World's Ultra-Rich hold a Fifth of their Wealth in Real Estate

10:00 PM

World's Ultra-Rich hold a Fifth of their Wealth
in Real Estate : Report

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Europe's super rich hold biggest share of all privately owned real estate assets, followed by Asians.

The world's super rich people hold a fifth of their wealth in property, estimated at USD 5,328 billion, while Asia's ultra rich have a greater share in real estate, a report says.

According to international real estate advisor Savills, in association with Wealth-X, property accounts for about a fifth of the invested wealth of almost 200,000 ultra high net worth individuals (UHNWIs) in the world.

Of the total private wealth of USD 27,770 billion, 19 per cent is held in real estate assets amounting to USD 5,328 billion, it said.

Europe's super rich hold the biggest share of all privately owned real estate assets, followed by Asians.

Rich people in Europe hold 31 per cent of their wealth in real estate assets worth USD 2,391 billion, followed by Asia (27 per cent at USD 1,800 billion) and the Middle East (26 per cent at USD 880 billion).

"Global real estate is mostly residential and held by occupiers, but private owners are becoming more important in the world of traded investable property," according to Yolande Barnes, head of Savills world research.

She said that since the North Atlantic debt crisis of 2008, sovereign wealth funds, wealth management companies, private banks and family offices have stepped into property deals that corporate bankers have deserted.

According to Savills, the total value of the world's real estate is now around USD 180 trillion, 72 per cent of which is owner-occupied residential property.

Of the USD 70 trillion that is 'investable' and therefore traded regularly - including USD 20 trillion of commercial property - over half is being bought by private individuals, companies and organisations.

According to Mykolas D Rambus, CEO of Wealth-X, the UHNW population is expected to grow 22 per cent by 2018 and its combined wealth - currently USD 27.8 trillion - is expected to total over USD 36 trillion by 2018.

"This presents huge opportunities for those involved in global real estate investment to create the right product in the right locations," Rambus said.

About 3 per cent of the world's total real estate value, or USD 5.3 trillion, is owned by UHNWIs.

This wealthiest 0.003 per cent of the world's population has real estate holdings which are worth an average of USD 26.5 million each, according to the report.

Source :- The Financial Express

2014

The Demand for Residential Housing in India will always remain Strong

11:00 AM

The Demand for Residential Housing in India will always remain Strong - Keki Mistry

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Fund flow: Mistry says the liquidity levels in 2014 will be a lot more comfortable compared to said 2013.

The Reserve Bank of India (RBI) will have the flexibility to cut interest rates in April, said Keki Mistry, vice chairman and chief executive of Housing Development Finance Corp. (HDFC) For a revival in demand for homes, the most important thing is that people must feel confident that their jobs are secure and that they will get their salaries, Mistry said in an interview.

Edited excerpts:

What's your assessment of the macro economic environment right now? Almost all the data points that we are seeing on growth, inflation, and industrial production seem to be negative. Would you say as we begin the New Year that the worst is behind us?

I would say, yes. Broadly the worst is behind us because in my view the inflation is going to start heading lower and interest rates will start getting lower too once we reach April. I think the key to what will happen in the coming year or two, is that the investment cycle will start picking up which is something that we have not seen happening so far. That is really something that will generate more jobs, create the growth number which we are looking at but having said that front the growth standpoint we have touched the worst.

I think things can only get better going forward. Headline inflation number will be lower because food prices are coming down. Food was the largest component of inflation in the last 2-3 months and with food prices getting lower possibly as an outcome of the good monsoon or a higher base effect that we are seeing, the headline number will come down and that will give the RBI the freedom and flexibility to cut rates, which I think they will do post April.

I want to push the point about inflation. Many people are beginning to say that we are going to see the signs of inflation ease. But taking into consideration what governor (Raghuram) Rajan said In the policy statement last time, do you think even if there is indeed a marginal drop in the inflation rate, would he have the flexibility to go and ease rates.

Not in the first three months of January, February and March because that probably coincides with the time that tapering would start. I don't think he will take the risk of cutting rates while the tapering happens—that's one reason. The other reason would be that typically February and March are the two months when the demand for money is at its maximum and at that point of time you obviously don't want to push rates lower.

But come April, the RBI will have the freedom and the flexibility to cut rates. So it won't happen in the first quarter but I will be surprised if it doesn't happen after April.

If you see the home loan rates as a whole for 2014 then what is the trajectory that you see? For someone who is trying to get a new home loan or for an existing borrower too, how do you see the rate trajectory behaving?

