Tag Archives: NRI property market

Affordable housing in Dubai – a mirage in the desert?

Posted on by Track2Realty

Dubai has always been an exciting destination for employment – for Indians as well as the rest of the world.

Ashwinder Raj Singh JLLI, PE Investment, NRI investment, NRI property market, Indian real estate news, India realty market, India property news, Investment in Indian real estate, Private Equity Deals, Track2Media Research, Track2RealtyThe petro-dollar ensured that the country grew in leaps and bounds, and provided excellent employment and living conditions. This explains the swanky high-rises, glittering malls and commercial centres sprawling all over the country. Investors with deep pockets have shown market preference to invest in residential projects catering to the luxury segment, thus prompting developers to come up with projects that cater to affluent.

This resulted in a shortage of affordable housing for the service class which is living on rent and cannot afford to buy homes in Dubai. The average household income of service class citizens is between 10,000-30,000 UAE Dirham ($2,720-$8,170). At this income, given the cost of living, they can afford to pay annual rentals of Dh72,000 ($19,600) and maybe to buy a property costing around Dh800,000.

However, as per the UAE mortgage regulations, a prospective buyer needs to deposit 25% of the property’s cost in advance. If a property costs Dh800,000, the buyer needs to deposit Dh200,000, which is not an easy amount for a normal citizen to raise immediately. In the case of off-plan sales, the loan-to-value is 50% maximum, which means that a borrower has to pay 50% using his or her own resources in savings, equities or other sources.

The average size of a property in areas like Dubai Marina and Dubai Downtown, where a 2-bedroom apartment sells for approximately Dh4 million.

Even though Dubai’s property prices and rentals have stabilised in the past year or so, they are still higher than two years ago and look set to rise again by 2017, owing to Expo 2020 being hosted by Dubai. Also, developers are currently not investing in building projects catering to the middle-income segment. As per the records till the 3rd quarter of 2015, out of the 19,500 projects launched in the country, a mere 22% meet affordable to middle-income housing criteria, despite the substantial demand in this segment.

The primary reason is the low margins in this segment, compared to the very high margins in high-end properties. Some big developers in Dubai have as much as 50% gross margins in their projects, thanks to government-provided land banks and other tax benefits.

The so-called surge in affordable housing projects development in the past year and a half is not making much of a difference, as these are being sold on freehold title and mainly to investors in bulk. This way, the prices of such properties are subject to market influences and do not necessarily reach the targeted middle-income group.

This has resulted in more and more people moving away from the centre of the city for more the more affordable homes on the fringes. However, it has also led to an increase in rentals in these areas, as well as a longer commute for employees. Also, it has not helped them build the savings required for advance deposits. Sharjah has proved to be an attractive destination where property prices are almost half of those in Dubai, but the long distances and comparatively lower quality of life than in Dubai give pause to most of the working class.

Another factor that has led to a higher demand and lower supply of affordable housing in Dubai is non-compliance with the government’s regulations, one of which categorically states that developers building high-end luxury projects should reserve a certain percentage of the property for mid-housing segment. This rule has largely remained on paper only.

That said, regulators and developers alike realize that the demand for affordable housing in Dubai is escalating. This has resulted in a flexible payment plan, which has met with some success. Under this plan, developers either provide finance to buyers themselves or ensure that buyers pay a fixed monthly amount instead of a huge initial lump sum.

Things may not change overnight, but the fact that demand clearly exists will ensure that more funds flow into affordable housing projects. That said, developers will not compromise when it comes to a minimum profit saturation; being business establishments, they are answerable to their shareholders as well as financiers. Once that is ensured, the supply of affordable housing in Dubai will begin to match the demand more logically.

By: Ashwinder Raj Singh, CEO – Residential Services, JLL India

Smart strategies for PEs investing in real estate

Posted on by Track2Realty

By: Ashwinder Raj Singh, CEO – Residential Services, JLL India

Ashwinder Raj Singh JLLI, PE Investment, NRI investment, NRI property market, Indian real estate news, India realty market, India property news, Investment in Indian real estate, Private Equity Deals, Track2Media Research, Track2Realty   Private Equity funds, famously known as PEs are invested heavily in the Indian real estate. Even though the sector is emerging only gradually from its slowdown, this could be the golden period of PE investments to invest further, as the opportunities being offered are humungous.

