Latest Property News on 'Mumbai'

Sale of residential plots at 2-yr low

Property sales have hit rock bottom in Mumbai with the latest figures showing that only 7,800 residential units were sold in October-December 2011, the lowest quarterly figure in the last two years. At its peak in the quarter beginning July 2009, it was 21,000 units.
The figures, showing a steep decline in sales in the overpriced Mumbai Metropolitan Region (MMR) real estate market, have been compiled by the real estate research agency Liases Foras. The database shows despite sluggish volumes, prices have risen by 75 per cent over the last two years from December 2009 to December 2011.

Regardless of the huge pent up demand for housing, MMR is presently sitting on an unsold housing stock of 95,000 apartments, a direct fallout of the unaffordable rates. The average per sq ft price of a new house in MMR has soared to Rs 10,559 per sq ft. In comparison, the price rise has been far less volatile in other major cities such as the National Capital Region-Delhi (NCR), Pune, Hyderabad, Bangalore and Chennai where the average rates have hovered in the range of Rs 3,000 per sq ft.

“For MMR, the last quarter of 2011 has been the worst in terms of sales,” said Pankaj Kapoor, CEO of Liases Foras. He added this continued price rise is unsustainable in such a bleak scenario and prices are bound to correct over the next two years. Kapoor explained that infusion of private equity money in the residential market has allowed developers to carry on so far without resorting to any price reduction. “But now, even the private equity funds are finding it difficult to raise money in the market. The developer is not the one who is going to be at the receiving end as his own equity in the project is very low. Investors and funds will now find it difficult to make a profitable exit,” he said.

Kapoor predicted that with construction finance from banks no longer easily available, developers will be forced to soon launch their new projects at lower rates. While there have been a spate of such launches at relatively lower than market rates in recent past, they have mostly been in the pre-launch or pre-sales category where the developer sells a particular number of flats even before the basic building approvals are in place. Due to the element of risk involved, such pre-launches attract only seasoned investors with no real respite in prices for the end-users.
According to Reserve Bank of India’s third quarter review of macro-economic and monetary development released this week, despite the central bank increasing key policy rates 13 times since March 2010, housing loans have continued to grow at a higher rate.

The RBI report states, “Higher housing loans coupled with price rigidities in the housing market reflect the continued pricing power with the developers as also the increasingly stretched balance sheets of residential buyers. The lower volume of transactions implies that many other households are getting priced out from the housing market.” The RBI’s quarterly House Price Index show a quarter-on-quarter increase in property transactions in six cities including Delhi, Kolkata, Chennai, Bangalore, Lucknow and Ahmedabad. The only city to register a decline in volumes is Mumbai.

Source: http://www.indianexpress.com/news/sale-of-residential-plots-at-2yr-low/904033/0

Land Acquisition Bill will raise project costs: Maharashtra

The Maharashtra Government has joined other State Governments in opposing the new Land Acquisition Bill. If the bill in the present form is accepted, then the land acquisition and rehabilitation cost for some of the projects, which are at execution stage could increase four times. It will also considerably increase the time taken for project execution.

The State Government has computed that existing expenditure for relief and rehabilitation for Shai water supply project, which is coming up in Thane district could increase to Rs 784 crore from Rs 197 crore. Similarly the expenditure for Talamba irrigation project near Kudal in Konkan region could increase to Rs 231 crore from Rs 37 crore. For the Goshikhurd irrigation project coming up at Nagpur, the land acquisition cost could increase from Rs 15 crore to Rs 53 crore.

A senior Maharashtra Government official said that a sub-committee of senior ministers will undertake a detailed study of all the provisions in the proposed bill and then suggest alternatives to the Centre.

The bill has a provision which says that if land for a project is acquired then the same amount of land should be given to the Project Affected People (PAP) as compensation. “In way a two groups of people would be PAP, the first group would be those who actually lost their land the project and the second group would be those giving, land compensatory land to the first group,” the official said.

The bill suggests that the consent of 80 per cent of the families affected by the project is required for the project to be established. However, this is an impractical suggestion as the very act of getting consent could take over 10 years. Getting consent from 51 per cent of the families would be easier, the official said.

