Mall vacancy in southern cities drops in July-Sept

The average mall vacancy in the southern cities of Chennai, Hyderabad and Bangalore dropped to 5.7 per cent in the third quarter (July – September) of 2009 from seven per cent in the second quarter.

However, supply in these three cities increased by one million sft, up 33 per cent from the second quarter, according to Cushman & Wakefield, a commercial real estate services and research firm.

Alongside this development, rents stabilised in these markets in the third quarter as against the corrections they had witnessed in the last six to seven months.

Rents in major cities and markets are expected to remain stable in the coming few months. Over 60 per cent of the anticipated supply during the quarter was delivered, a marked improvement from previous few months, it said.

There was no fresh mall space in Bangalore. Though leasing activities remained low, vacancy rates dropped as there was no additional supply in the city. The average rentals stabilised indicating a revival of interest in the city’s organised retail space.

However, the Garden City anticipates supply of one million sft in six months, 80 per cent of which is expected to come up by this year end. Bangalore’s suburban zone will see more than 60 per cent of the total new supply and the rest will come up in peripheral micro markets.

Hyderabad, till September, witnessed an additional mall supply of 650,000 sft at Madhapur and vacancy dropped to 14 per cent from 17 per cent till June. Rentals are likely to remain stable till March next year.

The mall space in Chennai increased 28 per cent with Ampa Skywalk mall becoming operational.

Food and Beverage outlets continued to be the main driver for retail space and are expected to remain so in the future. Retailers preferred to expand within city limits and refrained from venturing into the peripheries, it said.

Source : http://www.business-standard.com/india/news/mall-vacancy-in-southern-cities-drops-in-july-sept/375173/

Demand For Housing To Cross 75 Lakh Units In 5 Yrs, As Per A Report

The overall demand for housing in India is likely to cross 75 lakh units within the next five years, while the same for commercial space will reach 195 million sq ft, indicating a revival in the realty sector. According to a report by global real estate consultant Cushman $ Wakefield (C&W), the cumulative demand in the residential sector will be about 75.43 lakh units between 2009 and 2013. The demand in the housing segment this year is estimated to be 11.96 lakh units and is expected to grow by over 55 per cent to reach 18.64 lakh units in 2013, the report said. In the commercial space, the consultancy said the total five-year demand would be 196.3 million sq ft from the estimated 26.5 million sq ft in this year. In 2013, the demand might touch 53.9 million sq ft. Out of the total commercial demand, about 42 per cent is expected to be generated in the Tier I and II cities.

Source :  Business Standard

Builders see large room for growth in office space

Market for this predicted to grow at a compounded 19% annually for next four years.

The glittering towers in the country’s commercial capital may still be rising into empty space, but that hasn’t stopped Rashesh Kanakiya’s ambitions from soaring.

The chairman of Kanakiya Spaces has just launched a commercial project called — rather oddly, some would say — Boomerang, a 1.2 million sq ft complex at Andheri, a Mumbai suburb. Kanakiya says it’s the country’s largest single-project floor space on offer and a substantial part of that will be earmarked for offices.

The oversupply in the office space doesn’t worry him. “Though there is oversupply in the IT space, demand for office space hasn’t stopped. With international markets picking up, we expect demand to pick up from early next year. We have got an excellent response for our Boomerang project this week,’’ Kanakiya says.

Kanakiya has put his money where his mouth is. His company has also just completed 215 Atrium at Andheri that offers office space of 300,000 sq ft, apart from a 300-room four-star hotel (Courtyard Marriott). The space has been sold out.

Kanakiya is certainly not alone in expecting things to improve. According to a Cushman & Wakefield report, though the office market is expected to dip in demand this year with an expected absorption of 27 million sq ft, the period from 2010 onwards will see the markets experience a healthier demand, with a compounded annual growth of 19 per cent from 2009-2013.

The commercial office market in India is likely to head towards a more balanced demand and supply situation in the next few years. The highest demand in the next five years is expected to be in Bangalore at 34 million sq ft, followed by Chennai at 27 million sq ft. Mumbai comes just after that. The growing corporate confidence is expected to turn things around in the office space market, the report says.

According to the Global Office Real Estate review (mid-year 2009) by Colliers International, Mumbai remains the 15th largest office construction site in the world and the city is currently seeing as much as nine million sq ft of office space coming up. This is a huge jump compared to June 2008 (just before the global recession started) when barely 3.8 million sq ft was under construction.

According to real estate research firm Liases Foras, the Mumbai Metropolitan Region (MMR) has nearly 60 million sq ft of unsold office space, but developers are now planning to launch 120 million sq ft of new office space by 2016, in anticipation of a much better tomorrow.

The growing corporate confidence has prompted many developers to put the oversupply concerns behind them and either launch new projects or put the unfinished ones on the fast track, with aggressive marketing efforts.

The list is getting longer by the day and includes Indiabulls Real Estate, which is ready with its 1.5 million sq ft Indiabulls Finance Centre at Lower Parel, Ackruti City with its office complex at Bandra Kurla Complex, Phoenix Mills, which will develop 1.7 million sq ft of office space in its Phoenix Market City project in Kurla, ACME and the Ajmera group, which have launched their projects recently.

Raja Kaushal, executive director and chief operating officer of BNP Paribas Real Estate India, says there is a latent demand for office space from most sectors. “There are at least five to big companies which are looking for properties in excess of 50,000 sq ft,” Kaushal adds.

That’s a sharp turnaround from the middle of last year, when most companies and financial institutions deferred their expansion plans due to the uncertain demand scenario and in the hope that they would get properties at cheaper prices later. The result: Office rents in the city’s main business hubs, Nariman Point, Bandra Kurla Complex and Lower Parel, have gone down by 50-60 per cent in the past one year.

However, there is a large section of consultants who find the spate of new office space launches a bit difficult to digest. Some developers are marketing aggressively (two-page expensive advertisements in Mumbai dailies have become a common affair now) so that buyers come back.

“Developers have been trying to sell these properties for quite some time. It is very difficult to get buyers, so developers are advertising heavily to woo buyers. And in some cases, they do have any option other than launching office complexes as per zoning laws,’’ says Pankaj Kapoor, chief executive of Liases Foras.

According to Kapoor, a number of developers are also withdrawing their projects due to poor response. Mumbai witnessed 1 million sq ft of cancellation from buyers in the December quarter of this year and a mere 500,000 sq ft of leasing and buying in the June quarter, which is very insignificant, Kapoor says.

Kapoor, however, seems to be in a minority. A real estate developer who didn’t want to be identified says he isn’t a fool to have put his money in something without proper research. “Consultants may be wise people, but we are actually investing and know better,” he says.

Source : http://www.business-standard.com/india/news/builders-see-large-room-for-growth-in-office-space/371486/

Residential property prices rise 15%

AHMEDABAD: The upswing has begun. Not only have the sales picked up, but the prices of residential property too have increased 5-15 % in the last Greatest ceilings
Make maximum use of office space  couple of months. With a long festive season ahead, realty experts believe property markets could see heightened activity, provided developers desist from increasing prices of residential space any further.

“The festive season (September-December ) has historically been a buying period, with a large chunk of overall sales being converted during this auspicious time. Some developers see as much as 30-40 % of the yearly sales taking place during the festive season,” says Aditi Vijayakar, the executive director (Residential Services, India) of Cushman & Wakefield (C&W ), a global realestate consultant. “Residential prices have increased by 5-15 % from the bottom it made in the first half of the year. If the developers continue to raise the prices then the renewed demand and interest that is being witnessed will start to abate,” she cautioned while talking about the upcoming season which is also a source of attraction for the cash-rich NRIs.

“The previous year has been a taxing one for the real estate industry and the initial signs of recovery are evident in the market, and as most of the sales happen during the festive periods, developers have to be cautious not to hike prices in projects and new launches as this will drive out the end users and prolong the revival in the residential space,” Ms Vijayakar remarked.

According to the expert, almost all cities are registering a rise in sale as transactions had frozen up during the start of the year. But now as the economy has stabilised and is back on the growth trajectory, there is a revived interest in buying homes by end users and this increase in confidence, better economy, favourable borrowing conditions, rationalised capital values amongst others which is promoting rising sales across India..

However, developers and builders are eyeing the renewed demand in the residential space as a huge opportunity. “After almost a year-and-a-half, we see a renewed demand in the residential sector. During the last three months, sales have picked up by almost 100%, and with a long buying season ahead, the property prices will definitely move up the graph,” says Sameer Sinha of Savvy Infrastructures Ltd.

“In Ahmedabad, going by conservative estimates, the prices of residential property is expected to rise by another 25-30 % in the next one year”, Mr Sinha said adding that the prices in the city have already risen by about 15% since the markets bottomed out earlier this year. The fresh demand in the housing sector has boosted the confidence of developers as well. Earlier this month, the city-based body of developers, GIHED (Gujarat Institute of Housing and Estate Developers) displayed about 500 projects worth Rs 3,000 crore at property show in Ahmedabad.

“As the economy recovers and grows on a pan-India basis, residential demand is expected to grow along side. C&W Research estimated demand to be over 7.5 million units by 2013 across all categories such as Economically Weaker Section, affordable mid segment and luxury segment. The residential demand for NCR, Mumbai, Bangalore, Pune, Chennai, Hyderabad and Kolkata is estimated to be 4.5 million units by 2013”, Ms Aditi Vijayakar added.

http://economictimes.indiatimes.com/articleshow/5064201.cms

Bangalore Emerging as Most Preferred Real Estate Destination

Bangalore has emerged as a clear preference for sectors like office and retail, while coming a close third in the residential and hospitality according to Cushman & Wakefield, a retail estate research firm. In its report Cushman & Wakefield GRI India Real Estate Investment report 2009: ‘Survival to Revival – Indian realty sector on the path to recovery,’ the firm said that Bangalore is expected to see the highest demand for office space in the period 2009 – 2013 with approximately 34 million sq.ft.

The expected recovery in the IT/ITeS sector would have a positive effect on the demand in Bangalore, the preferred location for many IT/ ITeS companies. The demand for retail sector is also expected to be the highest in Bangalore with approximately 7 million sq. ft. while demand for residential is expected to be approximately 570,000 units over 2009 – 2013, with the highest compounded annual growth rate at 14 per cent. The hospitality sector in Bangalore too is forecast to register the highest compounded annual growth of about 26 per cent in demand, followed by NCR at 24 per cent and Pune at 23 per cent.

The city of Chennai is expected to witness the second highest demand for office space in India between 2009 to 2013 with a projected cumulative 27.2 million sq ft and the city also holds the fifth largest demand share for retail and hospitality space demand in India. Anurag Mathur, managing director, India, Cushman & Wakefield said that the office market in Chennai has seen a renewed interest from the corporate sector, post the economic crisis. While demand will be visibly affected this year, “We expect the five-year horizon (up to 2013) to be upbeat for the commercial markets in the city. The retail and hospitality segments are also likely to see considerable demand in the coming years.”

Chennai is likely to witness the second highest demand for office space after Bangalore of approximately 27.2 million sq.ft. by 2013. Good infrastructure, high quality construction and competitive pricing would be the key reasons for the location to see high demand from corporate sector. Hyderabad is expected to witness office demand of 16.6 million sq. ft. over a five year horizon and records the highest compounded annual growth of approximately 28 per cent during 2009 – 2013 in the office sector along with Pune and Kolkata. The residential demand for Hyderabad is expected to be 290,000 units with the highest compounded annual growth of 14 per cent in the next five years akin to Bangalore.

Mathur, further added that though the high growth trajectory of the previous years saw a setback during the global economic slowdown, the inherent strong economic fundamentals, low exposure to debt and state intervention, would help the sector to gradually return to the path of recovery and witness robust demand for real estate across sectors.

http://www.indianrealtynews.com/real-estate-india/bangalore/bangalore-emerging-as-most-preferred-real-estate-destination.html

Citys affordability index soars

Bangalore: Is it actual demand or pent up demand or just plain affordability Call it what you may, theres literally a slugfest now in the affordable housing market, homes priced between Rs 12 lakh and Rs 30 lakh.

The big daddy of the Indian real estate market, DLF, is looking to enter the affordable home market and Bangalore could well be its launch pad.

According to sources in the know, DLF is looking to attract buyers with annual household incomes of Rs 3 lakh to Rs 5 lakh per annum. This income group would be able to afford homes that cost between Rs 9 lakh and Rs 15 lakh, said a source. The company is said to be initiating a national market survey to find out what exactly buyers are looking for in an affordable home.
Since Bangalore is seeing a lot of action in the affordable housing space as compared to other metro markets, DLF would look at a roll out in Bangalore first, said a source. A point that can be corroborated by the number developers in the city who have launched projects in the Rs 12 lakh to Rs 30 lakh bracket.

In the last seven months, Puravankara, Confident, Mantri, CSC, Ozone, Nitesh Estates and Shriram Properties have all launched such homes. P Dayananda Pais Century Group has just announced its foray into this segment. The company launched Century Indus, located in Rajarajeshwari Nagar, comprising of 2 BHK (850 sqft to 950 sqft) and 3 BHK (1,120 sqft to 1,135 sqft) apartments in the price range of Rs 22 lakh to 30 lakh.

The Prestige Group is believed to be looking at launching homes in the Rs 25 lakh to Rs 40 lakh price band in Electronics City. Brigade Group has already spelt out plans of foraying into the affordable space early next year. Silverline Group too is looking at unlocking its land bank by developing affordable homes.

According to Cushman & Wakefield India, demand for housing in Bangalore is likely to be about 570,000 units over the period 2009-2013 , with a compounded annual growth rate of 14%. The affordable and mid segment housing category are likely to be the primary focus of most developers , says Anurag Mathur, MD of the real estate consultancy firm.

Source:http://lite.epaper.timesofindia.com/getpage.aspx?edlabel=TOIBG&pubLabel=TOI&pageid=17&mydateHid=24-09-2009

Developers Raise Property Prices- Plan to Give Discounts During Dussehra-Diwali

The last fortnight of Pitrupaksh, a period considered inauspicious for buying a new home, had few property transactions as usual but that did not stop developers from hiking their rates for projects under construction. Real estate players say this is a tactic to lure buyers with discounts during Dussehra-Diwali. “It is nothing but a strategy to make the festive pricing look attractive. Even new launches that were reasonably priced have seen a rise in prices,” said Pankaj Kapoor of the real estate research agency Liases Foras.

The 15-day Pitrupaksh phase ended Friday. “In North and West India, this period is considered inauspicious for buying a home or starting anything new. Sales normally pick up after Pitrupaksh between Dussehra and Diwali,” said Aditi Vijayakar, director of residential services at Cushman & Wakefield. Developer Sunil Mantri, vice president of the Maharashtra Chamber of Housing Industry (MCHI), ruled out substantial discounts during Diwali. He pointed out that prices have been rising anyway. “After a 30 to 40 per cent fall in rates, overall the market has stabilised and prices have been increasing since June. There might be festive period add-ons and marginal discounts on prices to attract sales, but nothing substantial,” he said.

Overall, between July and mid-September, prices of several projects including relatively affordable ones have been jacked up. For instance, the average rates at Rustomjee’s Global City in Virar, around Rs 1,900 per sq ft in July 2009, is Rs 2,750 per sq ft today. Flats at HDIL’s Premier Residences at Kurla, sold for about Rs 5,250 per sq ft in July, cost Rs 6,151 per sq ft today. Many other projects such as Kalpataru Aura at Ghatkopar, Lodha’s Casa Bella at Dombivli, Ackruti Greenwoods in Thane, to name a few, have each seen a rate increase of Rs 200 to Rs 1000 per sq ft.

Source : http://www.indianrealtynews.com/real-estate-trends/developers-raise-property-prices-plan-to-give-discounts-during-dussehra-diwali.html

Demand up for NCR budget houses

NEW DELHI: Even as the economic recession is running its course, there is one area where the shadow of gloom has not fallen. The demand for affordable houses in the NCR has, in fact, gone up as more and more people are coming forward to buy their dream house.

According to reports by leading property consultant agencies, there’s good news on the residential segment more and more people are coming forward to buy their dream house, albeit with minor adjustments. Affordable housing is the buzzword as the real estate market is limping back to normal.

Pramod Thakur, a broker in Gurgaon, said, “Its not that people have stopped wanting to buy a house. Prices were too high for most projects. However, in the past couple of months, a number of low or medium budget housing projects have been launched in the NCR, and the response has been good.”

It’s a trend that consulting agencies, too, have noticed. A recent report (for the second quarter of 2009) by Colliers International notes that residential projects launched 25-30% below prevailing market rates have received good response. A market report by Cushman & Wakefield added, “In the mid segment, Gurgaon and Noida witnessed noticeable correction (of prices) over the year due to competitive prices offered by the developers.”

A senior executive of a leading developer said, “Luxury housing, with world class amenities, is restricted to high end users who constitute only 5% of the population. It was time for the developers to look at the large middle class population which requires affordable housing.”

That developers have realized it is obvious from their behaviour in the past few months. Even as new projects were launched in Gurgaon and Noida in the low to mid range Rs 30-45 lakh other big projects that had already been launched saw addition of smaller flats in high-end projects. For instance, Tulip Orange, The Residences, Vatika Bellevue and IRIS-Emilia-Primrose apartments were launched by builders like Tulip, Unitech and the Vatika Group in the affordable segment some months ago even as reports of DLF changing its housing designs in Gurgaon to squeeze in more two-bedroom units, along with four-bedroom homes, makes the rounds of the real estate circle.

