Pre-leased commercial properties: Compelling investment choice

Pre-leased commercial properties: Compelling investment choice -------------- 

Rubi Arya
Pre-leased Commercial Real Estate (CRE) has been increasingly becoming one of the attractive investment opportunities in India over the last 12-18 months. Large private equity funds both foreign and domestic, sovereign wealth funds, family offices, UHNIs have been very actively investing in this asset class. Especially in an era post the demonetization drive, where the returns on fixed income products like G-secs, bonds, bank deposits are witnessing a declining trend, CRE is an attractive investment opportunity that can provide stabilized returns with appreciation on exit.

Investment into pre-leased CRE are low to medium risk investments with debt-like returns during the investment holding period with an equity upside on exit from these investments. As CRE investments are income generating from day one, the owner enjoys debt-like returns during the asset holding period. These returns range between 8.5%-9.5% p.a. to begin with and gradually improve on account of rent escalations, which is typically 5% on year or 15% after 3 years. These are stabilized returns due to lease tenures typically in the range of 3-15 years.

On exit the owner of CRE would earn equity upside with capital appreciation being earned on the escalated rent as well as on yield compression in an interest falling scenario over the asset holding period. Hence the investors can make around 16-18% p.a. returns from such investment opportunity. These can be bettered further in case some of the asset acquisitions can be structured through a combination of leverage through lease rental discounting available from banks and financial institutions and equity investment by the asset owner.

Attractive opportunities within the CRE space are available for investment. In bigger cities like Mumbai, Bangalore where capital values are higher in CBD locations as compared to other micro markets, opportunities like part asset purchase are also available in addition to buying entire asset. In terms of tenant profile, a diversified tenant mix from sectors IT/ITES, BFSI, Pharma, Manufacturing, E Commerce etc which provide the owner portfolio balance and diversity. Also with positive macro economic factors along with regulatory initiatives by the Government of India, the demand from various sectors for additional space is bound to increase thereby having a positive impact in CRE valuations.

Given that CRE investments need huge capital, investors prefer investing through a pooling vehicle like a private equity fund. With this, investors get benefits like diversification in terms of asset, developer and geography apart from better due diligence, low overhead costs, collective negotiation, lower entry cost, active control and asset management, which cannot be availed through direct investments.

Our experience with three such funds so far has been rewarding for investors and us because of these benefits of collective investment. Th e current market is even more conducive for such investments and that’s the reason our efforts to raise 4th private REIT-like fund focused on investing into pre-leased Commercial Real Estate in India’s top 6 cities is receiving good traction.

The key factors driving such investments into CRE are obvious as office space demand is growing at a robust pace, vacancy levels going down and rising rentals. In a falling interest rate environment, where other financial products show signs of volatility, investment in pre-leased commercial asset will provide stable returns in the form of regular quarterly returns and capital appreciation with yields compression.

With investment in completed Commercial Assets, there are no risks associated with Land, Project Approvals and Constructions delays. Regulatory initiatives including GST, RERA, REITs as well as demonetization will result into higher transparency that would further boost the commercial space demand and therefore makes a compelling investment choice.

(Rubi Arya is the executive vice chairman of Milestone Capital Advisors)

Key reforms to give leg-up to real estate, say experts

The moves related to RERA Act, Real Estate Investment Trusts, smart cities, GST and demonetisation will eventually boost the demand for real estate, feel industry participants. 
ref: http://realty.economictimes.indiatimes.com/news/industry/key-reforms-to-give-leg-up-to-real-estate-say-experts/56677815

 MUMBAI: The government’s various policy and reform initiatives over the past two and half years aimed at improving transparency and ease of doing business in the realty space will infuse the much-needed confidence and trust in the sector, said industry participants.

 The moves related to Real Estate Regulatory Act, Real Estate Investment Trusts, smart cities, Goods & Services Tax and the most recent demonetisation will eventually boost the demand for real estate, which has the maximum linkages to other industries after agriculture.

 In its mid-term performance analysis for the Modi government’s realty-specific initiatives, international property consultant JLL India rated the reforms at moderately successful level, expecting faster implementation of the same.

 “The recent demonetisation drive has definitely helped the government score well on regulations and transparency. We have taken a holistic view of the continued political will towards reforms in the real estate sector — and the very real challenges the government faces. Improved transparency will drive increased participation by institutional investors in India. With strong linkages between regulations, transparency and real estate, we assign it a high weightage,” said Ramesh Nair, COO — Business & International Director, JLL India.

 The most imminent change that will impact the sector in the years to come is the implementation of RERA that will increase transparency, which in turn will bring back homebuyers’ confidence.

 Given that investments are extremely crucial for a capital-intensive sector such as real estate, policy initiatives on Foreign Direct Investment liberalisation, interest rates, REITs and private equity flows, etc., have a strong bearing on the overall investment scenario.

 “The reforms such as RERA, demonetisation and steps to improve ease of doing business have ushered in higher transparency while discouraging a parallel economy. This will prompt developers to focus on completing their projects in a time-bound manner thereby increasing customer confidence,” said Rubi Arya, Executive Vice Chairman, Milestone Capital Advisors.

 According to her, as the property sector has been subdued for some time now, it offers for institutional investors an opportunity with better pricing and falling interest rates.

 The long term fundamentals are also looking intact due to increased transparency and governance thereby providing attractive returns on investments in real estate as an asset class.

 Realty developers agree that they will have to adjust to the new environment. However, they are also hopeful that in the long term, all of these factors will help strengthening the sector.

realty.economictimes.indiatimes.com

Hong Kong "mini" flats boom as govt fails to rein in record-high prices - ET RealEstate

By: Venus Wu

HONG KONG: For part-time furniture mover Kong Ngai-lam, 26, home is the bottom half of a bunk bed inside a tiny room that fits little else. Nearly 200,000 Hong Kong residents like him call a wire cage or bed in partitioned apartments their home.

 Making housing more affordable was among outgoing Hong Kong leader Leung Chun-ying's top priorities when he took office in 2012, but his administration has been unable to rein in skyrocketing prices that have added to discontent in the city.

