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Can Mumbai turn into global financial destination?

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News Point: The plans are to transform Mumbai into global financial destination.

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

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

Mumbai on way to global financial hub

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

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

GFC will attract FDI and domestic investment into the city

Entry of foreign financial companies to make Mumbai more business competitive 

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

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

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

Strengths:

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

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

Weaknesses:

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

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

Opportunities:

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

Threats:

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

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

Sector optimistic

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

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

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

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

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

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

Opportunities galore

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

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

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

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

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

6 reasons why Kochi will be India’s next real estate hotspot

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Bottom Line: Kochi expects investments of Rs. 2,076 crore; sustainable real estate growth assured

A Shankar JLL, India real estate news, Indian realty news, Indian property market, Track2Media, Track2RealtyKochi hits a six to become the next highly preferred real estate destination in India. All potential drivers such as IT development for employment generation, Metro rail for intra-city connectivity, the Smart City tag for basic infrastructure, port-based development for industry and commercial growth, airport terminal for international connectivity and foreign investment and tourism for the hospitality industry are emphasized in Kochi.

This will ultimately boosts demand for housing and make it one of the next highly-preferred real estate destinations in India. The 6 reasons why this will happen shortly:

1. Inclusion in the top 20 Smart Cities:

Recently, the Ministry of Urban Development, Government of India identified the top 20 candidates under the Smart City mission initiative through a competitive selection process. Kochi ranks 5th and expects an investment of Rs. 2,076 crore for pan city solutions and area-based development.

E-Governance and water management are focus areas as part of pan city solutions which will help Kochi to access improved and planned infrastructure with assured water and power supply, sanitation and solid waste management, efficient urban mobility and public transport, IT connectivity, etc.

Kochi-Mattancherry-Central City, which is selected as the area for development, will witness intense development in the coming years. Numerous developers are trying to acquire land for real estate development in and around this area. The ‘Smart City’ tag is expected to boost prices exponentially.

2. The first Indian Tier-II city to a propose Metro Rail:

Metro rail connectivity in Kochi is under various stages of construction and is expected to be operational by 2017. In Phase I, the Kochi Metro Rail Corporation has proposed an elevated route spanning approximately 25.25 km from Aluva to Pettah. Once completed, the metro will improve connectivity and reduce travel time from Aluva to the key micro-markets of Kochi. Real estate will be greatly influenced once the metro becomes operational.

Areas like Companypady, Ambattukavu, Kalamassery, Edapally, Palarivatom, Ernakulam South, Elamkulam, Vytilla, Panampilly Nagar and Kadavanthara will be the main beneficiaries and some of them have already started to witness increased development.

The future expansion of the metro will also benefit areas like Menaka, Kakkanad and West Kochi. Metro rail stations exert influence up to a buffer of 1 km radius, with maximum influence in the areas within a 500 m radius. Land prices along metro rail corridors have increased by 10%-15% after announcement, and are expected to increase further after operations.

3. New international airport terminal to cater growing demand:

Cochin International Airport Ltd (CIAL) is constructing a Rs. 1,100 crore international terminal with a built-up space of 15,00,000 sq ft. It is designed to handle 4,000 passengers per hour and will be commissioned by 2016. Once operational, the new international terminal will have a very positive economic impact and uplift the real estate market in the whole region.

The catchment will witness development of new retail and commercial spaces along with a good supply of residential and hospitality developments to cater to the increasing demand.

The increased international connectivity will also pave the way for global companies and cargo-based businesses to deploy and expand operations nearby. The completion of the international terminal, along an operational metro, will give significantly boost the city’s real estate market – and the catchment itself is expected to witness 15-20% rise in property prices.

4. Venue for one of two submarine cable landings in India:

Kochi is one of the venues for ‘SEA-ME-WE-3’ (South-East Asia – Middle East – Western Europe 3) and ‘SAFE’ submarine cable landings, and is the second Indian location along with Mumbai to have two submarine cable landings. This fact highlights Kochi as an important destination for IT enabled services. Presently, the Government of Kochi is keen on developing IT/ITeS, as the entire Kerala state is promoting this sector heavily.

