Why can’t you buy a flat in Mumbai?

Buying a house in a city like Mumbai or Delhi is becoming a very costly affair. While one can argue that income levels have gone up accordingly, the fact still remains that rising interest rates have taken a toll on the buyers EMI and the developers cost of construction making real estate costly.

But the global financial crisis of 2008 affected the Indian housing story. Corporate earnings were affected and many saw their jobs being threatened. Again, on the domestic side inflation became a big problem to manage and interest rates started to go up. This affected the ability of the home buyer to pay higher EMI and on the other side the construction cost went up by almost 40%. Again we were back into the gloomy days of unaffordable housing prices and low salary growth. Real estate consultants are abuzz with data about unsold housing stock that has kept on increasing in Delhi and Mumbai and if interest rates don’t come down the investors in these housing units will be in trouble.

Interestingly, the average income of a house buyer has crossed Rs 10 lakh as compared to Rs 2 lakh a decade ago so with a five times increase in salary, housing prices have kept in tune with this ratio. Over the last decade real estate prices have also gone up by five times.

Even if these numbers are satisfactory, there are a lot of questions that remain unanswered when it comes to affordable housing.

Pranay Vakil, Chairman of Knight Frank, a real estate consulting company answers some of the issues that ail affordable housing. Do listen to him.

Source: forbesindia.com

Analysing the real estate footprint of South India

By Real Estate Intelligence Service, Jones Lang LaSalle India

 
Executive Summary:

What a South Mumbai is to Mumbai or a South Delhi is to Delhi could well be South Indian cities to India! The question is - will the southern region become the downtown of India?

Southern India has for long been the silent crusader, building and strengthening its real estate development as one of the most sought after destinations in the country. With improving transparency and visibility of the real estate markets in the South zone, cities such as Bangalore, Chennai and Hyderabad have attained a place on the global real estate map, a status that was limited just to Mumbai and Delhi in the past.

While South Indian cities constitute nearly 45% of the country's office space, the stock of 140 million sq ft in these cities is projected to grow at a CAGR of 8% for the period 2012 - 2016, lower than the projected national growth of 11%. This implies that the southern cities, particularly Bangalore and Hyderabad, are relatively rationalised in terms of medium term supply of office space, and the cities have chosen a strategy of pursuing selective quality developments over rapid expansion. While this would keep their share in India's office stock range bound at 37%-40%, the South Zone's vacancy rate by end-2012 is expected to be 16%, considerably lower than the pan-India vacancy rate of over 20%.

South India's retail real estate market has gone through a makeover in the past decade when its retail stock grew from a mere 1.6 million sq ft in 2003 to 13.2 million sq ft in 1Q12. The share of South India's retail stock to the pan-India stock is expected to record a notable increase from 20% at end-2011 to touch 36% by end-2016.

While demand remains healthy for organised retail spaces, it is polarised towards either successful malls or high streets, which have better footfalls and conversion ratio. As the mall stock in the southern cities sum up to breach the 40 million sq ft mark by end-2016, the vacancy by then is expected to witness a notable decline from the peak levels of 2014 to drop below the national average of 20.5%.

South India's residential market has been an ardent follower of the 'affordability' mantra, with more than 80% of the new launches in the past two years being priced under INR 4,000 per sq ft (USD1 812 per sqm). As a result, the residential markets of South Indian cities have remained resilient in the past few quarters, relative to the significant decline recorded in the sales volume of Mumbai and NCR-Delhi. Having exhibited healthy resilience during times of uncertainty, it is imperative for the developers to ensure prudent pricing strategies in the coming quarters to remain competitive as well as sustain the momentum that they have gained during early 2012.

The focus of Indian real estate is shifting from Tier I to Tier II cities, and the southern region is also embracing the same, with secondary hubs developing in Kochi, Coimbatore, Vishakhapatnam and Mysore, that are persistently striving for higher milestones.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Source:www.moneycontrol.com

Real estate in Delhi-NCR is a bubble about to pop

Two days ago, property consultant Knight Frank  termed NCR (the National Capital Region of Delhi) as the largest residential market in India, with around 5 lakh houses under construction that are slated to be ready for possession by next year.

