India Real Estate Link

The RBI’s decision to rise its policy rates, leading to hike in lending rates by banks, will adversely affect the sectors like real estate and automobile. These increases in the policy rates will raise the cost of properties as it increases cost of funds. The RBI’s hiking of the repo rate by 25 basis points is far from good news for the real estate sector, especially in terms of housing. “Purchasing activity had already dropped, chances of minimising the property prices by developers to counter the negative effects of this hike depend on the financial ability of individual developers to hold on to their current pricing and risk losing sales till the situation improves. Developers with enough capital as base are less likely to relent on their pricing than smaller developers with an urgent need to sell their inventories. The industry is already revolving under the high input costs and coupled with high sanction costs, it has to pass on the same to end user. However, hope is that the development will not discourage buyers of their buying decisions.

ICICI Bank , Country’s largest private sector bank, Managing director & CEO, Chanda Kochhar said that the RBI’s decision to increase the repo rate by another 25 bps and the existing systemic liquidity conditions could lead to an increase in funding costs for banks, and in lending rates. RBI continues with its tight monetary policy to contain inflation. However, many analysts doubtes its efficiency to contain inflation. But, the measure will certainly affect the economic growth of the country. The increase in the interest rates will not only make the loan costly but will also reduce the entitlement of credit of a debtor. According to banking norms, while approving loan to a borrower, bank see to it that the EMI on the loan should not exceed the 40% of the total monthly income of the family. As increase in interest rates will lead to rise in EMI and will bring down the claim of loan amount of a debtor on the same income.

MUMBAI: In view of the tremendous response received by state-run housing corporation MHADA for its offer of 4,034 houses under different categories, Builders Association of India has adviced the Maharashtra government to take control of the redevelopment of SRA schemes and nominate MHADA, MMRDA and CIDCO as the official agencies for redevelopment of slum. BAI Treasurer, Anand Gupta said, “MHADA, MMRDA and CIDCO like agencies could offer free rehab houses to eligible slum residents by constructing multi – storied buildings as provided in the SRA Scheme. They can sell the balance area to all those applicants of MHADA flats who did not get allotment”.BAI has sent a written proposal to state government in this regard. “Over 2 lakh people had applied for the 4,034 MHADA flats in May this year, and nearly 7 lakh home-seekers are expecting that they will get flats at very reasonable rates. Funding such projects will not be an issue since customers are ready to buy the houses at rates and terms of payment as announced by MHADA”. MHADA has a unique advantage, it has over a period of time collected a huge data base of home-seekers in Mumbai, which promises ready customers for affordable and mass housing segments. All these Government bodies have made the mandatory consent by 70 % slum residents will not be required.

As per SRA record, 1,046 plots are available with state Government for redevelopment. That can house 3,70,000 flats of 430 square feet as per carpet area, and provide housing to six lac slum residents.

NEW DELHI: 17 flats which DDA said were constructed illegally in the upper basement of the Games Village will soon be razed. The developer Emaar MGF have been served the notice by the building department of the Delhi Development Authority to this effect on May 2. The vice-chairman of the DDA, G S Patnaik, said these flats were “illegal and have been sealed as of now”. The flats were not constructed as per the approved building plan, said DDA officials. The issue of the illegality of these flats came up just before the Commonwealth Games. The total cost of these flats is between Rs 30 crore and Rs 40 crore.. The developer apparently gave an application on April 28, saying they are ready to remove the 17 unauthorized flats in the upper basements, without bias to their claim and rights under Master Plan-2021 and the building bylaws, provided the completion certificate is soon issued to the balance 1,168 flats in 34 towers.

Emaar already having sold off its share of 450-odd flats, the people who bought them for approximatly between Rs 2 crore and Rs 5 crore each have been asking the developer to hand over the property. The remaining flats are with DDA. But no flat can be allotted before the completion certificate is issued. The developer decided to let go the loss of having these 17 flats destroyed to accelerate the process of getting the completion certificate. DDA claimed that a waterproofing of the basement is still going on and DDA has to ascertain whether the construction of the Village complex is within the overall ambit of Master Plan-2021 and the unified building bylaws which are in force in Delhi, then only the completion certificate can be given once these exercise has been completed.