Source: http://www.thehindubusinessline.com/todays-paper/tp-economy/article2832571.ece

Property prices in Mumbai to remain stable till June: Report

Property prices in Mumbai to remain stable till June: Report

Mumbai, Jan 23: Prices of residential property in Mumbai, which started to soften three months back, are expected to remain soft at least till June. That’s probably why developers continue to offer discounts and freebies to buyers though it’s unlikely, say hopeful consultants, that prices would correct sharply.

“Prices, across the city have softened by 10-15%, but since developers still have the capacity to hold on there is unlikely to be sharp correction,” says Anand Narayanan, national director (residential agency),Knight Frank India. Narayanan points out that the slight decline in prices isn’t seen on the brochures, but is the result of some tough bargaining.

A Bank of America Merill Lynch report, dated January 18,2012, points out that discounts of between 5% and 8% are there for those asking, depending on where one is buying a home. It says developers today are absorbing pre- EMI(equated monthly installments) interest and are not charging the usual premium for higher floors.

“Significant discounts are also available to groups or those who make advance payments. We continue to believe that developers will oblige with further discounts of 15-25% as volumes continue to dip in first half of calendar year 2012,” the report states.

That’s not only because some developers are sitting on un-built and unsold apartments, they’re also stuck with ready but unsold apartments. Bank of America Merill Lynch says sales in the year a project is launched are falling fast.

“Projects that were launched in 2006-08 were sold more than 60% in the year of launch. However, the rate fell to 45%, 24% and 17%in year 2009, 2010and2011 respectively,” the report shows.

“There is very little scope for appreciation in under-construction projects,” says Ramesh Nair,managing director (west), Jones Lang LaSalle India (JLL).

“The city’s residential market will be more or less sustained by the sale of affordable mid-income apartments and this trend will continue throughout the first half of 2012,” Nair of JLL adds. Narayanan from Knight Frank says that cautious buyer sentiment does not support any increase in residential property prices in the immediate future.

Mumbai saw a fall of 22% in homesale registrations in 2011 to 59,132 from 75,631 registered in 2010.Giving clear signs that there were lesser homes purchased. High interest rates and hopes of price correction kept the buyers away from the market.

The supply of new residential stock was also constrained last year with project approvals delayed and with few buyers in the market. Realtors saw cash flows choked and couldn’t complete projects. In a majority of cases, customer advances towards house bookings format least 40% to 60% of the cash requirement for real estate developers. The rest comes from financial institutions, banks or private equity players.

“It will be tough for the first half of the year,” says Thirumal Govindraj, head (western region) of real estate consultant CB Richard Ellis, South Asia. “The customer is cautious so the cash flows will be weak. There will be delays in investments in projects whose structures are 20% to 30% completed,” he adds.

Since the developers are wooing customers through discounts in the form of saving them interior design costs, favourable repayment terms and amenities in the apartments, the overall deal is looking better to customers. “All this will squeeze margins for developers but they will not make a loss,” says Govindraj.

Source: http://www.financialexpress.com/news/property-prices-in-mumbai-to-remain-stable-till-june-report/903084/

New DCR push land rates down

New DCR push land rates down

MUMBAI: The new development control rules (DCR) which restrict unabated building concessions and the amended public parking policy, which substantially curbed benefits for builders, have slowly started affecting land valuations in Mumbai. Experts said the city’s land prices, the highest in the country, are bound to fall in the months to come, but warned that flat prices would not decline.

In the past few years, developers bought land at astronomical prices as these concession policies could be manipulated to offer unusually high construction rights to builders who could bribe their way through. Since 2005, some of the country’s most expensive land transactions were concluded in the city because of the bonanzas they offered.

Property market sources said the sale of the 17-acre Mumbai Textile mill land at Lower Parel has been delayed after these two policies were amended by civic chief Subodh Kumar and approved by the state government.

DLF, the country’s largest real estate company, which paid Rs 702 crore for the defunct mill in 2005, is quoting Rs 3,000 crore for the land parcel. But there are not many takers.

Not many prospective buyers are willing to offer more than Rs 2,000 crore as earlier construction benefits no longer exist.

“The owners are expecting Rs 3,000 crore but no offer has come close to that figure yet. With the new DCR, the property’s valuation has taken a hit,” said a prominent developer interested in the central Mumbai property.

