The paradox of India’s real estate business

By: Karshni on 05:09

Over the last two years, India has been battling various economic issues such as rising fiscal deficit, a falling rupee and increasing food inflation. No, nothing new there. And what does this have to do with real estate? Quite a lot.

A country’s economic performance has direct repercussions on how its real estate market behaves. This is especially true for the residential property segment. More prosperity means higher financial confidence among home buyers, and this leads to a greater demand for homes. The opposite is, of course, equally true.

We have already seen that overall sales of residential real estate in India have gone down rather markedly in major cities like Mumbai, Delhi and Chennai in the first half of 2013. The market was far more encouraging in the same period last year. Bangalore and Pune performed a little better but not by much.

There are various reasons for this slowdown in the sale of homes in India. One of them is that prices have kept rising in the bigger cities, despite actual sales decreasing. Also, home loans have got more expensive because of increased interest rates. Many Indians just aren’t earning as much this year as they did before.

Residential property prices have gone through the roof in cities like Mumbai, making homes in the city more or less unaffordable to all but the ‘creamy layer’. The hue and cry over Mumbai’s developers refusing to lower prices is understandable, but there are also some ground realities of the real estate business that cannot be overlooked.

Most people do not realize just how challenging the real estate development process really is. It is not as simple as buying a plot of land and erecting a building on it. Developers have to run a gamut of permissions and licences before they can even think of starting construction – 57 of them (and sometimes even more).

Each of these permits and licences increases the amount of money they have to spend on the project. While they wait to complete the bureaucratic processes, they are stuck with non-productive land for which they have to pay revenue. On top of it all, the cost of building material and construction labour is constantly rising.

It is pretty clear by now that most people in cities such as Mumbai and Delhi are unwilling to buy homes in highly priced projects. The time has definitely come for developers to lower their profit expectations and prices. At the same time, they have to keep their businesses in the green. That’s the paradox.

 

 

http://blogs.reuters.com/india-expertzone/2013/07/31/the-paradox-of-indias-real-estate-business/

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Real estate sector to be big creator of economic opportunities in 2013: Study

By: Karshni on 13:43

India's real estate sector is estimated to have a total supply pipeline of close to 3.6 billion sq ft lined up for completion in the year 2013, with about 98% of this being concentrated in the residential, said a report prepared by CBRE titled "Assessing the Economic Impact of India's Real Estate Sector".

The report provides a broad view of the extent of economic opportunities generated by the real estate and construction sector in the country. It described the real estate sector as an important component of the construction industry.

Anshuman Magazine, chairman and MD, CBRE South Asia Pvt Ltd, said, "The potential for development and growth in the real estate sector is tremendous. It is expected to generate over 17 million employment opportunities across the country by 2025, thereby making a significant contribution to the GDP. However the industry does require the support and encouragement of policy makers in order to achieve its goals."

Lalit Jain, chairman, Credai and CMD, Kumar Urban Development Ltd added, "The report portrays the conservative status of the sector's contribution. For the first time a detailed attempt has been made to give facts on its importance in terms of GDP, industrial production employment opportunities.''

As per the report, the total economic footprint generated by the construction of this real estate pipeline will require a total investment of about Rs 254,000 crore, will help generate revenues worth Rs 370,000 crore, and provide employment to about 7.6 million people across the country in 2013. "The total contribution of the real estate sector to the nationalGDP has been estimated to be about 6.3% in 2013. Yet, this footprint is restricted by numerous challenges inhibiting the sector such as high borrowing costs, lack of institutional funding, lengthy approval processes and slow and uneven infrastructure development,'' it said.

http://timesofindia.indiatimes.com/business/india-business/Real-estate-sector-to-be-big-creator-of-economic-opportunities-in-2013-Study/articleshow/21454496.cms

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Real Estate Sector to contribute about 6.3% to the country's GDP in 2013

By: Karshni on 13:42

India's real estate sector is estimated to have a total supply pipeline of close to 3.6 billion sq ft lined up for completion in the year 2013, with about 98% of this being concentrated in the residential segment.

This was released by the latest CB Richard Ellis, CBRE report titled "Assessing the Economic Impact of India's Real Estate Sector' that provides a broad view of the extent of economic opportunities generated by the real estate and construction sector in the country.

"The potential for development and growth in the real estate sector is tremendous. It is expected to generate over 17 million employment opportunities across the country by 2025, thereby making a significant contribution to the GDP. However, the industry does require the support and encouragement of policy makers in order to achieve this goal," Anshuman Magazine, Chairman & MD, CBRE South Asia Pvt. Ltd.

As per the report, the total economic footprint generated by the construction of this real estate pipeline will require a total investment of about INR 254,000 crores, will help generate revenues worth INR 370,000 crores, and provide employment to about 7.6 million people across the country in 2013. The total contribution of the real estate sector to the nationalGDP has been estimated to be about 6.3% in 2013 alone.

Yet, this footprint is restricted by numerous challenges inhibiting the sector such as high borrowing costs, lack of institutional funding, lengthy approval processes and slow & uneven infrastructure development. Once these bottlenecks are addressed, we can expect the economic contribution of the sector to increase considerably, with its share of the GDP to more than double from 6.3% in 2013 to almost 13% by 2025. With the removal of the inherent bottlenecks present in the sector, the long term prospects appear highly positive for the sector, with a potential increase in completed space from 3.6 billion sq ft in 2013 to about 8.2 billion sq ft in 2025. This will generate significant employment opportunities, with annual employment expected to increase from 7.6 million in 2013 to almost 17 million in 2025, thereby providing substantial socio-economic opportunities for growth in the country

"The report portrays the conservative status of the sector's contribution. For the first time a detailed attempt has been made to give facts on its importance in terms of GDP, industrial production employment opportunities. The projection given can be accelerated if reforms are implemented," said Lalit Jain, chairman, CREDAI and CMD, Kumar Urban Development Ltd.