During a recent hearing, DDA representatives presented that these illegal flats were not safe and not likely to be fit for occupancy as widespread leakage in the basement area was noticed during floods in April/September 2010. Moreover, several service lines of other flats are passing along the roofs of the unauthorized flats.

The purchasers of the Emaar flats, however, continue to suffer. As they have bought these flats because it was a government project with a time-bound deadline for completion. We were supposed to have got possession of the flats by March this year. They are suffering huge losses as many of them are paying 12% as annual interest on the loans taken from banks.

Rising real estate rates may have resulted in a spiky decline in property  sales, but it has lead to a good growth in rental value in Mumbai and other  metropolitan cities in the country. Mumbai and the outskirts of the city have  seen an 11% growth in rental value in the past year. The figure for Bangalore,  Pune and Delhi has shot up by 13%, 11% and 9% respectively.

Unexpectedly, rental value in South Mumbai, one of the most preferred  locations to stay in the city, has seen a drop. The Worli residential market  saw a 21.31% drop last year, while the figure for Prabhadevi, Parel and Bandra  (West) fell by 18%, 12% and 11.57%. “The rent in South Mumbai had gone up to  the roof. It is still unaffordable. So, people are shifting towards the suburbs  and outskirt of the city,” a real estate expert said. However, the rental value in the suburbs too has shot up radically. Borivli  (West) witnessed a record of 42.25% growth, while the rates have shot up by 35.04%  in Powai, 28.32% in Malad and 20.40% in Kandivli (East). The Mumbai metropolitan region too has seen a rise in rental value. The figure for Mira Road and Seawoods shot up by 39.28% and 36.36% respectively in the past year.

A real estate expert featured the rise in rental value to exorbitant  property rates in Mumbai. “People prefer to stay in rented homes instead of buying a house. Also, there is a huge arrival of people in the city. As a result, there is a huge demand for rented homes,” a study says. Government data compiled by the stamp duty department also shows that there is a 35% of rise in  the number of lease agreements being signed in the city.

The ad-for-equity business, the Brand Capital of publishing group Bennett, Coleman and Co. Ltd., has hired real-estate adviser Knight Frank India Pvt. Ltd to manage its Rupees 5 billion real estate portfolio.

“This is the first initiative of its kind where we have taken up such asset management and advisory for a large corporate house,” said Amit Goenka, national director of capital transactions at Knight Frank.

The real estate firm will take care of the portfolio; will provide direction on timely exits, maintenance, reporting and analytic s, valuation, assistance with leasing, compliance and collections.

Bennett Coleman, the publisher of The Times of India and The Economic Times, initiated in India the concept of equity being swapped for advertising space and time which is also called private treaties.

Other publishers and media businesses follow the model, including HT Media Ltd., publisher of the Mint and the Hindustan Times; Network 18 Group, which operates the CNBC-TV18 and CNBC Awaaz TV channels; DB Corp. Ltd., publisher of the Dainik Bhaskar and the Daily News and Analysis; and New Delhi Television Ltd., which runs the NDTV 24x7and NDTV Profit channels.

Brand Capital has 13 real estate firms in its portfolio, including Emaar MGF Land Ltd., Sobha Developers Pvt. Ltd., Nitesh Estates Ltd., Shriram Properties and Lavasa Corp. Ltd., as per the organization’s web site.

“We have some other such orders in the pipeline from large financial institutions, ultra high networks, individuals and family offices,” Goenka said.

Anshuman Magazine, chairman and managing director of CB Richard Ellis India Pvt. Ltd., said, a real estate advisory firm, features this trend to flying real estate prices that have made holdings in land and property an important part of a company’s total business. He also says, “We have been managing the real estate portfolios for various state governments, however, in the private sector, the trend has picked up recently.”