To transform Indian real estate sector into the best paradigm in the world is vision 20-20" said Mr Anuj Puri, Conference Chairman & Chairman and Country Head, Jones Lang LaSalle Meghraj at the Conference on Indian Real Estate 20-20 organised by the Confederation of Indian Industry (CII)
With falling prices and depressed demand for residential properties,
many developers are offering huge discounts for ready possession
properties in and around HyderabadReal-estate prices are currently very
attractive in Hyderabad.Developers in this city are finding it
difficult to sell their ready possession properties due to fall in
demand. To overcome the lower demand and falling prices, some
developers are offering huge discounts of up to Rs8 lakh-Rs9 lakh.
“A flat costing about Rs35 lakh earlier is now being offered for as low
as Rs26 lakh. Realty sales in Hyderabad are falling every quarter. The
September quarter witnessed lower sales compared to the June quarter,”
said Pankaj Kapoor, founder and managing director, Liases Foras Real
Estate Rating and Research.During the quarter to end-September, total
sales of two bedrooms, hall and kitchen (BHK) properties at Hyderabad
fell sharply. Places like Secunderabad, Nizampet and Manikonda are hot
locations for residential properties and developers from these
locations are offering discounts of up to Rs8 lakh-Rs9 lakh.
Hyderabad-based Aparna Constructions and Estates Pvt Ltd is offering a 2BHK apartment
of 935 sq ft at just Rs963 per sq ft at Kompally in Secunderabad, till
March 2010, against the usual rate of Rs2,100 per sq ft.Hyderabad has a
supply of 60 million sq ft of residential projects, out of which
15%-18% are completed constructions. http://www.maaproperties.com
The
country’s largest real estate developer, DLF, sold apartments worth Rs
1,000 crore in December. This is the highest monthly sale the company
has recorded in its history. There are many developers like DLF who
have seen a surge in the sale of apartments across the country in the
quarter ended December, especially in the luxury and semi-luxury
category.A large chunk of DLF’s sales are also from the luxury and
semi-luxury segments. It sold 76 apartments of Rs 5 crore each in The
Magnolias, Gurgaon, netting nearly Rs 400 crore. The project has
apartments of 5,825 sq ft each and duplexes and penthouses of 9,000 to
10,000 sq ft each.It made another Rs 200-300 crore each in its
relaunched projects, DLF Belaire and Park Place, in Gurgaon. Belaire
had a price of Rs 2-3 crore each and Park Place of Rs 1.25-1.5 crore.
Indiabulls Real Estate has sold 100 apartments in its 65-storey
‘Indiabulls Sky’ in the Lower Parel area of Mumbai in the past four
months. It has also recently launched Indiabulls Sky Suites with
full-age advertisements, promising ‘A head in the clouds experience’’.
While, apartments in Sky were priced at Rs 6.75-22.5 crore, depending
on the size, Sky Suites are expected to be higher.Indiabulls is also
working on a super-luxury, ‘By invitation only’, Indiabulls Sky Forest,
where homes are more than 10,000 sq ft each and priced 10-20 per cent
higher than Sky projects.Buoyed by response for its premium housing
projects, Orbit Corporation, another Mumbai-based developer, says it
will launch one luxury project in the city every quarter. Orbit has
sold off its first lot of 18 flats in Orbit Terraces — a premium
housing project in the Lower Parel area where apartments ranged from Rs
3.3 crore to Rs 6.6 crore — within 17 days of its launch in September.
It sold another dozen flats in the same building later.Orbit earlier
sold its Orbit Arya project in South Mumbai, where apartments were
priced at Rs 10-15 crore, within a month.
The increasing sales
are a result of many factors, besides general economic recovery. “A
host of reasons have helped property sales. Interest rates are down,
property prices are down 30 per cent from the peak and markets are
doing well. All these are giving confidence to buyers to buy premium
homes,” says Rajeev Talwar, executive director, DLF.Agrees Raminder
Grover, chief executive of Homebay Residential, part of Jones Lang
LaSalle Meghraj: “Post slowdown, this segment has clearly picked up and
we must have marketed and sold 60-70 of homes of Rs 5 crore and
above.”Developers are cashing on this demand by offering even more
expensive and exclusive apartments. For instance, Pune-based Kumar
Builders is planning to build ‘sky villas’ in the Worli area of Mumbai,
where the first villa will start from the twelfth floor. Called Kumar
Couture, it will overlook the Bandra-Worli Sea Link and will be priced
at Rs 30 crore each, for about 8,000 sq ft.
