Shrinking homes

http://m.indianexpress.com/news/%22homes-no-bigger-than-a-bus%22/989700/

Homes no bigger than a bus - Indian Express Mobile

Yeh kamra toh shuru hone se pehle hi khatam ho gaya, bhai!” This piece of wit from the sidekick ‘Circuit

’, of Bollywood blockbuster ‘Munnabhai MBBS’ fame, is being played out in the affordable housing sector today, where real estate developers are offering homes that measure a mere 250 square feet. “Which is, as big as a bus!” said a real-estate expert who did not want to be named. Affordable, but how liveable?

In order to make the dwelling more affordable, reducing the saleable area is one of the several measures that are being adopted by real-estate developers who have entered the market in the National Capital Region, Mumbai, Ahmedabad, Kolkata, Pune, Bangalore and Chennai.

As a result, affordable houses have shrunk by at least 40 per cent of the sizes that existed a decade ago, say real-estate experts.

“According to our estimates, the sizes of affordable houses in Gujarat has shrunk by at least 40 per cent in the last decade,” says Nirav Kothary, head of industrial real-estate division at Jones Lang LaSalle (JLL), a global property consultant.

A recent report titled ‘Affordable Housing in India’ from JLL clearly states, “In order to reduce costs and improve affordability for the buyer, developers have adopted several measures. This includes units having reduced saleable areas of 250-350 square feet for one room-kitchen, and 400-500 square feet for one bedroom-hall-kitchen formats.” Experts describe these homes as being no bigger than a state transport bus operating in the state.

Real-estate developers say that the rising cost of land in urban centres is the main cause behind the shrinkage in the sizes of affordable houses. While experts believe that smaller housing units are an apt answer for India’s housing problems, a research study conducted by the Hyderabad-based Indian School of Business (ISB) in 2011, points out that families feel “uncomfortable” to live in houses that are smaller than 700 square feet.

Even large affordable housing players like Tata Housing are offering units as small as 293 square feet (carpet area) and in Ahmedabad it costs Rs 8 lakh.

In the period 2009-12, affordable housing projects priced between Rs 5-10 lakh have been sold on an “application model” due to huge demand, with multiple takers for the same unit, says JLL.

Thriving market, new suburbs

Increasing land prices have also pushed affordable housing projects away from city centres. Mumbai and NCR have affordable housing projects located 65-75 km away from the city centre. On the other hand, Ahmedabad and Kolkata provide better proximity, with projects located at a distance of 15-20 kms. Bangalore, Pune and Chennai also have projects after a distance of 25-30 km from the city centre, states the JLL report.

The shortage of land has been exacerbated artificially by poorly conceived central, state and municipal regulations. As a result, land prices in India are much higher than intrinsic levels that can support mass real-estate developments.

Mumbai is currently leading the affordable housing sector, with over 15 projects. Karjat, Palghar and Boisar in the neighbouring Thane and Raigad districts are the popular locations for homes at that price point. In Ahmedabad, the localities of Narol and Vatva have multiple ongoing projects.

Apart from Tata Housing the other players are Value Budget Housing Corporation, Foliage, DBS Affordable Homes and Nirman Group. Other big players such as HDIL and Usha Breco Realty have been successful while Mahindra Lifespaces, TVS Housing and S Raheja have announced future developments targeting this segment are.

“There cannot be houses as small as 250 square feet,” says Umang Thakkar, CMD Dharmadev Infrastructure which is currently building 10,000 affordable housing apartments in various areas of Ahmedabad and start at 600 square feet.

Thakkar who has been in the affordable housing business for the last 20 years feels that rising prices of land and the changing lifestyles of people have caused houses to shrink. “The prices of land have risen several fold over the last few years. Moreover, people no longer live in joint families. There are more number of singles and migrants who prefer smaller houses,” says Thakkar.

In order to ensure low construction cost, the building structure is typically low-rise with Ground+ four floors, without a lift. “The low-rise structure and adoption of technologies such as aluminium formwork and building information modelling enables developers to complete the project within a short period of 18-24 months, thus decreasing the collective time and better returns,” the JLL report states.

