Real estate investment

In present location issue is keeping the buyers away; but better ROI, an incentive, benefits of tax breaks are still attracting the investors as well as end users towards the real estate market. In India, affordable segment are finding buyers but most are investors not those who are planning to stay in those homes because of the location issue as the home is located too far away from offices and have little support infrastructure, analysts and trade experts said. Peoples are making the attempt to invest in real estate sector because government have increase the accessibility of housing through tax breaks and other incentives or benefits, which are therefore going towards those more interested in turning a profit.

Almost 50 per cent of the total housing stock of 293 million sq. ft sold in the last fiscal year, which was ended on March 2014 and the prices of those property was less than Rs.50 lakh, as per the data of real estate research firm Liases Foras. Flats which cost Rs.25-50 lakh accounted for 37 per cent of the total housing stock sold in the same period, while those below Rs.25 lakh had a 13 per cent share. Mumbai is the city which known for its high property prices as well as ROI, accounted for 13 per cent of the sale of houses priced below Rs.25 lakh and 28 per cent of houses in the Rs.25-50 lakh range. According to Pankaj Kapoor, The Managing Director of Liases Foras, “Most new launches in the last three quarters are in the affordable category”. The more he added that the rise in sales in part to state government regulations which have been favorable for both real estate developers and buyers in the relatively more affordable segment.

In December 2014, the Apex Bank (Reserve Bank of India) allowed real estate developers and housing finance companies to raise up-to $1 billion through external commercial borrowings to promote housing projects, which also referred to as low-cost because they are cheaper than more upscale properties. The budget of 2013, proposed a Rs.2.5 lakh deduction on the total taxable income on home loans of less than Rs.25 lakh, applicable to loans from banks and non-banking financial companies (NBFCs). Such housing projects are profitable business for real estate developers as in Mumbai, they provides an internal rate of return (IRR) of 45 per cent with gross margin of 24 per cent. According to report of Monitor Deloitte in 2010, a consulting firm, “Most of the flats are being bought by investors rather than genuine low-income end-users despite the low prices and interest rates, since these flats are being built in far-flung places with poor connectivity and social infrastructure, real estate and analysts”.

For example, If person buys such a home in Karjat, which is one of the last stops on Mumbai’s suburban Central line,  will have to travel about 85 km if his/her office is in the central business district of Nariman Point. That’s about two hours by train each way. According to Kapoor, “Trans Harbour Link have easy connectivity between the the mainland and the island city and provided a much-needed boost for affordable housing”. The Trans Harbour Link have 22 km road across the sea which will connect the island city and Navi Mumbai. It is expected that, Trans Harbour Link will be operational by 2018-19. Now investors are looking to it as excellent opportunity as it has connectivity and support of infrastructure. According to Om Ahuja, the chief executive, “Most projects are not affordable in terms of living and these projects are bought by investors who park their money. If it is a wrong product, their investment gets stuck”.

According to Brotin Banerjee, MD and CEO of  Tata Housing, “Tata Housing sells these homes under two different national banners; Shubh Griha (Rs.4-13 lakh) and New Haven (Rs.25-40 lakh). It plans to launch more affordable projects across different consumer segments in Mumbai, Bangalore, Gurgaon, Bhubaneswar and Kolkata.” VBHC (Value and Budget Housing Corp.), has many affordable housing projects, which are in Delhi, Chennai, Mumbai and two in Bangalore. It’s planning to launch one more in Delhi and Mumbai in the next few months, according to Vivin Mathew, chief executive, western region. On March 2014, GPL (Mumbai-based Godrej Properties Ltd), the realty arm of the Godrej group, launched an affordable housing scheme at its Godrej Garden City township project in Ahmedabad. In real estate market some of the real estate developers are using finance and marketing techniques to attract genuine home buyers or investors in the Rs.6-25 lakh range.

Poddar Developers Ltd, a Mumbai based real estate developer has 25 per cent of the apartments in one of its project to families availing loans from NBFCs such as Gruh Finance Ltd, Mahindra and Mahindra Financial Services Ltd and Muthoot Fincorp Ltd. NBFCs offer rates that are slightly higher than that of commercial banks, but have an easier documentation process, making it a better option for low-income borrowers. According to Rohit Poddar, MD of Poddar Developers Ltd., “We don’t sell more than one flat to a single buyer. We have a 75:25 mix of actual home buyers and investors”. In last two years, Poddar Developers has sold more than 2,500 apartments in Badlapur in Thane district and Karjat in Raigad district, in the range of Rs.3.5-12 lakh each. Recently they have launched the similar project at Atgaon in Thane and is planning 40,000 sq. ft of land by the end of this financial year.

According to Rashmi Housing Pvt. Ltd, “It’s also giving a loan to home buyers without interest to drum up interest in homes that cost below Rs.25 lakh. According to Yogesh Bosmiya, Director of Rashmi Housing, “Around 30 per cent of our home buyers or invetors they are availing this loan facility and we are mostly getting the end users”. Rashmi Housing Pvt. Ltd, said that they has sold more than 3,000 units in the Mira-Bhayander area of  Thane district since 1999 and is developing another 4,000 units in the same area. Bosmiya said the profit margin is 20-25 per cent. Whereas; some of the real estate developers are constructing the hospitals and schools to improve the existing public schools, to create social infrastructure in a bid to attract families.

