Sessions Court hires Knight Frank as consultant

In order To facilitate realization of maximum amount of the properties of defaulters in National Spot Exchange Ltd. (NSEL) scam subject to liquidation, D P Surana, special judge of MPID (Maharashtra Protection of Interest of Depositors) Act Court and additional sessions judge of City Civil & Sessions Court, Mumbai has appointed Knight Frank India to serve as property consultants. Knight Frank India as a global private broker will bring in buyers to speeden up the liquidation process.

This order by the Sessions Court is significant as it would not only expedite liquidation of NSEL defaulters’ properties but also pay dues of the trading clients (investors). Due to its global reach, Knight Frank is expected to rope in individual and corporate clients with high bid amounts.

NSEL had made an attempt in 2014 and finalised two global consultants — Knight Frank and Colliers International — to identify competent buyers for disposal of immovable properties of Mohan India, the largest borrower defaulter. Mohan India had then agreed to empower the ‘competent authority’ to liquidate their immovable assets to recover their dues. Ajit Sakhare, deputy collector, government of Maharashtra, is the competent authority appointed by the Bombay High Court for the NSEL case.

In the meanwhile, the court has ordered the ‘competent authority’ to pay brokerages along with applicable taxes to Knight Frank within 30 days if its bids are approved with the highest quotes.

Mumbai’s UHNI count to more than double by 2025

The tribe of super-rich individuals has increased in Mumbai over the last decade and according to a Knight Frank report, the strength is further expected to increase.

In the 2016 wealth Report by Knight Frank, Mumbai has witnessed the fastest growth in a list of 25 global cities that were tracked between 2005 and 2015.

The international real estate consulting firm also notes in the report that the number of UHNIs in Mumbai grew 357 percent to 1,100 individuals and in the next ten years their number is slated to rise by 105 percent to 2,255 individuals. New York has the highest number of UHNIs at 5,600 followed by London at 4,900.

Let us look at the factors that have contributed to Mumbai’s count of UNHIs. Firstly, the city has benefitted from its fast-growing GDP, which has risen by 11 percent annually over the last decade resulting in a growth of nearly 15% in capital markets and the real estate market. Interestingly, the bulk of the assets of these UNHIs are invested in capital markets and real estate.

In view of the fact that India still has the highest GDP growth, it won’t be surprising to see the country’s ultra rich grow their wealth in the next 10 years!

India’s most cosmopolitan city – Mumbai

As per Knight Frank’s Wealth Report 2016, released on Wednesday, Maximum City- Mumbai has the maximum number of ultra-high-net worth individuals at 1094, followed by Delhi at 545. This number is going to increase to 2,243 in Mumbai and 1,128 in Delhi over the next decade.

UHNWI are defined as individuals with net assets, excluding primary residence, of over $30 million (around Rs.204 crore). The data in the 2016 report by New World Wealth, wealth intelligence company, shows that there are 1,87,500 UHNWIs across the world.

As against a global growth of 68% to 1919 billionaires, the number of billionaires has increased exponentially by 333% to 78 over the last decade. It is expected that in the next decade, 6% of the world’s billionaire population will be from India.

Places rich people prefer to stay

As per the Attitudes Survey of Knight Frank’s Wealth Report, London for the second consecutive time has beaten New York to win the title of most important city to UHNWIs.

The survey, the latest from the stable of the ultra-wealth intelligence consultancy Wealth-X, has incorporated the views and opinions of approximately 400 of the world’s leading private bankers and wealth advisers.  Pooled wealth amounting to over half a trillion dollars for around 45,000 UHNWIs is managed between these 400 bankers and wealth advisers.

According to the survey, while investments on commercial property only constitute 11%, residential real estate constitute almost a quarter of the average UHNWI’s investable wealth. On exploring the distinct factor or reason for UHNWIs to buy residential property, 55% of the respondents indicated the ability to sell in future.

