Investment in a second home

According to a study conducted by Kapston.com, a Bangalore based e-business consulting firm, the sales of ’second homes’ in India increased by 50

per cent from 2002 to 2007, before the slump in the market brought the figures down to negligible. “Although the concept of second homes was accepted by the Indian audience, as the figures show, everything crashed during the downturn . In the last one year, there have hardly been any takers for this segment .

The market is stagnant as of now,” says Raminder Grover, CEO, Homebay Residential, Jones Lang LaSalle Meghraj.

There are two types of buyers, in the second home market, explains Grover. The first category consists of the affluent buyers who purely look at luxury and the second category is the middle and upper class, which looks at second homes as an investment option. “The first category has started showing interest, in the last coupe of months, but the second category of buyers is still playing the waiting game,” he adds.

As the demand for second homes dropped, even developers put their projects on hold and only now, are builders completing their pending projects. This trend, says Grover, is not surprising, as projects within the city are the ones that give developers immediate returns and so, most developers concentrated on completing these first. “With DLF launching their luxury home segment in Goa, other players, I believe, will soon join the fray,” he expects.

“The industry is still at a nascent stage and those who are planning for second homes, should look at it purely as an instrument of ‘value appreciation’ . Investors should look at it, in terms of growth, over the next two to five years,” says Hemant Shah, chairman , Ackruti City. Investment in the right property will always appreciate in value and with the younger generation earning well and investing intelligently , the second home market has good scope in India, says Abhishek Lodha, director, Lodha Develoers.

Second homes are sought, primarily as a means for a getaway from the city. However, for the larger Indian market, it is also an investment for post-retirement days. Real estate is always an asset and today’s generation wants the option of having a home by a hill or a riverside and this is why places like Devnahalli in Bangalore, Coimbatore, Ooty and Kasauli, are springing with second homes. “There is a lot of demand for properties between Pune and Panvel. Even the four main metros and its peripheral areas are in demand, for second homes,” reveals Tushar Khatri, GM (sales and marketing), Arihant Universal .

Apart from these, the other hotspots for second homes are hubs in Noida, Hyderabad, Jaipur, Kerala, and Gurgaon. Mumbai is also one of the preferred locations, with Royal Palms being the only second home provider within city limits. The 240-acre Royal Palms Estate is situated in the midst of Mumbai’s only green belt and surrounded by a further 20,000 acres of the Borivali Sanjay Gandhi National Park.

Source : http://economictimes.indiatimes.com/markets/real-estate/realty-trends/Investment-in-a-second-home/articleshow/5198311.cms

Property prices could get costlier this Diwali

If you are a homebuyer looking for some hefty discounts to come your way this festive season, you are in for some bad news. Real estate companies across the country are all set to increase prices this season in a bid to improve investor sentiment. CNBC-TV18’s Priyanka Ghosh reports.

Traditionally, the Diwali season has great offers for homebuyers. Developers shell out free parking, price-offs and in some cases even a Mercedes Benz to kick in bumper sales. But such offers may be hard to come by this time around. Analysts rule out a further price reduction as prices have already corrected by 30-35% since last Diwali. In fact, a price increase seems imminent.

Says Anuj Puri, Country Head of Jones Lang Lasalle Meghraj, “If the schemes have done well, you’re going to see some price increase. I think where the developers are coming in, they want to provide confidence to the buyer who had bought may be three-four months ago to say: look, when you bought it, it was at x price but today it is 5-7% higher.”

In the past few months, the real estate sector has seen a sharp price increase led by mumbai and the NCR market. An IIFL report says Mumbai has seen a price recovery by 25-40% from the bottom of early 2009. Prices in the NCR market has revived by 15-20% from March-April levels. Take a look at a few projects: HDIL has revised prices upwards by 38% along with Peninsula Land. Godrej Properties too has increased prices in its Planet Godrej project by Rs 5,000 per square feet.

In the NCR region, both Unitech and Indiabulls Real Estate have revised prices by 18% and 23%.

A slew of real estate companies are set to hit the primary market in the next six months. A price revival boosts cash flow income — that’s vital for the valuation these companies are vying for. There are projects where volume has been kicking in — both DLF and Unitech have doubled transactions in the first five months of this financial year compared to FY09. However, analysts caution that growth of income could soon fail to keep pace with the indicative price increase.

Source : http://www.moneycontrol.com/news/cnbc-tv18-comments/property-prices-could-get-costlier-this-diwali_417525.html

Below-market price attraction in Delhi, Mumbai home market

DLF, the country’s largest property developer, sold all the 1,250 apartments on offer in the second phase of its Capital Greens project near the Moti Nagar area of Shivaji Marg (Najafgarh Road) in West Delhi, within two hours of launching the booking on Tuesday evening.

While the prices were lower than the market, the lowest effective price was 39 per cent higher than the lowest price it had charged during the first phase of the project this April. At the time, DLF had sold all 1,356 apartments on offer under the first phase in a single day; a prime factor was that their lowest effective price was 32 per cent lower than the market price. This time, claimed a company spokesman, it was more than 25 per cent lower than the market one.

Apartment prices are upwards of Rs 6,000 a sq ft in the area. In the second phase, the company charged Rs 6,750, Rs 7,500 and Rs 8,000 a sq ft, respectively, for the apartments, which ranged from 1,210 to 2,720 sq ft each. There was a discount of Rs 500 a sq ft for timely payment and a 8.5 per cent discount on down payment. Hence, the effective selling price, which includes both discounts, is about Rs 5,677, Rs 6,363 and Rs 6,820 a sq ft, respectively. The company additionally charged for parking and for those wanting a preferred location.

A spokesman said the increased charges were due to the better location of the second phase, with a 90 per cent view of greenery and inclusion of four-bedroom apartments, which did not exist in the first phase.

“If buyers lap up the properties with increased prices so quickly, it shows there is a still an appetite in them to absorb that franchise,’’ said Anuj Puri, chairman of property consultancy Jones Lang LaSalle Meghraj (JLLM).

However, Puri said if speculators had participated in the project, then it is bad for the property market, as they could go in for arbitrage later. However, the company spokesman said it had imposed a restriction of one apartment per PAN card holder and a lock-in period of one year within which the buyers cannot sell the apartments.

“We are committed to give value for money for our buyers and rates are still 25 to 30 per cent lower than the prevailing market prices,’’ the spokesman said.

Unitech’s Mumbai launch
In a first of sorts in the Mumbai property market, Unitech, the country’s second largest developer, is planning to launch a new residential project in the Worli area of south-central Mumbai, which is expected to be 35 per cent lesser than prevailing prices in the area, sources in the company said.

But the catch is that the buyer of the apartments should pay 75 per cent of the apartment cost in one go, as against the construction-linked payment plans prevailing in the real estate market, wherein the buyer pays some money as booking amount and the rest in installments linked to each stage of completion.

‘’But the project is in its very initial stages and is expected to be launched in a year’s time,’’ sources said. The company is also expected to return buyers the entire amount with 12 per cent interest if it is unable to finish within a year from the launch.

Ashok Kumar, managing director of Cresa Partners, a realty consultancy, said: “It will certainly put pressure in the south-central Mumbai market, where a number of new projects are coming up, resulting in oversupply.’’

Source : http://www.business-standard.com/india/news/below-market-price-attraction-in-delhi-mumbai-home-market/370986/

Eastern suburbs to be Mumbai’s next commercial hub

Kurla is dotted with narrow, dingy bylanes and isn’t exactly considered a tony address in the commercial capital of the country. But that could change soon.

Kurla is set to add over 6 million square feet (sq ft) of swanky office space and around 3 million sq ft of mall space shortly. Leading the charge are developers such as Phoenix Mills, Kohinoor, HDIL and others.

This upcoming office space is three times the 2 million sq ft office space at Nariman Point, the city’s main office hub, and half of Bandra Kurla Complex, the secondary business district.

There’s more. R City, the biggest mall in the city covering 1.25 million sq ft, is up and running in the eastern suburbs of Ghatkopar, which houses global brands such as Marks & Spencer and Apple i-store, among others.

And the Vikhroli-Kanjur Marg belt, which is in close proximity to Hiranandani’s Powai township, has added nearly 5 million sq ft of office space, with new developments by Lodha, HCC, Akruti and others vying with each other for new clients.

Last year saw one of the biggest property deals in Mumbai when the National Stock Exchange bought 80,000 sq ft of office space from Unmesh Joshi-led Kohinoor City in Kurla, for Rs 120 crore (Rs 1.2 billion). NSE is expected to use the Kurla property for its operations, as its main office in BKC is not adequate for its operational requirements.

The hitherto low-profile eastern suburb of Mumbai, starting from Kurla to Thane on the Lal Bahadur Shastri Marg, is fast becoming the next commercial hub of the city with tony office complexes and new-age retail destinations, giving tough competition to its southern and western counterparts such as Nariman Point, Worli-Lower Parel and Bandra Kurla Complex, among others.

The reason: Easy accessibility from most parts of the city, a good road network, lower property prices than the western and southern suburbs and availability of large tracts of land from now-defunct mills.

“After 2003, the only region that saw rapid growth is the eastern suburbs because of land availability and cheaper property prices. In 2003, the average property price in the eastern suburbs was less than Rs 2,000 a sq ft, while the western suburbs fetched Rs 3,000 a sq ft,” Pankaj Kapoor, chief executive of Liases Foras, a realty research firm, said.

Lower property prices have played a major part in the growth of the eastern suburbs. The new office complexes in Kurla charge rents of Rs 100-150 per sq ft compared to Rs 300-325 at BKC, which is just a 15-minute drive from Kurla.

Outright sale prices at BKC are Rs 35,000 a sq ft, against Rs 10,000-15,000 in Kurla.

Though home prices in this belt have nearly doubled in the last four years, they are still 30 per cent lower than those in their western counterparts, property consultants said.

“Since many suburbs such as Powai, Bhandup, Mulund, Thane and others have come up very fast, it makes sense for companies to set up offices there. This belt is also becoming a destination for firms that want to move from BKC and Nariman Point for lower rentals,” said Pawan Swamy, managing director – West India, Jones Lang LaSalle Meghraj, an international property consultant.

Developers agree. Atul Ruia, managing director of Phoenix Mills said, “Where else in Mumbai would you get land to develop large-scale projects? I think this belt will become a hotbed for development projects.”

Ruia should know, as his company is investing around Rs 600 crore in its 25-acre Phoenix Market City project on LBS Marg in Kurla, which will see 1.7 million sq feet of office space, a 2 million sq feet mall and a 220-room hotel.

Lower property prices have played a major part in the growth of the eastern suburbs. The new office complexes in Kurla charge rents of Rs 100-150 per sq ft compared to Rs 300-325 at BKC, which is just a 15-minute drive from Kurla.

Outright sale prices at BKC are Rs 35,000 a sq ft, against Rs 10,000-15,000 in Kurla.

Though home prices in this belt have nearly doubled in the last four years, they are still 30 per cent lower than those in their western counterparts, property consultants said.

“Since many suburbs such as Powai, Bhandup, Mulund, Thane and others have come up very fast, it makes sense for companies to set up offices there. This belt is also becoming a destination for firms that want to move from BKC and Nariman Point for lower rentals,” said Pawan Swamy, managing director – West India, Jones Lang LaSalle Meghraj, an international property consultant.

Developers agree. Atul Ruia, managing director of Phoenix Mills said, “Where else in Mumbai would you get land to develop large-scale projects? I think this belt will become a hotbed for development projects.”

Ruia should know, as his company is investing around Rs 600 crore in its 25-acre Phoenix Market City project on LBS Marg in Kurla, which will see 1.7 million sq feet of office space, a 2 million sq feet mall and a 220-room hotel.

Though the suburb is connected by LBS Marg, the Eastern Express Highway along the way has improved connectivity significantly, experts said. The Rapid Bus Transit System, with its dedicated bus lines on the express highway, will ease the traffic on it.

Phase I of the Mumbai Metro project from Ghatkopar to Versova, scheduled to be completed by 2011, is expected to give a fillip to the connectivity of the eastern and western suburbs.

The subsequent phases, which will be completed in 2016, are expected to boost the accessibility of these suburbs. Phase II of the Mumbai Metro involves a 12.4 km stretch between Ghatkopar and Mulund and Phase III involves a 19.5 km stretch between BKC and the Kanjur Marg via Airport.

The plans of six-laning the Central Railway tracks from Chhatrapathi Shivaji Terminus to Thane is also expected to ease the train commute on the eastern suburbs.

Though developers are bullish about commercial rates shooting up soon, with demand for commercial properties coming back, real estate analysts are wary of the eastern suburbs going the way of the western and central suburbs.

“We expect rents to go up almost four times to Rs 400 a sq ft in the next three years. The rents would have gone beyond Rs 200 by now in places like Kurla but for the economic slowdown,” said Atul Modak, project Head, Kohinoor City, in Kurla, which will have 900,000 sq ft of commercial space.

“Commercial real estate is still a major concern because there is a huge commercial supply and demand has not picked up significantly as the economy is still not doing well enough,” said Pankaj Kapoor, chief executive of Liases Foras, a realty research firm.

Source : http://business.rediff.com/slide-show/2009/sep/11/slide-show-1-eastern-suburb-to-be-mumbais-next-commercial-hub.htm

CII’S REAL ESTATE CONFERENCE

After a mega success in its previous three editions, CII is organizing the fourth edition of its flagship Real Estate Conference “Turnaround in the Downturn” – An insight into the current Real Estate Scenario, scheduled for Friday, 11 September 2009 in Mumbai.

The world economy has witnessed a paradigm shift. The impact of subprime mortgage crisis, crashing of the financial and real estate markets across economies and weak first quarter earning by most companies has led to diminishing investor activities across markets.
The Indian market has been no exception to this phenomenon. However due to strong fundamentals, a stable political scenario and continued infrastructure investments in the country, the impacts has but been lesser than other economies.

The positive signals in the first and the second quarter are unhurriedly bringing back the economy to a sustainable position and this has encouraged us to focus the conference on the experience of this Economic Downturn.

While it is still to early to talk of a full-fledged recovery from the recent market turmoil, we are definitely seeing the first green shoots of a turnabout. It is significant that even as we speak, India is seen on the international real estate front as a hedge against the global economic downturn. We, as an industry, shoulder the responsibility of nurturing the boosting this image, and to do this will require perfect consensus on the way forward – followed by concentrated and collective effort.

The sector is gaining maturity, and it will take the most mature minds we have to groom it to its highest potential. This event is nothing if not timely, and the representation of real estate professionals it features is the best. During the course of this aptly-named CII Real Estate Conference, we can definitely look forward to progressive discussions and the emergence of solutions says Anuj Puri, Conference Chairman & Chairman and Country Head, Jones Lang LaSalle Meghraj.

The conference is aimed at debating the future of the Indian real estate industry, given the present economic and financial scenario.
With the current downturn, the situation is undoubtedly not encouraging. The mismatch in demand and supply has been made worse given the current economic scenario. The cautious buyers are carefully watching the real estate markets carefully, before making any decision.

With property drastically dipping across most markets, there is a need for new capital and new investment opportunities. There is a considerable scarcity of capital in the market and property values on an average have fallen by 40% in most markets. This trend is expected to continue through 2009. Tenants are increasing seeking value from their properties and As sellers expectations decline to meet new market realties, some of the capital might start seeping back into the market.

Source : http://www.centralchronicle.com/viewnews.asp?articleID=14059

Real estate prices won’t rise around festive season

Property prices are unlikely to rise sharply during the festive season as buyers have become very price sensitive and are not ready to pay premium on flats.

Talking to Hindustan Times, Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj (JLLM) said, “Developers have realised that they can no longer increase the prices at will as the customer will just not buy the product,” said Puri.

He added that since consumers had returned to the market after a lull, developers were not keen to alienate them by quoting high prices.

Puri said that the current market rates were similar to that of mid-2006 levels when the market was just picking up and said that it was the best time to buy.

However, unlike the last few years, this year, the festive season will witness fewer number of new project launches, falling by approximately 35 percent. Though major builders like Hiranandani (Goregaon), Supreme and RNA (Chembur) and Matoshree (Parel) will launch some projects around Diwali, many others have deferred their projects.

“During the last one year we have faced a lot of problems and we have recovered. Our focus is to complete our existing projects and only then will we think of launching new ones,” said Anand Gupta, General Secretary, Builders Association of India, an apex body of the construction industry.

Some developers are even adjusting their projects to suit low cost buyers.

Last week, Nahar Builders launched an affordable housing scheme at Powai at Rs 5,900 per sq ft in a complex where the going price was Rs 7,000. “The buyers of affordable houses will have smaller houses and less amenities,” said Sukhraj Nahar, director, Nahar Builders.

Pujit Agrawal, managing director, Orbit Corporation Limited also thinks that people are no longer inclined to pay a premium.

Source : http://www.tradingmarkets.com/.site/news/Stock%20News/2514190/

For those too busy to manage properties

Property management services are fast catching up, with a host of companies lining up to offer their services to high net worth individuals and real estate companies. Among those vying for a pie of the sky are Sahara Care, Neat Space, TTK Enterprises, Settlers India and Sai Associates, to name just a few. What makes these services so special is the convenience they provide to owners, in so as they do not need to personally supervise and maintain their real estate assets.

The spectrum of services provided is impressive: housekeeping, both manually and mechanised, tenant management or finding a suitable tenant, collection of rent, negotiating rent agreements with changes in market prices, other legal and maintenance requirements.

“The primary benefit is that property asset management (PAM) allows for better expense planning as far as maintenance of a property is concerned. This maximises the asset value, since a better-managed property fetches a higher price than one that is not — both in occupier rentals and in outright sale of the asset,” said Ashutosh Beri, managing director, property and asset management, West Asia, Jones Lang LaSalle Meghraj (JLLM).

JLLM has more than 1.2 billion sq ft of property and corporate real estate assets under management that includes clients in the real estate space such as Hiranandani, RMZ and Unitech.

“Since the economy is reviving we are witnessing that many clients are willing to avail these services,” Ashutosh said.