That there’s a world of difference between the high end projects and the affordable housing is obvious. For instance, most of these new projects have reduced floor areas, with some even having reduced floor heights to cut costs. However, the fact that the prices are within budget and there’s support from banks most have slashed rates with SBI offering housing loans
at 8% interest in the first year has prompted many to opt for buying a house in the prevailing downturn.

Incidentally, the affordable housing market in India that is increasingly being targeted by developers is worth at least Rs 3 trillion and will see demand for 2.06 million homes by 2011, said a survey conducted by property consultant Knight Frank India.

source:http://timesofindia.indiatimes.com/news/city/delhi/Demand-up-for-NCR-budget-houses/articleshow/4996638.cms

After a lull, land deals make a comeback

The slowdown in the property market, induced by the global meltdown and negative sentiments, had dealt a body blow to the mega land deals, in the country. But the gloom seems to be finally lifting. Coinciding with the return of buyer interest in select pockets of residential market and the improved liquidity position of builders, land auctions are inching back into the spotlight.

Consider this. DLF Ltd recently made headlines when it walked away with 350.7 acres in Gurgaon, for an estimated Rs 1,750 crore, marking one of the largest land deals in the country. The prime land, on the Gurgaon-Faridabad road, had been put on the block for re-bid after the only bidder in the first round (DLF) had drawn attention to certain difficulties in project implementation.

HSIIDC (Haryana State Industrial & Infrastructure Development Corporation) re-invited bids in July this year with easier terms and conditions, including staggered payment plan spread over seven years. This time, DLF clinched the deal with its winning bid of Rs 12,000 per square metre — two other bidders did not qualify on technical grounds.

The land in the Delhi suburb would be used for development of commercial, residential, sports complexes, and an 18-hole golf course. DLF, however, remains tight-lipped about the project, but sources say that the land deal is “positive” for the company, given its proximity to South Delhi on one side and the existing golf course on the other.

DLF is not the only one going after such transactions. Earlier this year, Anant Raj Industries decided to set aside nearly Rs 400 crore from its cash reserves, to acquire land for upcoming residential projects.

So are the land deals back in reckoning, after a long dry spell? Industry experts believe that land acquisition will gather pace, but will remain largely need-based.

“The market definitely is improving, new projects are being launched and the cash flow, for builders, is getting back in shape on the back of QIP issues and some proposed public offers that are being lined-up,” says Mr Manish Aggarwal, Executive Director, Investment Services, Cushman & Wakefield (C&W) India.

Time to buy

While the conditions are turning positive, the biggest clincher clearly is land valuation. In many cases the land prices have corrected nearly 60-70 per cent, says an industry observer.

Agrees Mr Amit Sarin, Director and CEO, Anant Raj Industries. “It is the best time to buy land — the valuation is a fraction of the 2007-level. Everyone is announcing low cost and affordable housing projects and the main ingredient of low cost in real estate is the land cost, not construction cost,” Mr Sarin points out.

But Anant Raj Industries, itself a zero-debt company, expects land buying to remain selective for a while.

“It is not a trend in the industry. It will happen only in those cases where the land costs are extremely attractive and the builder has a comfortable liquidity position,” he adds.

The company has stayed away from aggressive land buying over the last 2-3 years.

No frenzy likely

Real estate consulting firm CBRE too does not foresee the return of land frenzy seen in 2007-2008. “Companies are not rushing into transactions. They are more cautious and evaluating deals carefully on parameters such as potential for development, location, margins and valuation,” says Mr Anshuman Magazine, Chairman and Managing Director, CB Richard Ellis South Asia Pvt. Ltd.

Source : http://www.thehindubusinessline.com/iw/2009/08/30/stories/2009083051041500.htm

Developers witness revival of big ticket residential deals

The wealthy and elite across the country are scouting for good deals in the real estate sector. And in their kitty are a few crore of rupees to buy Land as investment the home of their choice. The concept of bigger, better and more luxurious has caught on. So is the demand in the Rs 5 crore plus housing seeing a revival?

Says Anuj Puri, chairman & country head of global real estate consultancy Jones Lang LaSalle Meghraj (JLLM), “Our Homebay residential agency has concluded several high-ticket residential transactions over the past three to four months, and we can vouch for a significant sea-change in how the luxury home market is being perceived. High networth individuals (HNIs) have begun to show renewed investment sense of purchasing luxury properties in prime locations of leading metros, realizing that supply in such locations is limited.”

But some feel that this demand is primarily coming from existing projects. Shveta Jain, national head, marketing & investment, residential, Cushman & Wakefield (C&W) India, says there already are significant amount of existing projects in the luxury segment that have not been fully absorbed. The demand, thus, is not significant enough to warrant key new luxury project launches, she feels.

At a time when affordable is the buzz in the real estate sector, are developers looking at new luxury launches? Manu Goswami, head, business development and strategic planning, Jaypee Greens, says although they have not launch anything over the last 10 months, they do have plans of launching luxury projects in mid September.

“The demand has turned around over the last few months. But people are more choosy now.” The developer has Estate Homes in Greater Noida which are priced at an upwards of Rs 8 cr and about 50% of their inventory has already been sold.

During the boom time in 2007, real estate developers were mainly concentrating on luxury projects. The margin for a developer in luxury housing would be at least 15-20% higher than say an affordable housing project. So for many, this seemed as a more attractive proposition in earlier times. But developers defend this logic.

“The absolute margins may be higher for a luxury development but the profitability also accrues over a much longer period of time vis-a-vis affordable housing which gets sold much earlier,” adds Goswami.

However, there are some developers who are not launching any new projects in this category at the moment. BPTP, for instance, is focusing on the affordable housing segment. But they agree that activity has started happening in the luxury segment. “The elite who were earlier waiting for the right investment opportunity have now started buying property. There has been an increase in demand for luxury housing,” says a BPTP spokesperson.

Raheja Developers too has an upcoming project — Raheja Atlantis, a ready-to-move-in luxury housing project. Located on NH-8 in Sector 31, Gurgaon, villas and presidential suites are primarily available for sale. It’s priced at Rs 6,600 per sq ft.

Harinder Dhillon, GM, marketing, Raheja Developers, says the demand has been quite encouraging. “In Atlantis we have had over 30 bookings in the last three months at Rs 1.50 cr onwards per apartment. The demand for luxury housing is making a comeback, provided it is ready to move in and at a good location.”

Most of the demand in the apartments segment is being seen for ready-to-move-in apartments. “We are witnessing enhanced demand for completed Land as investment projects or those nearing completion,” says Rohtas Goel, chairman National Real Estate Development Council and CMD of Omaxe. He says developers across the board are noticing this trend and focusing on completing existing projects and speeding up delivery.

Puri of JLLM too seconds the view. “The highest demand is for ready-to-move luxury properties, since the ability of developers to complete projects is generally not being viewed with much enthusiasm at the current time.

However, there are serious purchase inquiries for under-construction projects by highly reputed developers, especially in locations where there is very little potential for future supply.”

Real estate investment advisers such as Ashok Kumar find that the bulk of revival in Delhi has been in the heart of the city in premium areas such as Defence Colony and Greater Kailash where the supply is limited. So deal hunters are now picking up plots for between Rs 12-19 crore to redevelop old properties. And the buyers? CEOs, professionals and HNIs.

Buyers today are willing to spend to get the home of their choice. But the last economic downturn has showed them that long-term investments are counter-productive. Projects are behind schedule by one to two years and there is no guarantee that buying at premium rates fetches you better returns. Therefore buying a near-complete apartment is seen as mitigating the risk.

Though developers too have started to build in the affordable segment in keeping with the thrust of the government and the incentives offered to developers as well as buyers, few have exited the luxury segment. But with an increased interest shown from buyers, it seems that luxury housing is ready for a grand comeback.

Source : http://economictimes.indiatimes.com/News-by-Industry/Realty-sees-revival-of-big-deals/articleshow/4949705.cms

1% loan subsidy to boost affordable housing in Tier II & III cities

Govt has offered 1% subsidy on loans up to Rs 10 lakh & doled out tax sops for developers. But this will mainly boost affordable housing
projects in Tier II & III cities. Metros will be missing from the list.

At a time when low cost is the clearly the buzzword in the real estate sector, Union finance minister Pranab Mukherjee’s move to offer 1% interest subsidy on housing loans up to Rs 10 lakh can be seen as a positive development for the middle income group. The condition being that the price of the house should not exceed Rs 20 lakh. So what does this really mean for buyers who want to own their dream house? Is it really as good as it looks?

Avinash Narvekar, partner, Real Estate Practice, E&Y says the latest incentives are targeted at benefiting buyers of affordable homes. But there are some pros and cons. “The interest subsidy scheme would only apply to houses in the sub Rs 20 lakh category. This would automatically rule out most properties in a city like Mumbai, except for properties in distant suburbs. Secondly, the interest subsidy is only for the first year. Housing loans are inherently long-term borrowings (of 5-20 years), and therefore the benefit of the scheme may not be significant,” he says.

So let’s take a look at what this can do for your EMI. According to Kaustuv Roy, executive director, India, Cushman & Wakefield (C&W), for a Rs 20-lakh apartment, the sanctioned loan amount is generally around Rs 15 lakh. So for a Rs 15-lakh housing loan, at 10% interest rate per annum and a 20-year tenure, the EMI comes to Rs 14,476 per month. Of this, if Rs 10 lakh is at 9% per annum interest rate, and the balance Rs 5 lakh is at the same interest rate, the EMI comes to Rs 13,824 per month.

The savings thus is Rs 652 per month, only for the first year, translating to Rs 7,824 as savings due to this scheme. This translates to a savings of 5% of EMI in the first year, and over the entire tenure of the loan, it works out to 0.25% savings of the total EMI paid.

Besides savings on your EMI, the second incentive doled out for developers may also help. Tax holidays given to developers for projects approved between April 1, 2007, and March 31, 2008, with a completion deadline on or before March 31, 2012, is likely to have an indirect benefit for the consumer. So if the developer chooses to pass on this advantage to the buyer, it could mean a lower price for them.

While developers do not say anything much about how they plan to pass on this benefit, they agree that it is mostly consumers in Tier-II and Tier-III cities who would benefit from the latest incentives announced by the government. “Metro cities would generally miss out from this list owing to high Floor Space Index (FSI) costs. But the overall affordable segment is bound to witness an increased activity post this initiative,” feels Rajeev Rai, vice-president, corporate, Assotech. The developer has its Windsor Hills project in Gwalior and The Metropolis in Rudrapur, where consumers can opt for a home below Rs 20 lakh.

Similarly, BPTP too has projects in this category such as the Park Elite Floors starting at Rs 16.08 lakh that was launched in May 2009. They

recently also launched the Park Elite Premium at Rs 17.98 lakh that caters to the middle income group. “The given scheme will indeed help end consumers investing in budget housing projects make way for lesser EMI and more affordability,” says Amit Raj Jain, vice-president – marketing, BPTP.

Some, however, are of the view that although the 1% interest rate cut will help, it should be extended to the Rs 30-lakh bracket. “In metros there are hardly any projects that cost less than Rs 20 lakh. This is primarily going to help buyers interested in a Tier III city. For metros this step almost amounts to nothing,” asserts Vijay Jindal, CMD, SVP Group. The developer has recently launched Gulmohur Garden phase II at Raj Nagar Extention NH-58 starting at Rs 16.53 lakh.

Mr Narvekar of E&Y adds that although the options in Tier I cities for Rs 20 lakh homes would be limited, there are some renowned developers such as Tata Housing that have come up with low cost projects like the Shubha Griha for homes in the sub Rs 10 lakh category. He, however, exercises a word of caution for the buyer.

“Though there will be a lot of choices, most of the upcoming projects are likely to be on city outskirts with a fair degree of travel involved in getting to the central business district. Also, consumers will need to be aware that most of the cost reduction on affordable housing has been achieved through reduction in the unit size and a cut-back on various frills that had become a part of most projects launched in the last 2-3 years.”

Source : http://economictimes.indiatimes.com/Features/The-Sunday-ET/Property/1-loan-subsidy-to-boost-affordable-housing-in-Tier-II-III-cities/articleshow/4872871.cms?curpg=1

Delhi and Mumbai Dominate Residential Market

The rest of India almost doesn’t matter – at least when it comes to realty. Think property and you think capital Delhi and financial capital Mumbai. These two metros, along with their suburbs, comprise the largest pie of real estate in the country. No surprise that they are undoubtedly the most sought after destinations for an investor looking at attractive residential locations. These markets are significant from the perspective of sheer administrative strength and as centres of business as well as growth. And numbers bear out this fact as well. According to Rajiv Sahni, partner, real estate practice, Ernst & Young, while in terms of office space absorption, NCR comes second after Bangalore, it commands nearly 35% share of the top 8-10 residential markets in India. Mumbai comes second, with a 15% share of residential market.

So which are the best places to invest in Delhi and Mumbai? Aditi Vijayakar, executive director, residential services India, Cushman & Wakefield, advises that investments should usually be targeted towards destinations that have a stronger prospect of appreciating in the future, offer leasing potential and have the inherent strength to sustain demand. “Locations such as central Mumbai (Parel, Mahalaxmi), Bandra (West & East), Kalina and JVLR in Mumbai and NOIDA-Greater NOIDA expressway, Indirapuram, Golf Course extension road, in Delhi offer such opportunities. They are ideally located from the perspective of accessibility and have growing commercial hubs in the vicinity. These are emerging as strong changing markets.” Aditi adds that as far as return on investment is concerned, these will vary depending on projects, acquisition cost, leasing potential, supply pressure, promoter’s brand equity and maintenance quality. “Average returns from rental may vary from 4% to 6% and capital values may appreciate at the rate of 8% to 10% per annum. Returns are dependent on the capital and rental value cycle and currently both values have dipped given the economic environment.”

What also makes these cities attractive for owning a residential space is the fact that they are buzzing with economic activity. According to Anshuman Magazine, CMD, CB Richard Ellis, a lot of improvement has taken place in these cities in terms of business opportunities and infrastructure which makes them extremely viable destinations. Developers also agree that Gurgaon and Indirapuram are attractive markets in Delhi NCR whereas it is Navi Mumbai, Vasai, Virar, and Kandivali in Mumbai which will see increased development.

Says Harinder Dhillon, GM, Marketing, Raheja Developers, “These two markets make up at least 30% of the entire market. Gurgaon is lucrative due to the upcoming developments in accordance with the new Gurgaon masterplan. The Indirapuram area and beyond will remain in demand because of the revised floor area ratio (FAR) and population density norms. In Delhi, the areas under new master plan which will open up under the new R zone such as Chattarpur, Nangloi, Alipur, Najafgarh blocks will see heightened activity. In Mumbai, it is Navi Mumbai, Vasai, Virar, Kandivali which are likely to witness hectic transactions in the near future.”

“If one is looking at the futuristic development of the place, then places in Ghaziabad are NH24 and NH58, and if you move further then Faridabad is also coming up well. Some of these places might look deserted but think of places like Dwarka some 10 years back. It is now in demand primarily because of infrastructural developments. In the financial capital, locations such as Navi Mumbai and Thane are attractive,” he says. Some are of the view that the genesis of Delhi and Mumbai is different altogether as one is a political centre and the other a business hub. Brijesh Bhanote, senior V-P, sales and marketing of The 3C Company, a Delhi-based real estate firm feels that as the cost of construction and land prices in Delhi are relatively lower than Mumbai, hence return on investment could be better in the capital.

A few things should, however, be kept in mind while seeing the investment potential of a given location. Various aspects such as infrastructural developments, connectivity, power, roads etc should be considered so that one can get maximum returns of the investment. “Neighbourhoods with a strong employment base, proximity to educational, health and shopping centres, ideal external connectivity through mass transportation system, closeness to golf course and natural garden are essential features of a property having appreciation potential. If such a property is backed by a developer having reputation for high quality construction, it is destined to give handsome return on a medium to long term basis,” says Rajeev Rai, vice-president, corporate, Assotech.

With developers coming up with many projects in and around new developments in Delhi NCR and Mumbai, you can expect a lot of supply in these cities in the near future. But do study the pricing basics and micro examine the investment potential of a given location in these two real estate markets. Make a good choice and be sure of a profitable bargain.

Source : http://www.indianrealtynews.com/real-estate-india/delhi/delhi-and-mumbai-dominate-residential-market.html

Navi Mumbai real estate prices rise

Notwithstanding the concerns over the proposed international airport in Navi Mumbai, real estate prices around the satellite city have rising for the past one month.

During the past 30 days, prices of medium residential apartments rose by Rs 300-500 per square feet across various nodes in the city. The present prices range at Rs 2,500-3,000 per square foot across nodes like Kamothe, Panvel, Kharghar, Khandeshwar and CDB Belapur, said Srikanth Puduval, a real estate agent.

The prices at nodes far from the proposed airport site — like Airoli, Koparkhairane and Nerul — managed to hold steady at around Rs 3,000 per square  foot(medium residential apartments), despite the financial crisis. This also varies, as prices are different for different builders, while high-end and premium complexes are priced higher.