Beyond Delhi and Mumbai
In Hyderabad, Dax Properties Pvt Ltd (part of Countryside Realtors Pvt
Ltd) has sold 65 to 70 villas in its Golf Retreat Project since the
launch last month. Costing Rs 1.2-2.5 crore each, they vary from 500 sq
yards to 2,000 sq yards.“There are takers from all over the country,’’
says Hassan, managing director of Dax. Another developer, Aditya
Housing and Infrastructure Development Corporation, has sold 20 villas
out of 30 at Empress Park in the Jubilee Hills area of Hyderabad. Each
villa costs Rs 3.5 crore.A few days earlier, Aditya Housing announced
Mount Castle at Nandagiri Hills in the city, where each floor was
occupied by a single flat. Of the 24 it plans to develop, it has
already sold five.In Pune, Kumar Builders sold 77 flats within a short
span of time in its premium project, 45 Nirvana Hills, where apartments
are priced above Rs 1 crore. The company plans to launch two or three
luxury housing projects — flats, bungalows and row houses — in prime
localities like Kalyani Nagar and Hadapsar.Bangalore is also likely to
see more luxury projects in the category of Rs 4 crore-plus by
developers such as Prestige and Nitesh Estates, as developers have seen
good response for the premium products in the past three months.http://www.maaproperties.com
With weeks
of agitation continuing across Andhra Pradesh over the issue of
statehood for Telangana, transactions in the real-estate sector have
nearly come to a standstill in Hyderabad and other major towns, with
buyers opting to wait and watch.After a gloomy recession-hit beginning
to 2009 and major price correction, the sector had begun to gradually
show signs of recovery in the last few months. However, the continued
uncertainty over the statehood issue has set the clock back, according
to representatives from the realty sector.The President of AP Builders
Forum, Mr C. Shekhar Reddy, said the sector has taken twin blows in the
form of economic recession and also drop in prices due to slackening
demand. “The prices of residential properties have dropped by about 30
per cent in the last 12 months. The flexibility to go down any further
has gone,” Mr Reddy said.The Managing Director of Koncept Ambience, Mr
M.P. Agrawall, said: “While realtors are concerned about the ongoing
agitation as transactions have come to a halt, genuine buyers are keen
They expect some more downslide before buying.”The notion that there is
more supply than demand is incorrect, he said. The economic downturn
and lack of buyer interest in the first half has deterred many
developers from venturing into new projects.The available supply will
take care of the demand over the next six months, and “suddenly we will
realise that there is need for more projects particularly in the
affordable segment, which is in short supply,” Mr Reddy said.The
Chairman of Confederation of Indian Industry, AP region, Mr Y. Harish
Chandra Prasad, said: “The agitation is bad for the infrastructure
sector and real estate players. It sends wrong signals to investors. We
hope the issue settles down soon and the uncertainty is put behind,
helping resume normal business. The offtake of commercial property too
could be hit as companies and establishments adopt a cautious
wait-and-watch approach.”
Speculative buying
The Chief Executive Officer of Lanco Hills, part of the Lanco Group, Mr
S. Pochendar, said that speculative buying was missing in the market in
the last six months. This augured well for the sector as the slowdown,
coupled with demand-driven pricing, has helped stabilise prices.“Before
the build-up to the current agitation, market was already subdued and
bottomed out at every nook and corner of the twin cities. The number of
takers too had come down. The speculative investment was totally out.
The prices too had reached their lowest levels in the last four years.
I don't see any more surprises in the sector,” Mr Agrawall said.Since
the recent agitation, genuine buyers hope to see some more downslide,
which is unlikely. There is also no likelihood of flight of investors,
as some speculate. Investors invest wherever there is opportunity, not
just in Hyderabad, but other States and in some overseas markets, Mr
Agrawall said.However, some players said prices will go up in
Vijayawada and Visakhapatnam as some of the speculative investors could
prefer these growing cities to Hyderabad in the near term.Mr Shekhar
Reddy, however, believes this is not true. From the interaction he has
had with some of the project developers, they see this as a passing
phase of their business cycle and are okay waiting for this phase out.
“Even assuming that a separate state is formed, how will this change
their existing business plans?” he asked. “Due to slowdown, with scores
of real-estate developers delaying taking up new projects and
concentrating on completing the ongoing ones, in the next six to 12
months we will suddenly face a situation where we will have increased
demand and shortage of supply. This could potentially push up prices
faster than we anticipate,” Mr Agrawall argued.Mr Prasad said the
ongoing impasse could also affect the prospects of some of the major
infrastructure projects such as the Hyderabad metro rail and foreign
direct investment. Banks and financial institutions base their project
estimation on the business prospects and valuation of real-estate. And
if this comes down, they could be wary of funding new projects.
