Offline checks before you buy

Real estate is a big ticket item; a great deal of contemplation is required before you sign on the dotted line. A visit to past projects is a must and gauges the level of satisfaction of past buyers. Next, try to find if the developer has a strong intent to deliver the project on time. One can make a successful purchase decision only upon feeling the vibes you get after visiting the project site.

Check whether the builder has received all the approvals. A prospective buyer must insist on seeing all the relevant documentation related to a residential property purchase, including clear land title, development permits and the commencement certificate.

Before writing the first cheque, clarify all your doubts in a face to face meeting with the builder and take all his commitments in black & white. Ensure the price being quoted is all-inclusive.

What are the risks involved?

Online transactions in the real estate sector are different from those taking place in clothing, FMCG or electronics. You can go online and search for the price of a cell phone and the results will throw the best website to buy that phone with complete information on the product.

In the real estate space however, while some developers quote only the basic price, others quote the basic price with IDC and EDC (internal and external development charges), and some others quote it with the service tax and others without it. So, while you could get many price quotes, you can’t be assured that more charges will not be tacked on later.

It is therefore imperative that one does both a thorough online as well as offline scrutiny before inking any real estate deal via the online route.

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.

Carnival Group

Currently, Indian property market is witnessing boost after the two mega commercial deals; In first deal; Carnival Group buys real estate project from L&T Group in Chandigarh and the deal price was Rs 1,785 cr and in second deal; Abbott Group buys office space from Godrej Properties in Mumbai and deal price was Rs 1,479 cr.

About the deal of Carnival Group:

As per the reliable sources, Carnival Group, which is leading multiplex player in our country bought a commercial project in Chandigarh City directly from the Larsen & Toubro (L&T), which is leading engineering and construction player in country and for that deal price was Rs 1,785 crore. This two million sq ft mixed use real estate project in Chandigarh City will include a mall, office space and a Hyatt luxury hotel. Before one and half year, L&T had put the project on the block and company was in talk with Carnival Group from last one year. According to the statement of Shrikant Joshi, CEO of L&T Realty, “It was our strategic decision to not to run the malls and hotels”. The more he added that at this point of time we are looking for opportunity to sell out upcoming malls in  Navi Mumbai’s Seawoods region and regarding that we are in talk with other investors. It is expected that this acquisition will help the Carnival group to widen up the portfolio and this deal will also help the company to achieve a leadership position in the retail sector of country, as per the officials of the Carnival Group.

According to Shrikant Bhasi, Chairman of Carnival Group, “This acquisition is the part of our current asset creation initiative where we are trying to create new assets for the investment portfolio of company. The more he added that this deal will also help to expand our capabilities and make inroads into newer markets, however; this project will be operated as a separate unit and it will be led by Indi based management team. Off the records, it’s very clear that Carnival Group has been on an acquisition drive because it is third real estate acquisition after Leela Technopark in Thiruvananthapuram and Leela Infopark in Kochi. Previously, Carnival Group has also bought out the Big Cinemas multiplex business from Anil Ambani’s Reliance Group. Apart from that this group has acquired Glitz Cinemas, which was the part of Capital 18, a subsidiary of Mukesh Ambani controlled Network 18 Media

About the deal of Abbott Group:

deals of Carnival Group

In another deal Abbott Group, leading pharma company of India purchased 0.43 million sq ft of office space from Godrej Properties, which is located at Godrej Bandra Kurla Complex (BKC) in Mumbai and for that deal price was Rs 1,479 crore, it is one of the biggest office space deals in India. As per the statement of Ashok Kumar, MD and Director of Cresa Partners¸ a property consultant company, “The price of Rs 34,000 per sq ft, it is the higher than the market price and Abbott Group has paid 10 to 15 per cent higher price than market price, but as it is for self use and they are about to use it for Indian headquarters, so they didn’t bargain on the price”. However; for lease or rent offices properties prices are between Rs 250 and Rs 300 per sq ft in BKC and for sale property prices are between Rs 28,000 and Rs 30,000 per sq ft. at the same region.

The space which was bought from Godrej, Abbott Group is planning to build Mumbai office headquarters and it will be house of more than 1,500 employees. Godrej BKC is the joint development project of Jet Airways and Godrej properties for the development of a 1.3-million-sq-ft project. According to Sanjay Dutt, MD of Cushman & Wakefield, who also worked as the advisor for the deal, “Companies such as; Abbott and other large banks or fast-moving consumer goods companies (FMCG) continue to see India as a large market and this is why they are not hesitating to own the permanent space in India at high price. So, it makes sense for them to buy strategic assets. The more he added that valuations of the property and deal sizes are going to go up in the developing countries and it is just the beginning.

According to Pirojsha Godrej, MD and CEO of Godrej Properties, “Company will use the earning for debt repayment and to explore the new opportunities in the real estate market of India. The more he added that in present, two-thirds of the company’s debt pertained at BKC project.