Real estate industry says RBI rate cut to boost housing demand by buyers

By: Karshni on 03:15

Real estate industry and property consultants today hailed the RBI's decision to cut key policy rates, saying that it is a positive step that would boost housing demand and encourage foreign investment in the sector.

The RBI today cut short-term lending rate, called repo, by 0.25 per cent to 7.75 per cent and Cash Reserve Ratio (CRR) by a similar margin to 4 per cent, releasing Rs 18,000 crore primary liquidity into the system.

Developers and consultants expect the move would lead to reduction in interest rates for buyers as well as builders.

Commenting on the development, Unitech Managing Director Sanjay Chandra said: "This is a small but necessary positive move to boost investment as well as demand in the real estate sector. These growth oriented monetary measures combined with the government's fiscal measures should augur well for the industry in 2013."

Global realty consultant Jones Lang LaSalle (JLL) India said the RBI has shown commitment to improve liquidity in a cash-strapped economy by reducing the policy rates.

RBI rate cut: FE's Sunil Jain explains

"The RBI has taken a huge positive step by announcing the above policy measures. There should be a revival in investment and growth, including in the real estate space...RBI's policy is definitely a key to boosting real estate market sentiment and sending out positive signals to global investors," JLL India Managing Director (Capital Markets) Shobhit Agarwal said.

Confederation of Real Estate Developers Associations of India (CREDAI), the apex body for realty firms, welcomed the decision, but felt that the repo rate cut by 25 basis points is "just not enough".

RBI rate cut: FE's Sunil Jain explains

"What we need is creation of a robust supply to curb inflation, for which RBI needs to continue to ease fund supply position, month-on-month and quarter-on-quarter for realty sector," CREDAI National President Lalit Kumar Jain said.

National Real Estate Development Council (NAREDCO) said infusion of additional funds will trigger businesses for real estate and around 300 affiliate sectors and lift the declining IIP figures.

"To revive housing industry, there is also a need to bring down the high mortgage rates to improve common man's affordability, which had been hit in past because of high inflation and rocketing interest rates. Hopefully monetary and fiscal policies of 2013 will prove promising for both realtors as well as buyers," NAREDCO Director General R R Singh said.

Realty consultant Cushman & Wakefield (C&W) said the central bank has been keen on keeping inflationary pressures under control, which had led to stringent moves from the RBI over the past nine months.

"Backed by relaxation in repo and CRR...and contained inflation, institutions are expected to offer better rate of interest on loans and may also increase deployment in infrastructure and development projects," C&W Executive MD (South Asia) Sanjay Dutt said.

CBRE South Asia Chairman and MD Anshuman Magazine said: "This reduction in the CRR and Repo rate will bring in some liquidity into the banking sector. This is a positive move and hopefully will reduce interest rates marginally, which will help the real estate industry."

The industry expects more such steps to improve liquidity and reduce interest rates to increase investments, he added.

Raheja Developers Director Manoj Goyal said with the reduction of CRR and repo rate, the developer community now expects banks to pass on the advantage to end-users.

Knight Frank India's Chairman Pranab Datta hoped today's decision is the start of a series of rate cuts to be followed over several quarters in future.

"The consequential drop in home loan rates will greatly benefit consumers and stimulate demand for new housing.

Considering the sharp drop in housing demand, a 50 basis point reduction would obviously have been more desirable and would have also sent a powerful signal towards a more facilitative environment," he added.

Assotech Managing Director Sanjeev Srivastva said the much awaited relief, although small in percentage, is going to decide the trend in the coming months.

Royal Institution of Chartered Surveyors (RICS) South Asia Advisor S Sridhar termed the RBI's action as being on expected lines and an overall sentiment-lifter.

CHD Developers Managing Director Gaurav Mittal said: "We are happy that RBI has taken cognizance of the plight of the sector by lowering CRR and repo rate. Home loans may get cheaper facilitating the buying decision of the consumers."

M3M India Director Pankaj Bansal said the developers hope that the government will, in the forthcoming Budget, will take measures such as giving infrastructure status to the sector, allowing ECB for high-end housing and increasing tax rebate on housing loans.

Ramprastha Chief Executive Officer Nikhil Jain said the move will stir more liquidity, providing a slight breather for the real-estate sector, which has started to stabilise from the toll of the inflation.

http://www.indianexpress.com/news/real-estate-industry-says-rbi-rate-cut-to-boost-housing-demand-by-buyers/1066325/0

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13 Insights For India Real Estate In 2013

By: Karshni on 05:19

The year 2012 closed with a few positive notes as inflation was below projected levels and growth in industrial production gave new hope for 2013. Overall, 2012 remained inactive, affecting major sectors in real estate. With the expected moderation in inflation and strengthening policies, here are a few interesting insights for 2013.

Economy – As per the Reserve Bank of India (RBI), 2013 will focus towards growth, although risks of inflation will continue to remain. Interest rates are expected to soften in 2013.

Policies – The few policies likely to benefit the real estate sector in 2013 are: the Real Estate Regulation Bill, real estate investment trusts (REITs) and the Land Acquisition and Rehabilitation and Resettlement Bill.

Infrastructure – In 2013, the relaxation of foreign direct investment (FDI) policies in multi-brand retail and a 100% FDI permitted under the automatic route in built-up infrastructure, is likely to boost development in this sector.

Office Real Estate – Absorption in 2013 is likely to remain stable. Rents are expected to increase from 2H13 onwards. Decisions on occupying special economic zone (SEZ) spaces will be taken by occupiers as they have to go live by March 2014 to avail the benefits.

Retail Real Estate – The relaxation in FDI policies in multi-brand retail, has interestingly, boosted aggressive growth amongst Indian retailers. In 2013, retailers are likely to opt for built–to–suit (BTS) options or high-street properties amid constrained supply of good quality malls.

Residential Real Estate – The framework of REITs once formulated, is likely to drive investor demand in rental housing. In 2013, residential units in the range of INR 3,000–5,000 per sq ft in prime cities are likely to see fast sales.

Industrial Real Estate – Sale-cum-leaseback of existing industrial assets is likely to increase in 2013. Growth in e-retailing and FDI in multi-brand retail is expected to increase the demand for warehouse space in 2013.

Education and Healthcare – There are aggressive growth plans in education and healthcare infrastructure in 2013 and are expected to attract private equity investments.

