Two bids worth $ 1bn for property in Powai received by Hiranandani

It is heard that two bids totalling $ 1bn have been received by real estate giants Hiranandani for its property in Powai. As per sources, the bids have been received from an Indian PE Firm and Canadian Firm. Hiranandani is, apparently planning to sell commercial property measuring 4.5 million sq. ft in Mumbai’s suburbs. The process of reforging the company’s ownership to sell the Powai property has been initiated by the Hiranandani brothers. The idea being mooted is that the property sale is part of the company’s plans to convert itself from a partnership firm to a private limited company.

Loan Against Property

Purchasing a house is an indicator of our financial stability. Experts believe that the pursuit of buying a house ends up restricting the buyer’s financial ability. However, very few experts tell that the house can be utilized in a wise manner. This blog posts try to shed light on how you can use your house to achieve your desired financial goals.

Loan against Property

Loan against Property (LAP) can be defined as a form of secured loan received from a bank or a financial institution by mortgaging one’s existing property. LAP can be used for meeting requirements for such as launching a new business venture, its expansion, pursuing higher education, medical expenses, working capital requirements etc.

LAP, which can be applied individually or jointly with other persons or legal entity, can be taken as term loan with fixed EMI or as an overdraft facility. As an OD, LAP gives the much needed flexibility by helping meet the fluctuating requirements of capital in a business. While LAP has no upper cap on the amount of loan to be applied, the amount is ascertained by the banks as per the market value of property and repayment capacity of the applicant. The loan to value ratio normally tends to vary from 45-90% of the property’s market value and can be availed against residential, industrial and commercial property including a warehouse or a land parcel.

We will show how one can avail a LAP

Eligibility  :   Eligibility for the loan is decided on criteria such as age, income etc. The eligibility can be ascertained by checking the same or by visiting the bank’s website.

Choose the right lender    : One can choose one’s lender by comparing fundamental parameters like interest rates, application fees, processing fees and legal charges of different banks.

Application : On selecting the lender, the applicant has to fill the application form providing information about financial assets and liabilities; property details and other personal and professional details.

Documentation : LAP applicants are mainly for the self-employed segment and necessary documents are needed for income assessment.

Checking CIBIL score : The credit history of the applicant is checked through CIBIL score. The CIBIL score goes a long way in whether the customer receives the loan or not.

Technical and Legal clearance : Before approving the loan, the property documents are legally authenticated as the same acts as the security against the loan. Second is the valuation of the property determining the loan amount to be given as collateral.

Issue of Sanction letter : After the credit appraisal, the sanction letter is issued to borrower giving details like loan tenure, repayment options and rate of interest which has to be duly accepted and sent back to the lender.

Disbursal : At the end of all the above procedures, the loan amount is disbursed with the assurance that the same will be repaid within a stipulated timeframe. Businesses can use this loan instrument to make the most of their respective business ventures.

Emergence of Dadar as a real estate hub

Despite the emergence of Lower Parel and Bandra-Kurla Complex (BKC) as prominent commercial real estate locations, Dadar continues to be in a class of its own. This is on account of the favourable geographical location as well the superb connectivity it provides throughout the city.

On account of its historical popularity, the residential market property in Dadar has reached a saturation point. Owing to a lack of plots, there are only a few new projects that are scheduled for construction, leaving a significant number of projects for redevelopment within Dadar and its surrounding areas.

The reason Dadar has emerged as prime real estate has been the accessibility it provides for the city’s working professionals. Dadar railway station has the unique quality of being the only station that is common to both Central and Western Railway lines. Even neighbouring location of Wadala is an easy access point for people to commute from the Harbour line.

Besides railways, Dadar is also easily accessible by road for a large number of professional who are residing in Mumbai or even Pune for that matter. By reaching their journey in a single journey and travelling back in similar ease, the working location of Dadar eliminates the problem of changing of buses and trains for a large number of workers.

With its multinational presence, Lower Parel has become a major business district in Mumbai to such an extent that almost every available plot along the strategic Tulsi Pipe Road is being spoken about. While BKC remains a location of choice for all commercial office space occupiers, the forward linkage brought about by the frantic growth of Grade A office space development in Lower Parel has found its growth extension in Dadar. With the further completion of some more Grade A office projects, Dadar will join the queue for more such office spaces in Mumbai.

With the gradual emergence of Dadar as an advantageous commercial space location in Mumbai, one can anticipate the redevelopment of large number of existing buildings in and around that area. The same will also lead to increased demand for residential properties in Dadar and its surrounding areas.

Indian real estate sector 2016

In present, the rest of the world is considering our country as the land of opportunity for investment and business.  If we are talking about the real estate scenario for 2016, so no doubt it could be great year for residential as well as commercial projects.