At the moment though, markets for such services are localised and cluttered with small companies and real estate brokers, Amit Mookim, director, strategic & commercial intelligence, KPMG said. “Profess­ionalism of service is still in its nascent stages, but there is a good future for property management in India, which being a developing economy has witnessed dynamic appreciation in real estate prices, making investment in real estate a risky albiet profitable venture over the long term,” he said.

“It has become imperative for owners to ensure that their assets are managed holistically so as to optimise expenses and ensure greater value for users and investors of such assets,” explains Sushant Mutreja head, property and asset management, Sahara Care.

The charges for these services differ from company to company and also on the size of the property of the clients. Some company charges between Rs 2.50 to Rs 4 per sq ft while another one takes a commission of between six to 10 per cent on the annual rental value of the residential properties.

Simit Thakur, chief executive officer, Neat Space Property and Asset Management Services, which handles more than 30 clients with an asset base of 10 billion square feet, said that her clientele has a majority of corporate houses and HNIs or people with net financial assets of at least $1 million. These people build vacation houses on the outskirts of their city of residence or far off tourist cities in India,” she said.

She said the clients view these properties as investment as well as a vacation home for a few weeks in the year. “For the rest of the year they put it up on rent, the task of which can be assigned to a property manager in the local market. The property owner has to provide a notice of two to three months mentioned in the agreement, when they want to come back,” Thakur said.

“NRIs from countries such as Australia, UK, also form a large chunk of the customer base for our services. Living abroad they do not have everyday control on their property, the management of which are outsourced,” Thakur added

Source : http://www.mydigitalfc.com/real-estate/those-too-busy-manage-properties-046

Residential prices creep up

Call it better home loan rates or just improved consumer confidence and market sentiment, demand in the residential category, particularly in the affordable segment, has picked up.

And, as bookings and enquiries pour in, developers, particularly in Mumbai, have gone back to the customary practice of hiking rates, which have risen 20-30 per cent since May and continue to go up by the day as bookings grow.

Sales improve

Of late, there has been a marked improvement in sales across metros. DLF reported bookings for 1,356 apartments, measuring 2 million sq.ft, for its project Capital Greens, on a single day.

Indiabulls Group, which launched an affordable home project in Gurgaon, has closed over 100 bookings of its launch of 200 in the first phase. The project is a cluster of 800 apartments.

In Mumbai, Kalpataru Group’s project in Thane saw 110 flats sold in 10 days at Rs 3,100 per sq.ft. Another of its project at LBS Marg logged a sale of 50 flats after the rate for a two-and-a-half BHK was reduced from Rs 98 lakh to Rs 82 lakh. At the distant western Mumbai suburb of Virar, a residential township project promoted by Rustomjee and Evershine on 217 acres registered sale of 174 apartments at Rs 1,700 a sq.ft.

“DB Realty project at Dahisar registered 1,400 bookings, even before construction began,” says Mr Suman Memani, Associate Vice-President, Religare Securities, who also points out that prices have since gone up, particularly in the Mumbai suburbs.

Prices go up

According to Mr Memani, HDIL’s Versova project launched at Rs 7,500 a sq.ft had since gone up to Rs 9,500. Similarly, DB Realty had raised prices at Dahisar to Rs 3,300, from Rs 2,700. The most recent instance is of the Harasiddhi Group, which launched its offering in Goregaon, near here, at Rs 10,000 a sq.ft (carpet area), raised the price to 10,300 a sq.ft.

In general, the price hike creeps in after 50-60 per cent of the project gets sold out. In some ways developers are testing the waters and gauging how much the market can absorb. In any case, after the major chunk is sold any developer can afford to wait for a better tiding, he says.

The price increase is only 5-8 per cent since May, says Mr Anand J. Gupta, General Secretary, Builders Association of India.

Justifying the increase, Mr Gupta says it is purely based on demand-supply dynamics. Builders, who were languishing for want of enquiries, now see a silver lining on the horizon, after they had lowered prices to the maximum to stimulate demand.

Mr Gupta points out that historically real estate had either gone up or come down. It had never been stagnant and in places where it had been constant, development was rather stunted such as in Baroda and Ahmedabad. For ages, the only reason for real estate remaining a choice asset class is because it appreciates, he says.

NO JUSTIFICATION

Mr Pawan Swamy, Managing Director – West India, Jones Lang LaSalle Meghraj, sees little justification for escalation in rates at this point in time. The corrections that have taken place in overheated locations of cities such as Mumbai were required, since developers had priced themselves out of the market.

The fact that the slowdown forced them to rationalise their rates has been working to the developers’ advantage, and one would have assumed that the recent market dynamics had delivered a clear and unequivocal message.

However, Mr Swamy feels that there has been a resurgence of demand for residential property in many markets that are not seeing much supply. In such locations, a number of developers who have successfully sold a sizable component of their existing projects are now attempting to see what kind of price escalations the market will be able to accommodate.

This is, to a significant extent, a gamble that can backfire if the developer in question misjudges market dynamics.

However, this is not happening across the board, but rather in high demand-low supply locations and only among developers who have sufficient capital clout. Nevertheless, much depends on the buyer community — if such price escalations are pandered to, we may be looking at price bubbles building up in such locations.

Last month, Mr Deepak Parekh, Chairman, HDFC, cautioned developers against raising prices, stating that such a move would stall recovery of the segment. He was also sceptical about the builder fraternity’s commitment to the affordable housing segment.

Source : http://www.thehindubusinessline.com/iw/2009/08/30/stories/2009083051051500.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

Realtors turn malls and office plans into homes

Mumbai: Residentials hot, commercial space not.

With developers forced to return to the drawing board to make projects financially viable, the landscape is, indeed, changing.

Look what TTK Prestige, the cooker-to-condom maker, said in a notice to the Bombay Stock Exchange last week.

In 2007, the company had entered into a joint development agreement with Kolkata-based Salarpuria Group to develop a 6.3 acre site in Dooravani Nagar, Bangalore.

The initial plan was to construct a mall to ensure recurring rentals. But the financial crisis has forced a change: residential blocks will be added to the project.

“Taking into account the ground reality, Salarpuria suggested putting up a residential-cum-office space. But a decision on this is yet to be taken,” said K Shankaran, director and secretary, TTK Prestige.

The management feels the new plan makes sense from a liquidity point of view.

Also last week, another firm, Sunteck Realty, said it was revisiting its project –a commercial complex on a 1.5 acre site between Kandivali and Borivali. “The project hadn’t even reached the drawing board when we closed the deal a few months back. However, taking into account the oversupply situation in Mumbai’s commercial space, we thought it prudent to develop a high-end residential complex instead, with a small portion of retail added to it,” said Sunteck Realty managing director Kamal Khetan.

Orbit Corporation, the south Mumbai realtor, decided convert its 2.5 lakh sq ft commercial development, called the Hafeez Contractor House in Lower Parel, into a residential project.

Pujeet Agarwal, managing director, Orbit, said the company is actually converting two commercial developments — the Lower Parel one and another in Andheri — into residential ones.

Realty analysts said oversupply and declining demand is making such commercial space development unviable.

“The government’s initiatives towards reducing borrowing costs is reflected in declining interest rates on home loans. This, coupled with realty prices getting more realistic are helping maintain the excitement in the residential space,” said Sanjay Dutt, CEO, business, Jones Lang LaSalle Meghraj, the real estate consultancy.

Revival in demand for commercial space, meanwhile, will largely depend on the global economic scenario.

“The only movement that I see is offices being relocated to more reasonably priced commercial developments thereby cutting costs,” said Dutt.

Investment bank Goldman Sachs in a recent report, said primary residential volume trends (year to date till May this year) indicated recovery in markets such as Mumbai and Noida.

“Inventory days in the two cities have fallen back to early 2008 levels or better. However, the overhang in Bangalore, Chennai, Gurgaon and Hyderabad remains significant with at least 15 months of inventory in the pipeline,” Goldman analysts Vishnu Gopal and Aditya Soman wrote.

With inputs from Pooja Sarkar in Kolkata

Source : http://www.dnaindia.com/money/report_realtors-turn-malls-and-office-plans-into-homes_1282909

Developers relaunch, resize luxury housing

Old projects are being tweaked; new and smaller homes at lower prices to attract buyers are being introduced font size

Bangalore/New Delhi: It has sold just around one in three villas in a project it launched in Bangalore late last year, so QVC Realty Pvt. Ltd has now introduced new, smaller homes in the same project at lower prices to attract buyers.

New packaging: A sketch of high-end residential project Lodha Aria launched by Lodha Group in Mumbai’s East Parel in March 2008.

The villas are still available for the asking—for Rs1.5-3.4 crore—but the new houses will cost far less, between Rs72 lakh and Rs94 lakh.

As demand trickles back into the property sector, particularly in the affordable housing space, bringing back buyers and pushing up sales, developers such as QVC Realty, Lodha Group, Unitech Ltd and Ajmera Group are trying various ways to revive their so-called luxury projects in Bangalore, Mumbai and Delhi. So while some are adding cheaper homes alongside villas to boost sales, others are relaunching their high-end offerings in the hope that there will be demand for them.

Prakash Gurbaxani, chairman and managing director of QVC Realty doesn’t think so, which explains his company’s decision to launch the smaller houses: “Given the current market dynamics, we recognized the need for a lower ticket size product. Buyers are eager to see prices for homes come down and this time it is end-users, and not speculators, driving the demand.”

The Rs150 crore project is the first development of Bangalore-headquartered QVC Realty Pvt. Ltd, the country’s first venture capital-funded realty firm, backed by IL&FS Investment Managers Ltd.

Still, other developers remain hopeful about the prospects of their relaunched offerings.

Lodha Aria in Mumbai’s East Parel area, a high-end residential project, was launched by the Lodha Group in March 2008. It was a limited soft launch, primarily for investors and the firm closed a couple of deals. In July, the project was launched again, this time for buyers. The project has 30 three-bedroom apartments, two on each floor, at 2,100 sq. ft each, with prices starting at Rs3 crore.

“It’s a good time to launch now after a dry spell last year because buyers’ interest is rising,” said R. Karthik, vice-president marketing, Lodha Group.

The launch, he added, was triggered by rising demand at the company’s other Mumbai project, where an 1,800 sq. ft apartment costs Rs3 crore. “What worked for us wasthe various sizes of apartments that buyers could pick from.”

Analysts second Gurbaxani’s assessment of the market and say demand is yet to return to the “luxury” segment of the real estate market and that there are several reasons why developers are relaunching such projects.

“First, luxury projects aren’t selling as much as affordable ones, so many projects have been reclassified from luxury to ‘upper middle class’. Developers are repositioning projects by cutting the size of apartments,” said Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj, a real estate advisory.

And demand has returned to this segment in Mumbai, Puri added.

“Developers rationalized prices by reducing size of apartments by 25-45% and by offering price protection to buyers by telling them that if prices came down, they would be given the benefit of the price drop,” Puri said.

A Bangalore developer has chosen to go the other way.

In a recent auction of nine premium homes for Rs5.5 crore each in the Century Avalon project located at Jakkur in north Bangalore, not a single residence was sold. The builder, Century Real Estate Holdings Pvt. Ltd, has now decided to sell only two to three homes in the project and sell the rest once they are ready. Houses that are ready to move in typically fetch a higher price. The developer is changing part of the masterplan to make the houses bigger and is offering customized interiors.

Unitech recently redesigned its luxury project Unitech Grande on Noida Expressway. From penthouses and duplexes, the firm now plans to relaunch the project as an integrated township with high-rise apartments, villas and developed plots.

Unitech Grande was planned on 347 acres acquired by Unitech for Rs1,582 crore in May 2006 in what was then the largest land deal. Initially, 12 towers were planned, with 36-45 floors each, including duplexes and penthouses. Waning demand for luxury apartments propelled Unitech to redesign the project. This May, the firm launched residential plots, called The Willows, at the site. Around 200 plots have been sold, a company spokesman said.

“There is demand in the market but the pricing and the positioning of the product are important,” said Alexander Moore, managing director, L.J. Hooker India, a real estate agent that conducted the auction.

At the Ajmera Infiniti project in Bangalore’s Electronic City, the developer is now selling cheaper homes in the Rs20-27-lakh category three years after the project’s launch. After initially trying to sell houses for Rs40-72 lakh, the developer is revising the plan for the remaining part of the project and will now build 250 two-bedroom and 180 three-bedroom flats.

“We have seen huge demand in other projects in the same price category. We have got lot of enquiries since we made the change,” said Bandish Ajmera, the Ajmera Group’s managing director.

Source : http://www.livemint.com/2009/08/11215029/Developers-relaunch-resize-lu.html

Realtors may not gain from tax benefit extension

The government’s decision to extend the time limit for claiming tax exemption on profit earned from projects may not give the desired benefits to Buying a house?

Instead of giving benefits to ongoing projects, the government chose to extend a tax waiver to ‘affordable’ housing projects that were approved till March 31, 2008.

“A change in any regulation with retrospective effect doesn’t seem to address either the pricing or the supply issue in the real estate sector,” said Kumar Gera, chairman, CREDAI, a builder’s association.

The current provision is unlikely to have any impact on the prices or on the sale of stock. Had it been an exemption for ongoing projects, it would have been an incentive for developers to build more such projects.

Though there is a shortage of 24 million dwelling units in India, there is not enough supply, especially in bigger cities that cater to middle-income segment. “Such an announcement would have no impact on the overall sector,” said E Sudhir Reddy, chairman, IVR Prime, a south-based developer.

Since projects are already under construction, we will check their eligibility status only when tax is due, said R Nagaraju, corporate strategy planning head at Unitech. For developers, project completion is more important than the checking whether it will benefit from any regulatory change.

As per the new regulation, all projects which were approved by March 31, 2008 against the earlier deadline of March 31, 2007, would be eligible for the benefits of Section 80 IB (10). This section provides tax waiver for a project, which is on a minimum one-acre plot of land and the residential unit, and has a maximum built up area of 1,000 sq ft in Mumbai or Delhi and 1,500 sq ft at any other place. Besides these, there are certain other criteria that need to be fulfilled.

“Most builders preferred large units during April 2007 to March 2008, as they were in high demand at that time,” said A Shyamsunder, executive director, marketing agency Disha Direct.

All big builders, such as DLF, Unitech, Sobha, Omaxe and Parsvnath, had launched their luxury projects those days. One of the few listed players that had launched mid-housing projects during that time was Indiabulls Real Estate and DLF.

However, experts say that this relaxation could benefit a few developers, but not the entire industry. “The overall effect of the announced provisions will only be noticeable in smaller cities, where homes costing below Rs 20 lakh are still procurable. In larger cities such as Mumbai, a flat of 1,000-1,500 sq ft can by no yardstick be considered affordable,” said Anuj Puri, chairman, real estate consultancy firm Jones Lang LaSalle Meghraj.

Source : http://economictimes.indiatimes.com/Markets/Real-Estate/Realtors-may-not-gain-from-tax-benefit-extension/articleshow/4858000.cms

Big-ticket land buys on realty radar again

With a boost in sales and better cash flows from the June quarter, the appetite for land has improved

Bangalore/New Delhi: With the first signs surfacing of a revival in the realty sector, several developers have resumed buying large plots of land for building luxury and budget housing projects as well as to enter new markets.

India’s largest residential developer, Hiranandani Group, Lodha Group, Indiabulls Real Estate Ltd, Provident Housing Ltd and Anant Raj Industries Ltd have purchased tracts of land in cities such as Mumbai, Kochi and Pune at lower valuations following a boost in sales and improved cash flows from the June quarter.

The Mumbai-based Lodha Group, which last year had kept away from land deals worth more than Rs50 crore, came out of its sabbatical in July when it bid Rs710 crore for the 10.4-acre defunct Finlay property in Mumbai, auctioned by National Textile Corp. Ltd (NTC).

NTC now plans to put the Kohinoor Mill No.1 property in central Mumbai on the block for Rs1,100 crore. The Lodha Group may bid for this property as well, said a top executive.

“We bid for Finlay because we are planning new supply, more projects,” said Abhisheck Lodha, director, Lodha Group. “We may buy more land if the deal is good. We would build high-end homes in one part of it.”

In 2005, when land prices were beginning to peak, Lodha had bought Apollo mill, another NTC property in Mumbai, for Rs180 crore.

“The appetite for land transactions has improved. And if that continues, we can say the market has revived,” said Hari Pandey, deputy general manager (finance), Housing Development and Infrastructure Ltd, or HDIL.

The economic downturn had pushed developers such as DLF Ltd, Unitech Ltd—India’s top two realty firms—and Sobha Developers Ltd to sell land and non-core assets such as hotels.

This lull in buying land, which began sometime in mid-2008, followed a three-year realty boom that saw a spate of expensive transactions and continuous land assembling by developers.

Realty firms say they are now buying land for specific purposes. Land prices have not climbed down on par with property prices, but have dipped by 10-20% in certain markets such as Mumbai, Pune, Bangalore and Chennai.

Hiranandani Upscale, founded by Surendra Hiranandani, managing director of Hiranandani Group, intends to buy land in smaller cities such as Pune and Kochi to build townships.

“We are in talks with four private equity players—three foreign and one domestic—to raise about Rs800 crore to develop these projects,” said Hiranandani.

The company also plans to launch three projects in Bangalore, Chennai and Hyderabad, where it already owns land.

Indiabulls Real Estate, the country’s third largest developer by market value, is set to buy land in the metros and large cities after selling small parcels in the past eight months, primarily non-core assets such as 2-3% of a 150-acre plot in Sonepat, Haryana.

“We want to buy land in the heart of the city and are looking at Mumbai, Delhi and Chennai. We are also interested in buying through the government auction route and are looking for attractive deals,” said Gagan Banga, chief executive, Indiabulls Financial Services Ltd, and group spokesman.

Developers are in a relatively better position to buy land after restructuring debt and offloading part of their inventory, said Ashutosh Limaye, associate director (strategic consulting), Jones Lang LaSalle Meghraj, a property advisory.

