Latest Property News on 'Property Prices'

Factors that Drive Real Estate Prices in India

What drives real estate prices in India? The factors vary from city to city. In most countries, the construction of a noisy airport may be reason for residents to flee, but in India, the prospect of Mumbai’s second airport coming up near Khargar is driving up prices. According to Gulam Zia, national director—research and advisory services, Knight Frank, the Navi Mumbai area — from Vashi to Panvel — is likely to grow faster than other locations in Mumbai.

This is primarily due to the expectation that the new airport could come up here in the next 6-7 years in addition to the trans-harbour link. The entire look of Navi Mumbai could change in the coming few years, as Kharghar and Nerul record multi-fold growth. Noida and Ghaziabad are coming up well due to the metro projects shaping up in the vicinity. There are plans to extend the metro network to Manesar as well. These are the areas that are emerging quite fast and good growth is expected here. Read More »

Govt to Match Land Rates with Current Real Estate Price Scenario

The ground rent rates of the state-owned properties leased out by the government are way below the current market rates and need to be revised upwards in line with real estate price movements, the public sector auditor has suggested. A performance audit of the land and development office (L&DO) under the urban development ministry carried out by the comptroller and auditor general of India (CAG) reveals huge discrepancies between the value of the government land rented out and the ground rent receipts in the case of Delhi properties.

By extension, a similar situation should prevail in other cities as well. “Despite thousands of acres of land in prime locations with potential value ranging from Rs 1,18,000 crore to Rs 3,44,000 crore, ground rent receipts from these leased properties is relatively insignificant,” the report, submitted in Parliament on Friday, observed. While the ground rent receipts during 2008-09 was just Rs 92.77 crore, the report stated that leases falling due for revision during last three years alone could have fetched Rs 1,068 crore annually. At a time when the government is faced with a high fiscal deficit, this revenue foregone is significant. Read More »

India’s Real Estate Recovery to Drive Stocks- BofA Merrill Lynch Global Research

A recovery in Indian commercial property and rising home prices in Mumbai and New Delhi will boost asset values and drive real estate stocks next year, BofA Merrill Lynch Global Research said. The brokerage was reinstating coverage of the nation’s property industry with a “bullish” stance and has a “buy” recommendation for Indiabulls Real Estate Ltd., DLF Ltd. and Housing Development & Infrastructure Ltd., BofA Merrill Lynch analysts Unmesh Sharma and Gagan Agarwal said in report today. They have a “neutral” recommendation for Unitech Ltd., the second-biggest developer.

“Real estate stocks have experienced a sharp rally since March 2009 on the back of capital raising and increased sales volume in the residential segment,” the analysts wrote. “We expect commercial property and pricing to surprise positively, leading to the next round of significant net asset value upgrades.” Housing Development, the nation’s third-largest developer by value, has more than doubled in Mumbai trading this year, leading gains among the largest property stocks. The benchmark Sensitive Index, also known as the Sensex, has risen 80 percent, poised for its best annual performance since 1991. The commercial property market may only see the benefits from an increase in hiring in six months, according to today’s report. Investors are also “overly concerned” about oversupply as only 50 percent to 60 percent of commercial space being developed will be delivered on time, the brokerage said, citing trends over the past four years. Read More »

Godrej IPO Looks Overpriced

According to brokerage Bonanza the pricing of Godrej Properties look stretched and there are better opportunities available in listed space. “Pricing of IPO looks stretched, as bigger players in the listed space are trading at much better valuation. There are better opportunities available in listed space. However given the interest in Godrej group, listing gains may accrue,” the recommendation said.

Godrej Properties is a real estate development company and is based in Mumbai, Maharashtra. Currently, company’s business focuses on residential, commercial and township developments. It is a fully integrated real estate development company involved in all activities associated with the development of residential and commercial real estate. Godrej Industries currently holds 80.26% of Pre-IPO Equity share capital. Godrej Industries Limited is the listed flagship company of the Godrej group of companies.

Builders Expect Development in Commercial Real Estate Demand

Following the correction in commercial realty rates in metros by 20% to 40%, top builders expect sales to improve by 50% in Q3 and Q4 of 2009-10. In the first two quarters of the fiscal, sales of office space rentals grew 10% to 15%. To tap the growing opportunity, large builders in various metros are offering ready-to-possess offices, shops and commercial plots, and under-construction offices at 15% to 20% discount. The correction in commercial real estate rates comes at a time when the general sentiment is buoyant. There is ample cash flow in the market. However, the correction in the office space rentals is 15%— lower than that of the residential real estate sector.

According to Harinder Dhillion, vice-president (marketing) of Delhi-based Raheja Builders, “New Delhi followed by Gurgaon and Noida have witnessed 15% increase in sales of commercial space since the second quarter of this fiscal. As a result, we are planning to offer price discounts of up to 10% to 15% on office space rentals through our commercial properties based in Gurgaon.” Read More »

Throwaway Real Estate Prices in US Luring Indian HNIs

The throwaway real estate prices in the US have been attracting high net worth Indians in a big way. And now it seems, there’s more reason to look at investing in America for HNIs. The Obama administration has recently extended the regional centre investment programme, which is part of the permanent residency, EB-5 category by three years. Simply put, this programme allows investors a fast-track to US green cards and permanent residency. Under the scheme, investors who put in $1 million (about Rs 5 crore) into designated regional centre real estate projects and create at least 10 jobs in the US, are entitled to green cards along with their families. If they are willing to put money into a business carried out on in a designated backward area, the investment required is even lower at $500,000.