1. Residential Properties:

It is expected that year 2016 will not bring some great hope for the residential sector as demand will remain constant. However; we can expect that silver lining will shine more and bad days of the real estate segment will be bottomed out; as according to reports in some cities sales have picked up and these cities are; Mumbai, Hyderabad and Bangalore. However; you can expect less launch in the cities such as; Mumbai as inventory level is already high. Real estate developers initiatives such as; attractive schemes, freebies, deal terms and heavy discounts with lower interest rates by RBI have activated fence-sitters. It is expected that year 2016 will end the long and painful journey of real estate market and signal an upward growth trajectory. It will definitely mature further into an organized industry in which some lesser- organized players become casualties.

2. Office or Commercial Properties:

The absorption rate of commercial properties as well as office spaces are still at 35 million sq ft and it is second highest figure in the history of country after the year 2011. However; the PAN India vacancy is still at the 16 percent, whereas; the realistic vacancy actually stands about 8 to 9 percent. It is expected that in the year 2016 the demand will remain consistent as occupiers are showing a positive bias. The years 2016 will bring more demand for leased spaces however; the quality supply will be lower. It means in year 2016 we can expect higher occupancy for Grade-B office spaces.

3. Retail Properties:

In 2015, there were no launch for the quality retail space and the major trend which we observed in the year 2015 were; the consolidation of retail real estate by retailers and big brands are focusing on the profit making stores and they are closing down the loss making stores. These days there are more institutional investors and all credit goes to relaxation of sourcing norms as single-brand retail companies are able to explore the Indian market. It is expected that years 2016 will be good year for the retail investors as there are many ecommerce companies which are planning to set up their retail stores in near future. Retailers will have to revisit their real estate strategy and have a flexible approach, customized to different micro-markets.

Capital Markets:

The year 2015 was the interesting year for capital market activities in the real estate market as PE focus continued to remain high for the office and residential projects. The platform-level deals and entity-level investments are also came into the limelight as the level of confidence are increasing among the investors.  The income yield of the office projects are attracting the majority of equity investments and when it comes to the geographical spread, so we can say that tier I and tier II cities are good for the investment in the offices spaces because over there you can earn more rent.

Commercial Property

According to real estate experts, it’s good times to make an investment in the commercial property as companies are expanding their business with an aim to improve their business sentiment. If you are looking for regular cash flow with higher return and rental, so investment in commercial property is better than residential property.

As per experts, now commercial real estate space is witnessing a revival with little high demand at the time when real estate developers are not building commercial space from last four to five years due to global financial crisis and now its expected that soon existing stock will get consumed. And in simple words we can say that it’s the main reason why real estate developers and commercial property owners are receiving higher rental yields and now people are looking it as good investment option. Indian economy is growing with growth rate of 7.3 percent, apart from that inflation has been reined in with the gradual growth in manufacturing sector. However; with all these kinds of growth commercial office spaces are also gaining momentum because companies are looking for expansion due to improved business sentiments. These days big e-commerce such as; Snapdeal, Amazon and Flipkart are looking for commercial spaces to set up their warehouses, followed by IT-enabled services and the information technology sector as well as financial services and insurance (BFSI) segments and banking sector and they all are resulting in high absorption levels in commercial properties and quality office spaces.

It is expected that in near future the industries such as; engineering, pharmaceuticals and manufacturing will provide further impetus to the real estate market. According to Amit Bhatia of Assets and Business Banking in Deutsche Bank India, “Its best time in India to invest in the commercial properties as it is giving low capital values with high rental yields. However; there are many micro markets where price of commercial properties are still low than the residential property and commercial properties are offering double the rental yields”. The more he added that Grade-A properties including offices, retails or other spaces at high street are also are bound to deliver capital appreciation and higher rentals. However; for commercial properties the capital appreciation is low due to many speculative buying in residential property. On the other hand office spaces are more driven by end users whereas; commercial space might not be as easy to sell as residential spaces are and its also easy to find tenants for offices spaces in comparison of residential.

Why it’s best time to invest in commercial property:

From investment point of view the difference between commercial and residential property is that in commercial real estate you will get more rental in comparison of residential property, but when it comes to sale property, so its pretty easy to sale residential property, but its tuff to sale commercial property, as per the statement of Viral Desai, National Director at Knight Frank India. The more he added that in past few years, residential real estate market has seen more appreciation, but now its on peak and about to get over. However; it is expected that in near future office spaces are continues to give better rental yields. In residential property the annual rental yields are about 2 percent, but when it comes to office space annual rental yields are about 8 to 11 percent. Offices spaces are offering good opportunity for investors as tenants are looking for good quality lock-in of leases spaces.

