REALTY TRENDS

http://m.economictimes.com/markets/real-estate/realty-trends/rbi-rate-cut-a-boon-for-affordable-housing-investors/articleshow/12747704.cms

 REALTY TRENDS

The recent move by the Reserve Bank of India (RBI) in its annual Credit Policy has given some hope for investors in the affordable housing segment. This is being seen as a positive development for the overall property market. While investors remain cautious and wait for banks to announce the lowering of interest rates, realtors are optimistic of the scenario, however, hoping that inflation remains under check.

"While the rate cut of 50 basis points is definitely a ray of hope, it does not dispel the shadows nearly as much as may be initially supposed. It should be borne in mind that the Reserve Bank of India (RBI) has hiked interest rates 13 times between March 2010 and October 2011," says Om Ahuja, CEO - Residential Services, Jones Lang LaSalle India.

"While this is understandable , given the ongoing concerns over inflation and liquidity in the market, the spate of rate hikes has created a compounded problem for the residential real estate sector. The series of hikes in the past have also affected the price that builders put on their properties, since their own costs of borrowing have increased. It is unlikely that property prices will come down because of this rate cut. In fact, it is very likely that there will be an upward bias on property rates because of the anticipated improvement in sentiments of buyers who have so far been sitting on the fence, waiting for some signals of relief," adds Ahuja.

Shrinivas Rao, CEO, Vestian Global Workplace Solutions says the reduction in repo rate will boost economic growth and improve business sentiments which in turn will strengthen buying activity. However, the impact will vary across sectors depending on implementation of the cut by leading banks.

"Leading lenders are likely to cut interest rates on deposits and loans. Home loans are likely to turn cheaper. For instance, a 25 basis point cut could lower home loan EMIs by Rs 16 per Rs 1 lakh. A cut in the repo rate will also reduce the interest on commercial loans which in turn will favour developers to avail cheaper loans, thereby providing traction to real estate activity. Cheaper loan rates are expected to attract more end-users, impacting the residential sales positively," he says.

With banks offering loans at cheaper rates, developers are likely to prefer the bank loans as against private equity funds. However, an increase in market demand in the short term will drive capital values, thereby benefitting retail investors, adds Rao

According to Ganesh Vasudevan, Vice President and Business Head, IndiaProperty, the cut of 50 basis points by the RBI is a move that will have a positive effect on the real estate segment.

Land is netas’ currency of power

http://www.asianage.com/mumbai/land-netas-currency-power-445

Land is netas’ currency of power

The Asian Age explores the political-builder-mafia nexus to grab prime plots at throwaway prices

Last week, a report by global real estate firm Knight Frank LLP put Mumbai at the head of a list of most expensive cities in the world for locals. The firm estimated that the price of a luxury home in Mumbai is about 308 times the annual income of an average Indian. The average Indian, or Mumbaikar, of course, has little chance or hope of ever possessing a home in the city in his or her lifetime. That privilege is reserved for the rich and powerful.

But who are these people who not only use this privilege, but also drive up the prices for the rest of the commoners? They are the known faces, our own leaders, who with the help of developers, gangsters, police, and of course, the bureaucrats, work unscrupulously to grab whatever prime land they can at whatever little price they can.

If the leaked report of the Comptroller and Auditor General of India is to be believed, it is frequently a privilege usurped. A number of prominent ministers from the state have appropriated large tracts of land to themselves by using their discretionary powers to sell or lease out the land at a fraction of the official value to trusts they control. This official value itself would be well below the actual market rate.

THE POLITICAL CONNECTION

As recently stated by Union agricultural minister and NCP president Shard Pawar, the state wants to help trusts working for various charitable purpose, by providing land at subsidised rates, but this policy of the government is what has been taken advantage of.

Take the example of the state government allotting the Lavasa Corporation Limited a massive plot of land for development of Hill City near Pune that has opened a new chapter in state largesse. Even as the court of law dwells on the legality of the concept altogether, the names that are allegedly associated with the project smacks of blatant misuse of politicians’ power.