For a person who is taking a home loan, the most important thing that he should look at is affordability, the family should like the property, he should be confident about his job and then he should buy the property. Interest rates at the point of time when he takes the loan are not really important because today majority of today's loans are on a floating rate basis.

When you take a floating rate loan it does not matter where the interest rates are at the point when you take the loan because if rates are high then they will come down eventually. So you can always get the benefits of falling rates whenever the rates come down. Talking about how interest rates will pan out in 2014, I don't see too much of a change in the first three months of the calendar year 2014 but post April the RBI would start cutting rates, liquidity would enter the system and the inflation numbers are likely to start going lower. At that time, I would also expect the home loan numbers to come down.

What would be your own assessment of liquidity right now? Do you think in 2014 you are going to see the liquidity in the system being a lot more comfortable?

I would think so. I would think that the liquidity in 2014 will be a lot more comfortable particularly in the context of where liquidity was in the mid 2013. July, August and September were exceptional months. Those were the months when liquidity was extremely tight.

The last time when we spoke you indicated that you have shifted funding in favour of bank loans and you were hoping to repay some of these loans once the money market rates start easing. Is that happening? Did you see your profile of funding change all this time?

To some extent, yes. We did raise a lot of money through banks in Q2 (second quarter) of the financial year. I don't want to get into numbers before we have our results but a fair bit of those loans have been paid back. So I would say about U4,000-25,000 crore of money is what we have raised from the banks in Q2 and about 7000-8000 crore is what we would have paid back.

How would you characterize the behaviour of the real estate market? I ask this in the context of both commercial and residential in the pockets of Delhi and Mumbai. Do you see demand on the ground picking up?

Let's talk of commercial and residential separately. We don't really finance commercials so we are probably not the best people to talk about it. But commercial is hugely dependent on the state of the economy. So if the investment cycle picks up, people start creating new capacity, more demand for real estate will take place and then commercial real estate will start increasing. Till that time, commercial real estate will remain weak and it has been weak now for a fair period of time that is the last couple of years.

The residential side is a lot different. Now if you look at the residential side, people who are buying a house because they need a house to stay in, they are not investors or speculators, they are end users. And when you need a house you have to buy a house because it is a necessity or a requirement. It is no longer a luxury.

Therefore the demand for residential housing will always remain high.

You may think that the inventory levels in Mumbai in Delhi are very high but the fact of the matter is that, if you take Mumbai as an example then there was a period of 18-24 months when almost no project got approved and in the last 1.5-2 years we have started seeing a whole lot of projects getting approved and taking off.

So suddenly the supply has increased ' and because the supply has increased you see a lot of construction taking place and therefore you see a lot of unsold properties. I ant sure that over a period of time, these properties will get sold off or will be bought. The most important thing is the confidence level of consumers.

People must feel confident that their jobs are secure, they will get their salaries, they will get their income and that is the time people will buy houses. But fundamentally the demand for residential housing in India will always remain strong.

You always say that the property market of Mumbai and Delhi is slightly different from the rest of the country. How do you see the prices behaving right now because when you talk to the real estate companies you get the sense that things are not looking so good and so on but you don't see that being reflected in price?

My belief is that if today a developer is convinced that a customer is a genuine customer which means he has the capacity to buy a house, then probably Ite would even negotiate the price. You may be able to get a discount of 5-10% on the property hut not more than that.

And the fact of the matter is that construction cost has also gone up. Land prices have been extremely highs over the last several years. So land prices are high, labour prices are high, sand is not available, construction costs have been going up.

So the profit margins of developers have actually been shrinking. Therefore the ability to cut prices is to a great extent limited, it is not as much as it used to be 4-5 years ago when the profit margins were much higher.

Source : Mint

CNX Realty

Realty can deliver High Trading Gains

9:50 AM

Realty can deliver high trading gains

Given leverage in stock futures segment and high beta stock such as DLF, Unitech and IBRE, the sector could offer a high-risk, high-return play on interest rates

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Real estate developers have suffered from a combination of low demand, high interest rates and over-supply. Most have high levels of debt on their balance sheets and they are finding it difficult to cut leverage.
The realty sector is among the worst performing segments of the Indian stock market. The sector index, the CNX Realty, tracks 10 stocks. The index is down 38 per cent in the past year; it was flat over the past two years and down 65 per cent in the past four years. The best performer in the last year is Pheonix, down 10 per cent.

