Urban Youth Prefer to Invest in Real Estate

July 01, 2013

Real estate seems to be the hottest investment instrument for urban youth in India, with a whopping 85 percent of those surveyed inclined to put their money into immoveables on hopes of higher and guaranteed returns.

"Over 85 percent of urban working class prefer to invest in real estate saying it is likely to fetch them guaranteed and higher returns," says a survey conducted by industry body Assocham.

Those surveyed also said they cautiously stay off from investing in gold, stocks and mutual funds as these instruments are found to be riskier, the survey said.

A majority of urban youth surveyed believe that investing in the yellow metal is not as profitable as in real estate since they expect gold prices to fall.

Besides, global slowdown and the weak rupee have started casting a shadow on stocks, as many corporations are rationalising the salary structure of their employees with an emphasis on cost cutting which dampens the spirit of investment in the capital markets.

However, a few respondents still chose to invest in stock markets, gold and mutual funds.

The maximum concentration of real estate investments from urban working class and professionals is seen towards residential properties in emerging Tier-II and Tier-III cities.

These include Jaipur, Bhiwadi, Rishikesh, Haridwar, Nainital, Chandigarh, Dehradun, Sonepat, Panipat, Pune and Nasik, it said.

Most respondents felt that investments in real estate, residential and commercial properties are found to be lucrative and much safer since they are completely insured in contrast to those in gold, stocks and mutual funds.

Over 62 percent respondents, especially professionals, chose real estate properties in Tier-I cities like Mumbai, Delhi, Kolkata, entire Northern Capital Region (NCR), Hyderabad, Bangalore, etc for gaining maximum returns.

However, 78 percent of those working professionals with double-income, who bought a house in a metro city, want to invest in their home town for a second home, the survey added.

GHB defers Ahmedabad housing schemes

July 03, 2013

The wait has got longer for those aspiring for a house at the schemes of Gujarat Housing Board (GHB) in Ahmedabad. Change in usage type, higher cost quoted by bidders for construction and provisions in the new revised Development Plan (DP) have delayed three residential schemes in the city.

GHB had announced the launch of seven residential schemes for lower income group (LIG), middle income group (MIG) and higher income group (HIG) in the four major cities of the state before the assembly elections. It had also floated tenders for the seven projects, three in Ahmedabad, two in Rajkot and one each in Vadodara and Surat. Of these, work has already started for projects at Munjka in Rajkot, Tarsali in Vadodara and Ganeshpura in Surat. However, the schemes planned in Ahmedabad have been stalled.

The bidders had quoted 5% to 17% higher price compared to the ‘already high’ estimated project cost for Hathijan-I, Hathijan-II and ‘transport node’ projects in Ahmedabad. Therefore, fresh tenders would be invited. Moreover, instead of the earlier plan of a 3-BHK residential complex for HIG at the transport node in Naranpura, GHB plans to come up with a residential-cum-commercial scheme at the site.

The location of transport node has potential for commercial-cum-residential project, so why should we waste the opportunity, commented a senior office-bearer of GHB. During the discussion period, a mixed development plan at transport nodes was suggested, but the officials did not pay heed, he said, adding that the Board, therefore, rejected the proposal.

GHB also seeks to benefit from the higher ground coverage offered as per the new General Development Control Regulation (GDCR) of the DP, which proposes to increase ground coverage from 30% to 51%. “We are also exploring options to benefit from the new GDCR to bring down construction cost by reducing the height of the building,” said a senior official of GHB.

Under the circumstances, GHB will have to entirely revise its outline for the three schemes, resulting in a delay in implementation.

While planning the LIG housing scheme in Hathijan, GHB will have to consider the impact of the proposed affordable housing zone in one km area along SP Ring Road. If GHB’s price is too high, people might opt for schemes launched by private developers.

More rental homes the next big thing in housing?

June 11, 2013

To facilitate those who can’t afford to buy a house, a government appointed panel has recommended a separate law for regulating residential rental housing in India and tax benefits to encourage private developers to set up rental housing projects.

India does not have a rental housing policy as of now though some states like Himachal Pradesh have enacted their own legislation to address rent related disputes. Delhi, on the other hand is yet to notify its Rent Control Act. Globally, however, it is a popular concept.