Meanwhile, even as the dust settles in the Lavasa and Adarsh society scam — another case of land grab, the revelations made by CAG’s report resound like a bombshell. The leaked report names many bigwigs in the state cabinet of ministers and shows how the public “trust” was flouted in the name of charity. Public works minister Chhagan Bhujbal, for instance, has been named in the report as his trust Mumbai Education Trust (MET) got a plot at Govardhan Taluka in Nasik admeasuring 50,000 sqm on occupancy right basis at an occupancy price of `7.53 lakh. This allocation was in addition to an earlier adjourning plot to MET admeasuring 41,300 sqm in 2003, the occupancy charge for which was `1.55 lakh. The report says that the entire 91,300 sqm plot was initially reserved for mining activity by the PWD. Interestingly, the MET had requested for the entire plot in 2003, but while it got one plot in 2003, the other was made available to it during Mr Bhujbal’s tenure as PWD minister. The CAG observes that as per the ready reckoner of 2008, the market value of the land was `9.39 crore and the allotment to the allottee, NCP MP Sameer Bhujbal, who is the minister’s nephew and a trustee at MET, was an apparent “conflict of interest”.

Former CM and Union Minister Vilasrao Deshmukh, whose name has already figured in the Adarsh scam and the Whistling Woods case, has also been named for allotting a plot in Borivali worth `30.37 crore to Manjra Education Trust for `6.56 crore. However, no dental college, as was initially proclaimed was ever developed on the land, but in absence of the clause in the agreement to return the plot, it continues to be held by the trust.

A long list of other ministers figure in the list. The story is the same in every case: land given by politician to his own trust at a throwaway rate (see box).

The list ends with the highest and mightiest. President Pratibha Patil has allegedly taken over 81,563 sqm of defence land in Pune for a retirement home. The Rashtrapati Bhavan spokesperson Archana Datta said the land would revert to defence use after the president’s lifetime and hence, there was no question of transfer of ownership.

THE NEXUS

But, it’s not only the netas named in the current CAG report who have a finger in the real estate pie. The involvement of politically powerful people, who have access to the public property, also has a set precedent.

Take for instance, Raj Thackeray, whose name appeared in a controversial land deal as Shiv Sena opposed the sale of Kohinoor mill land. Raj Thackeray, however, bid and won the prime mill land on July 21, 2005. To recap, he and Unmesh Joshi, son of Shiv Sena leader Manohar Joshi purchased a five acre plot of land, Kohinoor Mill No 3, located across the road from the Shiv Sena party headquarters Sena Bhavan for `421 crore, but the source of this money is a secret well-kept.

Real estates is simply too lucrative a business in Mumbai. South Mumbai had always been the costliest as places like Cuffe Parade, Napean Sea Road, Walkeshwar figure in some of the most expensive deals forged.

THE MAFIA’s ROLE

However, Mumbai markets are always booming, with old chawls, mill lands and slums giving ways to high-rises, malls and plush hotels. Not surprisingly, areas such as the Bandra-Kurla Complex are now giving stiff competition to Cuffe Parade for the “numero uno” spot on the list of costliest lands in Asia. But the prices have not gone up overnight.

The process has been long and continuous and there can always be some level of politicians’ involvement expected, which holds the key to allotments. There are umpteen examples of politician-builder nexus, but there are other players in the game as well — as limited as their role may be. These are the gangsters, the mobs that the builders use to either grab someone’s land via encroachment or forceful possession; for clearing slums; to guard their own properties, etc. By extension, the moment gangsters get involved, there is little scope that the police remains far behind in these activities. However, when they are not in cahoots, a conflict can ensue between the police and the underworld.

No matter what the picture or who the players, it is evident that the sheer volume of money that trickles in the business of real estate is what keeps the politicians and builders in a warm embrace as they exercise the policy of “I scratch your back, you scratch mine.” Arun Gupta

Loopholes plague housing bill

http://www.dnaindia.com/mumbai/report_loopholes-plague-housing-bill_1674701

Loopholes plague housing bill

The Real Estate Regulatory Authority Bill, which was introduced in the legislative assembly today, has several loopho

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les that need to be ironed out. However, these lacunae can be amended in ongoing assembly session before it is passed.

Ramesh Prabhu, chairman of the Maharashtra Societies’ Welfare Association, said, “It is neither in favour of buyers or developers. It has several lacunae that need attention.”

