Top cities in India which are offering houses in your budget

It seems like, years 2016 is positive for real estate developers as well as end users because there are several affordable housing projects in all over India which are ready for launch. Due to active and optimized urban planning schemes in Indian states and cities now the budgets for properties is somewhere affordable for specific segment, however; its still true that there are not much number of cities where you will find affordable property and in India its far-fetched dream common man to own a property in most of the metro cities.

With the boom in commercial real estate sector, now budget for personal housing is also shooting on high levels. In past few years, the real estate landscape has witnessed spatial transition and due to that it has led towards the consistent rise in the budget of the properties. According to recent report of JLL India, which is global property consultant firm, there are still some cities in India where housing is still affordable. As per the statement of Anuj Puri, Country Head of JLL India, “It is expected that 2016 will be good year for investment activities that were seen in 2007; the previous peak year which saw investments of more than $8 billion into Indian real estate”. The names of cities are following where you can grab your dream property in the budget of Rs. 30 to 50 Lakh;

• Hyderabad, Telangana:  Hyderabad is the combined capital of Andhra Pradesh and Telangana and it is also the centre of dynamic workforce and now again its trending the buyer’s market. In Hyderabad, there are many well-developed residential localities such as; Sainikpuri, Kukatpally¸ Miyapur and Manikonda where you can buy house in the budget of Rs 30-50 lakh. In simple words we can say that Hyderabad is perhaps one of the most affordable cities among all tier 1 cities of India.
• Pune, Maharashtra: In last two years, Pune has recorded good growth in terms of economy and growth in the affordable housing segment. Here you can buy affordable property of 1 BHK and 2 BHK in different areas. Apart from that people from high-end segment are buying 3BHK and 4 BHK budget homes. Pune offers better standards of living than any most other metros
• Jaipur, Rajasthan: Jaipur is one of the fastest developing city with many influencing growth drivers and due to that it has progressed tremendously in last three years. In Jaipur, there are some regions such as; Malviya Nagar, Tonk Road and Ajmer Road, which is good for investment deals. Currently, with annual capital appreciation of 12 to 17 percent, Jaipur holds great potential and promises good returns on investment.
• Ghaziabad, NCR: Ghaziabad is perfect destination for those who wish to buy property near Delhi, Noida and Gurgoan because here the supply of property is very high and its easy to find the budget home of Rs 30-50 lakh. Infrastructural developments such as the extension of the Metro Rail and the widening of the NH 24 will further boost Ghaziabad’s realty market.
• Nagpur, Maharashtra: We all know that Nagpur is city with extreme climatic conditions and in present Nagpur is one of the fastest-growing cities in our country. Apart from that now even state government is taking interest in turning Nagpur into the next IT hub of Maharashtra, the city is set for a major transition in its real estate profile.
• Kochi, Kerala: Now days builders are not focusing on affluent buyers, they are focusing on the affordable housing because in present there are huge demand of affordable housing and its accounts more than 60 percent of the total housing projects in the city. The increasing land prices have made it difficult real estate developers to build independent houses, and due to that now there is increasing demand from the emerging mid-income segment that wants homes packed with amenities at affordable prices.
• Coimbatore, Tamil Nadu: Currently, Coimbatore is a market which is responsible for the 40 percent real estate investments including cities Bangalore, Cochin and Chennai and apart from that professionals are also looking for property in Coimbatore because its emerging as a retirement destination and people are interested to buy 2 BHK homes in Coimbatore.
• Ahmedabad, Gujarat: In present, Ahmedabad is witnessing rapid infrastructural development in the form of GIFT Smart City¸ bullet trains and entrepreneurial nature of the population. The gas, oil and energy industries, petro-chemical industries and automobile manufacturing industries are some of the major factors driving perennial demand for real estate in the city. Currently, there are high demands of affordable property and due to that you can easily find properties within the range of Rs 30-50 lakh.

Managing Director and Chairman of Mantri Group- Sunil Mantri

Recently, the Bombay High Court asked Mantri to not to sell any property till next court orders and after this the Bombay High Court also appointed an official liquidator with an aim to took the possession on the properties of Mantri Group.

After coming in news or controversy; Sunil Mantri, the Managing Director and Chairman of Mantri Group resigned from the position of NAREDCO chairman. NAREDCO is an umbrella body of real estate developers.

