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

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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

Union Budget 2012-13: Now buying or building of a house to cost more

http://m.economictimes.com/markets/real-estate/news-/union-budget-2012-13-now-buying-or-building-of-a-house-to-cost-more/articleshow/12304635.cms

Union Budget 2012-13: Now buying or building of a house to cost more-News -Real Estate-Market

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s-The Economic Times on Mobile

NEW DELHI: Purchase or construction of a house would now cost more due to expected rise in prices of key raw materials cement and steel and a hike in service tax by 2 per cent, realty players said.
Barring low-cost housing, property prices are expected to rise in the coming days after the proposed hike in service tax from 10 per cent to 12 per cent.


TDS at the rate of 1 per cent on transfer of immovable property (other than agricultural land) above a specified threshold will also add to the cost of buying a house. The threshold would be over Rs 50 lakh an urban areas and Rs 20 lakh elsewhere, according to the budget proposals.

Cement and steel manufacturers have already hinted at a price hike after the Budget proposed raising the excise duty to 12 per cent.
Commenting on the budget proposals, Confederation of Real Estate Developers" Association of India (CREDAI) Chairman Pradeep Jain said, "Application of TDS on the purchase and sale of property and increasing Service Tax by 2 per cent will further add on to the overall cost of property and are bound to make property more costly in coming days."

Realty consultant DTZ said that increase in the service tax is going to further increase marginally the overall burden on the home buyers of mid and high segment (dwellings costing more than 25 lakh). The impact of service tax would be about Rs 40,000 on a Rs 75 lakh home.
However, DTZ said that affordable housing, being part of negative list, is exempted from service tax and the move would give a boost to the affordable housing segment.

Jones Lang LaSalle India Chairman and Country Head Anuj Puri said that "the increase in the service tax rate from 10 per cent to 12 per cent will increase the cost of production for developers, who are already reeling under high input costs. It follows that this increased burden will be passed on to end users".

Omaxe Chairman Rohtas Goel noted that budget would give boost to affordable housing, but felt that "what nullifies the above positivity is an increase in service tax and excise duty to 12 per cent each resulting in an increase in cost of raw material".

In Budget for 2010-11, Finance Minister Pranab Mukherjee had brought development of real estate complexes under the ambit of service tax unless the entire consideration for the property is paid after completion of construction.

Complex is defined as consisting of more than 12 residential units.

The service tax is levied on 25 per cent of the gross sale value of property.

Arun Gupta

Number of migrant labourers down, construction sector hit - Indian Express

http://m.indianexpress.com/news/Number-of-migrant-labourers-down--construction-sector-hit/923145/

Number of migrant labourers down, construction sector hit - Indian Express Mobile

The migration from Bihar, Uttar Pradesh and Rajasth an to the city seems to be on decline as the construction industry is reeling under a severe shortage of manpower that traditionally comes from these states. Owing to this, the rates of skilled and unskilled labour has gone up by Rs 50-100 per day compared to the daily wages charged nearly a year back.

The officials of Confederation of Real Estate Developers Association of India (CREDIA) said that the rates of both skilled and unskilled manpower have increased with the carpenters and masons now charging between Rs 450-600 while the labourers charging Rs 250-300 a day. The businessmen associated with real estate industry said the shortage of manpower is around 20-25 per cent against the per day requirement of nearly 30,000 people in the city.

“The shortage is due to the decline in the number of workers from UP, Bihar and Gujrat. This is because now these states are also witnessing development,” said JP Shroff, member of management committee of CREDAI. Some independent real-estate companies also pointed out the decline in migration as a reason for the shortage of manpower.

Ranjit More, Managing Director of Universal Group, said the shortage in manpower is being met by raising the skilled manpower through in-house training. “We are facing manpower shortage at a number of projects that are going on in different parts of the state. We are being helped by people from other business streams in the company to train the manpower to operate machines which are now being used in place of manual labour,” said More.

While the developers are trying to meet the shortage by using machines, as a long term initiative training programmes are being offered by industry body like CREDAI and some institutes to help meet the gap. “We have raised a trained manpower of 1,600 people and the training in different skills is being offered at the sites. The training is currently going on at 11-12 sites,” said Shroff.

President of Maharashtra-Pune Metro chapter of Confederation of Real Estate Developers Association of India (CREDIA), Satish Magar, said, “Mechanisation is increasingly becoming common to deal with the labour shortage. The machinery like concrete mixers and lifts are being used by the developers to reduce the dependence on labour.”

Real estate developers however say despite initiatives like mechanisation and on-site training the projects are getting delayed. Director of B U Bhandari Landmarks, a real estate company, Anuj Bhandari, said, “The estimated time for the completion of projects is getting delayed. The work that is being done has now become more expensive due to the labour shortage.”