But there is a dark side to the Delhi property market, and this will become apparent with the Delhi government passing an order this week that no further transfer of property should be allowed through general power of attorney (GPA), where the buyer gets a GPA from the seller not only for his own use of the property, but for further ‘sale’ to someone else if he so desires.

A Times of India article on  Friday said “the revenue department has made all realty sales through transfer of general power of attorney null and void with retrospective effect from October last year.”

Those holding properties on GPA and SA (Special Attorney) will have to get a sale deed registered if they wish to sell the property in future. Many may face problems getting sale deeds because their properties do not have a clean title.

Realty experts told Firstpost the order will help curb evasion of duties, flow of black money into real estate and also save people from being cheated by unscrupulous owners selling the same property to several people.

The move to ban general power of attorney as a mode of property transfer is sure to impact the entire realty market in the region, and will finally regularise property transactions. In the absence of a clear procedure for converting leasehold property into freehold, the real estate market became highly speculative and GPAs were being used as a trading tool as and  when the price of a property would appreciate.

The order passed by Supreme Court in October 2011 states that no sales deed will be registered if it is through transfer on GPA. This means that transactions carried out since October on GPA transfers will have to be registered afresh with complete documents.

Even though realty players have opposed the order, saying it will reduce the number of saleable properties in the capital, the truth is the ban will finally allow the real estate market to cater to real, genuine end-users and not just traders, who are looking to make a quick buck.

Pankaj Kapoor, MD of property consulting firm Liases Foras, told Firstpost  that GPAs are the main reason why large private real estate developers like DLF and Unitech are reeling under massive debt despite claims of selling the entire stock  The truth is property remains unsold but is floated in the market through a piece of paper, which makes NCR realty an even bigger scam than Mumbai realty. ” There is no real consumption here, NCR is a bubble market,” Kapoor said.

A builder can easily sell flats to investors at a token price of Rs 5  lakh  for a Rs 1 crore property before the construction of a project begins. While the allotment of the flat would be in the name of the investor, the GPA ensures that the name of the buyer remains blank in the document, thus allowing the investor to sell the property further when the property appreciates in the next couple of months.  Hence, what happens is that the buyer will book his profits, sell the property at a 10-15 percent mark-up, and make his money without even registering the house! So an investor who spends only Rs 5 lakh for a Rs 1 crore property, will end up with Rs 10 lakh in just three months.

” The power of attorney gets circulated within investors, making real estate tradable like equity”, explains Kapoor. So although the stock gets sold from the builder’s point of view, it remains unsold and traded in the market, which is why  the  gestation period for construction of properties is so long in Delhi.

Another realty expert told Firstpost on condition of anonymity that GPAs are a one-way ticket to black money in realty. One of the leading realty groups —Sahara— in Nagpur offered to sell 100 flats for Rs 3 crore with the promise of no construction for the next three years. Result? The price is sure to appreciate and the buyer can easily trade the flats with a 20-40 percent gain, without owning a single flat.

The Economic Times cited Mahesh Gupta of Mukul Consultants Group as welcoming the ban too.  “Deals made via power of attorney involve black money. If someone sells his property for Rs 100 crore, he may show just Rs 2 crore in the sale deed. But in freehold property, they have to show at least the circle rate, which may be Rs 50 crore,” he told the newspaper.

And what’s worse is that banks were earlier at a massive risk since the documents would get registered only after the competition of the project. But now that property will have no value under GPAs, banks too will be relieved.  But realtors won’t give up with a fight as GPA deals are their bread and butter.

Source:www.firstpost.com

Power of attorney property deal ban

 :Wary property dealers call for easy conversion


The ban imposed by the Delhi government on general power of attorney as a mode of property transfer, following a Supreme Court order, is expected to impact the entire property market. Property dealers say that while the ban was required to regularize property transactions, in the absence of a simple and clear procedure for converting leasehold property or property held under GPA into freehold, transactions may fall sharply, at least for a while. 