 

 

 

http://timesofindia.indiatimes.com/business/india-business/Real-Estate-Sector-to-contribute-about-6-3-to-the-countrys-GDP-in-2013/articleshow/21454018.cms

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Foreign investors bullish on Indian realty, raise Rs 11,854 crore despite scepticism

By: Karshni on 13:41

While realty funds are cautious, they are looking for future opportunities as well. Sovereign wealth fund of Gulf ADIA has invested in the offshore fund of Kotak Realty Funds -run by KotakMahindra Bank -to pump in $300 million (Rs 1,800 crore) on its behalf in the Indian real estate sector.
ADIA, owned by the Emirate of Abu Dhabi, has also appointed Aditya Bhargava, an India-dedicated investment manager, to look at options to invest in the country. Bhargava had earlier served as the managing director at SITQ India.

However, diminishing interest of private equity funds has led to a sharp drop in investment in this sector. Besides, slowdown in construction activities has left funds with fewer projects to invest in. According to Cushman and Wakefield, PE investments in real estate was at $276 million (Rs 1,638 crore) in first half of 2013, which is 46% lower than the first half of 2012: PEs had invested $514 million (Rs 3,050 crore) in the first half of 2012.

"PE funds continue to show keen interest in the market with a number of deals in discussion. This decline in the quantum of PE real estate investment was essentially due to less number deals (12 in H1 2013). Funds are looking at only embarking on projects with strong fundamentals," says Dutt. In June, Oman's State General Reserve Fund and the Government of Singapore Investment Corp (GIC), investment firm Temasek committed to invest $200 million in HDFC Real Estate Fund. These funds will primarily invest in residential projects and redevelopment in cities like Chennai, Pune, Bangalore, Mumbai and Delhi.

"The fund already has a deal pipeline across these cities and has a target net internal rate of return of over 20% with an average ticket size of 40-50 crore," said the person, who did not want to be named.

The Shapoorji Pallonji group has received commitment of $200 million (Rs 1,200 crore) from a Canadian Pension Fund in the $500-million realty fund of Shapoorji Pallonji Investment Advisors. The fund will invest part of its corpus in the development projects of Shapoorji Pallonji group, while at least 60% of the investments will be in external projects.

"As of now, there's a paucity of new quality deals in the market, and due to this, focus is shifting to refinancing than new deals. Almost all funds have had their learning over the last 5-6 years and are now very selective - looking for right opportunity and quality of projects. Transactions have almost dried up in the last 2-3 months," says an official of a realty fund.

In another such transaction, sovereign wealth fund Qatar Investment Authority (QIA) is investing $300 million (Rs 1,800 crore) in Bangalore-based real estate developer and South India's largest office space builder RMZ Corp. QIA will back RMZ to buy IT parks worth Rs 3,000 crore. Jointly, both partners will look at acquiring commercial spaces across Bangalore, Hyderabad, Chennai and Pune. RMZ has already identified the project and the money is expected to be deployed by March 2014.

 

 

 

 

http://economictimes.indiatimes.com/markets/real-estate/news/foreign-investors-bullish-on-indian-realty-raise-rs-11854-crore-despite-scepticism/articleshow/21472535.cms?curpg=2

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Over $2bn investment available for real estate, but investments down by 46%: Cushman & Wakefield

By: Karshni on 13:39

Global real estate consultancy, Cushman & Wakefield's latest report on the private equity (PE) in real estate investment, reveals that approximately $2 billion (Rs 11,854 crore) is available with private equity firms ready to be deployed in real estate, despite a drop in the PE investment in the first half of 2013.

While PE investments in real estate was recorded at $276 million (Rs 1,638 crore) in H1 2013, which is 46% lower when compared to first half of 2012 ($514 million /Rs 3,050 crore), PE funds continue to show keen interest in the market with a number of deals in discussion. This decline in the quantum of private equity real estate investment (PERE) was essentially due to fewer deals (13 in H1 2013) as the average ticket size of deals remained same.

In reaction to the current prevailing volatility in the market, including slower growth of the Indian economy, political stalemates and depreciation of rupee, the pace of growth of the real estate industry in India has been impacted. While, there is a strong investment sentiment for PERE transactions in India, however, they display a reflection of the market sentiments, where funds are looking at only embarking on projects with strong fundamentals.

Commenting on the report, Sanjay Dutt, executive managing director south Asia, Cushman & Wakefield said, "It is noteworthy that despite a slowdown in the construction market and reduced number of investible projects in India, real estate features as the fourth-most invested sector by private equity funds in the latest report. It has traditionally been one of the most preferred investment categories on account of buoyant demand for real estate."

Sanjay further said, "Currently, it is estimated that approximately $2 billion (Rs 11,854 crore) is ready to be deployed in the real estate sector of the Indian market. The fund raising environment (domestic and offshore) has consistently improved with more quality capital available for the sponsors with demonstrated track record. Investors are willing to invest in real estate; however, they are exploring the market for right real estate projects. We anticipate that in the next few quarters, after some regulatory and politico- economic environment are regularized, the momentum in real estate will pick up throwing open more investible options for the investors."

The total value of investments in the residential segment recorded at $156 million (Rs 9.3 billion) in H1 2013 witnessed a drop of 48% over last year. The total value of investments in the office segment was also lower in H1 2013 at $118.1 million (Rs 7.0 billion). However, there is a strong growing trend towards investments in ready office space. The growing stability of the market is reflected by the continuous growth of the core investors (number and value) with over $1.3 billion (Rs 7,705 crore) invested in ready office space during the last three years.