Infrastructure development Mumbai

In past few years, Mumbai and other metro cities have emerged as the most preferred destination for property investment. After the budget of 2014 the ball of real estate sector is spinning in positive direction because new FDI norms, implementation of REITs and allocation of new funds for infrastructure development. Recently, Indian government has made it clear that there solo objective is to provide the affordable housing units and due to that they are implementing the new policies, which will be helpful to boost the economic growth. Property in Thane and Property in Mumbai is the one of the most preferred destination of investors and high end users because Thane and Mumbai is the most commercial areas and we all know here investment means more than 40 per cent ROI. It’s not easy for common man to own a Property in Thane and Property in Mumbai due to high budget, but now real estate developers are planning and constructing the new affordable housing units for middle class and all this is possible due to reduced size of apartments.

According to real estate experts, there are some areas in Mumbai, which will see a positive momentum and can play a vital role in the real estate market of Mumbai. Most of the Property in Thane and Property in Mumbai are comes in high budget, so just clear the pending inventories, developers are now ready to negotiate on the price and providing some great offers, so that they can attract the pool of investors and end users and after getting the money they will be able to invest in the new real estate projects. Property in Thane and Property in Mumbai are consequently growing and expanding with new commercial and industrial opportunities. In Thane and central Mumbai buyers have a option to purchase the 1BHK, 2BHK, 3BHK, 4BHK and luxury apartments in the price range of 25 lakhs to 2 crores, here apartments size vary from 1,000 sq ft to 3,500 sq ft. Mumbai is famous in all over the world for their super-luxury projects and due to that this city is attracting the Indians as well as NRI’s for investment.

Property in Thane and Property in Mumbai why are the hot-spot? Because of high returns and luxury apartments? The answer is both, realty market in Mumbai is attracting the investors and end-users of premium segment as well. But due to high cost it’s not a cup of tea for everyone to won a Property in Thane and Property in Mumbai. Thane and Mumbai fetch the high rates of appreciation due to metro connectivity, well developed road network, fast-paced development in infrastructure and availability of other basic amenities such as; colleges, schools, super market, shopping malls, banks, ATMs, hospitals and other places. In present even some people are ready to take the loan just for making the investment in these reasons because they know that this investment will bring the good returns in future.

In the eastern suburbs of Kalyan, Dombivli, Titwala, Badlapur, the real estate profile is slowly but steadily moving from only small and mid-segment developers to integrated townships by leading builders. These townships are spread over hundreds of acres and offer amenities such as club house, gymnasium, kids’ play area, community hall, a water body and all features of gated townships.

 “The new development happening in Dombivli is of international standard, inspired by Hong Kong and Singapore where a township is more of a district which has schools, grocery shops, malls and administrative offices in the same complex,” says Rajendra Chauhan, owner, Real Estate Investment Advisory, a property consultancy in Navi Mumbai.

Take for instance, Dombivli was perceived as a densely populated suburb of Mumbai, which faces water crises and poor civic and social infrastructure. However, the authorities have a different point of view. “Dombivli does not face any water shortage and is self sufficient for the next 20 years,” says RK Sonawane, commissioner, Kalyan Dombivli Municipal Corporation.

Lack of basic amenities in the eastern suburbs has encouraged developers to come up with integrated community plans, which will provide all these facilities inside the township. Inspite of all this, traveling to the ‘island city’ will still be a challenge. “The local trains are crowded till Dombivli, as most of the commuters get down here only. Hence, it becomes difficult for a daily traveler to cope with the jam-packed trains especially during peak hours,” adds Chauhan.

There is a real transport problem in the eastern suburbs where Kalyan Dombivli Municipal Transport buses ply between Kalyan-Thane and Kalyan-Navi Mumbai, passing through Dombivli. However, because of less frequency and heavy traffic over various nodes in Thane, not many people prefer to take this option. Experts believe that the proposed Ring Road can bring some relief to the daily commuters as it will ease travel hassles between Navi Mumbai, Mumbai and Thane.

Very few cities have a capacity to create micro markets and Mumbai is one of them. Mumbai has a micro markets in his boundaries and here is small analysis from those areas, where micro markets have developed.

If you will analyze the Indian property market, so you can easily notice that Mumbai is on the top most position in the property pyramid. This financial capital of country can be defined as DNA of country as attributes of Grade A city. In Mumbai there are many micro markets and they are catering the various needs for socio-economic groups. Mumbai is rising as one of the most attractive destination for real estate investment by following the global growth pattern.  The growth in real estate segment is evolving the new pattern because various budget segments have surfaced in same region and this situation is not only for commercial development as the growth trajectory has co-relation with residential apartments. In Mumbai city for long distance has been dampener the real estate market and now many micro markets have emerging as city within the city of Mumbai.

