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Noida builders unable to hand over completed homes as National Green Tribunal stops delivery

1 Comment   |  June 11, 2014

NEW DELHI: Builders in Noida are unable to hand over more than 30,000 completed homes to their buyers, because of a National Green Tribunal order forbidding the Noida Authority from giving completion certificates to projects within a 10-kilometre radius of the Okhla bird sanctuary.

Developers in Noida say they have in the past seven months since the tribunal’s order lost close to Rs 1,000 crore as they have been holding on the flats, paying interest on their loans as well as penalty to home buyers.

“Everyone is bleeding,” said Vineet Gupta, director of the Ajnara group, which has around 1,500 apartments waiting to be handed over to buyers. Projects of more than 45 developers including Jaypee, Amrapali, ATS, Logix and Ajnara have been impacted, with buyers demanding penalty from them for the delay.

“When the state government has recommended 100 metres around the sanctuary as the eco-sensitive zone then why doesn’t NGT (National Green Tribunal) allow the authority to give us completion certificates,” asks Getambar Anand, managing director of ATS Infrastructure and also the president of the Confederation of Real Estate Developers Association of India (Credai).

“Such a lot of stock has been put at jeopardy because of the decision, notwithstanding the fact that all of us have environment clearances for our projects.” A senior executive at Amrapali Developers said the company has 5,000 apartments ready for possession but it can’t offer physical possession to buyers. “We have sent them intimation for possession sometime back but we can’t give them their homes,” he said, not wanting to be named.

Real-estate developers have been facing a liquidity crunch over the past 12 to 18 months because of a slow economy and the consequent weak sales of apartments. According to property research firm Liases Foras, in the December quarter, unsold inventory rose to about 650,000 apartments, which would take more than 30 months to be sold. That number went up to 700,000 by the end of March 2014.

The situation in Noida puts further pressure on the stressed balance sheets of many developers operating in the area. “There is so much confusion even around how to measure the 10-kilometre radius. No one in Noida is getting completion certificates whether they think they are in the zone or not,” said Ajnara group’s Gupta. Some developers say it has become difficult to launch new projects.

“We are finding it difficult to launch new projects in the vicinity of the sanctuary because investors and banks are reluctant to fund such projects till there is clarity on the matter,” said Shakti Nath, managing director of the Logix group, which has put three of its mixed-use projects on the backburner due to the issue.

In October last year, the tribunal had directed the Noida Authority to stop all construction activity within 10 kilometres of the sanctuary and asked the central government to fix the rules on the distance to be kept for such developments from wildlife sanctuaries.

The Centre then asked state governments to suggest rules for sanctuaries depending on how fragile they were. In February this year, the Uttar Pradesh government sent its recommendation for deeming 100 metres as the eco-sensitive zone. “We should be given instructions about who to go to rather than dealing with multiple authorities,” said Anand of ATS Infrastructure.

Source: ET Bureau by Ravi Teja Sharma,



Crisil enters into Rajkot’ real estate sector

Add comment   |  June 7, 2014

RAJKOT: Credit rating firm Crisil has entered into Rajkot’s real estate sector and rated one real project in the city with giving 5 stars. Crisil has rated real estate projects across various cities in India including Bengaluru, Chennai, Coimbatore, Hyderabad, Kochi, Kolkata, Mumbai, Pune, Trivandrum, and Visakhapatnam. In Gujarat, it rates real estate projects in Ahmedabad and Baroda.

Patria, a residential real estate project, coming up in city’s prime location known as ‘Govindbhai ni Vadi’ near airport, has been rated with 5 stars by Crisil.

“We have hired the Crisil for the assessment and this is the first time in the real estate sector the Saurashtra where any project went to rating. It might inspire others to go for real estate rating for their projects” said Mihir Maniar, one of the developers of Patria.

Patria is highly luxurious apartments of 2 and 3 BHK project. Maniar said that the project will complete within the next six months.

“Crisil real estate star ratings provide city specific all-round assessment of real estate projects and help buyers benchmark and identify quality projects within their city. We are also in touch with other new projects in Rajkot for their real estate ratings” said Dnyanesh Nandurkar, regional head, real estate ratings, Crisil ratings.

“Real estate star ratings provide a comprehensive, independent assessment of real estate projects in the city. It improves transparency and objective benchmarking of projects,” he added.