In 2013, the highest value of private equity investments is noted in Pune at $131.6 million (Rs 7.8 billion) followed by Mumbai at $67.5 million (Rs 4bn), NCR at $38.8 million (Rs 2.3bn) and Bengaluru at $16.9 million (Rs 1bn).

Pune witnessed transactions such as the Panchshil Realty and Ireo Management Ltd SEZ by Blackstone for $75.9 million (Rs 4.5 billion). 

http://timesofindia.indiatimes.com/business/india-business/Over-2bn-investment-available-for-real-estate-but-investments-down-by-46-Cushman-Wakefield/articleshow/21485193.cms

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Centre pushes for real estate bill

By: Karshni on 07:34

With the UPA government pushing hard to introduce the proposed real estate regulatory bill in the monsoon session of Parliament, Union Ministry of Housing is working on issuing guidelines to states on urgent need for streamlining approval procedures for real estate projects.

The guidelines will contain suggestions made by a panel headed by Dhanendra Kumar, former chairman, Competition Commission of India, constituted by the Ministry of Housing for streamlining approval procedures for developmental projects.

The suggestions include simplifying the procedure of approval of different agencies, by both Central and state governments and removing unwanted bottlenecks.

As the proposed real estate regulatory bill specifically emphasises on streamlining the approval system, the ministry will direct the states to start working on this issue, Girija Vyas, Union Housing and Urban Poverty Alleviation Minister told Deccan Herald.

The committee, which submitted its report to the Housing Ministry recently, also recommended using an information technology-enabled single-window approval system, providing fast-track clearances, especially for affordable housing projects.

At present, each real estate project requires a minimum of 30 to 50 permissions from different agencies including water, land, electricity and town planning, which were considered as one of the major reasons for delaying the projects. 

The committee in its findings said the average time taken for obtaining all approvals for a residential project in Delhi is 141 days while it takes 599 days in Trivandrum. 

http://www.deccanherald.com/content/346054/centre-pushes-real-estate-bill.html

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Foreign lands beckon Indian property investors

By: Karshni on 02:25

Singapore, Malaysia, New York, Dubai, London suburbs and some other UK cities, are the preferred destinations for Indian property buyers, according to real estate consultancy firm Jones Lang LaSalle (JLL).

The real estate markets in many countries offer very lucrative investment prospects. Apart from that, Indians buying property abroad can, in some cases, become citizens of the host country. This factor has considerable aspiration value with many, according to Anuj Puri, Chairman and Country Head, JLL India.

Also encouraging investment abroad is the fact that real estate in Indian metros has become enormously expensive. Moreover, interest rates for bank loans are already proving to be a stumbling block and may rise further with the future revision of RBI norms.

In comparison, an Indian seeking to buy property in New York, London or Singapore can avail himself of considerably lower interest rates of local banks in those countries. Many foreign property markets are transparent, which enables investors to get ‘clean’ deals much faster and easier.

Investment in property abroad makes sense for those who are employed or have business interests in the country of choice. Indians who have settled or are planning to settle abroad permanently are among the prime candidates.

BUYER’S PROFILE

Business owners, professional property investors, mid-to-top-level management personnel and high net worth individuals (HNIs) are among the typical buyers of properties abroad. A very large proportion of buyers also consists of people whose children study in those countries.

The US and the UK are the most preferred property markets. When these are out of reach, Dubai is the next favourite. The current limit for Indians investing abroad continues to be $200,000 a year (about Rs 1.2 crore at Rs 60 to a dollar). This ceiling applies to any kind of investment in a foreign country. The investable amount doubles in the case of couples.

The Government may consider relaxing the ceiling further if it perceives increased interest by Indians in investing in foreign properties, according to JLL.

rishikumar.vundi@thehindu.co.in

http://www.thehindubusinessline.com/industry-and-economy/real-estate/foreign-lands-beckon-indian-property-investors/article4938077.ece

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European-style homes gaining fancy

By: Karshni on 02:24

Never mind, if you have never been to Venice, Tuscany or Spain. Real estate developers promise to give you a glimpse of Europe through various projects they are developing.

In a bid to distinguish themselves from competition and to satiate the growing aspirations of home buyers, newer themes are being developed.

Currently, Spain seems to be the flavour of the season, though Italy is not far behind. Developers are bringing the richness of various cultures into their ‘theme’ projects. Interestingly, these are being developed in smaller cities such as Chandigarh, Pune and Kundli rather than in the four mega metros.

Some developers, who have launched projects based on a Spanish theme, are ATS Infrastructure, Tata Housing and Emaar MGF.

YOUNGER BUYERS

Analysts note that themed homes are becoming popular as the age of buyers is coming down. Also, more young people are travelling around the globe and have aspirations to own such property back home. The affluent among them want their homes to reflect their financial and social standing.

Developers agree that while themes are important in attracting buyers, at the end of the day, what sells is quality, deliverability and correct pricing.

ATS Infrastructure, which is developing Casa España, a Spain-inspired Hacienda project in Mohali near Chandigarh, said the towers are designed by acclaimed architect Hafeez Contractor.

According to Sanjeev Kathuria, Deputy Chief Operating Officer at ATS, “The project has been designed keeping in mind the taste, class and requirements of our target audience.”

Tata Housing’s La Montana, in Vadgaon near Talegaon on the outskirts of Pune, too, has been designed and conceived for aspirational buyers and those keen on owning a second home. Designed by international architects F+A of the US, La Montana is distinctively Mediterranean in style and offers more than 850 apartments priced over Rs 4,600 per sq.ft.

