Mumbai flat got record Rs 28 crore
Residential real estate prices are growing in Mumbai very fast. The highest price stands at Rs 97,842 per square feet for a flat at NCPA Apartments. The transaction took place about fifteen days ago in the Maker Tower B building located close to the World Trade Centre at Cuffe Parade.
In November 2007, the largest-ever residential transaction on record was completed when a four-bedroom flat at NCPA Apartments at the Nariman Point end of Marine Drive fetched a price of Rs 34 crore.
Reason behind New Delhi’s real estate hike
New Delhi has been considered the business of real estate in India. With the growing number of students, tourists and bureaucrats, the real state of Delhi has become an area offered in India. Apartments, houses, land, agricultural and industrial lands, industrial and residential plots, are the main segments in which the real estate industry in New Delhi is thriving. Real estate prices in the city depend on a number of factors, including the location, accessibility, etc. Tourists look out for accommodation that is close to historic monuments and, secondly, the employers look out for residential properties that are easily accessible from the airport, train station, etc. Real estate demand in Delhi has increased more than ever. It has become the preferred place for foreign direct investment and many multinationals have established their headquarters at the site and adjacent areas. The search for a real estate agent recognized as offering real estate in New Delhi, according to your budget and needs. Beyond this, there are some other important factors such as strong economic growth, the recovery of financial markets and investor friendly policies of the government will also increase the demand for real estate in the city.
Real estate recovery story being scripted by investors
The real estate recovery story is being driven by the residential segment, but contrary to the claims made by a number of developers that end-users are their main buyers, the current trend is being driven by investors.
Investors are back in good numbers and before the curve goes up, they want to buy. Some who have bought are already hoping to book profits during this Diwali. This could be a precursor to further improvement in investor sentiments, since investors would take this as a sign to look towards a sustainable run in the future.
Investors moved away from the residential real estate market when the market crashed last year and many have not been came back. The last few months though have seen a number of affordable launches at price points, which have stimulated the market. Most developers have launched mid-income housing in the Rs 20-40 lakh range, which has created a movement.
Realty Prices In Mumbai Rise
Though realty prices across India are still smooth, Mumbai’s realty market has surely started heading north. Realtors in Mumbai have hiked prices for their developments by 5-15%, depending upon the location. Modern India Ltd, a Mumbai-based realty company, has finalized the sale of 4 residential flats, sized 2,100 square feet each at its high-end Belvedere Court, Mahalaxmi, at a price of twenty-five thousand rupees per square feet. Recent research reports (Market Beat) show that comparable flats (Vivarea, Planet Godrej) in the vicinity fetched between Rs 19,400 and Rs 20,000 per square feet, which clearly indicates a price rise of 25% in that area. Though prices had declined only by 30-35% inMumbai and its suburbs, they are again moving up and still demand is pouring in, which is beneficial for developers.
Real estate terminologies
The common and simple terminologies used (in fact misused) and often discussed in real estate industry generally end up into lots of confusion.Our aim is to provide an information for a common man having some kind of interest in sale /purchase or renting of properties.Surely you will find it useful:
A. Built-up area: It refers to the entire floor area including carpet area, walls, lobbies and corridors, atrium areas and basement.
B. CAM: CAM stands for Common Area Maintenance. It includes maintenance of hallways, pathways and utilities.
C. Cap rate: This is also known as Capitalization Rte. It is the return on investment (ROI) on the property. It is measured by the formula: Purchase Price / Net Operating Income from the Property.
D. Carpet area: It is the actual usable area within the walls of the floor.
E. Cash on cash: It is the annual percentage return of your down payment not including appreciation.
F. CPI: The Consumer Price Index is used to calculate the annual rental increase so as to compensate for inflation.
G. Efficiency ratio: Efficiency ratio is generally expressed as a percentage of carpet to super areas of the property.
H. FSI: FSI stands for Floor space index is the quotient of the ratio of the combined gross floor area of all floors excepting areas specifically exempted under these regulations to the total area of the plot.
I. Full service lease: This is a lease where the tenant pays rent to cover everything including utilities.
J. GLA: GLA stands for Gross Leasable Area. This is the total rentable area.
K. Gross lease: This is a lease where the renter pays only rent and the landlord pays the taxes, insurance and maintenance.
L. LOI: LOI stands for Letter of Intent. It is a non-binding offer letter to buy a commercial property.
M. Maintenance charges: These are charges taken by the maintenance society towards the maintenance of the property.
N. Market value: Market value of the property is the price that the property commands in the open market. It is calculated by the valuation process which works on “demand and supply” principle.