The report says, “Over the past 10 years, 54% of the respondents said their clients had increased their allocation to residential property. Just over 40% expected it to increase further over the next 10 years, with 30% of clients likely to consider a residential purchase in 2016.”

Majiwada Thane Property Price Boom

According to an industry report, if the transport infrastructure projects announced by the Maharashtra Government in certain areas meet stated timelines, neighborhoods of Mumbai such as Madh-Marve, Majiwada-Kasarvadavali and Ulwe are likely to get costlier.

The report by real estate research & consultancy Knight Frank India highlights that properties in Majiwada-Kasarvadavali may get expensive by about 11.2 per cent due to the proposed construction of a Metro rail corridor from Wadala to Kasarvadavali over the next five years. Similarly, prices in the sea-front Madh-Marve are expected to increase by approximately 14.2 per cent on the back of a projected Versova-Madh sea bridge, and the Nariman Point-Kandivli coastal freeway. Further, in anticipation of the proposed Navi Mumbai International Airport and the much-delayed Sewri-Navi Mumbai Trans Harbour Link, The report estimates Ulwe to continue to see an uptick in price at 9.7 per cent rate per year, which has already inflated over the past few years.

Madh-Marve is the costliest of the three regions where Knight Frank has forecast a growth with an average rate of Rs 13,500 per square feet. While a Property at Majiwada-Kasarvadavali presently costs an average of Rs 8,000 per square feet, prices in Ulwe are floating around an average Rs 6,000 per square feet.

Pankaj Kapoor, Managing Director at Liases Foras, a Mumbai-based real estate research firm, said the low-profile areas of Mumbai are now benefiting because of the sky-rocketing prices in the high-end ones.

Buy Property in Mumbai

If you are looking for the best time to buy property and you are looking for the indicators in real estate market such as; price and sales, so you can say that in many cities property market could be head for a revival. As per the reports of RBI, the average prices of residential units have increased by 13.7 percent in 10 major cities of the country in the period of July to September 2015. If we will see the brokers sales reports, so we can easily say that sales in real estate market have got a boost too.

According to one of the most reputed developer, “We are going for the pre-launch of our project because buyers are lined up outside of the office to book a flat. And at this point of movement we are expecting some good sales and price in near future”. According to statement of Sanjay Dutt, MD of Cushman & Wakefield, India, “It doesn’t mean that in near future real estate market will witness a turnaround, but it is expected that the trend will sustain for the next 6 to 8 months and we can call it revival”. The more he added that there are contradictions in the data as there are many launches in real estate market where buyers and investors are frenzy to buy. In past few months office and commercial demand has picked up, which means city is creating new job opportunities and if it will sustain for next few months so there will be a turning point for the industry.

Why it’s good time to buy property?

According to real estate experts, if you are end user, so it’s good time to buy residential property. As per the statement of A S Sivaramakrishnan, Head of Residential Services at CBRE South Asia, “These days smart buyers are already scouting for a property, as these days realtors are still flexible with the demand of buyers”. In Mumbai there are more than 77,000 apartments are in the inventory, as per reports of JLL India and it is expected that it will take 11 to 12 quarters to clear off that inventory against a healthy expected cycle of 5 to 6 quarters, as per the statement of Ashwinder Raj Singh, CEO of Residential Services at JLL India. The more he added that there are chances that developers will not raise up their prices if the sales pick up because it can make buyers uncomfortable.

Apart from that there are some developers in city which are offering flexible payment option with attractive interest rates, but they are aiming to sell houses at little higher price than the rates prevailing in those regions. Ashutosh Limaye, Head of Research at JLL India, Don’t just go by the quoted rate of the flat because developers might offer little lower priced with some additional charges such as; club fee, and fee for other amenities. Apart from checking the track record¸ titles and approvals, its recommended to check the discounts, offers and schemes for different real estate developers before making any kind of purchase, as per the statement of Mudassir Zaidi, National Director of Residential Agency at Knight Frank.