“We will now see a lot of developers roping in a partner to buy land. Developers will also tie up with private equity funds at the land buying stage, which was not very common earlier,” Limaye said.

As it became more difficult to buy land due to a severe cash crunch, many developers resorted to joint venture projects with landowners to cut costs. But many projects didn’t take off because the landowners demanded more money, he added.

Another set of developers is scouting for cheaper land parcels far from city centres for low-cost and mid-segment housing projects.

After launching two low-cost residential projects in distant suburbs in Chennai and Bangalore, Provident Housing, a subsidiary of Bangalore-based Puravankara Projects Ltd, is negotiating with landowners in Kochi and Coimbatore. Typically, Provident’s apartments are priced at Rs15-20 lakh, excluding taxes.

“We have restrictions in cost because we need to build the homes in a lower price bracket,” said Jayakar Jerome, managing director of Provident Housing, at the launch of the Bangalore project this week.

For other builders, the worst is clearly behind them. Anant Raj Industries, which has a land bank of 990 acres, has set aside Rs400 crore for buying land in prime locations as prices have fallen, Anant Raj is looking at launching houses near New Delhi in the Rs15-18 lakh range, said Amit Sareen, executive director.

http://www.livemint.com/2009/08/02214942/Bigticket-land-buys-on-realty.html?h=B

5% to15% Mall Vacancies in Major Retail Destinations

Mall vacancies in major retail destinations such as Delhi, Mumbai, Pune and Hyderabad climbed between 5% and 15% in June 2009, even as developers rewire their strategies to sustain cash flows. During the past six months, developers juggling with various revenue models have discovered to their relief that certain “flexible” formats like ‘minimum guarantee’ and ‘revenue sharing’ have picked up steam.

“Riding on a 30-40% annual rental growth in 2006 & 2007, and strengthening consumerism, developers in India planned and began constructing malls in dozens. A rental correction of 30-35% from the peak in 2008 was not able to entice retailers, leading to several malls becoming operational in the first six months of 2009 at high vacancies,” says Abhishek Kiran Gupta, head — research of global real estate consultancy firm Jones Lang LaSalle Meghraj (JLLM). According to Mr Gupta, the mall vacancies have continued to increase between 5% and 15% in retail hotspots like Delhi, Mumbai, Pune, Bangalore and Hyderabad.

“Select malls like Inorbit and Forum Value Mall in Bangalore, along with Select City Walk in Delhi, have shifted to a combination of minimum guarantee and revenue sharing models, accompanied by a performance clause in the agreement. Depending on the format of the store and the tenant, the revenue-sharing terms are decided,” Mr Gupta says, adding, “Such flexible revenue models are highly acceptable to the retailers as the risk is shared between the real estate owner and the retailer. Also, it makes the developer more accountable for generating footfalls and conversion rates in the mall. For the developer, it reduces the risk of high vacancy in the mall while counting on the probability of better revenues in future.”

Similarly, developers like the Entertainment World Developers Pvt (EWDPL) are in the process of constructing 20 such malls based on the revenue-share model across India. Gaurav Marya, the president of franchise solution company, Franchise India Holdings, says, “The revenue sharing model, where developers don’t charge rent and accommodate more local retailers into the malls, including local brands, can encourage a seamless model benefiting all the stakeholders.”

Retail consultant, Mr Wahid Ravji chips in: “The revenue-sharing model existed on the international retail scene, but has come very late to India. Most of the big deals finalised between retailers and mall developers are now on the revenue-sharing model. This model works well for both. Retailers now do not wish to shell out more than 4-5% of sales as rent, compared to the 10-11% they used to pay till a year ago.” According to Mr Ravji, the model will ensure that the mall developer continues to remain “interested” in the property and there are enough retailers in the mall to attract significant footfalls.

Source : http://www.indianrealtynews.com/retail-market/5-to15-mall-vacancies-in-major-retail-destinations.html

Mall owners focus on space fillers

AHMEDABAD: Mall vacancies in major retail destinations such as Delhi, Mumbai, Pune and Hyderabad climbed between 5% and 15% in June 2009, even as  developers rewire their strategies to sustain cash flows. During the past six months, developers juggling with various revenue models have discovered to their relief that certain “flexible” formats like ‘minimum guarantee’ and ‘revenue sharing’ have picked up steam.

“Riding on a 30-40% annual rental growth in 2006 & 2007, and strengthening consumerism, developers in India planned and began constructing malls in dozens. A rental correction of 30-35% from the peak in 2008 was not able to entice retailers, leading to several malls becoming operational in the first six months of 2009 at high vacancies,” says Abhishek Kiran Gupta, head — research of global real estate consultancy firm Jones Lang LaSalle Meghraj (JLLM). According to Mr Gupta, the mall vacancies have continued to increase between 5% and 5% in retail hotspots like Delhi, Mumbai, Pune, Bangalore and Hyderabad.

“Select malls like Inorbit and Forum Value Mall in Bangalore, along with Select City Walk in Delhi, have shifted to a combination of minimum guarantee and revenue sharing models, accompanied by a performance clause in the agreement. Depending on the format of the store and the tenant, the revenue-sharing terms are decided,” Mr Gupta says, adding, “Such flexible revenue models are highly acceptable to the retailers as the risk is shared between the real estate owner and the retailer. Also, it makes the developer more accountable for generating footfalls and conversion rates in the mall. For the developer, it reduces the risk of high vacancy in the mall while counting on the probability of better revenues in future.”

Similarly, developers like the Entertainment World Developers Pvt (EWDPL) are in the process of constructing 20 such malls based on the revenue-share model across India. Gaurav Marya, the president of franchise solution company, Franchise India Holdings, says, “The revenue sharing model, where developers don’t charge rent and accommodate more local retailers into the malls, including local brands, can encourage a seamless model benefiting all the stakeholders.”

Retail consultant, Mr Wahid Ravji chips in: “The revenue-sharing model existed on the international retail scene, but has come very late to India. Most of the big deals finalised between retailers and mall developers are now on the revenue-sharing model. This model works well for both. Retailers now do not wish to shell out more than 4-5% of sales as rent, compared to the 10-11% they used to pay till a year ago.”

According to Mr Ravji, the model will ensure that the mall developer continues to remain “interested” in the property and there are enough retailers in the mall to attract significant footfalls.

Source : http://economictimes.indiatimes.com/News/News-By-Industry/Services/Retailing/Mall-owners-focus-on-space-fillers/articleshow/4823854.cms

Siemens puts on Block 13 Residential Properties in Mumbai

German power equipment and transmission major Siemens has put 13 of its residential properties in Mumbai on the block. The properties, part of the company’s non-core assets, are spread across a total area of over 15,000 sq ft with an average price of around Rs 30,000 a sq ft. The properties are located in prime areas such as Altamount Road, Nepean Sea Road, Bandra, Dadar and Chembur. Siemens wants to take advantage of stability in realty prices. The company plans to raise around Rs 45 crore, with a minimum selling price of an apartment starting from at least Rs 1 crore with an average price of around Rs 3 crore. A Siemens spokesperson said: “As part of an ongoing strategy, Siemens regularly reviews its assets and (since) these apartments have not been occupied for quite some time, the company is planning to sell them. The properties will be sold through an auction route.”

The company has appointed Jones Lang LaSalle Meghraj (JLLM) as the property consultant for the deal. The company is also believed to be planning to put more such properties on the block soon. These residential properties would be put on block only after selling the current lot of 13 apartments. Anuj Puri, chairman, JLLM, said: “These are premium properties. Besides Siemens, there are many others also exploring the option of selling their non-core assets.” Earlier, Hindustan Uniliver had also sold some of its residential properties.

Even banks such as Standard Chartered and HSBC are planning to put their non-core assets on the block. The selling of assets is not the result of a distress sale, but to unlock the valuation of the existing assets that are lying underutilised. “Companies may either sell the property or rent them out since that is also an effective option,” said an industry tracker. The recent stability in the property market has been a significant reason for companies to sell some of their real estate assets.

Soruce : http://www.indianrealtynews.com/real-estate-india/mumbai/siemens-puts-on-block-13-residential-properties-in-mumbai.html

Increased Infrastructure Spending will Benefit Real Estate

While most real estate developers were disappointed with the Budget, a few realtors and global property service provider Jones Lang LaSalle (NYSE:JLL) Meghraj stated that increased infrastructure spends would indirectly benefit real estate. Mr Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj, said, of late, increasing number of infrastructure projects had a real estate component by virtue of a cross-subsidisation principle. Therefore, boosting infrastructure projects would give an impetus to real estate.

Similarly, a higher allocation to NHAI (National Highways Authority of India) would ensure improved and accelerated connectivity, which in turn would raise the value of real estate along the routes and open up new areas for development. A larger allocation for Jawaharlal Nehru National Urban Renewal Mission (JNNURM) was also good news for urban infrastructure. The programme has been instrumental in improving road and rail connectivity in urban and suburban areas, and this would boost mass housing schemes on the fringes of the metros. A higher outlay for the rural electrification scheme, besides rural housing fund and roads might serve to improve the realty markets in far-flung areas and help reduce inward migration from the villages by providing industrial growth in the hinterlands.

On the negative side, Mr Puri said STPI (Software Technology Parks of India) units would have a higher burden of Minimum Alternative Tax (MAT). This was an indirect endorsement of SEZs, and in line with the Government’s stance to phase out benefits to STPI projects, thereby encouraging migration to SEZs. Mr Pradeep Jain, Chairman, Parsvnath Developers, said though it was a non-event Budget specifically for the real estate sector, there were certain announcements which would indirectly support the sector. The Budget provides stimulus worth Rs 2,000 crore to the rural housing which was a welcome move as it would complement efforts to provide good quality housing in rural India.

Refinancing 60 per cent of commercial bank loans for PPP projects in critical sectors by IIFCL would infuse liquidity in the system and boost infrastructure development. Increase in allocation under JNNURM by 87 per cent to Rs 12,887 crore would be instrumental in reviving the urban infrastructure. The total excise duty exemption from pre-fabricated concrete slabs would help reduce the cost of construction in projects using pre-fabricated materials.

Mr Kapil Wadhawan, Vice-Chairman and Managing Director, Dewan Housing Finance Corporation Ltd, said the Budget clearly focused on improving rural housing and developing infrastructure in urban and rural India. The allocation of Rs 2,000 crore for Rural Housing Fund through the National Housing Bank to boost the resource base of NHB for refinance operations in rural housing was a significant announcement and would help organisations such as DHFL, which primarily focused on the lower and middle-income segment. The Confederation of Real Estate Developers Association of India said it was utterly disappointed, particularly because the Budget completely ignored the substantial contribution of the housing and real estate sector to GDP and employment of 10 million workers, which was second only to the agriculture industry.

Mr Kumar Gera, Chairman, CREDAI, said he was also upset as the real estate sector that has an impact on over 200 services and industries, with forward and backward linkages, had been let down. However, referring to the allocation for JNNURM scheme and enhancement outlay for housing and provision of basic amenities to urban poor, he said it would provide some relief through Government authorities without much participation by the private sector.

Source : http://www.indianrealtynews.com/real-estate-india/increased-infrastructure-spending-will-benefit-real-estate.html

Housing sector sees a silver lining, sales up 25%

A cross section of banks, property developers and real estate consultancies that SundayET spoke to confirmed that the rise in activity levels since the start of the year had picked up momentum in the last three months, with some in the sector saying that sales were up by as much as 25-30% since April, after witnessing a growth of 10-15%  during the first quarter of 2009.

India’s property market started showing signs of serious trouble nearly a year ago with first the American sub-prime crisis and later the Lehman bankruptcy playing havoc. The overpriced projects by builders found few takers which was worsened with the IT industry facing a major setback. Builders were stuck with high-end apartments which had no takers. There was a severe drop in sales with people wanting to conserve resources. As a result, property prices too fell 30-45% since peak of 2007, according to industry estimates. But today the scenario is different, with builders getting a mix of mid end and affordable housing into their portfolio. Raminder Grover, CEO – Homebay Residential, Jones Lang LaSalle Meghraj, says the revival in sales has been, conservatively speaking, to the tune of around 25% across the mid-to-high income segments, according to his company’s sales records.

Rohtas Goel, CMD of Delhi-based Omaxe too says there has been a 30% increase in sales thanks to factors such as a reversal in general economic sentiment after the elections and more options available in affordable housing. Statistics too would appear to bear this out. India’s largest real estate developer DLF says it has sold almost 1,500 flats in various cities since April, notably some 400 flats in its mainstay market Gurgaon, 700 in Bangalore, 100 plots in Indore, 200 flats in Hyderabad and 50 in Cochin. Rival Unitech has managed to sell more than 4,000 units in the last two and a half months in the National Capital Region, Chennai and Mumbai. Omaxe has also sold almost 500 apartments in its Omaxe Eternity project in Vrindavan. Niranjan Hiranandani, MD of Hiranandani Developers says there had been a sale of 7,000 apartments across the industry, mainly in Mumbai suburbs, over the last 60 days..http://www.maaproperties.com/Pages/ModuleContent.aspx?Module=Articles

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http://www.pr-inside.com/housing-sector-sees-a-silver-lining-r1360901.htm

Sluggish Growth in Real Estate Coimbatore

Laxity in promoting Coimbatore as next IT destination after Chennai,time-consuming approval process, speculative land prices, conservative nature of people and lack of political clout are some of the key reasons identified behind the sluggish growth in real estate in the techcity. Speakers at a forum organised by Confederation of Indian Industry (Coimbatore) and Jones Lang LaSalle Meghraj (JLLM) here on Tuesday. However, believed the realty sector has enough potential and it is poised to pick up growth in about six months to one-year.

In his presentation on Coimbatore Edge, Ramesh Nair, managing director of JLLM, Chennai and Hyderabad regions said branding Coimbatore, as a single entity is very important for the growth of the city. Also, the city has the capabilities to be promoted as a highly promising alternative IT/ ITES and a biotech destination. “There is a huge potential for local, national as well as international developers in the real estate sector in Coimbatore,” Abhishek Kiran Gupta, Head – Research, JLLM said. He cited high literacy rate, more number of people graduating out of many renowned colleges and the city’s contribution to the growth in the per capita income of the country.

“Coimbatore is a self-made city and we haven’t had a trigger point yet. If only the city had got an IT park five years ago when Chennai got it in 2000, it would have propelled a greater growth today,” said Ashok Bakthavathsalam, managing director, KG Information Systems. D R Sekar, chairman, Builders Association of India (BAI), Coimbatore Chapter added that getting approvals for land and buildings have been a difficult and laborious process in Coimbatore and whole of Tamil Nadu.

“Compared to other neighbouring states, the approval process takes a long time in TN and therefore all promoters are shying away from investing in the state,” he said, adding a single window system is the need of the hour. Rajesh B Lund, vice president of Confederation of Real Estate Developers Association of India (TN) said, apart from the delay in approvals, the market fell when the new projects were about to take-off. “It led to a lull in the construction industry,” he added.

Of the proposed seven SEZs in Coimbatore, only three including Tidel Park are under construction now. Likewise, many companies evinced interest to build malls in the city but today only two projects – Brooke Fields and Fun Republic are getting ready. “The lack of night life in Coimbatore and the delay in IT infrastructure has led to slowdown among retail mall developers,” said A Sridharan, managing director, Covai Propery Centre. “Coimbatore is not a modern city and it is also conservative and not used to mall culture. But, after these two malls start operations, people will get used to it,” added Mr Sekar. Also, with the new generation starting to work, the city is bound to catch up with experiencing a new culture”, he said.

On land values, Mr Rajesh Lund said though prices have dropped drastically compared to the all-time high in 2007-08, the landowners still stick to the high prices and are not willing to sell lands. About the city attracting big investments, he added, once infrastructure falls in place investments would automatically flow in. He also hoped that non-resident Coimbatoreans would return to the city and invest here. Mr Ashok added that with the opening of the Tidel Park and the IT-SEZ in Keerenatham village, nearly 16,000 seats would be created in another 1 to 1.5 years time. “If these new professionals are to come to the city, then there would be huge demand for affordable housing and also serviced apartments,” he added. Already leading promoters in the city have planned to construct budget houses costing Rs 15 lakh to Rs 20 lakh each.

HDFC branch head S Ramesh Kumar expected the market to pick up since the costs have come down. “Also with the fall in interest rates, a large number of people would be attracted to real estate now,” he said, adding the future trend also points to a reduction in interest rates.

Source : http://feedproxy.google.com/~r/Indian-Realty-News/~3/vJQ6jxVE5Bk/sluggish-growth-in-real-estate-coimbatore.html

Low-cost housing’s slow rise

While the affordable housing segment is in the limelight, generating some demand in an overall sluggish real-estate market, low-cost housing, essentially for the low-income group and economically weaker sections, appears to be making little headway.

The Government estimated a shortage of about 25 million houses in urban area at the beginning of the Eleventh Plan, of which 97 per cent is in the low-income group.

Mumbai has seen a few launches in the last two to three months, one of them being the Tata Housing project at Boisar, about 100 km from the city. The company received such a good response for its initial offer of 1,000 units that it raised the number to 1,300. The apartments, in the 283-465 sq.ft range, cost between Rs 3.9 lakh and Rs 6.7 lakh. Tata Housing has also tied up with Micro Housing Finance Corporation to provide easy finance to its customers.

LAND COST

Mr Brotin Banerjee, Managing Director and Chief Executive Officer, Tata Housing, feels land cost is a major issue and it should be understood that low-cost housing is high volume and lower profits, compared to high-end formats. When it comes to joint ventures, the philosophy of the landowner should be in harmony with that of the company, he says.

FUNDING, key ISSUE

Matheran Realty, among the first to launch low-cost homes in the price bracket of Rs 3-7 lakh in Karjat, which is also 100 km from Mumbai, says its buyers are finding it difficult to get finance. According to Mr Pravin Banavalikar, CEO, though his project has been pre-approved by 10 banks, only about 250 of over 1,800 applicants who sought loans have received sanctions. It has more to do with the eligibility criteria and loan ticket size, besides the high number of applicants, he says.

