Mumbai real estate

Swiss chemical giant Clarian on Wednesday sold its 87 acre land parcel at Kolshet in Thane district to the Lodha Group for Rs 1,154 crore. The plot has a development potential of nearly 6 million square feet. Earlier, Oberoi Realty and Tata Housing also went land shopping in Mumbai for development projects.

Niranjan Hiranandani, Managing Director, Hiranandani Group has observed resurgence in real estate demand as a lot of builders have been looking for land parcels in the last 10-15 days. A part of the revival in this demand can be ascribed to expectations of a stable government at the Centre.

Executive MD Cushman & Wakefield (South Asia), Sanjay Dot notes that real estate prices have bottomed out in Mumbai. He says Lodha’s recent big land deal signals a lot of on ground activities. When asked about the pockets in Mumbai that have the highest growth potential in terms of rate appreciation, this is what he had to say.

“If you talk about property within the Municipal limits of Mumbai, Sewri, Wadala, Goregaon (East) and certain pockets of Chembur. Further, there is a big delta in Bhandup, Kanjur Marg, LBS Marg and in terms of valuation this pocket seems very attractive.

If you go corridor by corridor, we have seen enough upside between Vasai-Virar belts and now it seems to be between Kalyan and Dombivli on the central corridor beyond Thane city towards Bhiwandi where there is lot of traction and appreciation. In the eastern corridor, it is the pockets between Kalamboli & Panvel.

So, despite the present dismal sentiment in the realty sector, we would see these pockets appreciate the most in the near future”.

RBI cut key interest rate

With the recent news that RBI has decided to cut the key interest rate, it is expected that this move of RBI will boost the affordable as well as premium housing demand and it also improve sentiments in the sluggish property market. Property consultants and real estate developers have demanded that interest rates should be further reduced. According to one of the realty Magazine, “This move is hope for the reduction in mortgage rates, which would improve residential sales in all over the country that have been suffering from general slackness in recent times. As per the recent research of JLL India, “Housing sales drop by 1.75 lakh units in the primary markets of 7 major cities in 2014 against nearly 2 lakh units in the previous year due to less demand. Happy with softening inflation, RBI decided to cut the benchmark interest rate by 0.25 per cent to 7.75 per cent with a view to boost growth.

Positive views of leading realty developer:

According to Rajeev Talwar, Group executive director of DLF, “It’s an awesome New Year gift and it seems that the finance ministry has putting his effort to convince RBI governor. Given the background of RBI governor, even the small beginning will be marked as big signs of hopes for the Indian economy”. The more he added that, this move would definitely encourage buyers now to invest in new homes or second homes.

Anuj Puri, Global property consultant JLL India Chairman & Country Head stated that “I expect this cut in interest rate to be the first of several to come and these will cumulatively make a big difference for home loan borrowers, as in present, the current interest rate cut will help revive market sentiment, which is very timely”.

Parsvnath Developers Chairman Pradeep Jain, appreciated the RBI decision and stated that realty sector has been struggling from the last 3 quarters with lower demand and more inventories. This decision would help reduction in EMIs and thereby encouraging fence sitters to conclude deals. Developers would also get funds at comparatively lower rates.

This move will instill hope as well as confidence in the real estate industry which is recovering from housing sales is around the corner, stated the Sanjay Dutt, Cushman & Wakefield Executive Managing Director, South Asia. Whereas; David Walker, MD of SARE Homes, said, “This step of RBI will cheer up the markets and hoped that financial institutions will pass on this reduction to customers, which in turn would boost housing demand”.

As per the Lalit Kumar Jain, Chairman of CREDAI, the apex organization of real estate developers, RBI’s decision is as a good beginning but said this is not enough as a reeducation of 200 basis point within short span is needed. Whereas; the Consultant Knight Frank India CMD Shishir Baijal, stated that This decision of RBI is positive approach that would benefit the debt burdened developers and stretched households alike and to comment on this RBI decision Anshuman Magazine, Chairman & MD of property consultant CBRE South Asia, said that this decision is good and in current market situation this reduction in the base rate is an important step in improving home buying sentiments.

According to CREDAI (NCR) President Rohit Raj Modi, “The rate cut will help the real estate developers to expedite projects that were otherwise facing tight fund crunch”. The more he added that home buyers are dreaming to own a home that would also get a boost as we expect an accelerated purchase cycle. Mohit Goel, CEO of Omaxe stated, that this move clearly shows RBI’s shift in stance in favor of positive growth and it is also correct time to usher in a slew of out-of-policy measures such as; to allow the banks to lend more to real estate, easy funding norms and more. Now real estate sector will play role of a catalyst in driving the overall economy.”

Amit Modi the ABA Corp Director said, “This was the most awaited change and development in policy and now easing interest rate will help to revive the health of businesses such as; Real-Estate which are highly sensitive to interest rate movements.” According to Ansal API Vice Chairman Pranav Ansal, “This is so positive step from RBI, which will boost housing sales and improve overall sentiments in the real estate market. The more he added it is a good sign and now real estate sector will look forward to RBI take the drastic steps in its forth coming monetary policy”.

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

Greater demand for dwelling units by 2018

Demand for housing in Mumbai is going to outstrip supply in next four years. The commercial capital of the country is going to witness an extra demand of around 231,000 housing units across all segments by 2018-end while the supply is likely to be around 203,000 units.

Of the total demand, majority (46%) is likely to arise in the Middle income group (MIG), followed by 33% in the Lower income group (LIG) and 21% in the Higher income group (HIG), said a Cushman & Wakefield report carried by the newspapers.