Due to the manpower shortage, the training institutes like the Ideal Construction Practices are offering training programmes on raising the manpower. Founder of Ideal Construction Practices, R B Chaphalkar, said, “From March we are starting 21-lecture course on the supervision of building constructions. The course will train people in undertaking the supervision of the construction works. We have created all the facilities at our training centre at Dhayani in the city to train the people in the supervisory work.”

Arun Gupta

FDI in India up 31% to $27.5 bn in 2011 Mar 11, 2012

Ihttp://www.firstpost.com/economy/fdi-in-india-up-31-to-27-5-bn-in-2011-240321.html

Firstpost

FDI in India up 31% to $27.5 bn in 2011
Mar 11, 2012

#Business/Finance #FDI #NewsTracker
New Delhi: Foreign direc

t investment (FDI) in India went up by 31 percent to $27.5 billion last year, notwithstanding uncertain economic environment globally. FDI inflows in 2010 totalled $21 billion.

FDI inflows in 2010 totalled $21 billion. AFP

The sectors that attracted maximum FDI last year include services (financial and non-financial), telecom, housing and real estate, and construction and power, according to the industry ministry’s latest data.

Mauritius, Singapore, the US, the UK, the Netherlands, Japan, Germany and the UAE are the major investors in India.

Experts said, meanwhile, that the government should further streamline policies and make the environment more conducive to FDI.

“The government should allow 100 percent FDI in sectors like domestic airlines and insurance sector to boost inflows and generate employment,” Ficci Secretary General Rajiv Kumar said.

During April-December, FDI moved up 51 percent to $24.18 billion, from $16.03 billion in the same period of the previous year.

FDI inflows totalled $19.42 billion in 2010-11 financial year, down from $25.83 billion in 2009-10.

To boost FDI inflows, the government has liberalised the FDI regime, allowing overseas investment in bee-keeping and share-pledging for raising external debt. Besides, 100 percent foreign investment has been allowed in single-brand retail sector.

Besides, the conditions for FDI in construction of old-age homes and educational institutions have been eased.

PTI

Please enable JavaScript to view the comments powered by Disqus. Arun Gupta

Realty sector returns in India at an all-time high

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Business : Realty sector returns in India at an all-time high

DUBAI — India’s real estate sector is poised to record continued strong growth given the robust state of the country’s economy, which is projected to grow 8.5 per cent in the current fiscal.

“Investing in Indian real estate is sure to give investors a rewarding deal as the returns are at an all-time high,” said M.I. Sait, managing director of Mindscape Exhibitions Pvt, which is organising the Times Realty India 2012 exhibition which is to run at JW Marriott Hotel Deira on Friday and Saturday.

At the two-day event, a wide range of Indian properties will be showcased. Sait said the real estate sector has attracted increased flow of foreign investors.

He said the Central Statistics Office, Ministry of Statistics and Programmed Implementation, has estimated an 8.5 per cent gross domestic product growth for 2011- 2012, against the initial projection of 8.6 per cent.

“This means the Indian realty has outperformed the primary investment sectors. The market witnessed stability with virtually no change in the rentals over the year as the malls located in the central districts continued to operate with high occupancy levels.”

Sait said the second half of 2012 is expected to witness an additional space supply of approximately three million square feet.

According to property experts, investment in residential property projects is currently preferred by investors, since the demand for homes in the metros and Tier II cities is virtually limitless.

Commercial and retail spaces also present potentially lucrative investment propositions, especially in the larger cities, they said. They argue that residential property investment is comparatively low risk, while retail is a moderate risk/returns option. “However, capital values are higher in commercial and retail spaces, so they represent larger investments. Moreover, it is more difficult to exit in the case of commercial spaces,” they said.

The Tier I cities of Mumbai and Delhi and Tier II cities such as Bangalore, Pune and Chennai are seeing the highest demand by investors. In broad terms, the configurations in greatest demand are one and two bedroom flats in the central areas as well as the suburbs, while three bedroom flats in good township projects on the outskirts are also a good option, they said.

Credai Kerala, the south Indian state chapter of the Confederation of Real Estate Developers’ Associations of India, the apex body of organised real estate developers representing over 6000 developers, will be part of the property show.

M.V. Antony, President, and John Thomas, secretary of Credai Kerala, said under it leading builders from the state would be showcasing their projects at the Dubai event. “Kerala is in a phase of development and progress. Important developments are happening in Kochi, the commercial capital of Kerala — the metro rail, Vallarpadam Transshipment Terminal, the Smart city to name a few. Not far behind are the other leading cities of Kerala — Trivandrum, Kozhikode and Kannur,” they said.