Investment Sentiment – Debt capital is expected to increase. Assets will witness a compression of yield rates amidst increased liquidity.

Delhi – Office absorption is likely to focus around Gurgaon and Noida. Rents are expected to increase in certain sub-markets due to supply constraints by 2H13. Developers will focus on delivery of the residential products.

Mumbai – Office absorption and residential demand will increase. Residential launches will increase but a price fall is unlikely to happen. There will be constrained supply of quality retail malls and they will earn premium rates in 2013.

Bangalore – The most preferred destination for office space will be Outer Ring Road and for residential real estate will be North Bangalore in 2013.

Other Cities – Residential launches are likely to increase in Kolkata and Hyderabad in 2013. Prices of residential units are likely to increase. Ahmedabad, Bhubaneswar, Kochi and Coimbatore are likely to witness enormous development in 2013.

Trivita Roy

http://www.joneslanglasalleblog.com/APResearch/forecasting/13-insights-for-india-real-estate-in-2013

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Real estate's expectations from Union Budget 2013-2014

By: Karshni on 05:18

Current Status

The GDP for the current financial year is not likely to cross the 5.7-5.9% mark - the predicted 8% in GDP growth is highly unrealistic. We expect the budget to come up with some immediate and effective announcements to remedy the situation.

In recent quarters, the Government and the RBI have been unable to curb the inflation to a more comfortable level of between 5-6%. Considering that the upcoming budget is expected to a populist one, given the Union election ahead in 2014, addressing the compromised GDP and skyrocketing inflation must be given highest priority.

The macro-economic concerns are having a cascading effect on Indian real estate. Here are the considerations that the sector needs from the upcoming budget as well as in terms of overall enablement:

- Reduce High Cost Of Borrowing:

Presently, interest rates charged by the banks to developers and home buyers are at an all-time peak and need to be brought down. A reduction in the base rate (rate below which no banks can lend to the corporates or industries) is necessary to help banks lower their lending rates. The Government should address these concerns in the budget, and this should be followed through by RBI in terms of easing the repo rates and relaxing other policy instruments such as the CRR, SLR, etc. to inject liquidity into the system. This is essential if the Indian economy's key sectors such as manufacturing and real estate are to grow.

The regulatory and monetary authorities need to bring down the housing loan rates to provide affordable housing to more cities and towns. The scope of the interest rate subsidy for loans towards affordable housing should be amplified and broadened to include a wider price band of budget housing to benefit home buyers, especially in lower income groups.

- Make Provisions For Special Residential Zones:

The Government could seriously consider enacting provisions for Special Residential Zones (SRZs) to incentivise the growth of housing stock at targeted locations.

- Increase Infrastructure Allocations:

The budget needs to increase infrastructure spending in urban areas with a view to unlocking the value of neglected and hidden land assets in suburban and peripheral districts. This will enable more holistic growth for the real estate markets in our over-burdened metros and allow the demand for housing to spread over a larger canvas. The increased demand in peripheral locations in which infrastructure has made the real estate markets there more viable will also help bring down prices in the central areas.

- Provide Real Estate With Industry Status:

The country’s real estate industry contributes approximately 5% to the GDP. Moreover, the real estate sector has grown significantly over the past decade, with tangible transformation in quality and business standards. However, due to lack of regulations and effective policies, the sector is experiencing many challenges on its growth path. The budget must consider the fact that the Indian real estate sector generates countless jobs across its various verticals. By granting it industry status, the Government would enable the sector to access debt lending at better interest rates and reduced collateral values. 

- Take Steps To Provide Better Clarity In Land Titles:

This is another policy hurdle which needs to be tackled by the Government. Across the country, land needs the benefit of legally documented ownership assigned to the right persons or entities. The lack of clarity on land titles shakes the confidence of investors, and is a serious hindrance to overall growth. The budget should make specific allocations towards regularizing and digitalizing land records.

- Provide More Adequate Sources Of Finance:

Since the sector is not under the umbrella of any specific regulatory authority, financing has been an issue over a number of years of credit slowdown. What is required at the current time is the liberalization of finance for the real estate sector. The budget should enable a broader scope for external commercial borrowings for real estate and provide a general relaxation of financing norms.

- Take Steps To Moderate Rising Input Costs:

The input prices for construction have skyrocketed in recent years, rising by more than 50% in the last two years alone. In addition, builders are faced with the increased costs of external and internal development charges, licenses and charges for change of land use from various departments. These factors have been directly responsible for rising real estate prices. The budget should make provisions for subsidized construction materials for low-to-mid-income housing, and rationalized license fees and other government levies.

- Unblock The Approvals Pipeline:

In this budget, the Government should come up with simple and effective polices that will ease real estate development approval procedures. Obtaining the 57-odd permissions to begin construction of a project can take as much as two years. During this time, the cost of acquisition or even just holding the land for projects rises. Single-window clearances are the need of the hour, since the absence of such mechanisms causes project delays which prove to be expensive to both developers and end users. 

- Take Steps To Improve Investor Interest:

REITs should be implemented so that small investors will get a chance to invest in real estate assets. The enactment of legislation on REITs to provide exit opportunities to real estate investors would be a real step in the right direction.

- Enact the Real Estate Regulatory Bill:

The Government should once and for all finalize and implement the proposed Real Estate Regulatory bill, which is needed to bring rationality back to the sector. This draft bill, which is pending since 2009, aims to create a regulatory authority for the realty sector, ensure sale of immovable properties in an efficient and transparent manner, and to protect consumer interest. One key proposal of this bill is to set up a regulatory authority in each state. The sector looks forward to intentions in this regard finally translating into action.

- Implement GST:

The Government avowed plans to introduce GST sooner rather than later need to be implemented. This will go a long way in streamlining the economy and providing stimulus to GDP growth.  

Anuj Puri

http://www.moneycontrol.com/news/real-estate/real-estates-expectationsunion-budget-2013-2014_813888.html

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A solution to save cost on your high real estate bills

By: Karshni on 05:11

Ajay Kriplani launched his own leather export business just four months ago. Yet, he has a spanking new office at Vibgyor Towers , one of those chrome-and-glass totems at the Bandra-Kurla Complex, Mumbai's prime commercial destination. Kripalani's office is a plush 225-sq-ft fit-out. It has the latest IT and other office facilities and a spectacular view too. No, his morning cup of coffee has never smelt better! And get this - this luxury costs Kripalani less than Rs 35,000 a month!