“The soaring of prices is based on speculation that the airport would eventually get clearance.

The price rise is across residential and not in retail or commercial structures, but as the area develops (with proposed Special Economic Zone and airport), the hike will spill over to commercial establishments also,” Cushman & Wakefield Executive Director (Occupier Solutions) Arvind Nandan told Business Standard.

Real estate prices are determined by certain benchmarks, and prices of Rs 2,500-3,000 for suburbs seem to be on the right side.

Source : http://www.business-standard.com/india/news/navi-mumbai-real-estate-prices-rise/362494/

Over 100 malls to spring up in India by end-2010: Report

Mumbai (PTI): Keen on matching supply with demand, real estate developers may spring up more than a hundred malls spread over 30-million sq ft in the country by end-2010, a report says.

“Between now and 2010, an additional 31,846,504-square feet of mall space will be created across India through just over 100 new shopping centres,” findings from a report titled ‘Mall Realities India 2010′, said.

However, 54 per cent of expected mall supply in 2008 was deferred to 2009-10, the report compiled by real estate consultancy firms, Cushman & Wakefield and Jones Lang LaSalle Meghraj, said.

“As far as retail real estate in the top eight was concerned, as much as 11-million sq ft of expected mall supply in 2008 was deferred to 2009-10, which was a reduction of 54 per cent from the projections made at the beginning of 2008,” it said.

Of the over 30-million sq ft of malls to be added by end-2010, India’s north zone is leading with a total of 14,790,000 sq ft.

“That translates into 45 malls expected in the North Zone with 24 in the Delhi NCR (National Capital Region) itself,” it said.

West Zone is the second-most prolific region in terms of additional projected mall supply of 7,438,504 sq ft through 47 malls, it said.

South and East Zones total up a projected mall space at 5,865,000 sq ft (through 29 malls) and 3,753,000 sq ft (by way of 13 malls), respectively, it said.

“Interestingly, while most projects in North, West and South Zones are in and around Tier II cities, in the East, the majority of developments are to open in or around West Bengal’s capital Kolkata,” the findings said.

The list of properties scheduled to open in this period are located across metros, mini-metros and Tier II towns, including in Delhi, NCR, Mumbai, Pune, Aurangabad, Raipur, Bangalore and Siliguri, among others.

Source : http://www.hindu.com/thehindu/holnus/002200905311051.htm

Luxury Homes a Nightmare as Realty Undergoes Worst Phase

When the rich get less rich, lavish lifestyles turn into a bad dream. Wide-ranging influences, from shock at sudden economic strains to the rise of simpler living, have shrunk blue-ribbon realty consumption. Million-dollar realty transactions, which used to be routine in big cities such as Mumbai and Delhi, have all but disappeared. Property brokerage firms point out that the once-tony suburbs of the Capital have been hit the hardest. “Million dollar transactions or deals worth Rs 5 crore are seeing a dip of around 50% in Noida and Gurgaon due to very limited supply,” says Pankaj Jain, executive director of Realistic Realtors, a North Indian real estate consulting firm. But according to property brokers, swish locations such as Vasant Vihar, Shanti Niketan and Anand Niketan are still holding up due to the pent-up demand for independent floors. “Over the last two quarters million dollar transactions in these locations have seen a spurt of around 20%,” adds Jain.

He also points out that cash rich cities such as Chandigarh are seeing only a few such transactions in prime areas like Panchkula and Mohali. “The dynamics of the Chandigarh market are very different. The holding capacity of these areas is quite good. However, owing to the tight supply, only a few transactions are being witnessed in this value,” he mentions. Even Mumbai, which boasts some of the most costly addresses in the country, is not faring any better. Other than a slim demand in areas such as Cuffe Parade, Lower Parel, Bandra and Worli, million-dollar real estate transactions in the City of Dreams are now far and few. “The supply is always limited, with only a few choosing to go for this segment,” says Rajeev Talwar, executive director of DLF.

Agrees Niranjan Hiranandani, MD of Hiranandani Developers, who feels that the mid and lower rung segments are in the limelight now. “There are not too many such big ticket transactions happening in Mumbai as of now,” he reiterates. “It’s a high price zone and the market for that is limited in the current scenario.” And down South, demand for $1m houses is also rather low. Says Anshuman Magazine, CMD, CB Richard Ellis, South Asia: “Jubilee Hills and Banjara Hills in Hyderabad are seeing an overall decline in such transactions. Similar is the case with Chennai in areas such as Boat Club and Poes Garden.” According to Mr Magazine, it’s also the nervous sentiment that is persuading buyers to postpone their purchase. “Since a lot of the demand in Hyderabad comes from senior IT executives, they are holding back due to uncertainty in the job market,” he adds.

Also, in Chennai, for instance, many independent houses that would roughly cost Rs 5 cr and above are owned by people who have inherited either the land or the entire property. In Bangalore, demand for such luxury apartments is also low owing to the erosion of demand from the market. However, according to Cushman & Wakefield, Bangalore is more important than Chennai and Hyderabad in the South for investment or purchase of property tagged at million dollars due to stronger economic fundamentals. The trend in Kolkata too is no different. Brokers say the million transactions in the City of Joy are to the tune of 1-2% in areas like Ballygunge and Alipore with a buyer profile mainly consisting of businessmen. “Kolkata is no Delhi or Mumbai. The fastest selling price bracket in the city is in the range of Rs 25-40 lakh. Areas such as Alipore and Ballygunge are saturated now. Fresh development in these areas is impossible,” says Venugopal Sampath, Eastern India head of allCheckDeals.com, a realty brokerage firm.

So what all can a million dollars do for you? While it will offer an independent residence for you in posh locations in Chennai, Hyderabad and Bangalore, metros such as Mumbai and Delhi will mean living in upper class suburban locations if you don’t prefer build-up floors. As per C&W, while locations like Lower Parel, Mahalaxmi, Prabha Devi and even further north in areas such as Juhu and Bandra have the potential to offer residential units costing roughly $1mn. In NCR many ‘gated community’ projects in the peripheral locations of Gurgaon and Noida are available in this bracket. However in Chennai, residential units with a price tag of $1mn will help you snap up luxury residences such as free hold bungalows and high-end condominiums in sizes varying from 4,500 sq ft to 6,500 sq ft in locations such as R A Puram, East Coast Road and Poes Garden among others. In Bangalore, some new high-end residential projects would be available at this cost in areas such as Richmond Road, Lavalle Road and Sankey Road. These apartments would range from 3,700 sqft-6,000 sq ft, with 3-4 bedroom units. So now you know where to make the most out of your million dollars.

Source : http://feedproxy.google.com/~r/Indian-Realty-News/~3/Ey_JCou5_F4/luxury-homes-a-nightmare-as-realty-undergoes-worst-phase.html

Rentals tumble as retailer response dip: C&W

Retail real estate across the country continued to reel under the current economic pressure.

According to a report prepared by Cushman & Wakefield, the world’s largest real estate services firm, most retail micro markets, both mall as well as main streets have seen a further correction in rental values during the first quarter ended March 31, 2009.

Mumbai saw the sharpest decline in rental values for both malls and main street. Suburban Goregaon, witnessed a fall of 42 per cent, while rentals in places like Colaba Causeway corrected by 38 per cent.

In the national capital region (NCR), main street location of Greater Kailash, M Block witnessed a 25 per cent decline in rental values while mall rental values in Noida dropped by 17 per cent.

Ahmedabad saw a downturn in rental values in malls and main street rentals with corrections in the range of 20 per cent to 36 per cent over the last quarter.

Rajneesh Mahajan, executive director, retail services, Cushman & Wakefield India said: “Even while a correction in rental values is recognised as a potential catalyst for retailers to re-enter, receding end user demand has severely curtailed uptake of space across most micro markets.”

“Thus the trend of further correction is likely to continue in short to medium time frame leading to further correction in both mall rentals as well as high street rentals. Only established retail micro locations and successful malls are expected to hold steady largely on account of revenue potential and low vacancy,” he further added.

Furthermore, in the same period only 1.4 million sq.ft. of fresh mall supply was added across seven major cities concentrated only in Mumbai and NCR. The fresh supply was much below initial expectation largely due the slowdown in uptake of space by retailers, which led developers to reduce the speed of construction in already underway projects.

A few other developers, which are yet to start construction of previously announced projects, may be reconsidering their retail mall plans. The slowdown in mall construction is expected to keep the supply low over 2009 and may help in maintaining a healthier supply to demand equation going forward.

The estimated mall supply by end of 2009 is calculated to be 17.66 million sq.ft., about 11 million sq.ft. of the same has been carried forward from 2008.

Source : http://www.business-standard.com/india/news/rentals-tumble-as-retailer-response-dip-cushmanwakefield/60560/on

Indian developers, retailers address new market realities

It’s no surprise that she shakeout in the real estate sector has hit India’s burgeoning retail segment as well. But even as the great shopping  experience in India hits a few road blocks, this could actually be a blessing in disguise. Retail formats are fast changing to suit market dynamics, even as profitable developer-retailer partnerships are being forged to meet aggressive sales targets. In fact, it is value retail that is emerging as the key buzzword in retail strategy and operations.

Shubhranshu Pani, MD, retail, of global real estate consultancy Jones Lang La-Salle Meghraj (JLLM) feels that retailers are now making their formats smaller, both to stay in tune with the modified demand and to factor in the elimination of certain product lines that have not been doing well.

“After the economic downturn, hypermarkets have tried to become more self-sufficient by stocking up on products that were previously sourced from FMCG suppliers. In apparel retailing, we have witnessed decreased selling costs and therefore margins in order to boost purchase. Sales have become far more popular than during the boom years, with hitherto unheard-of discounts of up to 60-70%. Promotional activities in malls have been stepped up, as has the presence of value retail brands such as Koutons and Liverpool,” Mr Pani says.

Probably it’s not a change in the profile of shoppers, or even a sharp drop in footfalls across markets and malls that is the big concern for retailers in the slowdown scenario. Says Prasenjit Roy, founder & CEO of In-store Consulting, a leading shopper research firm, “What is likely to be hit are conversions and average ticket size. Lesser shoppers will buy and those who buy may buy less or downgrade.

Even as the onslaught of summer will result in a drop in footfall in many cases this will also boost sales of some categories such as refrigerator and air-conditioners, which were hit last year due to a not-so-hot summer. In FMCG categories, liquid refreshing beverages such as soft drinks and water, will also sell more.” He also predicts that this slow-down will bring certain segments of shoppers alive such as those looking for bigger and better deals and more choices or new arrivals etc.

Of course, it’s not just retail formats and buyer profiles that are changing. Retailers and developers have drawn up effective strategies to meet the slowdown challenge. The trigger to this is the fact that nearly 25 million sq ft of retail space has been blocked (lying unconstructed) across the top seven cities. Most in the industry believe that the biggest problem is an oversupply of retail space.

The result is that many developers, who till sometime back were not ready to even negotiate prices, are now offering discounts and freebies to attract tenants. Majority of the developers across the country have lowered the common area maintenance charges that include facilities like air-conditioning, toilets and general space upkeep. This constitutes almost half of the rentals paid.

Today footfalls and revenues are as much a concern of the developer as of the retailer and mall management and promotion, is a bigger concern of developers who are taking a more active part in the planning and implementation of mall activities to garner footfalls. Many retailers faced with lower-than-expected footfalls in many malls, are looking to bring at least 20% to 30% of their total stores under revenue-sharing model with mall owners or real estate developers in two years’ time. The model, under which retailers share a percentage of their sales with real estate companies, is seen as a fair way of sharing risks between the two stakeholders.

“The best practices are coming out now. Revenue share model, zoning, clarity on super carpet, nature of contracts with both sides more in partnership as against a one sided contract are now gaining momentum.Its all getting rationalized with developers and retailers both commencing a partnership approach with each other,” feels Vikas Gupta, CEO and MD, Lacoste India.

According to a McKinsey report at present there are about 10% to 15% of the stores are under revenue sharing model in the organised retail industry,  which is only 5% to 7% of the country’s estimated retail market of $350 billion.

Says Yogi Arora, chairman Aarone Group and promoter of Select City Walk in Delhi: “We take minimum guarantee or between 1.5% to 25% of net sales from our tenants depending upon their format. Mobile retailers pay between 1-1.5% of their net sales where as fashion apparel, food and beverages retailers pay between 12 and 25% of their revenues.”

Even as the retailers and developers tweak their existing arrangements to try and cut losses, any dramatic change in the retail formats may not really be on the cards. Says Anshuman Magazine, chairman & MD, CB Richard Ellis, South Asia: “Mall formats from a real estate perspective have not seen any significant change. What we have seen is a change in the leasing models within these as well as new malls expected to open within this year. Given the current economic slowdown, retailers are looking for partnership relationships rather than a tenant landlord equation. Developers on their part are also making an extra effort to understand brands and further evaluating the survival potential of the brand that they are partnering with.”

Meanwhile, in certain micro-markets many retail spaces saw conversion into office space for quick revenue returns due to continued and increasing demand for office space in certain micro markets. This trend is expected to continue to the coming few quarters too.

Across the spectrum everyone believes that there is no better time than this to do a reality check and infuse more accountability into the system. Says Rajan Malhotra, president, Retail Strategy, Future Group: “We have in a way, rebooted to the year 2001 of doing simple things and conserving cash resources. It is just a mis-match of demand and supply in the retail real estate business. This is a good thing that has happened as we are now back to the basics again.” The Future group’s focus right now is on giving back to the consumer. High-ticket promotions have been halted for the time being and the whole effort is on making the back-end operations more efficient.

Others such as Vishal Retail are looking at resizing stores and reducing the number of stock keeping units (SKUs). “It’s more of an educational period right now where every aspect of retail is closely being looked at. Earlier, everyone was in expansion mode, but now everyone is more concentrated on making the best of what they have. The value retailers, clearly, are mainly the ones being able to sustain themselves at this time,” says Ambeek Khemka, group president, Vishal Retail.

Mr Pani adds that developers have now reduced their rents to values that businesses can afford. “Stores have been right-sized to streamline with the current scenario. The focus has now been taken off geographical expansion and instead been trained on the strengthening of market presence on established and familiar turfs.” Agrees Roy of In-store: “Retailers are now becoming more accountable beyond fancy interiors and air-conditioning to the real issues such as back-end services and shop-floor skills.”

Sunday ET and Cushman & Wakefield tracked more than 15 retail markets across the country where rentals have gone down in the last couple of quarters. The prominent ones that witnessed retail rental correction are Goregaon and Linking Road in Mumbai which recorded a correction of 42% Q-o-Q in Q1 2009 followed by Kankaria Lake in Ahmedabad which saw a correction of 36% over the previous quarter. NTR Gardens in Hyderabad also witnessed high rate of correction in rental values at 29% over the previous quarter. In the NCR market, Khan Market saw a dip of 10% and South Extension registered a dip of more than 20%.

Says Rajneesh Mahajan, ED, retail services Cushman & Wakefield: ”While most of the established retail micro markets had reached high price points by the beginning of 2008, majority of them witnessed substantial corrections by the fourth quarter of 2008. In the first quarter of 2009, there were further signs of softening and many markets are witnessing a major price correction. In 2008, there was a mall supply shortage of 54% from the anticipated supply essentially contributed by slow retail demand and lack of funds.”

Not every retailer, however, will root for ‘value retail’ even in the present context. B S Nagesh, customer care associate and MD, Shoppers’ Stop feels that India has gone a little too aggressive on the value notion for consumers. He advocates a positive environment and cheer instead. “The customer is also looking at cheer to get away from all the doom. The environment needs to be positive. For instance, we have makeovers in our cosmetic section. We are also having a desi festival in our ethnic wear section. The whole idea has to be of creating a shopping experience for the consumer. Our primary focus right now is to maintain our retail sales level and cut costs,” he says.

And while it’s time for all major players to start pulling up their socks, the retail sector still has enough reason to cheer. A CB Richard Ellis report, which maps the global footprint of 280 of the world’s top retailers across 67 countries, puts India at 39th position on a list of most preferred destinations to establish operations.

Source : http://economictimes.indiatimes.com/Features/The-Sunday-ET/Special-Report/Indian-developers-retailers-address-new-market-realities/articleshow/4477739.cms?curpg=2

Rs 25,000 crore coming to investors soon

NEW DELHI: Investors may soon have Rs 25,000 crore in hand to buy shares, real estate and gold, thanks to the redemption of fixed maturity plans MF Investments

(FMPs), a kind of close-ended mutual funds, in the first quarter of the current fiscal.

As positive rallies of the market during the last one month have buoyed the investors’ sentiment, a major chunk of the money being released from the redemption of FMPs between April-June, 2009, would find its way into the Street. And that is the view shared by an entire line up of mutual fund CEOs, analysts, brokers and consultancy companies, which SundayET spoke to.

According to the data provided by Value Research India, a firm tracking mutual funds in India, more than Rs 10,000 crore is going to come into the hands of investors in the next two months, which is currently locked up in the FMPs. Also, Rs 16,492 crore worth of FMPs had already matured in April alone.

Vikas Arora, associate director at KPMG India, feels that with equity market going up and positive signals coming in, investors with the FMP proceeds would enter the market. There is, however, a catch. He says that the outcome of elections will decide the final way forward.