Impact on infra projects
Asked if some of the projects are in trouble due to liquidity crunch,
Mr Shekhar Reddy said the situation is no different from the one about
12 months ago. In fact, several private equity players have set up
their teams to look at potential buyout candidates or investment
opportunities.“The agitation has had a negative impact on the sector.
However, we are looking at the next year with much optimism and hope
that the current stalemate is resolved. Once that happens, all those
who are keen to own a property will be back hunting for properties,” Mr
Pochendar said.For the real estate developers, reality has sunk in.
From a stage a couple of years ago, where on the day of Bhoomi Puja
most apartments would see buyer interest, realtors are now faced with
the challenge of convincing potential buyers who prefer to wait and
watch. This happens when it is a buyer's market, Mr Reddy said.
Hyderabad's real estate sector was in a state of shock on
Thursday, just hours after the Centre conceded to the demand for a
separateTelangana state. Speculating that the move would further dampen the
already crippled industry, realtors were seen making their own calculations
about the future of their business in the city. Apart from a few optimistic
voices, most realtors opined that the T decision would spell doom for real
estate in Hyderabad and result in a steep fall in the property value.
"We will go back at least by five years in terms of
growth," said Khaja Asif Ahmed of Stellar Project Management Consultant,
adding, "It will take at least two to three years for the political unrest
to settle and till then no investor from outside would put his money
here." According to his prediction, the industry, which is still battling
the recession ghost, is set to hit a new low over the next few months.City
realtors say that Hyderabad, as part of Telangana, would also disrupt the flow
of sentiment-driven investments. "So far people from all over the state
invested in Hyderabad because of its status as the capital of Andhra Pradesh.
But if it becomes part of Telangana, people would think twice before picking up
property here," said a Kukatpally-based realtor Madhusudan admitting that
it would indeed be a long haul before the sector gains momentum. "Until a
clear separation takes place, there will be no new investments,"
Madhusudan said.
A common sentiment that seemed to be riding high among most
players from the sector was that of ‘protecting Hyderabad' from the turmoil by
declaring it as the joint capital of two states. "Our fear of stagnation
in transactions (purchases) can be best addressed through this move. That way
the value of properties in the city would remain unaffected and investors too
would feel secure," said Ashwin Rao, director, Primus Developers. Though
Rao is one among the few optimistic builders who feel that the industry would
be back on track, only after an initial glitch of a few months, he says that
the common capital stand would be ideal to arrest the slump in the realty
business.http://maaproperties.com
India
leads the pack of top real estate investment markets in Asia for 2010,
according to a study by PricewaterhouseCoopers (PwC) and Urban Land
Institute, a global non-profit education and research institute. The
report, which provides an outlook on Asia-Pacific real estate
investment and development trends, points out that India, particularly
Mumbai and Delhi, are good destinations. Residential properties are
viewed as more promising than other sectors and Mumbai, Delhi and
Bangalore top the pack in the hotel ‘buy’ prospects as well.The study
is based on the opinions of over 270 international real estate
professionals, including investors, developers, property company
representatives, lenders, brokers and consultants. Since the global
economic meltdown, asset markets in the Asia-Pacific region have been
holding up surprisingly well compared with their peers in Europe and
the US. While pricing and rentals in the region fell steeply in 2008
and early 2009 in line with those in the West, markets across the
region were boosted in the second half of the year by the remarkable
resilience of the Chinese economy, which was buoyed by a series of
fiscal and monetary stimulus measures.
As a result, many Asian
markets have begun to flash positive signals toward the end of 2009.
Transaction volumes have rebounded, although from a very low base, led
overwhelmingly by China, the report said. “The relatively stronger
fundamentals and the lack of dependence on foreign demand are seen as
key advantages as India has managed to mitigate the severe recession
that has hit most other Asian countries. “The recapitalisation by
players in equity markets across Asia has been successfully replicated
by some Indian developers, which has helped ease the liquidity
stresses,” said Mr Gautam Mehra, India Leader for Real Estate Practice,
PriceWaterhouse Coopers. Unlike the US and Europe, distress sale in
Asia had been relatively minimal. This was due to several factors,
including a relative abundance of liquidity; low loan-to-value ratios,
leaving borrowers less vulnerable to loan servicing problems when the
prices declined, the report said.Further, Asian banks remain
well-capitalised, having experienced few major losses from derivative
investments and also because of the ability of many large investment
institutions to recapitalise via the capital markets, (particularly in
Australia and Singapore) allowing them to pay down debt. Despite the
recent bullish atmosphere, rebounds in most Asia-Pacific markets (with
the exception of China) appear tentative and fragile. Although
Asia-Pacific governments will probably be able to sustain high rates of
liquidity for the foreseeable future, their near term prospects are
probably tied to developments in the West and in particular the US,
where de-leveraging is far from over.