EXPOSURE TO CULTURES

Says Pawan Sarda, Head-Marketing and Product Development, Smart Value Homes, a subsidiary of Tata Housing Development Company, “Current home buyers are exposed to various cultures. A home is no longer about providing wall and roof. It is more about a lifestyle.”

Earlier, TDI Infrastructure in Kundli in Haryana had a project with an Italian theme.

The company had also engaged an Italian architect to design its project which offered water bodies, cobbled pavements and central piazzas.

Similarly, Mumbai-based developer Purvanakara Builders built Purva Venezia in Bangalore, which promised a slice of Venice.

Sarda says theme projects need to create an ambience, such as scenic surroundings and water bodies, to get the best result.

“In the end, the consumer must like the project to make investments. It is here that factors such as timely delivery, quality and price come in. The demand will drive sales”, he adds.

bindu.menon@thehindu.co.in

http://www.thehindubusinessline.com/industry-and-economy/real-estate/europeanstyle-homes-gaining-fancy/article4938156.ece

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Chennai real estate market growing steadily: Indiaproperty

By: Karshni on 02:50

Chennai real estate market has been stable with moderate price appreciation of 8 10% in 2012. With inprogress infrastructure projects taking shape, the demand and capital values are expected to rise across all sectors. Focus on improvement of public modes of transport has been one of the major highlights in Chennai. This is evident from the expansion of the existing highways, work on Chennai Metro and the Outer Ring

Road.

Approval of three new bridges connecting ECR and OMR at Neelankarai, Palavakkam and Kottivakkam is expected to impact the capital values. Going forward growth in Chennai would not solely be determined by the IT/ITES sector, but also the transport corridors of the above mentioned infrastructure projects. Chennai market is looking forward to the MRTS and BRTS projects to give the city a new face in 2014-15. 2012 has seen the city shift investor focus from the usual OMR, ECR to the WEST and NORTH of Chennai. The operationalization of the TIDCO & Ascendas SEZ at Tiruvallur and the operationalization of the new airport at Sriperumpudur in 2015 is driving interest in the North & West Chennai regions.

STOCK AND ABSORBTION

Global uncertainties and IT/ITES sector going slow with their expansion plans impacted the real estate scenario in Chennai with high vacancy rate. Though the focus on residential sector from developers end was high, and Chennai market saw remarkably high number of new launches in 2012. Sales were moderate in comparison to the new residential supply added to the market. In 2013 Chennai residential market is likely to see few launches compared to 2012 but improvement in sales with an overhang of 18-22 months.

http://www.moneycontrol.com/news/real-estate/chennai-real-estate-market-growing-steadily-indiaproperty_920307.html

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Real estate regulatory bill must cover all stakeholders: CREDAI

By: Karshni on 05:18

Terming real estate regulatory bill as a populist measure, realtors' bodyCREDAI today said the proposed law should govern all stakeholders of the industry and not only the developers.

The Real Estate (Regulation and Development) Bill, to be introduced in the next session of Parliament, will further increase the cost of development and delay projects, the association said.

"We want regulator. But like regulators in other sectors such as telecom and insurance, it should govern all the stakeholders," Confederation of Real Estate Developers Association of India (CREDAI) Chairman Lalit Kumar Jain said at an Assocham conference.

The planning authorities, banks and other government authorities do not come under this legislation, he added.

"It (the bill) is a populist measure that will please consumers. Bring regulator with proper design and understanding of business," Jain said.

He noted that developers already have to take a number of approvals from various government authorities that take anywhere between 6-18 months and now they would have to register their projects with regulators.

Jain also feared that "now those developers who are not politically aligned, they will have to politically align".

Assocham released a report 'Regulatory Issues and Clearance for Real Estate Sector' jointly with global property consultant Cushman & Wakefield. The report welcomed the government's move to regulate the sector.

"Besides safeguarding the buyers' interest and bringing credibility to the developer community, the Real Estate Regulatory Bill is also likely to attract investments from domestic and international funds that have harboured scepticism towards investing in Indian real estate largely on account of lack of regulation," Assocham-C&W report said.

However, it said the need for single-window clearances in the shortest possible time has become pressing.

The Bill provides for setting up a regulator for the real estate sector and has provisions like a jail term of up to three years for developers who commit offences like putting up misleading advertisements about projects repeatedly.

It also intends to make it mandatory for developers to launch projects only after acquiring all statutory clearances from relevant authorities. The Bill makes it mandatory for builders to clarify the carpet area of the flat.

http://economictimes.indiatimes.com/markets/real-estate/news/real-estate-regulatory-bill-must-cover-all-stakeholders-credai/articleshow/21124009.cms

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Office real estate expected to make a comeback

By: Karshni on 02:14

The office market in India might see some uptick towards the end of this year, according to a Cushman & Wakefield report.

By the end of the year, office space absorption is expected to be 30 million sq ft (msf), led by markets in Bangalore, Pune and Mumbai. For 2012, the total absorption was 27-28 msf. 

The initial sign of the pick-up is evident in the total absorption registered in the second quarter of calendar year 2013, said the report. The April-June period recorded absorption of 7.2 msf, marginally higher than the same period last year but better than the 3.6 msf in the first quarter of 2013.

“I think from here on, we will see a positive uptick in the commercial/office space segment. Over the last year or two, we have seen over-supply and an overall economic environment that resulted in a cautious outlook. The current uptick is due to pent-up demand among corporates, who preferred to have a cautious outlook,” said Ravi Ahuja, executive director, Cushman & Wakefield. 

