Bangalore A Haven for Real Estate Investment

By: Karshni on 23:52

The real estate industry in India is undergoing a phase of transition. The year 2013 saw a steady market for real estate in major Indian cities. In Bangalore, the residential market has been pretty stable as compared to its neighboring cities. It is expected that in 2014 the real estate market will gain momentum and get back on track. However, the development of the industry is largely dependent on the macroeconomic condition of the country.

A Silver Lining: 

In-spite of the sluggish economy, there is rising economic prosperity among the masses which has increased the available purchasing power. Mid-range residential properties have been a popular property choice among people. Bangalore's real estate market caters to large consumers who are local buyers, working professionals who have migrated from other cities and also NRI clients. Bangalore in particular, has a large clientele from across the globe which is the reason why real estate market is still flourishing. Contemporary consumers have provided the opportunity to realty developers and builders to expand their product base. As a result, various new projects are being launched ranging from mid-range apartments to high-end luxury villas and integrated townships.

Sliding Rupee Value: A Boon in Disguise:

Like several other industries, the real estate industry has been affected by global slowdown and sliding rupee value. Inspite of the challenging economic condition, the real estate sector in India has performed comparatively well. While, there was a slowdown in demand for properties by local buyers, superior dollar value has encouraged NRI clients to buy properties in India. Bangalore being one of the most favored destinations among Indians living abroad, the sluggish rupee value has in turn attracted NRI clients to invest in Bangalore, thereby, salvaging Bangalore's real estate market to a great extent.

However, the recent announcement by Reserve Bank of India to hike repo rates by 25 bps (basis points) has been a constant debate. It is anticipated that such a move will push banks to increase the loan rates, which in turn will have a visible impact on home buyers.

Growth of Bangalore as a Real Estate Market: 

Bangalore is a haven for real estate market. Over the years, real estate industry in Bangalore has witnessed massive growth due to improved infrastructure, better civic facilities, better road developments and better rail networks among others. Due to better connectivity and infrastructure, realty development is able to expand its borders to areas out of city limits which have great potential of becoming future hot spots. The improving socio-economic condition has encouraged the populous mid-income earning families to invest on real estate sectors. As a result of FDI will see many international players entering the Indian real estate market and a surplus demand is anticipated in commercial and retail segments.

Regions in Bangalore foreseeing Growth: 

The city is seeing rapid developmental activities in all the four directions. East Bangalore is becoming fairly popular among realty developers and potential home buyers due to better road connectivity which has as come a result of ORR linking to major IT corridors and other places of interests. Areas such as Whitefield, Marathahalli, Kundalahalli,

K R Puram, Kasturi Nagar, ITPL and Mahadevpura are some of the favorite residential destinations.

West Bangalore, covered by residential localities, is witnessing major developments

in the form of commercial and retail complexes and high-end residential projects.Some of the areas which have come to focus due to recent developments are Yeshwantpur, Malleswaram, Rajajinagar, Matthikere and Vijayanagar.

North Bangalore has been a popular residential destination both for end-users and investors. Developmental activities in these areas have been phenomenal. The region provides easy connectivity to major areas in the city which is one of the main reasons driving the demand in areas like Hebbal, Yelahanka, Ramamurthy Nagar, RT Nagar, Banaswadi, Hormavu and Sahakar Nagar.

South Bangalore is fast emerging to be a favorite region for real estate development. The entry of multi-national companies has boosted developmental activities in this region. Further, the development of NICE Road and Metro Rail connectivity to the region have increased the value for properties in localities like HSR Layout, Sarjapur Road, Electronic City, Bannerghatta Road, JP Nagar, BTM Layout, and Uttarahalli.

Road Blocks to Overcome: 

The future of real estate industry in Bangalore looks promising but it is also filled with obstacles and challenges. Some of the challenges can be controlled, while others need intervention from higher authorities. For instance, the recent move by Reserve Bank of India to hike repo rates by 25bps will definitely pinch the realty developers across the country. This step will push financial institutions to increase loan rates which in turn will affect the demand for residential properties.

