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. 

Low cost Housing: Miles to go

April 18, 2013

Sujeet Kumar Jha

The country is struggling with an acute housing shortage, and the shortfall is enormous in the affordable and low-cost housing segment, according to a recent report by the Ministry of Housing and Poverty Alleviation (MoHUPA).

But despite the government’s continued encouragement to low-cost housing projects, nothing substantial has come up so far, due to a lack of proper policy framework, opine the experts.

The MoHUPA report states that for the 12th five year plan (2012-17), 10.55 million houses are urgently required in EWS category and 7.41 million in LIG category. To promote the development of low cost housing, various state governments have come forward and announced several projects in their respective states recently.

For example, recently the UP government has announced two new affordable housing projects for Noida and Greater Noida. And moreover, it has already approved a residential project for the Greater Noida Authority that will build 7,200 affordable flats in ground-plus-three format in Sector 10.

On the other hand, the Gujarat government also has plans to build 120,000 homes in the affordable segment for the year 2013-14. Similarly, the Odisha government is also planning to build 5000 housing units, to meet the growing demand for affordable housing, and similarly various other states are also in the process of coming up with similar projects.

But, given the slow pace of these initiatives and without due participation from the private real estate players, meeting this huge target in the given timeline seems to be a distant dream. The government is urgently required to encourage all the developers with favourable policies, so that they can venture into affordable and low-cost housing projects in a big way.

“Looking at this scenario, the government should immediately act and grant different kinds of sops to promote affordable housings in the country. Housing is an urgent need of the common man, and for the welfare of the masses, nothing is more important than providing a roof over every head,” says R G Gupta, a leading city/policy planner and ex –advisor, NCR Planning Board & ex-planner-DDA.

“The widening gap between supply and demand in the affordable housing segment highlights the need for effective and focused efforts towards bridging the same. The Government needs to look into providing additional fiscal incentives such as tax concessions on building materials, technology and services to decrease construction costs, and provide more income tax relief to buyers of affordable housing units,” affirms Sanjay Dutt, Executive Managing Director – South Asia, Cushman & Wakefield

Moreover, Gupta also strongly pitches for granting infrastructure status to affordable housing, so that loans for affordable and low cost housing projects will be easily available to the developers.

The recent move by RBI to allow External Commercial Borrowing (ECBs) up to $1 billion for low-cost affordable housing projects, is expected to boost affordable housing scenario. Also, according to Ministry of Housing and Poverty Alleviation, the government is planning to allow more FDI in the affordable housing segment.

In order to boost the affordable housing segment, recently the government has also announced the CRGF – a scheme for low-income housing and a trust of Rs 1,000 crores through which the government can provide credit risk guarantee to lending institution against housing loans of up to Rs 5 lakh for borrowers falling under the EWS/LIG categories.

Moreover, in order to promote low cost housing and increase private sector participation into it, the experts opine that the provision of single window clearance system for project approvals should immediately be in place. It is since delay in getting different approvals always increases the project construction cost. Also, lesser FSI is another deterrent in this direction.

“The government should allow some extra FSI at the land for the development of affordable and low-cost housing,” says Jogy P Thomas, Deputy CEO, ATS Infrastructure.

In a recent development, the Wave group has recently announced a low-cost housing project at Ghaziabad. The company would be investing over Rs 500 crore to develop low-cost apartments of Rs 14-18 lakh in Ghaziabad. According to Rajendra Kumar Panpalia, MD, Wave Group, the demand of affordable homes is set to rise following the recent Budget announcement of increasing tax exemption on home loans up to Rs 25 lakh for the first home buyers to Rs 2.5 from Rs 1.5 lakh.

The requirement of 10.55 million houses in low cost housing segment has thrown open floodgates of opportunity for real estate developers, pan India. 

Few takers for affordable housing scheme in Mumbra

April 16, 2013

The response to state government's rental housing scheme.

aimed at stemming slum proliferation and preventing unauthorised structures from sprouting in the city's metropolitan region, has so far been dismal in the Mumbra-Shilphata belt, an area that probably needed the scheme the most.

There have been just two proposals from developers in this region for creating affordable houses under the rental housing scheme. Of the two, only one could be approved as per norms.

"The scheme was market-based. Wherever there was enough market demand, real estate developers submitted proposals to construct houses under this scheme. The response in the Mumbra-Shilphata region in particular might be low because, from what we understand, developers tend to agglomerate in clusters and probably there is paucity of continuous stretches of vacant land there," said Uma Adusumilli, chief of the rental housing project, being implemented by MMRDA.

Earlier this month, the collapse of an illegal building in Mumbra had brought to light the rampant growth of unauthorised structures in the Mumbra-Shil Phata belt.

The sole scheme approved in this region is by the Dosti Group at Mumbra junction. It is likely to yield about 1,800 units for affordable housing. The only other proposal could not qualify as the developer did not have a continuous plot.