When media tried to contact Mantri, so he confirmed that reports, but refused to provide any additional details. However; earlier it was report that Mantri has defaulted on sum of over Rs300 crore and after that all investors or creditors had appealed in the Bombay High Court with an aim to get the pending dues with an interest rate of 25 to 36 percent. According to reports, till now more than 60 investors and creditors had filed the cases against Mantri by stating that he has cheated on them as well as buyers and borrowers. According to reports now he will not be able to dispose any of his fixed assets which belongs from the company without court’s order.

However; a real estate developer from South Mumbai stated that in present property market is down and due to that developers are not able to pay back the loans and interests. Most of the real estate developers are launching the projects and with booking amount they are buying other properties. But if any plot comes under the under litigation, so it becomes very difficult to come out from that mess.

Commercial Property

According to real estate experts, it’s good times to make an investment in the commercial property as companies are expanding their business with an aim to improve their business sentiment. If you are looking for regular cash flow with higher return and rental, so investment in commercial property is better than residential property.

As per experts, now commercial real estate space is witnessing a revival with little high demand at the time when real estate developers are not building commercial space from last four to five years due to global financial crisis and now its expected that soon existing stock will get consumed. And in simple words we can say that it’s the main reason why real estate developers and commercial property owners are receiving higher rental yields and now people are looking it as good investment option. Indian economy is growing with growth rate of 7.3 percent, apart from that inflation has been reined in with the gradual growth in manufacturing sector. However; with all these kinds of growth commercial office spaces are also gaining momentum because companies are looking for expansion due to improved business sentiments. These days big e-commerce such as; Snapdeal, Amazon and Flipkart are looking for commercial spaces to set up their warehouses, followed by IT-enabled services and the information technology sector as well as financial services and insurance (BFSI) segments and banking sector and they all are resulting in high absorption levels in commercial properties and quality office spaces.

It is expected that in near future the industries such as; engineering, pharmaceuticals and manufacturing will provide further impetus to the real estate market. According to Amit Bhatia of Assets and Business Banking in Deutsche Bank India, “Its best time in India to invest in the commercial properties as it is giving low capital values with high rental yields. However; there are many micro markets where price of commercial properties are still low than the residential property and commercial properties are offering double the rental yields”. The more he added that Grade-A properties including offices, retails or other spaces at high street are also are bound to deliver capital appreciation and higher rentals. However; for commercial properties the capital appreciation is low due to many speculative buying in residential property. On the other hand office spaces are more driven by end users whereas; commercial space might not be as easy to sell as residential spaces are and its also easy to find tenants for offices spaces in comparison of residential.

Why it’s best time to invest in commercial property:

From investment point of view the difference between commercial and residential property is that in commercial real estate you will get more rental in comparison of residential property, but when it comes to sale property, so its pretty easy to sale residential property, but its tuff to sale commercial property, as per the statement of Viral Desai, National Director at Knight Frank India. The more he added that in past few years, residential real estate market has seen more appreciation, but now its on peak and about to get over. However; it is expected that in near future office spaces are continues to give better rental yields. In residential property the annual rental yields are about 2 percent, but when it comes to office space annual rental yields are about 8 to 11 percent. Offices spaces are offering good opportunity for investors as tenants are looking for good quality lock-in of leases spaces.

Income from commercial property:

It is suggested to invest in the property which is on the lease already because it will provide you regular cash flow, as per the statement of Desai. In normal cases, people prefer to go for the rental agreements of two to five years, if the space is for office and during that duration the tenants are locked in for that period. So if you are about to invest Rs 5 to 6 crore in an office space, so you can expect to get Rs 50 to 60 lakh as annual rental income. Apart from that you should also check that which kind of company has leased out the property and for what kind of business, for example if banks or some other brands has leased out that property, so you can expect that they will continue for next 15 to 20 years at least because they will avoid to change their address. If you are planning to buy property no multiple owners and large part of property is with real estate developers, so property maintenance will not be big challenge. As per the statement of Sanjay Dutt, Managing Director of Cushman & Wakefield, “The top three cities which have saw good supply and demand in the period of January to September 2015 were Pune, Delhi-NCR and Bengaluru. However; till now they have collectively contributed 77 percent to incremental supply and 65 percent to commercial absorption and on the same time you can expect annual rental yields of 11 to 12 percent for Bengaluru, whereas; in Delhi and Pune you can expect annual rental yields of 7 to 9 percent.

Why should you leverage the opportunity?