Another common problem faced by realty developers is delay in regulatory approvals which is often a big hurdle in launching projects. In a country driven by sentiments, political order plays a vital role in defining and governing acts and regulatory bills which needs stability. The new 'Land Acquisition Act' will concern realty builders and developers in India and it may result in subsequent changes in real estate prices and increased costs in project development with lower profit margin.

http://www.siliconindia.com/realestate/news/Bangalore-A-Haven-for-Real-Estate-Investment-nid-163004.html

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Fancy things your real estate agent may tell you

By: Karshni on 05:38

BankBazaar.com

When investing in a real estate property, a real estate agent might prove to be a really valuable asset. However, if you don't keep your eyes and ears open, you might end up ruining your investment.

Ankit is a regular investor in the real estate industry and has been buying properties for some time now. Things weren't always good for him as he once fell for some fancy claims made by a real estate agent and ended up losing a huge sum of money. However, he now knows that even though there are several statements that the brokers make regarding the property they are offering, it is you who needs to be alert and attentive when investing your money.

When you are out for buying real estate property, you should always remember that agents are here for business. The enthusiasm of buying a plush new apartment can get you stalled between tall claims and misleading promises. So, the next time your broker tells you that he has a cozy apartment up his sleeve, you need to be alert that he might just be talking about a cramped one. The industry cliches can change the entire definition of a clean and high class apartment.

Be ready to hear the following things from your real estate agent if you are planning to invest in one of the posh localities of the city.

You Got the SeaView!

Having an apartment with a sea view is a dream of every investor. However, not every agent can do that for you, though they surely can promise you of getting one. The estate agents these days are quick to mention that a particular apartment comes with an ocean view. The thing that they don't tell you is that there are certain obstructions. So, when you pay all the money all you get is an ocean view which is obscured by huge buildings and trees. This is quite common in coastal areas like Chennai and Mumbai.

A Huge Garage that can Hold 2 Cars at a Time

Let's admit it that we all want to have a huge car garage that can hold at least 2 cars at a time. Now, this is what the agents promise you, but the truth is that such garages have storage regions or dryers installed in them and so the space is not enough for two sedans or even hatchbacks for that matter.

You'll Get a Superior Price when You Sell the Property

Whenever we invest our money in a property, our agents claim that they'll help us get a better price for the property in the near future. However, you shouldn't fall for the statement as this is something which is not in the hands of the agent. The market behaviour cannot be predicted accurately and hence, you should invest your money after knowing your requirements well. So, don't believe your broker when he says that he'll help you sell the property at an unrealistic rate.

This is the Best Locality

This is a common lie that you might hear from your agent. To put it simply, you cannot just rate a locality to be the best in an area. There are a number of factors to be considered while determining a property's value, but according to the agent the property they are offering is the best. They will tell you a lot about how the area around the property will develop in no time.

The Place is a Paradise for Investors

Your agent will probably tell you that this place is a paradise for investors and a huge investment house is coming up to build a multiplex and shopping mall. You shouldn't pay much attention to these claims as the market changes quickly and nobody knows what's going to happen in a short span of time.

Not Much Time or Units Left

They'll tell you that there is not much time left as they only have the last few units to sell. You should never hurry while investing in a property; instead you should stay calm and see why the agent is pushing so much on selling the property. Even if they offer you the flat at the most economical rates, you should not fall for the trap and instead take a sound decision.

With the increased rates of property, brokers tend to charge a huge sum from their clients as a commission. So, if you are already giving them their share, then there's no need for you to take a risk with your investment by believing everything they say.

BankBazaar.com is an online loan marketplace.

http://profit.ndtv.com/news/your-money/article-fancy-things-your-real-estate-agent-may-tell-you-382408

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Warren Buffett warns of liquidity curse, celebrates property wagers

By: Karshni on 23:28

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., cited a farm he’s owned since 1986 to caution individuals against frequent buying and selling of stocks.