The major thrust on IT/ITeS development will eventually boost real estate development in the city, as it creates demand for residential properties, Grade A office spaces and retail developments.

5. Home to India’s first global hub terminal:

Kochi is among India’s leading cities for strong port infrastructure and has the largest (and India’s first) global hub terminal – the International Container Transshipment Terminal (ICTT) at Vallarpadam. This makes Kochi the premier port gateway to South India. Warehouses and other port-based industrial developments will see growth in these areas and lead to vastly increased port-related activities.

6. Continued tourism growth:

Kochi is known for its high heritage value, and contributes significantly to Kerala’s tourism industry. It sees an annual tourism influx that equals about four times its population, of which 14% accounts for foreign tourists, and reflects an annual increase of about 6%. The city’s vision of transforming itself into a tourist hub paves the way for steadily increasing demand for the hospitality sector and its allied industries.

In short, Kochi – which was earlier struggling to recover from an oversupply scenario – will see a massive revival due to creation of demand from these initiatives. Sustainable growth in real estate prices is now assured in the city, and this has incited new interests from numerous real estate developers from all over India who are keen to launch residential, commercial and hospitality projects there.

By: A. Shankar, National Director & Head of Operations – Strategic Consulting, JLL India

 

Rate quo status bad news for housing

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

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

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

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

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

Quick bytes

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

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

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

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

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

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

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

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

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

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

By: Ravi Sinha

NB Group and BridgeStreet Global Hospitality partners with three developers

Posted on by Track2Realty

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

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

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

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

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

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

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

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

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

Fiscal mismanagement behind realty turmoil

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News Point: It is simply fiscal mismanagement that is behind the turmoil in Indian real estate market and developers are caught in vicious cycle now.

Track2Realty, Track2Media, India Real Estate, Valuations of Real Estate, Realty News, Property News,Over leveraged balance sheets affecting the operational expenses, debt hurting the profits, liquidity crunch bringing the projects to standstill but yet funds being diverted for expansion plans…these are some of the issues that are behind the current turmoil of Indian real estate where the homebuyers are on warpath after having waited patiently for long enough. It is not that most of the developers’ facing consumer wrath don’t have execution capabilities but what has derailed their business is the lack of fiscal management.

Today, fiscal management is the key missing link in the Indian real estate and the blame must go to the developers’ pipeline visibility for the lack of fiscal discipline. The fact of the matter is that by over leveraging the balance sheets the developers have hurt their reputation, brand and execution capability. More importantly, they have come to a point where the project and the company’s financial health have gone out of their own control to stand at the mercy of the greedy lenders. How else can one justify the borrowing cost of up to 48 per cent in the North Indian markets today?

Ground reality

  • Fiscal mismanagement is behind current trumoil in real estate
  • Imbalance of debt-equity, over leveraged balance sheets & unreasonably high cost of borrowing hurting the developers
  • Land bank has turned out to be land liability as distress sale won’t fetch them over-valued cost or down payement
  • Developers’ defend debt but no developer with fiscal indiscipline has delivered project on time

The developers who have maintained fiscal discipline do not just have a better debt-equity ratio but also their borrowing cost is very low. These are the companies that are not so over leveraging where they just can not deliver. On the contrary, the over leveraged developers who relied for long on the land bank are today stuck. Some of these developers even tried to come out of the vicious circle, but found that either their land valuations are over valued or the distress sale is not commanding upfront payment in today’s market.

As PNC Menon, Chairman-Emeritus say, “I have a very simple and conservative way of looking at the business. And my philosophy is that if I have Rs. 100 with me, I will never borrow more than Rs. 50.” The question is how many developers ae maintaining this debt-equity ratio.

Most of the developers would rather justify their over leveraged balance sheets under the pretext that the Indian real estate is yet to get an industry status despite being the largest contributor to the country’s GDP. As a result, developers find it difficult to raise finance from banks and organised institutions. They have to rely on unorganised sources of funding for their projects.