Source: TOI



Affluent Indians over-invest in property

Add comment   |  May 27, 2014

Desi billionaires hold 44 per cent of their wealth in property, while the global average is 24 per cent.

From Africa to America, the rich world-over have their wealth where their heart is — in their homes. Nearly a third of the wealth held by the super-rich (those with over $30 million of assets) in Europe is locked in real estate assets worth $2,391 billion, according to data from Savills, a global property consultant.

The Asians are second, with $1,800 billion, or nearly 27 per cent of their wealth, in property.

Over-investment

The super-rich in India, as expected, beat the global averages by a big margin. Nearly 44 per cent of wealth of the super-rich Indians is invested in property, according to data from Knight Frank. Of this, nearly half is invested in residential property and 30 per cent in commercial property.

Worse, the ‘average’ for rich Indians includes cases where real estate forms nearly 80-90 per cent of the wealth.

“Many wealthy Indians hold a large proportion of their wealth in real estate as there is a belief that the price will never go down,” says Balamurugan, Co-Founder and Director of Metis Family Office Services. He also says that in the past, it was not easy getting a bank loan for business and property was often used as collateral for the loan.

The allocation also tends to be higher in the South when compared with the Eastern and Western regions. For instance, while 80 per cent of the wealth in property is not uncommon in the southern states, the average is closer to 60 per cent in the eastern region and only 40 per cent in the western zone. “There is a more conservative mindset among the older generation and the level of comfort in the capital markets is also lower,” says Rajesh Saluja, MD and CEO of ASK Wealth Advisors.

That said, there may be no ‘ideal’ investment levels. The proportion of property that is preferred depends on a number of factors, including the wealth level, the time period one plans to hold the property and return expectations, says Bikram Sen, CEO of ArthVeda Fund Management.

Upbeat Asian Market

The Asian bias towards property may be understandable, given that property prices in regions such as Hong Kong, China and Singapore were on a tear and government intervention was needed to rein in the property gallop.

According to the Wealth Report’s Prime International Residential Index, property prices in Jakarta and Bali in Indonesia surged over 37 per cent and 22 per cent, respectively, in 2013. But things were sombre on the Indian front.

While the price growth in the Asia-Pacific region was an impressive 13.5 per cent in 2013, Bangalore, the top performing city in India, witnessed a mere 5.6 per cent appreciation.

The slow pace of growth in the property market in India, however, did not dissuade buyers. This bias toward residential property seems to be universal. World over, the super-rich hold multiple second homes and have the bulk of their funds invested directly in property rather than in indirect investment avenues such as funds.

The tepid market notwithstanding, nearly two-thirds of the rich Indians wanted to increase their property investments in 2014. “The high historical returns enjoyed by the asset class and ownership motivation are aiding buyer interest,” says Samanthak Das, Chief Economist, Knight Frank.

Sombre outlook

Still, many factors point to a likely drop in allocations to real estate in the coming years.

Take the case of buying and holding land. There is already a shift away from investing in land, says Balamurugan. This is in spite of the fact that demand for land is robust.

Land price increase has been seen not just in cities such as Mumbai, where land is scarce, but also in cities such as Bangalore. During December 2011 to 2013, the Prime Residential Development Land Index for Bangalore witnessed an appreciation of 26 per cent, according to data from Knight Frank, slightly lower than 35 per cent for Mumbai.

Notable land deals include the purchase of a 0.37-acre plot on Vittal Mallya Road by Sobha Developers, at over ₹22,000 per sq.ft.
Indirect deals

Those who hold land are not keen on direct sale. Instead, they are opting to develop the land by partnering with a builder, to get higher returns. The option of lending money to builders rather than buying property directly is also gaining traction.

“Compared to direct holding, there is better returns and higher degree of transparency in indirect options such as structured deals with builders,” says Kiran Kumar Kavikondala, Director and CEO of WealthRay Securities.

In the last one-two years, there has been an increase in deals with developers who are unable to source funds and are willing to offer attractive interest rates and additional sops.

Branded homes

Sales in the luxury home market have not been robust either. In regions such as Mumbai, Pune and NCR, the concept of ‘branded luxury homes’, wherein developers tie-up with international luxury hospitality or lifestyle brands to create differentiated offering, was launched a few years ago. This segment is growing at a modest 5-6 per cent rate, says Anuj Puri, Chairman & Country Head, Jones Lang LaSalle, an international real estate consultancy.