Income from commercial property:

It is suggested to invest in the property which is on the lease already because it will provide you regular cash flow, as per the statement of Desai. In normal cases, people prefer to go for the rental agreements of two to five years, if the space is for office and during that duration the tenants are locked in for that period. So if you are about to invest Rs 5 to 6 crore in an office space, so you can expect to get Rs 50 to 60 lakh as annual rental income. Apart from that you should also check that which kind of company has leased out the property and for what kind of business, for example if banks or some other brands has leased out that property, so you can expect that they will continue for next 15 to 20 years at least because they will avoid to change their address. If you are planning to buy property no multiple owners and large part of property is with real estate developers, so property maintenance will not be big challenge. As per the statement of Sanjay Dutt, Managing Director of Cushman & Wakefield, “The top three cities which have saw good supply and demand in the period of January to September 2015 were Pune, Delhi-NCR and Bengaluru. However; till now they have collectively contributed 77 percent to incremental supply and 65 percent to commercial absorption and on the same time you can expect annual rental yields of 11 to 12 percent for Bengaluru, whereas; in Delhi and Pune you can expect annual rental yields of 7 to 9 percent.

Why should you leverage the opportunity?

We all know that unit size of commercial real estate is larger than the residential and due to that investors need to invest much larger amount in commercial property. And apart from that they will get no tax incentive for investing in commercial real estate, as they are used to get for homes. If you are thinking that price of property is too high and you will be not able to manage it, so you can take loan for the property against rental income.

Checklist before buying commercial property:

1. It’s recommended to check the background and experience of real estate developer in commercial property.
2. If there are any existing tenants, so better to consult with them and its suggested to check that what kind of companies have leased out the space and the business the tenants are into

• Check the infrastructure, society, location as well as surrounding area.

1. If you are taking loan or borrowing money, so never keep your property vacant for long periods.
2. If buying resale property, so prefer to buy leased out property.

Commercial real estate

Capital value expectations as well as monthly rentals both have marked growth in September quarter for commercial real estate segment in India, but still its lower than the expected as per the RICS (Royal Institute of Chartered Surveyors), UK based qualifications and standards authority for property, construction and land. Apart from that the Indian commercial property monitor also indicated that maximum number of tenants and investors felt that market valuation for commercial real estate segment is much expensive in comparison of previous quarter. In contrast, the percentage of tenants and investors who felt that price of commercial dipped in third quarter of 2015 was about 30 percent in comparison of earlier quarter.

According to Devina Ghildial, MD, South Asia, RICS, “The commercial property segment in India was always upswing because demand was outstripping supply, but growth in rentals value was modest with its early expectations”. The more she added that in India, there is dearth for grade A office space under commercial segment in major cities because many new MNCs are looking towards more business in India and for that they are looking for more space to set up new office space. In our country existing large business organizations are ramping up their business and operation with solid pace, but the supply of grade A office space is not able to match up to this demand, leading to healthy appreciation. As per the records of property price cycle of commercial segment, a large group of segment (about 38.3 per cent) feeling that its in establishment phase. Apart from that percentage who believed that it is in early uptrend phases, is about 27.2 per cent. And almost equal percentage, which is about 24.7 per cent, felt that commercial property segment was in mid-downturn stage, but only 6.2 per cent felt that it is in mid-upturn phase, whereas; 1.2 per cent felt it had peak stage.

According to recent reports, there was a spurt in the demand in Indian real estate sector and when it comes to commercial property because auto, IT and e-commerce start-ups, telecom, banking financial services and insurance (BFSI), consumer durables, fast moving consumer goods (FMCG) sectors are looking for more space to enhance their business and operation in premium cities such as; Bangalore, Mumbai, Delhi and National Capital Region (NCR) and these cities have witnessed several large-sized transactions during the quarter.

According to Ashutosh Limaye, Head of Research & Real estate intelligence service, JLL India stated that “In India commercial properties are more affordable in comparison of other countries and apart from that rentals in our country have bottomed out and making its way up. The more he added that rise in rental was gentle, but the direction was definitely up and rentals in real estate’s commercial segment is fair and competitive, but it’s still below the previous peak of 2008. Metro cities like; Bangalore was one of the few market which has reached its peak in the year 2008 while real estate sector in other cities remained more than 10 per cent below it, whereas; Chennai was 2 per cent below its peak and Pune was at 10 per cent while rest were over 10 per cent lower than their peak. In 2008, the price was high as Rs400 per square feet (sq ft) in the cities Mumbai and Delhi. In present, Nariman Point is 30 per cent lower than commercial property rental values of 2008 while other suburbs areas such as; Kurla and Andheri is 20 per cent lower.