DLF’s high valuation is mainly because the state government had earlier cleared its proposal under the public parking policy. The developer was to receive additional floor space index (FSI) for building a multi-storeyed public car park and hand it over to the civic administration free of cost.

But after the BMC reviewed the policy, the FSI benefit was severely restricted. “If DLF fails to receive parking FSI, its land valuation will not cross Rs 1,500 crore,” said another developer, negotiating with the real estate giant.

Another property whose valuation has been affected is the landmark 1.5-acre Famous Studio at Mahalaxmi. The studio has been on the block for some time and D B Realty had almost concluded the deal for Rs 500 crore over a year ago before it fell through. But sources said the valuation is down to less than Rs 300 crore now after the new building regulations were recently approved by the state government.

The 70,000 sq ft plot has a saleable area of 1.5 lakh sq ft, as against the 5 lakh sq ft that experts were expecting before the new policy came in. Famous Studio owner Arun Rungta denied the property was for sale but those in the know said the deal was stuck mainly due to change in valuation.

Similarly, the Dunlop House property at Worli, which has been put up for sale, may fetch under Rs 300 crore, against the expected Rs 400 crore, sources said.

New building rules introduced early this month allow only 35% extra space in a residential project. Builders will pay a premium to the BMC for this “compensatory FSI”. These areas were earlier not counted in the FSI but many builders who could manipulate the system were able to virtually double these free-of-FSI areas and sell them at the market rate to flat buyers.

Senior solicitor Parimal Shroff said the new DCR have severely hurt the business plans of builders and overall valuation of land. “The new policy has ended the secret computations of builders and affected their asset valuation,” he said. “Land values were high as builders knew how much concessions they could procure and the quantum of areas they could load and sell to the buyer,” he added.

Shroff said, “Builders have realized they can no longer receive these concessions.”

Lodha Group managing director Abhisheck Lodha said land owners would now receive a lesser share of the overall value. “The larger chunk will now go to the government as premium,” he said.

Knight Frank India chairman Pranay Vakil said land values will be more realistic now. “We were always surprised how people paid such high values. It made no sense as sometimes land value was equal to the sale price of the finished product,” he said.

Source: http://timesofindia.indiatimes.com/city/mumbai/New-DCR-push-land-rates-down/articleshow/11608922.cms

Realty rates may become more realistic now

MUMBAI: New DC rules and the amended public parking policy are affecting land valuations in the city. For instance, prospective buyers are not willing to offer more than Rs 2,000 crore for the Mumbai Textile mill land at Lower Parel, as earlier construction benefits no longer exist.

“The owners are expecting Rs 3,000 crore but no offer has come close to that figure yet. With the new DCR, the property’s valuation has taken a hit,” said a prominent developer interested in the central Mumbai property.

DLF’s high valuation is mainly because the state government had earlier cleared its proposal under the public parking policy. The developer was to receive additional floor space index (FSI) for building a multi-storeyed public car park and hand it over to the civic administration free of cost.

But after the BMC reviewed the policy, the FSI benefit was severely restricted. “If DLF fails to receive parking FSI, its land valuation will not cross Rs 1,500 crore,” said another developer, negotiating with the real estate giant.

Another property whose valuation has been affected is the landmark 1.5-acre Famous Studio at Mahalaxmi. The studio has been on the block for some time and D B Realty had almost concluded the deal for Rs 500 crore over a year ago before it fell through. But sources said the valuation is down to less than Rs 300 crore now after the new building regulations were recently approved by the state government. The 70,000 sq ft plot has a saleable area of 1.5 lakh sq ft, as against the 5 lakh sq ft that experts were expecting before the new policy came in. Famous Studio owner Arun Rungta denied the property was for sale but those in the know said the deal was stuck mainly due to change in valuation.

Similarly, the Dunlop House property at Worli, which has been put up for sale, may fetch under Rs 300 crore, against the expected Rs 400 crore, sources said.

New building rules introduced early this month allow only 35% extra space in a residential project. Builders will pay a premium to the BMC for this “compensatory FSI”. These areas were earlier not counted in the FSI but many builders who could manipulate the system were able to virtually double these free-of-FSI areas and sell them at the market rate to flat buyers.