O. Mixed use: These are commercial properties with retail on the first floor and apartments on upper floors.
P. Registration charges: These are the fees associated with getting the legal title registered in your name. This legal activity is conducted in the sub-registrar office.
Q. Stamp duty: Real Estate Stamp duty is a tax collected by the Government of India. Stamp duty is based on the market value or the agreement value whichever is greater.
R. Sale deed: Sale deed is the process by which the seller transfers all the rights on property to the buyer.
S. Super area: Super area is the entire area of the building including carpet area, walls, lobbies and corridors, lifts, staircases basements, and other atrium and utility areas.
Real estate recovery is now visible
Real estateAs we all know that property buyers are coming back to market, this time can be marked as market revival time. Once again the buyer has lots of choices and the seller has more profit from dealing. After observing the increase in demands in real estate industry, developers are all set to increase the prices of realty projects. If we talk about real estate companies, almost every company including DLF, are working on the same strategy.
With the wish to see real estate at its best in near future, I hope that the buyers will have more and more choices available to fulfill their needs.
Real estate demand revitalizes
The global economic slowdown has provided end users a unique opportunity to buy their sweet homes as prices in many areas in National Capital Region have fallen steeply. Apartments are now available in some markets at almost 50 percent of the prevailing price a couple of years ago. The average price in Gurgaon has fallen by almost thirty percent and in Noida by more than fifteen percent in last two year.
According to PropEquity, Noida and Faridabad demonstrated high absorption primarily due to launch of affordable housing projects. The projects of Jaypee in Noida and BPTP in Faridabad were primarily driving the high absorption values in these cities with these developers commanding more than seventy percent of the market share for the period of Jan-Jun ‘09. Noida maintained its top position in NCR with the launch of 7,032 units, and beats Gurgaon by a large margin of over 2,300 units.
However, the slowdown had its effect on the timely delivery of apartments. Unavailability of finances and lack of demand have forced developers to go slow in implementing projects, which were launched earlier. According to the report, amongst the cities witnessing the maximum number of delays in project completion, Ghaziabad and Gurgaon had 71 percent of the projects under implementation falling behind schedule.
Piramal Sunteck buys two Cidco plots
Piramal Sunteck Realty purchased two plots in Navi Mumbai for more than thirty-one crore rupees. In all five plots, measuring around eleven thousand square meter were put on the block by the City and Industrial Development Corporation (Cidco) for a total cost of eighty crore rupees.
Piramal Sunteck had put in a bid for all five plots. The bids for the other three plots were bagged by Millennium Enterprise, Atul Aggarwal & Sons and Prajapati Constructions. It is learnt that the Piramal-Sunteck group plans to develop its two plots for residential and commercial purposes. Residential development will account for 75%.
Cidco had invited bids for these plots around one month back. These plots are located in Airoli with a size ranging from fifteen hundred square meters to thirty-five hundred square meters. The successful completion of these bids comes not too long after the bid for Finlay Mill was scrapped. NTC is learnt to be looking for higher valuations as compared to the bid for Rs 710 crore by Lodha Developers.
Green buildings in demand
New trend of real estate industry is the green building concept. Such green buildings are environment friendly and energy efficient. A green building uses less energy, water and natural resources, creates less waste and is healthier for the people compared to a standard building. According to Mr. Ajay Mathur, Director General for Bureau of Energy Efficiency under the Ministry of Power, “India has close to thirty million square feet of green buildings; an amazing achievement given the fact that we had only about twenty thousand square feet in 2003 when the movement started here”.
Green buildings are wooing more and more buyers. These are in existence from last two years and now various Government organizations are spreading awareness and popularizing its energy efficiency feature.
Real estate is back on track
According to CREDAI, real estate sector is picking up in both residential and commercial sector. Both real estate sectors are getting more and more enquiries. Along with enquiries, demand in both sectors has also increased. However, there are various major and minor factors behind this, but two major factors are, affordable housing concept and reduction in home loan rates. Investors have more choice and offer these days.
Mr. Raj Menda, President of CREDAI-Karnatak announced a 2 day realty expo starting from 15th of this month. This realty expo will showcase 150 properties. During this announcement Mr. Menda said that there is a growth of 60% in March of this year as compared to December last year.
Realty regulator is needed
HDFC chairman Mr. Deepak Parekh said that there is need of real estate regulator at state level to deal with issues concerning the housing sector. He pointed out that the Government should layout an institutional framework for a real estate regulator. Regulators’ role would be to regulate the affordable housing agenda, promote real estate reforms and ensure transparency especially by mandating that flats be sold only on carpet area and act as a platform to protect buyers from real estate deceit. Mr. Parekh suggested that affordable housing has to be enable to cut all income segments and has to make economic sense in terms of distance from work place.