We all know that unit size of commercial real estate is larger than the residential and due to that investors need to invest much larger amount in commercial property. And apart from that they will get no tax incentive for investing in commercial real estate, as they are used to get for homes. If you are thinking that price of property is too high and you will be not able to manage it, so you can take loan for the property against rental income.

Checklist before buying commercial property:

1. It’s recommended to check the background and experience of real estate developer in commercial property.
2. If there are any existing tenants, so better to consult with them and its suggested to check that what kind of companies have leased out the space and the business the tenants are into

• Check the infrastructure, society, location as well as surrounding area.

1. If you are taking loan or borrowing money, so never keep your property vacant for long periods.
2. If buying resale property, so prefer to buy leased out property.

Housing Price Growth in Mumbai

For the duration of July to September or in Q3 2015, the housing price index grow by 13.7 percent, whereas; the cities such as; Jaipur, Lucknow and Kolkata have contributed to the slower pace of growth, as per data and reports of RBI.

As per data of Reserve Bank of India, till the end of July – September quarter home prices have not bottomed out. Indian Housing Price Index is the barometer for home prices in Indian real estate market and it released by the central bank. For years 2015, the Indian Housing Price Index has grown by 13.7 percent for the period of three months, which ended on September 2015, however; in last quarter it was 14.5 percent for the same financial year. On the other side it was city Kolkata, which has witnessed maximum fall in Indian Housing Price Index with 224.1 in the second quarter of 2015-16 and it was 3.13 percent less than the previous quarter. But New Delhi, the capital city of country have cheered the real estate developers because in Delhi real estate developers were offering freebies such as; free parking space, air tickets, cars, heavy discounts and more including latest gadgets. For the same period the Housing Price Index growth was about 21.9 percent in Delhi and it was maximum in whole country.

Overall increase in Indian Housing Price Index was 219.5 in the second quarter, however; in first quarter of 2015 it was 215.3 and this increase was due to the metro cities such as; Delhi, Ahmedabad and Chennai, as per press release of RBI. Whereas; in Q2 2015, the Housing Price Index for Bengaluru, Kolkata and Kochi decreased from the previous quarter. To give more curate data the Reserve Bank of India compiles quarterly house price index of top ten major cities such as; Mumbai, Bengaluru, Lucknow, Delhi, Chennai, Ahmedabad, Jaipur, Kolkata, Kanpur and Kochi.

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.

JLL India – “India Desk” in Dubai

Recently, JLL, the leading real estate advisory and investment firm, has launched its own “India Desk” in Dubai, which aims to facilitate the cross boarder investment between the GCC and Indian market. It is expected that JLL’s new initiative will support and help the GCC investors to manage their real estate investments and properties in India, apart from that JLL will also advise the investors and real estate developers about real estate investment on the matter of entering the UAE and wider GCC markets.

In starting “India Desk” will advise the real estate investors in Dubai to fund a development project in Mumbai and it will also shortlist the premium and most profitable land acquisition opportunities in India for those investors who are living in Abu Dhabi. In Dubai, the India Desk will be led by the Swati Shanker, who is Dubai based whereas; in Mumbai Amit Pande Head of Private Wealth for India & Middle East region will led the India Desk.

According to the statement of the Anuj Puri, Chairman and Country Head, JLL India, “We are continue seeing a significant interest from real estate developers and investors from GCC for India and vice versa and due to that we decided to establish the proper channel to make sure that clients are receive the same high quality of services in all around globe as per their need and requirement”. Commenting on the new initiative of JLL, Gaurav Shivpuri, Head of Capital Markets JLL MENA stated that India has very long stand as well as strong partnership with the UAE and due to that it continues to play a huge role in the region’s economic success. For growth of business it’s need of time and opportunity to set up a cross border platform to facilitate cross-border investments between these two countries”.

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.

Festive season offers

If we will look the business of real estate market at the time of festive season, so we will find that developers and the consultants are on the same side because they are accepting that it will continues to go through a slow time. There are many real estate developers in country which have strong financial support and they tend to challenge or complete the convincing progress of real estate market with their under-construction projects. Unfortunately fact this has been overly hyped by the media and real estate developers that they have strong financial background and they are able to complete their projects on time. But still there is drop in the overall confidence of end buyers because they are worried that if they will commit their money into properties which will not be delivered on time, so it could be problem for them.

