Prices May Not Come Down

Wednesday, May 28, 2014

 Construction cost has increased by 40% in two years, while taxes have also gone up. This eliminates any scope for reducing prices, says CREDAI Chairman Lalit Jain.

The Indian real estate sector continues to be a favoured destination for global investors. The urban population will surge in the coming years, which, coupled with growth in employment, education and health care, will push the demand for residential and commercial space.

Urbanisation has been rapid in the past few years, with 'upwardly-mobile' buyers keen to invest and reap dividends from the real estate market growth. Increasing migration to the cities will drive this demand. Also anticipate a rise in sales of housing property following the recent stock market rally and a slew of optimistic RBI rules to allow foreign banks into the country's protected banking ecosystem. Steady housing demand will be a big constant for the Indian economy this year, and the industry will focus on meeting this demand.

However, the real estate sector is burdened with high costs because of which there is little possibility of reduction in home prices in most micromarkets. Construction cost has increased by 40% in two years, while government taxes and premiums have also gone up substantially. This eliminates any scope for reduced prices, despite the weak market. Banks' reluctance to lend to real estate companies has led to increased cost of borrowing, adding to the overall cost. In fact, these factors will also result in an increase in prices in improved market conditions. The housing industry will revive at a faster pace if a stable government is formed after the general elections in 2014.

The Confederation of Real Estate Developers' Associations of India (CREDAI) has identified demand from tier-II and tier-III cities as an impetus for better real estate solutions. With rapid land and infrastructure development in smaller cities and towns, assisted by bank loans, higher earnings and improved standards of living, housing and construction demand will increase here.

The recent move to introduce Reits, or Real Estate Investment Trusts, is a progressive one as well. Reits are a great instrument to tap cash flow into the Indian economy, and help smaller investors access income-generating real estate assets. It will help both developers and investors, through better financing and investment options. This will give the Indian real estate market more depth. Providing tax incentives to REITs for investment in housing, especially the affordable housing sector, will increase chances of its success.

LALIT JAIN
Chairman, CREDAI

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‘Next 30 days good time to buy real estate’

New Delhi: Nearly 60 percent of Indians think that next one month would be a good time to buy real estate with improvement in consumer sentiments following formation of a stable government, according to a survey by global research firm Ipsos.

“Almost six in ten (57 percent) Indians think the next 30 days will be a good time to buy real estate, such as a house, vacation property or investment property,” Ipsos said in a statement.
Founded in France in 1975, Ipsos is an independent market research company controlled and managed by research professionals.

“With the formation of a new stable government at the Centre, the consumer sentiment which was low in the last 2 years has improved significantly. The stock market has already reacted in a positive manner reflecting this change, the real estate prices are expected to go northwards by the end of the year,” said Bhasker Canagaradjou, Associate Director, Ipsos Business Consulting.

The realtors reeling under large scale of debt are offering discounts to reduce their inventory levels taking advantage of the new found optimism in the market.

The residential real estate market may see an uptick in the demand and increase in the number of transactions in the near future, he added.

Majority (65 percent) of people in Russia think next 30 days would be a good time to buy property followed by India (57 percent), Indonesia (55 percent), Ireland (51 percent), Great Britain (47 percent), Mexico (44 percent), Australia (42 percent), Hungary (42 percent).

“Those rounding out the middle of the pack are from the United States (41 percent), Germany (40 percent), Canada (39 percent), Italy (38 percent), Argentina (37 percent), South Africa (37 percent), Sweden (37 percent), Poland (35 percent) and Spain (34 percent).

The survey was conducted in 26 countries with a total sample of 20,144 adults age 18-64 in the US and Canada, and age 16-64 in all other countries.
Source: Zeebiz.Com



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Government likely to grant infrastructure tag to low-cost housing segment

NEW DELHI: Low-cost housing, which found several mentions in BJP’s 2014 election manifesto, is likely to get infrastructure status, making it easier for real-estate developers to get finance from banks and for longer tenures, and eventually increasing the supply of houses. While developers are in favour of an infrastructure tag to the housing sector as a whole, the government is likely to grant it only to the low-cost segment, said a senior government official, who did not wish to be named.