 "Over the past four years, despite a number of measures by the current-term government which has successfully curbed external, investment and speculative demands, the difficulty in achieving home ownership remains an unresolved problem," Leung said in his swansong policy address on Wednesday.

 High property prices and rents posed "the gravest potential hazard to the Hong Kong community as many families have no choice but to live in subdivided units, even in industrial buildings," Leung added.

 Property prices have surged nearly 50 percent to historic highs since he took office, according to government data, and tiny living spaces have become increasingly common. About 100,000 people under the age of 35, including children, make up half of those occupying such partitioned units, a government report showed. Non-government organisations say the real numbers are higher.

 These units, measuring half the size of a standard carpark space at an average of 62.4 square feet (5.8 square meters), are getting more expensive too.

 Median rents surged 10.5 percent to HK$4,200 ($520) in 2015, official data showed. The figure is greater than the 8.4 percent rent increase in private homes over the same period.

 Kong now pays $250 monthly rent for his bed space in the cluttered apartment shared with 10 others. A handwritten note warns of eviction if rental payment is late: "We are not the Salvation Army," it says.

 There are no legal guidelines in Hong Kong restricting how small apartments can be, nor any on rent control. "The biggest issue in Hong Kong is we don't have any legal restrictions, so the landlords can do whatever they want," said Kong's social worker and community organiser at the Society for Community Organization, Sze Lai-shan. MOSQUITO-SIZED FLATS "Mini flats" or "mosquito flats" are a growing trend as developers target first-time buyers who have given up hope of ever owning a decent-sized home.

 Emperor International Holdings will build flats as small as 61.4 square feet (5.7 square metres), though the measurements exclude kitchen and bathroom; Chun Wo Development Holdings has plans for a residential building catering to young first-time buyers with 128 square feet (11.9 square metres) units. "Hong Kong's real estate has gone so expensive, that's why (developers) are making flats smaller and smaller to make them affordable," said Edina Wong, senior director of residential services at property consultancy Savills.

 Hong Kong's richest man Li Ka-shing recently said the trend made him feel "uneasy", even though a residential complex built by his Cheung Kong Property Holdings offers flats smaller than 200 square feet (18.6 square meters). One unit in September sold for HK$2.8 million ($360,000).

 Thomas Lam, senior director at Knight Frank, expects small flats to remain popular in the short run as long as prices remain high and tightening measures such as higher stamp duties stay in place. But a mini apartment is not for everyone. Freya Tseng, 27, who advises her family on property investments, has stayed away from mini flats.

 "If you buy it for yourself, the quality of life will be too low and you won't be happy living there. If you buy it for investment purposes, it doesn't have any reserve value," Tseng said. "It's a joke." (Editing by James Pomfret and Jacqueline Wong) www.arundevelopers.com   

Modi government mulls new housing scheme with just 6-7% home loan interest rate

Looking to boost the housing sector, the Modi government is mulling a new scheme that may use money from the demonetisation drive. According to an ET Now report, the government is keen to boost the housing sector via a new scheme and is already in discussion with the RBI. The new housing scheme may be announced as early as the Union Budget 2017, which is expected to be presented on February 1. The channel reported that the final contours of the housing scheme will be decided after the details of revenue earned from demonetisation emerge. The report went on to add that the government is eyeing an interest rate in the range of 6-7% for home loans up to Rs 50 lakh. This new lower interest rate option of 6-7% will be available to first time borrowers and is likely to provide a much needed impetus to the housing market.

The real estate sector has been under pressure for quite some time now, and with the government’s move to demonetise old Rs 500 and Rs 1000 notes, experts expect an initial slump in home sales. However, there are also chances that banks will find room to lower loan rates – a step that would encourage people to buy homes. ‘Housing For All’ is a dream project of the Modi government, and the new scheme that is being talked about appears to be a way to avoid demand for real estate from falling further. The proposed interest rate range of 6-7% for home loans up to Rs 50 lakh also suggests that the government is looking to make housing more affordable for all.

While rating agencies and analysts were skeptical of the impact of demonetisation on the real estate sector, some industry experts had welcomed the move, stating that it would benefit in the long-term. Nirmal Jain, Chairman of India Infoline had said that housing will no longer be a distant dream for people now. “This (demonetisation) is a very powerful measure to curb black money. PM Modi has kept his promise of taking stern measures against black money. It will have deflationary impact in general and more specifically on real estate prices and make homes affordable, and is indirectly a boon to honest tax payers,” he had said.

ref: http://tz.ucweb.com/11_1qqhY

Looking to boost the housing sector, the Modi government is mulling a new scheme that may use money from the demonetisation drive. According to an ET Now report, the government is keen to boost the housing sector via a new scheme and is already in discussion with the RBI. The new housing scheme may be announced as early as the Union Budget 2017, which is expected to be presented on February 1.

The channel reported that the final contours of the housing scheme will be decided after the details of revenue earned from demonetisation emerge. The report went on to add that the government is eyeing an interest rate in the range of 6-7% for home loans up to Rs 50 lakh. This new lower interest rate option of 6-7% will be available to first time borrowers and is likely to provide a much needed impetus to the housing market.

 The real estate sector has been under pressure for quite some time now, and with the government’s move to demonetise old Rs 500 and Rs 1000 notes, experts expect an initial slump in home sales. However, there are also chances that banks will find room to lower loan rates – a step that would encourage people to buy homes. ‘Housing For All’ is a dream project of the Modi government, and the new scheme that is being talked about appears to be a way to avoid demand for real estate from falling further.

The proposed interest rate range of 6-7% for home loans up to Rs 50 lakh also suggests that the government is looking to make housing more affordable for all. While rating agencies and analysts were skeptical of the impact of demonetisation on the real estate sector, some industry experts had welcomed the move, stating that it would benefit in the long-term. Nirmal Jain, Chairman of India Infoline had said that housing will no longer be a distant dream for people now.