Some of the highlights of their performance – and how they can maximise their presence and profits by being smart:

Big opportunity

The total PE inflows stand at Rs. 11,080 crore against only Rs. 4,000 crore in the corresponding period of last year. The current real estate market is huge for PEs to enter, as most of builders with projects in progress are looking forward to refinance their loans at a lower rate of interest.

With the economy on an upswing and most of these projects nearing completion, it makes sense for PEs to refinance loans and enter deals that will fetch great returns in a short period of time.

Simultaneously, developers can pay off their earlier investors, refinance their debts at lower rate of interest, get some top up capital and reduce their overall cost of operations. It’s a win-win situation all around.

Selectivity is in

  • Select Players: A smart strategy that many PEs are following (and which others should emulate) is that they are not investing in every project that shows promise.

Instead, they assiduously research real estate developers’ track records, market reputations, delivery capabilities, financial health, flexibility in conducting business and willingness to share the control of operations. Only after such due diligence will PEs invest.

With a lot of organised developers entering the sector, it is becoming easier for funds to find the right players to back.

  • Select Markets: In the phase before the economic meltdown of 2008, PEs were investing in all possible markets to distribute wealth and maximise returns. The lesson they learned is that it is better to invest in top 7-8 cities where exposure to developers is well organised and can be tracked, and the markets themselves are more transparent.

The smaller markets will take time to evolve. With time, there will be more reliable information coming out from them; till then, it is smart to stick to the primary cities. Profits can be re-invested in Tier 2 and Tier 3 cities at a later stage.

Resident experts

It is not a fixed position in a venture capital firm and may not be a fixed job profile either, but it makes sense to have an in-house expert working for you. These individuals basically act as catalyst to spot the next big idea or big investment, and can help bring together a project that big PE funds would have missed.

Also, if these entrepreneurs in residence themselves have a project to launch that meets the required criteria of investments, it makes more sense than to take blind risks with a newcomer.

Independent Directors on the BOD

After the Lehmann Brothers collapse that brought down the global economy, there is a greater thrust on transparency when it comes to investing funds that can have an impact on the common man. It makes sense to appoint an independent director in a team of Board of Directors who is not from the real estate sector.

This way, a PE can secure an independent voice bereft of ulterior motives and hidden agendas, who will only work to bring in efficiencies as well as improve accountability of the firms – especially those that have a direct B2C business model.

Exciting times ahead

Global investors are queuing up to invest in India, thanks to a growth story that is unfolding at rate better than expectations. Also, with a lot of churning over the past few years, the real estate sector as a whole is getting its act together to bring in transparency. It is evolving into a better organised sector, at least in the major real estate markets of the country.

These are the signs of bigger and better things ahead for those who invest at the right time and in the right place. For PEs looking aiming to distribute their investments and yet ensure healthy returns for their investors, Indian real estate sector is definitely the place to be.

Habitation challenges galore in Noida Extension

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Track2Realty Exclusive

Noida Extension, Greater Noida Property, Greater Noida West, Delhi-NCR Property, Indian real estate market, India property market, Real estate news portal, real estate website, Real estate news in India, Track2Media Research, Track2Realty, NRI property market, Investment in Delhi-NCRNo other residential micro market of India has arguably weathered as many challenges and controversies as Noida Extension. Its inception as a separate zone, other than Noida & Greater Noida, did lend credence to conspiracy theories against the farmers that culminated into land acquisition litigation. Since then it has been a sordid saga of project delivery uncertainties and homebuyers endless wait; not to speak of the additional charges levied as against the compensation amount hiked to the farmers.

Yet, Noida Extension is getting ready to be home to thousands by the end of this year. The well-planned region otherwise, the micro market still stands as a ‘no man’s land’ with not even an official pin code being given to the place.

From the standpoint of urban planning, it has the higher density of population than Noida or Greater Noida with around three lakh apartments under construction. The basic infrastructure is still very much a challenge and officially it is work in progress in Noida Extension. While the Greater Noida Authority (GNIDA) has laid power cables and built substations, the road network is still in a bad shape for habitation of nearly one lakh people very soon. There is only one school ready and the government officials claim land has been allotted for a few more as well as a hospital.