What his impressive business card doesn't reveal is that Kripalani operates out of a serviced office which he uses only when required - and he pays only for the number of days he uses it. Serviced offices, and their lesser cousins, virtual offices, are shared office spaces that offer a premium office address for your business card, access to top-class facilities and operate on the pay-per-use model. The cost of renting each varies with the location and facilities you sign up for.

Shared Office Spaces

A serviced office is a physical office space that offers the full range of services that any corporate office enjoys including a secretary, receptionist, infotech support, pantry and lounge. A virtual office, on the other hand, is not a physical space but is a service backed by business and administrative support such as telephone answering and call-forwarding facilities, fax facility and boardrooms for meetings. It varies from a basic plug-and-use business process hub to one that offers the full range of support services including a boardroom for meetings.

Who Needs Them?

Over the last few years, businesses have evolved to become increasingly flexible and less and less tethered to a physical office. Enter the shared office space, which is just perfect for people just setting up a business, a venture that is expanding to a new territory, companies that require off-site office space and also ventures with no long-term plans. Shared offices are also popular among young business executives, consultants and freelance specialists who are looking to move their businesses out of their homes, to the next level.

Catering to these entrepreneurs and ventures are service providers like DBS Business Centre and Apeejay Business Centre, the oldest players in this segment. Other prominent names include Regus, The Executive Centre, ServeCorp, Stylus, New Bridge Centre and Vatika Business Centre. According to Anuj Puri, Chairman and Country Head, Jones Lang LaSalle India , "Serviced offices are a very strong sector in India and the growth potential is immense. They are especially active across the Tier 1 and Tier 2 cities."

Professional Image

In Mumbai, most serviced offices are located in commercial hubs such as Fort, Nariman Point, BKC and Andheri. Nikhil Shah, owner, Parshv Business Centre, says, "Start-ups usually operate out of home and don't require office space. But to grow their business, they need a professional image for their company. Signing up for a virtual office could cost as little as Rs 1,500 a month. Also, your phone never goes unanswered!"

Reducing Costs

Renting a shared office involves huge cost savings. Minal Sinha, Country Head, Imperial ServCorp, explains, "In the serviced office space model, the client pays only for what they really need and end up saving upto 70 per cent. Entrepreneurs may not want to invest in infrastructure costs and hiring additional people to run the facility. Shared and centrally managed IT infrastructure, secretarial services and conference facilities result in significant cost reductions. Also, there is a lot of flexibility as the client can leave with a month's notice."

While renting a shared office in Andheri costs Rs 120 per sq ft per month, Parshv Business Centre charges Rs 48 per sq ft, which tots up to Rs 7,800 per cabin per month. Not a bad deal, considering you get an Internet connection, phone facility, mineral water, a reception area, refrigerator, furniture and stationary thrown in.

Tech Talk

Another huge plus is advanced tech facilities and support. "ServCorp clients were able to answer their office calls even during calamities because we re-route them through the nearest ServCorp location. We have also developed apps called Serv Corp meetings for the iPhone, BlackBerry and Android, to make it convenient for young entrepreneurs to book their resources and control their office via their smart phones. This way, they can change the way their calls are answered and the numbers being transferred. And everything is updated in real time," explains Sinha. He adds that ServCorp has a dedicated IT team in their head office in Sydney and has invested US$ 50 million in technology.

The downside is you cannot customise a shared office space. And it does not count as an asset on your balance sheet. But that doesn't matter to the new breed of entrepreneurs or start-ups who are working to a whole new business paradigm.

Nikita Peer

http://www.moneycontrol.com/smementor/news/starting-up/a-solution-to-save-costyour-high-real-estate-bills-813253.html

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City anchor: Despite December cheer, real estate market sluggish

By: Karshni on 05:17

After a slump in the real estate market during most part of last year, December 2012 seems to have seen a substantial recovery in home sales registrations. Though developers claimed that the rise in property registrations are a sign of revival, market watchers claimed the rise was due to marketing gimmicks.

According to data from the Director General of Registrations, December saw 6,193 house registrations as compared to 4,370 in November and 4,115 in October. Total house registrations in 2012, however, remained lower at 58,202 as compared to 58,422 in 2011.

Paras Gundecha, president of MCHI-CREDAI, an umbrella organisation of real estate developers, said, "There has always been a robust demand for property in the city, but people, expecting real estate prices to go down, postpone their decision to buy. Now, with property prices remaining rigid, those who have been sitting on the fence, have finally started buying property.

Various property exhibitions across the city towards the end of the year have also helped attract home buyers, said Gundecha.

A survey in June last year by Knight Frank, a real estate consultancy firm, revealed that Mumbai's real estate market had an unsold inventory of 80,000 units, worth approximately Rs 1,05,000 crore.

Though developers feel that the property market is finally looking up, some say it is due to technical reasons coupled with marketing gimmicks. Attractive property schemes and slashing of prices at pre-launch of projects have led to some increase in home sales, say market watchers. Developers such as Lodha Group have priced certain projects 15 to 20 per cent lower than the market rate.

Jayesh Vyas, president of Association of Real Estate Agents (AREA), said, "Some developers, who have taken up multiple projects, are facing a dearth of working capital. They are being forced to sell at lower rates. Yet another reason for the increase is that many home buyers, who may have bought houses earlier, rushed to register their properties before January, which technically sees a rise in stamp duty rates as ready reckoner rates are revised."

Monthly registrations have seen a gradual rise since October owing to a time gap in the registrations by home buyers who might have booked or finalised houses during the festive month. "The market still does not seem on the road to recovery yet as these are some selective examples of price cuts. On the whole, real estate prices are still rigid with not many buyers,"said Vyas.

Sharvari Patwa

http://www.indianexpress.com/news/city-anchor-despite-december-cheer-real-estate-market-sluggish/1063819/0

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Immune from Bubble

By: Karshni on 05:12

Speculation is highly risky, but it's one reason behind the exciting returns generated by real estate in locations such as the Delhi-National Capital Region (NCR) and Mumbai in the last couple of years.

"Most residential markets, those driven by end-users as well as investors, have given good returns. In the current volatile environment, the situation changes fast," says Neeraj Bansal, director, risk consulting, KPMG India.

There are concerns if a fast price rise of homes is sustainable. Many investors would like to stay away from high-risk zones. What if you could buy a house without worrying about prices going bust?

