Builder body Naredco asks members to fulfill promises made to home buyers within a reasonable time frame

NEW DELHI: Real estate industry body National Real Estate Development Council (Naredco) has appealed to all its members to fulfill commitments their firms have made to

home buyers in their various projects in a transparent manner.

Parveen Jain, the president of Naredco asked developers, whose projects are delayed and where buyers are agitating, to sit with buyers and workout a time frame for

delivery and fulfill commitments made to them.

"It's a confidence crisis for us. We have to win over the confidence of buyers," he said.

Taking the example of Amrapali and Supertech, Jain has asked all NAREDCO members to adhere to building bye laws, rules and regulations in a fair and transparent manner

to gain the confidence of home buyers.

Jain said that though Parliament has passed the Real Estate (Regulation and Development) Act and though it's still to be notified and implemented, builders must stand

committed to the written promises made to home buyers.

"Once the Act is implemented as designed, things would be easier for builders as well as developers. We have to gear up with changing times," he said.

"A customer can no more be taken for granted. A customer is king for us and will continue to be the king in our scheme of things," he said.

"Some financial discipline would help in timely completion of the projects and timely handing over possession to the buyers," Jain said.

He, however, appealed to the government to sort out the issues related to single window clearances at the earliest, so that when the Act is implemented, developers do

not have to run around for project clearances.

End-user demand for houses remains high

Sales in the residential real estate sector continued to fall in the fourth quarter of the previous financial year. According to real estate portal, PropTiger’s report for the quarter ending March 2016, sales across nine cities (Mumbai, Pune, Noida, Gurgaon, Bengaluru, Chennai, Hyderabad, Kolkata and Ahmedabad) decreased by 4% during the fourth quarter, compared to the third quarter. About 51,000 units were sold in that period compared to 53,000 in the previous quarter. Although sales did decrease, this was the lowest fall in the past five quarters.

“Launches and absorption failed to impress although there is marginal increase in transactions. This can be attributed to delay in the existing under-construction projects, quality of realtors and higher inventory prices,” said Mudassir Zaidi, national director-residential, Knight Frank (India) Pvt. Ltd.

Given the low demand, launches, too, were muted. As per the PropTiger report, launches during the fourth quarter declined 14% over the previous quarter, and 51% compared to the same period last year. All nine cities reported a decline in launches indicating a reduction in activity across the primary residential market.

“At present, there is a lot more supply than the actual demand. Once this is absorbed, may be in the next four to six quarters, and once supply matches demand, we might see developers launching more projects. This huge pile-up of inventory needs to be accommodated,” said Ashwinder Raj Singh, chief executive officer-residential services, JLL India.

A recent Mint news report (http://bit.ly/25VzOZt) noted that developers struggled to meet their residential sales guidance for 2015-16 due to tepid consumer sentiment and delays in securing project approvals.

Share of the end-user

Although sales have been continuously falling, the share in end-user demand has been high. According to the PropTiger report, over 95% of the demand in the nine cities surveyed comes from end-user.

“For the past two years, the investors have been out because there is a liquidity problem, and nobody is willing to keep their capital locked for long,” said Singh.

In cities such as Noida, Mumbai and Hyderabad, end-user demand is almost 100%. Chennai was the ‘lowest’ at 96%.

The high demand is mostly for houses costing lesser than Rs.50 lakh, as price rise is affecting affordability. According to the House Price Index (HPI) of the Reserve Bank of India (RBI), prices have increased 13.73% year-on-year during the second quarter of the previous financial year and 1.95% sequentially.

“Many who had invested in real estate a few years ago, are now stuck with no way out. Prices have risen substantially, but there are no buyers,” said Ankur Dhawan, chief business officer, PropTiger.

The increase in demand is for affordable houses. According to the PropTiger report, over 50% of sales continue to be in the affordable segment. Expect Noida, Gurgaon and Mumbai, majority of the demand is for houses costing below Rs.50 lakh.

Other than pricing, there is also a tax incentive for affordable homebuyers. This year’s Budget had proposed to exempt service tax on affordable houses of up to 60 sq. meters (about 646 sq. ft) constructed by central or state government, including public private partnerships. A 100% deduction on profits from a housing project with apartments up to 30 sq. meters (about 323 sq. ft) in four metro cities and 60 sq. meters in other cities, approved between June 2016 and March 2019 and completed in three years, was also proposed. Developers seem to be trying to cash in on this.

In the fourth quarter of the last fiscal, 69% of total launches were in the below Rs.50 lakh category. “Although many affordable projects are being launched in the outskirts of cities, we are seeing tier-2 and -3 developers offering properties with basic amenities within city limits as well. But people buy such properties only once the project is completed or only a few months remain,” said Dhawan.