THE AFFORDABILITY GAME

To make the housing project more affordable for the buyer, developers are adopting the following measures:
Limited options: Units offered are mostly one room-kitchen and one-bedroom-hall-kitchen formats
Reduced areas: Units have reduced saleable areas of 250-350 square feet for one-room-kitchen and 400-500 square feet for one-bedroom-hall-kitchen.
Low construction cost: Structure is typically low-rise with ground+3 or ground+4 floors, without lift.

Shorter period of construction: The low-rise structure and adoption of technologies such as aluminium formwork and building information modelling enables developers to compete the project within a short period of 18-24 months, thus decreasing the collection time and improve returns.

Policy paralysis hit realty sector in big way: CREDAI

Policy paralysis hit realty sector in big way: CREDAI

NEW DELHI: Realtor's body CREDAI today said the government's policy paralysis has severely impacted the real estate sector which is facing stagnation in growth.

"The economy

is in a bad shape and there is an all round despair. We have been witnessing a widespread criticism -- in India and abroad -- and policy paralysis has impacted the real estate industry in a big way," CREDAI National President Lalit Kumar Jain said in a statement.

Jain said the government needs to appreciate the fact that realty sector supports over 250 other industries, contributes 11 per cent to GDP and is the largest employment generator after agriculture.

CREDAI, the apex body of real estate developers from across the country, has convened its governing council meeting in Delhi tomorrow to take stock of the housing scenario in the country, the statement said.

The meeting assumes significance in view of the fact that real estate has been experiencing stagnation in its growth despite the housing shortage touching 26 million, it added.

Jain said the CREDAI's governing council would chalk out a plan and then announce it.

Real estate sector is witnessing slowdown in demand due to high interest rates on home loans since last couple of years and economic slowdown in global as well as domestic market.

Almost all the developers have reported decline in net profit from last several quarters.

Article: Numerous religious beliefs drive the Indian realty sector

Numerous religious beliefs drive the Indian realty sector


A saying goes that the best investment on earth is earth. In the words of Charles Dudley Warner : "No man but feels more of a man in the world if he have a bit of ground that he

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can call his own. However small it is on the surface, it is four thousand miles deep; and that is a very handsome property . To own a bit of ground, to scratch it with a hoe, to plant seeds and watch, their renewal of life, this is the commonest delight of the race, the most satisfactory thing a man can do."

Especially true for Indians, for whom home ownership has the most positive and uplifting effect. How the face beams with a megawatt smile when they start talking about their own home... 'sadi kothi' (my house)!

A house is not just a house - it stands for safety, security and there is great deal of pride in ownership of this unique asset for an Indian. Owning a house is a keystone in financial and emotional security. You aren't buying a space to eat and sleep. It is where you go after a hard day on the job - it is your 'safe haven' .

India, with its unique social landscape, is driven by numerous religious beliefs and, for most people, they are sacrosanct.

To approach the Indian market one has to be mindful about these social realities. One significant trend is of buying during Navaratra and Diwali. In Indian real estate industry, it is common knowledge that one third of the annual sales happen during Diwali.

On an average, the festive season stokes up real estate transactions by 25-35 %. On the contrary the "Shraadh" period typifies stalemate and a complete lull in the industry . This period is utilized for marketing and research activities to set the ground for sales during festive season starting from Dussehra to Diwali.

The real estate market operates on trust, rather than it being a plain commercial deal. People find brokers, more from word or mouth and references and bestow full trust on these agents. Brokers have a great deal of influence on the decision-making process and house hunting of a common man; hunting a house without a broker is akin to fighting a legal battle without a lawyer.
Even though things are changing now, and investors keep a keen eye on the internet platforms that provide reams of data on every locality and project, the final call, however, is made with the 'trustworthy' brokers. The New Age broker is becoming much more professional with even the term 'brokerage' rechristened as 'transactions' !

The other important emotional driver during house purchase is the family. "Family is the real engine or driving force of Indian real estate market. Strong family ties play a pivotal role; even today, if a person is buying a house, he consults his full family before a final decision," says Sonika Khurana, Planning Head, Vardhman Estate & Developer (P) Ltd.

An individual may zero in upon a property , but a final call happens only with consensus of family members. The stamp of approval of elders is seen as a must.