RISK FACTORS

In open markets, demand and supply decide prices. But residential property prices have been defying this basic principle. In many markets, the number of buyers is down but prices are not cooling off. Recently, the finance minister also asked builders to reduce prices.

Many developers are facing fund crunch. According to reports, the Reserve Bank of India has refused to allow banks to restructure loans to real estate companies without provisioning for potential losses in case of defaults. Restructuring would have allowed the builders to repay on fresh terms and conditions. Now, facing funding pressure, they may have to sell inventory at lower prices.

Investors flipping homes for quick gains pose the risk of creating a bubble if there are not enough actual users"If there is loan restructuring or increase in liquidity, a price correction is unlikely, but if capital availability becomes difficult, developers may have to cut prices to push sales," says Pankaj Kapoor, owner and managing director, Liases Foras, a real estate rating and research firm.

The latter will hurt investor sentiment in markets where there is heavy speculative activity. Unlike the stock market, where buying quality shares on dips is recommended, real estate investors don't have the option of averaging-buying more when the market falls to bring down the average purchase price. Developers may find themselves in a further tight spot if investors looking to benefit from price appreciation flee the market.

Under such circumstances, it is important to know the composition of buyers. Investing in areas where buyers are searching for homes rather than investment avenues can insulate you from any sharp price fall.

Not all property markets have investors trolling upcoming locations in search of a quick profit. In several cities, most buyers are looking for a place to live.

"End-user-driven markets are primarily in the southern region. It is estimated that around 80 per cent demand for residential housing in cities such as Bangalore, Chennai and Hyderabad is from end-users. Northern (Delhi-NCR) and western (Mumbai) regions are primarily investor-driven," says Bansal of KPMG India.

"Significant inflow of workers in South Indian cities, driven by growth in the information technology sector, is supporting the demand for residential units there," he says.

Some analysts also include Kolkata, Indore and Ahmedabad in the list of places where there is more demand from end-users.

"Some Tier-II cities such as Jaipur, Pune and Lucknow are also being preferred by end-users due to good availability of residential options in both affordable and middle segments," says Anshuman Magazine, chairman and managing director, CBRE South Asia, a property consultancy.

In speculative markets such as the NCR, hundreds of projects are coming up in far-flung locations without adequate infrastructure, with developers marketing these as future residential hubs and possible multi-baggers.

USER ADVANTAGES

Prices in markets where end users are the primary buyers are more realistic. In contrast, there is little link between prices and fundamentals in speculative markets such as the NCR.

"Whether bought by an enduser or an investor, the product is the same. The only difference is that investors enter a project early to gain from price appreciation," says Chintan Patel, director, real estate and hospitality, Ernst and Young (E&Y) India.

According to real estate analysts, 80-90 per cent inventory in Delhi-NCR under-construction projects has been bought by speculators. When units in new projects are sold to investors, these generally change hands multiple times during the construction period, which is generally three-four years. Such heavy churning means fast rise in prices. Also, builders who market their projects as an investment increase list prices frequently to keep existing investors happy with notional gains.

But things are changing. "To check heavy churning, a lot of developers have started including a minimum holding period or payment criteria in agreements with buyers. They have also started charging for transfer of under-construction properties," says Patel.

However, not all investors are speculators threatening the equilibrium. There are two types of property investors-first, people buying their second or third home, and second, those looking to flip properties after holding them for a short period.

"Individuals buying an additional home will be more careful and look for investment quality. Even an investor with a horizon of five-plus years will be more careful. But investors looking to churn are like traders for whom homes are just another commodity to buy and sell for a profit," says Patel.

RIGHT BUYS

If you want to earn steady income from a house, you should head to markets where end-users dominate. Here, prices will not rise at an obscene rate but you can expect steady appreciation. Such markets are also less prone to delivery delays.

Identifying an end-user-driven market is not difficult. Just find out how many units have been sold in new residential projects during a certain period.

"One of the factors which one should look at is the absorption level of new launches. An end-user-driven market will be less volatile. In the current economic slowdown, residential housing markets of cities such as Bangalore and Chennai are firm with a marginal drop in absorption compared to last year. However, absorption of new launches in Delhi-NCR and Mumbai has fallen significantly over the last one year," says Bansal of KPMG.

Rental yield can also be used to filter out speculative destinations. "In the domestic market, the annual rental yield from residential properties is 3-4 per cent of the property's value. In contrast, the yield abroad is 5-7 per cent. There is a difference in interest rates on debt as well," says Patel of E&Y. Loans are cheaper in countries such as the US and the UK.

"In India, people are willing to buy homes and give them on rent as price appreciation makes up for low rentals as well as high interest rates," says Patel.

In a speculative market, the end-user interest is low, resulting in apartments lying vacant or yielding low rental income. A high rental yield means the market is driven by end-users. Markets with high investor activity do not have good rental yields.

"Generally, Tier-I cities have strong fundamentals to support price appreciation. So, the right investment locations will be good Tier-I centres or cities with a lot of employment opportunities," says Patel.

Pritam P Hans  

http://businesstoday.intoday.in/story/real-estate-buy-a-house-in-market-of-less-speculation/1/191071.html

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Real estate sector makes a pitch for infrastructure status for housing

By: Karshni on 05:35

Hit by slackening demand amid economic slowdown and high interest rates, the real estate sector has asked for infrastructure status for the housing sector in the Budget for 2013-14, which would help it avail of tax benefits and easier flow of credit. The housing ministry has said at least low-cost housing should get this status.

The National Real Estate Development Council (Naredco) said the sector should get infrastructure status and rental housing should be made more attractive to address the shortage of houses.

The deduction from rental income under Section 24(a) of the Income-Tax Act should be increased from 30 per cent to 50 per cent, according to the council. “This will promote rental housing. And, for women and senior citizens, the deduction could be 100 per cent, keeping social requirements and empowerment of women in view.”

Brotin Banerjee, managing director and chief executive officer of Tata Housing Development Co, said he expected a raise in the income-tax exemption limit to Rs 3 lakh and a reduction in excise duty rates to put higher disposable income at the hands of the public. He further demanded that service tax be done away with in the housing sector. “There should be no service tax for residential construction, to motivate consumers to increase the buying activity and revive demand,” Banerjee said.

Developers blamed the tight monetary policy of the Reserve Bank of India for slackening housing demand. Despite pressure from several quarters, RBI has refused to cut interest rates since April last year, citing inflationary concerns. According to a Cushman and Wakefield report, there was a 16 per cent drop in the residential market across major cities in India in 2012.