In the report, all cities, expect Bengaluru and Hyderbad, saw an increase in inventory levels. Ahmedabad, Chennai and Hyderabad, account for over 45% of the ready-to-move-in unsold inventory. With regards to sales, Hyderabad, Bengaluru and Gurgaon bucked the trend and recorded an increase in units sold on a sequential basis.

Operating at ‘rock bottom’ prices, lowering possible in Mumbai, say realty players

Low offtake and funds crunch is leaving little room for real estate players to reduce prices, with the possible exception of visibly overpriced market such as Mumbai.

Real estate players say that they are already operating at ‘rock-bottom prices’ with some claiming they are operating below their cost price.

RBI Governor Raghuram Rajan’s on Monday made a plea to the real estate sector to reduce prices to increase sales. “I am hopeful that as interest rates come down, there will be more credit and buying. And I am also hopeful that prices adjust in a way that encourage people to buy,” Rajan had said while delivering the Y B Chavan Memorial Lecture in Mumbai.

Kishor Pate, CMD – Amit Enterprises Housing Ltd, said, “In grossly over-priced cities like Mumbai, there is certainly more scope for reduction. Affordably priced projects in cities like Pune, Bangalore, Chennai and Hyderabad continue to sell well, so there is no scope for further reductions. It is only in over-priced markets and projects that we will see any correction.”

CREDAI, apex body of realtors, on Tuesday said there is no scope for further reduction as this would lead to rise in NPAs and non-delivery of real estate projects.

Pate further said, “While there has not been a correction in the classical sense, developers have been launching new projects at reduced rates so as to align with current market dynamics. This trend has been evident in most of the leading cities where pricing has been proving to be a deterrent to faster absorption, including Mumbai, Pune, Bangalore and Hyderabad.”

Akhil Kumar Sureka, Managing Director, Sarvome Developers said, “If at all further reduction in prices needs to be made then it would be a well researched calculation made by RBI’s sole criteria and policy decision.

The Reserve Bank of India (RBI) has lowered rates by 1.5 per cent cumulatively since January last year and earlier this month the policy rate was cut by 0.25 per cent to 6.5 per cent — its lowest level in more than five years. More than half of the rate cuts have been passed on by the banks to consumers.

Hyderabad realty sector in doldrums

Six years post the global recession, Hyderabad's realty story continues to be bleak. In fact, in recent times, shutters have come down on over a dozen residential projects in the city, leaving customers in a soup even as roughly 6,000 units are crying for buyers.

While builders put the blame squarely on "unfavourable circumstances" -- first the meltdown and then the bifurcation keen observers of the sector tell a different story. According to them, the financial crisis that developers claim to be in, is in many cases highly exaggerated. "If it was true, how are they able to invest in projects outside Hyderabad?" asked a prominent realtor from the city, pointing out how many realty firms, including Janapriya Engineers Syndicate, Keerthi Estates Pvt Ltd, SMR Holdings and Aditya Infra among others, have entered the Bangalore, Chennai and Pune markets over the past one year.

This, despite some of them holding a vast number of unsold properties in Hyderabad. "The reality is that developers cannot sell these units because there is genuinely no demand. And that is not as much to do with pricing as it is to do with their inability to complete any venture over the last three-four years," sources said. The dwindling reputation has kept buyers at bay, with even modestly-priced homes (anywhere between Rs 2,800 and Rs 3,500 per sft) waiting for takers.

Incidentally, most of the dying projects are those that jumped on to the private equity bandwagon (partnering with private investors) that chugged into the city between 2006 and 2008. The concept, then new to Hyderabad, was lapped by primarily because it did not require the developer to bear the initial capital alone. Over time, however, the economic turmoil coupled with an almost 50% depreciation in land value spelt doom for these partnerships.

YSRCP leader held for ‘assaulting’ realtor

Summary: Gade Bal Reddy says the realtor, who was carrying his licensed short weapon, threatened him with it Bal Reddy charged that Murthy, who was carrying his licensed short weapon, threatened him with it. As he tried to escape, Bal Reddy and others surrounded him and hit with sticks resulting in bleeding wounds. Mr. Reddy along with his son and others went to Shastry’s house, called him out and started beating him after entering into an argument. “Video footage of surveillance cameras in the house showed Bal Reddy and others beating up Shastry.

 

YSR Congress Party leader Gade Bal Reddy, his son and associate Nagaraju were arrested for allegedly assaulting a real estate businessman Shastry at the latter’s house near Tulasi Garden in Jawaharnagar police station area on Thursday. Mr. Reddy along with his son and others went to Shastry’s house, called him out and started beating him after entering into an argument. Even before Shastry stepped out of his house, they pushed open the gate, barged in and showered blows on him. As he tried to escape, Bal Reddy and others surrounded him and hit with sticks resulting in bleeding wounds.