“Investors should treat their equity holdings like real estate purchases, focusing on the potential for profits over time rather than short-term price fluctuations,” Buffett, 83, wrote in an excerpt from his annual letter published on the website of Fortune magazine on Tuesday.

“Those people who can sit quietly for decades when they own a farm or apartment house too often become frenetic when they are exposed to a stream of stock quotations,” Buffett said. “For these investors, liquidity is transformed from the unqualified benefit it should be to a curse.”

Buffett has pursued a buy-and-hold investment approach as he built Omaha, Nebraska-based Berkshire into a $280 billion company accumulating the largest holdings of Coca-Cola Co., American Express Co.and Wells Fargo and Co. He’s said individual investors may be better off avoiding his approach to picking stocks, instead purchasing a fund that holds every company in the Standard and Poor’s 500 Index.

“The goal of the nonprofessional should not be to pick winners,” Buffett wrote. “The ‘know-nothing’ investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results.”

The S&P 500 has returned about 7% annually over the past decade, beating by almost a percentage point the average yearly advance of Buffett’s company. Buffett has said he aims to increase Berkshire’s book value, a measure of assets minus liabilities, more rapidly than the S&P 500.

Retail property

Buffett’s track record of profitable stock picks and takeovers has helped make his letters a must-read on Wall Street. The billionaire has said he writes them to be understood by his sisters, who don’t work in finance. The full document will probably be released by 1 March, along with financial results for 2013.

In today’s excerpt, Buffett cited the agricultural holding and a 1993 investment in New York City real estate. Annual distributions on the retail property, near New York University, now exceed 35% of the initial investment.

He purchased the 400-acre (1.6 square kilometer) farm, located 50 miles (80 kilometers) north of Omaha, for $280,000 in 1986. He says he calculated the farm’s return to be about 10%, based on production estimates for soy and corn. The farm is worth about five times what Buffett paid, and earnings have tripled, he wrote.

‘Moody fellow’

The billionaire compared the daily fluctuations in stock values to an erratic neighbour standing near his property, yelling out offers for the land.

If a moody fellow with a farm bordering my property yelled out a price every day to me at which he would either buy my farm or sell me his—and those prices varied widely over short periods of time depending on his mental state—how in the world could I be other than benefited, Buffett wrote. If his daily shout-out was ridiculously low, and I had some spare cash, I would buy his farm. If the number he yelled was absurdly high, I could either sell to him or just go on farming.

“That’s not how equity holders often react,” Buffett said.

“Owners of stocks, however, too often let the capricious and irrational behavior of their fellow owners cause them to behave irrationally,” he wrote. “Because there is so much chatter about markets, the economy, interest rates, price behaviour of stocks, etc., some investors believe it is important to listen to pundits—and, worse yet, important to consider acting upon their comments.

Market fluctuations

Buffett has said that he regrets not taking advantage of such irrationality to sell holdings. Coca-Cola Co., one of Berkshire’s largest equity holdings, was one of the billionaire’s most successful investments in the 1990s, reaching prices that were more than 45 times earnings at the end of 1998.

The investment has fared worse since then. While the stock price has recovered most of its losses since falling from the 1998 peak, Coke’s price-to-earnings ratio is less than half of what it once was. Shares have declined this year as the soft-drink maker faces sluggish growth outside the US and concerns about the healthiness of its product at home.

Though I said at the time that certain of the stocks we held were priced ahead of themselves, I underestimated how severe the overvaluation was, he wrote in a 2005 letter to shareholders, reflecting on stocks in Berkshire’s portfolio in the late 1990s. I talked when I should have walked.

Despite that regret, Buffett reiterated his view today that excessive trading can diminish returns.

‘Frictional costs’

“Both individuals and institutions will constantly be urged to be active by those who profit from giving advice or effecting transactions,” he wrote. “The resulting frictional costs can be huge and, for investors in aggregate, devoid of benefit.”

