real estate sector

The Data from the real estate sector in the early months of 2016 has revealed that property sales in the six major cities of India have increased by nearly 15 percent. Real estate research and consultancy firm Liases Foras has reported that maximum gain in sales has been recorded from Ahmedabad, Bangalore, Mumbai Metropolitan Region (MMR) and Delhi. The highest number of sales were reported for houses that are between the Rs50-lakh to Rs1-crore bracket (31 per cent) followed by those in the Rs25-lakh to Rs-50 lakh bracket.

According to The survey, the weighted average price of apartments in Ahmedabad increased by 11 per cent, while it has declined by 2 per cent in MMR and Delhi. The managing director at Liases Foras, Pankaj Kapoor observes that although the overall Indian real estate sector is going through turbulence, people cannot stop buying property and the survey tells that most of the buying activity is happening in the affordable segments only.

“Even though property sales have picked up, the average cost of flats has decreased. The cost of a 2BHK unit in 2015 is Rs1.31 crore, as against Rs1.32 crore in MMR, while in Greater Mumbai, in 2015, the same house cost Rs2.82 crore as against Rs3.2 crore in 2014. This shows that property prices have declined resulting in the significant increase in property sales,” Kapoor added.

Increasing Demand in real estate

According to report of Bain, real estate consulting firm, “The demand in Indian real estate market for organized segment can reach up to 1.35 billion sq ft by 2020, however; currently, it is around 880 million sq ft and out of this 85 percent is for the residential real estate”.

As per report of Bain which was titled with “Residential Real Estate in India: A new paradigm for success” finds that in present the sales of home is slow because of low consumer demand and high price. However; while going to forward, the business of Indian real estate sector will have to things very differently in an order to be successful with positive growth.  As per the statement of Parijat Jain, who work for Principal Infrastructure and Real Estate Practice at Bain and Co-author of the report, “The current business model of real estate is changing and it will continue to change more rapidly over the next few years. All the value that was attributable to a real estate firm was in land acquisition, agglomeration and managing approvals”.  The more he added that now people are building concrete businesses with sustainable and value addition inputs very good process and very good execution skills to manage real estate market.

In present, the real estate industry is seeing shift because of dynamics and competitive forces, which are giving rise to different business models in the market and regulatory environment are becoming more complex and apart from that the shift in profit is increasing and awareness among consumers are also increasing. However; the inventory level is increasing due to slow growth in real estate market, but still its challenges to sale the older inventory in market. Apart from that the newer projects are doing well in the market. According to Gopal Sarma, the Head Real Estate and Infrastructure at Bain for India Unit and lead Author of the Report, “It is combination where come part of sector are doing very well whereas; other segment is facing rough response from customers”. The more he added that there has never been value attached to discipline in the process to provide quality and best price to customer.

To be successful in the real estate market, real estate builder should keep themselves on three key aspects in mind; first, the real estate builder needs to select the business model with right processes in an order to deliver best service because with well defined processes and valuable chain from the pre-construction through the construction cycle, handover and beyond, can create alignment and increased ROI for companies. Second; real estate builder should decide that in which market they want to play in terms of geography and market segment because real estate is the business of local market, it is not the business of national and regional scale. Third; In most of the real estate market, customers are neither on front nor on centre, which means now onwards builders should think for customers.

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.

Central Advisory Council

Recently, the central government of India has made a crucial amendment in the CAC (Central Advisory Council) and according to new amendment real estate agents will be the part of Central Advisory Council, which is involve in helping the government to understand the issues related to the Indian real estate sector.

This new amendment has made the property brokers or real estate agents, a key stakeholder with homebuyers and builders in the real estate industry. However; in a separate development government is pertaining the same bill in the Rajya Sabha Select Committee, with an aim to add the functions of the REAA (Real Estate Regulatory Authority), which will be formed under the new proposed Bill and it will also include the protection of interest of allottees, promoters and agents. It is proposed to form a council under the aegis of the amended in the Real Estate Bill, whereas; the Minister of Housing & Urban Poverty Alleviation will be act as the ex-official chairman of the same body. The new group will provide active advice to the central government on different facts such as; protection of consumer interest, implementation of the Act,, recommend policy and foster development as well as growth in the real estate sector.