Alerted by Shastry’s family members, his friend Murthy rushed to his house. Bal Reddy charged that Murthy, who was carrying his licensed short weapon, threatened him with it. Murthy, however, denied the allegation stating that he tried to save the life of his friend by pacifying them. He maintained that he carried the weapon but didn’t take it out.

Amaravati dream turns sour for realtors and farmers

Real estate in the capital city area has been witnessing a downturn, contrary to expectations of a boom. The fact that buyers are staying away from the Amaravati region is a major cause of concern for both the farmers who own plots and realtors.

Land rates which soared in the past 12 months came crashing down following the low demand. The delay in finalisation of the land pooling scheme layouts is one factor behind this slump. The government's failure to translate at least some of its promises into reality is another.

According to sources, realtors went on a land buying spree in the area soon after the capital city announcement but most are now trying to off-load their investments. One of them purchased about 360 acres in bits and pieces in CRDA villages. At present, he is busy scouting for buyers. The realtor, who initially picked up land at Rs 30 lakh per acre about a year ago, went on to spend as much as Rs 1.2 crore on acre of land. His average spending was around Rs 70-Rs 80 lakh per acre. His dreams of striking it rich have crumbled as the realty bubble has burst. Now he is hard pressed to sell the land at Rs 1.4 crore to Rs 1.5 crore an acre so that he could repay the money he borrowed from friends and relatives.

 

Like him, over a dozen realtors are desperate to get rid of the land. They are worried about further losses once the layout for farmers is ready. This trend is creating ripples in the capital city area. Farmers, particularly from the river bank villages, who dreamt of selling their plots for a princely sum of Rs 2 crore per acre, have been disappointed by the recent developments.



"Speculation is rife that the government has been deliberately delaying the finalisation of the layouts only to let the market cool down as majority of the small farmers are eagerly waiting to sell their plots soon after receiving land pooling ownership certificates," a builder said. The farmers worry that the rates might further go down in the coming months.

he moves to keep on postponing the finalisation of layouts, citing one reason or the other, is giving credence to the rumours. In fact, the developed plots were supposed to have been distributed by March end. "It might take another four to five months to complete the process," said a senior CRDA official.

A realtor, G Venkateswara Rao, said that they are not expecting the situation in the capital city area to improve even after completion of makeshift secretariat and express highway as there are no big prospective buyers.

Smartrealtors

Hyderabad’s unsold residential inventory at five-year low

HYDERABAD: With steady absorption coupled with improving demand, Hyderabad's unsold residential inventory has come down to their lowest point since 2010, bringing some cheer to the lacklustre market, said a report by property consultant Knight Frank. 

There was absorption of 14,093 units in 2015 as against the 11,197 launched as new launches dropped by 14 per cent in 2015, continuing the trend from 2014. 

"The annual trend in launches shows a clear decline. However, the half yearly trend over the last three periods shows supply numbers stabilising gradually," said Vasudevan Iyer, Branch Director, Knight Frank, Hyderabad. 

The report also hinted towards a recovery of 5% in absorption year-on-year during the first half of 2016. According to city developers, price correction is inevitable as Hyderabad property prices are already rock bottom and hence there will be a price appreciation. Residential units witnessed a growth of 3.1 per cent year on year during the second half of 2015. 

On the other hand, the office market, despite a minor dip in absorption, posted robust numbers indicating an upward trend in office space absorption. In 2015, there was absorption of 4.6 million square feet as against 4.7 million sft a year ago. 
Office space absorption is likely to push up by 23% year-on-year in the first half of 2016, while an approximate 1.9 million sft space is expected to come up, the report said. 

Robust absorption coupled with falling supplies pushed vacancy levels to 14.4 per cent at the end of 2015 from 17.7 per cent in 2013. Interestingly, the second half of 2015 experienced the highest absorption levels of any half-yearly period in history on the back of big-ticket transactions by Qualcomm, Salesforce, Unitedhealth Group and J.P. Morgan. 

Simultaneously, rentals have been increasing steadily since 2012 and picked up momentum after the second half of 2014, post the resolution of Telangana issue. Also, severe shortage of good quality office space in prime areas has turned the market in favour of landlords, who are asking for higher rents from tenants with each passing quarter. The rentals are expected to rise by 7 per cent in the first half of 2016. 