Aseem Dhru, MD & CEO of HDFC Securities agrees. According to Mr Dhru, due to general decrease in interest rate and simultaneous boost in the performance of the equity markets, investors are expected to park a major chunk of their money into the equity market.

So while investors were shifting towards the debt market during 2008, due to the poor performance of the equity market, they have now started looking at equities. During the last couple of months, equity markets have started picking up. In April, the Sensex gave a return of more than 15%, which is much higher than an absolute indicative return of 10-12% from FMPs with maturity period of around one year.

Motilal Oswal, CMD of Motilal Oswal Fin Services, says a part of FMP redemption money would definitely be allocated to the equity market. “Investors were apprehensive to put money in the equity market last year, and rather invested it in the debt market. Now things have changed,” he said. Sudip Bandyopadhyay, MD of Reliance Money, feels around 20-25% of this may go into equity immediately.

FIIs too take shine

For the rest, investors may park the money into safe instruments till there is more clarity in terms of political stability, he added.

Better-than-expected results in Q4 have also buttressed the investors’ confidence. Most companies have posted better results in comparison to the previous quarter. Amitabh Chakraborty, president, equity at Religare Securities, said, “The stimulus package is working and results in the coming quarters will be even better. The valuations are still attractive and I am also expecting a stable government. This is the time when one should increase the beta of the portfolio, which means one should be a little aggressive in their investment strategy,” added Mr Chakraborty.

In fact, foreign institutional investors (FIIs) have also started pumping money into the market. Interestingly, FIIs are more confident of equity than debt. Since the beginning of March, these investors have invested Rs 7,038 crore in equities, though they sold assets worth Rs 3,930 crore in the debt segment.

Equities may not be the only resort for investors. Real estate can also attract some amount of this money. According to Anup Bagchi, ED at ICICI Securities, this money was idle and while a large part of it may go to real estate, the rest could go to equity. According to Kaustuv Roy, ED of Cushman & Wakefield, a real estate consultancy firm, most of the money may go into equity, however, some of the large ticket investors may consider allocating a part of the portfolio into the real estate.

Nevertheless, there are a few experts who do not buy the theory altogether. Some of them believe that a part of the money that came into the FMPs last year was from conservative investors, and hence that money would go to other debt instruments. According to Rajiv Deep Bajaj, vice chairman & MD of Bajaj Capital, there are a lot of uncertainties around and hence, a part of the amount may go into debt schemes only. However, it can not be ruled out that a part of the money will also find its way to equity market.”

So, here’s a strong case of a huge cash flow from conservative pockets to risky bets.

Source : http://economictimes.indiatimes.com/MF-News/25000-crore-coming-to-investors-soon/articleshow/4476912.cms

Leasing their way out of the gloom

With the economic slowdown affecting every industry, those in Bangalore are looking at ways to mitigate the impact and also utilise their resources, especially real estate, to bring in some revenues. Real-estate spaces left vacant by small garment factories in some of the city’s industrial belts are now being leased out to various other players — from manufacturing units to paper merchants and commodity traders.

Thus, spaces are available in areas such as Peenya, Whitefield, Yelahanka, Hebbal and Yeshwantpur for lease at Rs 12-20 per sq.ft for 5-9 years with a lock-in period of 3-7 years, says Mr Raja Sujith, Partner, Majmudar and Co, a law firm involved in such property deals.

Till recently, there were around 250 garment factories operating in the Yeshwantpur-Peenya area extending up to Nelamangala. Now with recession setting in, around 100 small factories and 15 bigger ones have shut shop and surrendered their properties to the landlords, says Mr Rajendra Hinduja, Senior Vice-Chairman, Apparel Export Promotion Council.

The landlords, in turn, are leasing out their properties to commodity traders, paper merchants and manufacturing units. In some cases, the lessors could be the factory owners themselves. So what was once a textile belt is now giving way to warehouse and storage facilities. Although unfortunate, it has happened out of sheer necessity, rues Mr Hinduja.

But this hasn’t yet become a significant trend, says Mr Sandeep Trivedi, National Head-Development Consultancy, Cushman & Wakefield, a real estate services firm. “Currently there are couple of such options available in Jigani, though no transactions have taken place. One cannot, however, negate possibilities of such transactions in the coming months,” he adds.

Mr Sunil K. Vasant, who runs businesses both in leather manufacturing and real estate development, points out that some tanneries have shut down, making way for some educational institutions and residential developments. However, these have not been leased or rented out. But larger spaces like garment factories could be available for lease/rentals or outright sales in the near future he says, since the garment sector is expected to face tougher times in the coming months. “The bad times are far from over; they have just started now. Bigger companies might go down. The bubble should burst any time,” he adds.

Parking spaces in malls

This is just one aspect of the spectrum. Other large spaces like malls, which are seeing falling footfalls, are facing an unprecedented problem of unoccupied car park space. Some of them in Bangalore are experiencing just 20-30 per cent occupation on weekdays. Mall owners are now toying with the idea of renting out parking space to corporate offices located in the vicinity.

Mr B. G. Uday, Managing Director, Euromar Garuda Resorts that operates the Garuda Malls in Bangalore, says he is willing to look at other options to earn car park revenues. The Garuda Mall in the Central Business District, for instance, has about 1,200 car park slots with hardly 30 per cent occupation. “On weekends, we have about 70-80 per cent occupation,” he says. In his opinion, the government can stop parking on busy roads like MG Road and Brigade Road, and shoppers can instead park at nearby malls. “The Corporation can provide shuttle services to these areas, which would not cost much. This would de-clog busy roads, especially with the construction of the Metro rail system.”

Demand for warehousing

With increasing demand (from both MNCs and Indian companies) and growing requirements, the logistics industry has expanded its bouquet of services to now include warehouse-related activities as well, says a report from Cushman & Wakefield.

“Growing at the rate of 35-40 per cent per annum, the warehousing industry is capturing the imagination of various logistics players. Warehousing activities account for about 20 per cent of the total Indian logistics industry and offer tremendous growth potential. This segment is estimated to grow from $20 billion in 2007-08 to about $55 billion by 2010-11. With such forecasts, any large space available for these facilities would mean an opportunity for real estate owners.

Source : http://www.thehindubusinessline.com/iw/2009/05/03/stories/2009050350661500.htm

Hotel Industry Expansion Plans Fall Flat

The hospitality spread laid out for the year ahead was cooked up for the most part, or so this downturn is set to show. Going by industry estimates, nearly 600 new hotels were planned or under various stages of development across the country, for commissioning over the next year or so. However, the number that actually materialises might at best be half of that, it seems now. While plans for 150 new hotel projects have been completely dropped, as many as 18,000 guestrooms across 150 other hotels are up for sale. These properties are under various stage of construction, including projects that are about to start, half-built, cold shells and finished.

“Around 150 hotel projects have just disappeared because of tall claims made primarily by the real estate companies. Then there are another 150 properties which are on the block. So realistically speaking, just around 300 new hotels are actually being built,” Manav Thadani, managing director of hospitality consulting firm HVS International-India, told DNA. Experts say companies which had entered the business to make a quick buck are the ones exiting the business, as they are feeling huge financial pressure in their core business.

In August last year, HVS had released its Trends and Opportunities report, which analysed the supply pipeline for different India cities. The report said approximately 1,14,000 rooms were being planned across the country, of which 58% would actually materialise — that works out to 66,120 rooms (58% of 114,000). “We have gone back and done that survey all over again and the figures are startling,” said Thadani. The new numbers, to be unveiled today at the two-day Hotel Investment Conference South Asia, reveal a different scenario. According to them, around 84,000 rooms are being planned, of which 61% or 51,240 rooms might materialise. That’s a drop of 14,880 rooms, or 22.5%, from the estimate made last year.

Officials of other hospitality consulting firms, including Knight Frank India, Mahajan & Aibara, Cushman & Wakefield, support the HVS survey findings. “There are a lot more transactions happening these days. In fact, we are working on multiple asset portfolios on an exclusive basis for the Indian market,” said one of the consultants.

Source : http://www.indianrealtynews.com/hotel-industry/hotel-industry-expansion-plans-fall-flat.html

Greater Noida records 8th highest rental growth in the world: Report

Greater Noida in the National Capital Region (NCR) saw the 8th highest annual growth in rental values in the world in December 2008, according to real estate consultant, Cushman & Wakefield’s report Industrial Spaces Across The world 2009. NCR’s Greater Noida area, which has been developed to attract medium to large scale industries, recorded an annual growth of 25 per cent in industrial rental values in 2008. The location is particularly promoted for campus development and has in recent past not received much supply.

Peenya Industrial area and Bommasandra Industrial Areas in Bangalore recorded the 12th and the 16th highest annual growth in rental values respectively, the report added. Peenya Industrial Area (19 per cent) and Bommasandra Industrial Area (11per cent) around Bangalore also recorded healthy growth in rental values in 2008. These established industrial locations around the IT city of Bangalore witnessed demand from small and medium scale industries.

Mumbai’s Thane – Turbhe Creek, which had recorded the highest growth last year and had finished on the 26th position as the most expensive industrial locations , slipped eleven places to settle on the 37th spot, said the report.

Meanwhile, London’s Heathrow retained its top position in the report as the most expensive industrial location for the eighteth year. Tokyo and Dublin switch places to settle at 2nd and third positions respectively.

According to the report, industrial areas in India saw the highest growth in rental values amongst the locations in Asia Pacific. Greater Noida , Peenya Industrial Area, Bommasundra Industrial Estate and Jigani Industrial took the top 4 positions in the Asia Pacific region.

Harleen Oberoi, executive director, industrial services, Cushman & Wakefield, said “Traditionally expensive industrial locations like Mumbai (Thane Turbhe Creek), Pune (Talegaon, Chakan, Ranjangaon), Chennai (Sriperumbudur), have seen a slowdown due to high price points and large scale development in recent years.”

‘‘Slowdown in the economy has affected the general uptake of industrial spaces especially by large multi-national corporations who were in the past few years keenly looking at India. However, the demand from indigineous industrial sector, including medium to small operations, has not decreased that rapidly and therefore new locations and locations providing smaller industrial sheds continued to grow in 2008,“ he further added.

— IndiaRetailing Bureau

Source : http://www.indiaretailing.com/news.aspx?Id=3500

See realty turnaround by 2010 end: Cushman & Wakefield

The real estate sector continues to remain under duress. While there may be sporadic signs of a turnaround with on-ground residential sales being reported, is the beleaguered sector out of the woods yet?

Responding to the query, Executive Director of Cushman & Wakefield, Kaustuv Roy, a real estate consultancy, said that even as real estate booms and busts were cyclical in nature, “we expect this downward trend to continue till then end of this year or so. Then, as prices stabilise by the year end or 2010 start, things would have recovered by end of 2010,” he said. He, however, added, “A lot depends on how the economic changes are and that is when it will kick-start corporates to actually start taking up space, giving job confidence to employees and subsequently employees getting back into purchasing, having the ability and the confidence to go in and make an investment with loans.”

Research Analyst – Infra & Realty, Angel Broking, Sailesh Kanani, said the house view on the sector was still negative because of liquidity concerns. “There has been a dramatic change in the business dynamics by itself because of risk aversion by end users. Now, developers have to fund their own projects through their internal accrual. That we think is going to impact growth, which would see only large companies going for expansion and sustaining and coming out of this,” he said. “So, there is going to be a cut on the expansion spree, growth would be curtailed and therefore the view on the sector as such is negative at least for the next four to six quarters.”

Here is a verbatim transcript of Kastuv Roy and Sailesh Kanani’s exclusive interview on CNBC-TV18. Also watch the accompanying video.

Q: What are the telltale signs you are getting from the various cities? Are you seeing any improvement in the housing sector and are you seeing any fall in the fortunes in the commercial sector or is the bottom still to reach?

Roy: In the residential segment, developers who have launched affordable housing projects in the last one month have been able to get some amount of success while developers who have reduced pricing are still to find end-users willing to bite. I guess the expectation is that the prices will fall a bit further and that’s the point of time when they’ll pick up the projects.

On the commercial side, demand is pretty much down quite a bit and it has been sliding since quarter four last year. We expect it to be subdued. We might see some movements in the bigger cities of Mumbai, Delhi and Bangalore but the smaller cities are definitely going to through a bit of a downturn over there.

Q: You must have certainly gone through the trajectory of the previous fall as well in real estate prices especially in Mumbai. Starting perhaps from 1996 and thereabouts and we didn’t see them recover up until 2003-04 and if I remember right what peaked off in 1995 actually bottomed out as late as 2001-02. I may be wrong maybe a year or two, you should correct me on the detail, but how long do you think this downturn can go and how much further in terms of percentage prices first for the housing and then for the commercial?

Roy: What we saw is actually if we see the run from 1991 onwards — 1991 to 1995 — was a bull run over there and we saw prices go up by at least 300 per cent–400 per cent and then it fell down from 1996 to I would say till 1998 or 1999 when it was a continuous fall and after that it kind of steadied out and then picked up in 2001-02 or so.

Over here, what we found is that in terms of the cyclical nature: yes, it is cyclical but the tenure is getting shorter. Over the last two years, where we saw the bull run from 2006 to 2007 and part of 2008, we expect this downward trend to continue till then end of this year or so. So we are expecting maybe one year downward trend and then possibly as prices stabilize by the year end or 2010 start, things would have recovered by end of 2010.

Q: When we were talking about 2000, most of the investors were individual investors buying into 30-40 per cent returns. This is a very different ballgame. You’ve got these FIIs who’ve invested significant amounts into projects, the FIIs and institutional investors themselves have wrapped up. How do you look at this situation and I am not talking so much about demand because affordable housing can only do so much? I am talking about liquidity. These are massive projects that are just pretty much in the middle. What happens here because there is a lot of un-built inventory or not completed inventory? How much is it, and how much pressure can it bring in the next two-three years?

Roy: You’ve hit the nail on the head because there is a huge quantum of: one, completed inventory, which is not picked up and second, what is in the pipeline — in the office sector or residential or in retail sector.

A lot depends on how the economic changes are and that is when it will kick-start corporates to actually start taking up space, giving job confidence to employees and subsequently employees getting back into purchasing, having the ability and the confidence to go in and make an investment with loans.

Q: My question relates to the kind of return to the old prices, which is for some of the big guys like HDIL in Mumbai, Sobha Developers down in Bangalore, Unitech, DLF, perhaps Puravankara. What is the outlook for these guys because there are massive landbanks, even more massive unfinished projects? Where is the money going to come from, when are these going to get over and what is the impact on the stock price?

Kanani: Our view on the sector as such is negative because the reason, as you said, is on the liquidity front. What we are witnessing is that there has been a dramatic change in the business dynamics by itself because of risk aversion by end users. Now developers have to fund their own projects through their internal accrual. That we think is going to impact growth, which would see only large companies going for expansion and sustaining and coming out of this.

So, there is going to be a cut on the expansion spree, growth would be curtailed and therefore the view on the sector as such is negative at least for the next four to six quarters.

Q: Is there any relative outperformer or underperformer in this entire list? What is Angel’s view on the bunch of listed real estate stocks?

Kanani: As a house, we are quite negative on the real estate sector because of the reasons mentioned. Apart from that, what factors we are looking out for is that the interest rates, which were in the 7-8 per cent range in 2002 which brought the boom in the real estate sector. They are still high and in the 8-9 per cent range right now.

Apart from that, affordability is still high because if you take an average housing loan, the ticket size is around Rs 15 lakh for the largest home financier, HDFC. Prices for 2 bedroom-hall-kitchen (BHK) flats are in the Rs 45-80 lakh range. So there is a disconnect there.

What we are seeing is that overall demand is going to be down. Further price reductions have to be done by developers but they are for projects that are under construction.

Q: I wanted some details from you. When you talk about real estate, the number of sectors and the size of the country makes the whole discussion very fuzzy. So let us stick to one area, say Lower Parel [in Mumbai]. We have seen a lot of retail of commercial development in this area. Give us a perspective of where rents were say at their peak, where rents are now, where do you see them going and when is the recovery in some numerical terms?

Roy: If one were to take last one year — from 2008 onwards — we saw rents actually go up to around Rs 350-400 per square foot per month. What we are of course finding today is that the rents in the same places or the same developments have come down to say between Rs 250-280 per square foot per month and some of the projects, which are under construction, we are seeing rentals in the range of Rs 150-200 per square foot per month, which is the typical range. I think there will be further softening in the next six months or so.

Q: From an institutional perspective, private-equity, real estate funds, most of these gung-ho guys have walked off. The only ones interested are in affordable projects. The yields they were getting used to be 25-40 per cent. That is what they promised their investors. What is the real estate yield now, especially if you were looking at ‘REITable’ kind of a project where you are going to lease it out and going to get X amount? What is the vacancy rate and perhaps if you could shed some light on two cities’ – Mumbai and Bangalore — commercial retail?

Roy: In terms of yields, they should be around 15-16 per cent or so though the expectation is much higher but at the same time, given developers are looking at 12-13 per cent, it will land up somewhere around 15-16 per cent. Now if you were to look at vacancy rates in Mumbai in the commercial sector, they have actually crossed around 10-12 per cent or so. Even with smaller segments like Nariman Point, vacancy rates have gone up to 16-17 per cent.