Family often lends financial support, without any 'interest' and, at times, without any expectation of return of their money . How else would one imagine people at the beginning of their career in their early thirties buying homes in metros; bank loans notwithstanding, it cannot be without the support of their family. So whether it is parents, in-laws , siblings - all have a role to play in that home purchase.
Some prefer to buy house in proximity to their extended families. And even those who, due to professional and sundry other reasons, are living in another city or country, are very keen and particular about the 'safety' and 'security' of their parents. "I am looking for a flat for my parents aged 70 and 65 in Gurgaon . I am keen on a place for them which has constant power, water and most importantly , tight security," says Amol Mehta, a US-based NRI.

Rajeev Talwar, the managing director of DLF Universal Ltd, says: "A majority of customers are senior people - in their middle ages and beyond, since only at that time can one have this kind of affordability . One of the major reasons they come to this elite community of DLF apartments, besides exclusivity, is safety and security - something that their children , especially if they are living elsewhere , are very particular."

Vastu compliance and east-facing property are other beliefs that drive the choice of customers. "People usually prefer eastfacing property. As the Sun rises in the east, this direction symbolizes life," Sonica says, adding, "According to vastu principles, the main entrance of a house opening up to the east or the north is considered best."
In fact, there is a new emerging trend of hiring 'astro' architects. Neeta Sinha, an 'astro' architect, has a clientele who are a veritable who's who of Bollywood and the corporate world (like Amitabh Bachchan, Shah Rukh Khan, Kirron Kher, Karan Johar, Punj Lloyd, Kotak Mahindra, ICICI Ventures, Cox & Kings, among others).

http://articles.economictimes.indiatimes.com/2012-07-14/news/32675068_1_festive-season-real-estate-indian-realty-sector

Maharashtra Bill to set up real estate watchdog - Indian Express Mobile

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Real estate funds clock high returns

http://forbesindia.com/blog/moneyball/real-estate-funds-clock-high-returns/


Real estate funds clock high returns


Real estate funds have been investing in India for more than six years. They started investing int

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o the Indian markets after the release of Press note 2 in 2005 which opened up construction and development for FDI. Institutional investment into the real estate was on a roll. Many of these funds who invested at that point in time are now heading for maturity and are exiting their prime investments. Foreign funds who invested into the Indian markets found it much tougher to operate as compared to their Indian counterparts.

Pranay Vakil of Knight Frank in a podcast has an interesting take on the hurdles that foreign funds faced while investing in the Indian real estate market and how some of them managed to survive.

According to a report by Jones Lang Lasale, out of the $13 billion invested in the real estate sector, about $3.2 billion of exit has been recorded through 80 transactions. In general, the returns to investors have been satisfactory. Indian real estate (RE) investors have returned around 24% of the capital invested. This performance, considering the global investment scenario looks satisfactory as the global average for RE investors in terms of returns works out to around 4.5%.

Real Estate has the highest share in terms of value

The majority of exits have happened in the residential segment followed by commercial office segment. Here it must be noted that post the financial crisis investors have mainly concentrated on the residential space as compared to office space and this call has reaped higher returns. Institutional Investors have realized that residential space is not much affected by global factors. Residential segment has remained resilient through out the financial crisis in most of the tier I and tier II cities resulting into good returns. Thus, 46% of the exit for RE investors has taken place in through the residential space. These investors also made heavy exit through land parcels which accounted to 22% in terms of asset class.

It is interesting to note that land is the only asset class that has given the highest return to investors. The exit multiple for land is around 4.75x. Mumbai and NCR-Delhi together account for nearly 72% of the total value of PE exits. These are areas that are on the radar for all the new funds because of the predictability of demand and ease of exits.

Land has turned out to be the best form of investment

Typically, for any PE fund manager the biggest parameter for any investment happens to be exit. More than 69% of the total exits have happened through promoter buybacks both in value as well as the number of transactions which are more prevalent in the commercial spaces.
Wachovia, HDFC, Kotak Realty, ICICI ventures and Indiareit are some of the funds that have managed to give above average returns while offshore funds were the biggest losers.

In an earlier chat with us, Pranay Vakil explained why real estate prices continue to remain high despite any demand.

