In other words, it can be said that the realty market is not the same throughout India, rather it is pretty good in Tier i cities, while just the same in Tier ii and Tier iii cities.

As far as the Tier II and Tier III cities are concerned, the property level is exactly similar to the level it was two years ago, i.e. before the recession period. Even after so many corrections in the property prices, the realty is in the same position.

It was a miserable condition for buyers when the annual GDP growth rate hit double digits. Be it be a vehicle or a house, an essential or a non essential product, everything was quoted at a big price. But, thanks to the banks which offered every kind of loans to the investors and brought them out of their miseries. However, the recession is over now.

After this recession, the affordable housing emerged as a new as well as interesting concept which became the ray of hope for all. Due to these affordable houses only, the realty market could recover so early. Thus, it would be nowhere wrong to call ‘Affordable Housing’ a pillar of residential realty market in this scenario.

Although property prices were comparatively lower at the outskirts but buying there was not considered wise since the connectivity was inadequate.

After some years came the 2008 recession. The lapse of the IT sector which resulted in job uncertainty all around hit the realty sector, in the very similar manner as it did to many others.

Then the realty market which was much affected by the IT sector went under a price correction. With this correction came the new concept of Affordable Homes.

Due to the rise of upper middle class in India, a sense of better lifestyle and good living has made home in the heart of society. Now days, people believe in spending and enjoying rather than saving and worrying. Easy living is the demand of the time.

People now do not compromise on their comfort level. When one comes back home after a day’s work, he just want an ambiance that helps him to unwind. And this statement has proved itself as a boom for the developers since they now provide facilities and get customers as soon as the project launches. The demand in the residential sector is increasing day by day. Also, due to globalization, demand for office spaces has also grown. Thus, it can be easily concluded that realty sector is flourishing to the fullest.

• The policies made by government for the Foreign Direct Investment have brought quite a large number of foreign investors into the Indian real estate market. India now ranks second in the list of most preferred location for real estate investment. In fiscal 2005-06, the FDI turned thrice to that in 2004-05, i.e., it turned from 2.38 billion USD to 7.96 USD.
• Another reason for the growth of Indian realty sector is the positive reform implemented by the government. The growth of this sector is also evident by the fact that this sector is the largest sector after agriculture providing employment.
• The education system also has impact on the realty sector. It is estimated that in next 2 or 3 years, there will be around 2 million graduates who would create a demand for 100 million sq ft of industrial space and office.
• Lastly, the existence of world renowned Fortune 500 companies also other large companies to start operations in India, which in turn would generate huge demand for corporate hubs.

Some of such companies are:

Textile company Arvind announced a residential complex across an area of 10,00,000 sq ft in Ahmedabad, in partnership with B Safal Group.

Cable Corporation of India (CCI) plans a project in the western India. The project is located in Borivali area of Mumbai and will be a project worth Rs. 1000 cr.

Usha Martin, the steel wire maker recently launched a residential project in Boisar, on the outskirts of Mumbai, and also plans to come up with more such projects in Bangalore and Pune.

Golden Tobacco and Hindustan Composite are next on the list who have not exactly launched projects but have sold their lands to Wadhwa group and Sheth Developer respectively for real estate projects.

Similarly, Reliance Group, Bombay Dyeing and Century Textiles etc are entering into this market.

Thus, conclusion can be drawn that the manufacturing companies are now hitting the realty market.

According to the report, although in 2010, the landscape will be beneficial for tenants, but in 2011, influence of landlords will be higher. It implies that since the office rents are beginning to hit the ground, in the coming term, they should be proactively looking to lock in attractive leases.

Abhishek Kiran Gupta, the Associate Director JLLM said in the report that the Indian commercial realty market is about to attain stability with the well going economic recovery of India.

Currently, the major constituents of the Indian housing industry are the affordable houses which target especially the low income groups and economically weaker class. In the field of medium and luxury housing, in next few years, it is expected to see a remarkable growth since this segment has huge prospects for further developments. The hiring of expat employees by the MNCs and then providing them with luxury housing benefits is one of the reasons for the development of this sector. Also, the demand for luxury housing by NRIs is acting as a catalyst in the growth of this sector in India.

RNCOS presented a report called “Indian Housing Sector Analysis” in which it gave exhaustive information and objective analysis about the growth of Indian housing industry. The current and past market performance, market structure and factors critical to the success of the Indian housing industry are also covered in this report.

Based on the relation between the past market growth and growth in base drivers, such as government support, long-term interest rates, disposable personal income, household size, contribution by housing finance industry, GDP growth, growing industrialization and competitive structure, a forecast is been made in this report about the Indian realty market.