According to government definition, low-cost houses are those with an area of up to 40 sq metres. BJP’s manifesto talks about rolling out a massive low-cost housing programme to “ensure that by the time the nation completes 75 years of its Independence (that is in about eight years) every family will have a pucca house of its own.” It talks about an innovatively designed scheme that dovetails various existing programmes and also encourages the housing sector by appropriate policy interventions and credit availability including interest subventions, where necessary.

According to a recent report by the National Housing Bank, the shortage of housing in urban areas is around 18.78 million units. Of that, about 95 per cent is in the low-income group and the economically weaker section. “At the moment, housing carries a very high risk weight and banks are worried when lending to the sector. With infrastructure status in place, the risk weight will reduce and banks will become more comfortable giving loans to developers,” said the official.

The decision is likely to be made soon by Venkaiah Naidu, the new minister for urban development, housing and urban poverty alleviation. Naidu is one of 24 Cabinet ministers in Prime Minister Narendra Modi’s government that was sworn in on Monday at a lavish ceremony at the Rashtrapati Bhawan. Even though he would take charge only on Wednesday, the former BJP president met secretaries and other key officials of the ministries at his residence on Tuesday.

Infrastructure status for low-cost housing has been a long-standing demand of the real-estate industry but experts say this will only help to a limit if other aspects such as taxation and interest rates are not considered. “It can only increase funding for the sector to a small extent as it will mean longer tenure of loans, but not lower interest rates,” said Lalit Kumar Jain, chairman of industry body Confederation of Real Estate Developers Association of India (Credai). “It will require a number of other things to be successful.”

It would, for instance, also require a faster approval process, quicker environment clearances, rationalisation of taxes, lower cost of funding and tax rebates for developers building such homes so that eventually it turns out to be profitable for them to be in this business, he said. According to Jain, the cost of finance is very high for both developers and buyers at the moment. “Low-cost houses can only be bought if interest rates for buyers in this segment are lowered below 7.5 per cent,” he said.

The housing ministry has been pushing the proposal for infrastructure status to low-cost housing for the past few years but it has been rejected by the finance ministry on two occasions, the latest being in 2013. The finance ministry is concerned about chances of misuse of the incentives that the segment could get.
Source: ET



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Spin TV: A real estate based channel to launch soon

MUMBAI: Looking at investing in real estate? Well, now rely not only on a half an hour real estate based show on some channel, but tune into a real estate channel. Christened Spin TV, the soon to be launched free to air (FTA) channel will be headquartered in Mumbai, showcasing the real estate industry and its related topic based programmes. The channel will be launched by Optimmus Media Network India, and has been conceived by its CEO Manish Rachh.

Spin TV will not only provide platforms for promoting real estate information, market analysis, housing policies and advertisements for developers to sell their real estate but also provide important services like raising issues relevant to developers in government and non-government forums, suggesting policy changes, making representations via panel discussion, and giving the developers a unified front.

The channel will act as a single point of information for the developer community for the latest developments in the industry and will also help members connect with experts who can offer specific advice.

Set to go on air in the second quarter of this year, Spin TV will air a bouquet of programmes across genres of real estate, tourist destination, architectures, vastu and interiors. The channel has included programmes that introduces new concepts in living styles and provides information on dream home, real estate advisors, renovation ideas and latest trends in interior furnishings and so on.

Targeted at the age group of 25 to 50, Spin TV will be distributed via all DTH, cable and satellite platforms across the western region of India. The channel is looking at airing original and engaging programming which can bring high audience involvement and viewer loyalty.

OMNIL CEO Manish Rachh said, “The channel will be one of the key platforms for showcasing the vast growth potential of the real estate sector and introduction of their property that respond to viewers needs. The real estate markets in India have been developed to a phase of rapid growth in recent years and hence, television plays an important role influencing the real estate market which can have an effect on people’s understanding of the real estate Industry, which can then affect their actions and purchase behaviours.”

“Spin TV will be driving traffic through our various targeted marketing strategies and partnerships. The channel is supported by its own portal www.spintv.in and mobile apps making it available on every device riding multiple cloud and content delivery networks. It is India’s first video support portal. It offers any device, any place video upload to the seller and a true video-on-demand facility for the prospective buyer,” he added.

While the channel has been launched in the western region, it will be available in north and south and would also be introduced in Middle East and USA in a short span of time.
Source: indiantelevision.com


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