Price Correction in Projects:

In last one year, the prices of property in Mumbai has been increased by 3.7 per cent, in Chennai its increased by 15 per cent, but in Delhi or NCR no change recorded in the price of property. All this rise represents the more or less stable scenario and it is expected that it will continue for another 2 or 3 quarters as there are many fence-sitting buyers, who are waiting for the time when real estate prices get correct. But according to real estate experts price correction will be location specific as well as developer and will happen only if there will be nothing to attract the buyers. There are few cities where demand is still sufficient and prices are more or less affordable and in those cities there will be no price correction. Apart from that the regions where people looking for more affordable property certainly price correction will happen in those areas. However; there are much activity to make the real estate market more affordable because developers are actively re-configuring their projects as per market conditions in process to save the cost and pass the benefit to buyers. Much number of real estate projects are about to launch and they all have been at lower rates than those of earlier projects launched in the same locations in such category projects.

Economical Scenario:

In present, economy has not shown any type of perk for which real estate developers are waiting. However; market has definitely improved in comparison of last year. But market is still improving and recently, RBI as cut the interest rates to help the sentiment of buyers and it is expected that it will be factor to drive more sales in real estate market. With the cut in interest rate, the RBI has sent the signal to the real estate market that inflation is under control and buyers and developers can be more confident about economic growth. However; these kinds of signals are positive for buyers and developers as well. If you will show the actual pertinence on property purchase, so it could draw big impact on the savings because impact may not be very significant, in expensive regions such as; MMR, NCR, Delhi and more. If property prices will be expensive in any case, then marginal reduction in the cost of borrowing will not make any big impact. However; the reduction in interest rates will draw a bigger impact on the buying behavior in less expensive markets such as; peripheral locations of tier I and tier II cities.

NRI Investment:

If will take a step towards the domestic real estate consumption and analyze the demand and supply ratio in metro cities so you will understand that outlook looks very upbeat. In present, there are many non-resident Indians (NRIs) who are extremely active while investing in Indian real estate market. In India, NRIs are among top five investor communities who are investing in countries property sector. Apart from that there is natural affinity to India that NRI with high intrinsic value prefer to buy property in India than buying property anywhere else in world. However; sometimes due to weaker rupee value NRIs prefer to invest in India.

This festive season it is expected that buyers will see the mixed bag, but still question remains same, is it a good time to buy? Definitely yes, for end buyers because they have never been more spoiled for choice with bargaining power and lower interest rates. There are many real estate developers who are offering hard discounts registration charges and waive on stamp duty, VAT service tax and on other services such as; floor rise premium, free parking space and more. This festive season is an ideal time to make the best deal of your life and turned your dream home into a reality.

Affordable homes in next one year

NARDECO (the National Real Estate Development Council), the umbrella developer body was formed under the ruling of Ministry of Housing and Urban Poverty with an objective to alleviate the work of central government. Niranjan Hiranandani, MD of Hiranandani Constructions Pvt. Ltd is now act as the president of Maharashtra NARDECO unit.

The National Real Estate Development Council has decided to construct one lakh affordable homes on the basis of no-loss no-profit. However; with this condition government has to provide land for the construction of homes. Niranjan Hiranandani, President of Maharashtra NARDECO unit stated that soon we will meet Chief Minister Devendra Fadnavis with detailed plan of action for the construction of affordable homes. Apart from that he also ensured that over one lakh affordable and low-cost houses to be built each and every years for the next five years in MMR (Mumbai Metropolitan Region) in sync with the government of Maharashtra. The more he added that “It will ensure the delivery of best possible technology at lowest possible cost. However; the allotment of the housing units will be based on the certain criteria and lottery system.

“If state government will provide land for such developments, so we will be able to construct home in Mumbai too. We want to earn good name and reputation in all over country. We want to show that this initiative aim to complete the dream of people, which is to own home in Mumbai. After throwing this idea now many real estate developers are coming forward and taking their responsibility to build certain number of houses” said Hiranandani.

Few Builders have different strategy:

According to Pankaj Kapoor, MD, Liases Foras, the real estate research firm, “In Mumbai real estate developers will never construct affordable home, no matter you provide them land or not. Because; first thing; Why we need real estate developers to construct affordable homes at government land? Government needs contractors to construct homes rather than the developers, apart from that urban bodies such as; CIDCO and MHADA should stop their habit to sell land in the open market rather use them for the construction of houses only”.