Photo by on Vacation Mode

MCHI is a member of CREDAI, Confederation of Real Estate Developers’ Association of India. This expo will last as an opportunity to NRI investors to fully explore the offers and opportunities in front of them as far as Indian realty sector is concerned. This expo would throw light on all the fields, be it be housing, retail or commercial sector.

This ‘India Realty Expo’ will prove as a golden opportunity for the NRIs, especially in the Gulf region, to come back close to their motherland. Apart from CREDAI and MCHI, there will be 21 more builders who will participate in this expo. The expo will be held at from 5 pm to 9 pm on 3rd June whereas the timings for 4th and 5th June are 10 am to 1 pm and 4 pm to 9 pm. The main focus of this expo will be on the real estate sector of cities like Bangalore, Goa, Pune and Mumbai.

April 24, 2010

As per the report from JLLM, Jones Lang LaSalle Meghraj, a realty advisory firm, the senior citizens’ home is now a days the most upcoming field of realty. This fact is evident from the increasing number of projects housing stock directed at this section.

The report published by JLLM ’Senior housing sector in India: Key Trends’ gives full details of this observation. According to the report, the seniors are not seen the same way they were seen a decade ago. These days, their status is experiencing a drastic change, the reasons being change in mindset, augmented financial independence and growing cohort size. The big caliber of this segment and its unique needs and promises are offering a good vector of opportunities to the Indian realty market.

Also, as per the report, the number of seniors believing in the idea of good standard of living and the sunset years of their lives with similar-aged companions and sharing facilities in settings of security  and enablement is rising rapidly. A survey was conducted on households with senior citizens from which it was inferred that more than 60% of them found concept of an elderly club or a senior citizen’s association as a viable and practical one. The old age homes are now replaced by contemporary retirement homes or resorts was one of the conclusions from the report.

In recent times, demand for housing has risen rapidly as income levels have soared, new jobs have been created and people’s aspirations have changed – although this is slowing down due to the credit crunch. A new report on commercial property by the Royal Institution of Chartered Surveyors lists India as one of the countries most vulnerable to the crunch.

Jane Jorgenson of Hamptons says: “The Indian property market is being affected by the credit crunch, as with all countries. Buying has certainly slowed. However, the growth of middle and high income earners continues to supply a steady market of buyers.” The property market has grown from £6.5 billion in 2005 to an estimated £30 billion. Hamptons has opened an office in Delhi, and has an India desk in London for UK-based investors.

Land prices have quadrupled over the past three years as developers rushed to build luxury residential developments, with starting prices at a minimum £125,000 for two bedrooms. But the big boom will be in low-cost affordable housing. The number of people earning more than £2,500 a year is forecast to double to 20 million in the next two years – not least because of the 2.5 million students teeming out of Indian universities each year.

The UK-based agency David Stanley Redfern is selling off-plan apartments in Rudrapur, northern India, costing £28,000 for two bedrooms. Called Mountain View, the scheme quickly sold out, but another is being built nearby which will also offer affordable housing, ready to capitalise on the anticipated demand. Rudrapur, designated a Special Economic Zone, offers tax incentives to companies moving into the area. The city’s new factories are expected to employ 300,000 people, at least 50,000 from outside the area, who will be looking for homes to rent. With only 20,000 new units being built, buy-to-let flat owners are hoping to cash in.

Emaar Properties and MGF are planning to build townships in Delhi, Hyderabad, Punjab, Uttar Pradesh and Chennai, an investment of more than £2 billion.

The potential for growth remains vast. Sebastian Siddiqui, who heads up Hampton’s Delhi office, claims: “With a rising middle class, 400 million people – more than the entire population of the USA – are set to buy their own homes.”

“In Asia Pacific, the financial market turmoil is starting to significantly affect the occupancy market for major financial office centres. Net leasing activity has been negative and vacancy rates have been on the rise for several quarters in Sydney, Tokyo, Singapore and Hong Kong,” JLL said in a latest report.

The consultant pointed out that rentals in Tokyo, Sydney and Hong Kong have already moved in downward phase of the cycle, with Singapore expected to follow suit in this quarter.

It has forecast that largest rental declines over the next one or two years are expected to be seen in the mature Asian markets following the demand contraction and the very strong rental increases observed in recent years.

JLL also noted that in the tier I cities in China and in some Indian suburban micro markets, the next two year will see abundant new supply hitting the market as demand begins to fall which would result in increased vacancy levels that could lead to major correction in rentals in short and medium term.

“In leasing markets where financial services companies contribute significantly to office occupancy and have driven rents to record levels, the increases now are beginning to reverse as the landlord-tenant power play shifts,” JLL said.

The report further pointed out that economic impact on real estate fundamentals are hitting more gradually in Europe than in the middle east and North Africa or Asia Pacific.

The outcome: The bitter realization that the Indian developer has limited options before him to attract buyers. The builders unanimously agreed to allow customers to have a greater say in price negotiations — in other words, they decided to cut home prices.

