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.

Trump Group to construct luxury towers in Mumbai and Pune

Possible Republican nominee for US presidential elections, Donald Trump has recently spoken about India by stating how well the country is doing without being talked about.

Adding further he stated, “I have big jobs going up in India” referring to the two luxury real estate projects rightly named ‘Trump Tower’ that are coming up in Mumbai and Pune.

Signing a brand licensing agreement three years ago, Trump Group will be constructing a 75 storey tower in Worli in association with Lodha Group and a 22 storey twin tower in Pune with Panchshil Realty.

The projected real estate project includes a promise of “a host of exclusive lifestyle privileges, including a 24-hour Resident Manager and white-glove services, access to global Trump luxury properties and for the first time in India — a fractional membership to private jet service exclusively for Trump residents.”

Spread across on a 2.5 acre site with 44 luxurious condominiums across two towers of 22 storeys each, Trump Tower Pune will be the tallest residential building in that city. Each floor will have one expansive apartment of approximately 6,000 sq. ft. with five bedrooms and an exclusive home theatre room.

Adding further, the company stated the real estate property will have an exclusive range of carefully selected lifestyle amenities and services including fitness and recreational options, concierge service, pick-up and drop laundry service, and for the first time, an exclusive art gallery. There will also be a dedicated level for world-class leisure facilities such as John Abraham fitness centres, yoga room, jogging track, kids’ play area, swimming pools, library, business centre and game rooms.

Reviewing the proposed project, Pankaj Kapoor, Managing Director of real estate research firm Liases Foras said,  “These projects are for the high-end luxury market and they do not represent the market at large. Also, it is not that only because it is named Trump Towers, the companies are gaining from it in terms of sales. It is mainly the location and facilities which matter to the luxury market as well as the affordable housing market,”

Real Estate

Now at least there is little cheer for real estate developers because of just concluded festival season, and all credit goes to the lukewarm response of end users and investors. Apart from better property price now key markets such as; Delhi, NCR and Mumbai are witnessing positive response from buyers.

This festive season, which was just ended and was between Navratri and Diwali, accounted more than 60 per cent of all planned property purchase decisions and it was also bulk sales opportunity for real estate developers. However; to attract property buyers most of the real estate developers were offering freebies as well as heavy discounts. We all know that from last three years real estate market was sluggish for developers because most of the buyers were holding their property purchase decision as they were hoping for better price. As per the reports of 99acres.com, in Mumbai the price of property in terms of per square foot saw a insignificant rise between the period of second and third quarter of 2015 (April-June quarter to July-September quarter). However; the rental for commercial property have increased from the September quarter again after little rise in January-March 2015.

As per the statement of Narasimha Jayakumar, Chief Business Officer of 99acres.com, “Currently, real estate market is filled with lucrative offers, heavy discounts and easy payment schemes due to high level of unsold inventory which resulted in buyers to adopt a wait-and-watch approach. Samantak Das, Chief Economist and National Director of Knight Frank India stated that “Stakeholders which are from the supply-side believe that in present situation is much worse in comparison of what it was six month ago. In real estate market stakeholders are pessimistic due to heavy demand in residential sector and because of that they are not forcing for any kind of recovery in next six month. Whereas; the main optimism about the future was driven by the commercial spaces because it is expected that rental value will increases due to robust limited supply and leasing volumes of property”. Apart from that some of the real estate watchers are saying that in eight major cities of country real estate market has been improved by 17 per cent from 57.8 msf (million square feet) in the second quarter of 2015 in comparison of last quarter. According to Pankaj Kapoor, MD, Liases Foras, “A decline in commodity prices is favoring the real estate developers because it bringing down the cost of construction and correcting the property prices”.

CRISIL Report:

CRISIL report stated that demand revival is expected to be marginal and due to that price will also increase. CRISIL analyze the top 25 realtors of country while comparing the 95 per cent of the real estate market’s capitalization to show that still there is debt obligations of Rs. 30,000 crore with high refinancing risk. However; it is expected that demand of commercial and residential properties will be tepid over the medium term. According to Sushmita Majumdar, Crisil Director, “These 25 real estate developers are accounted for more than 50 per cent bank lending in real estate sector and most of them are facing high refinancing risk in the areas like NCR. However; with net exposure of banks it is expected that it will decrease by 5 per cent for the first time in this fiscal year, whereas; banks were used to meet more than 90 per cent of the requirements for real estate developers till last year due to increasing proportion and funding gap. Sale ability of real estate projects has also been declining, especially in North region states.

FDI – Indian real estate

The central government’s decision to ease the Foreign Direct Investment (FDI) norms will certainly bring in much-needed capital in the cash-crunched domestic real estate sector, but according to experts, it will further fuel the soaring prices.

Property experts say the capital raised from FDI is not cheap. It comes with an interest rate of 20-25 per cent. “If developers take a loan to buy land at this rate, it is natural for them to increase the rate of the property to recover the cost. Earlier, the property market was driven by the end user. Now it is driven by investors,” opines property researcher Pankaj Kapoor, MD of Liases Foras. “FDI has been creating a vicious circle by spiking the property rates resulting in imbalance to the urban economy. While easing of FDI norms is good for investors, it does not solve the affordable housing problem. Rather, the government should ask banks to lend to developers at a cheaper interest rate and set stringent timelines for completion of projects,”  he added.

Gulam Zia, Executive Director of Knight Frank India Pvt Ltd, said the real estate sector is going through a bad phase from the last three consecutive festive seasons. As a result, fund raising has become the highest priority for developers. Although FDI will be a major source of capital infusion for them, this policy shift will not have a significant impact in the short run. “Without the consumers’ interest, no amount of changes in policy decision will have an impact on attracting the foreign investment into Indian real estate market,” he further added.

Conversely, Developers have a different point of view. Anand Gupta of the Builders Association of India feels that the easing of FDI will be very encouraging for the property sector. “There will be an easy cash inflow at a cheaper interest rate. Almost 70 per cent of the project cost goes in purchasing land in Mumbai. Once we are able to buy land at affordable rates, it will also cut down the property prices in the long run. It will, however, take at least a year to see the impact on ground,” said Gupta.