The Maharashtra Housing and Area Development Authority, which put up 3,863 flats in the affordable segment, received a tremendous response for its offering. But then, the number on sale was miniscule compared to the over four lakh applications it attracted.

Early this month, Housing Development and Infrastructure Ltd signed a joint venture agreement with the Mumbai Metropolitan Region Development Authority (MMRDA) to develop 525 acres in Virar. The company intends to build and hand over 13 million sq.ft to the MMRDA for rental housing and construct 39 million sq.ft for sale. The project would come under the affordable category and is scheduled for completion in six years.

PRO-POOR

In a recent development, DHFL Property Services Ltd, a 100 per cent subsidiary of housing finance company Dewan Housing Finance Corporation Ltd, tied up with developers to market affordable projects for low-wage earners. It will market a 2,400-unit project in Boisar. The apartments are of 380-500 sq.ft and priced at Rs 1,300 a sq.ft.

Mr B.K. Madhur, CEO, DHFL Property Services, says the company has always “focused on enabling access to home ownership for the lower and middle income groups across India through our mortgage finance company DHFL.”

The company intends to launch similar projects in other far-flung Mumbai suburbs such as Virar, Karjat and Badlapur, besides promoting such ventures in Ahmedabad, Chennai and Hyderabad in the coming months.

RISK FREE

Mr Ashutosh Limaye, Associate Director – Strategic Consulting, Jones Lang LaSalle Meghraj, says high land cost is a deterrent for developers to offer affordable homes. Otherwise, low-cost housing, especially in the metros, is virtually a risk-free proposition. Importantly, even in affordable housing, a developer would have certain minimum profit expectations and if the cost of land does not make these expectations feasible, there is no incentive for the developer to venture into the low-budget home segment.

Buyers of affordable housing can avail themselves of bank funding. But then, the affordable housing segment also brings in certain unique limitations with it.

In the case of mid-to-high-end housing, most buyers can readily produce proof of income, whereas only about 50 per cent of buyers in the affordable housing segment would be able to do so.

Nevertheless, due to the high rate of demand, this would not prevent a healthy absorption rate if such projects are launched.

Source : http://www.thehindubusinessline.com/iw/2009/06/28/stories/2009062850591500.htm

Is it low-cost or just affordable housing?

Affordable housing has been in the picture for the past few months since recession hit the economy . Developers who were busy profiting from  high-end and luxury projects, were suddenly struck by a liquidity crunch when they realised that the global economy has come crashing down. That is when the concept of affordable housing came into being in India. Till some time ago, it was hard for the common man to buy a home for himself. Today , it probably cannot be said that it is easy, but there certainly is hope for the many.

But what is the range of price for affordable housing anyway? Raminder Grover, CEO, Homebay Residential (A subsidiary of Jones Lang LaSalle Meghraj) explains, “Affordable housing is budget housing which offers quality homes at affordable prices, roughly in the range of Rs 18 lakh to Rs 40 lakh, depending on the size and location.” Turns out, that the affordable housing mantra because it isn’t just a few of the developers who have entered the arena, its number is quite large. Bhim Yadav, CEO, Falcon Realty Services Pvt Ltd explains, “Rates differ from one developer to the other, and location to location. But the current trend suggests that the individual unit prices under the affordable housing projects in India are touted to be around Rs 5 to 10 lakh for a one bedroom unit, Rs 11-25 lakh for two and three bedroom units, Rs 27 to 40 lakh for four bedroom units. The range from five lakh to 20 lakhs is what is honestly affordable. Anything beyond Rs 20 to 25 lakh for a three bedroom house is the affordability of a few only.”

Affordable housing has not only proved to be the saviour for the developers, it has brought opportunities for many to buy their dream home. Most developers are rather happy about the kind of response they have received during the booking time. Manu Garg, Director, Landcraft Developers exclaims, “We are providing all the modern facilities that are needed for contemporary living, like club, parking, parks, common security , just to name a few and the booking has already started and the response is very good.”

Affordable housing does not necessarily serve the purpose of the Economically Weaker Sections (EWS) of the society such as the Low Income Groups (LIG) and the Medium Income Groups (MIG). For them it is the low-cost housing that needs to be pushed further . “Low cost housing comes under the range of below Rs 10 lakh while offering one to two bedroom units,” explains Grover.

But why is it that affordable housing costs more than low cost housing projects? That is because affordable housing does not mean the bare minimum , it means the bare minimum facilities that can be provided for the price the buyer is ready to pay. Navin M Raheja, managing director, Raheja Developers says, “We provide all the basic amenities including community facilities and services , shopping area, parking, play areas and schools for children . Wherever there is a need for power back-up , we provide that too apart from other basics .” But that’s not it. Some of the affordable housing projects provide a facilities like, gymnasiums , swimming pools, multipurpose jogging tracks and more. However, it doesn’t seem that the EWS would actually need all these facilities. Instead, all they probably need is a home of their own. In the past few months, developers have realised that the majority of demand comes from affordable housing and they can’t only sustain with the high-end projects. So, now they are adopting a mix of affordable housing and high-end projects. Also, government has introduced a series of fiscal measures , including reduction of stamp duty rates, registration charges and income tax benefits for developers engaged in low-cost housing, which shall keep them interested in lowcost housing.

Source : http://economictimes.indiatimes.com/Markets/Real-Estate/Realty-Trends/Is-it-low-cost-or-just-affordable-housing-/articleshow/4705291.cms

Kolkata, Chennai prices drop the least among major cities

Kolkata’s real estate market has historically remained far more stable than those in other large Indian cities

Kolkata: Real estate rates in Kolkata and Chennai didn’t rise as rapidly as those in Mumbai, Delhi and Bangalore in the heady years of the boom. Now, as prices plunge in these cities, rates in the two metros aren’t falling as much, say international property consultants including the local arms of Cushman and Wakefield and Jones Lang LaSalle Meghraj.

The reason: better balance between demand and supply.
Less volatile: A building under construction in Kolkata. Property prices in the city fell by 14%, against 35% in Mumbai and 24% in Bangalore. Indranil Bhoumik / MintBetween January and March, when real estate developers were reeling under the impact of the credit crunch and slowing demand, and property prices dropped sharply across the country, prices of new homes in Kolkata fell by up to 14% from September last year, whereas they fell by up to 35% in Mumbai and up to 24% in Bangalore, according to Cushman and Wakefield. In Chennai, too, the decline wasn’t as sharp—prices fell by up to 18% but only in some neighbourhoods; in others, there was no change at all.

In Chennai, according to the consultancy, buyers are more sensitive to design and functionality than prices because of which developers weren’t forced to offer hefty discounts—like they were in other cities.
And in Kolkata, the prices didn’t rise as high as they did in some other cities. “In markets such as Mumbai and Delhi, builders overestimated the demand for residential properties, especially in the high-income segment, or properties worth Rs1 crore and above,” said Kaustuv Roy, executive director of Cushman and Wakefield. “This led to an oversupply of such properties in these cities and prices crashed. But that didn’t happen in Kolkata.”
And during the peak of the real estate boom in 2006, prices of residential properties in the upscale Ballygunge area of south Kolkata were Rs3,200-5,500 per sq. ft whereas in comparable areas of Delhi such as Vasant Vihar, the rates were Rs12,000-14,000 per sq. ft, according to Jones Lang LaSalle Meghraj.

Kolkata’s real estate market has historically remained far more stable than those in other large Indian cities. According to a recent report by investment bank Goldman Sachs, even in 1996, when there was a major correction in property prices across the country, prices of residential and commercial properties in Kolkata fell only by 26% and 35%, respectively, whereas in cities such as Mumbai and Bangalore, the drop was at least 50%.
“There’s not been much speculative play in Kolkata properties, which is another reason why prices didn’t go up fast,” said Abhijit Das, joint managing director of Kolkata-based real estate broking firm Lemongrass Advisors Pvt. Ltd. “Also, Kolkata-based developers weren’t as leveraged as the leaders in the industry, who were forced to cut prices sharply when things weren’t selling.”
“The typical debt-equity ratio of real estate developers in Kolkata is 1:1, but for bigger developers, the ratio is much higher—even 4:1 or 5:1 in the case of some companies,” said Pradeep Sureka, director of the Sureka Group, a leading real estate developer in Kolkata.

Source : http://www.livemint.com/2009/06/09224724/Kolkata-Chennai-prices-drop-t.html?h=B

Big Malls Make a Comeback

The global financial meltdown and its concomitant effect on India’s real estate industry had forced developers to defer supply of mall space in 2008. However, in what could be seen as early signs of revival of retail real estate, as many as 100 malls, spread over 30 million sq ft, are expected to come up in 2009 and 2010, according to a report. Though this figure is much lower than what was projected a couple of years ago, analysts say this is finally a positive development, realtors are now more keen on matching supply with demand, placing themselves in strategic locations and offering greater differentiation. An additional 31,846,504-sq ft of mall space will be created across India, according to a report, Mall Realities India 2010, released by retail research group Images in association with the Shopping Centres Association of India, Jones Lang LaSalle Meghraj and Cushman & Wakefield (C&W) India.

The north zone would see the development of 14,790,000 sq ft, of which, Delhi NCR alone is expected to account for 7,645,000 sq ft of mall space. This translates into 45 malls expected in the north zone with 24 in Delhi NCR itself. “The NCR region is huge in terms of area, and residential areas give way to markets. Malls nowadays are not just about shopping. They are leisure centres, with cinema halls, restaurants, beauty parlours and other entertainment avenues. Only malls with a multi-faceted role to suit every pocket will survive,” says Rajeev Talwar, group executive director of New Delhi-based real estate firm DLF. West zone is expected to supply 7,438,504 sq ft through 47 malls. South and east zones would account for 29 malls over 5,865,000 sq ft and 13 malls over 3,753,000 sq ft, respectively.

Says Vikas Oberoi, managing director of Oberoi Constructions, “I think any mall above half a million sq ft will be the order of the day in future. On the outskirts of the city, the size could be over one million sq ft. The advantage of big size is that one can have everything under one roof — food, cinema, fashion, home wear and personal care. Customers would get a wider choice and they would consider it to be a destination mall.” In 2008, 54 per cent of expected mall supply was deferred to 2009-10. Of the proposed 74 malls at the beginning of first quarter of 2008-09, only 34 were delivered by the year-end. At 9.7 million sq ft, Delhi NCR had the largest share of this supply. The credit crunch hit the developers hard, forcing them to put their mall development plans on hold.

“Construction was put on hold because of lack of funding, but as long as there is demand for residential units, there will be a demand for malls. It’s all about the location and positioning of the mall,” explains Snehal Mantri, director (marketing) of Banglaore-based Mantri Developers. The country’s retail sector as a whole has been experiencing significant pressures in terms of cash crunch and depressed sentiments. “Lower or negative revenue growth over last year on same store basis and high rental costs of the stores added in 2007-08 have forced brands/retailers to take a re-look at their real estate portfolio. The main challenge for the sector over the past few quarters has been sustainability,” says Tanuja Pradhan, national head (research services), C&W. Malls across the country have seen a drop of 25-30 per cent in footfalls and 10-15 per cent dip in sales. Mall operators and builders are looking at various options to push profits.

Big retail companies are forging revenue sharing arrangements with mall owners and developers. This is expected to be the model of business relationships between organised retail and property owners in the future. Spencer’s of the RPG group, the People Store chain of the Aditya Birla group and independent retailer Vishal have been able to win over developers who have now agreed to lower rents in lieu of a part of store revenues. Others are looking at various marketing ploys to boost revenues. Automobile company Bhasin Group’s real estate arm has announced a theme mall by the end of March 2010 year in Greater Noida (Delhi’s NCR). The mall, The Grand Venezia is to be built at a cost of Rs 500 crore. It recreates the ambience of Venice with Italian gondolas sailing through a canal located in the heart of the mall with each shop having access to it. It will have a 1.5 million sq ft shopping mall, an office tower, 2-lakh sq ft commercial tower, a 5-star luxury hotel, lifestyle clubs, gaming zone, multiplex and an amphitheatre. In Kolkata, Ambuja Housing Development is planning a mall with a 1,000-sq ft butterfly park on the second level, housing 40 species of butterflies.

Besides, there would also be a 4-screen cineplex, entertainment and food courts, banquet halls, 1,500-car parking area and around 200 small and big retail outlets. The mall will also have a 3-4 star budget hotel with 150 rooms to take advantage of the proximity to the airport, although no brands have yet been finalised. The built-up area of City Centre New Town is 6.8 lakh sq ft and the expected date of completion is September 2009. C&W’s Pradhan advises those looking at the retail sector to focus on 5 Ps — positioning for the brand, pricing for the right tenant mix, packaging for design and interiors, product for the perfect merchandise mix and promotion for malls and brands within malls. Dharmesh Jain, managing director of Mumbai-based Nirmal Lifestyle, sums up the future of India’s mall growth, “At least 80 per cent reduction in mall space is because of slowdown and turmoil in real estate. People who want to enter the business will find it difficult to survive, because the existing ones want to grow bigger. However, I think there will be a shortage of mall space from 2011-12. The economies of scale will come in handy for big malls, the reason why people will be looking for big malls,” he says.

Source : http://www.indianrealtynews.com/real-estate-trends/big-malls-make-a-comeback.html

Realty companies resorting to discounts

MUMBAI: Realty companies are resorting to discounts to sell commercial properties in order to improve cash flows and reduce mounting debts.

DLF, the country’s biggest real estate firm by market capitalisation, has recently sold its 66% stake in a special purpose vehicle that owns eight acres at Prabhadevi in Mumbai for Rs 310 crore, which analysts feel was at a discount.

It is also eyeing to raise around Rs 2,000 crore by selling two commercial properties in the city. Unlisted firm K Raheja Universal recently sold a plot in Santa Cruz in north Mumbai for around Rs 60 crore.

Mumbai is not the only city witnessing distress deals in the commercial property space. Bangalore-based Sobha Developers is learnt to have put a plot in the country’s IT capital on the block with a ticket size of Rs 100 crore. India’s second-largest firm by market cap Unitech, too, is going all out to sell some of its commercial properties to pay down debt.

In the past few months, it has sold its Marriott Courtyard Hotel in Gurgaon for Rs 232 crore and an office property in Saket, New Delhi, for Rs 500 crore.

The combined debt of DLF, Sobha and Unitech is estimated to be at Rs 25,000 crore. Vimal Shah, managing director, Akruti City, a city based real estate firm, said: “While the residential space has started looking up, commercial properties do not have buyers. Many big builders all over India are cautious with their commercial complexes.”
In the past three months the commercial property rates in New Delhi, Mumbai and Bangalore have witnessed a 30-45% decline in price. Rates could fall further if analysts are to be believed.

Anuj Puri, country head, Jones Lang LaSalle Meghraj (JLLM), a property advisory firm, said: “It seems that the commercial property market will take at least a year to revive. Presently only the residential market looks stable and their rates may not fall for some time while commercial property could still see some correction in prices.”
“Many big builders have come up with proposals of selling commercial properties in Mumbai and New Delhi,” opined Pravin Doshi, chairman, Acme Group, a Mumbai-based real estate developer.

http://economictimes.indiatimes.com/Market-News/Realty-cos-resorting-to-discounts/articleshow/4633546.cms

Jones Lang LaSalle Meghraj Releases ‘The Investment Value of Real Estate’

International real estate consultancy Jones Lang LaSalle Meghraj today released its study ‘The Investment Value of Real Estate’. In a period of uncertainty and instability, the company’s researcher wing sensed a need to investigate the underlying risk and return across the various asset classes in India. The result is a white paper that explores the investment opportunity in real estate compared with bonds and equity. The recent financial crisis has fuelled immeasurable anxiety among investors with regard to the assessment of investment opportunities in India. Uncertainty looms large, especially for asset classes that are traditionally classified as ‘risky’.

‘’’The Investment Value of Real Estate’ provides to answer many pertinent questions that investors currently ask our Capital Markets division,” states Sanjay Dutt, CEO – Business, Jones Lang LaSalle Meghraj. “In a scenario of recessionary trends gradually giving way to a definite market upswing, increased interest in the potential ROI of various asset classes vis-à-vis real estate is to be expected. This is a timely study that will be an important adjunct to many vital investment decisions currently being made.” Today, a recurring issue on the investment landscape is the optimal investment of money in the next phase of growth. In ‘The Investment Value of Real Estate’, Jones Lang LaSalle Meghraj investigates all traditional investment instruments and avenues in the light of this question, going on to build a convincing an credible case for real estate.

“In ‘The Investment Value of Real Estate’, we address some oft-repeated questions pertaining to optimal asset allocation in a portfolio comprising of bonds, equity and real estate, and the returns per unit of risk for individual assets and various portfolios,” says Abhishek Kiran Gupta. Associate Director, Research & REIS (Real Estate Intelligence Services) Jones Lang LaSalle Meghraj. “We then provide data to support our finding that real estate continues to provided impressive returns with moderate risk, coupled with a significantly higher efficiency ratio. Real estate in India is currently in the ‘pioneer’ stage, with unlimited growth potential. This said, the question of which sector of real estate is more attractive among office, retail and residential follows naturally. This question has been addressed with pertinent and substantiating information, as well.”

Source : http://www.webnewswire.com/node/456277

Poor absorption of IT space in Chennai

Chennai: Oversupply and poor absorption of commercial space, particularly IT office space, continues in Chennai.

The first quarter report for 2009 released by the Real Estate Intelligence Service (REIS) of the Jones Lang Lasalle Meghraj (JLLM), real estate consultant, states that the stock of commercial space, including IT space in Chennai, is about 30 million square feet and the vacancy rate is between 15 to 20 per cent.

The stock of the commercial space is expected to increase and get close to 40 million square feet by the end of 2009. Simultaneously, the vacancy rate is expected to rise to 20 to 25 per cent.

According to the JLLM study, commercial rents in Chennai were down by 10 to 15 per cent since the last quarter of 2008. Weakening IT demand and disproportionate supply has created this oversupply situation.