“The idea that the
recession is likely over gives rise to the widespread notion that
global economies will now revert gradually to the same trajectories as
in the past, which is normally what happens when recessions end,” said
the ULI Chief Executive Officer, Mr Patrick L. Phillips. He said the
aftermath was likely to be different because the imbalances that led to
the global downturn remain embedded in the system and could not be
quickly eliminated. Moreover, with spending by the Western consumers no
longer acting as the primary engine of global economic growth, a new
driver was needed to boost the world’s economy, and, in turn, the
global real estate industry....http://www.maaproperties.com
Lanco
Infratech has decided to move out of real estate sector to focus on the
core area of power generation, besides taking up engineering,
construction and procurement contracts, and orders for roads, highways
and ports. Company’s managing director G Venkatesh Babu told Financial
Chronicle on Sunday that the firm will, however, complete the two
luxury housing projects in Hyderabad and Chennai.“We have decided not
to take up new realty projects going forward, as we have realised that
there are too many players in the sector,” Babu said. He said the ever
rising power shortage in the country and comparatively lesser number of
players makes this sector lucrative.http://www.maaproperties.com/Pages/ModuleContent.aspx?Module=News&nid=1088
Lanco is developing a Rs
5,500 crore project — Lanco Hills — spread over 100 acres in Hyderabad.
The project includes 15 residential towers, special economic zones and
various commercial properties.The firm has also planned development of
Lanco Horizon Properties at Chennai. The township is planned over 80
acres.Last year, the company had lost about 250 customers of its
residential apartments in Hyderabad during the market meltdown. The
customers, mostly expatriates, cancelled bookings after paying 40 per
cent of the sum required for construction of the apartments.Each flat
in the project costs around Rs 1.5 crore. Following the withdrawal, the
company slowed down the project.
Babu said at present the
company has a power generation capacity of 950 mw. This includes the
368-mw Kondapalli project in Andhra Pradesh, 120-mw Aban project and a
300-mw facility at Amarkantak in Chhattisgarh.The company expects to
increase the capacity to 4,000 mw in two years. The company also plans
to go alone in bidding for upcoming ultra mega power projects. It had
bid for the last UMPP at Tilaiya with Malaysia’s Genting. They later
withdrew the bid.
To bring
the Indian property industry on par with the global real estate sector,
the Indian parliament is gearing up to pass the much talked about real
estate regulatory bill in the winter session. The industry is keenly
watching out for this one as the first draft was found to be faulty and
rather lopsided , excluding the government bodies from its purview. So
while the experts feel that it is time to have a single-point
regulatory body on the lines of SEBI or TRAI, which would prove
beneficial in the long run to the endusers and developers, there is
also a cry for bringing total objectivity and professionalism in the
workings of the body, to truly achieve its goal. Developers also point
out the dangers of overregulation in an industry that already faces
several stumbling blocks.The bill seeks to grant approvals to projects
on certain parameters and also expedite all the approval processes
mandatory for projects to take off. It is expected to help improve
transparency in the sector by rating developers on their financial
strength in terms of turnover, liquidity and profitability, scale of
operations, intellectual expertise based on the qualification and
experience of the management team, and past performance.
According to Ashutosh Limaye, associate director (Strategic
Consulting), Jones Lang LaSalle Meghraj, “The stock market has SEBI to
provide guidelines, define conduct and processes, provide a redressal
system for both buyers and sellers and install necessary consistency
and standardisation. The proposed real estate regulatory body intends
to do the same for the Indian property market, which currently presents
a rather under-organized picture.” Deepak Parekh, chairman of HDFC, had
expressed the urgent need for a real estate regulatory body, which
should play the role of a monitor for promoting and overseeing real
estate reforms, ensuring transparency in sales and protecting buyers
from a fraudulent case, if any. Parekh recommended that the state
housing boards should also be brought within the ambit so that there is
complete transparency in its working mechanism, the checks and balances
are well achieved from every quarter.The developers have welcomed the
move too, but not in its current draft form. Kumar Gera, chairman of
CREDAI, India, says, “The intention is good but a lot of thought needs
to go into formulating the role of the body, otherwise the effect can
be counter-productive . Two main intentions are stated in the preamble:
protection of consumers’ interest and speeding up the clearances to
facilitate the smooth development of real estate. There are enough
provisions to achieve the first objective, but I haven’t seen anything
regarding the second. It needs inclusion of processes. In the present
form it is likely to create more processes and hence obstacles.