“This (demonetisation) is a very powerful measure to curb black money. PM Modi has kept his promise of taking stern measures against black money. It will have deflationary impact in general and more specifically on real estate prices and make homes affordable, and is indirectly a boon to honest tax payers,” he had said. ref: http://tz.ucweb.com/11_1qqhY

Demonetization: 'Housing prices already at lowest, no scope for correction,' says CREDA

Credai said the real estate industry fully and unequivocally supports government's decision of demonetization.

Realtors' body CREDAI said on Saturday there is no further scope for correction in housing prices in the primary market post demonetization as rates are already ruling at the lowest level. Credai, however, said that the real estate industry fully and unequivocally supports the decision of the government to demonetise currency notes of Rs 500 and Rs 1,000 in the national endeavour to eliminate black money, corruption, fake currency and terror financing.

 The association in a statement said that the primary market is funded by banks and financial institutions which are all regulated entities. As such, cash component is not an integral element of the primary market. Therefore, Credai denies adverse impact on the primary real estate market arising out of demonetization. In fact, the primary segment is expected to gain at a rate of 15% YoY, the statement said.

The government's resolve to eliminate black money and corruption is in the interest of the common man as well as business and industry, it said. Real estate industry contributes 7% of country's GDP and is the second biggest employer after agriculture. Given the scale and size of the industry, it is imperative that Credai articulates the impact of demonetization on the industry and brings it to the knowledge of the general public, it said.

 In the aftermath of demonetization move, banks are going to have additional funds upward of Rs 10 trillion. Hence, a fall in interest rates up to 200 basis points is expected. An early sign is seen with country's largest lender State Bank of India cutting its deposit rates by 1.75%. According to Credai, we see home loan rates coming down from the present level of 9.25% to less than 7% in less than one year from now.

This would bring down the EMI for the ultimate consumers. Credai expects the mop up of black money to also lead to higher tax collection and a lower rate of personal and corporate income tax from the next financial year onwards. In other words, the demonetization would put more money into the pocket of home purchasers through lower tax burden and incentives for home ownership.

 The tendency towards lower rate of interest is also going to be strengthened by a low rate of inflation. Credai, comprising 11,500 real estate developers spread over 166 cities in 23 states in the country, is the apex body for private real estate developers in the country.
  http://www.dnaindia.com/money/report-demonetization-housing-prices-already-at-lowest-no-scope-for-correction-says-credai-2277276

Home launches rise 14% in September quarter, sales stable: PropTiger

NEW DELHI: Home launches across the top nine cities registered a 14% rise in the July to September quarter, the highest in last five quarters, says a report by online real estate advisor PropTiger.

The affordable housing segment, with homes priced between Rs 25 lakh to Rs 50 lakh, accounted for about 61% of the total launches in the September quarter (Q2 FY17). As many as 47,000 new residential units were launched in Q2 FY17, against 41,000 units in the preceding quarter. Sales, however, remained stable, with 54,721 units launched in the Q2 FY17, compared with 55,550 units in Q1. However, annual sales increased by 12%, from 48,976 units in Q2 FY16 to 54,721 in Q2 FY17.

Inventory overhang during the quarter remained unchanged at 35 months. However, unsold inventory in all the cities, barring Ahmedabad, Kolkata and Pune, witnessed a decline. “The market seems to be finding its base with sales hovering at around the 55,000-unit range for the past two quarters. The increased focus of developers on execution and new launches mostly happening with prior approvals, are expected to bring fence-sitters into the market," said Anurag Jhanwar, business head, consulting and data insights,

PropTiger.com and Makaan.com. Home prices remained range-bound across the cities, with just Hyderabad registering the highest annual appreciation of 11%.  "Developers have been reluctant to reduce residential prices and have instead been offering deferred and flexible payment schemes to entice buyers," said the report. Old projects launched more than 12 months ago accounted for 60% of the total sales during the September quarter, indicating buyers' inclination towards projects which are showing visible construction progress.

Mumbai, Pune and Bengaluru grabbed the major share of home sales during the quarter of about 58%. Mumbai contributed the most to sales, accounting for 21% of total sales during the quarter, followed by Pune and Bengaluru at 19% and 17%, respectively.

 The PropTiger report covered nine key Indian cities of Mumbai, Pune, Noida, Gurgaon, Bengaluru, Chennai, Hyderabad, Kolkata and Ahmedabad. Home sales are expected to increase in the subsequent quarters on the repo rate cut by the Reserve Bank of India, discounts and schemes offered by developers and the Real Estate (Regulation And Development) Act, according to the report.

 ref: http://realty.economictimes.indiatimes.com/news/residential/home-launches-rise-14-in-september-quarter-sales-stable-proptiger/55048951

Buying a House? 7 Things to Check Before You Seal the Deal

https://housing.com/blog/2015/12/30/buying-a-house-7-things-to-check-before-you-seal-the-deal/?utm_source=housing-existing&utm_medium=email&utm_campaign=buying-a-house-7-things

Buying a House? 7 Things to Check Before You Seal the Deal
Buying that perfect home is not the easiest task. Some wait for the perfect deal to come up while some may even spend a lifetime waiting to build or buy the right home, but it may just never arrive. Undoubtedly, it is one of your biggest financial purchases in your lifetime, so you would want it to go perfectly, be it the first time or the last. When you find yourself unable to save enough for a new house purchase, is when ‘planning’ comes in. Planning your financial aspects is as important as saving. Also, what should you consider before buying a house? Is it the location or the budget? Or is it going to be a choice to be made between a spacious house and a holiday home?  

Here are seven things that you should check before you seal the deal.

I) Budget

One of the most important home buying tips is to decide on a budget. This helps you decide what kind of house you will end up buying. To avoid a wrong financial decision that will turn the experience nightmarish, do a careful study of your finances before you start scouting for a house. Adding up all your income, determine what kind of expenses, investments and additional financial commitments you have. In the case of your spouse, parents or children contributing to the purchase, doing a joint calculation will make the task easy.

 A thorough calculation will give you a rough idea about how much money you can set aside per month for the house purchase. After deciding the full budget, the main objective is to break it up into down-payment and the monthly EMI that you can afford to let go from your income without getting hard-pinched. Once you determine the affordable amount, you can decide on the type and location of the house.