Source : http://ibnlive.in.com/news/see-realty-turnaround-by-2010-end-cushman–wakefield/87882-7-p2.html

Timely Completion of Projects- Builders New Mantra to Encourage Buyers

When it comes to selling residential projects in a downturn, the promise of ‘timely completion of project’ has become as good a bait, as any other — affordability, complementary club membership or swimming pools. With the slowdown in sales and cash crunch delaying real estate projects, some builders have started pitching ‘on time completion’ as their Unique Selling Proposition — a commitment that until recently was taken for granted. According to Mr Sanjay Verma, Executive Managing Director (South Asia), Cushman & Wakefield, this new positioning is a response to restore consumer confidence. “The biggest fear of a real estate buyer today is protection of his capital invested into a project, and its completion,” he says.

A case in point is the recent marketing campaign unleashed by Crossings Republik which declares that despite the “tough times” and “slump in global economy”, its project has been running on schedule. Another ad campaign, by Purvanchal Construction Works, talks of a commitment to “completion and possession on time”. Industry experts feel that when the market was ‘euphoric’, completing projects on time was a given. Now with funds drying up and projects getting stalled, real estate buyers are already feeling the heat — for some possession has been delayed by over one year. Builders are now hoping to differentiate themselves from the rest, by meeting project deadlines.

“In the case of Crossings Republik, we felt that some people had raised doubts on whether the project timelines could be maintained in the current market scenario. We wanted to reassure them that the first phase of 2,000 apartments is on track and would be delivered this year,” explains Mr Sanjeev Srivastva, Managing Director of ASSOTECH, a real estate company which has a project in the mega township of Crossings Republik.

Mr Pankaj Bajaj, Managing Director of Eldeco Group, says, “The past bull run in the property market had seen entry of many non-serious players, but the market has now realised that fly-by-night operators are unlikely to deliver. At the same time, the serious players are making a conscious attempt to differentiate themselves from others. They are reiterating their commitment to adhere to time lines.”

Source : http://www.indianrealtynews.com/real-estate-developers/timely-completion-of-projects-builders-new-mantra-to-encourage-buyers.html

Malls morph into offices

As major retailers slam brakes on heady expansion plans opting, instead, for selective rollouts, real-estate developers — faced with a mall oversupply situation — are switching gears and converting retail projects into commercial office space.

“There is a clear oversupply situation in the market today, when it comes to malls. Retailers are facing a tough time, given the liquidity pressure arising from slowing sales, and have started closing stores that are economically unviable and are becoming choosy about taking up new space.

Project conversion

“Also, in certain cases, the mall locations were not well-thought-out and the catchment areas, weak. As a result there have been no takers for such locations,” says DTZ Director, Mr Rajeev Bairathi, adding that demand-supply imbalance in retail space was prompting developers to go for project conversion after seeking required approvals, based on ‘zoning’.

JMD Group, last year, altered its plans for a mall spread over 3.5 lakh sq.ft in Gurgaon and turned in into ‘Corporate Suites’, a sprawling office space. “Malls are already in excess supply. We also felt that the maintenance overheads were working out to be higher for us, in the case of retail space. But in an office space, these are generally taken care of by the corporate tenant,” says Mr Sunil Bedi, CMD, JMD Group.

That aside, while the retail demand has tanked in certain cities, the office market continues to attract ‘takers’, says Mr Brijesh Bhanote, Vice-President, Sales and Marketing, Vipul Ltd, a company which converted its project ‘Agora’ into office space sometime back. “We anticipated the oversupply situation nearly 18 months back, and accordingly decided to change ‘Agora’ into office space,” says Mr Bhanote.

According to Cushman & Wakefield, the actual mall supply in major cities in 2008 stood at only 9.7 million sq.ft, almost 54 per cent lower than the initial supply projection of 20.8 million sq.ft for the year. The scale-back in supply has been attributed to multiple reasons, one of them being developers’ acknowledgement of the current market reality in retail sector.”

“We are aware of 5-7 cases of project conversion. Retail space is being converted not only into office buildings, but also into hotel projects. This trend may continue in some markets for the coming quarters,” says Mr Rajneesh Mahajan, Executive Director of Retail Services, Cushman & Wakefield.

Natural choice

Market watchers say that for realtors looking at alternate uses for space initially earmarked for retail purposes, office is the natural choice. “In the current environment where consumer sentiments are weak and footfalls have slumped, retail occupants are shying away from committing high or fixed rentals and are looking to pay on the basis of performance of the store. Office rentals, on the other hand, are not based on revenue-share model,” they point out.

In certain cases, instead of a full makeover, developers are opting for the middle ground — that is, retaining the space on the ground floor for retail usage, while transforming the rest of the building into office space. Conversion to office, however, implies a hit on rentals; real estate development cost for retail space is higher as is the risk factor, hence margins tend to be better in case of retail projects.

“While the rentals vary from market to market, on an average the differential comes to 10-20 per cent. But that’s a chance that builders are taking, as they may not get full retail occupancy for the project. By turning it into office or hotel project, the developer ends up utilising the space. So the loss is only notional,” says Mr Mahajan of Cushman & Wakefield.

Common specifications

Retail-to-office conversion becomes a tad easier as certain specifications (such as the need for ample parking space), remain common to both. “Modular retail enclosures can be knocked-off to convert the area into free open space for office use,” say market observers.

However, Mr Raghav Gupta, President, Technopak, feels that while switching to an office space may be the “closest compromise” for developers who are stranded with an oversupply it brings its own set of challenges. “I believe that the retail space design is not optimally suited for office use. Also, the location is not optimal, as malls are generally conceptualised in high-traffic density areas,” adds Mr Gupta.

Source : http://www.thehindubusinessline.com/iw/2009/02/08/stories/2009020850791500.htm

Developers Unable to Fulfill Retail Space Target

DLF, Parsvnath and other real estate developers have lagged behind by 54 per cent in their target to open retail space even as retailers’ vacancy climbed to 16 per cent in 2008, according to a study. Cash-strapped real estate developers failed to deliver 11 million sq ft of retail space in 2008, according to a study released by Cushman & Wakefield. Out of the proposed 74 malls in key eight cities at the beginning of 2008, only 34 were delivered through the year, the study showed. Developers in the National Capital Region (NCR) lagged the most with a supply of 4.7 million sq ft compared with the earlier target of 7.1 million sq ft. Developers may continue to restrict their supply, or go slow on retail space by a similar amount in 2009 across key major cities, the study showed.

“For any developer, the vacancy level should not cross over 5 per cent. The vacancy level of 16 per cent suggests that most of the malls across India are finding it difficult to manage their operational cost,” said Rajneesh Mahajan, director of retail services at Cushman & Wakefield. The reason for the shortfall was the mismatch between the potential and actual occupancy. The Indian organised retail sector grew at 25 per cent in 2007. Anticipating the growth of retail sector at above 35 per cent in the coming years, developers had announced big retail projects. However, owing to economic slowdown, the growth of the retail sector has come down to 15 per cent in 2008, resulting in developers deferring their projects for 12-24 months. “From the projected supply of 20.8 million sq ft space in the first quarter of 2008, we will see a spill over of about ten million sq ft development in 2009-10. Lack of funds leading to construction delays and cautious expansion by retailers have resulted in slow absorption of retail space in malls,” said Mahajan.

Owing to high vacancy rates, rentals for retail space have come down between 20 and 40 per cent and a further cut of 10-15 per cent is expected, according to Mahajan. “It is noteworthy that the high streets of Colaba Causeway, Linking Road in Mumbai and South Extension and Greater Kailash in Delhi, which had seen a 100-156 per cent rental appreciation in the first quarter of 2008, witnessed rental drops of almost 40 per cent over the last six months,” said Mahajan. The correction in 2009 would be mainly in non-metros as the ripple effect of the rental correction will reach the tier-II and III cities, said Mahajan.

Interestingly, developers were forced to convert their retail space into office space due to high vacancy. Delhi-based Parsvnath Developers has recently converted one of its metro malls in Shahadra into office space. As the operational cost of the retailers became unviable due to high rentals and lower sales, they began to work on sustaining business through innovative revenue models and retail formats. “A growing trend has seen the consolidation by large retail players of their multiple retail formats under a single roof,” said Mahanjan. According to Cushman & Wakefield, minimum guarantee and revenue sharing models will make for at least a third of all retail deals in the long term. According to Mahajan, most of the deferred projects are under construction and the developers will have to face increased cost overruns for completing these projects.

Source : http://www.indianrealtynews.com/retail-market/developers-unable-to-fulfill-retail-space-target.html

No Takers for Commercial Property

The downturn in the global economy has led to increasing vacant office spaces-something that was unheard of, till a few months ago. According to reports, empty offices in New York City, Chicago and Los Angeles have already exceeded 10%. And Mumbai, too, is following a similar path. “It’s the same story here, and it has to do with the global meltdown,’’ said a CEO of a leading city-based real estate company, who did not wish to be identified. Real estate observers say that the city’s premier commercial business district of Nariman Point has been witnessing a growing number of empty offices. It is learnt that for the first time in several years, there is space available in grade one buildings in Nariman Point. In fact, the business hub has seen vacancy levels in grade one buildings rise to 11%, said sources tracking the rental market. Till recently, the vacancy level was barely 2% in this area.

According to a report by the US-based Urban Land Institute and PricewaterhouseCoopers, commercial real estate in America faces its worst year since the “wrenching 1991-1992 industry depression’’. The report predicted 15-20% losses in real estate values, from the mid-2007 peak, and quoted real estate industry experts expecting financial and real estate markets in the US to bottom in 2009, and then flounder for much of 2010. Since the last quarter of 2008, all the prime commercial business districts such as Nariman Point, Bandra-Kurla Complex and Parel have been affected. Corporates and MNCs are not renewing their lease agreements and are shifting out. But even as the demand slackens, at least 5 million sq ft of office space is expected to hit the market this year in the mill land enclave of Lower Parel. Sources say that the vacancy levels, which are in the region of 5%, could increase in the coming months. In Parel, several corporates have renegotiated their lease agreements by hammering the price down by as much as 40% to 50%.

Kaustuv Roy, director Transaction Services of global property consultancy firm, Cushman & Wakefield, said vacancy levels have been inching upwards largely due to a change in corporates’ business strategies as visible in the last six to nine months. The firm’s research shows a 6.4% overall vacancy in Mumbai. “Many corporates are relocating from high cost to lower cost locations, thus ensuring locations such as Worli seeing a marginal increase in the vacancy levels. The demand side has been very slow and cautious. This has slowed down the rate of absorption of office space over the last year,’’ he said.

Mumbai received almost 9.5 million sq ft of office space, leading into an excess supply situation in certain locations. Kaustav said this trend will continue in the first few months of 2009 as a large supply of 16 million sq ft is expected, most of which is due in the first six months. Knight Frank India chairman Pranay Vakil said that up to 80% of the office market is driven by the IT-ITES industry, which has now considerably slowed down. “It is no surprise that vacancy levels will go up in this segment as most of the stock was created in anticipation of the demand. In Parel, for instance, offices are getting created but the demand is not there,’’ he said.

In the US, the New York Times reported that in Chicago, demand has dried up just as office towers are nearing completion. Vacancies are also rising in Houston and Dallas, which had been “shielded from the economic downturn until recently by skyrocketing oil prices and expanding energy businesses,’’ said the NYT report. Anuj Puri, chairman and country head of Jones Lang Laselle Megraj, said the only connection between these cities is the meltdown of financial markets. “It is not just about New York and Mumbai. This is a worldwide phenomena. Some of the office space in all major cities will be freed by big investment banks, which have disappeared. Nothing will dramatically change in 09, from what we have seen in the last quarter of 08,’’ he said.

Commercial lease rental market has seen rents dropping on an average of 20% to 25% and going up to 50% in certain locations like the erstwhile mill land enclave in central Mumbai Lease rentals in Nariman Point are currently hovering around Rs 375-Rs 400 per sq ft a month in premium buildings compared to Rs 475-Rs 500 per sq ft a month nine months ago. Rentals in grade C buildings hardly command Rs 250 a sq ft. In Parel, office space which was being leased out at the rate of Rs 300 to Rs 350 a sq ft a month four months ago, is now down to Rs 150-Rs 200 a sq ft a month. In the BKC, too, there has been a drop from an average of Rs 400 a sq ft six to nine months ago to the current Rs 275-Rs 300 a sq ft.

Source : http://www.indianrealtynews.com/real-estate-india/no-takers-for-commercial-property.html

Oversupply in commercial real estate may continue in 2009

The over-supply scenario that 2008 had witnessed in the commercial real estate space could well continue in 2009, says the annual year-end report by Cushman & Wakefield, real estate services firm.

While some companies, which had committed to larger spaces earlier, have scaled down their absorption as a prudent step to mitigate the cost on real estate others, which had taken up space based on anticipated expansion plans, are considering sub-leasing the excess space.

“With this trend continuing in the coming year, coupled with the additional proposed supply and the already existing increasing vacancy levels, the over supply situation is likely to see no early respite. Hence, rental corrections across micro-markets seem probable over the short term,” says Mr Kaustuv Roy, Director of Tenant Strategies and Solutions at Cushman & Wake-field.

The south, central and select suburban locations of Mumbai witnessed rental correction over the year and more recently, Thane Belapur Road (IT) and Malad (non-IT) too recorded a southward movement. Vashi and the non IT-projects in Thane Belapur Road recorded a stable trend. Central and Suburban locations of Lower Parel, Bandra-Kurla, Andheri and Powai are likely to witness a further fall in rentals with all other major markets expected to stabilise.

In Bangalore, the rental market continued to strengthen recording 4-9 per cent annual appreciation in the peripheral locations and nearly 18 per cent year-on-year growth in the CBD and off-CBD regions. Outer Ring Road and the suburban areas are likely to strengthen further in the coming months, whereas ITPB, Whitefield and Electronics City are expected to stabilise, says the report.

Chennai witnessed a drop of 5-10 per cent in rentals in the CBD and off-CBD locations of T. Nagar, Alwarpet, Anna Salai and Radhakrishnan Salai, while the suburban and peripheral regions witnessed a 7-9 per cent drop. Rajiv Gandhi Salai in the peripheries is the only market in the city that has begun to show signs of stabilisation and is likely to continue with the trend as all other major micro markets are anticipated to record a further fall in rentals, adds the report.

Source : http://propertybytes.indiaproperty.com/?p=3132

Oversupply in Commercial Real Estate

The over-supply scenario that 2008 had witnessed in the commercial real estate space could well continue in 2009, says the annual year-end report by Cushman & Wakefield, real estate services firm. While some companies, which had committed to larger spaces earlier, have scaled down their absorption as a prudent step to mitigate the cost on real estate others, which had taken up space based on anticipated expansion plans, are considering sub-leasing the excess space.

“With this trend continuing in the coming year, coupled with the additional proposed supply and the already existing increasing vacancy levels, the over supply situation is likely to see no early respite. Hence, rental corrections across micro-markets seem probable over the short term,” says Kaustuv Roy, Director of Tenant Strategies and Solutions at Cushman & Wakefield. The south, central and select suburban locations of Mumbai witnessed rental correction over the year and more recently, Thane Belapur Road (IT) and Malad (non-IT) too recorded a southward movement. Vashi and the non IT-projects in Thane Belapur Road recorded a stable trend. Central and Suburban locations of Lower Parel, Bandra-Kurla, Andheri and Powai are likely to witness a further fall in rentals with all other major markets expected to stabilise.

In Bangalore, the rental market continued to strengthen recording 4-9 per cent annual appreciation in the peripheral locations and nearly 18 per cent year-on-year growth in the CBD and off-CBD regions. Outer Ring Road and the suburban areas are likely to strengthen further in the coming months, whereas ITPB, Whitefield and Electronics City are expected to stabilise, says the report. Chennai witnessed a drop of 5-10 per cent in rentals in the in the CBD and off-CBD locations of T. Nagar, Alwarpet, Anna Salai and Radhakrishnan Salai, while the suburban and peripheral regions witnessed a 7-9 per cent drop.

Rajiv Gandhi Salai in the peripheries is the only market in the city that has begun to show signs of stabilisation and is likely to continue with the trend as all other major micro markets are anticipated to record a further fall in rentals, adds the report. In Hyderabad, the CBD, off-CBD regions such as Banjara Hills, Begumpet, Raj Bhavan Road, SP Road and the peripheral regions of Pocharam and Shamshabad recorded a 6-19 per cent annual appreciation in rentals, while the suburban regions of Madhapur, Gachibowli-Nanakramguda, Manikonda and Raidurga witnessed a 5 per cent fall. Banjara Hills, Jubilee Hills, Bachupally and Uppal have also recorded a fall in rental values.

Rentals in the National Capital Region dropped between 1 and 13 per cent from last year across micro markets, with Noida (IT SEZ) recording about 32 per cent annual depreciation. Over the last quarter, rentals recorded 6-16 per cent dip with the likelihood of a further correction in the months to come. Though rentals in Pune seem to have appreciated over the last year, the last two quarters recorded a 4-10 per cent dip across locations with the exception of Sholapur Road and Hinjewadi in the peripheries that remained stable and are expected to continue remaining so. All other major micro markets in the city are likely to witness a fall in rentals over the short term.

Source : http://www.indianrealtynews.com/real-estate-trends/oversupply-in-commercial-real-estate.html

HNIs still go for luxury homes…

NEW DELHI: India’s super rich just can’t resist falling in love with luxury houses. Even as slowdown mania grips the nation, the demand for dazzling US crisis & Indian realty | Home gadgets
luxury residential properties in India is showing no signs of slackening.