Realty players were cautious in launching projects as the gap between a launch and the absorption numbers reduced to 32,000 units in 2012, compared with 82,000 and 94,000 units in 2010 and 2011, respectively, according to a Knight Frank report. Consultancy firm DTZ said it expects an extension of an interest subsidy scheme with enhanced limit on housing. “We hope the finance minister relaxes norms pertaining to external commercial borrowing (ECB) for low-cost housing,” said Anshul Jain, chief executive officer of DTZ India. The government should look at development of special residential zones, he added.

Budget 2012-13 saw an interest subsidy scheme of one per cent on housing loans up to Rs 15 lakh, where the cost of a house does not exceed Rs 25 lakh for another year. Then finance minister Pranab Mukherjee had announced measures to address the shortage in low-income housing during his last Budget speech by allowing ECB for low-cost housing units and setting up of a credit guarantee trust fund to ensure better flow of institutional credit for housing loans. Builders in the National Capital Region are currently looking more at ECB, which will carry on in 2013, said Raj Sharma, managing director, Best Property Deals.

Housing Minister Ajay Maken, in a recent interview with Business Standard, had said affordable housing should be granted infrastructure status so they could get loans at affordable rates.

“Now, affordable housing comes under commercial real estate. Once it’s a part of the infrastructure sector, four per cent of bank loans should be reserved as priority loans for affordable housing,” he had said.

Like for infrastructure projects, a delay of more than six months should not be considered as non-performing assets, he had suggested.

Dilasha Seth

http://www.business-standard.com/india/news/real-estate-sector-makespitch-for-infrastructure-status-for-housing/499467/

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Outlook for real estate sector negative-to-stable in 2013: India Ratings

By: Karshni on 08:38

India Ratings has revised its outlook for the Indian real estate sector to 'negative to stable' for 2013, from negative in 2012. 

The rating agency sees signs of improvement in terms of stability of margins and the easing of liquidity pressures, with free cash flows turning positive since the second half of 2012. 

According to the report, in financial year 2011-12, companies generated positive free cash flows and the trend continued into the first half of 2012-13. "Apart from stable demand, other efforts to improve liquidity included strategies like monetization of land and non-core assets, exercising prudence in new launches and adopting the JV route to developing projects," India ratings, which is part of the international ratings agency Fitch Group, said in a report. Also, EBITDA margins, which steadily declined to 30% in 2012 from about 55% in 2008, stabilized at that level during 2012. "That this was possible despite increases in construction costs, signals a potential return of stability," the report said. 

However, demand remains subdued and EBITDA margins low, leading to weak credit metrics for companies in the sector, India Ratings said. 

According to India Ratings, demand for residential real estate stabilized in 2012, with banks' exposure to home loans growing by about 17.4% in November 2012 compared with the previous year. However, exposure to the commercial real estate sector increased by just 1.7%, during the first 11 months of 2012. 

Also, according to the report, the sales of large players declined marginally in 2012. "Economic weakness continued with the associated apprehension of employee downsizing and salary freezes, which adversely affected consumer sentiments," the company said in the report.

High inflation and high interest rates continue to reduce affordability, and high property prices will continue to hinder improvement in demand, according to the report. "Commercial demand will be hit by subdued job growth in the IT sector, where average quarterly net headcount addition in 2012 has been around 28%-32% lower than in the previous two years. Demand for retail space is likely to be muted in the near term," the report said. 

With funding options limited, the key to sustainability for real estate companies is growth in sales, India Ratings said. Private equity inflow, too, into the sector has been moderate. "The limited funding options imply a continuance of dependence on operational cash flows for funding growth and debt servicing," the agency said in the report.

http://timesofindia.indiatimes.com/city/chennai/Outlook-for-real-estate-sector-negative-to-stable-in-2013-India-Ratings/articleshow/18047807.cms

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Testing times for real estate stocks

By: Karshni on 08:53

In spite of concerns on the sector’s financial health, realty stocks have spiralled up in the past one year. The BSE realty index returned around 35%, much more than the benchmark index, recouping after being battered down for nearly three years prior to that. That said, any further rise in stock prices of realty firms hinges on an increase in demand and higher sales, although that is unlikely to be the trend in the December quarter.

The uptick in stocks seen so far has been the culmination of several factors. One, investors’ belief that realty firms have hit the bottom; two, improved financials as realty firms tried to lower debt by raising funds through equity or divesting non-core assets as with DLF Ltd. And the third factor is the hope that a fall in inflation and interest rates will buoy the sector’s profitability in the forthcoming quarters. Through the slump, firms like DLF, India Bulls Real Estates Ltd and Unitech Ltd have tried to hasten execution and cut construction costs to ease pressure on profit margins. Although the December quarter results will be a mixed bag, the operating margin for the sector should expand by around 150 basis points (bps) from the year-ago period. One bps is one-hundredth of a percentage point.

Indeed, cost rationalization when coupled with higher demand and sales, will improve the return on equity of real estate firms. Historically, sales have improved with a reduction in interest rates, which is expected in the current year. A Crisil Research report states that absorption of new residential units across six key cities is likely to increase at a compounded annual growth rate of 7% in the next two years, with Mumbai registering the highest CAGR of 14% in the next two years due to huge pent-up demand. Meanwhile, the Bangalore realty market is likely to see a stable rise in sales with firms such as Sobha Developers Ltd and Prestige Estates Ltd benefiting.

Analysts believe that a gradual recovery in sales and capital values in real estate is expected by the second half of calendar year 2013. Moreover, commercial leasing activity is likely to take a little longer to improve, given the recessionary economic conditions. December quarter revenue growth is likely to remain more or less flat, with profitability improving because of cost-reduction measures and better product and market mix by developers.

Most positive factors such as a reduction in interest rates and improved profit margins are built into present stock price valuations. Any further increase in share prices will come only from actual sales growth translating into robust revenue accretion.

http://www.livemint.com/Opinion/jwEmzSqAiOFzCdmuisEG3I/Testing-times-for-real-estate-stocks.html

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Mumbai, Delhi NCR and 6 other cities to remain favoured real estate investment destination in 2013

By: Karshni on 04:49

I want to buy a property this year' is likely to be one of the key resolutions of many Indians in 2013. And, not necessarily for living in that house, but also for investment purposes. After all, property, along with gold and fixed deposits, continues to maintain its stronghold over the average Indian investor's psyche. For many investors, the allure of real estate has not dimmed, despite the slump the sector witnessed in 2012.