"The move is right - that's how it should be. Property should not be transferred through power of attorney. However, along with this, the government should improve the process, the system of transfer so that people don't suffer. A majority of owners go for GPA because they don't have a choice. I think residential property will be hit the most," says Anshuman Magazine, chairman and MD, CBRE South Asia Pvt. Ltd. 

Commercial property owners are feeling the pinch as well. "If the government does not come up with a correct formula for conversion of leasehold property into freehold, there'll be hardly any transactions in commercial blocks," says Alok Batra of Aakar Properties and Investments. He explains that conversion into freehold will be a hugely complicated affair in business districts such as Nehru Place, Bhikaji Cama Place and Connaught Place. "You have to get the entire plot converted before you trying selling individual units. Who will get it converted? There can be disagreements about freehold conversion charges. There are a lot of technical issues," says Batra. "They had made these provisions. If they withdraw them, how will transactions happen?" 

Not everyone is worried however. Mahesh Gupta of Mukul Consultants Group welcomes the ban. "Deals made via power of attorney involve black money. If someone sells his property for Rs 100 crore, he may show just Rs 2 crore in the sale deed. But in freehold property, they have to show at least the circle rate, which may be Rs 50 crore," he explains. In the case of older residential areas with individual plots, the process will be relatively simpler. "The buyer can insist on the seller converting his property first," says Batra. "It's unauthorized colonies that will be worst affected. It is there that maximum transfers through GPA take place," says real estate analyst Pradeep Mishra. 

Though the ban may deter property deals for a while, it will benefit property owners in the long run, feels realtor Nagesh Mahajan. "Property has no value under power of attorney. One cannot get even a bank loan against it. Conversion gives owners all the legal documents they need," he says. 

Typically, if all papers are in order, conversion takes about three months. Reality though is different. Ashwani Singh Virk, proprietor, Jagson Realtors, says many properties are stuck in the conversion stage for several months. "Government levies penalties on some commercial properties if the area is overcrowded or if part of the property is used for a purpose other than what is specified. These penalties can run into several lakhs and owners cannot get their properties converted without paying. Conversion also requires a complete chain of documentation and some older properties may not have every document." 

Dealers say the number of transactions through the now banned mode is appreciable. "About a third of the deals we handle are via power of attorney," says Gupta. Ravinder Bakshi of BVM Infrastructure Pvt Ltd says business for his firm might decrease by as much as 20-30%.

Source:economictimes.indiatimes.com

Real estate Bill delayed again

The much-awaited regulatory Bill for the real estate sector is still a long way off. The draft Real Estate Regulation Bill will not be tabled during the current session of Parliament, a senior official in the Ministry of Housing and Urban Poverty Alleviation has confirmed.

The Bill has been in the making for several years now, and was slated to be introduced during the Budget session. The housing ministry is now targeting the monsoon session of Parliament. The official said the final draft was ready.

The draft bill has gone through some changes related to clauses on imprisonment and compulsory registration.

The imprisonment, according to the final draft, applies only in the case of non-registration with the real estate regulation authority. Registration is mandatory for projects of a certain area and type. The maximum term of imprisonment is up to three years, and penalty may be extended up to 10 per cent of the project cost. In the earlier draft of the Billl, imprisonment was recommended in case of willful failure to comply with orders of Appellate Tribunal too.

The ministry has also reduced the area size for compulsory registration from 4,000 square feet in the earlier draft to 1,000 square feet now. This would mean registration would be mandatory for the smaller players too.

National Real Estate Development Council (Naredco) hailed this as a good move. “It would also check fly-by-night operators in real estate, which are majorly into smaller projects,” said R R Singh, Naredco director-general. “However, the load on the authority will increase, as it would get flooded with projects for registration as smaller projects are more in number.”

Confederation of Real Estate Developers Association of India (Credai), however, wants no limit on the registration. “No developer should be left out of the ambit of Real Estate Regulation Authority,” according to Credai chairman Lalit Jain.

The objective of the proposed legislation is to establish an authority to regulate, control and promote planned and healthy development and construction, sale, transfer and management of colonies, residential buildings, apartments and other similar properties, besides to host and maintain a website containing all project details.

