the new government outlined its vision for boosting affordable housing. From the upcoming 12-month budget, the Indian real estate sector looks forward to provisions that firm this vision up on the ground.   

Provide tax incentives to boost rental housing segment

The Union Budget needs to provide tax incentives for renting out of residential properties. Currently, rental income is treated as normal taxable income. Providing tax breaks specific to rental income will give a significant boost to rental housing segment in the country, and help increase rental supply in the metros.

Enable faster project approvals

Developers have been campaigning for a faster project approval process for good reasons. Faster approvals would beef up the supply pipeline, help bring prices down and also ensure that real estate remain viable as a business. The Budget should provide suitable relief on this front, while simultaneously ensuring that construction quality norms are not compromised in the process and that faster approvals do not result in support infrastructure failure in new precincts being developed.

Implement Real Estate Regulatory Bill (RERA)

The approval of the pending Real Estate Regulatory Bill was deferred once again only recently. It must now be implemented so that the Indian real estate market becomes attractive for foreign investors. The upcoming Union Budget should make this vitally required policy a reality and put an end to the suspense.

Relax counter-productive clauses In LARR (Land Acquisition, Rehabilitation and Resettlement) Act

The LARR (Land Acquisition, Rehabilitation and Resettlement) Act, formulated and re-formulated several times, has so far failed to counter land-related bureaucracy in India and has to date done quite the opposite. In its current form, it is a deterrent for developers as well as institutional investors. The real estate sector is desperate to get past this hurdle, because a lot more land must be made available for primary real estate development as well as for infrastructure development. Given the new government’s focus on ‘housing for all’, fast-tracking of infrastructure and the creation of 100 smart cities across the country, the Union Budget should present a workable and streamlined LARR Act, with significant relaxation in the currently tedious rehabilitation clauses and other norms.

Provide more incentives for sustainable real estate

The upcoming Union Budget should make a clear benefit statement for consumers of green real estate in the country. Stakeholders of the residential real estate sector in India definitely need greater encouragement to go green. Most home buyers in India are still quite averse to paying an extra premium for a green residential project. Because of the low demand, developers are not sufficiently active in this segment. There is a distinct need for a combination of incentives and stipulates to boost the development and consumption of sustainable real estate development in India. The Union Budget should address this lacuna by announcing State-level subsidies for development of green spaces so that developers can keep their development cost at par with non-green spaces.

Fast-track REITs

Many overseas investment funds have so far abstained from the Indian real estate market because of the lack of regulation, political instability and bureaucratic quagmire. The new government has the opportunity of making Indian real estate more investment-friendly and attractive by introducing a revised tax code. Until vital changes to overcome the tax hurdles, REITs – which can literally be a life-saver for Indian real estate – cannot take off. In the interest of the real estate sector as well as the overall economy, the Budget must address this issue.

Encourage FII participation in infrastructure

India is still an infrastructure deficient country and needs large investments to help bridge the infra gap. The Union Budget should make more provisions to increase foreign investors’ participation in this sector.

DTZ probe into vacant commercial space in Delhi-NCR: Q4, 2014

Posted on by Track2Realty

Delhi NCR real estate, Bangalore Real Estate, JLLM, Jones Lang LaSalle Meghraj, Track2Media, Track2Realty, ravi sinha, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, KP Singh, DLF, Unitech, Emaar MGF, ndtv.com, ndtv, aajtak, zee news, india news, property news, real estate news, 99acres.com, 99 acres, indianrealtynews.com, indianrealestateforum.comIndiabulls real estate, BSE, Bombay Stock Exchange, Mumbai Real Estate, India Property, Track2Media, Track2Realty, ravi sinha, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, KP Singh, DLF, Unitech, Emaar MGF, ndtv.com, ndtv, aajtak, zee news, india news, property news, real estate news, 99acres.com, 99 acres, indianrealtynews.com, indianrealestateforum.com, Indiabulls real estate, BSE, Bombay Stock Exchange, Mumbai Real Estate, India PropertyTrack2Realty: The Indian real estate market is showing signs of confidence and improved industry momentum post the general elections 2014. The last two quarters clocked an uptick in commercial space take up across leading cities in India. Noticeably, Delhi NCR stood as one of the leading occupiers, registering a significant increase of 25% (y-o-y) in take-up figures during 2014. Moving forth, the demand and corresponding vacancy levels would be key determinants for future traction in the commercial segment across this region.

As witnessed, out of the total 91.4 million sq ft commercial stock in Delhi NCR, the vacancy hovered around 30.5 million sq ft (33% approx.) during Q4 2014. A staggering 32.7% of vacancy was recorded in Gurgaon which witnessed around 7 million sq ft of new supply in 2014. A probe into the vacancy reveals interesting facts around the rental and occupancy position in Gurgaon, the millennium city.

The lower rungs of rental in Gurgaon are located at IMT Manesar and Sohna road with INR 25-50 per sq ft of space available for occupancy. The flip side is towards Golf Course Road and MG Road where rentals are spiking in the range of INR 100-125 per sq ft and above. A midpoint lies around the skirts of Sohna Road, Golf Course Road, and DLF Cyber City where the rentals trend between INR 50-100 per sq ft.

An aggregate of 19 plus million sq ft commercial space remained available for occupiers in Gurgaon during Q4 2014. Despite an upward pressure on rentals at prime locations, more than 13 million sq ft still remained available in the band of INR 25-100 per sq ft. Accounting for more than 55% of total vacant commercial space, 10.6 million sq ft in Gurgaon is now available in the range of INR 25-75 Sq. Ft., which is almost equal to the entire new supply infused in Delhi NCR during the year 2014.

Reassured with investments in infrastructure and increasing demand around its peripheries, Gurgaon is expected to host robust occupancy numbers in the quarters to follow. With the increased demand as witnessed in the last two quarters, the focus is now moving towards Gurgaon’s affordable locales, vouching for promising absorption rates in the year 2015.

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