The JLLM explained that the Chennai saw a supply of 8.16 million square feet of commercial space, including 7.91 million square feet of IT space, in 2008. The absorption of commercial space was at 5.86 million square feet leaving about 2.30 million square feet vacant.

Drop in rentals

The drop in rentals was observed to be more prevalent along Old Mahabalipuram Road than along Grand Southern Trunk (GST) Road.

The REIS thinks this is because “GST Road consists of only IT SEZ space unlike OMR, which has a huge supply of IT buildings in the pipeline.”

This has also led to an increase in rent-free periods in IT buildings in Chennai.

However, neither the low absorption nor the falling rentals has dampened the supply of IT space in Chennai.

The RIES estimates that about 92 per cent of the commercial space supply coming in the next three years in Chennai is for IT occupiers. The JLLM study acknowledges that government efforts to revive the property market across India through fiscal measures have been positive, but the real impact is yet to be felt.

National trend

Chennai, the JLLM feels, reflects the national trend.

The vacancy for commercial space in India rose from 9.1 per cent to 12.5 per cent in the first three months of 2009 and in all the cities the vacancy rose to double digits.

Another report by the JLLM on the rental dynamics states that the downturn phase in the office sector is expected to last another two to two and half years.

Source : http://www.hindu.com/2009/05/23/stories/2009052361601200.htm

Jones Lang sees commercial rentals correcting further – report

MUMBAI, May 15 (Reuters) – Commercial rentals will fall faster in the second quarter of 2009 than the first, and some recovery should be seen by the end-2010, Jones Lang Lasalle Meghraj said in a report.

Oversupply across commercial space in cities are expected to increase in 2009 and vacancies are seen rising over 20 percent, in the year, the real estate consultant said in its May report.

The report covered Delhi, Mumbai, Bangalore, Chennai, Pune, Hyderabad and Kolkata, taking into account the first-quarter results of 2009.

Around 70 percent of India’s commercial projects announced in these cities for completion during the year are expected to be operational, it said.

“The rest will be delayed…We’ve only seen some isolated cases being shelved or converted. But it’s just a very small number and not in the major cities,” said Abhishek Kiran Gupta, Head-Research of Jones Lang LaSalle Meghraj.

About 146.6 million sq. ft. of space will come up in the next 11 quarters, according to the company’s estimates, as opposed to the total 172.9 million sq. ft. of commercial space announced for completion in the next 3-4 years.

The largest decline in commercial rents have been in Mumbai and Delhi, down 24 percent from the last quarter, followed by Kolkata, Hyderabad, Chennai and Pune, which were down 10-15 percent from the last quarter.

RETAIL

Total retail stock across the cities at the end of the quarter to March stood at 34.8 million sq ft while another 62.6 million sq ft of mall space is either proposed or under various stages of construction in the next 2-3 years.

Currently, Mumbai and Delhi account for about 72 percent of the retail space, but this is seen dropping to just under half the stock by the end of 2011.

Vacancies of retail space have increased to 14.5 percent as more malls in Delhi became operational.

Retailers are renegotiating on their rentals, looking for zero rental schemes, minimum guarantee and revenue sharing models, it said. (Reporting by Jasudha Kirpalani; Editing by Sunil Nair)

Source : http://in.reuters.com/article/domesticNews/idINBOM46805420090515?pageNumber=2&virtualBrandChannel=0

Building on benefits

Today, apart from the realtors who are under pressure to woo customers, there are buyers who are forcing developers to offer sops. About 800 people, who had booked flats in DLF’s Garden City project in Chennai last year, formed an activist forum on Google Groups in February this year. The objective: to collectively negotiate with the builder on issues such as refund of deposits and scrutiny of the original title deed. Finally, DLF refunded the deposits of 200 buyers who had decided to exit the project. It also offered a discount to those who stayed on. Similarly, in Gurgaon, another set of 500 buyers on Yahoo! Groups managed discounts from the same builder.

The combined impact of consumer activism and sectoral pressures is that a prospective buyer has an upper hand while negotiating for a property. “Overall, real estate prices have corrected by 25-40% over the past six months. With funds drying up from investors, speculators, private equity players and banks, realtors have realised that money is only available with the end-users who, in turn, are looking at value for their money,” explains Anuj Puri, MD, Jones Lang LaSalle Meghraj.

The best deals are available in the case of new or semi-constructed projects. DLF, for instance, has cut prices by 30% for its upcoming project in Chennai. In central Delhi, the same builder has launched a scheme to sell each of the 1,400 flats (1,200 sq ft each) at Rs 54 lakh, half the price of similar properties in the same location.

Does this imply that prices might fall further in the near future? Most customers believe so, but the builders don’t agree. “So far, the lack of demand has forced real estate companies to announce price cuts. I don’t think there is any further scope for this,” feels Rohtas Goel, CMD, Omaxe. Adds Puri: “In Gurgaon, property rates have dropped from Rs 6,500-7,000 per sq ft to Rs 3,250. The prices have now hit the 2005-year range and there is no possibilty for more reduction.”

At the moment, however, the deal fever is reaching a peak. This is especially for those who have already booked flats in new schemes or are ready to take possession. Some firms are now giving indirect discounts of nearly 20%; one of them has announced a 5% cut on base price, an additional 10% rebate for timely payments, and a doubling of the compensation rate (from Rs 5 to Rs 10 per sq ft per month) if the project is delayed because of problems associated with the builder. “We have implemented price corrections on project basis. Different models were worked out in different cities,” says Rajiv Talwar, executive director, DLF.

Similarly, the buyers who pay timely instalments to Omaxe are being offered 5-10% discount on future payments. Mont Vert is allowing existing tenants to buy the flat once the lease expires. The rent that has been paid over the past 11 months is considered to be the down payment and is deducted from the sale price. Unitech, Ansal Properties and Parsvnath, among others, require customers to pay only the initial booking amount during the development stages and the EMIs from the date of possession. In the interim period, the developers pay the EMIs.

Freebies have become the norm, rather than an exception. A smaller house free with a bigger one. A fully furnished house for the price of a bare one. A free car (Mercedes or BMW) along with the purchase of a villa. Free international holidays. The list goes on. What you get depends largely on your negotiation skills and level of patience. The desperation among realtors is so extreme that they would rather strike a deal now, at whatever price, than wait till day after tomorrow.

However, the caveat ‘buyers’ beware’ still applies. This is because there are many realtors who insist on fooling the prospective purchaser. The ‘zero EMI till possession’ offer only implies that you will not pay the interest for that period. Once your EMIs start, they will be calculated on the original amount that you borrowed and you will have to repay the entire principal amount. Thus, what you save is only the interest for a few months, which may end up being lower than a straight discount of 10-20% from the builder.

Check out the free house that is being given along with a larger one. In some cases, the latter may be priced higher than the market rate. So, the freebie offered might come to a naught. In other cases, the free one-room-kitchen flat with a 2-BHK, or a 1-BHK with a 2.5/3-BHK flat offer may be misleading. While your main house may be located within the city, the free flat may be far away in the suburbs or in another city. When it comes to cars, the models that are being doled out have, or are going to be, phased out. So, you could end up being saddled with a white elephant that you can’t use or re-sell.

It is important, therefore, to scrutinise the offers carefully before you home in on them.

 Source : http://www.indiainfoline.com/news/innernews.asp?storyId=101227&lmn=1

Rentals decline for high-end apartments, mid-segment sees upswing

Is it a good time for those living in rented apartments? Your location could well be the answer to that. While some pockets in the country are  showing an upswing in rentals, other micro-markets are witnessing a reverse downward movement. Leading real estate consultants say that the residential rental market has been moving in tandem with the demand-supply dynamics of a particular area, rather than the property prices.

Pankaj Jain, executive director of Realistic Realtors, a North-Indian real estate consulting firm says while rentals in some areas have come down, certain pockets are showing an upswing due to the limited supply. “In the national capital region for instance, lack of supply has led to an increase in rentals in some areas.

These include east Delhi, south Delhi and the university campus areas in north Delhi. However other areas in NCR such as Noida, Greater Noida and Gurgaon, have seen the opposite trend.” Agrees Subhash Kumar, a resident of east Delhi whose rent just got higher last month. “I was paying Rs 9,000 per month till last month for a 2BHK apartment. The landlord has recently increased it to Rs 14,000. I tried negotiating but he did not reduce the rent.”

While the upswing in residential rentals have impacted the mid-segment across cities such as Delhi, Mumbai and Bangalore, the high-end segment has seen a downward correction in most of these markets across locations. According to Cushman & Wakefield (C&W), in Delhi NCR all micromarkets witnessed correction up to 4% over the last quarter.

In Mumbai too rental values for high-end apartments witnessed a downward movement across most micro markets in Q1 ‘09. Chennai, on the other hand, saw no movement during the quarter as genuine demand continued to exist. However, a new trend in the city saw clients wanting to consider mid-end options in prime locations such as RA Puram and Poes Garden.

In contrast to Chennai, Hyderabad witnessed significant quarterly correction between 10-23% in the high-end segment. Reduced hiring by IT/ITeS companies, speculation regarding lay-offs and tenants becoming more selective towards rental commitment led rentals in the top-end segment to further drop in January, with these remaining stable over the last two months.

Like Hyderabad, Bangalore too saw a correction in the range of 17-20% in the high-end segment largely due to declining leasing activity. South Bangalore, in fact, has been most affected in the high-end sectors, with rental depreciation of around 19%, due to the decreasing demand.

Jones Lang LaSalle Meghraj (JLLM), too, sees the top-end residential rental market in Delhi slowing down. Transactions are happening, but there are significant time lags between them and volumes have gone down. Expatriate movement is at an all-time low.

Landlords are not getting the kind of rentals they did during the peak phase, but there is no likelihood of a further fall. In Mumbai, according to the consultancy, the residential rental markets have shown a decline in overpriced and speculative areas and in most areas that have seen more supply than demand can absorb.

However, rentals have displayed a remarkable level of inflexibility in areas where there is no supply and demand is high. Kolkata has not shown  much of a decline and continues to look good. In fact, the residential rental market of Kolkata seems to have escaped the worst of the slowdown dynamics, according to JLLM.

Rajiv Sahni, partner, real estate practice, Ernst & Young agrees that while there has been a significant rental correction in the upper end of micro-markets that witnessed unprecedented growth in the last few years, there has been a strong resistance in markets that have healthy demand-supply dynamics and strong fundamentals. But are people more inclined towards renting now or to buy/sell options? Sanjay Dutt, CEO (business), JLLM says the demand for rental homes continues to be high in prime areas with little or no new supply, and in locations that have witnessed a more rational supply rate in the past.

“In areas that have witnessed oversupply, the accent is currently more on outright purchase. This is because investors who had bought units in such areas have, to a large extent, failed to respond to the new market dynamics by coming down sufficiently on their rental expectations. There is also an increasing trend among property owners to sell rather than rent out their properties, since there is still scope for correction in many areas.”

While some developers feel that people are opting more for rent at present due to the uncertainty in the job market, others are of the view that end users will derive more benefit if they buy their own flat rather than stay on rent.

Ajay Midha, director, SEZ & commercials, Raheja Developers feels that a lot of people are opting more for rent owing to uncertain economic conditions and overall confused market sentiments. Rajeev Rai, V-P, corporate, Assotech, says rental property is currently being preferred by those who are not looking to stay in their city of residence for a longer duration.

“Those who have the means and better jobs to back their decision of buying property are going ahead with their plans of buying it. As far as rents are concerned, while the high-end apartments have been affected, the rentals of low and medium-range apartments are moving ahead.” The current situation, many feel, has led landlords to bargain hard with existing tenants to revise the rent in line with the market scenario.

Source : http://economictimes.indiatimes.com/Features/The-Sunday-ET/Property/Rentals-decline-for-high-end-apartments-mid-segment-sees-upswing/articleshow/4504468.cms?curpg=2

Small towns hold big promise for India’s housing boom

New Delhi, May 7 (IANS) For two years, Ratnesh Gupta, a software engineer with IT major Birla Soft, has been trying to fulfil his dream of buying a house of his own, either in the national capital or in Chandigarh. But his budget of Rs.2.5 million (Rs.25 lakh) was making it beyond reach.

Now, he has finally zeroed in on his dream house, though he has settled for Rudrapur, a small town in Uttarakhand. In the process, he has joined thousands of house hunters who are buying properties in smaller cities, fuelling a housing boom in them.

Rudrapur is among a host of towns like Almora, Bhiwadi, Neemrana, Haldwani, Meerut, Moradabad and Karnal that have started attracting new home buyers, bringing a lot of cheer to the realty industry that is otherwise facing one of its worst crises in decades.

“My budget was very small to buy a house in Delhi or even Chandigarh, my native place. Even a one bedroom apartment was not available in a decent colony. Now, I will own a decent house and also manage to save some money for other investments,” Gupta said.

“In Rudrapur, a two bedroom apartment is costing me Rs.14.6 lakh (Rs.1.46 million). It is within reach. And I feel it is a very good investment proposition for future as the city is opening up for development,” he told IANS.

“The main reason for realty development at these places is that metros and even many big cities have become overheated and oversaturated,” said Anuj Puri, chairman and country head of global realty consultancy Jones Lang LaSalle Meghraj.

“Property prices in larger cities have gone beyond the reach of the middle class. So people are looking at new destinations. Prices there are reasonable, where the pace of development is fast and it makes for good future investment,” Puri told IANS.

“Land at these smaller places is still available at reasonable rates. Industries are coming up. There is overall development. So real estate companies, so also investors, have very good future in these places.”

According to Jai Mawani, head of real estate with global auditing and consultancy major KPMG, smaller cities in India offer a huge potential, making them the most happening places for real estate development now and for the future.

“But there is no empirical basis yet to establish the actual market share of these towns in the overall realty sector as it is still unorganised,” Mawani said.

The Planning Commission, which estimates a shortage of 22.4 million dwelling units in the country, says some 80-90 million new units will need to be created over the next 10 years to adress the demand, a majority for middle and lower middle income groups.

Interestingly, rather than the big players, the smaller developers are the ones that are benefiting from the realty boom in smaller cities and towns, which have shown no sign of being affected by a slowdown that has otherwise gripped the country’s realty industry.

“The slowdown, in fact, is helping us. The big developers are staying away from these cities. They are selling land to smaller players so that they can raise cash for bigger projects in large cities,” said Mahim Mittal, managing director, Shivkala Developers.

Take Rudrapur. The town has good connectivity, with Pant Nagar Airport just 11 km away. Delhi is 254 km away, the famous Jim Corbett tiger reserve is 95 km away and a drive of 60 km takes you to the popular hill station of Nainital.

Developers say that in the past two years, more than 100 plots in Rudrapur have been sold to employees by companies like Tata Motors, Bajaj, Escorts, Voltas, Britannia, HCL, Nestle, Parle, Dabur, Hewlett-Packard and Kores India.

“Nearly $2 billion investment has gone into the real estate business in Rudrapur,” said Mittal, adding this would go up once the overall realty market in the country stages a recovery.

The story is similar in towns like Meerut, Moradabad, Manesar, Bhiwadi and Neemrana. For them the unique selling proposition is the proximity to the national capital. Another attraction is they fall along the dedicated freight corridor project.

Source : http://www.thaindian.com/newsportal/business/small-towns-hold-big-promise-for-indias-housing-boom_100189394.html

Housing sector shows signs of Life

India’s housing sector is showing stirrings of growth with a marked increase in the number of transactions for the last quarter of 2009, as the interest rate cuts on housing loans announced by various banks begin to take effect.

The number of residential transactions went up 12-15% for the quarter ended March 31, 2009, over the previous one, according to global real estate consultancy Jones Lang LaSalle Meghraj (JLLM). Leading realty players that SundayET spoke to confirmed there indeed was an uptick in demand in the last couple of months, especially in March.

DLF, India’s largest realty player, managed to sell all 1,400 apartments in its upcoming project in West Delhi within 24 hours at a discounted price, says Rajeev Talwar, group executive director, DLF.

Unitech, which launched two of its affordable projects last month in Delhi NCR and Chennai, too saw an enthusiastic buyer response, according to a company spokesman. The developer sold off 750 apartments in Uniworld Garden II in 45 days of its launch. Another project, Ananda, launched in Chennai and priced at Rs 20 lakh onwards saw 500 apartments being sold off in 10 days, claims the Unitech official.

In Mumbai, more than 2,500 apartments have been sold in the last 40 days, according to Niranjan Hiranandani, MD, Hiranandani Developers.

Reflecting this market movement, banks too confirmed increased activity in the home loan segment. Leading banks that SundayET spoke to said that business from this segment clocked an estimated growth of 10-15% in Q4 against the previous quarter.

Source : http://www.indianrealtynews.com/real-estate-india/housing-sector-shows-signs-of-life.html

Retail and Real Estate Projects on hold in Kolkata

Around 100 small and large retail and real estate projects in Kolkata are being delayed or deferred due to the financial credit crunch. According to analysts and industry insiders, increased retail development in Kolkata and in its suburbs had nearly doubled real estate prices over the last few years. However, although 40 to 50 projects are lined up in the city currently, around 100 projects are delayed or deferred due to credit crunch as well as because of uncertainty over projects’ viability and sustenance.

As per report, projects like City Centre II, Lake Mall, Terminus Mall, Axis Mall and Avani Riverside mall in Howrah, are already running behind schedule. According to Mr Mayank Saksena head of transactions in Kolkata, Jones Lang LaSalle Meghraj, around 40 to 50 projects are lined up for Kolkata while around 100 have been delayed. On an average, each of these projects is of approximately 200,000 square feet priced at an average of INR 3,000 per sq ft. Mr Saksena added that “The best performing local developer is currently Bengal Ambuja. Local developers deliver very satisfactory products at lower prices. For instance, Bengal Unitech is charging INR 3,200 per sq ft in Rajarhat, while other local developers charge INR 2,500 per sq ft for comparable projects.”