These homes boast of professionally designed interiors and exteriors, centralised management of facilities and various additional features such as concierge services, high-grade electronic surveillance and security and valet parking. “These factors have high appeal value, especially to buyers who have seen such homes abroad and aspire to live at such levels,” he says.

But he cautions that this segment has challenges, including getting the right brands to come on board, as the international designer labels expect the proposed project to live up to their very high brand standards.

Demand in the housing segment is likely to remain tepid in cities such as Mumbai, Chennai and NCR. A notable exception is Bangalore, where the premium market is ‘expected to remain active’, according to a report by Colliers International, a real estate services company.

Source: Mira Siva for The Hindu Business Line



‘Next 30 days good time to buy real estate’

Add comment   |  May 27, 2014

New Delhi: Nearly 60 percent of Indians think that next one month would be a good time to buy real estate with improvement in consumer sentiments following formation of a stable government, according to a survey by global research firm Ipsos.

“Almost six in ten (57 percent) Indians think the next 30 days will be a good time to buy real estate, such as a house, vacation property or investment property,” Ipsos said in a statement.

Founded in France in 1975, Ipsos is an independent market research company controlled and managed by research professionals.

“With the formation of a new stable government at the Centre, the consumer sentiment which was low in the last 2 years has improved significantly. The stock market has already reacted in a positive manner reflecting this change, the real estate prices are expected to go northwards by the end of the year,” said Bhasker Canagaradjou, Associate Director, Ipsos Business Consulting.

The realtors reeling under large scale of debt are offering discounts to reduce their inventory levels taking advantage of the new found optimism in the market.

The residential real estate market may see an uptick in the demand and increase in the number of transactions in the near future, he added.

Majority (65 percent) of people in Russia think next 30 days would be a good time to buy property followed by India (57 percent), Indonesia (55 percent), Ireland (51 percent), Great Britain (47 percent), Mexico (44 percent), Australia (42 percent), Hungary (42 percent).

“Those rounding out the middle of the pack are from the United States (41 percent), Germany (40 percent), Canada (39 percent), Italy (38 percent), Argentina (37 percent), South Africa (37 percent), Sweden (37 percent), Poland (35 percent) and Spain (34 percent).

The survey was conducted in 26 countries with a total sample of 20,144 adults age 18-64 in the US and Canada, and age 16-64 in all other countries.

Source: Zeebiz.Com



Realty hopes for infrastructure status, lower rates

Add comment   |  May 27, 2014

The real estate and property development industry, hurting from the slowdown in the country’s economic growth, is hoping for lower interest rates and grant of infrastructure industry status to enable developers to access cheaper finance.

The industry is hoping that a stable government acting decisively would help not only to revive economic growth, but also look into specific problems faced by the industry.

“The Indian economy and the real estate sector have gone through multiple years of stress,” Anuj Puri, chairman & country head of JLL India, said. “A change in sentiment is imminent now that a pro-business government with a clear mandate has been elected to power, so this is a very significant time for the industry. A general sense is that policy paralysis and indecisiveness are now things of the past,” he says.

According to him, the BJP has time and again given an indication of its willingness to adopt unprecedented reforms in areas such as taxation, housing and infrastructure, amongst others, which has raised high hopes in the real estate fraternity. For instance, the implementation of GST will make a huge difference for warehousing and logistics, and the new government’s focus on boosting tourism will give the hospitality sector a badly needed shot in the arm. “It goes without saying that the infrastructure segment is in for a major facelift, and this is nothing but good news for real estate,” he said.

“For real change, that could convert the scenario of shortage to surplus in housing units, we need an effective single window across the country,” said T Chitty Babu, chairman & CEO of Akshaya. “Further, the regulatory Bill has to be revisited. Government should come out with legislation that offers a level playing field to all the four key stakeholders of the industry, namely developers, financial institutions, government authorities and of course customers,” he added.

The real estate segment should see some reforms like infrastructure status being given to it to enable developers get access to loans at a cheaper rate and for longer tenures. Industry has also been asking for speedy approvals to cut delays in project execution and lessen the interest burden associated with it.

According to C Shekar Reddy, president of industry body Confederation of Real Estate Developers’ Associations of India (Credai), loans extended by the banks to the real estate sector are currently about 12 per cent of total loans. Of these, nine per cent are retail loans given to home buyers and the remaining three for developers amounting to about Rs 1.25 lakh crore. The latter should be increased more than three-fold to Rs 4 lakh crore.