According to published reports, between 40% to 80% of residents in cities such as Bangkok, Berlin and New York live in rental housing.

But in India, of the 18.78 million new houses built between 2007-12 for renting, a whopping 11.09 million houses are still lying vacant or locked up, indicating how opaque laws deter owners to rent out their house.

The 19-member panel headed by JaithirthRao, chairman, Value and Budget Housing Corporation Private Limited was set up by Housing and Urban Poverty Alleviation ministry last year to analyse the causes of non-availability of sufficient housing for rental purpose and recommend policy interventions for creation of rental housing stocks.

In its report, it has not only recommended setting up of a Residential Rental Housing Act specifically for the rental housing sector on the lines of the Model Residential Tenancy Act 2011 but also separate law for residential and commercial rental properties.

The panel also wants that instead of standard prices that are presently regulated by a rent controller or court, the rent price -- reflecting the present market rates -- should be based on contractual agreement between the landlord and the renter. Arbitrary increase in rent prices should be discouraged.

It has also called for setting up of a special fast track rental housing tribunal for speedy resolution of all rent related disputes and according "infrastructure" status for large rental housing projects. Tax benefits can also be given to rental management companies to help them operate smoothly.

Source:  http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=23624&cat_id=1

Unsustainable housing price rise....

June 04, 2013

According to the Reserve Bank of India’s House Price Index, residential property prices in India have grown at a compounded annual growth rate (CAGR) of 21.4% between the first quarter of 2009 and fourth quarter of 2012.

Further, there has been a large divergence between growth in metro1 cities (CAGR: 24%) and non-metro2 cities (CAGR: 15%).

Nomura points out that the growing divergence between metro and non-metro prices cannot be solely due to supply factors. It also appears to reflect growing investment demand, which is typically concentrated in large metro cities due to higher liquidity. In contrast, the economic slowdown over the last few years has likely affected real demand in non-metro cities.

Given the elevated house prices, subdued job markets and lower household incomes, real demand should remain subdued.

Consequently, in the absence of real demand, investment demand alone may not be able to sustain the excess return in metro cities. 

Ref : http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=23583&cat_id=1

State drew most realty investments - Gujarat

AHMEDABAD: Gujarat had the maximum share - about 41% - of new investments in the real estate sector across India during the last fiscal, a survey by Associated Chambers of Commerce and Industry of India (Assocham) said on Monday.
Overall, realty in India attracted new investments worth over Rs 42,000 crore as on March 2013, which slipped from over Rs 92,600 crore a year ago, according to a real estate-specific analysis carried out the industry body.

"While most states have seen a decline in new investments in realty, Gujarat has seen a surge of over 700%, as the state attracted investments worth over Rs 17,000 crore as of March 2013, from just over Rs 2,000 crore a year ago," said D S Rawat, national secretary general of Assocham.
Kerala is another state which has seen massive growth of over 550% in attracting new investments in real estate, followed by Uttarakhand at 400% and Rajasthan at 175%. Most other states have seen a 50% dip in investments, according to the survey.
Apart from Gujarat, states like Maharashtra (over 17%), Karnataka (10%), Tamil Nadu (8%) and Uttar Pradesh (over 6%) are among the top five states with the maximum share of new investments in real estate across India.
With a share of about 15%, Gujarat is second only to Maharashtra which has the maximum share of about 20% of the total outstanding investments worth over Rs 14 lakh crore attracted by the real estate sector across India as of March 2013.
"The real estate sector in India has, of late, been plagued by serious problems like falling sales, rising construction costs, dampened market sentiment overall, sluggish economic growth, high interest rates, high inflation and poor industrial production ( IIP) due to which leading players had to sell off land to reduce debt, private equity players trimmed exposure to the realty sector and a general slowdown in various industries hit commercial real estate," Rawat said.

Distressed properties' supply to increase in 2nd quarter of 2013

May 08, 2013

The RICS India Commercial Property Survey Q1 2013, which was released today, has stated that the supply of distressed properties within the commercial segment will increase during the second quarter of 2013.