Real estate prices in Kolkata are also down 15% and a further correction of 10% is expected, on the back of slowed retail activities and consumers going into savings mode. Due to increased retail development, real estate prices had increased till the better part of 2008 and this includes the suburbs. Right now, the situation is doubtlessly in stagnation, but the downward movement is minimal.

Source :  http://www.indianrealtynews.com/real-estate-india/kolkata/retail-and-real-estate-projects-on-hold-in-kolkata.html

Thane: Take the plunge in City of Lakes

Not too long ago, Thane was considered inaccessible and to put it simply — just a sleepy town. An efficient municipality (Thane Municipal  Corporation) and good infrastructure are just some of the factors that made Thane a location which a lot of Mumbai residents are taking to in more ways than one.

The area plays host to over 1.26 million inhabitants which is steadily increasing. If Mumbai suffered from a paucity of space and greenery, Thane has offered a decent alternative. It has as many as 30 lakes and is quite appropriately called the “city of lakes.” That coupled with the surrounding hills and a host of other picturesque locations have facilitated the metamorphosis of Thane.

“Thane combines the best of both worlds — tradition and modernity,” says Niranjan Hiranandani, managing director of Hiranandani Group, a developer who placed his faith in this town over a decade ago and today offers large townships like Hiranandani Estate and Hiranandani Meadows.

Joining the Thane real estate story are other property developers like Lodha, Kalpatru, Dosti and Runwal, all with a healthy client base. For a long time, access to Thane was an area of concern. That seems to have been corrected to a large extent.

“Thane was once viewed as the last possible means for the common man to own a home within his means in Mumbai. That is changing because of the large-scale construction and development going on there,” explains Ashutosh Limaye, associate director — strategic consulting at Jones Lang LaSalle Meghraj, a property consultant.

Limaye is convinced that the area has moved up in the pecking order of good locations. Today, Thane is connected to the Western suburbs (this eventually leads to key destinations like Surat and Ahmedabad) apart from the eastern express highway that leads to key parts of Central Mumbai like Sion and Dadar.

With the influx of more people, Thane has evolved as a cosmopolitan location. Today, it has a slew of schools, shopping malls, multiplexes, recreation centres and restaurants. “The proposed ring railway, availability of adequate water supply and good road infrastructure are just some of factors working in Thane’s favour,” says Hiranandani. He adds that the proportion of slums in Thane is 10% compared to a 60% in Mumbai.

However, the boom that Thane saw in the last few years (rise in average residential prices from Rs 1,700 per sq ft to over Rs 6,000 sq ft) was over a four-year period and has been affected by the real estate slowdown.

Both residential and commercial rates have dropped quite significantly. Industry experts place it at 20-25% in the case of residential and 25-30% in the case of commercial. Of course, for a lot of people, this situation is also a great opportunity to buy. “The property market in Thane now presents some very good bargains and the long-term outlook for such purchases is very good,” thinks Limaye.

Interestingly, Thane has been largely known as an industrial base with companies like Raymond and Cadbury still having significant operations here. All this has changed over time. According to Hiranandani, while industrial development has dropped, there is a silver lining.

“This has been compensated by a surge in service-based employment like IT and ITES,” he adds. If the evolution of sunrise sectors is a parameter of growth, Thane has passed muster on that one.

The question coming up in the slowdown relates to the best time to buy. Limaye says “Thane remains among the most affordable locations in Mumbai. Despite the current slowdown, there will be a gradual rise in rates as development catches up with the planning and existing supply is absorbed,” he says.

There are also a number of infrastructure projects planned in Thane. Three flyovers are proposed on Ghodbunder Road, connecting Thane to the western suburbs of Mumbai. “Driving time from Thane to South Mumbai will reduce once the other flyovers (including Sion, Chembur and Mulund) are ready,” he adds.

Agrees Limaye who outlines road connectivity as a key factor. “Thane is in the process of gaining equal desirability status with areas like Malad and Goregaon (suburbs in western Mumbai),” he says. The next round of Thane’s story has just unfolded.

Source : http://economictimes.indiatimes.com/Features/The-Sunday-ET/Consumer-Life/Thane-Take-the-plunge-in-City-of-Lakes/articleshow/4419236.cms

Oversupply may bring down Mumbai office rentals

NEW DELHI: For the first time in the past five years, Mumbai’s commercial real estate market is headed for an oversupply with a total of 16.02  million sq ft of new commercial office space expected to enter the market in 2009. However, demand has been dipping steadily.

According to property consultancy Jones Lang LaSalle Meghraj (JLL-M), the demand for office space has dropped 60-80% compared to the peak period from late 2005 to early 2008.

Some parts of the city had seen rental appreciation of over 100% during the period on the back of demand from the banking, financial services and insurance (BFSI) and IT/ITES sectors.

“Rentals are set to go down a further 20-25% in Mumbai owing to the mismatch in supply and demand. BFSI, which generated the most demand for the Mumbai market, has been hit the most in the recent times,” said Vivek Dahiya, CEO of property consultancy GenReal.

A JLL-M report ‘The Slope of Descent’ says: “The BFSI and IT/ITES sectors — the most prominent office space occupiers in the country — have been adversely affected in the economic downturn. The BFSI sector suffered globally with the collapse of major US and UK banks resulting in many financial corporates putting their expansion plans on hold. BFSI demand for office space in India’s business districts fell in 2008, and it is projected to remain sluggish in the short term.”

The mismatch for many years has been on the supply side that has been reversed now. Throughout 2006-08, Mumbai thrived on new companies coming in. A number of investment banks, management consultancies, private equity firms and others, who entered the Indian market, wanted to take up space in the financial capital of India, mostly south Mumbai. “The only demand that is there in the market today is from the non-BSFI corporate segment,” said Kaustuv Roy, executive director at Cushman & Wakefield.

The first quarter of 2009 saw a total supply of 2.47 million sq ft of new space in Mumbai, of which the total absorption of space is only 35%. The total absorption was only 896,454 sq ft. Rentals have been steadily falling in most major micro-markets of Mumbai.

Rentals in Nariman Point are down 13% compared to last quarter and about 30% down compared to a year-ago.
Worli, Lower Parel, Bandra Kurla Complex and Andheri-Kurla are the worst-hit, with rentals declining by 38%, 39%, 27% and 33%, respectively, over the last one year.

This is the best time for businesses to relocate to locations that offer lower rentals and bring down operating cost. “There is some leasing activity going on, but only for the price conscious that is mainly for relocation. The business expansion demand has completely dried out in the city,” said Aniruddh Wahal, national head, strategic occupier services at JLL-M.

Source : http://economictimes.indiatimes.com/Personal-Finance/Oversupply-may-bring-down-rentals/articleshow/4411981.cms

Residential Sector likely to witness oversupply

The residential sector, which has already seen a 15-20% price correction in markets across the country this year, is going to witness a significant residential supply over the next 12 to 18 months in two key markets Mumbai and Gurgaon (NCR).

The direct implication of the over supply will be that the rentals will come down drastically which could lead to a further price correction over a prolonged period of time (one to two years).

Says Niranjan Hiranandani, MD, Hiranandani Developers:”There is no over supply in the Mumbai market. In last one month there has been a good sale of apartment as far as Mumbai market goes. There was a short phase and thing are changing. There has been softening of prices, but things will look up from May onwards. This is all a temporary slowdown and the market will pick up.”

Morgan Stanley Research Asia Pacific reveals that in the next few months mid Mumbai micro market will get six to seven lakh million sq ft of residential space as compared to negligible delivery over the last couple of years. In fact the Mumbai market has seen a 50% rental correction in prime areas from Rs 2 lakh for a three BHK in 3Q 2008 to Rs 1.1 lakh now.

Rohtas Goel CMD, Omaxe Group & president Naredco said: “The low sentiments majority of buyers are in wait and watch policy. After the recent price cut by the developers by squeezing their margins to the minimum level and interest rate cut by banks, we don’t foresee any further price correction in the real estate.”

In fact, in many markets, the level of transactions have gone down drastically, which has resulted in this dip. This is also because residential capital values in some micro markets in the metros have shown a negative growth in the last one quarter.

Says Santhosh Kumar, deputy CEO of Jones Lang LaSalle Meghraj (JLLM): “In the current real estate scenario, what is being observed is a stabilization of select markets. A consistent upswing is not possible in any market. When a large level of supply is in the offering. Real estate markets have observed high growth levels in the recent past. However, in certain areas, market stabilization has been observed. This indicates that there are not many buyers for the prices quoted for various real estate typologies at this point of time.”

In various markets, despite a slowdown in demand, essentially from the end-user and speculative investors, developers have refrained from reducing rates. But both in Mumbai and Gurgoan now developers are offering 25% to 30% discount on the market rate. Sales in secondary markets have also taken a beating with very few transactions taking place at relatively lower price points than market expectations.

Source : http://www.indianrealtynews.com/real-estate-india/residential-sector-likely-to-witness-oversupply.html

Mumbai, Gurgaon residential mkts likely to see oversupply

NEW DELHI: The residential sector, which has already seen a 15-20% price correction in markets across the country this year, is going to witness a  significant residential supply over the next 12 to 18 months in two key markets Mumbai and Gurgaon (NCR).

The direct implication of the over supply will be that the rentals will come down drastically which could lead to a further price correction over a prolonged period of time (one to two years).

Says Niranjan Hiranandani, MD, Hiranandani Developers: ”There is no over supply in the Mumbai market. In last one month there has been a good sale of apartment as far as Mumbai market goes. There was a short phase and thing are changing. There has been softening of prices, but things will look up from May onwards. This is all a temporary slowdown and the market will pick up.”

Morgan Stanley Research Asia Pacific reveals that in the next few months mid Mumbai micro market will get six to seven lakh million sq ft of residential space as compared to negligible delivery over the last couple of years. In fact the Mumbai market has seen a 50% rental correction in prime areas from Rs 2 lakh for a three BHK in 3Q 2008 to Rs 1.1 lakh now.

Rohtas Goel CMD, Omaxe Group & president Naredco said: “The low sentiments majority of buyers are in wait and watch policy. After the recent price cut by the developers by squeezing their margins to the minimum level and interest rate cut by banks, we don’t foresee any further price correction in the real estate.”

In fact, in many markets, the level of transactions have gone down drastically, which has resulted in this dip. This is also because residential capital values in some micro markets in the metros have shown a negative growth in the last one quarter.

Says Santhosh Kumar, deputy CEO of Jones Lang LaSalle Meghraj (JLLM): “In the current real estate scenario, what is being observed is a stabilization of select markets. A consistent upswing is not possible in any market. When a large level of supply is in the offering. Real estate markets have observed high growth levels in the recent past. However, in certain areas, market stabilization has been observed. This indicates that there are not many buyers for the prices quoted for various real estate typologies at this point of time.”

In various markets, despite a slowdown in demand, essentially from the end-user and speculative investors, developers have refrained from reducing rates. But both in Mumbai and Gurgoan now developers are offering 25% to 30% discount on the market rate. Sales in secondary markets have also taken a beating with very few transactions taking place at relatively lower price points than market expectations.

Source : http://economictimes.indiatimes.com/Market-News/Residential-mkts-may-see-oversupply/articleshow/4390175.cms

Retail real estate struggles to survive

Pune retailers are unable to expand due to liquidity crunch and subdued demand, hampering development of malls
By Supriya Unni & Michael Gonsalves Retail real estate in Pune, which was hitherto a hot property, has started losing its fizz. Cash crunch, falling growth numbers and subdued demand are taking their toll on thesectors. It’s the ripple effect at its worst. Retailers are not able to expand their presence, which, in turn affects mall development.
“Owing to volatile market conditions, insecurity of jobs, there has been a decrease in the number of footfalls in the malls in Pune. The footfalls also vary from location to location and depend on the new schemes introduced from time to time to attract customers,” Kishen Milaney, property consultant, Kaypee Shelters, told FC Estate. Also, during the present uncertain times, even those who do visit the malls do not necessarily end up buying things, he added.
The city, according to him has about 60 business locations in the heart of the city, as well as in the newly developed residential zones and IT parks.

“About 20 to 30 malls of various sizes are in the making. It is not clear how many will be completed as some are looking for better brands. Some may even change hands,” Milaney said.
Big Bazaar, which has six stores of various sizes spread across Pune, says luxury items like furniture and electronic goods had taken a hit.
“Today, there are many malls being planned — however, due to the economic slowdown, we expect many of these to see only partial occupancy until things improve,” said Anand Dutta, head (retail) Pune, Jones Lang LaSalle Meghraj.

However, the real estate developers are pinning their hopes on the IT sector and believe that the fact that Pune, as a traditional automobile manufacturing hub, will continue to provide impetus to the city’s retail realty sector.

Over the past 3-4 years, Pune has seen considerable growth in the IT sector, placing it close behind Bangalore and on par with Hyderabad. In the same period, the retail sector has ramped up to introduce a number of malls in response to the increased spending power and demographic changes.

There are about six under-construction malls, each measuring over 5 lakh sq ft. At present, Pune’s retail-scape accounts for approximately 5 million sq ft.

There are about four-five townships of over 100 acres each planned in the city, and retail would be an inherent component of each of these. The scheduled townships will open up new frontiers, as will the proposed international airport.

Manoj Singh, store manager of Big Bazaar in Fatimanagar, is upbeat. “The footfalls have increased by 20 to 25 per cent in March 2009 compared with March last year. For example, on March 27, Maharashtra’s New Year’s day, we had a full house and did good business. On weekends and the first week of every month, we still attract good clientele,” he said.

Source : http://www.mydigitalfc.com/real-estate/retail-real-estate-struggles-survive-293

Realty rates will fall by 35% over 3 years: Report

Real estate prices are set to fall the same way they went up over the past few years.

Residential property prices have already corrected by over 25 per cent in the last eight months but have failed to enthuse buyers. This will pull prices down further.

Property prices in key Indian cities will decline by another 35 per cent in the next three years, a report by brokerage firm Edelweiss Capital noted. “Property prices increased sharply over the past six to seven years, rising 3.4 times in normal term (quoted price) and 2.5 times in real term (transaction price) over 2001 prices. We expect a price correction of 48 per cent in normal term and 58 per cent in real term,” the report said.

“Appetite for real estate has diminished significantly with foreign investors; developers are highly leveraged and their inability to serve the debt obligation raises a threat,” it said.

“Prices have fallen 25-30 per cent and have bottomed out in most places,” said Anuj Puri, chairman, Jones Lang LaSalle Meghraj. “Over the next 12 months, expect another 10-15 per cent drop in markets where there’s excess supply and where prices are too high.”

“Prices have corrected by 10-25 per cent,” said Aditi Vijayakar, executive director (residential services), Cushman & Wakefield India. “In high-end properties, it would correct by another 5 per cent and by 5-10 per cent in suburban markets over the next 12 months.”

Property brokers are feeling pessimistic. Gurgaon has seen a drop of 25 per cent in prices of ready-to-move properties and brokers say there’s no demand for under-construction properties either. It’s no better in Delhi, Noida and Faridabad.

Source : http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=Cricket&id=5319baf0-89d2-4f94-825f-b9a414552c78&Headline=Property+rates+going+south%2c+slowly

Slowdown Leads to Price Cut in Existing and New Residential Projects

Hit by slowdown blues and a massive credit crunch, real estate players are biting the bullet and lowering prices on new and existing residential projects. Recently, DLF Ltd reduced rates by 20 per cent on two ongoing projects — Chennai and New Town Heights, Gurgaon. Market watchers believe that the move could prompt others to follow suit. For instance, Omaxe says it has dropped prices by nearly 15 per cent, but only for new projects (Vrindavan, in Allahabad and Indore, is a case in point). While the company insists it has not “reduced” rates on existing projects, it admits to offering a 5-10 per cent discount to customers who pay instalments on time.

Overall, the real estate prices have corrected by 25-40 per cent over the last six months. With funds drying-up from investors, speculators, PE and banks, realtors realise that the funds are only available with end-users, who, in turn, are looking at value for money, says Anuj Puri, Managing Director, Jones Lang LaSalle Meghraj. DLF came under media glare recently when it slashed prices for its Chennai and Gurgaon projects. Besides this, the company has also launched two more projects at “lower prices” in Bangalore and Hyderabad — against the initially intended price of nearly Rs 3,000 per sq.ft, it has now announced a rate of Rs 2,200-2,300 per sq.ft, says a DLF official.

“In the case of existing projects, there was consumer demand for bringing the rates down. However, in the case of the upcoming projects, there had been an apprehension that the sales could get hit on account of two factors — consumer worry over future cash flows, and their expectation that prices will fall in future. By reducing the rates, we have been able to infuse demand and address these two concerns,” the official adds. According to DTZ, the last 3-6 month period has seen a 10-15 per cent price correction across the Delhi NCR micro-markets. “The correction has been more pronounced in the peripheral locations of Delhi NCR. There is a correction of 10-15 per cent on the quoted values,” a DTZ representative said.

Analysts feel that the price reduction is likely to be more pronounced in the case of new projects than those under construction and nearing completion. This is because on existing projects the end-user is sure on delivery timelines. For new projects, customers are discounting the risk of delivery, analysts opine. So have the residential prices finally bottomed out? No one really can tell for sure. Naturally, most players claim that the prices are unlikely to tank further. According to Rohtas Goel, CMD, Omaxe, “So far the lack of demand in the market has forced the real estate companies to announce price drops, but I do not think that there is any further scope. Builders cannot afford to cut rates, going forward.”

Agrees Puri of Jones Lang LaSalle Meghraj. “In many cases, I feel that the prices have touched the bottom. For instance, in Gurgaon where rates were initially pegged at Rs 6,500-7,000 per sq.ft, they have now come down to Rs 3,250 per sq.ft. I believe that where the prices have hit the year 2005-range, there is no scope for any more reduction now,” he points out. In fact, there are cases where builders are going all out to win customer confidence by offering ‘price guarantee’ of sorts. This essentially means that if a builder decides to cut rates on a particular project for the unsold inventory, he would cough-up the differential to its old customers who may have shelled-out more for the same project initially. This guarantee is being offered only in cases where the builder is reasonable sure that the prices won’t come down in a hurry.

