Home Buyers Expectations and Developers offerings during the Festive Season

9:03 AM

Home buyers' expectations and developers' offerings during the festive season:

Festive Realty 2013 by Makaan.com

Dynamics of Indian Real Estate market reaches its apex during this time of the year as the nation prepares for the festive season. The season commences with Ganesh Chatruthi followed by Navratri, Durga Puja, Dussehera and reaches its peak around the festival of lights – Diwali. The property market in India witnesses higher property transactions during the festive season that concludes with Christmas & New Year.

Makaan.com has conducted a comprehensive research and analysis to gauge the collective expectations and offerings within the real estate industry. The analytical research covers both: the buyers and sellers side expectation and tries to identify the common points and gaps. To achieve this, the research was conducted among the home buyers and developers / builders. The research was conducted in Tier I and Tier II cities of India and saw a major participation.

Home buyers’ expectations this festive season

The overall mood among home buyers is upbeat with majority of them optimistic about purchasing a property during the next 100 days of festive season. 68% home buyers are also looking forward to plenty of new property launches during the festive season. The desire to finalise a property seems to be more intense this year as the buyers are looking forward to support from the developers.

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The prime reason for this enthusiasm among home buyers is rooted in the expectation of schemes and freebies from the developers during the festive season. A very high percentage of respondents (almost 80) are expecting the developers to offer cash discounts of more than 5% of the home value and another 12% are looking forward to a discount in the range of 2-5%. It seems that the cash discount on the property value will be crucial for the home buyers’ final decision.

Similarly, out of the various freebies, the most popular and accepted option among buyers is ‘paying 20% at the time of booking and no EMI for next 12-18 months’. It seems people are unwilling to commit huge sum upfront and any freebie that helps them achieve this is bound to become the flavor of the season. The second most popular scheme among the home-buyers is “pay 40% at the time of booking and balance on possession”. Other popular schemes are free car parking and club membership with the purchase of a property.

When it comes to the budget, 75% of homebuyers are looking to invest in affordable

housing (under 40 lakhs) and 21% are looking for mid segment housing (40-100 lakhs); however, a negligible number of people are looking for high end (2%) & luxury homes (2%) with budget of 100-200 lakhs and above 200 lakhs respectively.

The mood among developers / builders

Looking at economic condition of the country, developers are taking a conscious approach this festive season; however, they do not want to disappoint the buyers and lose out on an opportunity to revive their sales. A good number of developers are planning at launching between 1 to 5 projects during the festive season. Another 27% are more upbeat and are considering 5-10 new launches to capitalize on the festive season. The number of launches this year is likely to be lower than previous year (based on Festive Realty research by Makaan.com for 2012).

It seems the developers understand the cash situation of home buyers as most of the developers are launching projects in the affordable housing and mid-segment section. However, the number of launches in the affordable segment is 50% whereas the appetite among home buyers for this segment is 75%. This ensures good absorption of these projects. Out of the new launches 7% and 6% are likely in high end & luxury homes with budget of 100-200 lakhs and above 200 lakhs respectively. These launches are more than the current appetite among buyers.

While majority of the developers have made up their mind to offer discounts and freebies to attract home buyers, the quantum of discount varies from developer to developers. It is good news for the home buyers that nearly 29% developers are considering to offer more than 5% cash discount. While another 21% developers are willing to offer 2-5% discounts.

Moreover, according to many developers this festive season, the home buyers can expect freebies like ‘paying 40% at the time of booking and balance on possession’ and ‘pay 20% at the time of booking and no EMI f or next 12-18 months’. This is mainly because the developers feel that the main point of attraction for the buyers will be in whichever situation they can hold onto their money now and pay later.

by Makaan.com Research Team

Draft Norms

SEBI floats norms for listing Real Estate Investment Trusts

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SEBI floats norms for listing Real Estate Investment Trusts

The market regulator SEBI has introduced draft regulations related to Real Estate Investment Trusts (REIT). This revives an earlier proposal in 2008 which was not implemented because of difficulties in valuation and reporting of net asset value periodically.