The Urban Land Ceiling act was also formulated with a noble intention,
but the outcome was disastrous.” R Vasudevan, MD of Vascon Developers
has a similar view: “I think the intention is very good if followed in
its spirit with modification to include the process of speeding up
approvals. It will revamp a sluggish and a beleaguered system. In fact,
no reputed developer would want a short cut to achieve his end, as his
intention would be to become a long-term player. It is not in his
interest to delay projects and offer bad products, as it will tarnish
his image and his brand. Hence this is welcome but only if it fulfils
its intent. A professional approach is the need of the hour now for all
of us.”Sunny Bijlani, director, Supreme Universal, which has projects
in Pune and Mumbai, says, “It is fine with us to have a regulatory
body, which helps bring in transparency to the customers.We are more
than happy. But they have to bring more changes in the rating system to
actually do proper justice to the customers, by doing a complete
financial analysis of the developers, and not just by collecting some
data. Secondly, it should be a single point for all clearances and NOCs
so that the project starts on time. Most delays are caused by
non-availability of clearances from the government authorities.” Real
estate is a major contributor to GDP growth and employment generation.
The minister of urban development acknowledges this fact and feels that
a single regulatory body at the state level is most needed, for faster
approvals , besides faster delivery of projects, accountability of the
project developers, professionalism and finally loan acquisition to
make affordable housing a reality.
Aggressive pricing and festival season discounts are beginning to draw home buyers in the Greater Hyderabad Municipal Corporation (GHMC) area, including surrounding municipalities and satellite townships. With the market correcting by nearly 30-40 per cent depending upon the location, be it core city area or peripheries, buyers have begun to not only evince interest but are also entering into deals, according to some real-estate companies in the city.The President of Greater Hyderabad Builders Federation, Mr C. Prabhakar Rao, said some of the large builders who have taken up integrated township and mega projects are those who are facing the heat of servicing loans. This has forced them to bring down prices by about 30-40 per cent to bring back buyer interest. Prices had shot up to unrealistic levels due to the boom in the real-estate market. That was the time when no one doubted the market potential and continued to invest, a good number of them for speculation.
However, after the correction, buyers, who were waiting for lowering of prices, realised that the market had stabilised and was not likely to go down further. They were now coming back into the market with renewed interest, he said. Significantly, due to good supply, buyers have the choice to select a property of choice, that too in a project that is at an advanced stage of construction instead of investing in just a coming up venture or one that is in a proposal stage.The Chief Executive Officer of Cybercity Builders and Developers, Mr Uttam Korupolu, told Business Line that the market now reflects a positive mood with buyers looking at projects that are attractively priced. Citing the company’s project near Hitech City, wherein apartments are priced at Rs 2,500 per sq.ft in gated community environs, Mr Uttam said that in barely months of launching the project, all the 400 apartments have been booked. This is because projects of similar nature were earlier priced anywhere between Rs 3,500 and 4,000 per sq.ft. Buyers now see value in such properties and are able to relate to them.
They also know that the market has found its bottom, he explained. “Interaction with some of the buyers shows that nearly 25 per cent of those who had booked their properties are actually speculating in the hope that the market will again find its way up,” Referring to the pattern in the core city area, Mr Prabhakar Rao said that the cost per sq.ft now at about Rs 3,000 to Rs 4,000 per sq.ft depending upon the location of the property and the stage of development.In fact, these were ruling 30-40 per cent higher about 18 months ago. Significantly, small developers who have five floors of built-up structures and relatively fewer number of apartments compared with high-rise projects in the city, are not budging on prices as they have less exposure to loans. It is the large builders who have exposure to bank loans and facing the heat of servicing them who are forced to lower their prices. It is not surprising to see some of the larger developers such as DLF, Mantri Housing, Meenakshi, to name a few, being among those who have priced their projects attractively to woo home buyers. Many other larger developers too are looking at fine-tuning their new ventures, he said...http://www.maaproperties.com/Pages/ModuleContent.aspx?Module=News
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DLF Ltd
has been conferred the Best Global Developer Award for 2009 by
Euromoney magazine at Euromoney’s Fifth Annual Real Estate Awards - the
most prestigious awards in global real estate. Further, DLF has also
won the awards for Best Developer in Asia and Best Developer in India.
The award ceremony was held in London amidst the senior management of
leading global leaders. DLF won the honour for the best global
developer services even with tough competition from other nominations,
such as CapitaLand and ProLogis.Commenting on the receipt of the award,
K P Singh, chairman, DLF Ltd, said, “There is tremendous prestige and
honour attached to these awards as they acknowledge the best of the
best in the real estate industry. To be named as the best developer,
not just in India, but across the globe, is definitely an achievement.