Source: business-standard.com

Investors flock to Dwarka expressway on promise of future gains

Nobody knows for sure how long it will be before the Dwarka Expressway is finished , but given its importance as an alternative link between Delhi and Gurgaon, and the high property rates in both cities , the road has fuelled a property boom along its proposed alignment. 

Already, rates have touched Rs 7,200 per square foot in certain parts, and even studio apartments start at Rs 40 lakh. Not surprisingly, developers and realtors have started spamming high net worth individuals with "hurry" and "rush now" text messages. But is it just another bubble or a real opportunity ? 

Builders and property analysts TOI spoke to said so far the increase in property values is driven by speculative buying. "These projects, as of now, are for investors and not end users. The area will only become habitable after it gets connected by the expressway," said Saurabh Sharma of Corporate Real Estate, one of the 50-odd realtors eyeing expressway projects in the New Palam Vihar area. 

Experts said the area is an opportunity for investors with staying power, as none of the residential projects are likely to be completed before two years. 

Dealers said up to 75% of the bookings in these buildings have been done by investors, and projects by reputed builders are almost sold out. "NRIs and local investors have lapped up most of the houses in projects by Era (Sector 103), Earth Infrastructure (Sector 112), Landmark (Sector 103), Rahejas (Sector 108), Ansals Housing , and Siddhartha (Sector 106)," a builder said. 

"Investors can wait for the values to increase further. Once the expressway is ready, prices will shoot up," said property dealer Hitesh Singh of India Home, adding rates have increased sharply ever since construction of the expressway started in April 2011. Twobedroom apartments now cost Rs 55-65 lakh, three-bedroom apartments Rs 75 lakh to Rs 1.5 crore, while villas cost up to Rs 10 crore. 

"The average range here is Rs 3,000-4 ,200 per square foot. However, in projects that are in prime locations and closer to Delhi, such as sectors 111, 112, 113 and 110, the prices are as high as Rs 7,200 per square foot," added Sharma.


Source:economictimes.indiatimes.com

Real estate purchasing tips

Buy property before launch for good discount. More tips..

Searching for a property is difficult. Usually, you start with reading advertisements in newspapers and real estate websites. Several weeks pass by before you identify a property.
However, when you approach the builder, it is not uncommon to find that it has increased prices. What should you do in such a situation? Is it better to invest in a property at the launch stage when prices are the lowest?

EARLY BIRD
Early investors can avail of discounts. Most real estate projects are developed in phases. Even before the basic approvals are in place, developers start marketing projects to brokers and some buyers at a discount. This is called soft launch in industry parlance.
'To attract investors, developers offer a 10-15 per cent discount at soft launch. The discount may go up to 20 per cent for a smaller project, especially if it is still under conceptualisation,' says Amit Goenka, national director, capital transactions, Knight Frank India.
Developers use soft launches to start generating cash flow. Usually, they begin by inviting bookings from old customers and local property agents. The discount is for limited bookings and a short period. Soft launches also help developers gauge the market response before the formal launch.
'Builders understand that the early buyers are sharing the risk. The discount is a way to compensate them,' says Amit Gupta, managing director, Orris Infrastructure, a New Delhi-based developer.
Soft launches also benefit brokers and investors. 'Brokers use pre-launches to offer clients a lower rate. When the project is launched officially, these clients sell at a premium, earning a good profit in a short period,' says Kailash Gahlot, director at Delhi-based Brisk Infrastructure and Developers.
Builders keep rates low in the first few days of the launch too. This is because at this stage construction is just beginning and there is still a huge execution risk. So, builders offer a discount, though small, to create demand.
However, most developers allow buyers to sell under-construction properties after they receive a certain part of the total price, usually 25-30 per cent.