A market expert said the proposal has been revived with a view to reverse the flow of capital from other REIT markets, particularly Singapore.

Beneficial Both ways

At present, foreign REITs involve offshoring of ownership of assets and capital markets outside India.

REITs are beneficial to both investors and the real estate industry. On the one hand, it provides an exit route for the developer/industry and for the investors it gives an opportunity to invest in properties which they would not have normally been able to take an exposure to.

According to the draft regulations, REITs may raise money from investors, resident or foreign, but initially the units may be offered only to high net worth individuals (HNI) and institutions.

Modus operandi

However, participation of foreign direct investment and foreign portfolio investors in REITs will depend on necessary clarifications in the FDI policy and also consultations with the RBI.

The minimum subscription per investor will be Rs 2 lakh and every unit will be of the size of Rs 1 lakh. REIT will have a structure similar to that of a mutual fund. The vehicle of the REIT will be a trust and it will have trustees registered with SEBI, sponsor, manager and principal valuer. The fully developed real estate (completed revenue generating real estate assets) will vest in the trust. The REIT will not invest in vacant or agricultural land.

To ensure regular income, at least 90 per cent of the net distributable income after tax of the REIT (rent) will be distributed to the investors. A REIT can invest directly in real estate or in a special purpose vehicle or company holding not less than 90 per cent of its assets in such properties.

The minimum size of investment that the REIT can hold is Rs 1,000 crore. Listing is mandatory for the units. The minimum initial offer size is Rs 250 crore and the minimum public float 25 per cent. To avoid excessive leverage, the consolidated borrowings and deferred payments of the REIT have been capped at 50 per cent of the value of its assets. If the leverage exceeds 25 per cent, the REIT will require credit rating and approval of majority of investors.

Inspection

Physical inspection is mandatory at least once a year but valuation and NAV should be declared at least twice a year. Investors have the right to remove trustees through SEBI, besides having the right to remove the auditors, principal valuer and manager. They can also seek delisting of units.

A tax expert said unlike a mutual fund trust, the REIT will be subject to tax. There is no clarity on whether there will be a withholding tax on the net distributable income, he said. This may affect the earnings of the investor. This compares unfavourably with the situation prevailing abroad where there is a marginal levy.

To develop depth of the market and increased liquidity, tax concessions and incentives (obtaining in foreign REIT markets) may be necessary to serve the desired purpose of reversing capital flows, the expert said.

Source :- The Hindu Business Line

Economic Slowdown

Popping the Myth of the Property Bubble

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Popping the Myth of the Property Bubble

Fears of the real-estate bubble bursting are exaggerated. But the slowdown presents an opportunity for the smart buyer.

Most Indians believe that property is the ultimate investment. After all, haven’t home prices been heading only one way — up? For instance, prices in Chennai have trebled since 2007.

Recently though, there are signs of a slowdown. Data from the National Housing Board (NHB) show that property prices fell in 22 out of the 26 residential markets in the last quarter. Buyers are staying away from booking homes in many recent project launches. The shift in mood seems triggered by high home loan interest rates and steep price escalation in recent years, which has made homes unaffordable in some markets. These were not a big concern in the past, thanks to a booming economy. But buyers are now more risk averse as the economic slump has impacted salary hikes and job prospects.

But do these justify talks of a bubble burst? The short answer is: No. Buyer interest in new homes remains quite healthy in most markets, even if transactions have slowed. Price correction will be limited to a handful of markets. In such an environment, here is what a buyer should do.

The ugly

To start with, watch out for the most vulnerable segments of the property market and avoid them. Right now, these include localities with a high level of ‘speculative’ buying, Tier-3 markets and luxury homes in certain cities.

If property prices don’t appreciate, those most likely to exit the market quickly are speculators or second/third-home buyers. After all, such buyers are looking to make a quick profit rather than hold on to assets. So, markets with rampant buyer speculation may see sharper corrections with investors selling their holdings. Experts believe that in localities such as Dwarka Expressway in the National Capital Region (NCR), speculative buying is sizeable, as much as 50 per cent of the total.