If you are looking for the under-construction flats, so its recommended to take some time and evaluate the projects and ideally buyers should take 30 to 60 days to visit the site and check if the construction is happening as per schedule or not. If there is any kind of deficit, then better to stay away from that project. However; buyers can find the good deal for old flats, which was constructed 5 to 10 years ago. Apart from that if you are at real estate investor, so better to wait and watch for the trends and developments for next two to three quarters.

Bengaluru has emerged as real estate capital of India

According to reports, Bengaluru has emerged as real estate capital of India with the major headlines of the day which dominate on national and international real estate market. Earlier, it was Mumbai, but now Bengaluru has overtaken Mumbai to become one of the most preferred real estate destinations for investment in India, as per the reports of PwC (PricewaterhouseCoopers) and ULI (Urban Land Institute).

Few Major Headlines from Leading Portals:

According to “Emerging trends in real estate Asia Pacific 2016” Bengaluru is one of the most preferred real estate capitals of India, published by “The Hindu”.

We all know that in our country, the major property market includes Bangalore, Mumbai and New Delhi and they are witnessing more appetite from NRIs and foreign investors for investments in real estate market, as per the rankings of these cities as perceived by investors, according to perception study of PwC (PricewaterhouseCoopers) and ULI (Urban Land Institute), published by “Economics Times”. According to reports of Economics Times, the State Government of Gujarat will consult all stake holders such as; real estate developers, while constituting the state RERA (Real Estate Regulatory Authority), as per the statement of Anandiben Patel, Chief Minister of Gujarat.

There are some pockets in Bengaluru residential market such as; Thanisandr and Panathur-Varthur are expected to see price appreciation of more than 55 percent and 61 percent respectively by the end of 2020, as per the reports of Knight Frank Report. A relaxed FDI policy for the real estate sector has reinforced the confidence of foreign investors and has helped the regions in India to become one of the most preferred investment destinations, as per PwC survey, published by “Economics Times”. Ulwe and Madh-Marve in Mumbai are among the top residential investment destination in country as it promise the property price appreciation of more than 70 percent and 90 percent by the end of 2020, respectively as per the reports of Knight Frank India¸ property consultancy, published by “Economics Times”.

BroEx, which is network of real estate brokers stated that it has associated with Rentomojo, which is an online furniture and appliances rental. After this association, BroEx distributed exclusive coupons to its clients on behalf of Rentomojo with an aim to enhance the end customer experience, published by “Hindu Business Line”. Apart from that Hilton Worldwide Holdings Inc. is also pursuing a spinoff of its hotels into real estate market through different investments and it is one of the moves which have become popular among companies who are looking for the way to slim down and boost their stocks, published by “The Wall Street Journal”.

Real Estate Sector

At the end of 2015, the investment into real estate sector is ready to close with $ 8 billion or Rs 53,000 crore and it highest among last seven years. However; most of the money has come from borrowings as well as private equity (PE) route through NCD (non-convertible debentures).

While looking to size of the inflows you might get surprised as it is not in good shape nor systematic. From past few years, the residential space has been under pressure whereas; the pieces of commercial properties have also done the same reasonably. But its less than 5^th of the PE funds and it has find its way to the commercial real estate, on the other side the bulk is flowing into residential ventures. According to experts if real estate developers have not dropped prices than all credit goes to investors backing. As per the estimation of Cushman and Wakefield, about $ 2.8 billion or Rs 18,700 crore had been find a way in real estate market through private equity players till the end of Q3, 2015. While adding to that estimates $ 4.5 billion, or Rs 30,500 crore, of NCDs the tally is already up by the 74 percent with Rs 17,600 crore.