"With property options ranging from Rs 3,200-15,000 per sq ft and investor returns in the range of 18.6-29% per annum residential real estate will emerge as a promising asset class for the next 5 years.

From the perspective of return, real estate investment especially in India has garnered superior returns in comparison to other asset classes over a long term. But the truth remains that Investment in real estate is burdened with decisions based on gut feeling and tips which result in poor investments," says Gulam Zia, executive director, retail, advisory and hospitality with property consultancy firm Knight Frank India in its investment advisory report 2012.

Clearly, the tougher part is zeroing in on the right destination, price and project. This is because unlike stocks and mutual funds, whose performance can be easily tracked thanks to published prices and net asset values (NAV), the real estate sector lacks transparency.

Nevertheless, you can always bank on certain parameters to make the right choice. "Identifying the right markets becomes easier if one looks for certain at key market triggers. The critical ones that highlight the potential of any property markets include existing infrastructure readiness, implementation timelines for new infrastructure initiatives, demand for commercial space in the market (leading to job creation), social infrastructure, and price trends," says Om Ahuja, CEO, residential services, Jones Lang LaSalle India.

According to real estate consultants these are the cities and the locations within that will continue to be attractive this year:

MUMBAI

According to Knight Frank's investment advisory report 2012, Wadala and Chembur are expected to witness price appreciation of 133% and 125% respectively between 2013 and 2017. The factors in its favour? Strategic location, proximity to premium office markets and upcoming infrastructure projects like Monorail and Eastern Freeway project.

NAVI MUMBAI

Within Navi Mumbai, localities like Ulwe and Kalamboli look promising. "Ulwe will immensely benefit from the upcoming Seawood-Uran suburban rail network, which will connect it to the prominent office hubs through a mass rapid transport system," notes the Knight Frank report.

Then, there are Kharghar and Panvel. "In Noida and Navi Mumbai, there are market drivers over and above job creation at play - namely superior infrastructure and affordability. Navi Mumbai and Noida are absorbing investor demand from Mumbai and Delhi, where affordability plays important role for investors. In the case of Navi Mumbai, one can further extrapolate the investment potential to Kharghar, Kalamboli and Ulwe," explains Ahuja of JLL.

NATIONAL CAPITAL REGION

Knight Frank expects Noida Extension and Dwarka Expressway to consolidate their position as attractive investment destinations. Property rates in Noida Extension could see a 111% price appreciation. JLL, too, places its bets on Noida's extended growth corridors of Noida Extension and Noida Expressway.

PUNE

Another city that has consistently made it to the hot property destinations list, Pune looks set to maintain this reputation this year as well. " With four investment destinations namely Hinjewadi, Ravet, Tathawade and Wakad, Pune has the maximum number of promising residential property options...Proximity to employment hubs of West Pune and strategic location on the Mumbai-Pune Bypass Road will immensely benefit these residential markets," says the Knight Frank study.

BANGALORE

IT and ITES will continue be the key driver for growth in Bangalore this year as well. "North Bengaluru will be the biggest beneficiary of the Bengaluru International Airport (BIA) and is expected to emerge as the new Central Business District (CBD) of Bengaluru within the next decade. Hebbal will be the biggest beneficiary of this development. Destinations like KR Puram in East Bengaluru possess the potential to provide a lifestyle shift, which is possible generally in projects developed on large land parcels that facilitate high rise premium developments with plush amenities," notes the Knight Frank report.

CHENNAI

"Pallikarnai and Medavakkam iwll witness price appreciation of 93% and 103% respectively in the next 5 years," predicts the Knight Frank study. These destinations will benefit from IT/ITeS and automobile industries located on the Old Mahabalipuram Road (OMR) and GST Road.

HYDERABAD

Hyderabad, like other cities mentioned here, scores high on the job creation front, which in turn, translates into demand for residential properties. "In all these cities, massive job creation will further fuel the demand for residential property for quite a while to come. Every individual employed by IT/ITES and BFSI industries is eventually a buyers of a residential apartment. The current absorption of residential apartments in Hyderabad, Bangalore, Pune and Chennai shows the lion's share of demand coming from IT/ITES and BFSI employees," says Ahuja.

http://articles.economictimes.indiatimes.com/2013-01-11/news/36279724_1_knight-frank-india-real-estate-ulwe

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Real Estate Regulation Bill likely in Budget session

By: Karshni on 06:08

Real Estate Regulation Bill likely in Budget session

The government is likely to come up with a Bill in the forthcoming Budget session of the Parliament to regulate the real estate sector, Housing Minister Ajay Maken said. “Inter-ministerial consultations are still on. Cabinet clearance will be sought once inter-ministerial consultation is over,” Maken said. The draft legislation, pending since 2009, aims to establish a regulatory authority for the realty sector, ensure sale of immovable properties in an efficient and transparent manner and protect consumer interest. The most important proposal in the draft Bill is setting up a regulatory authority in every state.

New home launches drop 16% in top 8 cities

AROUND 1.62 lakh housing units were launched last year in India’s eight major cities – a drop of 16 per cent from 2011, global property consultant Cushman & Wakefield said. The cities tracked by the consultant are NCR, Mumbai, Pune, Bengaluru, Hyderabad, Chennai, Kolkata and Ahmedabad. A majority of the units were launched in the mid-price segment comprising about 83 per cent of total launches, it added. NCR, Chennai, Bangalore, Hyderabad and Ahmedabad witnessed decline in home launches compared with 2011, but Mumbai, Pune and Kolkata reversed the trend with higher number of launches. NCR saw maximum launches of new homes at nearly 54,500 units in 2012, followed by Pune (24,000), Mumbai (22,500) and Chennai (20,800). High inflation as well as home loan interest rates and slow economic growth had a strong impact on the end users making them more price sensitive than previously experienced, the report said.

Godrej Waterside to be merged with parent firm

Godrej Properties said the company will merge its fully-owned subsidiary Godrej Waterside Properties into itself. In a filing to the BSE, Godrej Properties has informed that its board, approved the scheme of amalgamation of Godrej Waterside Properties Pvt Ltd with Godrej Properties under sections 391 to 394 of the Companies Act, 1956.