Tier-3 cities may find the going tough for quite awhile due to excess supply of new homes. For instance, Nagpur has around a 10 year supply of housing units. Coimbatore, with an annual demand for 500 units, churns out 7,000 units every year, according to Om Ahuja, CEO, Residential Services, Jones Lang LaSalle India. Lack of employment growth in these markets is also a stumbling block. These markets are likely to see a price correction as well as developers exiting.

Price corrections are likely to be steep in the luxury segment, where the lure of high profit margins for the builder has created an over-supply. For instance, in Pune, mid-income housing remains robust but demand for high-end property is sluggish. Specific projects that do not fit the needs of buyers in the market are also likely to see steeper correction. For instance, a few builders in Sriperumbudur and along the ECR, near Chennai, are left with a large inventory as many projects are not meeting buyer expectations, with respect to features and prices.

The bad

Some residential markets and segments may see milder price corrections or prices moving sideways.

Economic or political concerns in the region may keep prices depressed in cities such as Hyderabad and Kolkata. For instance, the depressed Hyderabad market is looking for a firm resolution of the Telengana issue before sales pick up. Slowdown in a particular sector can have an impact too. For instance, the lull in the automobile sector has affected Pune, and a lull in the manufacturing sector has hit Coimbatore.

These trends may offer an opportunity for home buyers to negotiate attractive prices. A builder in dire need of cash to complete a project may offer price cuts, as delays reduce profits in a market where prices are not increasing. Builders with high debt may be open to selling completed properties at lower rates. Such deals, although offered only by few builders, may result in lingering price pressures.

The good

Buyer sentiment overall may be down, but far from out. Data from a property website suggests that following a decline, buyer interest in new apartments has increased by over 30 per cent in all major markets over the last six months. This is particularly true in markets such as Bangalore, where the fall in rupee has helped buoy the fortunes of IT companies and, as a result, the expectations of their employees. JLL says Sarjapur Road, Outer Ring Road and Whitefield in Bangalore, and other areas where IT companies are in close proximity, will see price appreciation.

Low supply may help price increase in certain markets. For example, the Central Business District (CBD) in Chennai has a dearth of supply and properties are being lapped up at a brisk pace, according to Sunil Rohokale, MD & CEO of ASK Group.

Price pull

Even while house prices increased overall, home affordability, measured as the ratio of property price to annual income, has been stable. Data from HDFC shows that affordability was around 4.7 as of March 2013, a level that has been stable since 2010. Mudassir Zaidi, National Director, Residential Agency, Knight Frank, says that, on an average, home mortgages are paid out in six to eight years. The growth in annual savings may continue to help home price appreciation.

Increasing construction and financing costs will have an impact as well. JS Homes, a Bangalore-based developer, says that the company’s cost of construction is now around Rs 1,500 per sq ft. Poddar Developers, a Mumbai-based developer of affordable housing projects, says that land prices have gone up by 15 to 40 per cent.

All in all, if you are looking to buy property, be selective. Keep away from the bad and the ugly. There is plenty that is good and which is still available for sale.

by Meera Siva for The Hindu Business Line

HeadOffice

India 11th most favoured destination for MNC headoffices: McKinsey

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India 11th most favoured for setting up MNC headquarters: McKinsey

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India hosts about 158 large global companies having a revenue of $1 billion or more, making the country the 11th most favoured destination for setting up a multinational corporation headquarters, says a report.

According to an analysis by McKinsey Global Institute, as many as 158 global large companies have their headquarters in India with a combined revenue of $898 billion.

The US topped the chart with 2,123 large firms having their headquarters in the country with a combined revenue of $15,221 billion, followed by Japan (1,028 firms, $7,347 billion), China (577, $5,449 billion), Germany (462, $3,788 billion) and United Kingdom (358, $2,818 billion), constituting the top five.