The first payment that you have to make is the down-payment. Banks will finance a maximum of 80-85% of the property cost and you will have to shell out the other 15-20%. But don’t spend every last penny in the down-payment or borrow from other sources. Beware of taking loans from sources like family members, colleagues or your office. Banks don’t include stamp duty and registration charges in the property cost, so the entire amount has to be borne by the buyer alone. Next comes monthly EMIs which may run for over 20 years, in many cases. Plan it keeping in mind your financial commitments (children’s education, medical needs and emergencies, family vacations, etc).

 While deciding the final budget, plan out in such a way that you have some money left (for other uses) after the down-payment is made. Also, make sure your monthly loan payments do not exceed 40-45% of your net income.

  II) Home Loan

 With increasing property prices, when you don’t have much choice but to opt for home loans, look for a bank that’ll give you an easy home loan with the minimum rate of interest. There are many websites (mostly of home loan companies), which have online EMI calculators. You can calculate your monthly EMIs using these easy tools. Use Housing.com’s EMI calculators to get the best customised offers too. Most banks and home loan financial companies have information on their websites stating eligibility and the rate for home loans. The most popular ones are SBI, HDFC, ICICI Bank and Axis Bank among others.

 After you collect information about the lenders, you can do a comparison about which lender offers the most convenient loan. Home loans are determined based on the location of the property, history of the developer and can be obtained for both new and resale property.

When it’s a resale flat, most lenders choose to value the property independently before providing the house loan. This loan is based on their value instead of the cost mentioned in the purchase agreement. Next comes the choice between ‘fixed rate of interest’ or ‘floating’ or a mix of both. Most people tend to get confused regarding this part and end up taking advice from anyone, including the broker. Take help from the bank’s relationship manager, instead, or consult a property expert, as your entire financial burden will depend on it. Also, consider flexibility on the bank’s part to adjust the EMI amount or tenure in the case of an interest rate revision.

III) Location

 After your financial calculations are done, decide on the location of your property. Where exactly do you want your dream home to be? Would you prefer a suburban location or an urban area? Do you want to live in a peaceful isolated community or close to the main hustle-bustle of the city? Can you compromise on a little more time on travelling instead of living in a crowded area?

Before going ahead with the purchase, you should check out its distance from public amenities, hospitals, marketplaces, malls, corporate offices, schools/colleges, police station, etc. Also, ask around about security of the place, especially if you’re a single woman. Is it a crime-prone area or is law and order well-maintained? Home Buying Tips Also, enquire if the place gets affected in the monsoon and if the area comes under the municipal corporation.

Check if a regular water supply is available and if there is a power shortage in the area. Only after checking out these crucial criteria, go ahead with the location. Also, remember that the price of the property depends on the locality and the area. Some banks do not offer loans, in particular to black-listed areas, so beware of them in order not to be cheated.

IV) Type of Home

 Right after you have decided the budget, the amount of the loan required and the location where you want your residential property to be in, the task becomes easier. Next, you have to decide the type of home you want to own.

 This could range from an apartment, villa, flat, duplex, penthouse, row house to a big bungalow. There are many factors which you need to consider before deciding the type of house. Right from the size of your family to your professional needs, the size and type of home depends on many factors. Will your family become bigger any time while you’re in this house? Do you have plans to get a pet? Would you rather have a big kitchen instead of a luxurious bedroom?

V) Insurance

 Insurance is the most forgotten factor through the excitement of buying a property. The overwhelming experience of buying a house may make you forget that everything needs to be protected, including your hard-earned house. “India is one of the most under-insured countries in the world as non-life insurance sector has a penetration of only 0.7 percent in the country,” P. Chidambaram, former Finance Minister, said. Among 200 general insurance products available in the market today, around eight of them offer home insurance products – ICICI Lombard, TATA AIG,

HDFC Ergo, United Insurance, IFFCO TOKIO Home Insurance, The New India Assurance, Bajaj Allianz and The National Insurance Company. Don’t forget to buy any of these after carefully reading the document as you can protect your home from damages caused by calamities, burglary or a fire accident. This will not only insure your home but also keep you protected from losing all your investments during the house purchase.

VI) The Devil is in the Details

 Many get tempted to ignore small details while buying a house, which may not seem to be so crucial initially. Some builders bundle up amenities as a preferred option. They offer security, various facilities such a swimming pool, gym, library, park, coffee house, etc., which constitute society charges! Make sure you also inquire about the annual maintenance charges before you buy a property. In most cases, you have to pay a share of the overall building maintenance.

 Home Buying Tips

Enquire if there is electricity backup in the community or the building as frequent power-cuts are more or less common. You should also check if the lifts in the building work properly and the lighting within the house and in key common areas such as hallways and stairwells have 24/7 power backup.

Bringing Ravet closer to everything

2 BRT, one coming from Aundh and one from Nigdi, two subways connecting Akurdi , New railway line to connect Pune and Lonavala : what more do you need to become the next centre of the promising PCMC !!!

read the news extracts and happenings around for the concerned news !

Railway under bridge at Akurdi station inaugurated PUNE:

Travel from Nigdi to Ravet will become easier for thousands of people as the second railway under bridge (RUB) near Akurdi railway station has been inaugurated. 

Anil Suryavanshi, executive engineer, PCNTDA said, "The length of subways is 47 meter. The width is 8.58 meter and the height is 4.78 meter. The first new subway was inaugurated in February 2014 which reduced the vehicular congestion on approach roads of the old subway. The second subway was inaugurated by district guardian minister Girish Bapat last week."

 Earlier, residents of newly developing areas of Ravet, Walhekarwadi, Kiwale and parts of Akurdi crossed the railway tracks through a water logged subway to go to Nigdi-Pradhikaran, Pune-Mumbai highway and other areas.  There was a demand from residents of Akurdi, Ravet and Nigdi that a modern wide subway be constructed. The Pimpri Chinchwad New Township Development Authority (PCNTDA) invited bids for the construction of new subway in March 2010 at cost of Rs 8.1 crore.