During the last six months, the home loans in the above Rs 75 lakh segment witnessed an average growth of 15-20% thanks to the young high networth individual (HNI) population liking for the high-end property. In fact, with real estate developers in a money tight situation, they are offering discounts to the tune of 10-15% for the properties above Rs 1 crore and above. With the buyer conversion rate (BCR) significantly high in this segment, the realty players are counting on luxe home buyers as their best bet to bail them out of the current cash crunch.

Says Ashish Mehrotra, business manager – mortgages, Citibank India; “Home loans in more than Rs 75 lakh segment has seen significant growth in the last two years, especially in tier A cities where property prices have steadily increased. Over the last few months, though the market has been sluggish, demand in this segment has not weakened.
We have seen a 15- 20% increase in the share of these loans in the last six months.”

Super-luxury residential complexes are coming with quality construction and world class amenities that showcase an aspirational living style to the urban upper middle class. The amenities include swimming pools, gyms and jacuzzi, themed-landscaped gardens, water bodies and meditation centres.

With HNIs usually rated high on credit ratings, bankers say the loan approval process is generally easier and done in double quick time. The clientele generally includes non-resident Indians, and senior level executives in MNCs. In fact, due to higher returns on investment, a number of developers have now switched on to luxury housing segment, especially in bigger markets such as Mumbai and Delhi National Capital Region (NCR).

Not to be left behind are Hyderabad, Bangalore, Chennai, Pune where number of luxury residential projects are under construction. Another thing that has attracted more demand for these apartments is the aspirational living and moving to better quality homes built-on international standards offering state-of-the-art modern amenities.

Locations throughout Mumbai, for instance, where demands for high-end options far exceed supply, have witnessed significant appreciation in property prices ranging from 20% to 30% over the last 12 to 15 months, according to Cushman & Wakefield, a real estate services firm. At the high end, large apartments used to be about 3,000 sq ft. Today, that space is 5,000 to 7,000-sq ft in the city. In addition to space, the newer complexes offer ample parking spaces, swimming pools, gardens and health clubs.

Says Achim Vogt MD Deutsche Postbank Home Finance: “The growth in this segment has been exceptional compared to the other segments. We have had a growth of more than 100% (CAGR), in the last five years. In the first half of this financial year, the level of disbursement is almost at par with last full year’s volume, for this particular segment.”

Bankers feel significant growth in affordability amongst customers due to a substantial rise in income, over the last five years, steady rise in property prices, and increased focus by builders to develop and market the properties in this segment due to higher profitability led to growth in this segment. Says Vikram Sabharwal, MD, SABH Infrastructure; “The current boom in luxury apartments has been largely contributed by rising income levels and affordable interest rates on mortgages. The rising interest rate scenario coupled with the rising property prices will not effect the take-off of this segment. Merrill Lynch has forecasted that the Indian realty sector will grow 7.5 times from 2005 to 2015.”

Bankers are convinced that the demand for luxury housing will continue to be robust in this depressed market. “It’s a niche segment, catering to the HNI clientele. In October, our growth stood at 43% year-on-year in the Rs 75 lakh & above loan segment, which is phenomenal by any standards,” said RR Nair, CEO of LIC Housing Finance. A senior official with Axis Bank confirmed that the demand for big ticket-size loans has remained fairly stable and growing

Source : http://economictimes.indiatimes.com/Economy/HNIs_still_go_for_luxury_homes/articleshow/3834075.cms

Rental market hits a new low

MUMBAI: The global economic meltdown has now hit the once-booming commercial lease rental market in the city.
Information gleaned by TOI  through various sources in this segment show that rents have dropped by 20% to 25% on an average in the last quarter of 2008. In some prime commercial properties in the erstwhile mill land enclave of central Mumbai, the drop is as much as 50%.

It was barely six months ago that the London-headquartered Barclays Bank shook the commercial lease rental market when it paid a record-breaking rent of Rs 725 a sq ft per month for a 15,000 sq ft office space in Worli’s CeeJay House, whose landlord is aviation minister Praful Patel. It was the highest commercial rental deal in the country.

However, over the past couple of months, all the prime commercial business districts (CBD) like Nariman Point, Bandra-Kurla Complex and Parel have been affected. In fact, Nariman Point, considered to be India’s premier CBD, has seen vacancy levels in grade I buildings rise to 11%, said sources tracking the rental market. Till recently, the vacancy level was just 2% in this area. Up to 2005, 30% of offices here were empty.

The lease rentals in Nariman Point are currently hovering around Rs 375 to Rs 400 per sq ft a month in premium buildings compared to Rs 475-Rs 500 per sq ft a month nine months ago. Rentals in grade C buildings hardly command Rs 250 a sq ft, according to market sources.

Kaustuv Roy, director Transaction Services of global property consultancy firm, Cushman & Wakefield, said, “Since September, the overall economic conditions have been rather volatile and with a visible decline in demand for commercial space across the city. Many corporates have postponed their expansion decisions. This has affected traditionally strong markets like Nariman Point and central Mumbai where we have noticed a drop of 20% and 13% respectively.”

Real estate sources pointed out that a developer of a commercial project in Parel, which leased out office space at the rate of Rs 300 to Rs 350 a sq ft a month four months ago, is now struggling to sign deals at as low as Rs 150 to Rs 190 a sq ft. “Several big companies and corporates that had taken office space in this complex at high rates have now renegotiated the price with the developer and brought them down substantially. The developer is getting jittery and is ready to cut down on its margins,” a source said.

Pranay Vakil, chairman of Knight Frank India, said rentals have fallen and there have been few transactions in this segment. “The gap between the asking rental and the final rental has also gone up. Somebody may demand Rs 300 a sq ft and settle for Rs 225. Earlier, there was a spurt in demand. But we are back to the rental prices seen two-and-a-half years ago,” he said.

In the Bandra-Kurla Complex too, there has been a drop from an average of Rs 400 a sq ft six to nine months ago to Rs 275-Rs 300 a sq ft at present. But, according to Roy, the largest fall is noticed in Andheri where the drop has been 25%. “This is attributed to a possible over-supply scenario that this micro market seems to be heading for. With an expected supply of 4 million sq ft in the next six-12 months, the location is feeling the heat current of suppressed demand. We will continue to see this trend well into the early 2009,” he said.

A property expert claimed that desperate developers putting up commercial buildings, are now willing to sell their projects instead of giving them out on lease as has been the trend so far.

Explaining the high rentals that the city witnessed between 2006 and mid- 2008, the expert said rentals were equally high during the 1994 property boom. But, subsequently, not many companies could afford them and were forced to move out, he said.

Source : http://timesofindia.indiatimes.com/Mumbai/Rental_market_hits_a_new_low/articleshow/3825103.cms

Reliance Retail forays into home furnishings

Reliance Retail, a subsidiary of India’s largest corporate Reliance Industries, today announced its foray into home furnishing format as it presses to expand into more areas across the country.

The company announced the opening of its first ‘Reliance Living Furnishings’ store in Noida (Uttar Pradesh) and has plans to follow it up with one more store in Delhi and two in Hyderabad.

“We have not put any target regarding the number of stores which we intend to set up. Our turnover figures would be set once we receive adequate customer response,” Reliance Retail Senior Vice-President and Business Head (Home Furnishings and Decor) Manu Kapur told reporters.

With the recent softening of retail rentals, real estate companies have opened up to the idea of revenue sharing with retailers. Asked if Reliance Retail was contemplating such a step, Kapur said: “We are open to the revenue sharing model also but nothing has been finalised as yet.”

According to real estate consultant Cushman & Wakefield, retail rentals in some high streets across major cities, including Mumbai, Pune and Chennai and the National Capital Region, had witnessed a fall between 13-20 per cent in the third quarter of this calendar.

The home furnishing format is the 14th specialised segment tapped by Reliance Retail, which operates 800 stores across 60 cities having a total retail space of 38 lakh sq ft.

He said the company has started with 120 products under three private labels, including ‘Home One’ (basic), ‘My Home’ (mid-segment) and ‘My Home Premium’ (Lifestyle). The home furnishing items, 80 per cent of which would be the company’s own labels, are priced between Rs 199 and Rs 14,000.

The company’s offerings would include bedding, bath textiles, curtains, floor coverings, table and kitchen linen and decor in both autumn-winter and spring-summer ranges.

Source : http://www.business-standard.com/india/news/reliance-retail-forays-into-home-furnishings/16/21/50694/on

Fast growing retail markets

India has six of the 10 fastest growing retail markets in Asia, with Linking Road in Mumbai the most expensive retail high street in India, according to ‘Main Streets Across the World’, an annual report by Cushman & Wakefield.

The survey, covering 236 locations in 48 countries carried out in June 2008, puts Linking Road, Mumbai, as the fifth most expensive location in Asia, and among the top three locations globally to witness the highest annual growth in rental values.

The press release from Cushman & Wakefield also strikes a note of caution. The third quarter of 2008 was significant for the retail real-estate sector as many established locations saw some decrease in value in mall and high streets.

In the last two years the rentals have grown faster than business potential, which hits rental sustainability. Though the domestic locations are positioned high in global ranking as on June 2008, Linking Road and other markets have felt the market pressure in 2008 and rentals have dropped by about 20 per cent during the third quarter. In the short run, retailers are likely to go slow and rental values could drop further.

India realty expo in Dubai

The Maharashtra Chamber of Housing Industry plans to showcase major real-estate projects in West Asia through the 11th India Realty Expo 2008 to be held in Dubai between November 27 and 29.

A press release from MCHI said the expo hopes to attract NRI investors to look at housing, commercial and retail investment options in real-estate in India. Over 25 developers, including Godrej Properties, Hiranandani Constructions, Tata Housing Development and Sunil Mantri Realty, will showcase their projects spread across cities such as Mumbai, Thane, Navi Mumbai, Panvel, Pune, Bangalore, Goa, and Nagpur.

According to MCHI, it is an ideal time for NRIs to invest in India as the prices are attractive and the depreciation of the Indian rupee against the US dollar will give them 20 per cent more value.

The forthcoming exhibition in Dubai is being attended by prominent developers, who had their projects in almost all the categories such as IT, ITES, Retail, Entertainment, Banking, Financial, Hospitality, Education and residential properties to suit all budgets, ranging from Rs 4 lakh to Rs 2 crore and more. The event is expected to see substantial investments from Indian and overseas companies. —

Source : www.thehindubusinessline.com

Retail rentals decline by 20% in Q3

India’s retail sector showed signs of sluggish activities in the third quarter ended September 2008 with most retailers recalibrating their expansion strategies in response to slower consumer demand.

The rentals dipped by 20%, the maximum decline, at Linking road and Kemps corner in Mumbai, according to real estate firm Cushman & Wakefield.

The rental values for malls and high streets in many major micro–markets across the cities witnessed a slowdown over the last quarter indicating a phase of correction, C&W said in a statement.

Traditionally strong retail high street locations reported significant slide in rental values. In Delhi – Karol Bagh saws 18% drop, Ganesh Khind Road (Pune) and Cathedral Road – R.K. Salai (Chennai) both witnessed 13%. This is, prominently due to caution in expansion plans of retailers which is leading to a slowdown in demand.

Mall rentals too witnessed a similar trend where rental values have corrected to realign to the achievable business potential of the given market. This was especially true for rentals in Mumbai markets such as Ghatkopar (-11 %) and Vashi (-10 %).

National capital Region which received the highest quantum of mall space in this quarter saw rental correction of approximately 6-9 per cent in peripheral locations like Noida and Gurgaon.

Bangalore, Hyderabad and Kolkata retail markets remained stable with certain mall locations even seeing an appreciation in rental values. Ahmedabad situated on the other side of rental spectrum experienced the highest fall in rental values of 20 % in Kankaria Lake.

The real estate services firm said the expected mall supply for 2008 has been reduced by approximately 36 per cent to 10.57 mn sq. ft. for the year of 2008 from previous quarter estimates of approximately 16.77 mn sq.ft. The drop in the estimated supply is largely due to delays in project completion.

In July-September 2008 (Q3), the total supply for retail malls was 3.25 mn sq.ft. which was dominated by NCR that received approximately 2.1 mn sq. ft. Only two other cities witnessed new addition to mall supply in 3Q 2008 which includes Mumbai (0.89 mn sq. ft.) and Pune (0.25 mn sq.ft.).

Approximately 2.4 mn sq. ft. of supply is expected in the fourth quarter ended 2008.

Source : www.business-standard.com

Firms may expand into NCR on low rentals: Study

Delhi : Companies, which had deferred expansion plans in the National Capital Region (NCR) due to high property prices, can now think of going ahead as rentals for office space in IT and SEZ segments have declined by up to 13 per cent during the second quarter of 2008.

“The rentals of IT/SEZ segment in Gurgaon and Noida witnessed correction with values declining by 3 per cent and 13 per cent over the quarter respectively,” global real estate consultant Cushman & Wakefield (C&W) said in its report on the office market for second quarter of 2008.

The anticipated supply and deferred expansion plans of the companies resulted in the decline of rents, the consultant pointed out. However, the office rentals in Delhi have risen, though the pace of growth has slowed down. In the Central Business District (Prime) and other micro markets, rentals rose by up to 4 per cent only. Limited supply and robust demand due to convenience of the location pushed the rentals in these areas.

Giving the outlook, C&W said office market is expected to remain firm with rental values rising except for the IT and SEZ segments of Gurgaon and Noida, which are likely to see an estimated supply of 3.3 million sq ft during the third quarter.

Realty players face moment of truth

NEW DELHI/MUMBAI: The fresh wave of liquidity crunch is set to worsen problems for the Indian real estate sector. The sector is already facing a cash
crunch on account of diminishing sales, expensive and largely unavailable credit and drying up of private equity funding. And if an economic downturn sets in as feared, many developers may go out of business and others may be forced to drastically cut prices.

Property consultancy firm Cushman & Wakefield estimates that real estate activity in the current fiscal is not likely to be more than half of what it was in the previous year. “If market fears actually come true, we will see a number of small and medium real estate players exiting the business,” says Cushman & Wakefield joint MD Sanjay Dutt.

“SBI has stopped overdraft facility and many banks are not disbursing sanctioned loans. All companies, including those from real estate, will face serious problems,” says DLF CFO Ramesh Sanka. He was also not very sanguine about the prospects of investors shifting their funds from the stock markets to the property market. “Where is the money? Money is getting eroded every day,” he said.

Developers feel liquidity is a must for companies to survive. “RBI had put in restrictions on banks on lending to real estate, fearing an asset bubble. We feel asset bubble is under control and it is time that RBI relaxed lending norms,” says Unitech MD Sanjay Chandra. Adds Mr Sanka: “Ultimately, RBI will have to release cash through relaxation in CRR and SLR.” Parsvnath Developers chairman Pradeep Jain hopes that the RBI will cut repo rate by 150-200 bps.

The biggest challenge for realty firms today is to boost demand for property. And many of them know price cuts are perhaps the only way to do that. “Consumer sentiments are down in the market. We have cut prices by around 20% last week in our two projects. We hope it will revive sales,” a senior executive of Mumbai-based Orbit Corporation said.

At the prestigious Maharashtra Chamber of Housing and Industry property fair, developers offered attractive discounts to woo buyers. While this did lead to the number of enquiries and bookings going up, they were much less compared to the demand that existed last year. “The gloomy news from across the world has made people apprehensive. That’s why, even festive season offers haven’t had great impact on them,” says Parsvnath’s Mr Jain.

Cushman & Wakefield’s Mr Dutt says prices have already corrected by 20-30% in most markets and may see a further correction of 20-30%. As sales refuse to pick up, developers are putting projects on hold and focusing only on a few projects mainly in metro cities, which may over a period of time generate sales.

Sourece : Economictimes

Office rentals rise in pockets of Bangalore, Ahmedabad, Kolkata

AHMEDABAD: At a time when global property markets are literally on their knees, small pockets in cities like Ahmedabad, Bangalore and Kolkata have bucked the trend and registered 3-18% rise in office space rentals in the third quarter of 2008. Apart from robust demand for corporate office space, the rise in rentals has largely been driven by lack of quality corporate space in these cities, states a report by global real estate solutions provider Cushman & Wakefield (C&W).

The trend of rising office rentals has been a deviation from the country’s office markets which have largely remained stable despite the addition of 18.41 million square feet (sq ft) of office space in Q3 of this year. Of the new space, a total of 9.21 million sq ft got absorbed during the quarter, while marginal corrections in values (ranging between 1% and 14%) were recorded in peripheral locations of cities like Chennai, and NCR.

Prominent gainers during the third quarter were micro-markets located in Bangalore, Kolkata and Ahmedabad. In Kolkata, office rentals in Dalhousie witnessed an increase of 18%, while CBD and Rash Behari Connector areas recorded an increase of 9% and 8%, respectively. “This is largely because of a robust demand for corporate office space in these locations which has led to the increase in rental values in these locations of Kolkata,” states the report.

Similarly, three out of four major micro-markets in Ahmedabad recorded increase in rental values over the last quarter which include, CG Road (3%), Ashram Road (3%) and Satellite Road (6%) largely due to severe lack of quality Grade-A corporate property in Ahmedabad, while the demand for space in the city has remained buoyant from corporates across sectors.