The top 10 most favoured destinations for setting up headquarters of a global MNC include: France which hosts 236 firms’ head office, Australia (203), Canada (194), Italy (179) and Russia (165).

India was ranked 11th in the list followed by South Africa, Switzerland, Taiwan and Brazil.

At present, there are some 8,000 distinct large companies worldwide with revenue of $1 billion or more, and three out of four are based in developed regions, McKinsey said.

This situation is likely to undergo a sea-change as by the year 2025, an additional 7,000 companies would grow to this size (revenue of over $1 billion) and seven out of 10 of these new entrants are likely to be based in emerging regions, the McKinsey report added.

Currently, the US, Canada, and Western Europe account for 11 per cent of the world’s population but are home to over 50 per cent of large company headquarters.

In comparison, South Asia is home to 23 per cent of the world’s population but only 2 per cent of the world’s large companies’ headquarters.

As per the report, by 2025, nearly half of the Fortune global 500 companies are likely to be based in developing countries including India.

“As Japanese and South Korean companies became formidable global competitors in the past half century, new players from emerging markets such as Chinese telecom networking giant Huawei, Brazilian aircraft manufacturer Embraer and India’s industrial conglomerate Aditya Birla Group are asserting their presence,” it said adding “many more are soon to follow“.

According to the report, companies from emerging regions are growing faster than their counterparts from the developed world not only on their home turf but also in overseas markets. It cited the example of the aggressive expansion of India’s Tata Motors into Europe in the past decade.

Source : The Hindu Business Line

Affordable Housing

Maharashtra plans another city, 50 km off Mumbai

8:30 AM

Maharashtra plans another city, 50 km off Mumbai

After Navi Mumbai, state govt zeroes in on Uran; blueprint drawn to develop 100 sq-km city with pvt participation

Uran, a fishing village-turned special economic zone, will acquire a new status soon — that of a city. As a part of its plan to decongest Mumbai and Navi Mumbai, the Maharashtra government proposes to develop a third city in Uran, 50 km away from Mumbai in the Raigad district.

The plan is still in the preliminary stages, but the state government wants to build the city over 100 sq km of land (10,000 hectares) with private sector participation. A beginning has already been made with the state-run Maharashtra Housing & Area Development Authority (MHADA) initiating a blueprint to build housing projects and other infrastructure over a 10 sq-km area (1,000 hectares of land).

Uran, situated east of Mumbai across the Dharamtar Creek, is connected by road and a boat service. A project to link it with Navi Mumbai by rail has already been planned. Uran also houses the Jawaharlal Nehru Port, two private ports, a 672-Mw gas-based power project of MahaGenco and an onshore terminal complex of ONGC.

The proposed city will be one-fourth the size of Mumbai and one-third of Navi Mumbai’s. The Navi Mumbai Municipal Corporation, however, has an area of 162 sq km under its supervision.

Maharashtra’s minister of state for housing Sachin Ahir told Business Standard that the development of a third city in Uran was being considered in view of the constraints faced by Mumbai and Navi Mumbai. MHADA will put in place the necessary infrastructure along with other government agencies over 10 sq km, but the private sector would have to come into the picture to make the 100-sq km city a reality.

Ahir said the government might bring the proposed city in the Mumbai Metropolitan Region so that its state-of-the art transport infrastructure could be further strengthened. He, however, said the success of the project would depend on the development of the Navi Mumbai airport and the Nhava Sheva-Sewree, popularly known as Mumbai Trans Harbour Link.

Tansukh Jain, a leading architect from Uran, said development of transport infrastructure would give a big boost to the real estate sector in Uran and its adjoining areas.

The prevailing land prices in the area are Rs 40-45 lakh per acre.