However; officials are expecting that soon new council will come in existence and it will act as the main mover in for starting the debates on critical facts and figures of the Indian real estate industry. According to the statement of the Sanjay Bhargava, Founder of realty advisory company Bombay Homes, “After including the real estate agents, central government will get the better understanding on many of the issues which are related to the satisfaction and transactions in the real estate sector because agents are the persons who directly interact with customers in comparison of real estate builders or any other official authority”. Apart from that real estate agents are happy with new amendment because now onwards they can highlight the key issues on which government can work. However; many different broker bodies are suggesting to set-up the registration format and minimum criteria for property brokers where they need to have minimum educational qualification, if they want to raise their voice and concern for the real estate sector.

However; the Real Estate (Regulation and Development) Bill, 2013 is seeking to establish the RERAs (Real Estate Regulatory Authorities), at the state level so that every state can regulate the development of real estate sector in country. The main aim of RERAs is to make sure that there is consumer protection and standardization in the business practice of real estate sector of the country.

Penthouse south Mumbai

One more record deal Indian realty market, in which one of the most prominent Indian industrialists is set to buy sea-facing triplex penthouse in South Mumbai at Napean Sea Road locality at record Rs 202 crore, the biggest deal for residential apartment in country.

We all know that this is another surprising deal in Indian real estate sector. It was four times bigger transaction in comparison of recent big-ticket transaction for an apartment, in which Banker Uday Kotak bought house of 11,000-sq-ft area in Rs 55 crore at commercial business district, which is located in the district of Bandra-Kurla Complex. From past two years Mumbai is witnessing big deals in luxury apartments as uber rich guys are not hesitating to pay even with Rs 100 crore prices in localities such as; Malabar Hill, Napean Sea Road and Worli.

Key Points of deal:

1. Deal Price: Rs 202 crore
2. Location: Napean Sea Road, South Mumbai
3. Developer: Runwal Group
4. Built Area: 17,000 sq ft over 20th, 21st and 22nd floors with parking slots for 21 cars
5. Expected Delivery Date: End of March 2018

About Deal:

With this deal it’s clear that in Indian real estate market any record cannot stand for much longer time because this deal is set to make a new record with its sea-facing triplex penthouse, which is located at Napean Sea Road locality in South Mumbai. One of the prominent industrialists is buying this luxury pad, which have carpet area of 17,000 sq ft, spread over 20th, 21st and 22nd floors of a project with 21 car-parking slots. This sea-facing triplex penthouse will be built buy the Runwal Group. However; this penthouse will offer the mesmerizing view of the Arabian Sea and the Queen’s Necklace. Apart from other facilities and amenities property will provide luxury club house and swimming pool with an aim to attract the international investors or buyer for its 30 apartments, which is being constructed in two separate wings.

According to one of the real estate expert, “This is great news because people are also moving towards the alternatives and other vertical developments. Now day’s families are looking for specific kind of lifestyle for which options are limited”. It is expected that this penthouse will be ready for possession by the end of March 2018, and industrialist has already made deal though the token payment and has signed agreement last week. It is expected that this deal will be concluded in next one month. If this deal will work out, so it will be one of the most expensive transactions for any residential apartment as per sq ft basis because buyer is paying Rs 1.20 lakh per sq ft. However; it’s not clear that who is buyer, but according to reliable sources, buyer runs a large and prominent group of diversified business with interest in a wide range of business sectors. Whereas; Sandeep Runwal, director of Runwal Group declined by commenting on the deal.

About Project:

Each floor of both the wings has one apartment and it is expected that by the end of March 2018, the project will be ready for possession. The well known Runwal Group is developing the project on the largest plot after bringing down a bungalow named as Napean Grange. In 2011, the developer was bought the bungalow in Rs 350 crore, which was spread on an area of half acre and the owner of the bungalow was Kapadia family. Earlier, the bungalow was famous as Bansda Residence, and family of Maharaja of Bansda (Bansda is state in southern Gujarat) were using it.

