Foreign real estate investors have become more realistic about Indian market

NEW DELHI: The real estate market in India has matured after the slowdown and investors now have a more realistic view about returns these days, says Robert Marten, managing director, Global Real Estate Institute (GRI), a global club of senior real estate investors, developers and lenders. 

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"There has been a spike in foreign investment in India after the new government. We will not see an overnight impact of the reforms, but the Indian real estate market is certain to revive soon," he says.

The real estate sector has been reeling under the impact of sluggish sales due to high prices and costly credit and a severe liquidity crunch due to the cautious stance of lenders for the past couple of years.

Real estate investors too have been a cautious lot after burning their fingers in the slowdown.

Marten feels that while the market is recovering, there are a few bottlenecks stopping the real investment flow. A major concern is finding a credible partner to enter the Indian real estate market. "Due to the fragmented nature of the Indian market, with each city has a separate market leader and finding a credible partner to put money in is the major question for investors," he says adding, "Complex policy and regulations in the country is the other major concern."

The government has recently announced the 'Housing for all by 2022' scheme to address housing shortage in the country. Marten says this affordable housing opportunity can play as a major trigger in reviving the real estate market, adding, "Provided the government makes this a realistic business proposition and attractive for developers."

The Smart City scheme, where there is a plan to build 100 smart cities, is another prime opportunity for the real estate market, for which the government has already allocated Rs 48,000 crore. Marten feels smart cities are not a real investment opportunity immediately, but will surely turn into a big business proposition in the longer term.

The real game changer will be the launch of real estate investment trusts (REITs), "which is sure to provide easier and safer entry route foreign players into the Indian market," he said.

Founded in 1998, GRI is a global club of senior real estate investors, developers and lenders, which meets annually in different regions of the world to discuss potential investment opportunities

Source - TOI 

Weak sales, stagnant prices pose challenge for realty companies: Moody's

NEW DELHI: Weak housing sales and stagnant prices will pose challenge to big real estate developers over the next 12 months as their cash flows and project execution capabilities get affected, ratings agency Moody's said.

Developers will not reduce price to boost sales, rather will continue with their strategy to reduce apartment size and offer freebies, Moody's Investors Service said.

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However, the agency said that "solid economic growth" would give some support to housing sales, while gradual easing of lending rates would boost investment activity.
 

"India's largest property developers will continue to face a challenging operating environment over the next 12 months - including weak cash flows, flat sales and stagnant prices," the agency said in a statement while releasing a report on the Indian property market titled 'Cash Flows to Remain Weak Amid Flat Sales and High Costs' today.

Sales volumes will remain weak because of unaffordable housing prices, resulting in unsold inventories.

"Aggregate cash flow for India's largest property developers will remain weak over the coming 12 months because the companies' sales will be flat and their costs will stay high," Moody's said, adding that the construction costs have increased in the past four years owing to high inflation.

Besides sluggish sales, delays in project completion would contribute in slow cash collections from home buyers as payments are generally construction-linked.

With the challenges in the operating environment, Moody's said that builders such as Indiabulls Real EstateBSE -1.37 %, Lodha Developers, UnitechBSE -0.82 %, DLF and Oberoi RealtyBSE -1.98 % would experience "most pressure on sales and cash flow" because they operate in Delhi and Mumbai areas where prices are the highest.

In contrast, the agency said the developers in relatively affordable markets like Bengaluru, like Brigade Enterprises, Prestige and Sobha should fare better owing to stable demand for housing.

Commenting on the report, Moody's Vice President and Senior Credit Officer Vikas Halan said: "...despite the difficulties, we expect solid economic growth in India to provide some support to housing sales, while the likely gradual easing of lending rates will also boost investor confidence and investment activity."

He said interest rate cuts by RBI, if passed on by the banks, would filter down to the property market, reducing the borrowing cost for developers as well as buyers, and supporting demand. RBI has cut interest rates thrice in 2015.

However, Halan said that high home prices and declines in savings rates will outweigh these factors, particularly in Mumbai and Delhi.

On prices, Moody's said: "Rather than reducing housing prices outright to drive sales volumes, developers will likely continue to modify their products and offer promotions".

 Talking about the proposed real estate regulatory bill, the agency said it would improve consumer confidence but weigh on developers' cash flows.

Moody's said the ability of developers to execute projects across markets has been challenged in the past 2-3 fiscal years owing to delayed approvals and stretched liquidity.

The delays in projects completion have slowed the flow of payments from home buyers. It has also hit investors demand for new projects by locking up their capital and decreasing their expected returns.

With already significant oversupply in the market because of unsold inventories, Moody's said that new project launches would be muted.

On the proposed real estate regulatory law, Moody's said: "consumer confidence will get a boost from the Real Estate (Regulations and Development) Bill, which seeks to set up a regulatory authority and introduce guidelines for commercial and residential development."