The marked pick up in the activity around distressed properties in the first quarter and the subsequent hike in their supply in the second quarter could prove to be a dampener on the extent of gains in capital values going forward. Even so, capital values expectations recorded their third consecutive quarter of positive readings, which is best run since early 2011.

Problems such as lower sales, cash flow crunch, expensive loans, high cost of labour and inflation are putting builders into a situation where they are forced to go for a better selling asset. Thus, we see such examples, where developers are either reformatting their commercial project into a residential project or are looking for an exit.

Commenting on the trend, Sachin Sandhir, managing director, RICS South Asia, said, “From the occupier’s point of view, commercial spaces often involve more capital. As there is huge demand for housing, small affordable to mid-income residential apartment projects sell faster than a commercial project.” Even investors — considered a good source of funds for developers — now prefer residential over commercial.

On the occupier side, it appears that the slowdown in economic growth over the past year is still taking its toll on occupier demand, although the economy is expected to pick up over the remaining part of the year 2013. However, in comparison to the last quarter, the occupier demand rose modestly in the first three months of 2013.

Commenting on the findings of the report, Simon Rubinsohn, chief economist of RICS, said, “Developers within the commercial space are facing problems of funding. Meanwhile, India has not been able to attract a lot of foreign investments in comparison to other countries such as China and Malaysia within the region. Ongoing issues such as high inflation, large budget deficit and the slow pace of regulatory reforms are weighing down on business sentiment.”

The survey does note that investment enquiries increased modestly in the first quarter of the year compared to the previous quarter. “It is expected that the investment scenario will improve as the year progresses with the benefits of the recent regulatory announcements beginning to be felt,” he added.

On the supply side, inventory continued to rise but at a slower pace than the previous quarter. As a result the gap between the change in demand-supply recorded during the first quarter of this year (Jan-Mar) has further narrowed to the levels of the second quarter 2011.

Source : http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=23521&cat_id=1

Demand up for 1-BHK homes

April 22, 2013

Single working individuals and newly-married couples, trapped in an environment of rising property prices.

uncertain job market and a gloomy macro-economic scenario, are reconsidering the option of buying the more affordable one-bedroom apartments in Mumbai.

These home buyers, confident of good increments and job security in the past few years, had shunned such apartments and focused on buying at least two-bedroom apartments, or something even fancier. But things have changed since then, and these folks aren't ready to take on higher liabilities of owning bigger apartments, especially at current rates.

Property developers, who too stayed away from this segment due to lower margins, have sensed a change in mood and have spotted an opportunity in this unfancied one-bedroom category. Rustomjee Group,Marathon Realty, Hubtown, Nahar Group, NRDL, Kanakia Spaces and several other developers are all offering apartments in this category.

The product, which was a big hit in the 80s and 90s until the economy offered more opportunities and higher pay-packages, is making a comeback of sorts. "Buyers are very cautious right now, they are buying smaller units. The mindset is similar to pre-1995 when homebuyers were not willing to stretch themselves as confidence about their income levels was low," says Mayur Shah, MD, Marathon Group that has been developing realty projects in Mumbai since 1969.

It was in the late 1990s, with tax sops on housing loans thrown in, people started buying larger apartments, which was in sharp contrast to their earlier approach of buying a house with own savings or family support, and therefore mostly ended up buying one-bedroom apartments. "Ultimately, budget plays a very important role in this decision.

Realty prices have been going up for long making it unaffordable. Buyers are not sure if their salaries will rise in the same fashion as they did earlier," says Shah, while reasoning the revival of one-bedroom units. Around 65% of Marathon's new 18-storey residential project near Mulund, a Mumbai suburb, will comprise 1BHKs. For developers too, this seems to be an easy remedy to their liquidity worries.

"Right now, turnover of such smaller apartments is high. Developers are also facing tight liquidity situation, therefore this is the best available solution for improving liquidity rather than depending on private financiers," said Manju Yagnik, vice chairperson of Nahar Group.

For long, developers have been focusing on apartments with at least two bedrooms given the high-margin possibility, but are now considering even lower margin vertical. "Margins in this segment are low, but given the high-volume play, many developers are moving back into this as a sure-fire sales proposition, with almost instant absorption if the location is right.