For one, the regulatory bill will be applicable only to private developers. Government bodies, including Maharashtra Housing and Area Development Authority (Mhada) and the Mumbai Metropolitan Region Development Authority (MMRDA), are excluded from application of the bill. “Government bodies also commit mistakes. Who will fine them? And as per the Central government bill, a criminal offence can be registered against the developer. But in the state bill, the criminal offence clause has been removed. There is only monetary punishment which the developer can pay anytime,” said Prabhu and added, “The government should not pass the bill hurriedly. It needs to be discussed thoroughly.”

Lalitkumar Jain, president of the Confederation casino of Real Estate Developers’ Associations of India (CREDAI), agreed that the bill needs to be studied. “I fear that politicians and government officials may use this as an instrument to interfere in the construction business. The CREDAI is already resolving property-related disputes at its own level,” he said.

Pranay Vakil, chairman at Knight Frank, India, a real estate research firm, said, “The government is only focusing on the housing aspect. They are ignoring the fact that many people are buying commercial properties. So, the commercial segment should be added into the main bill,” he said.
Arun Gupta

Mumbai Is the World’s Least Affordable Home Market

http://mobile.bloomberg.com/news/2012-04-10/mumbai-is-world-s-least-affordable-home-market-chart-of-the-day.html

 Mumbai Is the World’s Least Affordable Home Market- Bloomberg
 Mumbai Is the World’s Least Affordable Home Market

 By Pooja Thakur and Ailing Tan April 10, 2012 6:00 PM EDT

 The average Indian would need to work for three centuries to pay for a luxury home in Mumbai, making that city the least affordable in the world for locals, according to an analysis of real estate and wages.

The CHART OF THE DAY shows a 100-square-meter luxury residence in Mumbai costs about $1.14 million, or 308 times the average annual income in India, based on calculations from a housing index compiled using 63 markets by Knight Frank LLP and income estimates of the U.S. Central Intelligence Agency for purchasing-power parity in 2011. Shanghai buyers would need 233 times the per-capita income in China and Moscow inhabitants 144 times Russian earnings. Singapore and New York homebuyers would need 43 years and 48 years, respectively, for equivalent residences using national income averages, the data show.

Prime-location home prices in Mumbai averaged $11,400 a square meter in the quarter to Dec. 31, while India’s per-capita purchasing power was $3,700, the data show. Shanghai residential prices were $19,600 a square meter and China’s income was $8,400. The Knight Frank Prime International Residential Index is compiled using the top five percent of districts in each city, according to Liam Bailey, London-based head of residential research at Knight Frank.

“There are big differences in wealth levels in emerging markets compared to the developed world, which is part of the course for economic development,” Bailey said in an e-mailed response to questions. “In the first phase of growth some people make big fortunes, it takes time for this to trickle down as the middle class develop and generate their own wealth.”

In a separate study published last month by a unit of Lloyds TSB Bank Plc, India, Russia and South Africa were the best performing housing markets since 2001. Residential prices in India, calculated using an average in major cities nationwide, rose 284 percent in real terms in the period after adjusting for consumer-price inflation.

Japan, Ireland and Germany posted the biggest price declines in the same period, according to the Lloyds TSB report. Japan’s cost-adjusted drop was 30 percent, the data showed.

To contact the reporter on this story: Pooja Thakur in Singapore at pthakur@bloomberg.net To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

Donald Trump Is Focusing His Attention On Indian Real Estate

http://www.businessinsider.com/donald-trump-isfocusing-his-attentions-on-indian-real-estate-2012-4

Donald Trump Is Focusing His Attention On Indian Real Estate

American property mogul Donald Trump targets India above other emerging

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economies, his son and business partner said, as the flamboyant tycoon looks to crack a notoriously tough real estate industry with his brand of luxury homes and hotels.

Trump"s eponymous real estate group expects to sign multiple deals for Indian residential projects and hotel contracts over the next five years, despite a market riddled by regulatory uncertainty and bureaucratic red tape.

"India, among other emerging markets, is the biggest push for our organization," Donald Trump Jr, an executive vice president of The Trump Organization, said on Wednesday.