According to J C Sharma, MD of Sobha Developers, India offered arbitrage in two things; one office rentals and second salaries or wages. The more he added that MNCs came to India because of these two arbitrages, which is competitive in comparison of global market. The more he added that if you will include the market of the Bandra Kurla Complex (BKC), Mumbai and Delhi, so its 90 to 95 per cent of the totals transactions in the India’s commercial property segment and it is very affordable in comparison of emerging global market such as; Southeast Asian countries such as; Jakarta, Bangkok and Malaysia.

Image Credits: DNA

The MMRDA (Mumbai Metropolitan Region Development Authority) is all set to process the auction of land in BKC (Bandra-Kurla Complex) with an aim to fund its some of infrastructure projects.

In past MMRDA has funded many infrastructure projects by selling different land parcels, but after 2007 its fist time when MMRDA decided to invite bids to fund its infrastructure projects. According to spokesperson of MMRDA, “We intend to sell 21,807 sq mtrs of residential space in G block (north) of BKC and 12,500 sq mtrs of commercial space in G block of BKC. MMRDA has decided to appoint consultants for the valuation and documents preparation in the process of bidding”. In Mumbai, the FSI (floor space index) for commercial and residential space is 4 and 3 respectively.

It is expected that in next few months consultant will prepare the whole road map for bidding invitation and rest of the process. According to one of the MMRDA official, “We hope that auction will start at the beginning of second quarter of 2016. We expect that we will get rate of Rs 4 to 5 lakh per sq mtrs, however; it also depends on the available built-up area, as there are more restrictions, due to which we have sought relaxation”.

MMRDA is planning to lay 118km of Metro lines with the cost of Rs 35,000 crore and MMRDA has already sanctioned work for Dahisar (Rs 5,566 cr) to DN Nagar Metro; Phase I, Metro II (Rs 4,737 cr) and Dahisar-East to Andheri-East Metro VII corridor. It will also have the pride for MMRDA to fund Rs 23,136 cr for Metro III or Colaba-Bandra-Seepz and its proposed extension between Kanjurmar-Seepz, which will cost around Rs 1,700 cr. However; it is expected that for Metro III it will get the bank loan for 88 per cent of the total cost from Japan International Cooperation Agency.

According to officials, “From many years we did not sell land because of downturn in the market, but now scenario is getting better and we need funds for crucial and most important projects. Earlier, MMRDA had tried to sell land with the rate of Rs 3 lakh per sq mtrs, but many felt that price was too high in 2010”.

Mumbai Metro

Phase 1 of the Mumbai Metro which runs from Ghatkopar to Andheri has resulted in a substantial improvement in the realty development along the metro route and areas close to metro stations due to east-west connectivity within the city saving office goers precious time of commuting to-fro work.

As there was no direct link earlier, this metro route has come as a blessing for commuters by taking the load off the existing road and rail infrastructure. This decongestion has attracted buyers who were hitherto hesitant to buy residential or commercial spaces in these areas. Places like Chandivali and Sakinaka in Andheri (east) are easily accessible now. “The demand for both residential & commercial property is heading northward due to the Mumbai Metro,” says Manju Yagnik, vice-chairperson, Nahar Group.

Experts believe that infrastructure development acts as a catalyst that boosts residential and commercial property segments. In this context, the Phase -1 of the Mumbai

Metro has played a crucial role. Considering the pivotal function of rail infrastructure development in the city, Maharashtra chief minister and chairman, MMRDA, Devendra Phadnavis  has sanctioned an outlay of Rs 35,400 crore for the development of 118-kms Metro network in Mumbai alone.

The network includes a 40-kms Dahisar-CharkopBandra-Mankhurd Metro-2 corridor (Rs 12,000 crore), 40-kms Wadala-Ghatkopar-Thane-Kasarvadavali Metro-4 corridor Rs 12,000 crore), 27-kms Dahisar-E-AndheriE-Bandra-E Metro-5 corridor (Rs 8,100 crore) and 11-kms Jogeshwari-Vikhroli Link Road Metro-6 corridor (Rs 3,300 crore).

All these Metro projects will certainly draw property consumers to adjoining areas due to resultant enhanced connectivity. Infrastructural proposals have always contributed to the real estate boom in the city and Nishant Agarwal, managing director, Avighna, believes that the future infrastructure plans like the new metro routes will also continue to fuel growth in the real estate sector.

Property prices in the neighboring areas of the metro rise significantly once the project gets on track. Ramesh Nair, COO business and international director, JLL India, points out that the areas near Ghatkopar-Andheri Metro line have already seen a price rise of nearly 400 percent over the last eight years. A similar trend may continue with the announcement of the new metro corridors in the city.