Berkshire last week decided to stop letting high-speed traders purchase direct access to press releases distributed by its Business Wire unit. Such firms often enter and exit positions in less than a second. Buffett said last year that such activity is not contributing anything to capitalism.

Bloomberg

http://www.livemint.com/Money/RZ9ejMftBYOSuwjsoJ3m7L/Warren-Buffett-warns-of-liquidity-curse-celebrates-property.html

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Cushman & Wakefield reports private equity investments in real estate increased 13% in 2013

By: Karshni on 23:26

Global Real Estate Consultancy, Cushman & Wakefield on Monday reported that private equity (PE) investments in real estate increased 13% in 2013 compared to 2012. 

The total inflow last year was Rs 7,000 crore; it was Rs 6,200 crore in 2012. 

Overall private equity investments across sectors in India have also increased by 11% from USD 9.49 billion in 2012 to USD 10.5 billion in 2013. "The increase in private equity inflows was primarily due to rising investments in residential assets and other sectors like retail and hospitality, it said. While the number of deals has increased to 40 in 2013 compared to 34 in 2012, the average deal size has declined marginally and was approximately Rs 175 crore (USD 28 million). "Given the difficult economic conditions, developers are finding it increasingly difficult to raise capital through traditional sources and are opting for alternate sources," said the report. 

The total Foreign Direct Investment (FDI) inflow in Construction Development for the third quarter of 2013 was noted at Rs 3,200 crore (USD 520 million), which is the highest quarterly investment since Q3 2009. FDI inflow for the first three quarters of 2013 in Construction Development was Rs 5,500 crore (USD 900 million), a 25% increase from the same period in 2012. 

The realty index grew by approximately 24% in Q4 2013. The report said overall net-absorption in the commercial office sector has been lower in 2013; primarily due to high relocation and consolidation activity with occupiers moving to better quality, larger and cheaper spaces in the suburban and peripheral locations.

http://timesofindia.indiatimes.com/business/india-business/Cushman-Wakefield-reports-private-equity-investments-in-real-estate-increased-13-in-2013/articleshow/30946673.cms

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Knight Frank sees revival in real estate market

By: Karshni on 23:23

While developers and financial institutions believe that the present residential and office markets are weaker they were six months ago, they are optimistic that the next six months would see a change.

This was one of the key findings of the FICCI-Real Estate Sentiment Index report launched by London based realty consultant firm Knight Frank in Mumbai.

The index is based on a quarterly review of stakeholders including developers, private equity funds, banks and NBFCs and is calculated on the basis of weighted average score of respondents across seven main cities.

While optimism is reflected among the respondents with regards to the residential sector in terms of launches, sales volume and price appreciation in the next six months, office sector as well as credit lending or funding situation are not expected to improve in the next six months.

According to the report, the residential index in terms of unit launches and sales volume have neared the 2009 levels that marked the global financial crisis following the collapse of Lehman Brothers in the US in end 2008. Office spaces on the other hand have seen their absorption levels significantly ahead of the 2009 level despite a contraction in office space demand, the report added.

Other highlights of the report includes Mumbai and Pune emerging as the frontrunners in price appreciation during 2009-2013, with Pune showing maximum appreciation among the IT/ITes driven markets of Bangalore, Hyderabad and Chennai.

The report also pointed that that the NCR market prices trended downwards till end of 2010, after which they have risen more than any other major residential market in India.

http://www.thehindubusinessline.com/economy/macro-economy/knight-frank-sees-revival-in-real-estate-market/article5689998.ece

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Tier-III cities drive retail realty market: Jones Lang LaSalle

By: Karshni on 22:28

Tier-III cities are emerging as attractive destinations for retail real estate primarily due to development of infrastructure and increasing purchasing power of consumers in these markets, according to property consultant Jones Lang LaSalle (JLL).

Cities like Ahmedabad, Chandigarh, Surat, Amritsar, Vadodara, Nagpur, Coimbatore, Lucknow, Jaipur, Ludhiana, Kanpur and Raipur are emerging as high potential markets for retail development.