Arun Gupta

Rich households in India prefer disciplined investments

http://business-standard.com/india/news/rich-households-in-india-prefer-disciplined-investments/479331/
Rich households in India prefer disciplined investments
Rich households in India prefer disciplined investments
BS Repo

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rter / Mumbai Jul 04, 2012, 00:26 IST
The investment allocation to debt by ultra high networth households (HNHs) increased nine per cent in 2011-12 and it remained constant for equities. Investments in real estate dipped seven per cent compared to 2010-11, although realty's share among asset classes remains relatively high since ultra HNIs expect healthy returns over the long term. But generally, the appetite to take risk was subdued, with greater preference for a disciplined rather than opportunistic approach, particularly in high-risk instruments like equities and real estate. “Alternative assets like art are yet to catch up as an investment avenue in India,” said Mukesh Agarwal, president of CRISIL Research.

“The fact that so many ultra HNIs said their spending habits had not changed due to the slowdown is an indication they do not expect the slowdown to continue for long. However, it would be interesting to see whether the caution that has crept into their investments would spill over into their spending if the economic crisis persists longer than expected,” he added.

Currently, metro cities account for more than half the ultra HNIs. But that may dip by 3.5 percentage points in 2016-17 as cities like Ahmedabad, Bangalore, Hyderabad, Nagpur and Pune would see an increased number of HNIs.

While ultra HNIs in non-metros were extremely conscious about which brand of school their child should go to, their counterparts in the metros factored various other attributes such as curriculum and the quality of faculty.

Similar to the first edition, this time also the study identifies three distinct profiles of ultra UHNIs -- the inheritor, the self-made or entrepreneur and the professional.

CRISIL used the 'Idea' method to establish the findings of the report, that is, Income and Demographic Analysis, using NCAER data of bucket-wise income, census data on the number of households and GDP growth.
Arun Gupta

dollar appreciating in value compared to the rupee, more NRIs are looking forward to investing in real estate

http://m.economictimes.com/markets/real-estate/realty-trends/nri-real-estate-investments-rise-in-mumbai-every-time-the-dollar-appreciates/articleshow/13960446.cms

REALTY TRENDS
With the dollar appreciating in value compared to the rupee, more NRIs are looking forward to investing in real estate in India. Since Mumbai is a booming realty market, NRIs have always considered it to be a safe bet to invest in the city.

"Generally , NRIs are looking at this period as an extremely advantageous one for realty investments. The Government has been making proactive policy changes clearly aimed at routing more NRI investments into India," says Om Ahuja, CEO - Residential Services, Jones Lang LaSalle India.

"We have experienced a surge in NRI investments every time the dollar gets stronger. Considering the current scenario where the rupee has depreciated by nearly 23 per cent in the last six months or so, NRI investments are bound to increase significantly," says Manju Yagnik, Vice-Chairperson , Nahar Group.

The confidence levels of NRIs are also high since many amongst them have already earned and continuing to earn huge returns on their earlier investments.

"With exchange rate of the dollar rising, this is augmenting interest among expats for investing in properties in India, especially from locations like Dubai, Hong Kong and the UK. The interest levels have gone up in the past four months and Mumbai being a rank one city always has a higher traction," says Shveta Jain, Director, Residential , Cushman & Wakefield India.

According to Rajendra Karia, Past President, AREA Group and Convention Organiser , NAR India 4th Convention , "In the Mumbai realty market, inflows from the UAE and other GCC countries should be highest across the next few months." He elaborates that as the annual vacation in schools in the GCC start from July, many Indian families come for their holidays to India in the July-August period, and this is where most construction sites in and around Mumbai will see maximum number of NRIs visiting with the intent to grow their hardearned petro dollars.

Kousal Raman, an NRI settled in Sharjah, says, "Even though the real estate prices in Mumbai have not substantially reduced, it makes a lot of sense to invest in real estate now as appreciation of the investment is far higher in this city than any other."

Apart from the advantages NRIs have due to the depreciating rupee, developers are also offering discounts. "The 20/80 scheme and 10/90 schemes offered to patrons at Nahar's Amrit Shakti has been a major attraction for NRIs and 55% of this segment who have purchased their apartments at our township has availed of this scheme," avers Yagnik.

Arun Gupta