IndiaHomes to foray into loan servicing biz

Real estate brokerage firm IndiaHomes will be investing $20 million through private equity infusion over next two years to fund its foray in home loan servicing as well as to expand geographical reach. IndiaHomes has so far invested around $14 million for

expanding its operations in the country. These funds were raised through a mix of private equity infusion from Helion Venture Capital India and US-based Foundation Capital and its promoters.

http://www.indianexpress.com/news/city-lights-real-estate-regulation-bill-likely-in-budget-session/1058109/0

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Real estate in fix: New home launches decline 16% in top 8 cities

By: Karshni on 04:59

About 1.62 lakh housing units were launched last year in India's eight major cities -- a drop of 16 per cent from 2011, global property consultant Cushman & Wakefield said today.

The cities tracked by the consultant are NCR, Mumbai, Pune, Bengaluru, Hyderabad, Chennai, Kolkata and Ahmedabad.

"Residential market across major cities in India witnessed a drop in total number of units launched by approximately 16 per cent over previous year. 2012 recorded launch of about 1,62,000 new units of residential properties across the eight major cities," the report said.

A majority the units were launched in the mid-segment comprising about 83 per cent of total launches, it added.

NCR, Chennai, Bengaluru, Hyderabad and Ahmedabad witnessed decline in home launches compared with 2011, but Mumbai, Pune and Kolkata reversed the trend with higher launches.

NCR saw maximum launches of new homes at nearly 54,500 units in 2012, followed by Pune (24,000 new units), Mumbai (22,500 units) and Chennai (20,800 units).

"In 2012, the residential market saw proactive and innovative marketing and new launches of specialist projects on one side but restrained activities in terms of large scale development as most developers were cautious not to overestimate the end user demand market," C&W Executive Managing Director (South Asia) Sanjay Dutt said.

High inflation as well as home loan interest rates and slow economic growth had a strong impact on the end users making them more price sensitive than previously experienced, he said.

Dutt noted that cash-strapped developers were not willing to take up projects that could fall short in interest from end users, keeping their risk exposure to the minimum.

"Investor activities however have been strong in the residential market, with many viewing this as the right time to enter the market with the much needed capital for developers. This has been the primary reason why most markets across categories experienced a rise in values," he said.

PTI 

http://www.indianexpress.com/news/real-estate-in-fix-new-home-launches-decline-16--in-top-8-cities/1056954/0

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Why black money is making real estate a Ponzi scheme

By: Karshni on 03:40

The trend of rising property prices due to the circulation of black money is dangerous. The fact that every transactor from a crook to a salaried professional is being sucked into dealing with black money makes real estate even more dangerous. The only way this trend can be stopped is by the income tax authorities cracking down on black money in real estate.

Now the million dollar question is “Is there political will in allowing the IT department to crack down on real estate?” If the answer is no then everyone should listen to “Hotel California” by the Eagles before entering the real estate market.

The real estate Ponzi scheme is one primary reason why real estate prices are going up while rental yields are going down . Reuters

The tax authorities will do well to scrutinise every real estate transaction taking place in the country. It is high time that the plug is pulled on the Ponzi scheme that is real estate in India.

The real estate Ponzi scheme is sucking in even normal working class professionals who otherwise in their lives would not have any contact with black money. The real estate Ponzi scheme is one primary reason why real estate prices are going up while rental yields are going down .

Real estate is the talk of the town and anyone and everyone in any place in India talks about rising real estate prices. However buying or selling real estate is a nightmare for everyone, especially salary earners.

The reason that real estate transactions are a nightmare for everyone is the cash component involved in the transactions. Obviously the first part of the nightmare starts with the dealing with the brokers, agents, builders and every other peripheral person involved in the transaction. One conversation with the real estate dealers is enough to put one off buying or selling property in India.

The trend in every part of the country is part of the real estate transaction takes place in cash. Hence a salaried professional wanting to buy a property has to cough up cash and that would mean several hundred trips to ATMs. The same applies to a person selling property, as the buyer who is invariably one who has sold a property and has got cash from sales wants to reinvest the cash.

The Indian government, to its credit, has made it more and more difficult to launder cash and that is forcing any transactor in real estate to deal more and more in real estate as there is no place to invest the black money that is prevalent in real estate dealings.

The black money floating in the real estate market is being circulated within the market and has no outlet. This black money is forcing property prices higher as one sale transaction results in demand for real estate as black money has to be deployed somewhere. This circulation of black money in a single market is driving prices higher and higher. However, at the same time, genuine demand for rentals, especially in commercial real estate, is low and that is driving down rental yields. In short the real estate market in India is flying high not on the back of demand and supply but on the back of black money having no other place to go.

The question is where will this all end? An investor wanting to book profits in real estate ends up with taking cash payment. The investor cannot exit the real estate market as he is holdings wads of cash that cannot be deployed elsewhere. Unlike markets such as equities, bonds and commodities where exit is easy and one can wait to enter, the real estate market has no exit. As the song Hotel California goes “ We are just prisoners here of our own device”. Once one enters the property market one can never leave it even if he or she wants to.

Arjun Parthasarathy is the Editor of www.investorsareidiots.com, a web site for investors.

http://www.firstpost.com/investing/why-black-money-is-making-real-estate-a-ponzi-scheme-580628.html

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Year 2013 will bring a paradigm shift in the real estate sector

By: Karshni on 05:15

The passage of two crucial bills, Real Estate Regulation Bill and Land Acquisition Bill, in particular, sometime in the next few quarters this year will boost the sentiment of all stakeholders and herald a new order in the country's real estate , Pranab Datta, chairman of Knight Frank India, says.

The recent approval of FDI in multi-brand retail by Parliament will attract foreign investment , which will not only benefit the retail industry but also boost the demand for commercial real estate. It also showcases the government's seriousness in introducing reforms in India — and this is just a preview of things to come, Datta says.

Additionally, the RBI can be expected to lower interest rates in the coming months which will benefit developers as well as consumers. The change in sentiment on account of the above measures will have a positive impact on all the segments of real estate — whether it is retail, office or residential and will certainly make 2013 a much better year in comparison to last year.

Against this, 2012 has been disappointing for real estate as falling sales and rising construction costs dampened the market sentiment. This is reflected in the financial performance of real estate companies, which have taken a hit in their revenues and profit during the year.