The fundamental reasons are not difficult to find. Real estate developers have suffered from a combination of low demand, high interest rates and over-supply. Most have high levels of debt on their balance sheets and they are finding it difficult to cut leverage. In the home loan market, mortgages are high-interest and demand is soft. The commercial market is worse. Banks are reluctant to make advances to realty developers, so their access to funding is also restricted.
The realty sector has a high correlation with the financial sector because it is extremely rate-sensitive. In fact, it is high-beta with respect to the financial sector index, the Bank Nifty. And there are several realty stocks available in the derivatives segment. These stocks, such as Unitech, IBRE or DLF, are high-beta with respect to the realty index itself.

This means the realty index will move in the same direction as the Bank Nifty but will have an exaggerated movement. Given leverage in the stock futures segment and high beta stock such as DLF, Unitech and IBRE, the sector could offer a high-risk, high-return play on interest rates.

This is why thesector could be interesting for the trader who doesn’t mind gambling for somewhat high stakes. The realty sector in itself, might be fundamentally busted. But it is more or less guaranteed to respond with sharp short-term moves to any changes in interest rates. The chances are quite high that the Reserve Bank of India (RBI) will have to change policy rates in its next policy or even “off-policy” as Raghuram Rajan warned in the December policy update, where the central bank hit the pause button on rates. We will know in another 10 days if inflation has shown signs of abating. If it hasn’t, RBI will probably raise rates. If it does, shorts on realty stocks could generate even more in the way of returns than shorts on bank stocks or on the Bank Nifty. If RBI leaves rates unchanged or it looks as though there could be rate cuts because inflation has eased, the relief rally in realty stocks could be sharper than in the Bank Nifty or in bank stocks.
Given leverage and volatility, this usage of realty stock futures to play interest rates is in no way a safe trading possibility. But the risks can be controlled by use of sensible, disciplined stop-losses. Right now, the Bank Nifty is sliding slowly downhill and this downtrend could accelerate if the inflation numbers are high.

by Devangshu Datta for Business Standard

Five-Star Hotel

No takers for Tulip Star

7:45 AM

No takers for Tulip Star

There were no bids for the mammoth 24,706 sq m hotel at Juhu during an auction; realty experts say the lack of offers exposes the present slump in the industry

Hotel Tulip Star, formerly known as Centaur Hotel in Juhu, found no buyers during an auction. On Wednesday, the Asset Reconstruction Company (India) Limited had set up an auction to sell the 24,706-sq metre hotel located at prime property in Juhu. However, there were no bids for the sea-facing prime property. A top builder from the central suburbs, who was associated with the deal, said, “There were no bids to buy the hotel.

The Tulip Star Hotel has set a reserve price of Rs 1,315 crore.

According to the information I have, no one came forward to purchase the hotel.” The hotel’s reserve price was set at Rs 1,315 crore and the earnest money deposit for what was one of suburban Mumbai’s first five-star hotels was Rs 25 crore. The location was also open for inspection to prospective buyers on January 1 and January 2. Realty experts say that had the deal been inked, it would have been a big break for the realty market, which is slow right now with no big deal having taken place.

The failure of the auction also is a matter of concern, said some experts. “The reality of the realty market is now exposed. The fact that no one came forward to buy such a prime piece of property shows that there is a real serious liquidity crunch and even top builders, businessmen cannot afford such prices,” said Ajay Chaturvedi, CEO of Accommodation Times, a real estate-centric newspaper.

Others added that the fact that the hotel was not bought showed that it was not just the common man who was facing problems. “The economy is bad and while the sales for homes is low, even top businessmen cannot bring in the money to buy homes. The deal falling through shows that the real estate market is going through a rough patch,” added Prakash Rohira of Kkarma realtors.

Our calls to Asset Reconstruction Company (India) Limited (ARCIL), proved futile, as the person on the other end refused to share any information. He said, “We are under a non-disclosure agreement (NDA), and hence can’t disclose anything about it.” A message asking them whether they had got any bids also got us no results.

Source:- Midday

Bandra Kurla Complex

Office space absorption in Mumbai flat in Dec Quarter

7:30 AM

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World's Ultra-Rich hold a Fifth of their Wealth in Real Estate

The Demand for Residential Housing in India will always remain Strong

Realty can deliver High Trading Gains

Realty can deliver high trading gains

No takers for Tulip Star

Office space absorption in Mumbai flat in Dec Quarter

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World's Ultra-Rich hold a Fifth of their Wealth in Real Estate

The Demand for Residential Housing in India will always remain Strong

Realty can deliver High Trading Gains

Realty can deliver high trading gains

No takers for Tulip Star

Office space absorption in Mumbai flat in Dec Quarter

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