Indian Realtors Sniff Gains in Rupee Low

Laborers worked at a construction site in Hyderabad, March 3.

India’s real estate developers are trying to turn bad news for the rupee into good news for themselves.

These developers have long targeted the non-resident Indians or NRIs, who are often tempted to buy property in their country of origin, whether it’s for emotional reasons or family ties.

Lately, however, Indian developers have been working on a new marketing pitch: buy now to benefit from the rupee’s decline.

The rupee has fallen nearly 18% over the last one year, to trade at around 55.48 rupees per U.S. dollar on Tuesday. “The rupee has touched an all-time low, very recently, making investment in India a win-win situation for you,” says BPTP, a real estate developer in the Delhi suburb of Faridabad, on its website. “Your dollar has never been this strong,” it adds.

In a recent ad in the Times of India’s e-paper, BPTP announced that its apartments in Gurgaon were around $25,000 cheaper, thanks to the decline in the rupee’s value. BPTP touted this as an opportunity to make an investment.

Meanwhile, Dubai-based Sternon Group, is running television advertisements on Indian channels in Singapore, hawking its “Magic Kingdom City” project off the Mumbai-Pune highway as a potential investment.

Whether for investment or not, some NRIs seem to think this is an attractive time to buy property in India, according to media reports and brokers.

“We have seen increasing interest by NRI customers who are taking advantage of the dollar’s rise,” says Jitesh Kansal, a real estate broker in Ghaziabad, a New Delhi suburb.

But buying property in India remains fraught with risks, especially for NRIs who can’t monitor the progress of construction routinely. Last summer, dozens of NRI buyers of some residential apartments in the state of Kerala had to turn to law enforcement authorities to attain possession of apartments they had paid for years ago. The founders of the real estate firm, Apple a Day Properties Pvt., were arrested and later said they would complete the projects.

As Apple a Day buyers learnt, it’s still buyer’s beware in Indian real estate.

Source: blogs.wsj.com

India real estate players under pressure

Indian realty sector seems to be going through a rough phase. On one hand, in metros like Mumbai, sales have declined, and the government has been strict with regulations and granting clearances. On the other hand, it is difficult to get investments.

DLF, India’s biggest realty player, has seen a 38.6% drop in its profits for the quarter ended March 2012. One year ago, DLF reported a net profit of Rs 344.54 crore, but this year, it has come down to Rs 211.7crore. Higher interest costs and margin compression have been cited as the reason for the loss. A brokering report said that interest cost increased by 32.5 percent year-on-year to Rs 604 crore, while other income declined by 30 percent year-on-year to Rs 131 crore.

DLF has a staggering Rs.22,725 crore debt on its book, after shedding only Rs33crore in the fourth quarter. The firm has long been looking to sell non-core assets and sell off some of the special economic zone(SEZ) properties, but have not met with much success. The company is looking sell around 12 million sq. ft of residential space to raise Rs.4,000 crore and Rs.6,500 crore, respectively

DLF is not alone. Parsvanath Developers too, have posted a loss of Rs 23 crore in the fourth quarter. Last year, it had made a profit of Rs32crore. Mr Pradeep Jain, chairman, Parsvnath Developers Ltd, said: “Financial Year 2011-12 has been very challenging for us, primarily due to the increasing cost of material, funding and then the unavailability of funds for real estate sector. “

Other players, like Omaxe and HDIL, who have reported profits, have also pointed out that there is scarcity of funds available for realtors. The glum economic scenario, along with the rupee devaluation has put a strain on builders. To add to their worries, market regulator Securities and Exchange Board of India (Sebi) has issued a notification that makes Rs1 crore the minimum limit for alternative investments, including realty funds, up from Rs5 lakh earlier.

Sebi’s move will make it difficult for builders to find investors, as many of them would not like to invest as high as Rs1 crore in real estate when the situation is tough. Hence, the demand for private equity funding will remain, even though the borrowing rates are sky high in cities like Mumbai and Delhi.