The developers, however, face stricter terms over the receipt and use of cash advances, which will further weigh on cash flows, it added.

Moody's believes that the bill promotes transparency, accountability as well as discipline in the industry, which is positive for buyers.

Source - ET 

Real estate agents now a part of Central Advisory Council

MUMBAI: The central government, through a crucial amendment, has included real estate agents in the Central Advisory Council that will help the government understand issues related to the real estate sector.

The amendment makes property brokers a key stakeholder in the real estate industry along with homebuyers and builders.

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In a separate development pertaining to the same Bill, the Rajya Sabha Select Committee has added that the functions of the Real Estate Regulatory Authority, to be formed under the proposed Bill, will include protection of interest of agents along with allottees and promoters.

The council is proposed to be formed under the aegis of the amended Real Estate Bill and the Minister of Housing & Urban Poverty Alleviation will be the ex-officio chairman of the same. The advisory council will be established after the enactment of the proposed real estate Bill.

The group will be advising the central government on a continuous basis on the implementation of the Act, recommend policy, protection of consumer interest and foster growth and development of the real estate sector.

Apart from property brokers, the council will have one member representing key stakeholders, including consumers, builders, architect and the legal fraternity.

"We expect the Council to be formed soon after the Bill gets enacted. The Council can act as a prime mover in initiating debates on critical aspects of the real estate industry.

By including real estate agents, the government will now have better understanding of several issues that relate to consumer satisfaction in real estate transactions, as agents interact with customers more than what builders do," said Sanjay Bhargava, founder of realty advisory company Bombay Homes. While property brokers have welcomed the move, they also highlighted other key issues that need government's attention.

Various broker bodies have suggested setting up registration criterion for realty agents along with minimum educational qualification, while voicing their concern on agents being treated at par with builders.

The Real Estate (Regulation and Development) Bill, 2013, seeks to establish Real Estate Regulatory Authorities (RERAs) at the state level for the regulation and development of the real estate sector. It aims at ensuring consumer protection and standardisation in business practices and transactions in the real estate sector.

Source - ET 

Government plans to shrink Lutyens' Bungalow Zone

Delhi/NCR - The urban development ministry has proposed to reduce the Lutyens' Bungalow Zone in the heart of New Delhi by 5.13 sq km to 23.6 sq km, which if implemented could free up land in one of the most coveted and expensive residential areas in the country. The ministry has proposed to exclude areas like Babar Road, Bengali Market, Sundar Nagar, Jor Bagh, Panchsheel Marg and parts of diplomatic area in Chanakyapuri that were added to LBZ in 2003. When it was first demarcated in 1988, LBZ spanned 25.88 sq km. With the additions in 2003, it grew to 28.73 sq km.

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"Properties will become more affordable in this area going forward as builders will be able to reduce apartment sizes, even as the per sq ft remains the same or increases, bringing the overall ticket size down," said Ashwinder Raj Singh, chief executive officer-residential services at real estate services firm JLL India.

The Delhi Urban Arts Commission has proposed to restrict LBZ close to the original boundary envisaged by the British architect Sir Edwin Lutyens in 1912 while removing the transformed, commercialised areas and modern colonies which do not bear any semblance to the original character of the area while retaining the green areas which were included in the zone in 1988.

The commission on August 12 submitted a report to the urban development ministry that included a proposal to bring back the premises of the Supreme Court of India which was excluded from LBZ in 2003. The ministry has proposed floor area ratio (FAR), or the gross floor area permitted on a site, of 20 with 12.50% ground coverage, while in the present guidelines FAR is not specified. It has proposed that basement be allowed within the building line, only for household storage and parking. The building is to be restricted to a height of 12 metres and the number of dwelling units will range from one to four, depending on the size of the plot. 

Source - Economic Times, Delhi/NCR

Kolkata based BGA Realtors plans cheap housing in 6 states

KOLKATA: Kolkata based BGA Realtors is looking to build 1.5 million sq ft of affordable housing space across Gujarat, Madhya Pradesh, Assam Jharkhand, Bihar and Andhra Pradesh said a top company of ficial. 

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The developer has built 2.5 million sq ft of which 2.2 million sq has been sold. The additional projects spread over 1.5 million sq ft will be launched by 2017 and delivered by 2019. "In 2010 we had launched and sold houses at Rs 2 lakh and delivered them by 2013 without any escalation in price. The buyers, however, enjoyed a 100% return on in vestment and at present the government is valuing the same unit at Rs 6 lakh when one goes for registration of the same," said Shampa Ghose, Managing Partner, BGA Realtors. 

The apartments sized between 200 sq ft and 1,200 sq ft would mostly be studio apartments for the low income group and three bedroom units in the middle income group category, priced between Rs 5 lakh and Rs 22 lakh. 