Some of the micro-markets which registered marginal correction in office rentals during the same period include, NCR (where correction ranged from 1% in Gurgaon to 14% in Nodia IT/SEZ), Chennai (4-13%) and certain pockets of Kolkata (9-10%). Cities like Mumbai maintained its rental values as in the last quarter. However, prime commercial office locations such as CBD, Worli, Lower Parel, Andheri and Powai are likely to weaken. Rental values in Pune also remained unchanged since the last quarter, but most micro-markets in the city have shown signs of weakening or at best stagnancy.

Kaustuv Roy, director, tenant strategies and solutions, said: “This quarter continued to show signs of the cautious approach from developers who focused on completion of existing projects within defined time limits. On the other hand, a wait-and-watch policy adopted by the corporate sector has brought the quantum of transactions low. We will continue to see this trend well into the last quarter of the year as well as into the early 2009.”

In the third quarter, NCR witnessed the highest supply of new office space of around 5.04 million sq ft, followed by Pune, Bangalore and Chennai with 3.55 million sq ft, 3.41 million sq ft and 3.36 million sq ft of supply, respectively. Mumbai witnessed an addition of 1.88 million sq ft of supply, while Hyderabad and Kolkata recorded 930,000 sq ft and 242,000 sq ft of supply, respectively in Q3 of 2008.

Absorption of office space was recorded at 9.21 million sq ft which is a 44% increase from the previous quarter’s 6.36 million sq ft. All cities showed a considerable increase in absorption over Q2 with the exception of Bangalore that showed a minor dip and Ahmedabad that showed no change.

Source : Economictimes

Realty demand to remain robust in long-term

A recent paper by Cushman& Wakefield Research, titled ‘The Metamorphosis – Changing Dynamics of the Indian Realty Sector,’ points out that real estate demand in India, has moderated with the sharp increase in real estate prices, coupled with rising interest rates.

But despite all such apparent similarities, it would be unfair to liken the economy’s performance in 2008 with that in 1995.

The economy continues to remain strong in comparison to that in the mid-nineties. Consumption demand too has remained strong despite dire predictions. With the services segment comprising sub-segments like trade, hotels and restaurants, real estate, banking and insurance, etc., the growth of the segment clearly indicates a space demand for commercial office, retail and hospitality verticals.

It is important to reiterate that with a moderate growth rate predicted for the time being, the real estate sector will revert to its strong uptrend over the long term, performing in line with the overall economy.

The long-term robustness of demand for real estate in India will remain intact and we will probably see resurgence once the market finds its own level by responding to these short to mid-term global and domestic factors.

The BRIC report citing Indian economy’s potential with the view of surpassing the richest countries by 2050 is indicative of it being among the fastest growing markets.

According to Cushman & Wakefield Research, the pan-India demand projection across office, residential, retail and hospitality segments is expected to be approximately 1,098 million sq. ft. in the coming five years.

The residential segment continues to drive real estate demand with 687 million sq. ft., contributing 63 per cent throughout the term under consideration.

Despite the expected slowdown in the office market, the demand for commercial office space is projected to be 243 million sq. ft, which is around 22 per cent of the total demand projections for the next five years. The retail and hospitality segments are expected to constitute 95 million sq. ft. (9 per cent) and 73 million sq. ft. (6 per cent) of this total demand, respectively, driven by an increase in income levels as well as by accelerated travel in the domestic and international sectors.

The top seven cities in India account for nearly 80 per cent of this pan-India demand with around 877 million sq. ft. The residential sector still remains the largest segment for the top cities with 60 per cent share, the commercial office segment coming up to 23 per cent, followed by the retail (9 per cent) and hospitality (8 per cent) segments. The residential segment is expected to be the major demand contributor over the next five years with a total space requirement of 529 million sq. ft., followed by office space at 203 million sq. ft., retail at 79 million sq. ft. and hospitality at 66 million sq. ft.

The real estate demand is expected to increase marginally over the period with the Tier I cities expected to generate majority of the demand during 2008-2012. The Indian economy is expected to perform well with growth driven by domestic factors, which will add momentum to the real estate sector in addition to expected improved global economic situation with reinforced investor confidence in the coming years.

The high residential demand witnessed in NCR is most likely because of the buoyant corporate sector in the region, which requires a huge migrant working population with residential needs, in addition to working professionals in the city aspiring for a second home.

However, the highest growth rate is depicted by Chennai (9 per cent), which is attributed to the increasing migrant population driven by the buoyant manufacturing as well as the IT/ ITeS sector; the latter having envisioned the need for multi-storeyed residential developments.

Bangalore (6 per cent), Pune (4 per cent) and Mumbai (3.7 per cent) are most likely to be second in line with regards to growth in residential demand forecasts.

Other cities that are expected to witness an increase in residential demand through 2008-2012 are Mumbai, Pune, and Hyderabad accounting for 6 per cent, 10 per cent and 9 per cent respectively, of the total residential demand projected across India.

Rising property prices and increased interest rates, coupled with a demand-supply mismatch has brought down the overall affordability of residential properties in the country today. Developers have come up with innovative schemes like ‘Book now and pay later on possession’, as well as home loan installment payment for the initial one to two years. However, established developers with substantial cash reserves have up till now remained insulated from this trend.

Middle-income housing projects as envisaged by industry experts is gaining visibility. In order to meet the demand for affordable housing, the Confederation of Real Estate Developers Association of India (CREDAI) has even proposed a concept of Special Residential Zones (SRZ) as a solution. An SRZ is a notified geographical region that is free of domestic taxes, levies and duties, with special development rules to promote large-scale, Greenfield affordable housing projects.

Finally, a 10-15 per cent fall in price or a decline in mortgage rates is most sought after in the current scenario to improve affordability and for end-users/home buyers to come back into the market. If this happens, demand is likely to pick up again with rising income levels.

Source : sify.com

5% Decrease in Residential Property Prices

With the ongoing slowdown in real estate industry and correction in secondary markets, some of the country’s major cities have witnessed up to 5 per cent fall in capital values in residential properties, a Cushman & Wakefield (C&W) report said. According to the global realty consultant C&W, the high -end residential market of Pune has seen a decrease of 5 per cent in capital values during July-September period, while it fell by 1 per cent in the mid-range category. Other prominent markets, like Mumbai and Bangalore, witnessed a fall of 4 and 3 per cent respectively in the mid-range housing sector, it added.

However, few locations in Chennai witnessed appreciation in capital values up to 8 per cent. “Most markets are predicted to continue to have stable capital values with a softening bias in the last quarter of 2008, with the exception of Chennai which may see some further strengthening in key micro markets. A lacklustre festive season, along with sharp drop in the stock markets have further aggravated the situation for the developers, who are also battling conditions such as high rates of servicing debt and liquidity issues,” C&W India Director (Residential Services) Aditi Vijayakar said.

Such conditions have led many developers to re-align their strategies and several developers may be now looking at targeting the middle-income groups, where the demand is high and mostly driven by end-users, she said. “Correction in value in the secondary sales market has impacted the overall values of residential properties in certain micro-markets and is expected to further affect the capital values in the next quarter,” the report stated.

Source : www.indianrealtynews.com

Real Estate Developers Suffer Reality Bite

With Diwali having come and gone and no increase in sales in the real estate sector, it now seems certain that developers will be forced to reduce prices at least in the residential segment. The biggest reason for concern for all real estate players is that a number of private equity deals did not materialise.

This is coupled with isolated or barely any property changing hands this festive season. In fact, many desperate developers had offered major freebies — ranging from consumer durables to luxury cars — but it seems nothing worked. And now developers who had taken huge loans from banks would be forced to reduce the prices so that the end users come back to the market.

In fact, in various markets, despite a slowdown in demand, essentially from the end users and speculative investors, developers will be looking at reducing rates further by 10-15%. Some have already started offering the lower rates.

“All the developers have tried to use the freebies route but nothing has paid off. In many residential projects not a single apartments has been sold. We may have to offer a 10-15 % discount soon to bring the end users back to the market,” feels CMD of a leading real estate company on the condition of anonymity.

Sales in secondary markets have also taken a beating with very few transactions taking place at relatively lower price points than market expectations. Says Anuj Puri, chairman & country head of Jones Lang LaSalle Meghraj: “It was unreasonable for the promoters to hope that the Diwali season would somehow pull the real estate market out of the doldrums. The situation is a result of deeper economic issues. Currently, the equity markets in India are in a rather low phase and credit is extremely tight, resulting in the Indian real estate sector taking an unprecedented body-blow. We expect domestic demand to sink by another couple of degrees and international interest to remain at cautious levels before the situation gets better.”

Industry sources, in fact, say that across all metros and tier II cities such as Mohali, Pune, Kundli (Sonipat), Chandigarh, Jaipur, Lucknow, Indore, Surat, Ahmedabad and Cochin there has been an estimated 80-90% drop in the number of deals. The situation is so bad that there are no buyers for any kind of residential real estate in these markets.

Many feel that it will take at least couple of years before the realty market witnesses a turnaround. Says Sanjay Verma, executive MD, South Asia, Cushman & Wakefield: ”Once real estate prices sink to more realistic levels, the watch-and-wait stance currently evident on both the domestic and international investor fronts will give way to cautious forays and eventually to steadily increasing market recovery. The turnaround phase should come in another 18 months to two years.”

Source : Indianrealtynews

Retail Woes: Mall supply to double in 2010

NEW DELHI: The retail party seems to be over, with rentals witnessing a major dip across the country. But what’s adding to the negative sentiment is More Pictures the over supply waiting to come up in the next couple of years. It is estimated that the total mall supply in the country will double in 2010 as compared to the supply slated to come up this year.

SundayET, along with global real estate services firm Cushman & Wakefield, conducted a survey in the top seven cities, which reveals that despite the slowdown this year, there will be more than 16.5 million sq ft of fresh retail space supply. In fact, by 2010, these figures are going to cross a whopping 32.5 million sq ft.

Interestingly, this year the NCR region tops the list with more than 7.5 million sq ft of additional space, while in 2010 the retail supply here will come down to 5.5 million sq ft only. The real growth in the retail supply will come in Hyderabad, which will cross nearly 7 million sq ft in 2010.

Experts things will only get worse. Says Kishore Biyani, CEO of the Future Group: “The risk element of the developers will increase with so much supply slated to come up. To sustain this, we need to look and work at the dynamics of how the market can grow. Till such time the retail market does not grow, it will be very difficult to absorb such kind of space. In the near future, the market has to stabilise as far as rentals are concerned. Productivity is a key factor for any retailer to operate efficiently in a mall, in case of a leased deal. We have changed our business model and are now operating on a revenue-sharing model in the malls.”

Agrees Rajneesh Mahajan, director, retail, Cushman & Wakefield India: “The industry is taking stock of its progress and consumer response to various retail formats. The varying levels of acceptability of modern retail by consumers in different micro markets across India has led both developers and retailers to redraw their business plans. The consolidation or modification is largely to do with aligning the business models to the consumers’ needs, preferences and adaptation. This will lead to alignment of their expansion plans and of course correction in some of the past decisions.”

The supply in these cities may also see a correction in the coming years. The actual supply may be lower than the planned supply, due to delay in the delivery or some developers postponing construction. The large development houses that are going on with their projects may also run behind their timelines due to approval and construction delays.

In certain cases, they may put on hold their projects due to weak consumer confidence in specific micro markets. The retail developers this time are much more cautious and may delay or alter their development plans.

Economictimes.com

Mirroring the US, India’s Real Estate Sector Melts Down

The new moon of the lunar month of Kartika marks Diwali, the Indian festival of lights, when Hindus across the country worship the goddess of wealth, Lakshmi. But divinities know full well the laws that govern finance, and Lakshmi may now be a little tight-fisted about circulating her riches amid the ongoing global credit crunch.

Indian tradition decrees that it is auspicious to make purchases in the days leading up to Diwali, which falls in October or November. With faith meshing so effortlessly with commerce, the season sees sellers, advertisers and marketers urging the devout to spend money with a religious fervor, as they hawk everything from chocolates and consumer durables to gold and houses. Buying a home is considered especially propitious. What better way to welcome the goddess of wealth into one’s life than by inviting Lakshmi into a new abode? Thus, the period from just before Diwali through March is usually a bonanza for the real estate industry: some 70% of the annual business is conducted then.

Not this year. With just about a week to go until Diwali, the mood is decidedly downbeat. The demon of impending economic doom refuses to die, and as tightened liquidity makes people put off larger purchases, the real estate sector is facing the worst attack. “This time last year, I was selling 10 to 12 properties every day,” says Alok Gupta, who runs Advanced Real Estate in the New Delhi suburb of Noida. “This time, I haven’t sold a single property all month!”

Considered the barometer of its economic growth, the real estate sector in India has grown 30% to 35% during the past five years, reflecting the rapidly increasing demand for office, commercial and industrial space, as well as for bigger homes, now considered within the range of India’s prospering working classes. But the economic juggernaut began slowing earlier this year because of double-digit inflation and a severe liquidity crunch (a fallout from the U.S. subprime crisis). Now economic activity may shrink as part of a global slowdown. The country’s growth estimates of 9% at the beginning of the year have been revised to well below 7%, and the effect is directly visible in the realty sector. “No one’s buying anymore,” says Ashwani Shukla of New Delhi-based Triveni Associates. “Two years ago, 25-year-olds earning fat pay packets from [multinational corporations] were buying high-end apartments. Now there are no takers for flats selling at 20% markdowns. Estate agents are finding it difficult to even meet daily overheads.”

Shukla himself has branched out of real estate. He started selling insurance six months back “to pay the bills,” he says. According to various estimates, sales in cities like Mumbai and Chennai are down 30% to 40%. Hoping to induce buyers during Diwali, realtors are advertising cash discounts of 5% to 10% for down payments, and as much as 25% discounts if buyers are willing to wait two to three years before taking possession of the property. “But there is no liquidity with the end user,” says Arvind Nandan, director of consultancy at real estate company Cushman & Wakefield India. “Home-loan rates have hit the roof, and people’s investments have lost value at the stock market. No one has the money to buy.”

Shukla says if the situation does not improve, there could be distress sales within the next six months. The realty sector was heading for a cyclical slowdown even before the current economic slump. Over the past few years, increasing demand had pushed up prices, with speculators jumping in to further inflate the market. Eventually, inventory piled up when buyers refused to pay unrealistically high prices. “So many transactions were taking place between speculators and investors that no one bothered to find out what the end user, the family who would eventually live in the house, would be willing and able to pay,” Shukla says. And those prospective homeowners are the biggest target of India’s real estate industry: almost 80% of real estate developed in the country is residential space.

This all comes at the worst possible time. Even as buyers refused to bite, inflation passed into double digits in June this year, raising prices of construction material. Realtors overran their budgets and projects stalled, leaving skeletal structures dotting the landscape in big and small cities all over the country. Then came the liquidity squeeze, as the government sponged away cash from the system to control inflation. Home-loan rates went from about 7% to 12% and higher. People who bought struggled to pay, and potential buyers kept away.

Realtors like Shukla and Gupta may have little reason to light firecrackers this Diwali, but their prayers to Lakshmi, the goddess of wealth, will definitely be more fervent, especially as experts predict that things will get worse before they get any better. “This was a much-needed correction,” says Nandan. “And it isn’t complete yet. I expect the market to go down further, and it’s hard to say when the recovery will begin.”

Yet no one is entirely pessimistic. Experts and industry insiders believe that once the storm blows over, demand is bound to rise for the same reasons it did last time — a large, young workforce; gradual but consistent liberalization reforms; and a high rate of consumer and private-sector savings. “The silver lining is that once this phase ends, land and property prices will be corrected to rational levels, speculators will be out, and the sector will have stronger fundamentals,” says Shukla. If everyone’s prayers go right, the goddess will eventually be propitiated and her blessings will issue forth once more.

Source : time.com

Realty players face moment of truth

NEW DELHI/MUMBAI: The fresh wave of liquidity crunch is set to worsen problems for the Indian real estate sector. The sector is already facing a cash  crunch on account of diminishing sales, expensive and largely unavailable credit and drying up of private equity funding. And if an economic downturn sets in as feared, many developers may go out of business and others may be forced to drastically cut prices.

Property consultancy firm Cushman & Wakefield estimates that real estate activity in the current fiscal is not likely to be more than half of what it was in the previous year. “If market fears actually come true, we will see a number of small and medium real estate players exiting the business,” says Cushman & Wakefield joint MD Sanjay Dutt.

“SBI has stopped overdraft facility and many banks are not disbursing sanctioned loans. All companies, including those from real estate, will face serious problems,” says DLF CFO Ramesh Sanka. He was also not very sanguine about the prospects of investors shifting their funds from the stock markets to the property market. “Where is the money? Money is getting eroded every day,” he said.

Developers feel liquidity is a must for companies to survive. “RBI had put in restrictions on banks on lending to real estate, fearing an asset bubble. We feel asset bubble is under control and it is time that RBI relaxed lending norms,” says Unitech MD Sanjay Chandra. Adds Mr Sanka: “Ultimately, RBI will have to release cash through relaxation in CRR and SLR.” Parsvnath Developers chairman Pradeep Jain hopes that the RBI will cut repo rate by 150-200 bps.