Sunil Mantri, president, National Real Estate Development Council, termed the proposal an innovative idea. He saw a large scope for affordable housing in the area. “Instead of the traditional auction route, the government should invite joint venture partners,'' he added. Anand Bhingarde, general secretary, Uran Education Society, said the government's move would change the economy of the area and help Uran gain a new identity.

by Sanjay Jog for Business Standard

Festive Season

Understand The Cues From The Residential Market This Festive Season

1:20 AM

Understand The Cues From The Residential Market This Festive Season

The National Housing Board (NHB) recently published its quarterly index data for the period April to June 2013. The data for the top seven cities suggest an across-the-board fall in residential property prices in the latest quarter ending June 2013, as against a rise in price in the previous quarter (January-March 2013).

With the latest data getting wide media attention, the question in the minds of many individuals who intend to buy a first or second home this festive season is – are prices beginning to correct? Should one defer purchase decisions and potentially benefit from lower rates few months down the line?

Various channels have interpreted this data as early signals of a broad-based price correction. The fact is that while residential inventory seems to have indeed piled over the last few years, prices continue to remain high in major metro cities. This is also corroborated by the NHB Residex city indices, which suggests that the fall in prices in the most recent quarter has been largely a phenomenon limited to smaller cities such as Kolkata, Chennai and Hyderabad, rather than big metros. The data certainly does not signal an imminent price correction across the board.

Yet another belief being entertained on various fronts is that a certain section of developers, given the current levels of inventory and industry slackness, will be forced to reduce prices considerably. While inventory pile-up is certainly a reality, the real question is whether this is sufficient cause for developers to offer considerable discounts to individual buyers.

Overall unsold inventory in cities like Mumbai is high (as per JLL REIS data, Greater Mumbai has close to 48 months unsold inventory as against an acceptable level of 15 months). However, a major part of this unsold inventory lies in the Island City, which was never affordable to small individual buyers. On the other hand, in the comparatively more affordable suburban locations, vacancy is relatively lower and prices have not corrected as expected. They have, in fact, remained stable or risen. Therefore, if anyone benefits from this current scenario, it is either bulk-buying institutions or HNIs or NRIs.

In a depressed economy where cash-conservativeness is the watchword, it could be a natural tendency to postpone a major financial commitment such as buying a home. Often, individuals are tempted to time the market in an attempt to buy cheap, on the basis of interpretations that do not reflect ground realities.

It is pertinent to note that, in a growing economy, property always appreciates over the long term. It never does a complete about-turn to march in the opposite direction, though it could occasionally deviate from ‘learned’ market predictions. Such deviations are not necessarily corrections in the commonly understood sense of the term – they could be minor course alterations that any market must undergo in order to adapt and stay dynamic.

Those who intend to buy residential property during the festive season out of personal / traditional reasons are likely tend to proceed with their purchases. For the rest, the question would be whether one should attempt to time the market.

We believe this question is more apt for an investor who has the potential to wait, watch and put his financial muscle to test. Individual end users, on the other hand, will need to establish whether the financial pain of an identified residential project is sufficient reason for him to mark down the pricing of units and thereby send out signals of a price correction into the market.

That said, actual cash discounts are definitely not out of question. Buyers with cheque books and/or pre-approved home loans in hand are certainly in a position to bargain for a better price. However, caution must be maintained before assuming complete slackness of sales at the developer’s end. As already mentioned, no developer will confirm such a state of affairs and risk sending out distress signals to other potential customers. Demonstrable earnestness of interest in the project, backed by ability to make a down-payment, is the best position from where to pitch for a discount.

Also, while certain new projects in a location may have been launched at slightly lower rates, they could be at planned or under-construction stage. Ready-to-move-in properties in the same location will not display the same pricing, as demand for ready units is always the highest.

by Om Ahuja, CEO – Residential Services, Jones Lang LaSalle India

Source : Core Sector Communiqué

Commercial Real Estate

Office space absorption to reach 132mn sq ft by 2017

1:05 AM

Office space absorption to reach 132mn sq ft by 2017

With the economy expecting more stability in the post- election phase, the trend might also pick pace in Mumbai’s established market, says a report.