It fortifies our vision to be a world - class real estate developer and
provide best quality developments.”
Euromoney is the world’s
leading financial markets magazine. Clive Horwood, editor of Euromoney,
said, “In an increasingly challenging financial environment, the
winners of the 2009 Euromoney Real Estate Awards are those that
exhibited the ability to react at speed, innovate, and make best use of
the inherent strengths of their organisation. Through the real estate
poll, the market has recognised the achievements of these institutions
in the face of difficult market conditions, which is why the awards are
so richly deserved.”Euromoney’s annual Real Estate Survey canvassed the
opinions of real estate developers, advisors, financial institutions,
investors and end-users worldwide, who were asked to name which firms
they thought were best at providing various real estate products and
services in their market in the last 12 months. While DLF was accorded
third position in these awards last year, it moved to being named the
best global developer this year.
A month
after a Company Law Board ordered the handing over of the erstwhile
Teja Raju promoted Maytas Infra to IL&FS, its chairman Ravi
Parthasarathy finally took over the reins of Maytas Infra as chairman
on Tuesday. Parthasarathy takes charge following completion of the
transition process as per SEBI guidelines with effect from September
29. The government has also recalled two out of its four nominees from
the Maytas Infra board with effect from Tuesday. While K Ramalingam and
OP Vaish have been recalled, Ved Jain and Anil Agarwal will continue to
remain on the board of the company.
With this, IL&FS has
formally taken over as the new promoter of Maytas Infra, which was
being run by government -appointed board comprising chairman K
Ramalingam and three other directors since March 2009. In the aftermath
of the Satyam scam, the operations of Maytas Infra, then promoted by
Ramalinga Raju's elder son Teja Raju, had come to a grinding halt. The
CLB had in its order issued last month to hand over the company to
IL&FS, had ordered Maytas Infra vicechairman and CEO Teja Raju,as
well as his family friend B Narasimha Rao to step down from the
company's board. Since then IL&FS had made an open offer in early
September to acquire an additional 20% stake in the company for a price
of Rs 112.80 per share and hike its stakeholding in Maytas to 57.1%.
IL&FS already holds 37.1% stake in Maytas Infra as the Rajus had
pledged the stake with the infrastructure financing firm to raise funds
in October 2007 soon after the company was listed. htttp://www.maaproperties.com
PROPERTY
firms are launching new housing projects and raising pitch for their
ongoing projects hoping to make decent sales going into the festive
season. The mood among builders may be buoyant but few believe price
hike is possible as demand is still hesitant and new supplies are
hitting the market. The festive season, which usually begins late
September with Hindu festival of Navratri and continues up to Christmas
holidays, often sees higher sales of property, cars and other durables
in India. “Last year’s festive season was a total washout. But this
time indications are that we are back to normal,” said Mumbai-based
Lodha Developers director Abhisheck Lodha. He said property firms
usually make 30% of their sales in one and a half month between
Navratri and Diwali, and this time will be no different. Last festive
season, though, was disastrous. Lehman had just collapsed plunging the
entire global economy in a crisis and driving away homebuyers fearing
for their jobs.
Mr Lodha is planning to launch two new
real estate projects, comprising apartments priced over Rs 1 crore, in Mumbai’s
suburbs of Andheri and Thane. So far, the slow return of housing demand
was scripted by lower-priced homes. But Lodha’s offerings indicate the
builder is confident of getting buyers to high-priced segment as well.
Similarly in Delhi, DLF is preparing to launch over 1500 apartments in
a project in which it sold 1350 apartments just six months ago. DLF
says it is yet to fix a price or number of apartment to be sold for the
project, but brokers on behalf of DLF are offering apartments at a 30%
premium to the first phase price. “If a location has a very good demand
and not enough supply, prices will go up,” says DLF executive director
Rajiv Talwar. Delhi may be one such market because it has lived under
state-controlled DDA’s monopoly for long and has not many private
developers building homes. But price rise is not something many are
really betting on. “Housing demand is not going to rise dramatically in
a hurry. The market remains price-sensitive and any attempt at price
hike will adversely impact demand,” says Vipin Aggarwal, principal of
$200-million India Industrial Growth Fund. Agrees Pradeep Jain,
chairman of Parsvnath Developers and head of the NCR chapter of
industry body CREDAI, “We have requested all developers not to increase
prices. If we increase prices in the next six months, it’s likely that
demand will be hurt and we may get into that vicious circle of lower
demand and higher debt.”