Source:www.businessreviewindia.in

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

Homes become more affordable in last 10 years

Real estate prices in metros such asMumbai may be at a record high. But, on an average, homes across the country are more affordable than they were five or even ten years ago. 

According to an analysis of HDFC data, the average cost of a house purchased by its borrowers was Rs 12 lakh in the year 2002. Over the years, the average amount paid for a house (by HDFC borrowers) rose to Rs 40 lakh in 2011. 

But salaries have risen faster. The same period saw the average borrower's salary rise from Rs 2.45 lakh to Rs 8.3 lakh. As a result, affordability - measured by the home price as a multiple of annual salary - has improved . 

The borrower, who on an average needed 5.1 times his annual salary to buy a house in 2002, needed only 4.8 times his annual salary in 2011. 

The affordability figure is a national average and over the years HDFC's borrower profile has also changed with more loans being disbursed in smaller cities. However, the long-term trend in affordability holds true for most cities because of high levels of income growth in the first decade of the 21century. The country's per capita income has tripled from Rs 19,040 in 2002-03 to Rs 53,331 in 2010-11 . 

The increase in affordability would mean that housing and housing loans will continue to grow in coming years. Considering that there is a housing shortage of 26 million housing units according to Jones Lang Lasalle, the potential will last for some time. 
If affordability has improved for home purchase, it is has jumped for rentals. "Around 2001-02, a one-bedroom apartment in Andheri costing Rs 22 lakh would fetch a rent of Rs 8,000 to Rs 9,000. Today, the market value of the same apartment is over Rs 1 crore, but the rental income is at best Rs 25,000. Rentals have not kept pace with house prices," says Deepak Mehta, a Mumbai-based real estate broker who specializes in the suburb of Andheri. 

Incidentally, the golden period for buying property was the year 2004 when, on an average, the HDFC borrower paid the equivalent of 4.3 years of his prevailing salary for buying a house. It was at this time that borrowers got full benefit of tax breaks because of larger loans and interest rates started dropping. 

Internationally, rentals up to 25% of income are considered affordable. However, this would vary depending on how much of the income is left over after providing for basic necessities. 

"Monthly rentals in Mumbai are in the range of 22 to 25 basis points of the property value," says Mehta. According to real estate developers, one of the reasons for high prices in Mumbai is the freeze on supply. According to Vyomesh Shah, MD, Hubtown, high prices in Mumbai are largely because of the constraints on supply. 

"Today, even in a city like Ahmedabad, there are projects where you can get apartments where the rate per square foot is around Rs 2,500" says Shah. 

Source:timesofindia.indiatimes.com

Course on real estate industry lures youths

With the boom of real estate industry across the country, it seems the youths are not just concentrating on good communication skills and sound knowledge of geographical area to become a good realtor, but are now looking at courses on real estate industry to get� the professional touch.

An industry report filed by leading real estate intelligence firm, Jones Lang Lasalle, India, has debated if a career in real estate in the country is apt right now.

Debating whether the Indian real estate industry is the right place to start a career, Sameer Khanna, Head, Human Resources, Jones Lang Lasalle India, noted that compared to developed countries, the Indian�� real estate sector still lacks sophistication and transparency.

Further Sameer Khanna explained, “However, it is popular for domestic and international investments. This has resulted in the need for better and capable human resources. Though real estate is not nuclear science, there is are complexities involved.”

What courses to pick?

While the real estate industry is changing fast, a lot of professionalism is coming in, as many major international players, developers are introducing best practices and higher transparency.

“People equipped with the know-how, training and professionalism are in high demand, and are paid correspondingly,” experts� revealed.

Why are city students interested?

While many students are choosing the course out of interest, many others enter the trade to see if the industry is challenging.

Further, there are the third kind, who have families and forefathers who have been an integral part of the industry and are looking at entering the trade, with a professional course.

“I do not know much about this industry but I have enrolled myself for this course because it seems interesting. So far the only role that interests me is one related to analysing the market,” said Shreeti Dey, a student.

Source:ibnlive.in.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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