Besides, delay in process of approvals and the wide gap between conceptualisation of the project and sale of flats results in the shortage of funding for projects. The developers are hence compelled to raise funds from unorganised sectors. Once the sector gets an industry status, developers will be able to raise funds from the organised sector.

Amit Oberoi, National Director – Valuation & Advisory Services and Research with Colliers International says that real estate development is a high risk business due to the lack of certainty related to the approval process, changing market dynamics and consumer taste, and the obvious associated (and many times unforeseen) challenges in the construction business. Due to these factors predicting timelines becomes difficult. However, this cannot be an excuse for fiscal indiscipline. A prudent entrepreneur should factor these while raising capital for the project. Also many have over-leveraged themselves to fund expansion or acquisition of newer land parcels.

“The Indian real estate market needs to adopt global best practices (such as selling on carpet area basis), enforce self-regulation through industry bodies and peer pressure, and also get ready for the real estate Regulator. It is also imperative that the government lays down unambiguous guidelines for development norms and ensure a transparent and timely approval process. Additionally, reputed bodies like RICS should work towards educating future generation of professionals on the practice of real estate. Most stakeholders in the industry want to run an ethical and professional practice,” says Oberoi.

Manju Yagnik, Vice Chairperson, Nahar Group has a caveat here when she insists that fiscal discipline is a case to case basis scenario. Branded developers follow fiscal discipline as they generally get their funding from organised sources. Pipeline visibility to some extent can be blamed for lack of fiscal discipline as there is a huge gap involved between conceptualisation of the project to the sale of the project.

“Over leveraging of balance sheets cannot be applicable to all the developers but to only certain set of developers, especially small time or mid size developers. Builders of repute are generally not involved in over leveraging of balance sheets. Over leveraging of balance sheets takes place when there is mismatch on the funding of ongoing projects and the actual funding reflected in the balance sheets. However, this practise is not carried out by reputed developers as it affects the reputation and brand of the developer,” says Yagnik.

A section of the developers who are in deep trouble today find it convenient to even blame the media for poor perception and projection of the business. They maintain that debt and fiscal management should not be seen as the same but the mistake that media often makes is to not differentiate between the debt and fiscal management. If a debt is earning more than the interest that it is paying then such a debt can not be termed as fiscal mismanagement. On the contrary, it is a good fiscal management.

They maintain that the major problem today is pretty slow delivery and execution which gives an impression that developers’ fiscal management is poor but the fact of the matter is that some zero debt companies have a bad track record of delivery while some of the developers with standing debt in the books are delivering quality projects on time.

The defence line even goes to the extent of justifying the fiscal mismanagement with the argument that over leveraged balance sheet does not count much if the developer is delivering quality product on time.  Those developers that have delivered as promised and on time command a premium in the market and have seen faster absorption rates. The market does factor brand when valuing a product.

However, the fact remains that over leveraged balance sheets and lack of fiscal discipline is the key reason behind the project not being delivered on time. There is hardly any case study where the developer with messy financial condition has actually delivered the project as promised. Industry bodies should also understand that there are certain best practices that need to be adopted as an industry practice for the facelift, beyond their lip service, of course.

Developers’ defence apart, the fact lies that the higher debt at unreasonable interest rates in Indian real estate today is not helping the cause of the developer in terms of taking the execution forward. Most of such debts accumulate without execution and sale of the project and hence there is a debt trap that speaks volumes about the fiscal indiscipline on the part of the developer.

They have reached to a point where it is not a choice or luxury but compulsion to really work on the fiscal management and that too with a fair degree of transparency in all the transactions and compulsory approvals before starting a project to leave the extra baggage of perception issues behind. After all, the consumers today are extremely well informed and assertive since do cross check to take cognisance of a developer’s past track record in terms of quality and timeliness of project delivery.