Senior solicitor Parimal Shroff said the new DCR have hurt business plans of builders and overall valuation of land. “The new policy has ended secret computations of builders and affected asset valuation,” he said. “Land values were high as builders knew how much concessions they could procure and the quantum of areas they could load and sell to the buyer,” he said.

Shroff said, “Builders have realized they can no longer receive these concessions.”

Lodha Group managing director Abhisheck Lodha said land owners would now receive a lesser share of the overall value. “The larger chunk will now go to the government as premium,” he said.

Knight Frank India chairman Pranay Vakil said land values will be more realistic now. “We were always surprised how people paid such high values. It made no sense as sometimes land value was equal to the sale price of the finished product,” he said.

Pankaj Kapoor of Liases Foras, a real estate research firm, said the dip in land prices could be 30-40% in the island city, where land cost comprises 60% of the project cost. “Wherever the land cost is less than 30% of the project cost, we may not see more than a 15% fall in land prices,” he said.

Source: http://timesofindia.indiatimes.com/city/mumbai/Realty-rates-may-become-more-realistic-now/articleshow/11607664.cms

Decision to levy service tax on flat, shop construction upheld

Mumbai: In a decision that might have an impact on realty prices in the metropolis and nearby areas, the Bombay High Court has upheld the decision of the Union Government to levy service tax on construction of flats and shops.

A division bench held by Justice D Y Chandrachud and Justice Amjad Sayed yesterday upheld the decision of the Centre to levy service tax, saying it was legal and constitutional.

Maharashtra Chamber of Housing Industries (MCHI) had filed a petition challenging the decision mainly on the ground levying service tax on land and landed properties was the prerogative of the state government and therefore the Centre could not impose such tax on the construction industry.

MCHI prayed that the Centre’s decision to levy service tax on construction of properties may be struck down as it was illegal and unconstitutional.

The Union government had amended the Finance Act of 2009 and imposed 2.5 per cent service tax on construction of flats and shops with effect from July 1, 2010.

The bench concurred with the argument of the Additional Solicitor General of India Darius Khambata that construction activity was a service and so the union government was empowered by the Constitution to levy service tax.

To buttress his argument, Khambata cited several Supreme Court judgements and also quoted provisions of Maharashtra Ownership of Flats Act which allows registration of flats and shops even before they are constructed and are ready for possession.

The judges however felt that the decision of the Centre was absolutely legal and constitutional and that it could levy service tax on the construction of properties such as flats and shops.

Source: http://www.financialexpress.com/news/decision-to-levy-service-tax-on-flat-shop-construction-upheld/902351/

BMC notice to six under-construction towers

BMC notice to six under-construction towers

Mumbai: The BMC has issued notices to six major under-construction residential towers in Mumbai asking them to toe the line in keeping with the state government’s revised rules for projects built under the parking FSI policy.

Over the past two months, notices have been issued to the realty majors asking them to reduce the size of their projects. These include Orchid Crown-DB Realty’s three proposed 50-storey highrises in Prabhadevi, Indiabulls’ over 60-storey residential highrises Indiabulls Sky Forest at Jupiter Mills and Sky Suites at Elphinstone Mills, and the proposed 117-storey World One Tower by Lodha at Shrinivas Mills, all three in Lower Parel.

Notices were also issued to the yet-to-be launched Kohinoor Square at Kohinoor Mills in Dadar and Palais Royale at Shreeram Mills in Worli. In the last two cases, construction of the parking lot has already been carried out until the seventh and 11th floor respectively. Spokespersons for both companies said they procured stay orders from the court against the BMC notice on the grounds that they had already constructed a substantial portion of the public parking lot.

The six projects are among the 11 that were issued commencement certificate (CC) under the parking FSI policy. The policy allowed developers to construct public parking as high as 10-20 storeys on their plot and hand it over to BMC.

In return, they could avail a proportionate amount of additional FSI (ratio of built-up area to plot area) in their projects, allowing them to construct 50 to 60-storey towers. Following criticism about the policy implementation benefiting developers at the cost of straining the infrastructure mainly in the Lower Parel-Dadar belt, CM Prithviraj Chavan cancelled all public car park projects. However, 11 projects that had received a CC during former CM Ashok Chavan’s tenure were allowed to go ahead.