Source  : http://www.indianrealtynews.com/real-estate-developers/slowdown-blues-leads-to-price-cut-in-existing-and-new-residential-projects.html

Commercial realty rates set for a correction, 20% to 40%

Mumbai After the decline of residential realty rates, the commercial real estate market in the city is expected to make a 20-40 per cent correction.

A recent report by Jones Lang LaSalle Meghraj has predicted the short term rental corrections in various micro markets across the country. The report, The Slope of the Decent, states that riding on a boom and expecting tremendous demand for commercial space, developers have constructed extensively across cities from 2005 to 2008. This is evident from that the commercial space supply in the country grew more than three times in four years, from 43 million sq ft by the end of 2004 to 140.7 million sq ft by 2008-end.

However, the JLLM report states that rentals have started falling and are expected to drop further over the next two years. The steepest fall has been predicted in Central Mumbai (Worli, Parel, Prabhadevi, Lower Parel, Dadar), Western suburbs (Malad, Goregaon) and Eastern suburbs (Ghatkopar, Vikhroli, Kanjurmarg, Powai). These areas are set to witness high vacancy levels and a sharp decline of rates of 30-40 per cent from its peak levels in 2008. It attributes the high price correction to the oversupply and appreciation that these areas have seen in the recent past.

It states, “good infrastructure and proximity to the city led developers and occupiers to believe in the growth potential of these areas. Therefore, while rentals surged, a lot of projects were put under construction in these markets.”

The suburban areas of Thane and Navi Mumbai, which have seen huge projects being planned as land was available at lower rates than in Greater Mumbai, are expected to be hit next by the slump. Commercial rentals in these areas are expected to fall by 30-35 per cent.

The commercial business districts are set to be the least affected as they have a low supply. However, since rentals in these hubs have reached unaffordable levels (with a growth rate of 250 per cent), the report predicts a 20-25 per cent correction in such places. These include the CBDs of South Mumbai (Nariman Point, Cuffe Parade, Fort, Ballard Estate) and Bandra Kurla Complex.

The report also says the demand for commercial spaces from manufacturing sectors is expected to increase in future.

Source : http://www.expressindia.com/latest-news/commercial-realty-rates-set-for-a-correction-20-to-40/443616/

Lower rates in realty

Hit by slowdown blues and a massive credit crunch, real estate players are biting the bullet and lowering prices on new and existing residential projects.

Recently, DLF Ltd reduced rates by 20 per cent on two ongoing projects — OMR Chennai and New Town Heights, Gurgaon. Market watchers believe that the move could prompt others to follow suit.

For instance, Omaxe says it has dropped prices by nearly 15 per cent, but only for new projects (Vrindavan, in Allahabad and Indore, is a case in point).

While the company insists it has not “reduced” rates on existing projects, it admits to offering a 5-10 per cent discount to customers who pay instalments on time.

Price correction

Overall, the real estate prices have corrected by 25-40 per cent over the last six months. With funds drying-up from investors, speculators, PE and banks, realtors realise that the funds are only available with end-users, who, in turn, are looking at value for money, says Mr Anuj Puri, Managing Director, Jones Lang LaSalle Meghraj.

DLF came under media glare recently when it slashed prices for its Chennai and Gurgaon projects. Besides this, the company has also launched two more projects at “lower prices” in Bangalore and Hyderabad — against the initially intended price of nearly Rs 3,000 per sq.ft, it has now announced a rate of Rs 2,200-2,300 per sq.ft, says a DLF official.

“In the case of existing projects, there was consumer demand for bringing the rates down. However, in the case of the upcoming projects, there had been an apprehension that the sales could get hit on account of two factors — consumer worry over future cash flows, and their expectation that prices will fall in future. By reducing the rates, we have been able to infuse demand and address these two concerns,” the official adds.

According to DTZ, the last 3-6 month period has seen a 10-15 per cent price correction across the Delhi NCR micro-markets. “The correction has been more pronounced in the peripheral locations of Delhi NCR. There is a correction of 10-15 per cent on the quoted values,” a DTZ representative said.

New projects cheaper

Analysts feel that the price reduction is likely to be more pronounced in the case of new projects than those under construction and nearing completion. This is because on existing projects the end-user is sure on delivery timelines. For new projects, customers are discounting the risk of delivery, analysts opine.

So have the residential prices finally bottomed out? No one really can tell for sure. Naturally, most players claim that the prices are unlikely to tank further. According to Mr Rohtas Goel, CMD, Omaxe, “So far the lack of demand in the market has forced the real estate companies to announce price drops, but I do not think that there is any further scope. Builders cannot afford to cut rates, going forward.”

Agrees Mr Puri of Jones Lang LaSalle Meghraj. “In many cases, I feel that the prices have touched the bottom. For instance, in Gurgaon where rates were initially pegged at Rs 6,500-7,000 per sq.ft, they have now come down to Rs 3,250 per sq.ft. I believe that where the prices have hit the year 2005-range, there is no scope for any more reduction now,” he points out.

In fact, there are cases where builders are going all out to win customer confidence by offering ‘price guarantee’ of sorts. This essentially means that if a builder decides to cut rates on a particular project for the unsold inventory, he would cough-up the differential to its old customers who may have shelled-out more for the same project initially.

This guarantee is being offered only in cases where the builder is reasonable sure that the prices won’t come down in a hurry.

Assured value

Lodha Group, for instance, is offering “best value guarantee” scheme to its luxury housing project customers in South and Central Mumbai. “This is aimed at building customer confidence in the project,” says Mr Abhishek Lodha, the company’s director.

Mr Lodha admits that the new pricing in overall real estate sector is reflecting the market reality. “In our eight new projects, the prices have been pegged 15-20 per cent lower than what they would have been, say, a year ago,” he adds.

Source : http://www.thehindubusinessline.com/iw/2009/04/05/stories/2009040550811500.htm

Kolkata retail demand down, new projects on hold

Kolkata: About 100 small and large retail and real estate projects in Kolkata are being delayed or defered due to the financial credit crunch.

According to analysts and industry insiders, increased retail development in Kolkata and in its suburbs had nearly doubled real estate prices over the last few years. However, although 40-50 projects are lined up in the city currently, around 100 projects are delayed or defered due to credit crunch as well as because of uncertainty over projects’ viability and sustainance.

Projects like City Centre II, Lake Mall, Terminus Mall, Axis Mall and Avani Riverside mall in Howrah, are already running behind schedule.

As retail sales are down by 50 per cent, depending on discount or lifestyle retail categories, and consumers’ discretionary spends are also down 15-20 per cent, developers are now cautious about new projects.

Real estate prices in Kolkata are also down 15 per cent, and a further correction of 10 per cent is expected, on the back of slowed retail activities and consumers going into savings mode.

According to Mayank Saksena, head of transactions in Kokata, Jones Lang LaSalle Meghraj, around 40-50 projects are lined up for Kolkata while around 100 have been delayed.

On an average, each of these projects is of approximately 2 lakh square feet, priced at an average of Rs 3,000 per sq ft.

“The best performing local developer is currently Bengal Ambuja. Local developers deliver very satisfactory products at lower prices. For instance, Bengal Unitech is charging Rs 3,200 per sq ft in Rajarhat, while other local developers charge Rs 2,500 per sq ft for comparable projects”, Saksena added.

Due to increased retail development, real estate prices had increased till the better part of 2008, and this includes the suburbs. Right now, the situation is doubtlessly in stagnation, but the downward movement is minimal.

In the suburbs of Durgapur, Asansol, Bardhhaman, Siliguri, Guwahati and Bhubaneshwar, demand movement was upward because of an increasing retail presence and all the associated boosts to these markets. Retail rentals started at Rs 50 per cent sq ft in these areas and are even now at approximately Rs 100 per sq ft, Saksena informed.

Kolkata’s real estate prices are generally lower than in the other metros.

It is an emerging market that took off only 2000 in terms of residential. Retail development followed in 2003 when the first mall was launched.

“It is still a young market, but is nevertheless all about appreciation,” Saksena added.

Rates started with Rs 1,000 per sq ft and are now at 5,000 sq ft.

Also, the average real estate price drop in Kolkata is the lowest in India at 15 per cent, pointed out Jones Lang LaSalle Meghraj.

“Right now consumers are deferring real estate purchase decisions and the upper budget limit has sunk to Rs 20-40 lakh in the last six months from the earlier budget of upto Rs 60 lakhs,” Saksena said.

Prices are likely to come down by another 15 per cent, mainly in developing areas such as Rajarhat, Salt Lake, Howrah and the CBD zones of Park Street, Camac Street and Elgin Road.

Rates have appreciated unreasonably in these areas and there is now a deadlock in transaction in these locations.

The deadlock has resulted in several store closures in these developing areas.

For instance, the 3,500-sq ft flagship Adidas lifestyle store on Camac Street that had opened less than two years ago, has been closed, on grounds of ‘irrationally high’ rentals. Bangalore-based Primus, the franchisee of the Adidas lifestyle store on Camac Street, had reportedly sought a 25 per cent reduction in rent but the landlord did not agree. High rentals, coupled with ‘hardly any’ sales, had made Adidas on Camac Street ‘non-viable’. Primus has also closed its Adidas, Nike, Levi’s and Reebok factory outlets on VIP Road.

The Adidas store in Mani Square has been temporarily shut and negotiations with the mall management on rentals is ongoing.

RPG Group’s Spencer’s Retail has also taken a hit, especially at its large-format store in Mani Square.

Another large-format retail address — Khadim’s 28,000-sq ft departmental store Egaro — is on the brink of closure.

It has been running a 75 per cent ‘clearance sale’ for over two months now.

Other bleeding retailers in the city include British retailer Marks & Spencer, The Body Shop, Guess, Next and Accessorise, both at Avani Heights near the Exide crossing and in South City Mall.

E-mall, the electronics market on CR Avenue, has seen Future Group’s Depot, the stationery and gifts store, shutting shop, as has the Kodak outlet.

Source: Business Standard

Luxe, but deserted

High-end luxury malls were expected to command huge rentals, which in turn would have helped malls cover high overheads and translate into high margins. But the economic slowdown has changed all that

By Priyanka Dasgupta Brahma & Shilpa Shree They were touted as the Golden Goose of the retail world. Luxury malls, housing high-end and designer brands, were looked at as one of the most promising segments in retail real estate.

These complexes were expected to command high rentals, which in turn would help the malls cover the high overheads and also translate into huge margins.

However, many of the prominent luxury malls across the country are wearing a deserted look these days. The economic recession broadly hurt the real estate business. Rentals have crashed and to make matters worse, these malls are recording very few footfalls, which again is not converting into purchases that much. It’s a vicious circle.
According to property consultants, high street rentals across the country are seeing corrections from 16 per cent to a whopping 44 per cent.

While Connaught Place, Karol Bagh and Basant Lok in New Delhi have seen a 16 per cent correction in rentals, the Mumbai market has seen corrections of up to 41 per cent on Kemps Corner and Breach Candy and 44 per cent on Linking Road.

Although mall owners are tight-lipped about the dip, according to Mumbai brokers, Palladium, the luxury part of High Street Phoenix, a mall in Central Mumbai, is quoting only around Rs 300-350 per sq ft. Palladium officials refused to comment.
“Malls and strips housing designer and high-end brands used to quote sky-high rentals. In the metro areas, this has dipped from around Rs 900 per sq ft to around Rs 250 per sq ft,” said a real estate consultant, who did not wish to be identified.

A recent Macquarie research report on the Indian real estate sector states, “Mumbai’s (and potentially India’s) most prominent mall, The Atrium, remained 30 per cent vacant. This is a product more of design issues rather than market conditions. However, it serves as a case study of how important mall design is for the industry.”

Contracted retail rents are coming down, the report said. “Forecasts regarding footfalls and retail mix are not materialising, leading retailers to seek rental abatements. The Oberoi Mall in Mumbai has seen a substantial number of closures,” the report added.
Another issue that crops up is that when the market becomes difficult, design problems come to the fore. More than one developer said that many malls are not designed well and hence will need capital, which isn’t there at the moment, to improve them. “Some may be converted to warehouse-style retailing,” the report said.
In Bangalore, liquor baron Vijay Mallya had set up UB City, in joint venture (JV) with Bangalore-based real estate developer Prestige Group.

The luxury mall houses designer brands from Cavalli to Paul Smith, has a food court and a club, Shiros, but local real estate analysts say rentals have dipped and most of the space is lying vacant. “We know for sure that a couple of floors still have spaces vacant, although they were expected to be completely occupied within six months of the launch. The mall is quoting only around Rs 250 per sq ft,” said a Bangalore-based real estate consultant who did not wish to be identified. In fact, some brands are rethinking their Bangalore-centric expansion plans.
“The situation of UB City puts a question mark on the viability of a luxury mall in Bangalore. That’s why we are rethinking when it comes to opening our stores there. We are going ahead with our plans to open stores in Delhi and Mumbai. But Bangalore, we really want to wait and watch” said a senior official of a retail major, which is yet to roll out its stores formed out of a JV between some prominent Italian luxury brands. However, the company says this is a good time for expansion, considering the fact that rentals are correcting everywhere in the high streets at the rate of 35 to 50 per cent.

With retail companies struggling at the moment, expansion plans have been put on hold. The previous model of aggressive store openings with an intention to sell the business 3–5 years post-expansion is a thing of past. Profitability, not market share, has become the key driver at present.

During an economic slowdown, luxury items don’t sell. “So, generally the malls and high street, which are selling luxury items, are seeing downward correction in rentals. In some cases, they are down 50 per cent,” said Bappaditya Basu, associate director of retail services, Jones Lang LaSalle Meghraj (JLLM).

Luxury retail still forms a small part of the total retail business in India. According to property experts, the segment is expected to grow at the rate of 5 per cent due to the slowdown.

Rentals have crashed even on the high streets of Mumbai, such as Linking Road and Colaba Causeway. “This is happening in Mumbai all the more because rentals had shot up here to unrealistic levels. The demand was very high because high streets give luxury brands the prominence that they deserve,” said Sanjay Chugh, national head, business drive, retail services, JLLM.

According to Shailesh Chaturvedi, chief executive officer, Tommy Hilfiger Apparel India, rentals have indeed added to the problems of premium and luxury brands. “It should correct or else, it puts a pressure on the bottomline” Chaturvedi said.

http://www.mydigitalfc.com/real-estate/luxe-deserted-097

More malls despite the slump

CHENNAI: The slowdown may have stalled construction projects across the country, but Chennai is set to get six to eight new malls in the next couple  of years, replete with food courts, cinema theatres, gaming arcades and shops.

“In another two to three years, about six to eight malls are expected to become operational. Two will be functional by this year: Ampa mall in Aminjikarai will be ready by the first half of 2009 and Express Avenue on Whites Road by the end of the year,” said Sanjay Chugh, national head of business development, retail of Jones Lang LaSalle Meghraj (JLLM), a leading real estate services firm.

According to a report by Cushman and Wakefield, another well-known real estate solutions firm, 14 malls covering 6.2 million sq ft were to come up in 2010 and 2011, mostly in the southern and western parts of Chennai, but many are now on hold. “Though there are quite a few projects listed on paper, only three or four malls will probably become operational in two years,” said Rajneesh Mahajan, executive director, retail services at Cushman and Wakefield. “There is limited spending on the ground and construction activity has slowed down. It is hard to tell exactly how many projects will stick to schedule,” he said.

Though many projects are stalling due to the slump in business, those already underway will continue according to plan. For instance, Ampa Mall, under construction for more than two years, is now nearing completion. “None of us expected a slowdown to hit us,” said Ampa Palaniappan, owner and developer of Ampa mall. “But since we’ve already weathered the storm, we can only expect growth now.” He said Ampa mall will be the first hyper market (a hyper market covers roughly about 60,000 sq ft and has both supermarket and departmental stores) in the city. “We have retained most of our clients due to reasonable rentals,” added Palaniappan, through whose mall PVR Cinemas will also be entering the city.

Many maintain that the recession has not made a dent in the retail market except for high streets like Khader Nawaz Khan Road, Nungambakkam High Road and Cathedral Road-RK Salai. Unlike other cities, Chennai has only two big malls and faces a huge demand-supply mismatch when it comes to organised retail, and retailers too need more space which is why the new malls are expected to be a hit.

According to JLLM, the share of organised retail space in Chennai is under 5% as compared to 35% in Delhi NCR and 17% in Mumbai, respectively. But what the slump has brought about are revised business strategies and models, and more practical rental rates. “According to the earlier model, rent-revenue ratio would be as high as 40%, which was unrealistic. But now the rates have been revised, say for a smaller store (1,000-2,000 sq ft) it would be about 18% of the gross sales,” said Chugh. “The upcoming malls are in different corridors, so even if there is some delay, there is a definite demand,” he said.

Source : http://timesofindia.indiatimes.com/Cities/More-malls-despite-the-slump/articleshow/4311674.cms

Retail and Commercial Sector Feels the Heat of Recession

The meltdown in the residential segment of real estate is known but the situation is no better in the retail and commercial space as well. Many projects across the country have been badly hit and industry analysts feel that there is a huge over supply of retail and commercial space. In fact, there’s nearly 90 million sq ft of grade A commercial space that is blocked (lying unconstructed) across the top seven cities and more than 25 million sq ft of retail space that is similarly blocked. In the star category hotel segment, 3,000 rooms were expected to be opened for the market in the first six months of 2009, but only 1,000 of these will actually come up.

Says Sanjay Dutt , CEO, Jones Lang LaSalle Meghraj:” The reasons for so much property lying unconstructed is a drop in overall demand, a severe liquidity crunch, generalised uncertainty in the market and the non-viability of many projects, deriving from the fact that some developers bought land at high prices and now are unable to sell at cheaper prices and are now stuck. In the hotel segment, 3,000 rooms were expected to be opened for the market – however only about 1,000 of these will actually materialize. Residential projects, though not actually stalled, are in go-slow mode as developers are re-working their original plans to make these projects more affordable.”