PCNTDA had planned to construct two separate subways using push box technology for light vehicles and two-wheelers, namely one for going from Nigdi to Ravet and other for coming from Ravet to Nigdi.  http://timesofindia.indiatimes.com/city/pune/Railway-under-bridge-at-Akurdi-station-inaugurated/articleshow/48759306.cms http://m.timesofindia.com/city/pune/PCMC-changes-design-of-Ravet-ROB/articleshow/48460805.cms

PCMC changes design of Ravet ROB PUNE:

The Pimpri Chinchwad Municipal Corporation has changed the design of its railway overbridge (ROB) at Ravet due to expansion of tracks on the Pune-Lonavla section. A third track is being planned on Pune-Lonavla stretch. On July 8, the railway authorities sent a letter to the civic body asking it to shell out Rs 26.51 lakh extra before change in overbridge design is approved.

 As per the resolution, the civic body plans to develop a 45-metre wide bus rapid transit system (BRTS) route from Bhakti Shakti Chowk in Nigdi to Mukai Chowk in Kiwale with Pune-Lonavla railway track crossing it at Nisarga Darshan Society.  The PCMC sought to construct a railway overbridge at this spot for providing easy passage of vehicles. We have just the right project for you Arun BLU

Real Estate slowdown: 5 factors that can revive the sector

http://www.financialexpress.com/article/economy/real-estate-slowdown-5-factors-that-can-revive-the-sector/125918/ Real Estate slowdown: 5 factors that can revive the sector

The real estate slowdown in India appears to be taking much longer to get stable. The sector has been going through a rough phase with inventories piling up and sales down. Declining consumer trust in the sector can be revived if developers exhibit appropriate construction progress in order to avoid fear of delays in completion. To counter sales developers have shown caution with controlled launches. However, if market trends were anticipated beforehand such moves should have happened earlier. Sales of residential units declined significantly over the last two years, particularly in the initial periods.

The number of units that are sold from both new and old projects every quarter form the sales rate, and from 14% in 1Q13 this has steadily declined to below 9% as of mid-2015, thereafter remaining stable at low levels, according to global property consultant JLL India. The report further added that the slowdown trend has been observed in seven leading metros with the situation particularly grim in markets such as Delhi-NCR, where the sales rate has declined by 10%. Despite a big fall in Pune, Hyderabad and Kolkata, the sales rates of these cities still remain in double-digits at 12-13%.

Mumbai’s fall was moderate, owing to low sales rate throughout the said period. Suvishesh Valsan, AVP – research & real estate intelligence service, JLL India lists out five broad factors that influence real estate markets, including country’s GDP and employment scene, credit availability, interest rates, housing supply dynamics and consumer confidence. These factors indicate the formula for revival could lie within the reach of builders and policymakers.

1. GDP and employment scene: In contrast to the housing sales rate, India’s GDP has been rising consistently over the last two years from 6.9% y-o-y growth in fiscal year 2013-14 to 7.3% in 2014-15, and is expected to be over 7.5% in 2015-16. Also, the monthly reports of leading recruitment firms in India suggest that hiring activity has picked up pace, particularly in the last year.
2. Credit availability: RBI data on the growth in home loans as well as the growth in credit to the construction sector (including loans to public housing agencies) reveals healthy credit offtake. Home loans have grown at a 17% y-o-y average over the last two years (until May 2015) whereas bank credit given to the construction sector grew at 22% y-o-y – one of the highest levels of all sectors.
3. Interest rates: CPI inflation has declined sharply by around 3% in the last two years and it now stands at 5% (as of May 2015), which is well within the comfort zone defined by the Reserve Bank. Consequently, the RBI has responded with three rate cuts (totalling 75 basis points) since the start of 2015, with a possibility of more rate cuts in the near-term.
4. Housing supply: Developers have consistently launched close to 60,000 units every quarter since 1Q13 despite the slowing demand. As a result, developers’ unsold stock has mounted, particularly in NCR-Delhi, Mumbai and Chennai.
5. Consumer confidence: With above factors portraying a positive picture for the economy, the influence on consumer confidence is positive. This is also borne out by various market reports. However, the rising consumer confidence has not translated into higher demand for apartments.

Real estate slowdown: Key points – Delhi-NCR, where the sales rate has declined by 10% – Pune, Hyderabad and Kolkata, the sales rates of these cities still remain in double-digits at 12-13% – Mumbai fall was moderate, owing to low sales rate throughout the said period. First Published on August 26, 2015 3:02 pm© The Indian Express Online Media Pvt Ltd

Real estate is second largest employer: Siddaramiah

http://www.siasat.com/news/real-estate-second-largest-employer-siddaramiah-819929/Real estate is second largest employer: Siddaramiah   

 Bengaluru: Real estate sector is the second-largest employer in India after agriculture and is slated to grow by more than 20 percent in the next decade, said Karnataka Chief Minister Siddaramiah on Saturday. “Real estate is the second most active sector attracting private equity investors in the last ten months,” he said at the seventh convention of the National Association of Realtors (NAR), touted as India’s biggest real estate convention.

 Zeroing in on the state, Siddaramiah said Bengaluru is the fastest growing city and top real estate market in India beating other big cities like Mumbai, Hydeabad, and National Capital Region (NCR). Leading real estate player Prestige Group’s chairman Irfan Razack said that the real estate industry played a pivotal role in bringing hundred of large global MNCs like Amazon, JP Morgan and many others to come and set up shop in Bengaluru.

Siddaramiah also said that while Bengaluru is known as the IT capital of India, this industry would not have grown without the important role played by the real estate industry. “Bengaluru consumes eight million square feet of real estate space every year and produces 80,000 jobs,” said Razack, adding that the government is the biggest beneficiary of the real estate growth in India as it earns a huge amount of revenue through stamp paper, registration, taxes and others. As many as 1,200 delegates from various nationalities attended the NAR – India to deliberate on the crucial issues pertaining to real estate.