The investments are not materialized, whereas; real estate developers can drop their prices to monetize inventory at the point of time when demand is decreasing. However; there are large group of real estate builders which are holding on the inventory and refusing to pay back to their lenders. According to reports of CRISIL the debt obligations on real estate market is Rs 30,000 crore. On the other side the cost of alternative funding has jumped in past one year as real estate developers strapped for cash and for NCDs the internal rate of return are 20 percent whereas; in 2012 there were no were virtually comparable issuances. If you are expecting higher return on PEs, so it will also increase the refinancing risk for the realtors for long terms, as per reports of CRISIL. It is hard to see that how real estate builders going to refinance the about what they have borrowed through NCDs as banks were not financing to this sectors.

However; still builders are not into much trouble, as Vikas Oberoi, MD and Chairman of Oberoi Realty, points out that its seems that there are no shortage of money because real estate developers are backed by different ventures. Whereas; the financial schemes which was offered by the real estate developers can be considered to be in the nature of a discount as real estate builders have managed to sell the apartments and for that they have reduced the size of apartments. There are many investors who are big game player and now they are betting on the real estate market. From GIC (Government of Singapore Investment Corporation) to Blackstone and Warburg Pincus to Goldman Sachs, they are picking up stakes in different residential and commercial projects at the level of the enterprise. CRISIL, one of the major rating agency estimates that for a clutch of 25 companies; in next five to six years the payout to PE funds could be Rs 85,000 crore and it is nominal return with 20 percent. According to Samantak Das, Director of research at Knight Frank India the prices may hold for next two years, but in the absence of demand they’re unsustainable.

Apart from that when it comes to domestic funds, so alone they have been a share of more than $ 2 billion into the residential sector in 2015 and it is expected that it is 80 percent of the of structured debt. For real estate developer, structured product means; it ensures they can exit at a pre-determined return. According to Abrol; the risk for investors today is far lower than they were facing in 2008 and due to that most of the time PE players ensure they have the first charge on cash flows.

Global Rentals Chart

Owing to a vigorous demand from start-ups and e-commerce business, office rentals in major cities of India are experiencing a significant surge. The rising appetite for Indian commercial properties is attributed to about 67% of investments flowing into Indian real estate market from overseas which has been noted to be the highest among all other countries.

Indian cities of Mumbai, Delhi and Bangaluru have topped the global commercial property market with regards to annual rental yields as demand for commercial spaces has picked up in recent times. While Bengaluru topped the list with 10.5% annual yield, other cities like New York, Singapore, London, Tokyo and Hong Kong ranged between 2.9% and 7%, indicates a global survey of property consultant Knight Frank. Mumbai and Bengaluru have also featured among the list of top 5 global cities for future rental growth and the anticipated growth is nearly 22% and 16% for both cities respectively.

Currently, these cities are facing severe paucity of good quality office space in the face of strong demand which is creating an upward pressure on office rentals that is expected to scale up in the range of 6-7% in the next six months year-on year,” says Samantak Das, Chief Economist & National Director of Research, Knight Frank India.

Although the aggregate vacancy level of commercial spaces is at 17%, occupiers and investors are facing a challenge in procuring quality office spaces across prime business districts in the country where vacancy is in single digits.

The Indian commercial real estate sector is making a comeback after experiencing massive slump for over three years.  With a healthy pipeline and recent large ticket transactions, early signs of revival are being observed.

Big corporate occupiers are returning to the market hinting at an improved business sentiment. Bengaluru and Mumbai have been leading with these large transactions.   In May this year, while Tata Consultancy Services leased over two million sq ft of built-to suit space at Hiranandani Estate in Thane in Mumbai, Flipkart hired a 2-million sq ft custom-built office campus in Bengaluru.

Andheri’s Hotel – Aura Grande

Deal space in the hospitality sector is picking up in 2015 with alleviation of valuations and improved market conditions drawing buyers back to the bazaar after nearly two years.

In the most recent development, MRG Hospitality and Infrastructure, the owner of a chain of boutique hotels under the ‘Goldfinch’ brand, has acquired Aura Grande, a four-star business hotel for Rs 100 crore. The 94-room hotel is located in Andheri, a suburb of Mumbai. K Prakash Shetty, chairman and managing director, MRG Group confirmed that his company has acquired 100% stake in Mumbai-based Annakoot Properties which owns the Aura Grande hotel.