By: Ravi Sinha 

Many catalysts to project delays and trust deficit

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

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

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

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

Quick bytes: Major reasons of project delay 

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

Sector accepts with defence

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

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

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

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

Both buyers and developers suffer

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

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

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

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

Any way out?

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

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

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

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

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

Price correction on Gudi Padwa?

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: Reports of price correction on eve of festivals like Gudi Padwa are often misleading.

Gudi Padwa, 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, Ravi Sinha, Track2Media, Track2RealtyBacked by the media reports on inevitable price correction in the Mumbai market, Meenaxi Rohtagi, a textile engineer waited for long to buy an apartment in and around Andheri East. Though the prices have moderated in the last three quarters, the media reports, backed by the property consultants’ analysis, suggest some more significant price correction is on the cards. She now has made up her mind that she will book the flat on the day of auspicious Gudi Padwa.

“I have waited for long anticipating the substantial price cut in the housing market. Of course, there have been marginal price cut in the housing market but that is nowhere close to my expectations. It would not make any difference to my EMIs burden. I am actually expecting a good correction but going by the brokers’ feedback I am rather disappointed and even more confused,” confesses Meenaxi.

She is not the only one in the Mumbai housing market to feel confused about the housing trend and disappointed with the kind of price cut that the market has to offer. Everyone in the housing market across the city, whether the novices or the seasoned investors, have the same dilemma today. Whether there will be more price cut? Will the price cut be symbolic or substantive? Should I buy on the day of Gudi Padwa when more price correction is expected ahead?

Will I get the discounted price, as being reported? Will the festival be the beginning of the price correction this time around? Will the housing market of Mumbai ever be buyers’ market? There are many questions and hardly any answer that could convince, and not confuse, the prospective homebuyers across the length and breadth of Mumbai.

The fact of the matter is that the answer to these questions is not straight and simple and it can be answered as both yes and no. Analysts point out that it all depends upon which market one is talking about as within Mumbai market there rests many sub markets, each having its own distinct character. Then comes the question of segmentation, as all the housing segments in the city are not showing the same trend, whether in pricing or demand & supply cycle.

Quick bytes

  • Price trend has many variable across the MMR; no consistent price trend across the city
  • Price correction more in the luxury segment, less in mid segment and no correction in the affordable segment
  • South Mumbai prices correcting, Western Suburbs softening, and locations of Eastern Suburbs firm
  • Attractive deals available this Gudi Padwa with new launches

Prashant Nambiar, a broker operating out of Mahalaxmi area says there are various pockets of property in Mumbai and price correction depends upon the kind of inventory that is available in the market. According to him, it is much easier to say that Mumbai is sitting over a record number of inventory and with nearly four years of inventory the only way to move forward is to cut the prices. But the reality is that there is real scarcity of properties in certain price brackets.

“If you are talking about affordable housing, then I feel Gudi Padwa onwards the prices will rather firm up as there is hardly any inventory and the demand is huge. Added to this, the market sentiments are improving and the economy shows the signs of revival. In mid segment, some sort of correction in the form of discounts and freebies will be available during the festivals and even beyond. But in luxury not just correction but some sort of crash can also not be ruled out,” says the broker.

Geeta Shukla, another homebuyer is on the property hunt, having been shifted to Mumbai recently from Bangalore. Being new to Mumbai tradition, but a spiritual person at heart, she decided to book the apartment on the festival spirit of Gudi Padwa as well. Her property search led her to an altogether new finding; something that in a way confirms the assessment of the property broker Rajesh.

“Across South Mumbai I am finding that substantial price correction has happened and some attractive properties are available at very attractive price points. What is a reality in Colaba, Cuffe Parade or Fort is not a Mumbai reality though. In Western Suburbs locations like Bandra, Khar or Santacruz the prices might have corrected in the last one year but not as much as in South Mumbai. However, as I move to Eastern Suburbs locations like Kurla, Chmbur or Ghatkopar, I did not find any signs of price correction. It is like travelling rom one different city to an altogether different city in Mumbai,” says Geeta.