 Realtors, developers, architects, lawyers, investors, venture capital firms, equity funds, chartered accountants, financial institutions, property valuers and others from across India participated in the event. “It (NAR – India) also helped create a platform for over 26,000 companies and 1.2 million members across the globe to network seamlessly and do business,” said its chairman Farook Mahmood.

Why real estate may not crash

http://wap.business-standard.com/article/opinion/bhupesh-bhandari-why-real-estate-may-not-crash-115073001745_1.html

Bhupesh Bhandari: Why real estate may not crash

 Of late, there has been much talk of an imminent crash in residential real estate. The sector is expected to crumble under the weight of high inventories. After the clampdown on black money, fresh sales have come to a halt. Thanks to low sales and the banks tightening the screws, builders are in a financial bind, which is expected to precipitate distress sales. One research house has predicted that this will shave sizeable percentage points off India's growth in the coming quarters. Actually, the sector has been stuck with high inventories and faced a liquidity crunch for at least two years now - and yet, prices haven't tumbled.

There has been some correction, but there is no evidence of a crash. That is because a sizeable number of builders are not highly leveraged, and can therefore afford to sit on unsold stock for some more time. This is how residential real estate works in India. The builder pays for the land and then sells the project. With the money paid by buyers, he carries out the construction. The only cost he has to pay out of his own pocket is the land. And if he is a serial builder, he will buy the land from the money he raised for earlier projects - there is no monitoring of these funds. In Noida, one of the real estate hotspots in the country, he needs to pay only 10 per cent upfront and the rest in installments over several years.

 Many builders who have not been able to sell apartments have simply halted construction, rather than take debt to complete their projects. A majority of projects are therefore behind schedule. Buyers are helpless. Some builders had offered to pay penalties in case of a delay, but the promise comes laden with so many riders that buyers seldom get paid. Those builders who are highly leveraged do indeed have a problem in their hands. While banks had turned their back on them long time ago, NBFCs and private lenders have also started to say no to them. Most of the builders in this category are those who are into commercial real estate as well, where pre-sale does not happen. Such projects are financed out of debt. With the debt tap turned off, and the equity market having tuned cold to real estate years ago, these builders are now desperate. Some large builders I know admit that they are inundated with requests from those in distress to buy their projects.

A Godrej Properties executive recently told Business Standard that his company has been approached by builders who are unable to complete their projects. But not all stuck projects will sell - those in the boondocks don't stand a chance. It is, after all, a buyer's market. Those who have the money will cherry-pick their projects. This might lead to a sea change in the country's real estate landscape. So far, large business houses have stayed away from it. The reasons are obvious: the cash transactions involved in the business, the headache of negotiating a plethora of rules in every market (every state has its own set of rules) and the never-ending speed money. But now they see an opportunity in the large number of projects that have got all clearances but are stuck because of the lack of funds. Trust in builders is really low amongst home buyers.

They are looking for projects that are backed by sound corporations. And that is where business houses like Tata, Godrej, Bharti and Mahindra have the opportunity. In spite of the crisis, the love affair of Indians with real estate is far from over. Projects at the right price (The euphoria over premium homes has died down: not a single premium project has been launched in Mumbai so far in 2015, says a report by Knight Frank!), and backed by respectable names, will still find buyers.

This trend was in evidence earlier this week when Eros, a fairly large builder, tied up with Bharti Realty for a large-sized project on the outskirts of Delhi. It is worth noting that Eros has already executed projects in that area but chose to partner with Bharti Realty for this one. This is a clear indication of things to come - expect more such announcements in the future. Will it mean lower prices for home buyers?

 That may not happen. This is because builders have sharply cut down new launches, and there is a slight uptake in demand. According to Knight Frank, in the second half of 2015, launches will be down 52 per cent (from 37,643 in the second half of 2014) to 18,000, while absorption will improve 24 per cent (from 12,075) to 15,000, which will cause the weighted average price to climb three per cent. The crash in home prices may not happen, after all.

Facility management market to cross $19 billion by 2020: Report

http://realty.economictimes.indiatimes.com/news/industry/facility-management-market-to-cross-19-billion-by-2020-report/48173841
Facility management market to cross $19 billion by 2020: Report

 GUWAHATI: The Indian facilities management market is estimated to grow 17 per cent to cross $19 billion mark over the next five years, says a report. "The swiftly growing services sector is creating huge potential for FM services, which is anticipated to grow at a CAGR of around 17 per cent during 2015-2020 and reach to approximately $19.4 billion by 2020," the report by Global Infrastructure Facilities and Project Managers Association (GIFPMA) said.

The report pointed out that various factors such as boom in real estate, increasing awareness levels, growth in retail and hospitality sectors are the major drivers of this sector. "In light of the immense growth potential that the sector promises, many players, including foreign players, have dotted the Indian market... India's service sector is the fastest growing part of its economy," the study said. As per the report, the overall services sector held 33.3 per cent of GDP (at current prices) in 1950-51 and it grew to 64.8 per cent in 2012-13. Commenting on the findings, GIFPMA President Amit Raual said: "Companies are increasingly concerned about the skills of the manpower provided by them with changing needs of the customer...

 It was also found that the qualification and the minimum salary of the manpower vary with the type of service to be offered." As per the report, with administrative and HR departments of around 300 companies across India, 87 per cent of the respondents expect knowledge of basic English, 87 per cent of them expect dress code and 73 per cent expect tidiness and basic etiquettes. "Almost 93 per cent of corporates are concerned about the police verification of the people deployed at sites," he added. Talking about the salary structure, Raual said it varies with the type of service to be offered, which is lower in soft services.

GIFPMA analysis highlights that soft services is dominating the market with the share of about 65 per cent, in which housekeeping and security occupy large shares of 45 per cent and 34 per cent respectively. "HVAC/Electro-mechanical is clearly dominating the hard services sector and is expected to occupy 90 per cent of the market in 2015," it added. As per the report's finding, more than 60 per cent of these services are performed in-house, but this trend is changing rapidly.