Trump, whose portfolio includes projects in South Korea and Turkey, in addition to hotels and skyscrapers in the United States, is close to signing a couple of deals with Indian developers, the younger Trump said without providing details.

"Equity investment will depend on individual projects and partnerships but first we would like to form relationships which allow us to understand the processes and spectrum better," the 34-year-old said on the sidelines of a hotel conference.

The developer entered India last year with a joint venture partnership with Rohan Lifescapes to build a 45-storey luxury residential tower in http://online-nlcasino.nl/ Mumbai.

However, work on the tower, which will bear the Trump name but involves no equity from the U.S. developer, has been halted for about nine months since authorities said it lacked the necessary permits, a common problem in an industry wrapped in red tape.

Indian developers are often hit by changing regulations. In Mumbai, for example, the scrapping of a rule granting extra floor space in exchange for providing public parking facilities has meant many projects must reapply for clearances.

But Trump, whose father is worth an estimated $2.9 billion, according to Forbes, says the lure of an emerging India outweighs the regulatory headaches.

"I like the regulatory changes I am seeing. It may slow things down a bit but will create a level playing field and will help in eliminating the unknown for an outside investor coming in," he said.
The company plans to focus expansion in the country on luxury residences and hotels, and would look at cities including Mumbai, Delhi, Bangalore and the state of Goa.

Some local players such as privately held Lodha Developers and Godrej Properties are emerging as strong brands in India"s luxury housing space, but the market remains fragmented.

And despite a slew of interest rate hikes that have cooled India"s overall property market and hit luxury developers particularly hard, Trump is bullish.

"The Indian market is starved for a good luxury product and it needs a brand like ours," he said.
(Writing by Henry Foy; Editing by Tony Munroe)
Arun Gupta

Round Table Conference: Real Estate: Ethical marketing and rational policies needed

http://www.afaqs.com/news/story.html?sid=33531_afaqs!+Round+Table+Conference:+Real+Estate:+Ethical+marketing+and+rational+policies+needed

afaqs! Round Table Conference: Real Estate: Ethical marketing and rational policies needed

The panel brought to the foreground the realities of the gimmicks disguised as marketing tactics, flawed policies and lack of regulation that abounds the real estate sector.

The afaqs! Roundtable Conference held on March 23 at Hotel Shivalik View, Chandigarh, focussed on the requirement of ethical marketing and various challenges faced by the real estate sector in cities other than metropolitan India.

The panel of speakers included Colonel R S Perhar, partner, Stellar Infrastructure Development Company; Satender Singh Jarry, director and chief executive officer, Alchemist Group; Yudhvir Arora, senior manager, marketing and commercial, Parsvnath Developers Ltd; R S Bipin, director, business development, Blessings World; Amit Puri, director, Accord Infra Developers; Gursharan Batra, managing director, Gee Impact Infra Con; J K Sharma, partner, Future Estates; Anil Chopra, chairman, PPR Group; P S Grewal, director, Orbit Apartment Constructions; and Kanwaljit Singh Walia, chairman and managing director, RKM Housing. Dipin Preet Singh, director, West Coast Investment Solutions moderated the discussion.

The panel debated and discussed multiple issues related to the realty industry. Some of the hard-pressing questions raised during the round table session were: Does real estate, like any other industry, need hard selling or does quality of a project speak for itself? Are Indian real estate players setting global standards of construction and infrastructure development? Is the industry doing enough to gain the consumer"s trust and credibility? Are issues like affordable housing given serious thought and commitment?

Realty marketing: a farce or reality?

Every newspaper on a weekend is full of advertisements that promote different real estate projects, which just makes things difficult for the buyers. One among many things that the panel agreed upon was that ethical marketing in real estate industry is the need of the hour. "Marketing should be turned to realistic marketing," Chopra said. Word of mouth marketing is the best that a realty project can get and brand equity needs to be built before promotion, agreed the panellists.

According to Grewal, real estate projects value sales more than sensible marketing. "Marketing majorly involves understanding the inherent need of the customer and delivering on it, thereby making your mark," he said, and highlighted that to deliver the best, development of quality needs to be ensured first and for quality projects, one needs skilled manpower, too.