HIGH HOPES
While
some firms like DLF & Omaxe believe price rise is imminent, others
like Parsvnath have decided to keep prices steady to encourage demand
Last festive season was disastrous. Lehman collapsed plunging the
economy in a crisis and driving away homebuyers The festive season,
which usually begins late September with the Hindu festival of Navratra
and continues up to Christmas, often sees higher sales of property,
cars and other durables
Quinn Group,
a leading business conglomerate from Ireland, has unveiled Q-City, a
Class-A commercial building in Hyderabad, which sets a new benchmark in
quality commercial real estate. This is the first offering in India
from Quinn Property, the division of Quinn Group, specialising in
development and management of premium quality commercial real-estate
for lease. Q City Hyderabad, a signature property located at
Gachibowli, in the midst of marquee organizations like Microsoft,
Infosys, Wipro, Computer Associates, UBS, Franklin Templeton, Polaris,
ICICI amongst others. Q-city is a modern international office
development consisting of two blocks with a total built-up area of 1.2
million sq.ft. Speaking to mediapersons here today on the launch of
their first project, Peter Quinn, Head-Quinn property said, "India is
an exciting market for us with immense potential in the commercial
real-estate space. The location where Quinn developed its first project
is one of the most prominent ones in the South Asian region with the
presence of many marquee organizations and with many more planning to
set-up operations".
With
fall in interest rates in the last eight months, affordability factor
of house buyers has improved substantially. During the period, interest
rates on home loans up to Rs 30 lakh have declined by around three
percentage points to 9%, from 12%. This sharp decline in rate has
improved the capacity of borrowers.For instance, at 12%, the EMI on Rs
10 lakh loan to be repaid in 20 years is Rs 11,010. But, with interest
rate at 9%, a person can borrow Rs 12,30,000 with the same EMI. That
means, now he can buy a house that is almost of 20% higher value than
what he could have done in 2008.
In the meantime,
since January, prices of residential units have also fallen by up to
30%. Together, these two factors have led to an increase in
construction activities in the country. This has also brought housing
within the reach of a large number of buyers. As per the Housing
Development Finance Corporation Limited (HDFC), the largest lender in
the housing loan market in India, the maximum affordability of a
household has been computed to be 5.1 times its annual income. In other
words, for a household earning Rs 3 lakh a year, an affordable house
should cost at most Rs 15 lakh. The report of a high level task force
under the chairmanship of Deepak Parekh, chairman of HDFC, delves into
the various aspects of providing affordable housing and has recommended
a similar definition of affordability. In fact, it has been seen that
if one buys a house within these limits, the chances of default go down
substantially. A prospective buyer's purchase decision is influenced by
a host of factors ranging from price points to location. Due to the
growing awareness among consumers, choice of facilities and amenities
are also found to be important determinants. Uninterrupted power
supply, water supply and safety and security are the other three
important factors influencing a buyers decision with respect to
residential project in a preferred location. The potential buyers are
not much concerned about developers brand and goodwill. The survey has
brought out factors influencing preferences of potential buyers
pertaining to locations, projects and amenities within the projects.
Many
of the so-called affordable projects are offering apartments with an
area of 1,200 sq ft and above. In such cases, even though a project is
affordable on the basis of rate per sq ft as calculated by Knight Frank
research, the larger size of the apartments make them unaffordable.
Higher cost of living and lifestyle have adversely impacted
affordability of households in Mumbai and Bangalore, compared to cities
like Kolkata and Hyderabad. For instance, middle class households in
Kolkata, Chennai and Hyderabad can afford houses valued at Rs 14-45
lakh, whereas households of a similar status in Mumbai can only afford
houses valued at Rs 12-38 lakh.The primary deterrent in providing
affordable housing in cities is the high land cost involved in
developing such projects. While construction cost has increased
marginally in the last few years, land cost in contrast has gone up
several times.
With
developers forced to return to the drawing board to make projects
financially viable, the landscape is, indeed, changing.Look what TTK
Prestige, the cooker-to-condom maker, said in a notice to the Bombay
Stock Exchange last week.In 2007, the company had entered into a joint
development agreement with Kolkata-based Salarpuria Group to develop a
6.3 acre site in Dooravani Nagar, Bangalore.The initial plan was to
construct a mall to ensure recurring rentals. But the financial crisis
has forced a change: residential blocks will be added to the
project."Taking into account the ground reality, Salarpuria suggested
putting up a residential-cum-office space. But a decision on this is
yet to be taken," said K Shankaran, director and secretary, TTK
Prestige.The management feels the new plan makes sense from a liquidity
point of view.