For the first half of 2013, absorption fell in the office market. The total net absorption across eight cities — Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, the National Capital Region, Mumbai and Pune — denoted a decline of 15 per cent at 10.9 msf, compared to the same period last year. This was primarily due to the dismal performance in the first quarter of the year. 

Net absorption refers to new leasing activity within a city and includes only the incremental new space take-up in instances of relocations and expansion from within the city. It does not include lease renewals and relocations to office spaces with the same areas. 

Beating the national trend, Pune recorded an increase of 37 per cent in absorption of office space in the first half of calendar 2013 over the first half of 2012, with consistent levels in both quarters. In the second quarter, Pune saw total supply of 364,000 sq ft.

Chennai was the only other region with a positive trend. Half-yearly net absorption rose nearly six per cent versus the first half in 2012. The second quarter saw absorption of 1.4 msf, a huge increase over the first quarter. Leasing transactions in Grade-A commercial office spaces with the IT sector continued to be the major demand driver, followed by the banking, financial services and insurance sector. 

“The office real estate market has been able to keep afloat in the midst of the negative market sentiments, which include poor GDP growth projections, depreciating value of the rupee against the dollar, political volatility and continued unrest in the global economic conditions. Even while absorption registered de-growth (a fall) of 15 per cent year-on-year, the second quarter of 2013 has outperformed on both counts, of year-on–year as well as quarter-on–quarter, indicating an existing strain of growth that is still visible among the corporate world. Though corporates have been cautious in their expansion, the trend has been positive, albeit slow. By the end of the year, office space absorption is expected to be at approximately 30 msf, with markets such as Bangalore, Pune and Mumbai leading the trend,” said Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield. 

Similarly, fresh supply during the first half also declined by three per cent and was recorded at 17.6 msf. Vacancy rates at the end of the second quarter were noted at 19.6 per cent, an increase of 1.7 percentage points over the same period last year.

Also, there was increase in pre-commitments in the second quarter, of 2.65 msf, in Bangalore, Hyderabad, Mumbai and Pune.

Ahuja also stated that rentals in certain regions had started to see an uptick. Other than the IT sector, he said growth for commercial space will be driven by segments such as pharmaceuticals and banking & finance. “The pharma sector is going very active. We have met around three to four large players who are looking at consolidating their operations,” he said.

http://www.rediff.com/business/report/office-real-estate-expected-to-make-a-comeback/20130714.htm

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Real estate has entered phase of maturity: Sanjay Dutt

By: Karshni on 13:07

The future of the real estate sector in India is tremendous in the next few years. The top eight cities alone have a total pipeline of 70 million square feet for Grade A office space offering large opportunities in the services of project management, facilities management along with our core broking expertise.

From the financial market side, the total private equity totals approximately Rs 1,100 crore in Q1 2013 maintaining its previous quarter levels. The current esti-mated debt to the real estate and development sector is worth over $24 billion. This is expected to rise over the next few years. With more and more public sector financial institutions being com-mercialised, there is an increase in willingness to provide funding to large infrastructure and real estate projects at reasonable rate of return.

Also large infrastructure proj-ects like the Delhi Mumbai indus-trial corridor along with the west-ern and eastern freight corridor have the potential to create new cities and economic centres in the years to come providing immense growth prospects in the years to come. We believe that by maintaining integrity along with innovation, we will be able to help our clients maximise profits.

These clearly indicate that the real estate market can look at a long sustainable growth in the years to come. We may, however, take cognisance of the fact that the real estate market is defi-nitely entering into a new phase of maturity and order which will throw open more options for professional services in the realm.

Sanjay Dutt is Executive MD, South Asia, Cushman & Wakefield

(As told to Business Today)

 

 

 

http://economictimes.indiatimes.com/news/nri/nri-real-estate/sliding-rupee-more-nris-consider-investing-in-indian-properties/articleshow/21084398.cms

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Sliding Rupee: More NRIs consider investing in Indian properties

By: Karshni on 13:05

The continuous slide of the rupee against the US dollar may be a cause of concern for many, but has led to NRIs considering investing in real estate back home. Industry observers said there has been a marked rise in the number of inquiries from NRIs and international investors in the last six months, during which the rupee has declined over 10% against the dollar.

Realty developers and observers told TOI that the trend is more noticeable in the commercial real estate sector, which is suffering from weak interest andhigh vacancy for the last many quarters.

Though the US dollar has hardened against many other currencies, NRI investors are more inclined towards India, albeit partly, due to the emotional bond with the country. The interest is primarily rooted in the fact that they would be shelling out fewer dollars to acquire properties than they would have last year, experts said.

The current interest in real estate is only reflective of an established trend, just that it has picked up. According to Reserve Bank of India (RBI), the net NRI remittances into India are rising with the current fiscal registering a record net inflow of over US $12 billion, almost double the remittances of US $7 billion witnessed in the last financial year. About 40% of these inflows have gone in the real estate sector, the RBI has said.

Rohit Gera, vice-president of Credai Pune Metro and director of Gera Development, said, "Properties are cheaper than they were a year ago in terms of dollars. We have already seen a spurt in inquiries from NRIs over the last seven to ten days."

Ashutosh Limaye, head of research real estate investor services at realty advisory firm Jones Lang LaSalle India, said, "The Indian rupee has seen 12% depreciation against the US dollar since May 2013. This has led to a decrease in its value against all the other currencies pegged to the US dollar." Limaye added that according to a recent survey conducted by Sumansa Exhibitions, NRIs place a higher intrinsic value on property owned in India over the ones owned in other countries.