The industry draws hope from the inclusion of ‘housing for all by 2022’ in the BJP manifesto. Towards achieving this, says Reddy, the government must cut down on various taxes in the sector and also cut home loan interest rates, maybe with an interest subvention of about three per cent. It should also remove the 4.9 per cent service tax, an added cost to the developers and is passed on to the home buyers, he said.

The shortfall in the housing segment has been around 18.78 million units, which is likely to be there for the next eight years. There are not many developers keen on taking up affordable housing projects due to thin margins, he said.

Now there is a requirement for a nod from the ministry of environment and forests for projects spanning more than 20,000 sq m, which is hindering progress and causing unnecessary interest burden on developers. This can be scrapped by evolving new building guidelines.

This has caused many a project in Maharashtra and other high density housing areas to be delayed, said Reddy.

According to Anshuman Magazine, CMD, CBRE South Asia, the initial expectations from the new government include an investor and reform-friendly government open to global as well as domestic investment opportunities. “The current liquidity crisis in the sector has been ongoing for the last couple of years and having overlapped with the present slowdown, it appears that much more pronounced,” he said. “As a result of the wider cash crunch plaguing the sector as a whole, developers have faced quite a few project delays too—including in the Noida and Faridabad areas,” he added.

RK Pachauri, TERI director-general said, “Environmental issues are often presented within the framework of conflict between environment and development. What is attempted here is a refreshing departure which provides a price tag on the damage that poor environmental quality and degradation is imposing on human society and how substantially lower-cost action can avoid this burden. What is included here are sectors largely within urban areas, but a similar analysis and presentation is essential for rural environmental degradation as well. Undoubtedly, that would be a far more complex challenge analytically, but given the large population in our villages, ignoring such analysis would be at the cost of ignoring the welfare of two-thirds of our population.”

Rajesh Krishnan, MD and CEO of Brick Eagle, said, “On the supply side, we wish for the government to streamline the lengthy approval process. The construction process requires 50-70 approvals and delays developments by two years on an average, a luxury that most social housing developments (defined as less than Rs 25 lakh per unit) cannot afford without the extra cost factoring into prices. Our hope is that the new government will institute a single-window clearance, in which one bureaucrat is responsible for our case, and can grant approval on behalf of all concerned parties.”

“Furthermore, we expect FDI regulations to be lessened in the affordable housing sector. Presently, the minimum possible investment is $5 million, capital which many developers in this sector cannot access. On the demand side, we would like to see more regulation on behalf of the end-user, who presently has very little protection while entering into an agreement with a developer,” he said.

Ganesh Vasudevan, CEO, IndiaProperty.com, said, “Specifically for the real estate industry, priority areas are infrastructure improvement projects and affordable housing projects. At a systemic level, steps towards improvement of transparency of the industry such as bringing in a regulator, improving speed of approvals by creating a single window process and enabling access to low-cost financing of infrastructure and affordable housing projects are critical enablers. One of the focus areas for BJP has always been development of road infrastructure. Their visionary project – ‘The Golden Quadrilateral’ would be taken to the next level and improved road connectivity with tier II and III cities would help the realty industry prosper in these cities.”

Babulal Varma, managing director, Omkar Realtors & Developers feels, the BJP has always been pro-development, with the focus largely on infrastructure development and real estate sector. Also, the party’s manifesto emphasised ‘urban upliftment’ in India by initiating building 100 new cities, twin cities and satellite towns. It also eyes providing low-cost housing to the poor and making the country slum free. “The SRA scheme in Mumbai, started by the Shiv Sena-BJP combine will be kickstarted once again, having taken a backseat during the UPA regime,” he added.

By B Krishna Mohan, Ritwik Mukherjee (With inputs from Jharna Mazumdar and D Govardan) for Financial Chronicle



Realty players hope Modi to usher in faster reforms for sector

Add comment   |  May 27, 2014

With the Narendra Modi government taking charge on Tuesday, real estate players hope the sector will get due priority, which will help bring the economy back to 8-9 percent growth.

“The new government will pave way for realty reforms and take concrete steps to implement its promise given in the BJP manifesto to ensure housing for all in eight years,” Confederation of Real Estate Developers’ Associations of India (Credai) Lalit Kumar Jain said.