Let us find some positive aspects of recession
Everybody is cursing recession as it resulted into slowdown in market. But, have you ever realized that there is always some positive aspect behind every off-putting phase. Recession has changed the point of views of consumers, lenders and developers as well. Consumers became more cautious during spending their saved money. On the other hand developers shifted their focus towards low cost housing.
Recession has made tremendous changes in real estate, various real estate giants showed interest in housing for middle class people rather than building a huge complex. Investors may seem to be winners with recession giving them an opportunity to pickinvestments at more realistic prices.
Puravankara buys sixty-two acres in Bangalore
PropertywalaProvident Housing is a fully-owned subsidiary of the Bangalore-based Puravankara Group. Provident housing is learnt to have bought a 62-acre land parcel in the outskirts ofBangalore. The deal is believed to have been struck for a value of 150 crore rupees. The deal between Provident Housing and the seller, who is an individual, was signed earlier this month.
The land parcel is located on the Mysore road around half-an-hour away from the heart ofBangalore. This is said to be an outright purchase with Provident Housing, scheduled to make the payment in two tranches. In the first stage, the buyer has paid a nominal token amount at the time of signing the agreement and the balance would be paid when the project is completed.
Recently, many real estate developers have been exploring opportunities in the affordable housing sector. The Puravankara Group will have these projects in Chennai and Bangalore and is negotiating deals in Hyderabad and Coimbatore. It is learnt that deals in Hyderabad and Coimbatore will be finalized in a month.
Government tries to make home affordable
PropertywalaThe government announced for lower cost housing are expected to have a significant impact on the affordability of such homes, and encourage developers to get into the segment.
As per the government’s announcement, the value of the house that’s eligible for such subsidy can go up to twenty lakh rupees, but the subsidy will be applicable only on loans up to ten lakh rupees.
The move to extend by two years the tax exemption available to builders of smaller homes is also likely to convince builders to cut the cost of such homes.
The government has extended the provision of section 80IB (10) of the Income Tax Act to projects approved before March 2008 and to be completed before 2012. Earlier, the provision was limited to projects sanctioned before March 2007 and to be completed before March 2010.
The extension exempts builders from paying tax on income from the sale of houses of one thousand square feet built-up area within 25 km of municipal limits of big cities and fifteen hundred square feet in other areas.
Some say that very few projects were launched during the extended period, so it’s unlikely it will have a major impact. But Confident, which did launch projects during that period, thinks they’ll now be able to offer more aggressive prices for them. That could help to drive demand and also facilitate completion of the projects by 2012.
Realty companies are back on track
PropertywalaEmaar MGF, Godrej Properties, Lodha Developers, Sahara Prime City, Nitesh Estates and Sriram Properties will all hit the capital markets in the current year, declaring that the worst may be over for an industry that virtually cratered in the global economic storm last year.
With market conditions still tight, it will be tough for these issuers to demand substantial premium from investors. Looking at the present volatile market, it would be really difficult to predict the premium.
The last to be listed, Mahindra Holidays and Resorts, debuted on BSE 7 percent higher than its issue price. Godrej Properties, the real estate arm of the Godrej Group, plans to sell around 10 percent through its maiden public issue. Before that, the company will place a 3.5 percent equity with select institutions.
The IPO is expected to fetch the company anywhere between 450 crore and 600 crore rupees. It will use the proceeds for building low-cost housing. ICICI Securities and Kotak Mahindra Capital are the merchant bankers to the issue.
Mumbai is most preferred property investment destination
The financial capital Mumbai now ranks as the most preferred destination for investing in properties, while Chennai has replacedBangalore.
The survey, “Trend in residential space across top cities in the current scenario” ranked Mumbai as the most preferred destination to invest in property while in south, Chennai is in the first place for property investments, overtaking Bangalore.
Cities like Patna, Nasik, Tiruchirapalli and Madurai have also become choive destinations for property investments, the survey said.
It said 60 percent of respondents felt interest rates for home loan would come down further in the coming months, while 40 percent evinced interests on properties with an area between 500 to 1,000 square feet.
More than three thousand people from the metros and other cities, including Pune, Ahmedabad, Thane, Coimbatore, and Vadodara participated in the survey.