 "The corporate sector, especially IT/ITES, BPO/KPO and banking and finance sectors are rapidly inclining towards outsourcing the services," the study said. Research also found out that, currently 80 per cent of the services offered are on a sub-contractual basis, but it is expected that the trend will shift towards integrated facility management as organised players are entering the market.

Should You Buy A House Before Turning 30?

https://scripbox.com/blog/should-you-buy-a-house-before-turning-30/?utm_source=outbrain&utm_medium=contentmarketing&utm_campaign=outbrain_content_distribution_all_feed

Should You Buy A House Before Turning 30?

Many of you may have big dreams before you reach the age of 30, like clearing your debts, getting a promotion, getting married, owning a house, or start saving for an early retirement.
Take one step at a time to avoid getting flustered by the financial decisions you need to make before you turn 30.

A step forward in securing your future is to have a house of your own. To encourage people to invest in residential property, availing home loans is now easier, and the government also provides tax exemptions.

Here are 5 pointers that will help you make the decision of buying a house before you turn 30.
#1: Have clarity as to why you are buying a house
There could be many reasons why you want to buy a house, as a personal choice, as an investment, or out of social pressure.
Buying a house to live in – Most investors believe that you should, “own the house you stay in”. By the age of 30, if you are sure about the city you want to live in, your career path, your family plans, and your disposable income, buying a house is a possible option.
Here’s what you basically need to know to own the house you live in without getting into trouble:

• Affordability to pay at least 30% to 40% of the cost of the house as downpayment
• Clarity on the requirements based on your plans – where you want to live, how many years you wish to stay there and your future family plans
• Stable income to make repayments on the home loan

Buying a house as an investment – If you want to buy a house as an investment option, due diligence is required. You need to:

• Track the rate of price appreciation, and the worth of the property in the current market
• Consider additional costs of buying, owning and selling a house like interest, insurance and maintenance
• Your EMI should typically be not more than 40% of your take-home salary or income

Buying a house because of social pressure – Buying a house because of social pressure, because your parents, family or friends say so, is not a good idea. You need to be 100% certain on your intention to buy, and you should be clear on whether you can afford it. Without this conviction, you may have to compromise on your standard of living, lifestyle and be financially dependent.

#2: Buy a house based on your needs first, and then your budget
You are earning well and invest in a 1 BHK space that fits your budget. In the next 3 years, drastic changes happen; you get a promotion, get married and have a baby. You upgrade to a 2 BHK to accommodate changes. A few years later, your parents decide to live with you and you need to move closer to your child’s school. Moving to a 3 BHK is inevitable.

You realize that every time you moved, although you found a space at a good price, there were additional costs of 2% brokerage and 8% tax. This additional cost of 10% had created financial pressure and it could have been avoided had you planned ahead before closing on that 1 BHK.
When investing in a house, it is natural to check out the price first. While this is necessary, what is more important is to consider if the house meets your requirements. 

The house you choose should cater to your needs not only of today, but also of what you may require after 5 to 7 years. In this way you can avoid unnecessary costs, and benefit from eventually owning the house you live in.

#3: Take advantage of tax deductible options, on the interest of home loans
Under Section 80C of the Income Tax, here’s how you can save tax by claiming benefits on interest and principal repayment of your housing loan:

•  You can claim the entire amount up to Rs. 1,50,000 on interest paid on home loans
• Once you have paid your installments, you can claim deductions on principal repayments up to Rs. 1,00,000
• If you are married, take a joint home loan. This way, you and your spouse can claim deductions separately on interest paid and principal repayment. Which means, together both of you can claim Rs.3,00,000 in interest paid and Rs. 2,00,000 on principal repaid.

#4: Plan repayment with disciplined budgeting
It typically takes around 7 years for a person to repay a home loan in India. Assuming that your salary increases at around 12% per annum, and the EMI on your home loan is constant, only the first few years will be stretch. With disciplined budgeting it is possible to create a successful repayment plan.

• Best time to prepay home loan – In the first 2 to 3 years not only have you drawn on your savings to pay upfront for your home loan, your salary would not have increased and you have very little surplus for emergency needs. Prepayment is advised only after the 2nd or 3rd year when your cash flow pressures have reduced. You could open an Interest Saver’ account, where surplus can be kept while still being available during emergencies.
• Not so good time to prepay – Once your EMI / annual total interest is less than the tax benefit (INR 2 lakhs per year of interest and INR 1.5 lakhs per year for principal prepayment), then one can continue to maintain the loan for tax benefit. The surplus can be invested in financial assets if the expected return is greater than 10%.

For example, if you have a loan of INR 20 lakh, instead of pre-paying in the 1st year, it is better to pre-pay INR 1.5 lakhs each year (principal repayment, adjusted for principal portion of EMI) and take the tax benefit over a 3-4 year period. By pre-paying more than the principal repayment linked tax benefit you lose out on tax benefit.

#5: Be realistic about the returns you expect
Don’t get giddy when your friends say,” There is great wealth that can be made in property investment with the rate of appreciation.”

You need to understand that price appreciation depends on various factors such as location, quality of the construction, connectivity and upcoming infrastructure projects in the area.
The typical expected return on an apartment is about 10-12%, that’s around 8-10% on appreciation and 2-3% on rental. Keep in mind that, on a 12% rate of annual appreciation, if you change your house after the 3rd year, the impact cost will trim down nearly 1/3rd of your gain.