In a nutshell, the Mumbai Metropolitan Region (MMR) is not a linear property market where the price trends would be consistent. Each pockets of growth have their own price trend and demand & supply dynamics. It also depends upon the segment of housing and the price correction has mostly happened in the upper segment of housing. On Gudi Padwa too the expected price correction would be more in the upper end of property pyramid.

Does it mean that the affordable homebuyers have no hope of getting reasonable property on this Gudi Padwa? Not really! Analysts suggest that the affordable homebuyers too have their options and they need to keep a close reality check on the market. With a number of new launches expected on the festive occasion there are chances of some attractive deals being offered. It is just a question of finding the right property at the right time and at the right price point.

Many developers are strategizing their marketing channels to make the best of festive spirit. This sounds good for the prospective homebuyers who wish to book their dream home on the day of festivals. Call it due to price correction or strategy or the emerging market reality, but this Gudi Padwa promises to offer everyone a decent deal in the housing market.

 

 

Gudi Padwa spirit may not land you in fancy trap

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: Discounts & freebies on Gudi Padwa are often fancy trap by the developers.

Gudi Padwa-1, 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, Ravi Sinha, Track2Media, Track2RealtyWhen Navneet Khandelwal bought her first apartment five years back on the day of Gudi Padwa, she thought she had made a killing deal. After all, the kind of freebies that she got with the apartment was something that tempted her to book it on the day of the festival known for the acquisition of new properties. She got an air conditioner and a discount coupon that rewarded her further with some furniture. Isn’t it a grand prize when buying an apartment on the auspicious festive day? It sounds so!

Why then is Navneet apprehensive today when she wants to buy her next house in Vashi? It is true that she religiously believes in the Gudi Padwa and is sure to book the apartment on the day of the festivals only. But then this second time is more matured to understand the value of house hunt and at the same time not get tempted by the freebies. More importantly, she understands the difference between wants and needs; something that can save her from fancy trap in the housing market.

“Though I was happy with the kind of freebies that I got. But it was a few months later that I came to know that some other properties in the same market were offering a better deal with the cash discount as well. My temptation to grab the freebies immediately on offer was something that completely misled me. The value of the stuff that I got in freebies was much lesser than the high price that I paid for the apartment,” says Navneet.

Prabhu Parekh is another homebuyer who was tempted with the marketing offer has a very basic question to ask today. The builder has offered him freebies over and above subvention offer. He nevertheless questions that if the developer can offer him so much of discount and freebies, why can’t the same developer straightaway reduce the Basic Sale Price (BSP) of the project. “These dicey discounts and unwanted freebies clearly suggest there is scope for price deduction,” he points out.

In Parekh’s question is hidden the stark reality of the marketing gimmick of real estate. The developer will continue to bombard with the offers of discounts; giving amenities that a new homebuyer might already be in possession of and even holiday tours but will never reduce his BSP.

Reasons: it hurts his brand reputation (read ego) to have scaled down on pricing due to failure to sell and, equally importantly if not more, is his sales channel of brokers and under-writers who force the developers to do so as they do not want to lose on their commission that is calculated on the BSP.

Added to this market reality lies the fact that the real estate is today groping in dark as far as the new ideas and marketing strategies are concerned. They are hence often going off track to lure the homebuyers with discounts and freebies.

Quick bytes

  • There is nothing free in discounts & freebies and the homebuyer has to pay the hidden charges
  • Always ask for direct price cut than discount on car parking or club etc
  • Evaluate whether the freebies on offer is what you actually need
  • Discounts should be cash discounts in flat cost and not add on amenities being discounted

Developers on their part maintain that discounts & freebies are offered to add to the festive spirit. It has been a tried & tested marketing methodology since ages. However, the fact remains that the homebuyers today are more informed and aware about the cost & benefit of the discounts & freebies.

Home ownership has long been a valued tradition across most societies and cultures. Indians traditionally aspire to possess their own homes. The festive occasion like the Gudi Padwa adds zing to the aspiration since it is considered to be auspicious and lucky. And it is here that the gullible homebuyers are prone to make emotional mistakes.