“Market sentiments are reviving and people are ready to invest. Based on our survey, more than 60 percent of customers are looking at buying residential properties in the next six months. They also have a hope that interest rates on home loans will soon come down”, Consim Info Founder and CEO Murugavel Janakiraman said.
DLF drops mall proposal
PropertywalaDLF has dropped its plans to develop a mall on upmarket Commander-in-Chief Road inChennai due to the ongoing economic recession.
The company has now sought permission to develop the land as a premium residential project. DLF Southern Homes director KK Raman said, “We have completed the design process. We are awaiting approval to announce the launch of our residential project during October-November 2009”.
Sometime in 2005, DLF Commercial Developers acquired the 4.41-acre property from German major Mico Bosch for about Rs 138 cr and had intended to develop it as a retail-cum-office complex. Later, it revised the plans and applied for a multi-storeyed building status, hoping to develop the property as a mall.
Now, for the second time, the company is revamping its plans. It has approached the Chennai Metropolitan Development Authority to permit its reclassification so that the land can be developed as a residential project.
Affordable housing is not more affordable for builders
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Propertywalasector appears to have found its feet with focus on affordable housing and this may reflect in the June quarter results of the companies. The move has led to higher sales for many companies, but on the other hand, it has also impacted the margins negatively. The reason being that the mid-segment housing is a high volume with low margin business.
It may also be understood that only the residential market has seen a recovery, while the commercial and retail segments are still under stress.
Among all the listed companies, Orbit and Indiabulls Real Estate (IBREL) are expected to show a marginal improvement in sales. With a huge fall in property prices in the luxury segment, Orbit has shown 5% increase in sales. With a 70% YoY decline in revenue, Parsvnath is expected to see the highest fall. DLF and Unitech may follow with 60% and 54% decline, respectively. As a move to generate cash for business activities, both these companies have exited from unviable projects and also sold noncore assets. This would help in completing under-construction projects. Even some large SEZ projects have been shelved.
Many companies have launched new residential projects in affordable housing segment. Though construction costs would be low, EBIDTA margins would decline by 5-10 % average due to sharper decrease in prices. However, companies like Unitech, DLF, HDIL, and Sobha that have raised funds have improved their balance sheet positions and thus lowered their overall finance cost. Average EBIDTA margin for June’ 09 would be 39% as against 43% for March’ 09. Peninsula Land is expected to show positive margin, as the number of projects was very limited, hence leverage was also low.
Despite all the gloom, realty sector is seen to show some improvement in margins. The overall PAT margins for the June quarter will be at 26%. Though real estate sector is one of the major contributors to the over all profit growth for India Inc, yet it is low as compared to the past PAT margins of 35-40 %. However as alternate sources of funds have become available, builders have managed to improve their cash position. Loans have been restructured and thus interest liability has been reduced. Developers like Mahindra Lifespaces, IBREL and Peninsula Land are expected to report PAT margins upward of 30%.
Govt may relax FDI norms in realty
Real estate monitorThe government department responsible for the promotion of industry is proposing easier rules to allow overseas investors to be part of smaller real estate projects and lower capitalisation norms for those which involve facilities in hospitality or tourism sector.
The department of industrial policy & promotion, which handles the FDI policy, in a note drafted for the Cabinet Committee on Economic Affairs, has said that FDI should be allowed to flow into realty projects even if the area covered is only 10 acres.
As of now, FDI is allowed in realty projects only if the minimum area covered is 25 acres. The move will help realty projects in metros like Mumbai, Delhi, Bangalore, Chennai and Hyderabad to attract FDI. Realty players feel that it is not possible to find 25 acres of land in these cities to make their projects comply with Press Note 2 of 2005, which defines guidelines for permitting FDI in this sector.
The industry is keen on business in the metros, as it attracts high-profile customers, but wants FDI to be allowed since the cost of land in these cities is high, making them expensive.
The DIPP has also proposed that the minimum capitalisation norms specified in Press Note 2 can be waived in the case of projects, which involve hospitality and tourism facilities, such as hotels, restaurants or entertainment facilities meant for tourists.
Press Note 5 specifies that minimum capitalisation should be $5 million for permitting FDI in realty projects, which involve an Indian partner. In case the project is implemented by a fully-owned subsidiary of an overseas firm, the minimum capitalisation specified is $10 million.
The waiver would be available in case 50% of the built-up area in a project is devoted to hotel and tourism business, such as food courts, resorts, restaurants etc.
If 20% of the total built-up area is used for hotel rooms, the waiver will be available. Veterans in the realty business, who do not want to be identified, said the liberalisation moves were welcome changes that they have been waiting for.