Remember, that you may not be able to have it all, but you need to start early, invest smart and work towards securing your future with proper financial planning.
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These 21 Images Of India Are Never Shown By Foreign Media

http://www.rajnikantvscidjokes.in/these-21-images-of-india-are-never-shown-by-foreign-media/

These 21 Images Of India Are Never Shown By Foreign Media

It’s no wonder that foreign media always puts allegations on India for being a poor country which has less signs of progress or improves very slowly due to corruption, poverty, violence and other issues. And this is what they show in their views about India. However, they must take a look at below 21 images which would surely give them a perfect counterblast in addition to displaying the India which is real but far above and beyond their imagination. What’s more, it’s so beautiful and elegant that they just can’t imagine even in dreams. Besides, once visited, these places will leave foreigners awestruck and mesmerized with their grace.
Let’s take a virtual tour around the marvelous sites:

1. Mumbai’s Chatrapati Shivaji International Airport

2. Ahmadabad’s Sabarmati Riverfront

3. Mumbai Skyline

4. Kerala – God’s Own Country

5. Bangalore – IT Capital of India

6. City of Dreams – Mumbai

7. Hyderabad’s Char Minar

8. Paradise on Earth – Kashmir 

9. City of Lakes – Udaipur

10. Lotus Temple – House Of Worship in New Delhi

11. Chennai’s Highways 

12. Pink City – Jaipur

13. Bandra-Worli Sea Link

14. Yamuna Express Way

15. Marina Beach in Chennai

16. Kolkata

17. Shimla – Summer Capital of British India

18. Republic Day Parade in New Delhi

19. Queen’s Necklace – Mumbai

20. Gangtok

21. Aizawl – Capital of Mizoram

Which of these places did you find most attractive? Don’t you think these images should be used to describe India in place of the one that demonstrate our country as the dwelling place of hungry and poor people? Aren’t these enough to shut the bloody mouth of foreign media which always puts a question mark on India with some issue or the other? Share your answers in your comments!
Source

Developing rental housing as a viable option in urban centers

http://realty.economictimes.indiatimes.com/realty-check/Developing-rental-housing-as-a-viable-option-in-urban-centers/599

Developing rental housing as a viable option in urban centers

Although India’s housing segment accounts for almost 80% of the real estate and construction sector in terms of volume, we continue to have a housing shortage of approximately 19 million units. According to the Ministry of Housing & Urban Poverty Alleviation (MoHUPA), Government of India, the 10 states of Uttar Pradesh, Maharashtra, West Bengal, Andhra Pradesh, Tamil Nadu, Bihar, Rajasthan, Madhya Pradesh, Karnataka and Gujarat constitute about 76% of this urban housing shortage. Around 56% of this shortage is among households from the Economically Weaker Section (EWS) with an average annual household income of upto Rs. 1 lakh, while approximately 40% is among households in the Lower Income Group (LIG) with an average annual household income of Rs. 1–2 lakh. Nearly 96% of this housing shortage, therefore, lies among the EWS and LIG categories of urban India.

A primary reason for this supply–demand mismatch is the paucity of formal housing options for India’s large low income population with low affordability levels. The lack of access to formal credit along with high priced home loans and debt, leave the bottom of the housing market pyramid with little more than squatter colonies, urban slums and unauthorized settlements by way of affordable accommodation options.

Rental housing
To tackle this enormous shortage that is expected to accelerate with rising migrant population movements to urban areas, MoHUPA has been focusing on an affordable housing policy that includes a rental housing interventions program. Despite a housing shortage of approximately 19 million units, around 10.2 million completed houses are also lying vacant across urban India, which may be absorbed within a formal rental housing program to address issues of urban accommodation. Although the larger focus has traditionally been on ownership of housing, the significance of rental housing cannot be emphasized enough. 

Vulnerable population groups either residing in or migrating to urban centers, in need of rental housing for employment or education, include:
• Single students
• Young, single executives
• Newly married couples
• Migrant families, and
• The elderly
Rental housing offers a convenient and cost effective option for all such migrant populations, who may not want to make long-term financial commitment in a city. While the higher and middle income members of these groups have the option of hiring apartments and bungalows in upmarket and middle class residential areas, the LIG and EWS groups are left with hiring rooms and/or jhuggi/jhopdis in unauthorized colonies and urban villages.

Legislative support
According to the Census 2011, around 69% of households in urban areas live in owned dwellings, while about 28% live in informal rented accommodation, and just about 3% in formal hired dwelling units. Taking cognizance of this scenario, a Task Force on Rental Housing was constituted by MoHUPA, whose objectives were to:

• Develop a strategic policy intervention to promote Rental Housing as a viable option;
• Create a legal and regulatory framework to enable Private Sector participation in rental housing; and to
• Improve the financial attractiveness of Rental Housing.

Based on the recommendations of the task force, a “National Rental Housing Policy” is currently under formulation. By way of legislative initiatives, this national policy also includes:
• The Draft National Urban Rental Housing Policy 2015,
• The Draft Model Tenancy Act 2015, and
• Rent Control Act 1992
The vision of the Draft National Urban Rental Housing Policy 2015 is to enable the growth of rental housing in a holistic manner. Its key objective is the promotion of:
• Basic shelter facilities (destitute, homeless and disabled)
• Social Rental Housing for the Urban Poor
• Affordable Rental Housing for specific target groups (migrant labors, students, women hostels, etc.)
• Rental Housing as a stop gap towards aspirant home buyers
• Institutional rental housing for the working class (Government, PSUs, corporate firms, industrial groups, NGOs, etc.)
• Formalization/regularization of Rental Housing on pan India basis
• Facilitate fund flows/incentives to Rental Housing
• Institution/organizations to construct, manage, maintain and operate Rental Housing (RMCs/housing companies, cooperative societies, RWAs, REITs, etc.)
The Draft Model Tenancy Act 2015, meanwhile, attempts to create a framework for the regulation of tenancy for commercial and residential properties. It tries to balance the rights and responsibilities of landlords and tenants alike through rental contracts; and aims for registration of rental contracts with Rent Authorities. The main objectives of the Act, however, will be to:
• Have rent fixed and revised by mutual agreement between landlord and tenant
• Unlock existing properties for renting out
• Address repossession issues in rental housing markets

The Rent Control Act 1992 is slightly skewed towards tenant protection, and is aimed at controlling rent. It tries to protect tenants from eviction and from having to pay more than a fair/standard rent amount. The Act may need to be revisited to make rental housing attractive enough for landlords as well.

The Government is currently working towards the promotion of rental housing stocks through such legislative support. A recommended strategy will lie in addressing issues related to institutional implementation to encourage adoption of the policy at central, state and municipal levels in a time bound manner.


DISCLAIMER: The views expressed are solely of the author and ETRealty.com do not necessarily subscribe to it. ETRealty.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.