Considering the overall health of an economy is largely influenced by the functioning of its housing market, there is definitely a need to reform the property buying and selling process which allows consumers to be more involved. This is all the more relevant in the present market conditions where, the cost of capital and loans are high and not expected to decrease in the near future – affecting the affordability and availability of homes. Resultantly, the decision to purchase a house is taking place in a highly constrained environment.

Therefore, analysts suggest that as prospective consumers knowing the right questions to ask and engaging expert advice can definitely help one make a sound investment for your future. Whether you are buying a home to live in with family or for investment purposes, understanding your wants and needs is the way to avoid emotional mistakes.

There is no point in getting lured by the discounted freebies like refrigerator or air conditioner. These consumer durables should not be a criterion when you already have it. A gold coin or home furnishing may not be a sound advice when the price of the apartment is too high against the competing projects in the neighbourhood.

Sachin Sandhir, Global Managing Director of RICS says ‘buyer beware’ may sound like a cliché, but it is absolutely essential that homebuyers protect their interests. Therefore, knowing the right questions to ask can definitely help you make a sound investment for your future. It is critical to understand that the decision to buy any property requires a long term financial commitment.

“For all properties, regardless of age and design, basic checks should include the structural condition of the property; electrical wiring; plumbing; insulation; alterations which have been made to the original floor plan and if the same have been approved and assessed by the local development authority. It is also advisable to consider what the immediate and future maintenance requirements of a house might be,” says Sandhir.

The ‘urgency’ factor of moving into one’s home will largely depend on one’s disposable income and the decision to invest either in an under construction or resale property. However, prior to making any such decision, it is always wise for the buyer to consider the associated risks that are involved in buying property and evaluate the same, before making a financial commitment.

Today, when the inventory level is high in Mumbai market, it is advisable to go for a ready to move property than book an under-construction or new launch project in exchange of discount. In the final cost & benefit such discounts & freebies are often more costly.

Gold strike proves golden for real estate

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: Real estate preferred over gold by women on this Gudi Padwa festival.

Gold, Realty Investment, India real estate news, Indian realty news, Indian property news, Track2Media, Track2Realty,Gold and real estate have been two most sought after investments in India. While the men preferred to invest into physical asset of property, the quest of women has traditionally been for gold. However, on the eve of Gudi Padwa this year in Mumbai, women seem to have taken a conscious call to be pragmatic and understand the long term value of holding a property. As a result, women in general and single women in particular seem to be a major catalyst in the housing market of the city.

Suchitra Sen, a single woman in Mumbai is a compulsive shopper of gold jewellery. The festivals are ideal time for her and on each and every festival she buys one or the other jewellery product. However, on Gudi Padwa this time she has taken a conscious call to invest in real estate. The media reports on the strike in the jewellery market has somewhat dampened her spirit with the precious metal.

“I feel this is not the right time to invest in jewellery. The real estate looks quite attractive at this point of time. The kind of properties that are available today at the attractive price point and loaded with discounts & freebies make real estate worth an investment now. May be post the festive spirit when the economic outlook is even more positive the property price will go up,” says Suchitra.

The analysts tracking the market in this part of the world are not surprised. They maintain that for the last few years the trend is changing and gold has slipped to alternative choice and definitely not the first choice of young women. They prefer to have real estate in their portfolio.

As a matter of fact, women nowadays are rather selling their gold jewellery to invest into real estate. The city of Mumbai is full of working women and they understand the value and worth of investment in terms of the Return on Investment (ROI). Hence, there is less emotional connect for the gold now.

The evaluation of historical data also suggests that while gold has appreciated with a Compounded Annual Growth Rate (CAGR) of 12-13 per cent in the last over three decades, the CAGR growth rate of residential property has been no less than 17-18 per cent.