The EB-5 programme is attracting a large number of hospitality entrepreneurs from Gujarat who are keen on setting up shop in the US. Many of the Gujarati hotel entrepreneurs also have strong family links in the US. “The falling dollar has increased the number of applications in the EB-5 category in addition to access to branded hotel deals that are trading at 30-40% discount. This is definitely the time to buy as the US real estate market is slowly recovering,” says Sachin U Patel, managing principal of real estate development company American Life Inc, which operates the EB-5 regional centres in Seattle, Tacoma, and Everett. The regional centres are diversified funds or private business development projects that allow EB-5 investors to infuse the required funds and in return acquire a small ownership interest. Read More »

Increase in Residential Demand May Spur Prices

It doesn’t take much for residential realty prices to move upwards; with just a slight improvement in sales, prices at projects that were once stalled start inching upwards. It is all part of basic real estate marketing strategy. Prices move up when actual deals take place but the scenario in 2009 is a bit different , says Pankaj Kapoor, CEO of real estate research firm, Liases Foras. He cautions that “If residential realty rates rise at this juncture, it will again take the market back to a scenario of stalled sales, similar to what was prevalent during the end of 2008,” he points out.

Realtor Ramprasad Padhi feels that there has not been any significant revival in sales. “The marginal improvement in sales has been mistaken by some builders as signs of ‘the next wave’ . In reality, it has been a combination of pent-up demand and accumulated stock being disposed off at lower prices” shares Padhi. Potential buyers, he says, find the new, increased rates ‘unjustified’ , even if it is higher by just 10 to 15 per cent. In Mumbai, around 25 to 30 per cent of hitherto fence-sitting home buyers have now begun initiating purchases or indicated serious purchase decisions , says Pawan Swamy, MD (west India), JLLM. “The current sales figures are a vast improvement over the depressed market scenario six months ago. Developers who have been successful in selling a sizable component of their projects are now beginning to test price elasticity” he adds. Read More »

82% Growth in Orbit Corporation’s Profit

City-based real estate firm Orbit Corporation has posted an 82% growth in consolidated quarterly profit on 91% rise in sales. The company’s net profit in the September quarter went up to Rs 25 crore from Rs 14 crore in the year-ago period while total income rose to Rs 141.9 crore. Orbit Corporation said it sold 62,650 sq ft in the July-September period as against only 9,599 sq ft in the same period last year, a whopping 550% increase.

The company in a statement to BSE also said that the real estate prices have moved up by around 10-15% in the quarter. The company, which has a major presence in redevelopment activities in Mumbai, said it is looking to increase its footprint in the city.

Commercial Property Prices Expected to Go Up Post RBI Provision

Developers said property prices were likely to go up after the Reserve Bank of India (RBI) increased the provisioning for commercial real estate. This, they said, would increase the cost of funds. Developers expect up to 75 basis points rise in cost of funds after the central bank increased banks’ provisioning requirement for commercial real estate from 0.40 per cent to 1 per cent. “I think affordable housing will become more expensive as banks will raise rates and credit offtake will slow. Availability of bank funds will become a big issue for developers now. We will bank more on our sales and instead of raising additional funds. We will focus more on internal accruals,” said Sarang Wadhawan, managing director of HDIL, a Mumbai-based developer. “Execution of projects will suffer due to lack of bank funds,” said Wadhawan.

A number of property developers such as DLF, Unitech, HDIL and Lodha, among others, have ventured into affordable housing since the third quarter of the previous financial year to beat the slowdown in property sales. The projects are 25-40 per cent cheaper than market prices and carry margins of 15-20 per cent as against the luxury projects’ margins of over 50 per cent. “It will certainly increase our cost of borrowing. We will consider this increase like any other increase in input cost,” said Bharat Mody, chief financial officer of Akruti City. RBI increased provisioning as it felt that credit flow to commercial real estate had risen sharply and there had been large increases in restructuring of loans by developers. Some top developers of the country such as DLF, Unitech and HDIL have restructured loans worth Rs 10,000 crore after RBI allowed banks to do so. Read More »

High Rentals in Mumbai Force Banks to Commence Operations in Suburbs

High real estate prices and the advantages of integrating operations within a single premise are compelling banks in Mumbai to move further north into the suburbs at half the rentals they used to pay in the commercial hubs. Offices in suburbs are not by themselves a new trend. Banks such as HSBC and Deutsche Bank have been running call centre operations in suburbs for years. Banks have also had their IT hubs in suburbs. For instance, SBI has its IT operations based in Belapur in Navi Mumbai. What is now happening is that some jobs, including senior management, that have traditionally been inside corporate headquarters, are also moving north.

Standard Chartered Bank was the first to move a significant part of its operations to the north-western suburb of Goregaon. The bank purchased an over 136,000 sq ft building in Goregaon (Standard Chartered Tower) to house its consumer bank management and central units. Earlier this year, Kotak Mahindra Bank also moved its operations into a five-lakh square-foot tower at Raheja’s Infinity Park in Goregaon (E). Around December Deutsche Bank will move a large part of its operations into new premises measuring 1.9 lakh sq ft, again in Goregaon. Read More »