The merger of Housing and Urban Development Department will ensure coordination and proper control, he said.

“The new government will bring in a positive change to developers and buyers in the otherwise dark era that has been witnessed during the previous government,” Jain added.

Expressing similar sentiment, Jones Lang LaSalle’s Santhosh Kumar said, “For the common man, the dream to own a house will soon turn into a reality. Issues such as affordability of real estate, delayed construction projects, delays due to litigations surrounding real estate projects, which have impacted developers as well as consumers, are likely to be resolved.”

The new government will bring the economy back on track and raise the currently plummeting GDP to 8-9 percent in the coming fiscal, he said.

“The new government at the centre is expected to infuse life in the existing policy paralysis in the country by removing the major bottlenecks that are deterring growth. Besides, FDI in the sector is also expected to get a lift, resulting in amplification of fund flows and strengthening of the battered rupee,” he said.

Global investors are now markedly optimistic about the economy, which is expected to witness more than 100 percent increase in foreign investment inflows, both through FDIs and FIIs, to above USD 60 billion in the current financial year, as compared to USD 29 billion during FY14, Kumar said.

He further said the urban development ministry is expected to repeal the existing restrictions on real estate firms by allowing foreign investment up to 49 percent, free of all conditions.

“This will help the real estate sector to raise foreign capital at competitive rates and reduce stakeholder dependency on the beleaguered local financial institutions. Foreign capital for urban renewal and slum redevelopment projects is also expected to see major relaxations,” Jain added.

He said there should be efficient and accountable governance in building approval process to be initiated at the Centre, to be strictly followed by all states.

“If the government takes the necessary steps, growth in GDP and employment will be three-fold and the housing sector will further drive the growth of the country. It is imperative to go for single window system of approvals, correct the RBI’s perception of housing sector and a balanced land policy that will help the farmers as well as developers,” he added.

Source: ZeeNews



Realty sector pinning hopes on new govt for revival

Add comment   |  May 27, 2014

The real estate sector is pinning hopes on the new government for revival.

Confederation of Real Estate Developers Association of India (CREDAI) Chairman Lalit Kumar Jain expressed hope that the new government would bring in a positive change to real estate developers and buyers by introducing reforms given the challenges of slump in sales, high prices and liquidity crunch that the sector has been facing.

‘Housing for all’

“We expect the government to take concrete steps to implement its promise given in the BJP manifesto of ensuring ‘Housing for All’ in eight years,” he added.

For an immediate plan of action, Jain suggested efficient and accountable governance in building approval process to be initiated at the Centre and be strictly followed by all states.

He also suggested that realty sector reforms should cover administrative, banking, tax and legal aspects. “It is imperative to go for single window system of approvals and a balanced land policy that will help the farmers as well as developers,” added Jain.

Regulatory approvals

According to global realty consultancy JLL, India’s developers are hoping that the new government will expedite the process of granting regulatory approvals as the chronic lag in this regard has been a major obstacle for most of their projects.

In its latest report, JLL stated that the pending Real Estate Development Regulation & Development Bill is expected to be passed and land acquisition parameters are also expected to be eased so that availability of land is no longer a major constraint.

The report further highlighted that with the slowdown in home sales, developers have been battling a severe liquidity crunch and a rise in their inventory levels.

“Many prospective buyers have abstained from investing in property because of market negativity, high inflation, and high interest rates on home loans. Now, with pick-up in market sentiment, buyers are expected to snap into action. Increased sales, along with availability of funds from both domestic and foreign investors, will bring significant respite to developers and finally bring an end to the liquidity crunch that they have been facing,” the report added.

3 major promises

The three major promises made by the NDA in their manifesto that have direct pertinence to the real estate sector comprise development of 100 new cities, implementing a new land use policy and planning for low-cost housing.

Modi’s pledge to implement an affordable housing policy and thereby provide homes to every Indian family presents a $150-billion business opportunity to the sector. “The real estate industry now also has real hopes of being granted the coveted industry status, which will further ease fund flows,” said Santosh Kumar, CEO-Operations, JLL India.

“Meanwhile, consumers are optimistic about the impact that the new government will have on real estate pricing, and expect a reduction in home loans, implementation of the proposed GST framework and the implied tax benefits to buyers,” he added.

Source: Manish Jhan for The Hindu Business Line



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