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.