The supply seems extremely skewed towards the HIG (63%), and likely to exceed demand significantly. As a result, due to excess supply in one segment, the overall demand-supply gap seems reduced but a large portion of the MIG and LIG demand will remain unaddressed,” said the report.

Paucity of land in the island city has led to residential housing developments in the suburbs and peripheral locations of Mumbai. With increasing demand, land costs have risen sharply and the developers are finding it difficult to launch the LIG and MIG projects at many locations.

Though the developers have launched projects targeting the MIG in far-off and peripheral locations, the overall physical and social infrastructure at these places has not supported these residential developments and the demand has remained subdued, the report says, highlighting how poor infrastructure is a hurdle in expansion of realty sector in the metropolitan region.

Total new demand for urban housing in India is expected to be nearly 13 million units by the end of 2018 on account of the burgeoning population in urban centres. This is addition to the already existing unmet demand. Of the total additional demand, the top eight cities are likely to constitut

At a time when ways to reduce bureaucratic hurdles are being debated across the country, the state government has planned to remove one crucial layer in registration of properties.

From now on, registration of property sale deeds will not require no-objection certificate from the local civic authority. Builders had been complaining that such NOCs delayed land deals and were tainted by corruption. This system had caused a major hurdle to the realty sector across the state.

The move is likely to revive the struggling realty sector in the state and also curb corruption in the civic departments, said a government official. “Many transactions were getting delayed in the already sluggish market because municipal authorities were able to delay sale deeds. In many cases, local officers would ask for bribe to give NOC,” said spokesperson of a leading real estate firm.

So far, the buyers or sellers were supposed to get NOC from the civic body or the department of town and country planning (DTCP) as no sale deed could be registered without this approval. This has led to the delay in the registration of residential and commercial properties and caused a great inconvenience to the buyers. Moreover, the officials caused deliberate delays to clear the files unless they were paid the bribe, this led to a lot of social tension and the government had received a plethora of complaints against the corrupt civic officials who were netted by the anti-corruption bureau sleuths from time to time.

Further the state government is forming a subcommittee to ascertain the possibilities of amending rules related to medium and small townships where too the resident will not have to seek permission from the municipality authorities to repair, rebuild or buy a new home. “The panel will submit its recommendations to the government in the due course of time so that the necessary action could be taken”, said the official.

Digital technology has touched every part of our life. So how can the multi-billion dollar realty sector remain untouched by it?

Right from setting up branded YouTube channel that showcase walkthroughs of upcoming projects, to hiring social media marketing firms, real estate players such as Godrej Properties, Tata Housing and Adani are joining the digital media marketing bandwagon in a bid to strengthen sales.

Real estate developers in Mumbai and other metropolitan cities have taken to digital media in a big way to boost sales, sidelining the print media. The reason is not far off. Not only are the developers finding digital media cost efficient but also increasingly effective in enhancing conversion rates.

Not only are the developers finding digital media cost efficient but also increasingly effective in enhancing conversion rates. So on one hand while Tata Housing saw over 10 bookings in first few hours of going live, Godrej Properties finds 20 per cent of its sales coming from online play.

The Mumbai-based real estate developers recently found success in the three-day ‘Great Online Shopping Festival’ where Google in association with Tata Housing offered prospective buyers of houses and encouraged them to book a flat or apartment by the company. Moreover, Tata Value Homes (TVHL), a 100 per cent subsidiary of Tata Housing recently received over 200 applications online within three hours on the National Home Buying Day. For Godrej Properties as well, the number of online enquiries for its projects has more than doubled over the past few months.

In the aftermath of the success of both Great Online Shopping Festival and National Home Buying Day – where both the marketing of the sale, and the transaction itself, were conducted purely online – we plan to add several more to the calendar, providing consumers more frequent avenues for accessing quality homes. This is emerging as an exciting option to target HNI’s and NRI’s,” says Brotin Banerjee, CEO and MD, Tata Housing.

A study by Google India says: The internet is influencing consumer behavior as 7 out of 10 buyers know the exact brand and model they want to buy with the help of online research.

Says Girish Shah, Executive Vice President (Mktg & Sales), Godrej Properties Ltd: “We use digital media to build communities of like-minded individuals, without an overt brand presence. This allows for a lot of creative flexibility and the ability to co-create products by crowd-sourcing trends and preferences. We also use it to convey transparency and are probably the first real estate brand in the country to have branded YouTube channel, which has sets dedicated to walkthroughs, news about the brand and project updates,” says Girish Shah, Executive Vice President (Mktg & Sales), Godrej Properties Ltd.

The realty developers not only run contests on Google plus and LinkedIn to connect with diverse customers, but also have integrated IP-based calling that is connected to call centres that are trained to handle specific campaign-related enquiries.

If that is not enough, developers have also begun taking help of professional digital media marketing firms for enhancing their web presence.”In the recent times, a number of our new clients have been from the real estate industry. Real estate developers this year have found it hard to continue business only through the offline media platform and have, hence, begun outsourcing their digital media activities to firms like us to enhance their web presence and bring in increased conversions,” said Anshul Gupta, chief executive officer, Digimedia, a Mumbai -based digital marketing firm.

What also has been attracting real estate developers to the platform is the cost efficiency. Dipesh Roy, vice president (marketing) Adani Township and Real Estate Company says: Digital media tends to cost us one tenth of the conventional print and outdoor platforms and yet bring in at least 40-45 per cent conversions which is only growing. Also, there are lots of leakages in the conventional platform whereas the digital platform can be used to focus only on the target consumers. We have seen that out of 10 people using digital platform for our projects, nine have come to see the product.