Rajesh Prajapati, president of MCHI-CREDAI's Raigad unit, said the price builders get in this area is lower than the cost of construction that they incur in a rental housing project.

"To use the FSI of 4 under this scheme, the building has to be at least 30-storeyed and the cost of construction comes to at least Rs 3,000 per sq ft. Looking at the cost overruns and other issues, the cost that the developer will want to sell at will be Rs 5,500-6,000 per sq ft. The market is not able to sustain such a high price," Prajapati said. He added that the soil in that region is mostly clay and a building foundation has to go very deep, raising the cost of construction.

The rental housing scheme was floated in October 2008 with the intention of creating five lakh affordable houses within five years. However, so far MMRDA has approved only 54 schemes across MMR.

Only 25 of these have got commencement certificates and are at different stages of construction. These are expected to yield 45,000 units. There are about 140 proposals under scrutiny.

Clearance of new proposals is currently sluggish as MMRDA is awaiting Chief Minister's nod to make changes in the scheme, mainly changing the nature of the project from rental to affordable housing. Other changes include increasing the size of tenements to 300 sq ft from the current 160 sq ft. 

CREDAI-NCR plans to regulate property brokers

April 15, 2013

Realtors' body CREDAI-NCR today said it will direct developers to disclose both saleable and carpet area in their brochure and is considering measures to regulate brokers who are engaged in mis-selling projects.

The NCR Chapter of the Confederation of Real Estate Developers Association of India (CREDAI) also plans to boost end-user demand in housing by imposing lock-in-period for re-sale and higher transfer charges.

Announcing the new team for 2013-15, CREDAI-NCR said Anil Sharma, the Chairman and Managing Director of Amrapali Group, has been elected as its new President.

"A new team has been formed. We will focus on consumer awareness and consumer redressal," Sharma told reporters while listing out his priorities for the next two years.

CREDAI-NCR has already formed a consumer redressal forum last year and has so far received about 700 complaints and out of that 90 per cent cases have been resolved.

Asked about non-disclosure of carpet area by developers in their brochure and application form, he said: "We will ask our members to disclose saleable as well as carpet area and also method used for calculation of such areas". The saleable area is built-up area plus common area, he added.

On property brokersmis-selling products, Sharma said: "We have come across situation where some of the brokers are not providing full information to buyers. The governing council will take up the matter how to regulate them."

Asked about rates being lower in the secondary market compared with developers price-list, Sharma said this is because of investors selling their units with some premium.

In order to curb investor demand and encourage end-user demand, he said the association would consider steps like lock-in-period for re-sale and higher charges for transferring the property on some other name. 

Now smaller cities can also pitch in for a Metro..

The Union Urban Development Ministry, which has been urging cities with two million plus population to pitch in for a Metro system, is now considering extending the efficient mass transit system to cities with lesser populace.

The proposal stems from the need to decongest cities, enhance the ease of commuting on public transport and to improve the link between the suburbs and the main city centres. If the proposal gets approved, more than 50 cities with a million plus population in States like Tamil Nadu, Madhya Pradesh, West Bengal, Maharashtra, Gujarat and Jammu and Kashmir among many others will benefit.

As on date, the two million plus population cities are being encouraged to send proposals for a Metro system, but with smaller cities showing interest in the Metro, the Ministry is contemplating relaxing the norms and drafting a common set of rules for all Metro projects. The cities with less than two million will, however, have to fulfil the requirements of finance and footfalls.

Indore for example has recently invited tender for drafting a detailed project report on the feasibility of a Metro.

“Why should a Metro system be planned only on the basis of the population within the city? We need to look at bridging the gap between the suburbs and the city, bringing people from far to within the city centre. The idea of a Metro was to offer the lower and the middle classes who stay outside the city limit an efficient transport system,” said an official of the Ministry.

The proposal also complements the requirement of another scheme – transit-oriented development which is being implemented in several cities, including New Delhi, with the aim to decongest cities and develop suburbs and satellite towns.

Cities with under two million population will have to prepare a detailed project report and show adequate means of funding and prove that the passenger traffic of at least 4,000 persons per hour per direction will be met.

“They will have to follow the prevalent pattern where the Centre pitches in with 20 per cent of the funds, 50 per cent will have to come from them and the remaining will have to be raised through loans. We encourage public private partnership mode of operation and they will have to prove the project is viable,” the official said.

The Centre will also reimburse 50 per cent of the money spent on preparing the DPR. “But the initiative to have a Metro has to come from the city and the State, the Ministry can only help with funds and other provisions,” the official said.

Among the cities that have submitted a DPR and are awaiting the Centre’s nod are Ludhiana, Chandigarh, Ahmedabad and Pune.

Source :  http://www.thehindu.com/news/national/now-smaller-cities-can-also-pitch-in-for-a-metro/article4597840.ece