The developers agreed to give a 10-12% reduction for all consumers, albeit couched in schemes such as ‘bearing’ 2-3% of the interest cost, flexible rates for parking and floor rise pricing. “Don’t be rigid on rates; allow the customer to have his say,” was how one participant who is involved in large housing projects in suburban Mumbai, described the conclusion of the meeting.

The developers’ move also assumes significance as a sharp correction in Mumbai home prices would have a ripple effect across the country. Though residential prices are down 20-25% across India, developers in Mumbai have been unwilling to cut prices, citing a huge demand-supply mismatch.

“This quarter was crucial for us,” said a developer who was present at the meeting. “Demand is still robust as far as residential markets are concerned. What we want is to convert the demand into actual deals. If pricing is hampering sales, we are willing to compromise on that,” he added.

Till now, developers were not ready to accept that demand at high prices would weaken. In fact, most developers were currently holding out and did not offer discounts. They could afford to do so, since they were sitting on huge profits accumulated over the past two years of bull run in realty market.

“But the same developers have realized that demand is unlikely now at the prices seen two years back,” said an analyst with Kotak Securities. “We believe demand can only come back if prices correct.”

Some of the developers who were learnt to have attended the Grand Hyatt meeting were Akruti City, Nirmal Lifestyles, Kanakia Builders, Evershine Builders, Rahejas and RNA.

In Delhi, several developers in the National Capital Region have started offering deeper cash discounts and have increased their marketing efforts. Developers are banking on more ‘genuinely-priced’ products, a good cash discount and more advertising to lure buyers. “We didn’t offer any discount during the festive season last year,” said Raheja Developers chairman Navin Raheja. “But this time, everyone is giving it, since market conditions have changed.”

Raheja Developers is offering an outright discount of Rs 200 per square feet or around 6-7% at its soon-to-be-launched high-end project in sector 109 in Gurgaon. Aiming to lure government employees — beneficiaries of the Sixth Pay Commission recommendations — the developer is offering them an additional discount of Rs 100/sq ft, which is over and above the Rs 200 discount offered to all.

This quarter, developers are caught in a pincer-grip of falling sales, dropping rentals and tight liquidity conditions. Developers said they have also asked industry associations and their officials to help bring back investors and buyers’ confidence in the real estate sector. The overall quantum of sales dropped over 60% in the past quarter due to rising interest rates and additional pressure on household budgets.

Developers across the country have now pegged hopes on the upcoming festive season, offering to pay stamp duty and gifts like a car or free home furnishing.

For instance, Mumbai-based Sunil Mantri Realty has waived stamp duty (5% of property value) for buyers at its Mantri Park project in Goregaon (East) in Mumbai and is also offering 5% discounts at its Bangalore and Gwalior projects.

The Citigroup-backed Golden Gate Properties has offered a car for every customer booking a flat at the Golden Palms project on Hennur-Banaswadi road, some 30 minutes from Bangalore’s new international airport. “We are offering a Skoda Fabia to every customer who books a flat at the Palms,” said Sanjay Raj, executive director at Golden Gate Properties. “For those who already own a car, we are providing a discount equivalent to the value of the car,” he added. Golden Palms comprises 450 apartments measuring 1,400-1,800 sq ft and is priced at Rs 2,600 per sq ft.

However, industry observers say that cutting prices alone may not bring in buyers, as sales have touched an all-time low and steep interest rates have put off many prospective buyers. “Home sales are at an all-time low. Pricing is a crucial factor, but it has to be supported by required policy support to revive the market,” said Pranay Vakil, chairman of real estate consultancy Knight Frank India.

After RBI raised interest rates, commercial banks have increased lending rates by 50-100 basis points. This has led to a sharp drop in pre-sales for property developers, their main source of project funding. Developers have also been hit by the falling stock markets, increased lending rates and bar on external borrowings which have limited their cash flows and execution capabilities.

Even prime areas in Delhi such as Friends Colony, Maharani Bagh, GK I & II, Prithviraj Road and Hauz Khas have witnessed a 5-10 percent fall in the prices.

In 2006 China got 14.6 % votes while India had 18 % and was ranked in the 2nd position. One of the important findings that cannot be unnoticed is the jump in investor’s confidence in China.

AFIRE Chief Executive J A Fetgatter told that this is the 2nd time in 3 years, China has been chosen as the country offering the 2nd best chance for capital appreciation after the US. Interestingly, the United States, whose economy continues to be bogged down by the subprime crisis and faces the danger of a recession, still managed to preserve the top position in the ranking list.Among those surveyed, 26.2 % said America offered the greatest prospect for capital appreciation in the real estate sector as compared to 23 % recorded in 2006.