Mumbai Bullish on the revival of the economy after general elections, real estate consultancy firm Cushman & Wakefield expects nearly 132 million sq ft of office space, across the eight major metros, to get absorbed by 2017.

However, the report said the current year will see a 26 per cent fall in office space absorption to around 22.5 million sq ft over the past year due to the ongoing slump in the economy.

The supply of office space between 2013 and 2017 in the top eight cities- Delhi- NCR, Mumbai, Bangalore, Chennai, Hyderabad, Ahmadabad, Kolkata, and Pune is expected to be around 143 million sq ft.

Of this 143 million sq ft, around 90 million sq ft are currently under various stages of construction and is expected to get completed by 2015, the report said.

" The office market is expected to remain attractive for occupiers with steady increase in absorption after a trend of decline in 2013.

" With the economy expecting more stability in the post- election phase from 2015, the absorption trend is also expected to pick pace especially in established markets of Bangalore, Mumbai and Delhi- NCR," Cushman & Wakefield executive managing director for South Asia Sanjay Dutt said.

The report said the absorption of office space will decline in 2013 over 2012, mainly due to the current economic slowdown, which has made many companies defer their leasing requirements.

According to the report, office space absorption including top eight cities is expected to be over 22.5 million sq ft in 2013, a decline of around 26 per cent over 2012.

However, going forward the trend in absorption is expected to pick up at a steady pace with 2015 with an estimated absorption of 28 million sq ft.

Dutt said that the commercial office sector has seen substantial deferment of supply in the recent times due to slack in demand and delays in regulatory clearances.

" Similar trend is expected to continue in the next few years owing to issues such as demand from occupiers as well as funding issues that developers have been facing," he added.

However, growth is expected to set in from the second half of 2014 when an increase in leasing activities both on account of entry of new companies into the country, expansion of existing companies and indeed relocation and consolidation activities that are expected to continue, Dutt said. - PTI

Source : The Free Press

Bandra

Where the Elite Reside

7:00 AM

Where the Elite Reside

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Bandra west has a constant buzz about it with the seashore, bollywood stars, landmark infrastructure projects and posh suburban malls

Bandra has traditionally been referred to as the 'Queen of Suburbs', a sobriquet that inspired others to position Mulund as the 'Prince of the Suburbs' when the new millennium began.
It not only marks the beginning of suburbs along the western line but is better known for the celebrities that reside here, particularly the bollywood actors.

Bandra’s clubs and lounges are a great place to do some star spotting. The G7 multiplex (formerly known as Gaiety-Galaxy) near Bandra station is a good place to catch movie stars on screen if you don't get to see them in the flesh.

In terms of lifestyle, Bandra west is synonymous with great shopping, best bargains, renowned brand stores and entertainment options.

It is also the preferred destination for restaurants and thus it attracts crowds from all over the city and as well as foreigners.

When it comes to shopping, Hill Road is again a well-known and preferred location with Globus being the favoured mall. Spread across 3 large floors Globus showcases a wide collection of apparel, jewellery, gadgets like cell phones, watches, stylish eyewear. And much more.

Bandra west also has its share of 'fashion street' replicas offering everything from t-shirts featuring your favourite artistes and musicians. Try your bargaining skills and pick some tops, jeans, footwear and accessories. Shopping at Bandra fits every pocket and budget.

Bandra west is also famous for its beautiful churches and educational institutions like St Andrews College. Band Stand is where the lovely sea and greenery beckons. Here you can spend some quality time with your friends and family.

If you want to enjoy a leisurely evening-out with luscious greenery, a seafront and soothing zephyrs complementing your mood then Bandra Bandstand is the place to be. The growing number of couples frequenting the place and indulging in PDA (public display of affection) is almost taken for granted here.

The Taj Lands End hotel provides the luxurious setting this prime suburb needs and the Bandra Worli Sea Link highlights its position as the link between Mumbai city and its suburbs.

by Pooja Vora for DNA India

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Home Buyers Expectations and Developers offerings during the Festive Season