“We have funded this acquisition through a mix of debt and equity.” MRG will invest additional Rs 10 crore in revamping the seven-year old property. We wanted a presence in northern and southern part of Mumbai and this acquisition will launch our presence in the northern part,” said Shetty. “We are also exploring opportunities in Navi Mumbai,” he added.

“It’s encouraging to see that deals are back in the market and investors with long-term view for play in the hospitality industry are getting active in the market,” said Abhijit Umathe, associate director for hospitality and leisure,  Knight Frank India.

MRG Group which is currently operating four boutique hotels in Bangaluru and Mangalore under the brand name ‘Goldfinch’ and 15 restaurants, is looking to expand its portfolio to 12 properties with around 2,300 rooms in the next three years. The company which has interests ranging from real estate to hospitality has entered into contracts with international chain Hilton Worldwide and Marriot for developing their hotel properties in Goa & Bangaluru respectively. “We wish to grow the ‘Goldfinch’ brand to markets like Puducherry, Coorg, Chikmanglur and Udupi where we have already acquired land parcels for hotel projects,” Shetty stated.

Property prices in Mumbai

According to few reports, property prices will remain high in certain market conditions, but they will not increase any more. The value of under construction property which is unsold in real estate inventory in Mumbai can be anything as its R 53,400 crore for a clutch of listed firms and it presents that consumer confidence isn’t exactly soaring. What can be worse with an additional R36,800 crore of launches in the area of 20.4 million sq ft, which is more than half of south central part of the city and it can put the prices of real estate industry under pressure.

According to Niranjan Hiranandani, co-founder of Hiranandani Developers, in real estate market pricing strategy is now crucial since only relatively affordable projects are able to find takers whereas; high end properties in the central and southern parts of the city aren’t seeing any specific interest. Ghulam Zia Executive Director of  Knight Frank India, stated that first-time home buyers continued to sit on the fence however in recent budget there are no incentives for home buyers the market will get revitalized only once the RBI (Reserve Bank of India) begins to cut interest rates.

Analysis of Kotak Institutional Equities (KIE):

According to analysis of Kotak Institutional Equities (KIE) the numbers are clearly indicating that says land buying has dropped and prices are not going so up as only there are four or five developers have the capacity to buy land worth more than $200 million. The analysis showed that Oberoi Realty, Peninsula Land, Sunteck Realty, Godrej Properties, HDIL, DB Realty and Indiabulls real estate are among those property developers who are sitting on high inventories and major part of those inventories belongs from Lower Parel, Worli, south and central pockets of Mumbai and Prabhadevi.

Ambar Maheshwari, CEO of Indiabulls Group also believes that there is a glut at the premium and high ends of the real estate market. The more he added that a recovery is unlikely in areas like Lower Parel and Prabhadevi unless developers build smaller apartments that result in some kind of rationalization in prices. In present Oberoi Realty is targeting on the sales of unsold inventory and they are expecting to sale it in next 12 months, but KIE expects the company will only be able to sell R8,500 crore worth of residences in the next 30 months. As per the data issued by the Director General of Mumbai, in the first 11 months of 2014, property registrations fell 2.4 per cent.

As per few reports developers are planning to offer discount after definitive interest from buyers and channel checks suggest that large number of units are being sold in the 20:80 schemes which will be without a bank debt burden to and trip abroad for designing apartments however discounts are becoming more evident as real estate developers are also offering absolute discounts to investors and as well as end buyers now. These measures are clearly failing to impress and attract new buyers. In certain real estate market, in certain markets developers are selling 20-30 units in a month while in others they could be selling in 2 to 6 a month. Amit Bhagat, who is CEO & MD, ASK Property, stated that the demand was tepid in the luxury space so any developer who was leveraged might be under pressure.