While global investors such as foreign private equity (PE) investors are shying from investing in India and waiting for the rupee to stabilize, NRIs have been thinking otherwise, say realtors. "The depreciation of rupee has eroded the exceptional gains made by foreign PE funds in the last few months. Hence, short to medium term interests from several foreign PE funds may be subdued in view of the current economic performance," said Neeraj Bansal, partner at business consulting firm KPMG in India. "However, there is no shortage of funding for grade 'A' projects with promoters having strong track records. The fall in rupee is being cheered by NRIs who are now in a better position to invest in properties in India," he said.

"As the rupee continues to fall, the IT/ITeS sector, which is among the largest occupier of commercial real estate (SEZs and office space) in India, is expected to witness a strong growth. This may result in increase in offtake of commercial office space," Bansal said.

Anuj Bhandari, secretary, Credai Pune Metro, said around 20% more NRIs as compared to the last couple of years inquired about residential schemes. This may result in 7-8% increase in the purchases by NRIs, he added. 

http://economictimes.indiatimes.com/news/nri/nri-real-estate/sliding-rupee-more-nris-consider-investing-in-indian-properties/articleshow/21084398.cms

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Find out: 8 cities that give maximum returns on real estate

By: Karshni on 12:19

Recently, global real estate consulting firm Jones Lang LaSalle came up with a report which elaborated on eight locations in India that gave maximum returns on investment. Good connectivity to the city centres, big shopping malls, and an influx of residential project pipeline were the parameters to come up with the investment hotspots.

Here are the most preferred destinations chosen by the agency which were featured on CNBC-TV18’s weekly real estate show- Prime Property.

Noida and Greater Noida were the most preferred locations followed by Thane and Navi Mumbai. Whitefield area in Bangalore gave the fourth highest returns while the southern suburbs in Chennai were ranked at number five. Viman Nagar and Nagar Road in Pune was ranked sixth; followed by Gachibowli in Hyderabad and Rajarhat in Kolkata.

While Noida and Greater Noida have been touted as top investment hubs, it is Thane and Navi Mumbai that gave investors maximum returns in the past four years. Since the first half of 2009, prices in Navi Mumbai have increased by an estimated 85 percent. Prices in Thane saw a surge of 84 percent. This is followed by Whitefield in Bangalore and Viman Nagar and Nagar Road in Pune.

Chennai suburbs recorded an appreciation of 53 percent. Rajarhat in Kolkata had an increase of 46 percent while Gachibowli area saw prices rise by 43 percent.

Surprisingly, Noida and Greater Noida, the report's top picks, recorded the least price escalation in the timeframe.

While launches are currently tepid in the Noida and the Greater Noida markets, an estimated 78,000 units are forecasted by the end of this year. All the other micro markets put together is expected to ring in 67,000 units of supply.

According to experts however, the Noida and Greater Noida markets are also going through a change in occupancy profile.

Shveta Jain, executive director, Residential Services, Cushman & Wakefield India said, "The overall speculation in National Capital Region (NCR) which has been driving the activity will slow down; it has already slowed down. So, the markets will become healthier as there will be more end-user activity which continues to be strong. Developers will be more cautious on new launches. The velocity will be slower and that is where developers need to reconcile. Any other city in India, typically on the velocity of sales, is spread over two to three years. In NCR an absorption period is spread over six months. That realignment will be seen in the market."

"If the objective is to be retaining asset for anytime between five to seven years, then there is no reason to wait. It again depends if somebody is looking to flip the asset in six months to a year's timeframe. Then one should not go ahead with the purchase", she added.

Each of these peripheral suburban areas have been promised a new skyline by both real estate developers and respective state governments. However, their projected price appreciation will largely depend on two factors.

i. Whether developers can keep to their timelines

ii. If the infrastructural development can keep pace with housing development. These according to market analysts are the key risks that consumers must consider before parking funds. 

 

 

 

http://www.moneycontrol.com/news/real-estate/find-out-8-cities-that-give-maximum-returnsreal-estate_915836.html

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Office real estate market may see uptick

By: Karshni on 12:18

The office market in India may finally see some uptick towards the end of this year, said report. By the end of the year office space absorption is expected to be at approximately 30 million square feet with markets like Bangalore, Pune and Mumbai leading it, said a report by Cushman & Wakefield. For 2012 the total absorption rate was around 27-28 million square feet.

The initial sign of the pick up is evident in the total absorption registered in the second quarter of calender year 2013, said the report. The period April - June 2013 recorded a total absorption of approximately 7.2 million square feet (msf) which was marginally higher than the same period last year, but better than 3.6msf reported in the first quarter of 2013.

"I think from hereon we will see a positive uptick in the commercial/office space segment. Over the last year or two we have seen trend such as over supply and overall economic environment that resulted in cautious outlook. The current uptick is due to the pent-up demand among corporates who preferred to have a cautious outlook," said Ravi Ahuja, executive director, Cushman & Wakefield.

For the first half of 2013, though the office market in India registered a downtrend in absorption. The total net absorption across eight cities--Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkatta, NCR, Mumbai and Pune-- denoted a decline of 15 % at 10.9 million square feet compared to the same period last year. This was primarily due to the dismal performance in the first quarter of the year.

Net absorption refers to the new leasing activity within the city and includes only the incremental new space take-up in instances of relocations and expansion from within the city. It does not include lease renewals and relocations to office spaces that have the same areas.

Beating the national trend, Pune recorded an increase of 37 % in absorption of office space in H1 2013 over H1 2012, with consistent levels of absorption being achieved in both quarters of the first year in 2013. In the second quarter of 2013, Pune witnessed a total supply of approximately 364,000 square feet (sf).