It is hence no surprise that single women are nowadays a major demand driver in the metropolitan cities like Mumbai. The women who are professionally doing well and prefer late marriage or no marriage prefer to have a house of their own. It is the better security than gold; something that also saves them from hassles of answering to landlords about the reasons of their single status.

Take the case of Rachita Verma, a lawyer by profession, who is buying her second house on Gudi Padwa this year. She feels the lure of gold no longer attracts professional women like her. It used to be a security for women who were married in traditional societies but does not hold true in modern context.

“Had it not been strike of jewelers, I would have rather sold some of my jewellery at this point of time. The price of gold is relatively higher now and from here the chances of appreciation is not that high. I personally believe women should be more rational than emotional about their holdings and better invest in real estate nowadays,” says Rachita.

The strike of the jewelers has further tilted the sentiments in favour of the real estate today. This is seen as more safe investment at this point of time. Moreover, traditionally the Indians have shied away from controversial investments where the controversy could lead to price volatility. And hence, gold is clearly losing out to real estate across the Mumbai Metropolitan Region (MMR).

In a nutshell, while the trend of women preferring real estate to gold is not new, the strike in the gold market this year has ensured that real estate in Mumbai hits gold on Gudi Padwa this year.

Altico Capital invests Rs. 575 crore in real estate

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Bottom Line: Altico entered into a multi-project financing arrangement with Marvel Developers, Midcity Group, Century, Skylark and Unishire.

Track2Realty, Track2Media, India Real Estate, Valuations of Real Estate, Realty News, Property News,Altico Capital India closed three transactions aggregating over Rs 575 crores in Mumbai, Pune and Bangalore last week. Altico lends to leading and growing developers in the real estate sector, focusing on mid-income and residential projects in Tier I cities.

Sanjay Grewal, the CEO of Altico Capital said, “Altico continues to focus on its core strategy and looks to build a stable business deploying Rs 2500 Crores in Tier I cities each year. We expect to close out similar amounts of disbursements of around 600crs in this upcoming quarter”

Altico entered into a multi-project financing arrangement with Marvel Developers, Pune. Additionally, it concluded its second transaction with Midcity Group in Mumbai. It also closed its third transaction in Bangalore following its transactions with Century and Skylark earlier this year, financing Unishire against a portfolio of 5 projects.

“These transactions appealed to us from the standpoint of product offering, promoter comfort, project stage and multiple cash flow streams. They have been structured to provide a win-win solution to the developer and us by aligning project execution with the prevailing market scenario,” said Amit Pachisia, Chief Credit Officer at Altico.

“While some locations are resilient, some locations are slow at present. With medium to long term fundamentals of the sector intact, these are preferable market conditions for us to underwrite senior secured loans instead of markets in upswing,” Sanjay Grewal added.

Altico have a net worth exceeding Rs 2000 and the company claims to have zero NPAs and zero restructured assets. Going forward, Altico plans to gradually expand within its areas of expertise. This year the company has expanded footprint from Mumbai, NCR and Chennai to Bangalore and Pune.

Outside of the core strategy, Altico plans to deploy incremental capital in the commercial real estate and infrastructure sector. The Altico Capital Board has approved raising of funds up to Rs. 2,000 crores through a mix of instruments and funding sources including bank lines, commercial paper and NCDs in order to support the asset growth plans.

Altico Capital has recently roped in banking veteran Naina Lal Kidwai as an independent non-executive Director on its board. Kidwai stepped down as Chairperson of British lender HSBC India last year after serving the bank for 13 years. Before joining HSBC, Kidwai was Vice-Chairperson and Head, Investment Banking, at JPMorgan Stanley. She would be working closely with the Management and the Shareholders on Altico’s growth and diversification strategies.

Altico Capital India is a non-banking financial company (NBFC) backed by Clearwater Capital Partners, Varde Partners and Abu Dhabi Investment Council. Altico has completed 11 transactions in the past 9 months, including some sizeable transactions such as with Mumbai-based Radius Developers, promoted by Sanjay Chhabria and the co-invest facility to Century Developers along with Piramal.

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