There are at least 15 million sq ft of commercial real estate blocked across Mumbai and Thane district. While in NCR region more than 12 million sq ft of space has been blocked and one million sq ft each in Chennai and Kolkata markets. There were about 0.5 million housing units that came up in Q4 of 2008 in the same period in 2007 0.8 million housing units came up. Now many projects will be shelved or will face delayed completion. The possibility of projects being shelved is the lowest in the residential asset class as compared to commercial and retail space. In many cases the residential projects might undergo some construction changes in terms of configuration, pricing and size.Many in the industry believe that there has been an over supply of retail and commercial space. This has resulted in many developers, who till sometime back were not ready to even negotiate prices, 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. In fact, this itself constitutes almost half of the rentals paid. Says Kishore Biyani, CEO of Future Group:” It is just a mis-match of demand and supply in the real estate business. We feel that now is the time where the developers should rework the entire gambit of the business. Till such time the retail market does not pick up it would be very difficult to absorb such kind of space. In the near future the market has to stabilise as far as the rentals are concerned. Productivity is a key factor for any retailer to operate efficiently in a mall, in case of a leased deal.”

However, 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 particular trend is expected to continue in the coming few quarters too.

Source : http://www.indianrealtynews.com/retail-market/retail-and-commercial-sector-feels-the-heat-of-recession.html

Now, DLF homes for the ‘aam aadmi’

An economic recession sometimes has its advantages like pushing luxury realty developers to make houses for the middle class.

Well, DLF, India’s largest real estate company is looking to set up a residential complex in West Delhi with a very aggressive pricing.

The complex will be set up in the Swatantra Bharat Mills compound, a property that DLF bought from DCM Shriram in 2007 for Rs 1,675 crore. The developer plans to attach a competitive price tag of Rs 7,000 per square feet—a price that may spur a price war in the capital as a minimum area for a two-bedroom hall kitchen is about 1,200 square feet.

Anuj Puri, MD of Jones Lang LaSalle Meghraj, said, “The country’s largest developer launching a project in this kind of a market will definitely help revive sentiments. The fact that the project is being launched at quite an affordable price will attract lot of consumer interest.”

This is expected to be compared with Emaar MGF’s Commonwealth Games Village project, which has priced flats at nearly double than that of DLF’s at Rs 12,750 a square feet.

However, real estate experts say that an aggressive pricing by a leading developer might force other realtors to reduce rates.

It looks like finally DLF is targeting middle class people, who always save and hardly spend. But survival in a depressed market, where access to funds is getting increasingly difficult, is also another reason for big developers to lower prices and construct affordable houses.

Source : http://profit.ndtv.com/2009/03/18223523/Now-DLF-homes-for-the-aam-aa.html

Oversupply of retail space

As against 1 lakh sq.metres of shopping mall space in 2002, there are no fewer than 120 malls totalling 3.9 million sq.m today. The exponential growth of India’s retail sector is expected to continue until at least 2010, by which time the shopping centre stock could be as high as 8.25 million sq.m, says a report from realty services firm Jones Lang LaSalle Meghraj (JLLM).

While the numbers look staggering, on the flip side, the country is seeing a state of oversupply as far as the retail space is concerned. This, coupled with low sales for retailers, is forcing them to rethink their expansion plans. As a result, “demand for mall space has sunk by more than 50 per cent from the same time last year”, says Mr Shubhranshu Pani, Managing Director – Retail, JLLM. “Retailers have drastically slowed down on their expansion plans and are attempting to squeeze in maximum value on their deals with developers.”

With demand dipping, projects that have not taken off so far are being stalled, and developers are attempting to reinvent their intended malls into more marketable formats such as office and residential, depending on the demand.

Mumbai has seen a 30 per cent dip in demand, while it is a 40-45 per cent dip in New Delhi, around 80 per cent in Kolkata, and 70 per cent in Pune. “The retail situation in Bangalore and Chennai is muted, but transactions are going on at a more subdued level,” says Mr Pani.

Though the retail euphoria has died now, location-specific malls will still be in demand, says Mr K.S. Sudarshan, Chief Operating Officer, Ozonegroup, a Bangalore-based real-estate developer. Chennai, he points out, is supply-starved as far as retail space is concerned, for it is the only city that has not witnessed any price and demand correction.

This short supply scenario has encouraged the company to plan the launch of a 1.5-million-sq-ft mall in Anna Nagar, an upscale locality in Chennai, “where there are no competing malls in the vicinity,” says Mr Sudarshan. “We have already tied up with major brands for the retail space in the project, and are in talks with a few others too. We haven’t seen price and demand corrections now, nor do we anticipate any major correction in the future.”

What will work

There is still demand for quality space across the country, says Mr Susil S. Dungarwal, Founder and CEO, Squarefeet Management, a Mumbai-based real-estate consultant firm. It will be only the stand-alone shopping/retail spaces that would feel the pinch, feel industry analysts. A destination or integrated mall will always be in vogue, says Mr Sudarshan. There is a dearth of quality luxury space in India, “which is why luxury brands have no choice but to go to five-star hotels or high streets,” feels Mr Dungarwal. “With the FDI allowed in single brand retail, many luxury brands are still waiting for the luxury retail space availability,” he adds.

Besides, with two-thirds of the country’s shopping stock currently located in tier-I and tier-II cities, retailers and developers are also gradually shifting their focus towards tier-III cities, which are expected to have about 100 new malls that are to be developed in the country over the next five years, say analysts.

While new retailers in India (both domestic and international) are still focused on major metros, expanding retailers and mall developers are now selectively focusing on tier-III cities, says another JLLM report. These markets, including Ahmedabad, Chandigarh, Ludhiana, Jaipur, Lucknow, Kochi and Surat, are witnessing strong growth in income and, more significantly, changing lifestyles and aspirations along with a fundamental shift in the consumer mindset.

Rental and lease values

With the sudden increase in the supply of retail space, and a reduced demand, there is a correction in the price of rentals. “Now, retailers have an upper hand over developers, which was not the case till recently,” says Mr Dungarwal.

While mall rentals are said to have fallen by 20-30 per cent in most of these cities, the number could be even higher at 45 per cent in some cases, some say. “Tenants are now trying to re-negotiate rentals and are asking for about 20-30 per cent reduction,” says Mr Dungarwal. There has been correction where the mall has not been doing well and retailers have already left or are considering vacating the space.

Mr Pani says that almost all transactions now feature the revenue-sharing options rather than full rental, “since this is now the only way of getting retailers interested in occupancy”. Says Mr S. Raghunandan, CEO – Retail, Prestige Group, which owns and operates the Forum Mall in Bangalore, “Occupancy rates have to be made more affordable and this can only be done through the revenue-sharing rental model.” Prestige has followed the revenue-sharing model right from the beginning when it launched the Forum Mall five years ago. In Mr Raghunandan’s view, this works well for both the mall owner and the tenant “in both good times and bad times.”

The future

Most of the tier-III markets have also started to show signs of maturing and a shift in momentum, says the JLLM report. Demand for space by retailers is starting to slow in some markets as a result of a better understanding of local consumers and a realisation that standardised formats will not necessarily work in all markets. Developers in some of these markets now suffer from the effects of their overly optimistic assumptions on retail space absorption. Ahmedabad, one of the largest and most active retail markets, is currently suffering from a short-term oversupply of retail space, which has led to a dampening of market transactions and a correction of rental levels.

Mr Dungarwal agrees that the tier-II and tier-III cities did see an upsurge in rentals, but have been more stable on the rentals. “There is, however, a small correction of about 10-20 per cent in the new space availability,” he adds.

The JLLM report says, “While developers, occupiers and investors should be astutely aware of the shift in market momentum, we believe this to be a short-term phenomenon rather than a reflection of a broader long-term trend in tier-III markets.” But matters on India’s retail front will only look up after a convincing economic revival and return of confidence and positive sentiments, says Mr Pani. This could take anywhere between 18 and 24 months.

Source : http://www.thehindubusinessline.com/iw/2009/03/15/stories/2009031550661500.htm

Property in hill stations on a uphill

At a time when sales in most real estate markets are seeing a downward trend, there is one segment that could start moving uphill, literally.

In a bid to escape the stress and hectic schedules, many feel that homes in hill stations and foothills such as Rishikesh, Mussoorie, Almora, Shimla, Ooty, Kodaikanal, Haridwar and Dehradun will be an ideal buy in the present scenario. Desiring a break from slowdown blues is, in fact, making many of these locations a better proposition.

The only thing, however, that a buyer needs to keep in mind is to check if buying property is legal in these locations or not. In some Indian states, non-locals are not permitted to buy land.

In Jammu & Kashmir, for instance, there are laws prohibiting affluent outsiders from buying land so that the interests of local farmers are protected.

This law is applicable to all those who have not been residing in the state for at least 10 years before May 14, 1954. In Sikkim, non-locals cannot purchase land except to establish industrial units.

In Arunachal Pradesh, sale of land or property to non-locals, more specifically non-tribals, is not allowed. There were also restrictions on purchase by outsiders in Himachal Pradesh under the Himachal Tenancy Land Reform Act (1972).

Many of these laws, however, are being bypassed by outside investors entering into partnership deals with locals. Today, Himachal Pradesh Urban Development Authority (HIMUDA) has granted permission to builders to develop land and licenses are now being issued.

There are a lot of reasons why buying in hill stations is gaining momentum these days. Modern day stress, hectic schedules and a desire to lead a peaceful life makes these hill locations a preferred choice for many.

Buyers also love the spaciousness, greenery and natural beauty which homes in these locations offer.

Says Raminder Grover, CEO of Homebay Residential, Jones Lang LaSalle Meghraj (JLLM), “Despite the negative economic dynamics prevalent today, the market for residences in hill towns is still emerging in India. This buyer segment is usually in the age bracket of 35-45 years. These buyers purchase such homes either for investment purposes or as weekend getaways.”

However, as compared to the West, the trend of buying in hill towns is yet to catch on in India.

“Buyers of holiday homes at locations in the West tend to spend their entire summers at their vacation homes and buy them accordingly in terms of scale and numbers. The concept is an emerging one this side of the globe, but the driving motives and scale are very different,” adds Grover.

Many feel the trend of buying a home away from the city or a weekend home is increasingly becoming predominant in the country, much on the lines of the West.

Says Shravan Gupta, vice-chairman of Emaar MGF, “Having widespread appeal in the West, the idea is quickly catching on here, with various individuals opting for the alternate house on the outskirts of their cities, in order to get away from the hustle and bustle as often as possible, in the relaxed atmosphere of one’s own home in these areas. These homes are created either in the form of cottages or built-up apartments, with the view being an important criterion.”

Experts say those who buy homes in hill stations do so in locations close to accessible areas with convivial surroundings.

For instance, in the case of Mumbai and Pune, the locations of choice are Lonavala, Khandala, Baneshwar and Alibagh. Towards the north, it is mainly non-restricted areas around Dehradun, Mussoorie and Nainital which are popular.

In the east, areas around Darjeeling are popular while in the south, destinations such as Ooty and Kodaikanal are quite a hit with buyers.

Developers are very positive about the opportunities in these markets and agree that properties here could become attractive. Omaxe, for instance, is constructing Park Wood township which will have more than 2,000 flats in Baddi.

Says Rohtas Goel, CMD, Omaxe Group, “The real estate sector in Punjab and Himachal has great demand and Shimla’s industrial areas such as Baddi are close to Chandigarh and that is the reason for the growth in Himachal Pradesh. We are making one of the biggest townships in the state and are confident of its success.”

Needless to say these hill stations are more popular as vacation homes. And in that sense they are still seeing a steady clientele.

Says Rajeev Rai, vice-president (corporate) of Assotech, “Homes perched atop a hill always buck the slowdown trend as they offer luxury of a different kind. Single family homes are preferred where the developer enters into an agreement with the buyer to maintain his property throughout the year. Some of the developers are also offering a model in which the buyer can use his property for a part of the year and during rest of the year, his property will be rented out to users thereby guaranteeing a return on buyer’s investment.”

This developer has a project located in the industrial hub of Rudrapur amidst natural beauty, which is witnessing a good response from buyers.

What also acts as an incentive is the prices in these locations which are more lucrative than that in new residential property. “The added attraction is the pricing of such new built residential property, which is being offered at quite attractive prices compared to new residential property available in suburbs in the bigger cities. Such developments are conspicuous in towns which have witnessed a fair amount of interest from buyers in bigger cities, looking at a holiday home for religious or weekend getaways,” says Kamal Taneja, MD of TDI Developers.

Well, here then is an opportunity to buy your own home in the hills. You could feel the serenity of nature all around you — and beat the slowdown blues.

Source : http://economictimes.indiatimes.com/Features/The-Sunday-ET/Property-in-hill-stations-on-a-uphill/articleshow/4265741.cms

In crisis, discount schemes for home buyers

Calcutta, March 14: Some city developers are offering to pay a part of the interest on buyers’ home loans to revive demand, hit by the economic slowdown.

Four leading developers have unveiled “subvention schemes” under which they pay their customers’ pre-equated monthly instalments (pre-EMIs) to banks or housing finance companies for an agreed period.

The pre-EMI represents only the interest on the loan taken. Unlike the EMI, which the buyer starts paying later, it does not include any component of the principal.

In two housing projects, the developers — Eden City and Ruchi Group — are offering to pay the pre-EMI from the time the buyer books the flat till he takes possession. With the average period for this being about 30 months, the scheme in effect offers the buyer a 10-12 per cent discount on the flat’s price.

A third project — Calcutta Riverside, an upcoming township at Batanagar — is offering to pay the pre-EMI for a fixed 12 months, the discount working out to 3 to 5 per cent.

Keppel Land, a Singapore developer, too has announced a one-year pre-EMI offer in addition to its older incentive scheme for buyers: free travel and lodging during a three night-four day trip to Singapore for two.

Several more developers are expected to come out with their own subvention packages. Developers in western and northern India have been offering such incentives but this is a first in Calcutta.

The sales slump in the city shows in Calcutta Municipal Corporation statistics: it sanctioned 941 buildings in October-December 2007 but only 225 in the same period last year.

“We are trying to create a buzz around the (subvention) scheme in the hope of reviving the market,” Indrajit De, managing director of Eden City, said.

Eden is offering its subvention scheme for 200 flats in its upcoming project at Maheshtala, after sales fell to a fourth of the early 2008 figure. The Ruchi Group is making the offer on its new project, Active Acres, off EM Bypass.

“It’s a limited-period offer. There are 450 units on offer now, but not all of them will get this scheme. We have to see how the market responds,” a Ruchi official said.

Ambuja Realty, owned by Harshvardhan Neotia, is planning a subvention scheme for its Uphaar project on EM Bypass, where 150-odd flats will be on offer. “We are yet to decide the tenure,” an official said.

“Subvention schemes are a better instrument to prop up demand than reducing the price, which only increases buyers’ expectation for more rate cuts, resulting in fewer sales,” said Abhijit Das, city head of the property consultancy, Jones Lang LaSalle Meghraj.

An HDFC official said the schemes made equal sense for the developers, buyers and housing finance companies.

While the builder sells fast, the buyer too gains, whether he is an investor who would later sell the flat or house, or an end-user who will live there.

For the end-user, the scheme amounts to a straight discount. “It will be of most benefit to those who now live in rented houses and find it tough to pay their monthly rent and pre-EMI simultaneously,” the HDFC official said.

Under a subvention scheme, an investor pays only 15-20 per cent of the property value when he books it. He then pays nothing till possession, waiting for a rise in prices to sell it. Without the scheme, he may be paying 10-12 per cent more to hold the flat.

Finance companies stand to gain because higher sales means more demand for home loans. Just to be safe, they plan to take the total pre-EMI from the developer at one go.

Pradeep Sureka, president of builders’ body Credai (Bengal), said the real estate market was keenly watching the development. “If they (developers offering the schemes) prove successful, others will surely follow,” he said.

The HDFC official, however, said housing finance companies would only work with top-notch developers. “Don’t expect the neighbourhood builder to offer such schemes.”

Source : http://www.telegraphindia.com/1090315/jsp/nation/story_10672472.jsp

Commercial property developments in India being abandoned and delayed

Mumbai and Delhi, India’s leading commercial property markets are unlikely to see any major increase in supply in the next couple of years, as developers either abandon or delay projects due to severe lack of cash.

Out of 212 million square feet grade-A office space planned in Delhi, Mumbai, Bangalore, Kolkata, Pune and Chennai, it is predicted that only 88 million square feet is likely to be completed by 2010, according to industry officials.

The demand-supply scenario in these cities would remain under pressure, they added, and average absorption across these six cities is also set to reach its lowest point, as it will fall by nearly 60% during the next five to six quarters.

‘Developers will be forced to cut back new construction plans significantly given the low demand for office space due to overall slowdown of the economy,’ said International property consultant DTZ in a recent report on office space supply.

Projects, that were announced and which are still in planning stage, will most certainly be shelved, added the report.

‘Many under construction projects will undergo financial stress or will be stranded due to lack of finances for completion, until there is an improvement in market conditions,’ said Anshul Jain, CEO (India) at DTZ International.

Mumbai, one of the most expensive commercial markets in the world, had been expected to add another 34 million square feet over the next two years. However, with the current slowdown it is now highly unlikely that all this supply will be realised before 2010.

Industry analysts believe only 16 million square feet will be added into the Mumbai commercial market by the end of 2010.

In the Delhi a total of 67 million square feet of new supply of office space has been scheduled to hit the market by the end of 2010. But, industry analysts are now predicting that only 27.3 million square feet is likely to come to the market by 2010.

‘The demand-supply scenario in the retail segment will be under pressure since many malls which were expected to come, have been converted into commercial or residential properties. The demand-supply situation may not, however, be as bad as other commercial properties,’ said Annul Purim of Jones Lang LaSalle Meghraj.

Source : http://www.propertywire.com/news/asia/commercial-property-india-abandoned-200902122603.html