Following Pune, Chennai was the only other region that saw a positive trend in absorption rates. Half yearly net absorption figures for 2013 registered a rise of nearly 6 % versus H1 2012. Q2 2013 on the other hand saw absorption of 1.4 msf, a huge increase over Q1 2013, with most of the leasing transactions in the Grade A commercial office spaces with the IT sector continuing to be the major demand driver followed by the BFSI sector.

"The office real estate market has been able to keep afloat in the midst of the negative market sentiments, which include poor GDP growth projections, depreciating value of Rupee against dollar, political volatility and continued unrest in the global economic conditions. Even while absorption registered de-growth of 15 % year-on-year, the second quarter of 2013 has outperformed on both accounts of year-on–year as well as quarter-on–quarter, indicating an existing strain of growth that is still visible amongst the corporate world. Even though corporate have been cautious in their expansion, the trend has been positive, albeit slow. By the end of the year office space absorption is expected to be at approximately 30 msf with markets such as Bangalore Pune and Mumbai leading the trend," said Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield.

Similarly, fresh supply during H1 2013 also declined by 3 % and was recorded at 17.6 msf. Vacancy rates at the end of Q2 2013 were noted at 19.6 %, an increase of 1.7 percentage points over the same period last year.

Also, there was increase in pre-commitments in the second quarter of 2013 which was registered at approximately 2.65 msf in Bengaluru, Hyderabad, Mumbai and Pune.

Ahuja also stated that rentals in certain regions have also started to see an uptick. He also stated that other than the IT sector, the growth for commercial space will be driven by industries like Pharma and banking and finance. "The Pharma sector is going very active. We have met around three to four large players who are looking at consolidating their operations," added Ahuja. 

http://www.business-standard.com/article/companies/office-real-estate-market-may-see-uptick-113071100749_1.html

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PE investments in real estate pick up in April-June quarter

By: Karshni on 06:34

Private equity (PE) investments in real estate in the April-June quarter rose both in volume and value to $318 million, an increase of 85% over $172 million raised by real estate companies from PE investors in the corresponding quarter last year. On a sequential basis, there was a drop from $569 million the companies raised in Jan-March quarter. PE investors invested in 13 companies in the just concluded quarter as against six in the corresponding quarter last year.

PE firms like Blackstone - which has concluded the biggest real estate deal this year (in January-March ) so far by investing $367 million in Embassy Group's Bangalore project - have completely refocused on real estate. "They are more bullish on real estate than traditional sectors and are keen to do more," said Arun Natarajan, CEO of Venture Intelligence, a firm which tracks PE investments .

In June quarter, Ascendas Trust's $110 million acquisition of 2 million sqft of office space in Hyderabad from Phoenix Group was the largest investment . This was followed by Xander's $52 million investment in Supertech's 125 acre township project in Gurgaon and Clearwater Capital's (along with Ajay Piramal Group non-banking financial company PHL Finance ) $50.2 million investment to finance VGN Developers' acquisition of a land parcel for a gated community project in Chennai.

Transactions could gain traction going forward as developers are still waiting for a manna from banks. With bank funding drying up, developers are left with little choice other than knocking on PE doors. "I expect the next six months to be better," Natarjan said.

Companies have learned from the first wave of investments (2006 to 2009) when many of them burned their hands. Today, most of the transactions are debt transactions and don't involve equity. "None of the projects that firms took equity in the first wave were completed on time," said S Sriniwasan, CEO of Kotak Realty Funds.

Most deals have happened in residential space in Tier 1 cities. Driven by better returns, Sriniwasan said that his fund was focusing only on residential properties in large cities .

Although, the opportunity in lower tier cities is considered untapped, no one is immediately investing in it. "The fascination for Tier 2 and 3 has completely gone away," said Natarajan. "It will take some time before firms start looking at it again."

PE firms are also sticking to few partners this time compared to earlier when they tried to engage with multiple developers. Blackstone group for example is engaging most with the Embassy group for its investments.

However, PE-real estate investments in the first six months of 2013 at 21 transactions ($887 million across 20 deals with disclosed values) are still down 16% compared to the 25 investments in the corresponding period in 2012 ($659 million across 22 investments). 

 

 

 

http://timesofindia.indiatimes.com/business/india-business/PE-investments-in-real-estate-pick-up-in-April-June-quarter/articleshow/20938369.cms

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Online real estate business likely to grow: Experts

By: Karshni on 06:33

With a rising number of property portals entering the market, the online real estate business is expected to improve gradually as these websites bring transparency by providing high quality information about projects, believe industry experts.

Property portals are increasingly becoming a tool for research on buying, selling and leasing residential or commercial properties in many parts of the country, as the amount of information listed on these sites is increasing.

"By increasing the quality and quantity of information available to end-users, we attempt to bring in greater transparency to the entire gamut of buying/selling properties. It is our constant endeavour to increase the amount of information listed about a particular property and to avoid spam or incorrect listings," Magicbricks.com business head Sudhir Pai told PTI.

According to experts tracking the realty sector, sites such as Magicbricks.com, 99acres.com, Makaan.com, IndiaProperty.com and CommonFloor.com are fast becoming the choice of consumers looking for renting a property, as well as for developers.

"The online real estate market is yet to reach an inflection point as seen in the travel or e-commerce sector. However, with the penetration of internet more and more consumers in the urban areas have started using this medium as the first point of search for all their real estate needs," HomeShikari.com chief executive P Sunder said.

Currently, the size of the property portal market is around Rs 250 crore going by the topline of some of the listed portals in the country.