Also last week, another firm,
Sunteck Realty, said it was revisiting its project --a commercial
complex on a 1.5 acre site between Kandivali and Borivali. "The project
hadn't even reached the drawing board when we closed the deal a few
months back. However, taking into account the oversupply situation in
Mumbai's commercial space, we thought it prudent to develop a high-end
residential complex instead, with a small portion of retail added to
it," said Sunteck Realty managing director Kamal Khetan.Orbit
Corporation, the south Mumbai realtor, decided convert its 2.5 lakh sq
ft commercial development, called the Hafeez Contractor House in Lower
Parel, into a residential project. Pujeet Agarwal, managing director,
Orbit, said the company is actually converting two commercial
developments -- the Lower Parel one and another in Andheri -- into
residential ones.Realty analysts said oversupply and declining demand
is making such commercial space development unviable."The government's
initiatives towards reducing borrowing costs is reflected in declining
interest rates on home loans. This, coupled with realty prices getting
more realistic are helping maintain the excitement in the residential
space," said Sanjay Dutt, CEO, business, Jones Lang LaSalle Meghraj,
the real estate consultancy.Revival in demand for commercial space,
meanwhile, will largely depend on the global economic scenario.
"The
only movement that I see is offices being relocated to more reasonably
priced commercial developments thereby cutting costs," said Dutt.
Investment bank Goldman Sachs in a recent report, said primary
residential volume trends (year to date till May this year) indicated
recovery in markets such as Mumbai and Noida."Inventory days in the two
cities have fallen back to early 2008 levels or better. However, the
overhang in Bangalore, Chennai, Gurgaon and Hyderabad remains
significant with at least 15 months of inventory in the pipeline,"
Goldman analysts Vishnu Gopal and Aditya Soman wrote.
India’s
struggling realty industry may have sprouted some green shoots of late,
but the top nine listed real estate firms posted a 76% dip in profit
and 57% fall in sales in the June quarter, prompting the segment leader
to observe that the industry is not “completely out of the woods”.
Analysts said the revival in demand could improve things, especially in
light of a government subsidy for loans taken for affordable housing,
but warned that a possible price war between players sitting on huge
inventories could spoil the scene. “The recovery of the sector will
depend a lot on the sustenance of demand,” said Shailesh Kanani, a real
estate analyst with Angel Broking.
Rupesh Sankhe, another real
estate analyst with Centrum Broking, felt low-priced homes will
continue to drive up demand , even though it may not be, “anywhere
close to what we saw in 2006 and 2007”. DLF, India’s largest listed
real estate developer, sold 2.5 million sqft of home space in Delhi and
Bangalore in June quarter and wants to launch another 16 million sqft
of residential space this fiscal. DLF reported a 79% decline in profit
and 57% slide in sales for the June quarter.“There has been a
reasonable revival in demand for homes not just in low-cost or
mid-income , but also for high-end ,” DLF vicechairman Rajiv Singh told
an analyst conference call on Friday. His immediate competitor,
Unitech, reported 63% decline in profit with sales down by half.
“Property prices have come down and so has the interest rate. That’s
why home buyers are again looking at the property market ,” said R
Nagraju, head of corporate planning at Unitech. The firm is targeting
to sell a total of 30 million sqft of space this fiscal. Other realty
players Indiabulls Real Estate, Parsvnath, Omaxe, HDIL, Akruti, Sobha
and Purvankara too have reported decline in profits up to 95% for the
June quarter. Parsvnath chairman Pradeep Jain said the worst was over
for the sector and demand had started picking up. But the pick-up in
demand hasn’t really erased all concerns as DLF’s Rajiv Singh said the
sector was still not “completely out of the woods.”
Much of the
new bookings received in residential projects have been in what
developers call ‘affordable’ category or homes priced between Rs 20-35
lakh. Encouraged by the response , more developers are readying to
launch homes in this segment. The tax benefits announced recently by
the government for smaller homes is likely to act as additional
incentive for projects in the category. “Supply is likely to increase
faster than the demand in the residential market, as many developers,
who had been postponing their launches for a long time are now
launching new projects ,” says another analyst with a Mumbai-based
brokerage firm, who didn’t want to be named. He says prices may correct
further as new supplies hit the market.Mr Sankhe of Centrum believes
the scope for price correction in low-price segment is limited, but
high-end homes can still see property prices drop at least 10%. Some real estate developers such as HDIL and privately held Lodha developers have
claimed that prices have already started firming up in Mumbai. But
analysts as well as some developers, including DLF and Unitech, say
price hike would hit demand and not be good for the sector at this
stage.