Source - ET

30,000 sq ft Jatia House in Mumbai is up for grabs

Spread over 3,000 square metres, with a carpet size of 30,000 square feet, Jatia House is twice the size of its famous neighbour, Mehrangir, more popularly known as Bhabha House. Last year, Bhabha House was sold for Rs 372 crore. At twice the size, Jatia House may well be sold for twice that price.

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Real estate agents JLL are handling the sale mandate exclusively. Bids will be accepted till August 31 and the auction will take place on September 7.

The decision to sell has been taken with an eye on the future. The current occupants of the house are brothers, Arun and Shyam Jatia, sons of the Pudumjee patriarch M P Jatia, and their respective families. Shyam's three daughters are married and have moved out to their respective homes. Arun has two daughters and a son. Once the daughters are married and move out, it will be a small household.

"I was around eight or nine years-old when I first moved into this house. Back then, it was my parents, my five siblings and me. But in time, my sisters got married. One of my brothers moved out and the number of family members in the house kept reducing," says Jatia.

"Eventually it will be just my son and me. We don't need such a huge space. I'll feel more comfortable in an apartment, rather than a landed property," he adds. Also, a staff of 35 to run a household for two may be quite impractical in time.

Looking back Jatia house has been home to the family for over 40 years. Since 1980, Jatia moved around a fair bit, first to the US for studies and then to Singapore for business. But Jatia House was always home. "I've learnt to stay away from the family house. But when you are moving out of the nest, there are bound to be emotional implications," says Jatia, "One must always accept change."

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He looks back on his time at Jatia House and its memories fondly. Moving into the bungalow was a dream come true for Jatia's father. The family moved to India from Myanmar in 1964, after the political coup in the country and bought Jatia House in 1971.

"My father used to always live in a bungalow (in Myanmar). So he was yearning to move into a bungalow, even when he came to India," he reminisces. The house also proved lucky for the family, he believes. They started Pudumjee Paper Mills almost immediately after moving in.

For Jatia, the house was filled with celebration and parties that his father loved throwing. Like the time Jatia senior and a friend of his realised they'd been friends for 50 years and decided to throw a party to toast the friendship. The house has even hosted weddings — first for two of his sisters and then a niece — accommodating over 600-800 guests.

The little things to miss Jatia accepts that a house such as this will be difficult to find today. Moving into an apartment, after being a lifelong bungalow resident, he will miss the serenity, the quiet, the greens and the morning sea views he enjoys from his bedroom. Or that occasional glass of wine or a puff of the cigar in one of his favourite spots in the house, the library.

"When you have a bungalow, you don't lock your cars. You just open the main gate, open your car and drive off. With an apartment, you must put your car in the parking lot," Jatia says. He hopes that the bungalow's new buyers will enjoy it as much as his family and he have. "We hope that whoever buys this house, uses it as one, rather than redevelop it. The kind of architecture of the house, with its Burma teak wood paneling, is very difficult to create today. Built in 1928, the house has a long history," he says.

The family will move out by next week and is in the process of shipping out its furniture. But it has made time between all the shifting to celebrate the house. The house was entrusted to the sons and daughters, nieces and nephews for a weekend of fun. There was also a photo shoot of the family and the house to frame the memories. As for the proceeds of the sale, they'll be divided between the family. For his share, Jatia says, "I'll buy another house for starters and then save some." Plenty saving.

Source - ET

Mumbai set to have India's tallest commercial building

NEW DELHI: India's tallest commercial building is set to come up in Mumbai, with the Nitin Gadkari-led Ministry of Shipping proposing to construct a towering 'business district' on Mumbai Port Trust land to monetise the asset and ease the space crunch in the country's financial capital.

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 "It will be a 130-storey building and will house mostly offices along with other amenities. We are working on the plan and it's still in initial stages," Gadkari told ET.

The project, which may cost more than .`10,000 crore, is likely to be developed without costing the government asingle penny, financed with funds raised from pre-booking of space from public sector units and private companies. The proposed building would be in the vicinity of Nariman Point, once considered Mumbai's leading business district, and the Fort area in south Mumbai.

Other business districts in the city include the Bandra Kurla Complex, which was set up in the suburbs to decongest the commercial areas of south Mumbai. Apart from the number of floors, little else is known about the building. The contours of the project, including the location of the building in the port trust premises, are yet to be finalised. The ministry is engaging an international consultant to prepare the blueprint for the project. "A separate master plan for the port land would be prepared and this building would be a part of it. We are yet to finalise the land parcel and the area for this building," a senior government official said.

The government is likely to undertake the project on its own — land won't be given to private builders for redevelopment. "If the logistics issues of evacuation of people without stressing the cargo-laden port roads are addressed, the proposed 130-storey building will have a demonstrative effect on a mechanism for monetising land assets owned by ports," said Jaijit Bhattacharya, Partner-Infrastructure at KPMG 

Source - ET