Diverting the attention of those present in the session, Colonel Perhar said that the number of projects completed and handed over in Chandigarh could be counted on fingertips, whereas the number of projects launched was in the range of a few hundreds. This statement brought to the fore the topic of accountability and transparency while delivering realty projects, which many speakers on the panel admitted was missing.

Highlighting the malaise of false claims and unethical advertising, Puri concurred that it"s high time that a regulatory body for real estate industry was established. "Any sector, whether it"s telecom, automotive, broadcast or stock exchange, when faced with problems sets up a regulatory body."

Cracking the marketing conundrum
How important is marketing for the realty sector? Does brand equity matter here or is it all about tall claims? We are moving from unorganised to an organised way of functioning, said Batra. With increased competition, real estate and infrastructure developers are hiring professional real estate consultants like Jones Lang LaSalle and Cushman & Wakefield to jack up their brand equity and project delivery capabilities.

Grewal added that like any other servicing-led sector, real estate, too, should invest in building brand equity. "Builders and developers have to be conscious of the customers" demand, expectations and loyalty," he said. Trust needs to be established and grown with every project completed and delivered, said the speakers on the panel.

Challenges faced from flawed policies and guidelines
From sticky policy issues to the standardisation of business practices, from vested political forces playing to the gallery to the concept of master plans, a lot of challenges ailing the real-estate sector were discussed and ruminated upon. Some of the challenges discussed in the session included high construction costs and low margins in real estate in North India.

"With rising inflation, the Reserve Bank of India has raised the bank"s cash reserve ratio around a dozen times. A few years ago, land cost Rs 1,600-1,700 per sq. ft. Now, it is Rs 3,500-3,700 per sq. ft," Grewal said. Agreeing to this, both Arora and Bipin endorsed the view that since costs were running high, marketing and ethical promotion of worthy projects was not done adequately. Summing up what promotion of a real estate project should include, Col. Perhar enumerated, "Location - details and legitimacy; a project"s layout and ambiance; specifications; facilities and amenities; true accountability and time-bound delivery."

Highlighting the flawed governmental policies on developing land banks into habitable residential colonies, Jarry said, "I have made several representations to the Haryana government for roads, sewage plants, street lighting and landscaping on lands we were developing, but I"m sorry to admit that really shoddy, lax and old land development policies prevail currently.

Grewal pointed out that environmental impact assessment is not given a serious thought in official policies. There are so many clearance windows in place that instead of facilitating development, they act as impediments to project completion. Chopra agreed and cited examples of multiple cities in Punjab where unauthorised colonies were given preference and offered lenient taxation compared to regularised ones.

"In Punjab, 95 per cent of urbanisation is unauthorised. Due to political interests and backstage lobbying, unauthorised colonies get preferential treatment," he said. Arora brought in a streak of optimism when he referred to the introduction of the Real Estate Bill that addresses a lot of industry online casino spielautomaten problems.

Walia deliberated that developers are resorting to corrupt and unethical practices due to stringent and irrational tax regimes. On a project worth Rs 50 lakh, about Rs 20 lakh goes into taxation, he concurred. In 1995, there was no external development tax, while the development charge is Rs 7 lakh per acre today.

Global standards: a great outcry

Bringing in a perspective of what prevails in metro cities, Bipin said, "In a bid to meet deadlines and completion of projects, many a times developers miss out on delivering the promised global standards." Arora opined that master plans should be made, strictly frozen and adhered to.

"Like the West, after great deliberations and feasibility analyses, a master plan needs to be drawn and then implemented, followed by a detailed zoning plan. Making a fancy master plan and then changing it regularly according to some vested interests is common in India," Grewal said.

Many on the panel agreed that the pre-requisites for global standards are internationally trained and skilled manpower, and techniques. There is also a need for the will and desire to compete internationally and make a mark.

Affordable housing - who bells the call

In a "welfare state", it is the responsibility of the state to shoulder the onus of facilitating access to housing for the low income and economically weaker sections of the society. "Affordable housing to me sounds like a utopian thought," Colonel Perhar maintained. The reality, city by city, is staring us in the face, he added.

There"s no clear-cut definition of "affordable," the speakers agreed in unison. As a suggestion, Chopra, who also chairs the Punjab chapter of Confederation of Real Estate Developers" Associations of India (CREDAI), said that affordable housing should be incentivised by waving off external development charges for affordable housing projects.