BMC officials said of the 11 projects, five agreed to limit their car park to four floors and pay a premium as per new rules.

Additional Municipal Commissioner Aseem Gupta confirmed that the BMC has issued notices to the remaining developers under Section 51 of the MRTP Act, asking them to justify why the BMC should not revoke their CC unless they modified their plans in keeping with the revised rules.

Last week, Gupta started the process of hearing the developers on a case-to-case basis. “The changes in the rule are rational and should be made applicable in as many cases as possible though we do recognise the rights of projects that are in different stages,” he said, adding that the matter is sub judice before the BMC as well as the court.

DB Realty spokesperson said their project has received all the necessary permissions and the company is in the process of responding to the show-cause notice. He added, “DB Realty is committed to complying with all rules laid down by the government and its agencies from time to time.” Lodha and Indiabulls did not comment.

Source: http://www.financialexpress.com/news/bmc-notice-to-six-underconstruction-towers/901397/

Mumbai residential realty market to start recovery from second half 2012: JLL

Residential property market in Mumbai will start witnessing a recovery in the second half of 2012 as it looks set to bottom out by the second quarter of the year, said property consultancy firm Jones Lang LaSalle India.

“The reduction of interest rates expected by the second half of the year will help kick-start a generalized – though cautious – recovery in demand for residential property, leading to an increase in launches,” a release from JLL quoted Ramesh Nair, Managing Director – West, Jones Lang LaSalle India as saying.

However, prices at existing under construction projects are unlikely to see appreciation as unsold under-construction stock will increase significantly.

There is lot of scope for strategic pre-launch bulk investment deals by high net-worth individuals who can predict the market’s direction. Many high net-worth individual investors would have perceived this trend and already parked their monies in advantageously located residential projects by well-funded developers. Completed high-end projects will become costlier by mid-year, largely because of reduced supply in this segment.

Demand for commercial space in Mumbai in 2012 will be marginally lower than in 2011 with IT and ITES companies becoming even more cautious on account of the expected reduction in IT spend by US and European companies. The tenants will get more options, rational pricing and concessions, the release said.

Source: http://economictimes.indiatimes.com/markets/real-estate/realty-trends/mumbai-residential-realty-market-to-start-recovery-from-second-half-2012-jll/articleshow/11510367.cms

High stakes in Mumbai

The Brihanmumbai Municipal Corporation (BMC) is not just another urban civic body. With its Rs 21,000 crore annual budget, far surpassing that of some states, its projects and contracts running into several hundreds of crores and its central role in running the affairs of the megapolis, this is one powerful agency to lord over. Which is why elections to this civic body also assume the proportions of a mini assembly poll.

In 2012, the lakh-plus new voters in Mumbai are inheriting a troubled economy, uninspiring politics but have a growing awareness of democratic responsibilities. These factors that make BMC 2012 more relevant than for the combination of prosperity and power it gives victorious corporators.

Whether with its property tax laws or policies that impact real estate prices, the BMC plays an invisible role in moulding corporate India ‘s interest in staying in the financial capital. The BMC’s recently struggling finances and state politics have stifled attempts to phase out border taxes or octroi. Add to it the general perception that its administration is corruption-riddled, the decrepit roads and overflowing drains, the repeated resurgence of the chauvinistic Marathi manoos issue, and the sense that doing business in Mumbai is an ordeal. Will Mumbai voters mobilise on these issues?

It is now five years since Ward 63 in Juhu, Mumbai, elected a “citizens’ consensus” candidate, Adolf D’Souza, as corporator. Now, a new set of activists have entered the fray, enthused by the recent anti-corruption mood. One group called ‘Mumbai 227’, expecting to find a consensus candidate for each of Mumbai’s 227 wards, is now struggling to identify even 50 adequately well-received candidates. For now, with Team Anna’s campaign having all but fizzled out, the BJP expects it will be the worst hit by these independents — the Sena has its loyalists and the slum-dweller/ Muslim voter is still believed to press the button for the Congress’ palm.