Blackstone may invest Rs 450 crore in Salarpuria’s Hyderabad office property

 

BENGALURU | MUMBAI: Blackstone Group, the world's biggest private equity real estate investor, is in advanced talks with Salarpuria Sattva Group to put in about Rs 450 crore in its upcoming, 30-acre commercial property in Knowledge City in Hyderabad, three people familiar with the development said. 

"This would be a pure equity transaction and is expected to be concluded in the next few weeks. The fund is picking up this stake on its own and not through any of its joint ventures with Embassy Group or Panchshil Realty," said one of the people.

 

This will be the first real estate investment by New York-based Blackstone in 2016 after being one of the most active buyers of office property across India last year. This will be one of the few under-construction properties that Blackstone is investing in - the fund has mostly picked up ready and income-producing office real estate projects. Blackstone declined to comment for this story. "Blackstone, as a matter of policy, does not comment on market speculation," the fund said in an email    response to ET's query. Mahesh Khaitan, director of Bengaluru-based Salarpuria Sattva, declined to comment.

Knowledge City in Hyderabad is spread over 200 acres of land that was sold to some 13 companies for Rs 2,000 crore by the Andhra Pradesh government in 2008. Salarpuria Sattva bought 30 acres in the project for over Rs 400 crore. The proposed Salarpuria project is estimated to have total saleable office space of 6.5 million square feet, which will be developed in phases over the next five years. Swiss pharmaceutical company Novartis picked up 1.15 million sq. ft. of space in this project last year to consolidate and expand its operations in Hyderabad. 
Blackstone concluded some of the major office property transactions in 2015. Among them was its buyout of Gurgaon-based builder Alpha G: Corp for Rs 1,600 crore, the first full acquisition of a real estate company in India. Blackstone also acquired 247 Park at an enterprise value of Rs 1,050 crore and paved way for the exit of investors Milestone Capital and listed construction firm HCC. 
Private equity real estate companies deployed over $5 billion in Indian real estate companies and projects in 2015 - the highest since the financial crisis of 2008. These firms made 90 investments in India last year, of which 85 transactions had an announced value of $5.06 billion, according to research from Venture Intelligence.Investment values surged from $2.2 billion in 2014, when there were 75 transactions. Demand in India's commercial property market in the top seven cities has risen, with deals covering a record 38 million sq. ft. in 2015.

Pune, Hyderabad, Navi Mumbai among 10 affordable property markets

Pune, Hyderabad, Navi Mumbai among 10 affordable property markets

 

NEW DELHI: Hyderabad, Pune, Navi Mumbai, and Ahmedabad are among the 10 affordable property markets in the country where flats are available within the budget of Rs 30-50 lakh, according to JLL India.

The other six cities are Kochi (Kerala), Ghaziabad(Uttar Pradesh), Jaipur (Rajasthan), Nagpur (Maharashtra), Surat (Gujarat) and Coimbatore in Tamil Nadu.

In its latest report, property consultant JLL India has listed 10 cities that offer great lower-budget real estate investment prospects over medium to long term.

"These towns and cities offer a wide spectrum of investable options in real estate with relatively lower property price levels, providing the incentives for future capital appreciation and healthy returns," JLL India Chairman and Country Head Anuj Puri said.

On Hyderabad, Puri said it is perhaps one of the most affordable cities among all tier 1 cities of India. Even the well-developed residential localities in Hyderabad, such as Manikonda, Kukatpally, Miyapur and Sainikpuri offer housing properties in the budget range of Rs 30-50 lakh.

The report mentioned that Hyderabad's realty market is now set for an upswing after a prolonged slump due to the global recession followed by political turmoil.

About Pune, JLL said the city has recorded good growth in the affordable housing segment over the last couple of years. Such projects are located on the periphery of the city and offer small 1-2 BHK flats with basic, no-frills amenities.

"While property prices have increasingly become unaffordable in Mumbai, Navi Mumbai still provides numerous options for residential housing within the budget of Rs 30-50 lakh," Puri said.

The proposed SEZs at Dronagiri, Ulwe and Kalamboli, and the upcoming international airport at Panvel are expected to help generate employment and boost demand for commercial and residential developments.

On Ghaziabad, JLL said that the city is an emerging residential neighbourhood of NCR which has a very high supply of flats in the budget of Rs 30-50 lakh.

"Well connected via metro and roads to the job markets of Delhi-NCR region, the city caters largely to the mid-segment home buyers. The city has a high supply of ready-to-move-in properties offered by renowned developers," the report said.

Infrastructural developments such as extension of the Metro Rail and widening of the NH 24 will further boost Ghaziabad's realty market, it added.

On Kochi, JLL said: "Gone are the days when the city's builders focused only on affluent buyers. Today, the Kochi residential real estate market is dominated by affordable housing segment, which accounts to about 60 per cent of the total housing projects in the city."