Indian Property Show in London

The Indian Property Show in London was officially launched on the 25th April 2015 on Saturday. The Chief Guest as well as the Brand Ambassador of the show was no other than Bollywood director, producer and actor Arbaaz Khan. This property show was held at the Olympia West Hall London, and it showcased more than 40 real estate brokers and developers. This property show was the perfect platform for the investors from the UK to see the work as well as meet the property developers and market experts from India.

What is the show all about?

In the past few years this show has gained immense popularity among the NRI buyers who are interested in property exhibition apart from providing the best platform for the buyers to meet their Indian real estate developers. According to Mr Khan., he can see the journey of the transformation of the property show and would like to be associated with the show for a long time. He further added that, this show is about highlighting biggest and the greatest properties across India. The show is about increasing the awareness that the Indian real estate and therefore the show concentrates on giving all the insights and even brief analysis of the Indian real estate sector.

According to Mr. Sunil Jaiswal, organisers of the show and representing the Sumansa Exhibitions, in India, about US$1 trillion has been spent to improve the current infrastructure and there has been increased support from the government for the development of the industrial projects. Global investors are looking towards India as a hub in terms of the real estate sector as the urban population is expected to grow and increase in the employment and education will increase the demand for both commercial as well as residential projects.

He further added that the NRIs will have lot of benefits as they take the leverage of weak Indian rupee against the dollars and invest the same in projects which will ensure value and higher returns. The show comprises of one of the most interesting segment called the Property Dhamaka, which is about offering exclusive discounts and deals for the people who are looking for spot booking. This offers also included attractive down payment deals and EMI options. UK NIRs have been given the option of good discounts. This show was able to bring together various properties from Noida, Gurgaon, Delhi, Greater Noida, Navi Mumbai, Chennai, Mumbai, Kolkata, Pune and Bangalore apart from various other cities.

All the visitors at the show were given the opportunity ok seeking legal advice related to the properties they are interested. Free seminars were conducted to give insight on all the details of the properties. Apart from legal advice people were also given the opportunity to seek advice from the Vaastu experts as well. Delegations were conducted by the market experts to highlight the growing potential of the Indian real estate sector and the increasing number of investment opportunities in different cities of the country.

Indian real estate sector

The Indian real estate sector is contributing almost 6 per cent in country’s GDP and it also has generated the employment for 76 lakh people. This sector has nourishes the industries like; chemicals, tiles, cement, steel, paints, fixtures and fittings. The growth of Indian economy depends on the growth of its cities and it is the product which real estate developers delivers. The contribution of real estate developers are overshadowed by antipathy against the entire realty sector of country.

On the other side it is true that some of the real estate developers intentionally undertake a slower pace of construction because of slow sale of their apartments. Whereas, in most of the cases the reason for delay is government authorities, who don’t grant timely approvals. Obtaining the 57-odd permissions to begin construction is not cup of tea and it could take as long as two years and it is possible that during this time the cost of acquisition, construction or even holding the land for a project, rises.

The other un-favorable condition for developer can be that he had to rework on specifications of their upcoming as well as ongoing unapproved projects and it can led towards the significant project delays. Apart from an exacerbated cash crunch, developers also had to contend with the ire of buyers. If we consider the unexpected price increases or changes in apartment area after consumers have purchased properties from a real estate developer, these often occur because of changes in the project plans were required by the authorities before issuing an approval. Before two years, revisions were made in the DCR regulations for the MMR (Mumbai Metropolitan Region), which simultaneously road blocked several real estate projects and added to the overall development costs by about 15 per cent.

For real estate industry the fact is simple that there are 20 per cent hikes in construction cost and price increases across most projects in MMR. Whereas due to faulty land acquisition and title disputes the few real estate developer are ready to fly with in the night. It is true for the some cases in the Noida Extension, which has been legally established because of acquisition issues have been the fault of the authorities. However as always the blame is on the part of builders and it’s high time for them as they take a balanced view of the problem