These steps, when implemented, will provide relief to high-value projects in metros and projects being developed for the tourism sector.
IREO to invest 500 million dollars
Photo by thinkpanamaGlobal real estate giant IREO will invest 500 million dollars in various infrastructure projects in India.
IREO is already one of the largest investors in the country’s real estate sector. The company currently has thirteen projects and is in the process of constructing an IT SEZ in Pune. The company has projects in many states including Haryana, Punjab, Tamil Nadu, Maharashtra and Delhi. The company said it would develop an eight million square feet housing project in the next one year.
Realtors use technology to boost productivity
SALES slowdown, stagnating capital values and a need to manage resources better are pushing Indian realty firms to invest in technology that will help them achieve optimum productivity, information access and regulatory compliance.
End-to-end enterprise resource planning (ERP) solutions, that manage diverse projects across different locations, are slowly finding favour. ERP vendors are seeing increased enquiries pushing them to develop tailored solutions targeted at mid-market realty firms.
When Delhi realty firm RDS Projects’ standalone ERP deployment failed, it turned to a solution that provided efficient management of projects across locations and customers: Aurigo Brix. Similar was IDEB’s case, which used Aurigo’s product across realty projects in Southeast Asia and India.
Recently, global tech giant SAP said Maharashtra-based builder City Corporation has gone live on its ERP solutions to help accelerate business plans, such as building 50,000 houses across five townships in Pune including India’s first digital township, Amanora Park Town.
SAP has signed deals with Chennai-based True Value Homes and the Kolkata-headquartered Tantia Construction and also counts GMR Infra and HCC as its major clients.
From tech biggies to mid-market IT firms, everybody is gunning for a slice of this market. While Bangalore-based Sonata Software has launched SonnetCONSTRUCT, a specialised ERP solution for this vertical, Oracle India and HP have teamed up for a bundled offering — Oracle Accelerate Solution for HP ProLiant servers — that will help mid-size businesses across verticals sustain and grow operations.
While vertical-specific ERP figures are not available, the overall market is expected to top $250 million in 2009, growing at a CAGR of over 25.2% between 2004 and 2009.
The firm recently launched its fifth generation product, BRIX 2009, an industry add-on to Microsoft’s ERP solution suite, Dynamics AX and available through select partner channels in the US, Middle East and Africa.
Mumbai is the next target for DLF and Unitech
Mumbai seems to be the next destination for realty giants DLF and Unitech. Both companies are trying to restart some of their projects in Mumbai which were on hold.
Unitech, said, “We have a number of slum redevelopment projects in Mumbai. We also have a focus on affordable housing and some projects will be announced by the end of 2009.” A company official said that the focus would now be on residential projects and prices would be lower than the current market rates.
Residential property becomes cheaper
Residential property prices are expected to fall by about 10% this year. Residential property rates declined by 18% to 20% in this March. Despite this drop, buyers are watching market scenario with ‘wait and watch’ policy. This trend is likely to continue through 2009. Mr. Sudhir Nair, Head, CRISIL Research says, “Demand in the commercial and retail segment is likely to remain under stress for the next two years owing to excess supply and weak off take.”
It is believed that lower home loan interest rates would help to revive demand in the residential segment. Hence, capital values are likely to stabilise in the first half of 2010, and increase during the second half of the year.
Mutual Funds Bet On Realty
Diversified equity mutual funds are betting big on realty, the best performing category in the past one month. The construction segment has shown the highest growth in exposure in value terms in May spurting 95.53% to Rs 7565.76 crore.
Construction has now emerged as one of the most favoured sectors for mutual funds and now ranks behind refinery and banking stocks in overall exposure. Realty companies have been able to raise money through QIPs and stake sale. Their financial position has changed and leverage has now come down. DLF, Unitech and Indiabulls Real Estate are among the top additions to the portfolios of equity mutual funds in May. While DLF saw the biggest addition in quantity terms with mutual funds adding nearly 50 lakh shares, a 493.5% jump, Indiabulls saw a 151.3% increase in shares added followed by Unitech that recorded a 52.7% growth in additions.
Buyers are more attracted towards new projects
It is known that demand for housing has increased in last one month, but this growth is restricted towards new projects. Buyers are rejecting resale properties. Major reason behind is, project developers are offering discounts and many more to woo the buyers. On the other side, resale properties come with a larger unaccountable component. This means seller demands for 20% to 30% more than the price mentioned on paper. Banks provide loan on behalf of the price mentioned on paper. That is why, resale propertiesare out of reach for a salaried employee. This is the scenario of tier-I cities.