“The Vizhinjam International Seaport project in Trivandrum and the upcoming cyber park project in Kozhikode given a further big boost to the property sector in those tow cities. Kannur is also fast developing with an international Airport underway,” they said.

issacjohn@khaleejtimes.com

54,000 new properties in Pimpri-Chinchwad in 3 years

http://m.timesofindia.com/city/pune/54000-new-properties-in-Pimpri-Chinchwad-in-3-years/articleshow/12117254.cms

54,000 new properties in Pimpri-Chinchwad in 3 years - The Times of India on Mobile

PUNE: A total of 54,000 new properties have come up in Pimpri Chinchwad city in the past three years as per the records of the Pimpri Chinchwad Municipal Corporation (PCMC)"s property tax department.

There are now 3.25 lakh properties in Pimpri Chinchwad.

Figures made available by the property tax department show that there were 2.71 lakh properties in the city till March 31, 2009. There was an increase of 17,000 properties in 2009-10.

In the subsequent year - between 2010 and 2011 - the number of properties increased from 2.88 lakh to 3.07 lakh. In 2011-12, the number went up to 3.25 lakh.

Shahji Pawar, assistant commissioner and chief of property tax department, PCMC said, "Large numbers of properties have come up in Sangvi, Thergaon, Bhosari, Chinchwad, Pimpri Waghire and Chikhli areas in 2011-12. There was an addition of 3,000 properties each in Sangvi and Thergaon divisions; 1,800 in Bhosari casino online division; 1,400 properties in Pimpri division; 1,300 in Chikhli division and 1,200 properties in Chinchwad division in 2011-12 till February 29."

Pawar said that the property tax department has for the first time crossed the mark of Rs 160 crore in annual income.

The annual property tax collection target for 2011-12 is Rs 180 crore. Last year, PCMC"s property tax collection had reached Rs 159 crore.

Pawar expressed confidence that the department will achieve the target and set a new record of annual property tax collection.

He said that in the year 2008-09, the property tax department had collected Rs 89.57 crore.

The collection crossed the Rs 100-crore mark in 2009-10, when it earned property tax of Rs 102.46 crore. In 2010-11, tax collection crossed the Rs 150 crore.

Meanwhile, the civic administration has spent Rs 365 crore on development projects in the current financial year.

The engineering department spent Rs 178 crore on development projects. The garden department has spent Rs 7 crore and another Rs 10 crore have been spent on land acquisition.

The PCMC has spent Rs 15 crore on development works for the urban poor living in the city.

Pawar said that Rs 23 crore each have been spent on the electricity department and on water supply and drainage department works.

Branding matters in the property market

Branding matters in the property market:
Sanjay Bajaj, Jones Lang LaSalle India

 1 Mar, 2012

Sanjay Bajaj, Manging Director - Pune Jones Lang LaSalle India

In the hyper-driven world of advertising, literally nothing has escaped the phenomenon of 'branding.' In the world of real estate development, whole question of how important builders' brand names are on the property market should be examined in greater detail.

* For practical purposes, a branded builder is one whose projects are selling well on the basis of reliable construction, imaginative designs, and provision of desirable amenities, good project locations and honesty in dealings. The creation of a credible brand image requires positive feedback from existing customers and a good market reputation as far as delivering consistent quality and value is concerned.

* A branded builder will have invested a lot in building up his image, having employed a professional. Also a branded company would be affiliated with all relevant industry associations, thereby establishing credibility.

* A builder derives numerous advantages from his brand image. He gets clubbed among reputable professionals in the field, wields greater clout with financiers and can attach higher rates to his projects. He commands the trust of both his clients and employees.

INGREDIENTS OF A REAL ESTATE BRAND

A builder in the process of establishing a brand name will make his presence felt at real estate events such as property exhibitions, and will regularly offer new projects to buyers here. These will be advertised in leading publications and eye-catching hoardings. With repetitive exposure, a brand name gets firmly implanted in the buyers' minds. A branded developer's signature is evident in the conscientious choice of location, superior amenities and quality

A branded builder is a trend-setter on the property market - in other words, the rates he charges in his projects will often decide the rates that other projects of similar configurations in the same locality will charge.

WHY SOME DONT GO FOR BRANDING

Few builders do decide against establishing a brand name to highlight themselves and their projects. This can have a number of reasons: Real estate development can be a supplementary activity for some companies. The builder may lack the expertise or financial resources necessary to establish a brand. The builder may be engaged in realty for a short period only, to make a quick buck. The builder may be under the archaic illusion that if a project is good, it will sell itself.

POTENTIAL DOWNSIDE OF BRANDING

Generally speaking, brand-building is a valid and beneficial exercise that profits both the builder and his clients. However, it should be noted that fame and prestige carry with them a burden of responsibility towards all involved. It is easy for a builder whose name commands respect to grow complacent and eventually allow his company's standards to sink.