"High immigration, excellent infrastructure, increasing per capita income and propensity to consume are key drivers for high market potential in the Tier III cities. Besides, growing office market is another important factor for retail development in such markets," the report said.

According to JLL, while Ahmedabad, Chandigarh and Surat have already emerged as high potential markets, cities such as Kanpur and Raipur are slowly moving up in their market potential and retail maturity index.

"While leading cities of Mumbai, Delhi and Bangalore have the highest level of market potential and retail maturity; rising income, consumption and infrastructure scenario in other cities make Tier III cities high potential markets for retailers and developers in future," JLL Managing Director - Retail Services Shubhranshu Pani said.

Cities like Mumbai and Delhi have witnessed an influx of big-box, fast-fashion and high-end retailers, it said.

Other leading cities such as Bangalore, Pune and Chennai have seen reasonably good absorption of retail spaces on the back of high consumerism supported by strengthening IT-ITeS sector and the strong auto, manufacturing and biotech sectors.

"Improvement in infrastructure, city expansion and the right supply of retail malls have been primary reasons for growth over the recent past," the report said.

http://www.mydigitalfc.com/real-estate/tier-iii-cities-drive-retail-realty-market-jones-lang-lasalle-372

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Gurgaon on its deathbed: Haphazard model of development causes severe water crisis

By: Karshni on 23:08

Pramod Bhasin is still coming to terms with the idea that Gurgaon, for all its glitter, may become uninhabitable in a few years. Genpact was one of the first global companies to set up office here — way back in the '90s — and Bhasin, who is the non-executive vice-chairman and former CEO of the company, has witnessed the breathtaking transformation of an agrarian district into an international business hub.

On the surface, Gurgaon continues to stir to life every morning with people rushing to offices within stylized glass-facade buildings and shoppers thronging the malls. Given the affluence, it would be difficult for anyone to suppose that the end of the city could be around the corner. But outrageous as it may sound, Gurgaon is on its deathbed. The problem is water and the signs are ominous enough to convince anyone who has studied the problem in detail that the city is on the brink.

The city has almost exhausted its groundwater with an estimated 30,000 borewells having been sunk even as the water table recedes year after year. Almost all residential areas in the district were dependent on groundwater since there was no piped supply in a majority of the colonies here in the first place. As the groundwater is also drying up, people have been dependent on water tankers for many years now.

A Near-death Situation

Bhasin was one of the first business leaders to move to Gurgaon in 1998, soon after DLF's KP Singh convinced General Electric's Jack Welsh to move their outsourcing business into the city. The idea of the city becoming almost uninhabitable in less than three decades horrifies him. But it does not sound like an unreasonable proposition, he maintains. "It would be catastrophic because a lot has been invested in Gurgaon already. We have been saying that this can't happen. But it is happening. We will have to tackle it [the water crisis]."

Bhasin is not shocked to hear that experts have predicted a neardeath situation for the city. "We know about the extent of the water problem here. It is this crisis that has turned so many people in the city into activists and they are all doing a fine job trying to get the government to address the issue."

A study done by Megha Shenoy of Resource Optimization Initiative, a firm that does industrial ecology research in developing countries, says Gurgaon will be able to provide less than half the per capita water recommended internationally by 2020.

The study says that Gurgaon would have only around 48 litres per capita per day (LPCD) of water by 2020. The international standard is 130 LPCD. The population of the city would have increased from 25 lakh to 43 lakh by then. The study also says that in 2010, water available in the city was 83 LPCD.

"It is a very important issue. With rising urbanisation and a decadal population growth rate of 250%, the concretization of the city will continue. It will affect the catchment areas and lakes in the city. This combined with greater reliance on groundwater by the housing societies and industry will exacerbate the situation and the city may slowly die in future," says Ranen Banerjee, executive director — public sector and governance, PwC India.

http://articles.economictimes.indiatimes.com/2014-02-02/news/46898519_1_water-crisis-gurgaon-water-problem

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