Other factors will muddy the waters too. With the markets the way they are, election funding has never been more constrained, and Mumbai’s famed builder lobby is peeved at newly-introduced regulations that leave little room for manoeuverings. Reservation for women has been increased to 50 per cent or 114 of the 227 seats. But, above all, the 2012 BMC elections will be the ground on which new trends in Maharashtra’s politics play out, before the assembly elections of 2014 where the Nationalist Congress Party (which nosed ahead of the Congress in the December municipal council polls), will stake a claim to be the biggest party in the state.

The Congress and NCP have stitched up their first-ever pre-poll alliance for the BMC, and the sense on the street is that a historic win is now possible, provided the partners in Maharashtra’s uneasy coalition government put their mutual misgivings aside. The unlikely team of Chief Minister Prithviraj Chavan, Maharashtra Congress chief Manikrao Thakare and city unit chief Kripashankar Singh has much riding on the results. A win would ease the pressure each currently faces — the CM would establish that he can handle the rough and tumble of an election, Thakare’s detractors would be silenced, and Singh, who has had a series of jousts with the CBI, will find himself on firmer ground. But the alliance is based neither on trust nor ideological common ground. The NCP has its eyes set on the 2014 assembly elections — tying up with the Congress in Mumbai, where the party has negligible presence, will help them grow new roots.

The other alliance, the Shiv Sena, Bharatiya Janata Party and Ramdas Athavale’s Republican Party of India, is faring only slightly better. Even as it was formalised, the BJP took umbrage at being left out of an advertising blitzkrieg by the Sena. From full pages in newspapers to hoardings, the Sena’s latest warcry is: “We did it”, with a grave-looking Uddhav Thackeray alongside. The BJP is miffed, with even Athavale getting more attention from Uddhav right now. And at least a handful of senior BJP leaders believe that if they cast their eyes on 2014, like the NCP has, then a loss for the Shiv Sena in the BMC may be a desirable short-term goal in view of the larger mission to reboot their alliance on a footing of mutual respect.

For the Shiv Sena, this is a do-or-die election. The party derives its state-wide power solely from controlling the BMC and this time, there is more than power and prestige to be lost. Many believe that if the Sena is vanquished in the BMC, it could be the start of the end for the party.

That leaves Raj Thackeray, whose Maharashtra Navnirman Sena could prove to be kingmaker, but his gameplan is yet to be clarified.

For Mumbaiites, the promised makeover is now almost forgotten. A barrage of new promises is likely. But the big question is, will Mumbai’s sub-40 per cent voter turnout change?

Source: http://www.indianexpress.com/news/high-stakes-in-mumbai/899989/

Realty investments take a beating, city at 15th spot

The realty slump in the overpriced Mumbai market has taken a toll on its investment potential, with the city being steeply downgraded from its third position in the Asia Pacific region last year to 15th place in 2012.

The annual report prepared by research firm Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC) has unseated Mumbai from its enviable position of being the third most favoured real estate investment destinations in Asia Pacific region. Both Bangalore and Delhi have outshone Mumbai this year, ranking 10th and 12th respectively. The report points out that the investment prospects for Mumbai plummeted by 12 places, owing to economic and inflationary issues even though there exists a latent demand.

Jai Mavani, head for Infrastructure and Real Estate at PwC India said that even post the 2009 meltdown, the latent demand manifested itself each time there was a price correction. “However short-term pain is here to stay until the regulatory processes get streamlined, approvals resume, interest rates improve and more liquidity gets introduced. The long-term solution can only come through reforms, both regulatory and financial,” he said, adding that the Real Estate Regulation Bill is a step in the right direction. The report says with sales volumes at an all time low and ongoing the liquidity crunch, developers will turn to private equity funds as a last resort.

Meanwhile on the Asia Pacific level, Singapore and Shanghai have retained their first and second places as property investment hotbeds. Sydney replaced Mumbai as the third most preferred destination followed by the fast growing Chinese city of Chongqing and its capital Beijing. The report added that the economic problems in the United States and Europe “are weighing upon local economies across the Asia Pacific region as well as investor sentiment in Asia and Australian real estate markets”.

Source: http://www.indianexpress.com/news/realty-investments-take-a-beating-city-at-15th-spot/899567/