This market is expected to grow at a CAGR of 50-100 per cent in the coming years, mainly on the back of increased focus on this medium of communication by buyers as well as developers. This model also helps decision-making faster for buyers.

http://economictimes.indiatimes.com/markets/real-estate/realty-trends/online-real-estate-business-likely-to-grow-experts/articleshow/20954472.cms

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Urban youth prefer to invest in real estate: Survey

By: Karshni on 12:17

Real estate seems to be the hottest investment instrument for urban youth in India, with a whopping 85 per cent of those surveyed inclined to put their money into immoveables on hopes of higher and guaranteed returns.

"Over 85 per cent of urban working class prefer to invest in real estate saying it is likely to fetch them guaranteed and higher returns," says a survey conducted by industry body Assocham.

Those surveyed also said they cautiously stay off from investing in gold, stocks and mutual funds as these instruments are found to be riskier, the survey said.

A majority of urban youth surveyed believe that investing in the yellow metal is not as profitable as in real estate since they expect gold prices to fall.

Besides, global slowdown and the weak rupee have started casting a shadow on stocks, as many corporations are rationalising the salary structure of their employees with an emphasis on cost cutting which dampens the spirit of investment in the capital markets.

However, a few respondents still chose to invest in stock markets, gold and mutual funds.

The maximum concentration of real estate investments from urban working class and professionals is seen towards residential properties in emerging Tier-II and Tier-III cities.

These include Jaipur, Bhiwadi, Rishikesh, Haridwar, Nainital, Chandigarh, Dehradun, Sonepat, Panipat, Pune and Nasik, it said.

Most respondents felt that investments in real estate, residential and commercial properties are found to be lucrative and much safer since they are completely insured in contrast to those in gold, stocks and mutual funds.

Over 62 per cent respondents, especially professionals, chose real estate properties in Tier-I cities like Mumbai, Delhi, Kolkata, entire Northern Capital Region (NCR), Hyderabad, Bangalore, etc for gaining maximum returns.

However, 78 per cent of those working professionals with double-income, who bought a house in a metro city, want to invest in their home town for a second home, the survey added. 

 

 

 

http://www.financialexpress.com/news/urban-youth-prefer-to-invest-in-real-estate-survey/1135771/0

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Mumbai real estate market most unaffordable: Survey

By: Karshni on 12:28

The real estate market in Mumbai continues to be the most unaffordable with 29 per cent of the city's under-construction units priced at over Rs 1 crore, real estate consultancy firm Knight Frank said in a report.

This is against 11 per cent and 5 per cent for the National Capital Region and Bengaluru markets, respectively, the report said.

"Incessant price rise and higher concentration of premium projects with a ticket size of more than Rs 1 crore in new launches have limited the purchasing ability of home buyers resulting in a decelerating rate of absorption over the previous four quarters," the report said.

Only 48 per cent of the city's under-construction units are below the Rs 50 lakh mark, which is the lowest among the top six cities including Pune, NCR, Chennai, Bengaluru, Hyderabad, it said.

The large number of new launches in Mumbai, in the previous four quarters, has significantly increased the unsold inventory in the market, it said.

Peripheral locations like Vasai, Virar, Mira Road, Ghodbunder Road and Panvel have witnessed a slew of new launches during the last one year, the report said.

"However, despite the waning interest of home buyers, quoted prices in Mumbai continue to remain high as developers are increasingly offloading their unsold inventory at a discount to investors who are willing to make substantial upfront payment," the report pointed out.

Bengaluru is the most affordable residential market with more than 77 per cent of its under-construction units falling below the ticket size of Rs 50 lakh followed by Chennai at 75 per cent, it said.

Hyderabad has only 51 per cent of its total under construction units below the Rs 50 lakh ticket size despite the city having the lowest weighted average price among the top six cities, it said. 

 

 

 

http://economictimes.indiatimes.com/markets/real-estate/news/mumbai-real-estate-market-most-unaffordable-survey/articleshow/20862107.cms

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Real estate charms Indian youth more than gold: Survey

By: Karshni on 12:26

Real estate seems to be the hottest investment instrument for urban youth in India, with a whopping 85% of those surveyed inclined to put their money into immoveables on hopes of higher and guaranteed returns.

"Over 85% of urban working class prefer to invest in real estate saying it is likely to fetch them guaranteed and higher returns," says a survey conducted by industry body Assocham.

Those surveyed also said they cautiously stay off from investing in gold, stocks and mutual funds as these instruments are found to be riskier, the survey said.

A majority of urban youth surveyed believe that investing in the yellow metal is not as profitable as in real estate since they expect gold prices to fall.

Besides, global slowdown and the weak rupee have started casting a shadow on stocks, as many corporations are rationalising the salary structure of their employees with an emphasis on cost cutting which dampens the spirit of investment in the capital markets.

However, a few respondents still chose to invest in stock markets, gold and mutual funds.

The maximum concentration of real estate investments from urban working class and professionals is seen towards residential properties in emerging Tier-II and Tier-III cities.

These include Jaipur, Bhiwadi, Rishikesh, Haridwar, Nainital, Chandigarh, Dehradun, Sonepat, Panipat, Pune and Nasik, it said.

Most respondents felt that investments in real estate, residential and commercial properties are found to be lucrative and much safer since they are completely insured in contrast to those in gold, stocks and mutual funds.

Over 62% respondents, especially professionals, chose real estate properties in Tier-I cities like Mumbai, Delhi, Kolkata, entire Northern Capital Region (NCR), Hyderabad, Bangalore, etc for gaining maximum returns.

However, 78% of those working professionals with double-income, who bought a house in a metro city, want to invest in their home town for a second home, the survey added.

http://www.hindustantimes.com/business-news/BusinessRealEstate/Real-estate-charms-Indian-youth-more-than-gold-Survey/Article1-1084708.aspx

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