PRICE REVISIONS
Builders raise prices after development begins and the number of buyers increases.
'Typically, developers raise prices based on sales. If the phase that is up for sale gets, say, bookings for 20-30 per cent units in the first few months, the developer increases prices. The increase is determined by prices of competing projects in the vicinity. The extent is higher if sales are brisk or the price difference with a competing project is large,' says Knight Frank's Goenka.
'The price increase is based on demand, the value perceived by the buyers and their appetite to pay more for the project's advanced stages,' he adds.
Several developers revise rates after they sell a fixed number of units. 'Usually, builders keep starting prices low to sell 20-25 per cent units in a project on a rate-to-rate basis or even below cost to start cash flow. They charge extra for the remaining units to recover cost or the profit margin lost on initial sales,' says Rajesh Goyal, managing director, RG Group, a New Delhi-based developer.
However, higher prices should not be the sole reason for striking out a property from your list. If the demand for a project is robust, it makes sense to clinch the deal even after prices have been increased. The risks associated with such projects are reduced significantly in later stages.
'The end-consumer should not be worried about price increases as the aim is to own a good property for living,' says Goenka.

RISK ZONE
An early bet can be risky. 'Investing at the soft-launch stage is more risky than at the advanced stage. It is not advisable for a person with a low risk-taking ability unless the project is by a reputed builder and has all the necessary approvals. The project should be approved by reputed banks,' says Goenka.
By the time a project is open for the public, its status becomes clear and several risks are eliminated.
'In the initial phase, the project should have received at least basic approvals so that the developer can start ground-breaking and foundation work, build the sample apartment and print brochures,' says Goenka.
If you plan to benefit from low prices in early stages of property projects, you must be aware of the developments in the real estate market. 'Talk to a good property dealer in the area and ask him to keep you updated on new launches. It is advisable to take professional advice before investing in a new project,' says Gahlot.


Source:
www.businesstoday.in

HDIL to construct First Project outside Mumbai

Mumbai-based real estate firm Housing Development and Infrastructure Ltd (HDIL) will build a 100 acre township in Noida, on the outskirts of Delhi—its first project away from its home turf. The project is crucial for the developer which hasn’t launched a single project since last April and requires the much-needed cash flow from fresh projects.

Hari Prakash Pandey, vice-president, finance and investor relations, HDIL, said the Noida project will kick off in the next 8-10 days, as the firm has secured the required approvals.

“The project format has a villa kind of feel, and both plots and villas will be sold,” said Pandey.

In recent times, the company has also spoken about divesting some assets outside Mumbai to exit so-called non-core assets, something that large developers such as DLF Ltd have done. It owns about 170 acres in and around Kochi and another 100 acres in Hyderabad.

Property analysts said HDIL, like many other realty firms, badly needs fresh projects to generate cash flows to repay debt, which stood at about Rs.4,000 crore as of December.

New launches will bring in cash in the form of pre-sales and customer advances, according to Param Desai, research analyst, Nirmal Bang Equities Pvt. Ltd.

Pandey said HDIL will soon launch a residential project in Mumbai’s Ghatkopar suburb, following the launch of a project last year in the suburb of Mulund. The Ghatkopar project, which will generate almost 0.8 million sq. ft of saleable area, was delayed on account of approvals.

HDIL has to make sizeable repayments in the next 12 months, JP Morgan Asia Pacific Equity Research Report said in March.

“However, given policy issues in overall Mumbai real estate and specifically the airport project, work on the company’s ongoing projects has been slow over the last two-three quarters and the deliveries have been delayed,” it said.

As policy regulations gain clarity in Mumbai, the developer has tried to sell assets and development rights of plots to reduce debt in the past year. Analysts estimate this earned the company about Rs.1,400 crore in the past one year. “In the December quarter of 2011, we spoke about reducing our debt by 15% over the following year and we are on track,” said Pandey. “The asset-sale process is also on.”

Source:www.livemint.com

How to Find Best Real Estate in Delhi/NCR

Real estate is "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; (also) an item of real property; (more generally) buildings or housing in general.

Indian property market needs to be looked at in context of the overall economic situation in India and the local real estate pricing trends prevalent in a region.

If you're looking for a home to buy in Delhi/NCR, prices are extremely low, so the benefit is that you'll be operating in a buyer's market. Nevertheless, it's always a good idea to determine what you can afford. Once determined, getting a pre-approved loan is essential if you're not buying with cash.

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