The biggest challenge for realty firms today is to boost demand for property. And many of them know price cuts are perhaps the only way to do that. “Consumer sentiments are down in the market. We have cut prices by around 20% last week in our two projects. We hope it will revive sales,” a senior executive of Mumbai-based Orbit Corporation said.

At the prestigious Maharashtra Chamber of Housing and Industry property fair, developers offered attractive discounts to woo buyers. While this did lead to the number of enquiries and bookings going up, they were much less compared to the demand that existed last year. “The gloomy news from across the world has made people apprehensive. That’s why, even festive season offers haven’t had great impact on them,” says Parsvnath’s Mr Jain.

Cushman & Wakefield’s Mr Dutt says prices have already corrected by 20-30% in most markets and may see a further correction of 20-30%. As sales refuse to pick up, developers are putting projects on hold and focusing only on a few projects mainly in metro cities, which may over a period of time generate sales.

Sourece : Economictimes

PE funds commit $5.6bn to Indian realty over the last year

Investor confidence in the sector remains strong with a total of 79 private equity real estate deals made between August 2007 and August 2008, according to a report by Cushman & Wakefield.
Private equity real estate investments in India totaled approximately INR269 billion ($5.6 billion; €4.1 billion), according to a study by commercial real estate services firm Cushman & Wakefield of 79 deals done over the last year.

The most popular asset class was residential which netted 41 percent of private equity real estate investments in the country. Townships drew 21 percent of the investments and offices followed with 10 percent.

The report also noted that a rising number of real estate investment deals were being done through India-specific real estate funds, rather than through Foreign Direct Investment (FDI), which exposes foreign investors to increased scrutiny and tighter regulations.

In recent times India has seen large capital inflows into its real estate sector, which has led to concerns about the creation of a price bubble in the sector. As a result, a number of private equity funds focused on the real estate and related sectors are awaiting approvals from the Securities and Exchange Board of India (SEBI) to commence operations.

However, a good sum of FDI inflow goes into the real estate sector and about 50 percent of 2007’s FDI inflows have been accrued during the first two months of 2008’s second quarter, which is a positive indication of investor confidence, the report said.

Source : privateequityrealestate.net

Nano to open doors for realty corridor

AHMEDABAD: At a time when the property markets in the country are witnessing downswing, Tatas’ decision to park Nano at Sanand will not just boost la
nd prices in and around Ahmedabad by almost 25%, it will also create a brand new “realty” corridor between Sanand and Ahmedabad, global, experts say.

Global real estate consultant Jones Lang LaSalle Meghraj (JLLM) feels that Nano plant will not only propel realty growth, but it will also create new avenues for retail and hospitality sector. “If such a plant is located close to a major city, the potentially short commute will cause a new realty corridor to develop and prosper”, says Ashutosh Limaye, associate director, strategic consulting, (JLLM).

“Most Indian markets are currently in a low phase. The arrival of an industrial plant of such size and scope will definitely help the location in question to reflect positive trends faster than other areas. There will be an influx of manpower from other states, and the market in question will become more cosmopolitan and more interesting in real estate terms on a national scale,” he said while talking about Tata’s decision to relocate its Rs 2,000-crore Nano plant to Sanand from Singur (West Bengal).

“Real estate and its value is a function of employment. When any big industrial plant comes into a locality, it catalyses direct employment in the actual plant and indirect employment in the associated feeder units (ancillary industries will also be located near the plant.) Moreover, there will be indirect employment for various other support service providers. For all of them, residential spaces across all typologies (affordable and mid-income to luxurious) are essential. Once a residential district is planned, retail, schools, hospitals, recreational centres etc. are natural add-ons”, Limaye told ET.

“Apart from direct demand generation from actual end-users, such developments in any particular location also attract the interest of investors, who will seek to buy properties for renting out. Hospitality and retail will also be boosted”, he says.

An official of GIHED (Gujarat Institute of Housing and Estate Developers), a city-based body of developers, feels that that the Tata Nano project will provide the necessary boost to the property markets in and around Ahmedabad. “The ripple effect of the Tata Nano project will be seen in the Ahmedabad property market in the next three years. The project will attract new manpower and definitely power the growth of the housing segment in Ahmedabad”, Suresh Patel, vice-president of GIHED said.

“The land prices between Ahmedabad and Sanand are also expected to rise by about 25% in the coming days”, he said adding the prices which were about Rs 1,000 for an square yard is bound to leap-frog in the coming days. “Once Dholera port in Ahmedabad district develops, the entire region will grow by leaps and bounds”, Patel remarked.

The biggest beneficiaries are developers like Savvy Infrastructures Ltd who are already in the process of building large residential projects in nearby places like Dev Dholera and Nal Sarovar.

Similar views were aired by Cushman & Wakefield, another global real-estate solutions provider. “The economic activity (in form of the Tata Nano project) will enhance capital value of land in and around this corridor of Sanand. Positive sentiments in times we live in today, which are not so encouraging, would witness definite lift the spirits for investors. Hospitality, retail, logistics, transporters are likely to benefit in the medium to long term”, said Sanjay Dutt Joint Managing Director, India, C&W.

“Nothing will happen in the short term but for some lift in land valuations n around proposed Tata site.

However medium to long term impact would lead to generation of demand in Ahmedabad, which is highly under leveraged vis-a-vis other top cities in India. It is about time the world sees it and the Tata deal would certainly help”, Dutt remarked.

Source : Economictimes

Bangalore eyes resale market

With prices in the primary market in Bangalore reaching never-seen-before rates, genuine home-buyers are seriously looking at the secondary, or resale market, for that dream home.

The secondary residential sales market in the city has witnessed an increase in transactions in recent months due to a host of factors. In the light of rising interest rates, coupled with developers announcing a hike in sale prices, the primary market conditions are becoming less attractive for the end-user, feel industry experts.

“Simultaneously, the rental market has stabilised, with a few micro-markets such as the east and south-east regions witnessing a correction. The segment that has benefited from this scenario is the secondary sales market (essentially driven by investors), where the buyer can avail of discounts on capital values,” says Mr Sandeep Trivedi, National Head – Development Consulting, Cushman & Wakefield, real-estate services firm.

Moreover, the primary market has been moving relatively slowly in terms of project completion and “that, coupled with the ready-to-move-in option offered by a secondary sale property, has boosted the demand for the latter from an end-user perspective,” he adds.

According to him, new projects are priced relatively higher and project completion is seldom within timelines as per current market trend. For investors too, the ready-to-move-in option offers immediate returns, he feels.

Till the property in a primary market is handed over, there is uncertainty on every issue related to value appreciation, rental revenue, quality of construction, maintenance issues, etc, whereas in the secondary market, the buyer can enter into the deal after ensuring the quality of construction, maintenance process, rental trend, and value appreciation, says Mr R. Balaji, CEO, Propmart, an end-to-end on-line and off-line property solutions provider.

Strong demand

In some areas such as the Central Business District (CBD), the demand for resale properties is strong, as there is a short supply. So, people looking for properties in that area have little or no option left but to look at existing old buildings. “And in the case of the peripheral areas, those who bought property earlier are selling at prices lower than what builders quote for their developments in the same locality. This is because they bought at lower pre-launch prices. Now, with the costs of construction going up, builders have hiked prices between Rs 300 and Rs 700 per sq.ft. Investors who bought earlier are cashing in on this opportunity in the secondary market,” says Mr Farook Mahmood, Managing Director, Silverline Realty.

Explaining the nature of the secondary market, Mr Balaji says that two types of properties come up for resale — the existing properties and new ones, some of which are still under construction. “The demand for existing properties is high. One of the reasons is that the cost of first supply has increased,” he adds. Many times, resale of apartments happens even before the construction of a new property is complete. “This is done by small individual investors who are looking for short-term gains,” he says.

Besides, the buyer opting for a bank loan for a primary market property would have to make pre-EMI interest payment along with the rental for existing dwelling, while EMI on a loan for a resale property would include basic cost, car park, deposit on statutory bodies, maintenance, wood work, and fittings and fixtures, says Mr Balaji.

Supporting factors

Mr Trivedi agrees that the high price points of the primary market have certainly boosted the number of re-sales in recent months. “Unlike the primary market, the secondary market has witnessed a price drop of approximately 10-15 per cent, which has led the consumer towards resale purchase,” he says.

It all depends on the property, says Mr Mahmood. Factors that make a difference when it comes to pricing for resale properties include location, quality of construction and the track record of the developer from whom the property was bought. He, however, feels that prices have not come down significantly in the secondary market. “The target segment here is very different and this market does not have a strong correlation with the primary market. The difference between primary and secondary markets in some developments is between 5-10 per cent,” he says.

Attractive areas

According to him, transactions have decreased in number. “The demand for houses has come down with the increase in home loan interest rates,” he says. The reason for this decline is probably because it is mostly the end-users who are looking to buy property, and not investors. The drop in demand is more pronounced in peripheral areas than the core city areas, he adds.

Mr Trivedi identifies areas such as Whitefield, Bannerghatta Road, Outer Ring Road, Sarjapur Road, Hebbal and North Bangalore among the front runners in the secondary property market.

Mr Mahmood says that while all central areas and localities such as Indiranagar, Koramangala, Palace Orchards, Jayamahal, Frazer Town, Richmond Town, Malleswaram, and parts of north and south Bangalore command high premiums, suburban Whitefield has gone through a correction phase because of excess supply. Parts of Kanakapura Road, J.P. Nagar and Mysore Road are also in the grip of a correction phase, he adds. According to him, there is very little supply in the central areas and moderate supply in the peripheral areas.

Most of the projects that were launched in 2004-06 are only now ready for possession, says Mr Trivedi. “Property owners/investors (second and third flat owners) who are unable to derive good rents or who are feeling the pressure of the increased EMIs are the people who are essentially willing to sell their property,” he adds.

Real estate firms shun leasing, prefer to sell

Reputed real estate developers in Mumbai and many parts of the country have started selling their commercial real estate which includes office, retail and hotels, rather than leasing them out. The developers are ready to sell properties at a rate which is seen attractive by the buyers today. The appetite is to purchase, build and sell off projects, with the prospect of gaining immediate returns, according to experts.

Raheja Corporation, which has huge office spaces in multiple projects spread across Pune, Hyderabad and Navi Mumbai, have started selling their office spaces. Not only that, various other subsidiaries of the Raheja Group have actually started the process of selling their office spaces across the country, including Mumbai, according to a company source.

Indiabulls Real Estate has recently started selling their office spaces based in Tulsi Pipe Road, Jupiter Mills and Elphinstone Mills. According to sources, “Indiabulls Center, which was leasing out office spaces, has now started the process of selling the office space completely.”

Ashok Piramal group’s realty company Peninsula Land Ltd (PLL), which is developing commercial buildings in Ashok Gardens – a premium residential project comprising 2-, 3-, 4- and 5-bhk (bedroom, hall, kitchen) apartments located at upper Parel in Mumbai – is selling off the commercial building instead of leasing the property. Peninsula Land, which had sold off 5 lakh sq ft of Dawn Mills, is now in the process of selling complete 19 lakh sq ft. Realty major, DLF too is in the process of selling a part of its big commercial establishments instead of leasing. Competitor, Hiranandani Constructions is understood to have not entered into a single land deal since the past few months.

Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj, has cited various reasons behind developers wanting to sell properties instead of leasing them. He said, “There are owner occupiers wanting to take the benefit increasingly of the properties on lease and wanting to buy. The lease rates are still high while there has been softening of the sale price and the builders need some cash flow.”

When contacted, Sanjay Dutt, MD, Cushman & Wakefield said, “Today, real estate developers are willing to enter only those projects which can be purchased, built and sold off quickly and make money. Developers have started believing in futuristic games. Real estate market is here to continue very strongly in the long term. Real estate developers should also ensure to take steps to insulate themselves from the issues related to financial turmoil. For raising capital, they should tie up with reliable private equity players.”

Indian Realtors Positive, Despite The Crisis

The collapse of the Lehman Brothers and the buyout of Merill Lynch have not become a reason to frown for Indian realtors, as they are putting up a brave front and maintaining that there will be no impact on the real estate sector of the country. Lehman Brothers filing for bankruptcy will impact those Indian realty operators who have not structured their agreement carefully, according to Mr. Sanjay Dutt, joint Managing Director, Cushman & Wakefield. He does not foresee a situation where projects would get shelved. “Most of the funds that were committed have been delivered.” Mr. Dutt is of the opinion that if projects get shelved it is mostly because of changing market dynamics and not because of a lack of liquidity. Experts think that in a bid to de-risk, these investment bankers would trade their private equity placements. India is still a growth story and as far as the real estate investment is concerned it is very attractive from a long-term perspective.

Store rentals suffer 20% fall in 4 months

Store rentals have come down by 10 to 20 per cent in tier-II and tier-III cities in the last three to four months, said retailers at the India Retail Forum here. The rentals have dropped following the country’s property market cooling down after three years of high growth.

Many retailers, such as Aditya Birla Retail, could not expand their hypermarkets and large-format retail stores as they had planned due to high rentals and unavailability of space.

“With the downturn in the property market, the correction process has already started. With this, we hope roll­outs will be pretty faster,” said Thomas Varghese, the chief executive of Aditya Birla Retail, which has over 600 stores in the country, including two hypermarkets.

“We have seen rentals cooling off by 10 to 20 per cent in the last three to four months,” said Ashok Bhasin, managing director, Wadhawan Food Retail, which runs the Spinach brand of convenience stores.

According to property consultants, Kishore Biyani’s Future Group has been unable to strike deals for nearly 6 to 7 lakh sq ft of ready retail space in the last three to four months due to high rentals.

“We have looked at many locations and said no to many. But now, developers are demanding much more sensible rentals than before. We are closing three deals very soon,” said Mark Ashman, the chief executive of Marks and Spencer India.
Marks and Spencer, which has a joint venture with Reliance Industries, plans to open 50 stores in the country in the next five years.

Apart from the correction in rentals, analysts tracking the sector said 60 per cent of retailers were opting for revenue-sharing agreements with mall developers, wherein retailers pay a share of their sales to developers.

“Now retailers are demanding zero rentals and a full revenue-sharing agreement. Until and unless developers realise the need for reasonable rentals, many deals may break off,” said Bappaditya Basu of property consultancy Jones Lang LaSalle Meghraj.

Analysts also attribute the decline in rentals to over-supply of retail space in the next couple of years. According to property consultancy CB Richard Ellis, nearly 100 million sq ft of retail property development is in the pipeline.”Some developers were building malls at Rs 4,000 a sq ft. I wonder who will occupy those malls at such rates,” said Future Group Chief Executive Kishore Biyani.

“Developers were building malls not for retailers, but for investors. They did not figure out what would drive retailers to malls. But now, investors are backing out and funds are drying up for developers, which is leading to rationalisation of rentals,” said Sanjay Dutt, deputy managing director, Cushman & Wakefield.

Developers cutting cost, improving efficiency

Real estate companies are becoming more efficient in project designing and even procurement strategies. They are trying out new strategies improve margins. While some are procuring expensive capital goods directly from manufacturers, others are going to China to get high quality yet cheaper material. Developers have seen their margins shrink progressively in the last one year with input costs going up tremendously. Input costs (cement and steel) have gone up at least 20-25% in the last six months. Margins for developers were high in the 60-70% range for most projects (and over 100% in some) a couple of years back. Today, they are down to about 30-40% across India, says Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj (JLLM). This reduction can be attributed to higher cost of construction, labour, land and other input costs apart from the higher cost of capital. This has forced many developers to look a little closely at various aspects of their processes, something many ignored when the going was good (extremely good).

Some smart developers are utilising economies of scale. “Developers are clubbing projects while procuring to get better rates,” explains Ravindra Singh Verma, director, development projects, project management, Cushman & Wakefield. To save on cost, developers are also now going for direct procurement of big-ticket capital goods such as chillers, diesel generators, glass and even tiles in case of residential projects. “Going for direct procurement from manufacturers can help you save 10-15%,” says Saxena.

Mid range property records peak values in Bangalore

According to the Cushman Wakefield India’s Q2 Bangalore-residential report, Bangalore’s residential rentals in central locations for mid-range properties for second quarter of 2008 have recorded peak values. The values have gone up by 8-10% in two quarters and the main reason credited for this sharp movement is lack of fresh projects launched by leading developers. Rentals of mid-range properties (Rs 20,000-40,000) located in eastern and south and southeastern parts of the city have fallen by 11% and 4% correspondingly.

The excess supply of all grades of developments, appearance of newer residential locations and unexpected shift in interest towards north Bangalore have impacted the eastern and southern markets to a huge extent. Also Whitefield, Sarjapur Road, Outer Ring Road and Bannerghatta Road have an abundance of existing and future residential developments of a range of grades, leading to excess supply. “However, the mounting rate of inflation and the existing cash crunch has led to stabilization in rentals across most areas, barring a few projects in both high-end and mid-range sectors since the first quarter,” the report added.

The coming quarter is not likely to witness any big changes in either capital or rental values in Bangalore’s real estate especially the residential sector. The current economic condition and the unstable stock market situation have changed the outlook for investment preferences in this sector. Capital values are expected to continue stagnant across all areas in the future months, but are probable to weaken in Whitefield, Sarjapur Road, Outer Ring Road and Bannerghatta Road.