Real estate market of Mumbai is very dynamic and people love the Walk-to-Work facility, but because of cost this facility is only available for CEOs and other top management of MNCs. In recent development scenario satellite towns are making it possible for average working class of city. For example, Bandra-KurlaComplex has made it possible to leave nearby professional space.  To make sure that Mumbai real estate market is beneficial, analysts are tracking the real estate market of Mumbai in respect of rest of world and buyers or end-users. Mumbai is successfully creating the sub cities like; Navi Mumbai to cater the present and future needs of housing, and it aims to improve the connectivity and infrastructure of city. City is preferred as perfect market to emerge as realty hub with a lot of appreciation potential.

Few emerging locations like; Thane, Bandra and more are providing the supply of more quality spaces with best rentals, which is the interest of corporate. From Navi Mumbai to Thane, one can find a lot of affordable options with in the real estate market of Mumbai. People want to buy property within the radius of 2 kms due to easy connectivity of community centers, hospitals, schools, colleges, and more. The development of micro-markets in the city is the reflection of history and culture of the Mumbai, the way it has developed in past few decades. The modern community places have shifted from Nariman Point to Worli, Parel and BKC and it indicates that these localities are shifting from commercial to preferred residential spaces. Due to heavy traffic people want to live near work places for easy connectivity and those places are; Chembur, Saki Naka, Bandra, etc. Now Mumbai is moving from community flavor to cosmopolitan flavor with the development of various micro-markets.

Micro-markets such as; BKC, Goregaon, Malad, Powai, Andheri has emerged as most important locations for commercial as well as residential spaces. Today end-users or buyers want to travel least possible distance to save their time. In present metro connective is working as game changer for real estate market with the potential to redefine and improve the Mumbai’s property market.

These days, Boisar in Thane is growing as one of the favorite destination for established real estate developers to launch affordable projects. Here buyer can own a home in very reasonable price, which starts from Rs 15-25 lakh. Some big names are such as; Mahindra Lifespaces and few mores are undertaking the residential projects in Boisar and later these projects will cater the demand of homes in affordable price. Soon this locality will tout to be the hub of premium affordable homes in Mumbai.

What attracts the real estate developer in Boisar?

Now big names of industry have started the real estate projects and because of that this location is known as the hub for affordable homes due to availability of easy parcels of land. Real estate experts are saying it’s just a simple demand supply statistics, and said that it is expected that Boisar will receive the proper local demand for home in affordable price from those people, who are working in the Boisar Industrial area. These peoples are looking or homes in the range of Rs 10-15 lakh budget. This current demand always existed in the locality for real estate investment. Boisar locality is also witnessing the high demand from nearby locations such as; Virar, and more because these locations have gradually become expensive.

Buyers are not comfortable to buy property in Virar region due to increased property prices.  Boisar is one of the perfect locations where one can buy the property in affordable price with quality and basic amnesties. Boisar location is the preference of buyers to find the home within the Mumbai municipal limits beyond their means. Developer are realizing that people are targeting the Boisar region for owning the property, and the locality also offers the large land parcels, which are comparatively cheaper for developers to acquire land.

Boisar is also one of the best regions for investment as projects that were launched before three years with Rs 1,500 per sq ft are now stands in the range of Rs 3,000-4,000 per sq ft. Locations in affordable price is the primary venues for commercial establishments like; SEZs, IT parks and many more corporate houses because they are moving in these areas for better space availability in low price and also to access the suburban manpower. So, if you are looking for affordability near Mumbai than buy the property in Boisar because here you will not have to compromise on amenities and luxury.

Do you live in a small apartment? Many of us whether by choice or necessity live in smaller apartments. But do you know that you are not alone. Many people are going for smaller apartments as residential flats in Mumbai, Thane and Navi Mumbai have become more affordable due to the reduction in their dimension, says global real-estate consultant Cushman & Wakefield. In its report published in a local newspaper, it says apartments in Mumbai and other cities have become more affordable following a reduction in their sizes in 2014 launches.

Mumbai this year witnessed a 12% reduction in apartment sizes, easing cost by 9% over the last year.

Noida recorded the sharpest decline of 16%. In the over 50,000 mid-segment units which comprise one and two BHKs of new projects across top eight cities in the first quarter of 2014, most cities have seen a reduction in size of approximately 100 sq ft.

Significantly, not just Mumbai but other markets also saw unit sizes drop including Ahmedabad (8%), Chennai (3%), Hyderabad (9%), Pune (6%), and Gurgaon (3%).

Executive Managing Director, South Asia, Cushman & Wakefield Mr Sanjay Dutt, said: “The residential sector is banking on end-user driven demand and developers are tweaking products to make them more affordable. It also signals a degree of stress among developers, which is forcing them to launch products to inject doses of robust sales numbers into their balance sheets. Affordability holds the key right now. End-user buyers have been shying away from making purchases for a long time, owing to lacklustre economic conditions and low confidence.”

Chennai, Gurgaon and Hyderabad witnessed an additional push towards affordable options as they saw a decline in prices of new launches, though most of these launches have been in the peripheral or futuristic locations with lower benchmark pricing. “These locations are generally price-sensitive and driven by end-user purchase, making it necessary to meet price expectations,” the company said.