The GNIDA officials say water supply provisions for individual plot owners are in place, but for group housing societies, it is a builder’s responsibility. The industry body CREDAI does not seem to think it is their responsibility to take up the matter with the authorities. As a matter of fact, the CREDAI President Geetamber Anand even refused to speak on whether Noida Extension can be called habitation-ready.

The market is nevertheless going to be the address of those middle class who could not afford in any other part of Delhi-NCR. Most of the developers who started the projects early in the year 2010 are closer to delivery and many of them would offer the possession by early 2016. So, in all nearly 50000 to 60000 flats would be ready for delivery by that time.

In terms of its appreciation potential, the average salaried-middle class homebuyers got a shock in July this year, when the property consultant JLL in a report declared Noida Extension as high-risk zone and advised the homebuyers to stay away. The report had said that with around 2 lakh apartments coming up the market is not likely to appreciate. It seems now that Noida Extension is getting ready to deliver thousand of apartments, the outlook towards the market is changing.

Santhosh Kumar, CEO – Operations & International Director, JLL India says  that with the infrastructure developments happening in the region, and with better connectivity to Delhi and Gurgaon, Noida Extension is ready for habitation. With the rate cuts and cheaper housing loans, demand is going to be high in that region. Both the primary and luxury residential markets segments have high potential.

“At current estimates, around 21,000 units should be delivered by the end of the year. However, some projects may still miss the deadline. At a rough estimate, around 15-18 thousand units are likely to be delivered. The infrastructural developments in Noida, Greater Noida and Noida Extension are well planned, with road and metro corridors. Hence, there will not be much impact as far as the load on infrastructure is concerned,” says Kumar.

Nikhil Hawelia, Managing Director of Hawelia Group that is getting ready to deliver a project in Noida Extension early next year is bullish on the market. According to him, going with the present situation a number of developers has already started giving possession of residential units in different projects in Noida Extension. The region is on the fast track of progress. Great connectivity & infrastructure with required facilities have made this region a leading real estate market today. Already near to 300-400 families have moved and living here. At the same time the other related developments which are necessary for a comfortable and hassle free living are taking shape speedily.

“With the kind of development taking place in this region, it is undoubtedly all set to become an ideal destination for habitation by addressing all the required necessary facilities for a community living. Currently, basic daily needs are being addressed but it will take another 10-12 months for major facilities to be fully functional in the area. As of now, receiving a courier to your home address is a challenge in the existing scenario. Local transport facilities from authorities and state government are still not functional. Installation of a landline phone connection or internet facilities which are the necessity of today’s modern habitable living are still the concerns,” admits Hawelia.

Urban planning fundamentals suggest that for a city to grow as a residential or commercial hub and to lure its potential customers, there is the need to set in place its basic infrastructure and facilities which are the factors considered pivotal in decision making. Can Noida Extension be termed as investment magnet from that given benchmark? The opinion is divided but on paper there is definitely detailed planning of infrastructure, including the road connectivity network, sewage & sanitation, electrical, etc.

The developers active in the market assert that with a lot of developments across various sectors, and metro connectivity to all key destinations, this region will not add up to the load on infrastructure. They maintain it will become one of the fastest developing sub-cities in the NCR. Also in line to the residential developments, the required commercial developments, educational institutes, health & medical facilities and office & IT spaces are already part of the planning by GNIDA.

On the eve of festive season, as many of the homebuyers were evaluating their work-life balance post shifting to the new homes in Noida Extension, there came another blow to dampen the spirit. The Allahabad High Court ordered the demolition of numerous realty projects launched by various real estate developers including Supertech, Amrapali and Jagat Taran. The demolition of the high-rise building projects located in the Patwari Village of Greater Noida came in light of the fact that they are situated nearby graveyard areas, which according to the High Court, is illegal and therefore stand to be demolished accordingly.

The final vote of confidence, if not verdict, on Noida Extension is yet to come. However, within the built environment of Indian real estate everyone continues to whisper that Noida Extension has been a thriller micro market that has scripted many thickened plots.