Bringing forth various examples of successful affordable social housing initiatives, Bipin spoke about the colonies set up in Tamil Nadu after the Tsunami and in Bhuj, Gujarat after the earthquake. Batra opined that the government should realise that affordable housing is social infrastructure. Grewal, supported by a few other speakers, demanded that the government unlock land banks, bring in public-private partnership (PPP) projects and have experts on-board to see socially affordable housing projects through to completion.

The National Urban Housing and Habitat Policy 2007 incorporates reservation prominently by stating that 10-15 per cent of land in every new public/private housing project or 20-25 per cent of floor area ration/floor space index (FAR/FSI), whichever is greater, will be reserved for economically weaker sections (EWS) and low income groups (LIGs) of the society.

Puri, though, admitted that due to absence of rational policies in the past, many such projects have not been really good for some developers, but he added that new and vital beginnings can definitely be made.

Wrapping up the proceedings, Dipin Preet Singh, the moderator, said, "A lot needs to be done before the real estate sector can enjoy customers" faith and unflinching trust, and can take pride in contributing more to the gross domestic product and the healthy development of India."
(Held in Chandigarh, Punjab on March 23, 2012, the Round Table Conference on The Challenges in Marketing for Real Estate was sponsored by STAR News)

India Sees Record Rise in House Prices as Affordable Units Get Little Relief

http://www.worldpropertychannel.com/asia-pacific-residential-news/india-sees-record-rise-in-house-prices-as-affordable-units-get-little-relief-5449.php

India Sees Record Rise in House Prices as Affordable Units Get Little Relief

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ousing prices in India are the highest in the world, according to the most recent research from London-based Lloyds TSB International Global Housing Market Review. Prices in a country of 1.21 billion residents have increased 284 percent since 2001, after inflation. That number equates to an annual increase of 14 percent.

The Lloyds report ranks Russia and South Africa with the second and third highest housing prices. Prices in Russia are up 209 percent over the last 10 years; in South Africa, they are up 161 percent.

By contrast, shelter prices in Japan dropped 30 percent in the reviewed period. They were down 17 percent in Germany. The U.S. showed a price decline of 2 percent over the past 10 years, according to the report.

Great Britain is still among the top 15 performing markets. Housing prices rose only 50 percent over the past decade.
Last year alone, prices in India rose by nine percent, according to the Lloyds report.

According to banking and financial analysts in India, the recurring problem in trying to create affordable housing is a lack of inexpensive banking credit for developers, increased debt servicing levels and a declining rate of foreign direct investment.

Published reports note India"s real estate sector has contributed only 5% of India"s overall GDP this year as compared to a contribution of 10.6% in FY 2010-11

Developers were largely disappointed with the country"s budget for 2012. They had hoped the budget would have included more incentives for the development of affordable housing. Still, several of the key budget items were aimed at stimulating capital for new residential projects.
For example, External Commercial Borrowing ("ECB") doors are proposed to be made open for specified low cost affordable housing projects which could potentially provide the much needed liquidity to the housing sector.

Further, the interest to be paid by developers on ECB loans available from July 2012 to June 2015 will drop to 5 percent from the existing rate of 20%

The budget also includes a plus for Venture Capital Funds ("VCF") focused on the real estate sector. The VCF making investments in real estate will not be subject to tax and the tax will be levied at the investor level.

This amendment avoids the perennial controversy surrounding taxation of trusts. It is also expected to reduce litigation on many real estate-oriented matters.

Analysts in India also note that one of the major budget proposals which may have a huge cash-flow impact to the real estate sector relates to the deduction of a 1 percent tax on the purchase of certain land parcels in urban areas. The measure would also help to close deals where installment payments are agreed to by buyer and seller.

While many in India"s real estate industry were hoping for a strong regulatory and effective policy framework which would have helped boost the real estate sector, the Union Budget 2012 falls short of expectations, according to several financial analysts.

However, with the expected increase in liquidity through the availability of ECBs and the availability of higher deductions for the development of affordable housing generally, the real estate sector may see a surge in activity this year from an otherwise stagnant growth pattern, according to several analysts.
Arun Gupta