Jones Lang LaSalle (JLL) in its report also said that the outlook for the real estate sector in the New Year looks promising in the NCR. However, all the stakeholders like consultants and developers feel that those areas where the prices have not peaked and world-class infrastructure like roads, parks sports complexes are being developed by the authorities concerned and developers will see the maximum appreciation.

Om Ahuja, the CEO of Residential Services of JLL, says that the supply trends in real estate indicate that it is in a state of flux. The supply of products priced below Rs 3,000 per sq ft is reducing markedly. From 43% in the fourth quarter of 2009, supply in this segment will come down to 8% in the same period of 2013. At the same time, supply in the price range of Rs 5,000-10 ,000 per sq ft is expanding. He said aspirational and affordability levels are driving such trends.

However, smart residential property investors will identify the right products priced below Rs 4,000 per sq ft in key growth cities as best options. In cities like Bangalore, Hyderabad, Chennai, Pune, Noida and Gurgaon, one can still find good projects in this price range for long-term investments, which would yield good appreciation .

JLL in its report on the NCR region says that areas like Dwarka Expressway, New Gurgaon-Manesar , Noida Extension and Noida Expressway show huge potential for investors as well as end users. It says that Dwarka Expressway, because of its infrastructural advantages and locational benefits, enjoys huge upside.

The area has been able to successfully withstand the heat that many other areas and pockets of the NCR faced. The price sustainability and appreciation trends of the recent past, and also its relative affordability, will continue to maintain investor interest and confidence . Other important areas to watch out for in 2013 for residential realty, the report says, will be New Gurgaon and Manesar.

The increase in commercial developments, its developing infrastructure, continuing affordability and the proposed connectivity via Metro and the expressway will put this region on the radar in 2013.

Noida Extension and Noida Expressway will continue to generate interest as more and more IT-ITeS companies shift their offices to Noida Expressway for its rental affordability when weighed against the rentals in Gurgaon, the Cyber City.

Noida Expressway will further increase its appeal as a residential hub. The comparatively better infrastructure, easy accessibility and availability of affordable options will appeal to investors and end users, the report says. Supply in this region will not be an issue and good levels of absorption with appreciation in capital values are a high possibility in 2013.

Om Ahuja of JLL also says that most research reports highlight factors like oversupply and low absorption. Cities with a high level of job creation continue to see high volumes of real estate supply and absorption. Cities with few or no economic drivers to spur the growth of employment fall behind, no matter what other factors seem to work in their favour, he says. Earlier, Mumbai and Delhi attracted most of the talent from rural areas.

Today, cities like Bangalore, Hyderabad, Chennai, Pune and Gurgaon have taken pole positions and are all set to overtake Mumbai and Delhi.

Prabhakar Sinha, TNN

http://articles.economictimes.indiatimes.com/2013-01-05/news/36161818_1_real-estate-regulation-bill-new-gurgaon-and-manesar-knight-frank-india

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An optimistic future: Government's concern towards real estate fuels hopes

By: Karshni on 04:35

Developers across the city are expecting favourable policies and industry status in the New Year.

While the end of 2012 witnessed the initiation of a few regulations by the government benefitting the realty industry, 2013 can be considered as the starting point for these policies to be executed. 

Several experts feel that 2013 would witness the much needed steps to be formulated for the realty sector. 

Sukhraj Nahar, CMD, Nahar Group says, "The real estate industry is currently passing through a transformation. All of its participants have made serious efforts to bring transparency in 2012. Going forward, we feel this will help both industry players and stakeholders. The industry is still unorganised and its efforts with the government for awarding them industry status are in progress." Nahar also has a lot of expectations from the government in terms of various positive initiatives like priority lending from banks, immediate rate cut by RBI and single window clearance for project approvals. 

The economy had its share of ups and downs during the last year, but it picked up in the end because of a few government initiatives. Samujjwal Ghosh, Head of Marketing, Lodha Group says, "The Indian economy slowed down between mid 2011 and mid 2012, but then bottomed out and started rebounding. This was partly because interest rates started falling and partly because the government started taking proactive measures to push up the economy in the last few months. Also, last year many developers adopted a wait and watch attitude due to changes in FSI norms and approvals, which will now change as the sector will be buoyant this year. This is good news for the industry as well as for customers being a win-win situation for both." 

Lodha plans on continuing with the development of their city centre project New Cuffe Parade. Ghosh lists Wadala as a prime destination to invest in property in 2013 as it has proximity to the premium business districts of Bandra Kurla Complex and is the only confluence of the Monorail, Metro and Eastern Freeway. 

Joint government efforts can help revive the real estate sector and take it to new heights. 

Lalit Kumar Jain, CMD, Kumar Urban Development Ltd and President National - CREDAI, believes that if the government shows concern towards the industry, they expect a lot from the government like the Finance Ministry and RBI working together to strengthen demand and supply by a special housing development policy. He says, "We also expect the Housing Ministry to work with the Finance Ministry and work out affordable housing through various measures in the Finance Bill." 

Several essential issues in the real estate industry need to be addressed immediately. Approval of single window clearance, stamp duty and VAT, among many others, is important for the sector to grow. Dhaval Ajmera, Director, Ajmera Realty & Infra India Ltd says, "2013 is expected to be vibrant for the realty industry. The need of the hour is quintessential reforms to be passed along with the approval of single window clearance to ensure speedy approval. Matters which urgently need to be addressed include stamp duty, VAT, service taxand labour tax." 

The year 2012 has seen maximum number of steps taken by the government to boost the realty sector. As a result developers believe that 2013 would be a positive year for the sector. A KalpataruBSE 2.15 %spokesperson says, "We are expecting 2013 to be more robust compared to the past few years based on the government's impetus on the infrastructure development including the Mumbai Metropolitan Region; coupled with positive steps taken by the Centre to find concrete solutions for issues in the industry." 

The Kalpataru spokesperson also feels that the Finance Ministry's motivation through softening of interest rates and lending more to the real estate sector will have a positive impact on both developers and consumers. Thereal estate market could start to perform better as the easing of FDI norms will begin to show results during the second half of the year, believes Jain. He says, "The economy will also recover in 2013 which in turn will perk up the real estate sector in India. With the government trying to introduce developer and buyer friendly policies, the outlook for real estate in 2013 does look promising." 

NISHA SWAMI,TNN 

http://economictimes.indiatimes.com/markets/real-estate/realty-trends/an-optimistic-future-governments-concern-towards-real-estate-fuels-hopes/articleshow/17922322.cms

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