Narendra Modi's rise to impact real estate; Indians set to buy: Ipsos

Saturday, May 31, 2014

Nearly 60 per cent 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 per cent) 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 per cent) of people in Russia think next 30 days would be a good time to buy property followed by India (57 per cent), Indonesia (55 per cent), Ireland (51 per cent), Great Britain (47 per cent), Mexico (44 per cent), Australia (42 per cent), Hungary (42 per cent).

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

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.

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Five ways to check a builder’s reputation

Monday, May 19, 2014

If you are planning to buy a property under construction, don't just go by the brochure claims. A lot depends on the builder's competence and resources. ET lists some checks before you finalize a project

1. Groundreport

You can conduct a quick Internet search by keying in the company name since customer forums, blogs, news reports, property sites, etc, typically have a lot of information. However, it is still a good idea to go in for field research. Talk to customers who bought units in old projects as well as local brokers. The current market price of the past projects in comparison to peers in the same locality is also an indicator of the builder's standing. You should check the credentials of the contractors associated with the project as well.

2. Trackrecord

It is safer to buy from an experienced builder with a good delivery record since he is likely to have a more professional approach, with systems and processes up and running. Besides, you can check his track record and find out how well the past projects have been executed. Remember, lack of transparency is a good enough reason to not buy. A reputed builder will also typically be a member of an industry association, such as the Confederation of Real Estate Developers Association of India (CREDA),or the Builder's Association of India (BAI). These are self-regulatory bodies that have strict norms for builders and any deviation may lead to the company being blacklisted by the association

3. Qualitycertificate

The International Organization for Standardization's 9001:2008 certification criteria for a quality management system is based on eight principles, including customer focus and satisfaction. Therefore, an ISO 9001:2008

audited and certified builder is expected to be more professional in his approach, and it is a good idea to check this before zeroing in on a housing project.

4. Realty ratings

Started in 2010, the CrisilBSE 1.29 % Real Estate Star Ratings (Crest) provide cityspecific assessment of real estate projects, and can help you compare and identify quality projects in a particular city. They also have a National Developer Ratings list, which rates a developer on parameters such as good track record of transfer of clean title, maintaining legal and construction standards, and timely project completion. However, the developer has to register with Crisil to be rated and not many projects are on its radar yet.

5. Financial stability

Is the company overleveraged? Get hold of the company's balance sheet, and if the business has too much debt or is unable to repay its loans, strike off the project. Some listed builders put up their financial details on

their websites. For others, you can contact the concerned Registrars of Companies (ROC) office. The Ministry of Corporate Affairs' website (Mca.gov.in/MCA21/) also has the details. Log on and register yourself to view all company documents under the 'view public documents' section. The site will ask for information like company CIN/FCRN, registration number,ROC details, which should be easily available with the company, or you can run a Google search. Also, check the cash flow statement (not income statement). Companies with strong cash flows are likely to complete the projects on time.

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New government: Home prices may not rise immediately

While the the stock markets, the corporate world and a large section of the country's citizens are celebrating the election verdict, 45-year-old Shailesh Singh, a Delhi-based executive, is a worried man. Singh has been hunting for an apartment in the National Capital Region (NCR) for the past six months but has not been able to zero in on one. Now he is afraid that in the euphoria generated by the Bharatiya Janata Party's (BJP) decisive victory, real estate prices may start rising again, making his purchase more expensive.

Why prices won't move up Singh's worries might be premature. Realty experts are of the view that  while there might be some euphoria-driven rise in transactions and a  marginal rise in prices, this will dissipate soon. "It will take another 12-odd months before prices begin to rise within the sector. And that will  happen only if the new government has a successful first six months and its  initiatives put the economy on a higher growth path," says Anshul Jain, chief executive, DTZ India.

One reason why prices may not rise immediately is that they are already very high in most major metros. The economic slowdown has had an impact on salary revisions, and hence on urban buyers' purchasing power. "Economic activity has to pick up and purchasing power has to rise before we see more demand in the housing sector," says Anshuman Magazine, chairman and managing director, South Asia, CB Richard Ellis. High interest rates are another deterrent. "In
the near term, the new government can't down interest rates, especially with inflation reining high," adds Magazine.

Urgently needed reforms While the new government can't engineer a quick revival of the real estate  sector, it can take several steps that would have a salutary impact in the  medium to long term. One, it could expedite the process of granting approvals to real estate projects. "We expect the new government to be more efficient in granting approvals to real estate projects," says Lalit Kumar Jain, chairman, Confederation of Real Estate Developers' Association of  India (CREDAI). Developers complain that the authorities too should be made accountable for not granting timely approvals. But remember that since real estate is a state subject, the central government can at best create a model of best practices for offering quicker clearances and persuade state governments to adopt it.

The new government also needs to get the Real Estate Regulation and Development Bill passed. "By making developers more accountable, the Bill will revive trust in the sector. Low trust in developers' ability and intent to deliver a quality product on time is one reason why buyers are staying away," says Sanjay Sharma, managing director, Qubrex, a Gurgaon-based real estate consultancy. However, some of the harsher provisions of the draft  Bill need to be modified. Currently it says that if a developer doesn't comply with certain rules, he could be jailed. Experts feel that it would be more prudent to punish an economic offence with a penalty rather than treat it as a criminal offence.

 

The slowdown in sales has caused a severe cash crunch among developers, forcing them to borrow from non-banking financial companies (NBFCs), private equity players and private lenders at high rates, thereby making housing more expensive. "Fund flow to real estate from banks and housing finance institutions needs to improve," says Kumar. This will happen only if RBI relaxes the provisioning norms and caps applied to realty lending.

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Emaar MGF, DLF, IREO etc like big gaints: Private equity players boost city's real estate market

Tuesday, April 29, 2014

PUNE: The unbridled influx of professionals and a local economy, which is relatively less affected by the economic downturn, has renewed interest of private equity players in the city's real estate sector like Emaar MGF, DLF, IREO etc like big gaints.

ensured a steady demand for homes and offices in the city. This has helped induce a high interest among private investment firms in the developer companies.

Private equity investments in Pune's realty space bounced back with a 300% jump to Rs 1,464 crore during 2013, a research report by Cushman & Wakefield has said. "With growing housing demand, investments in the right project have the potential to yield healthy returns," the report added.

Importantly, Pune has bagged a fifth of the Rs 7,000 crore total inflows from private equity funds (13% higher than the previous year) in the country's real estate sector for the year. The increase in private equity inflows was primarily due to rising investments in residential assets and other sectors like retail and hospitality, the report said. "While the number of deals has increased to 40 in 2013 compared to 34 in 2012, the average deal size has declined marginally to Rs 175 crore ($28 million)," the report added.

Other factors encouraging private investors include likely entry of real estate investment trusts (REITs), reducing fiscal deficit and expectations of fall in inflation and a pick up in GDP growth post the Lok Sabha elections, the report noted.

Sanjay Dutt, executive managing director for South Asia at Cushman & Wakefield, said, "The residential asset class continues to provide tremendous potential for growth in the coming years. With housing requirements growing across cities and funds investing in the asset class, primarily in the form of non-convertible debentures, providing fixed returns, investments in the right project have the potential to yield healthy returns."

Anuj Puri, country head and chairman of real estate advisory company JLL India, said investors are enthusiastic about India as a vast army of young, educated Indians is set to turn the world's second most populous country into a talent powerhouse. "The consumer base is growing fast as a swelling middle class comes online;

Come 2030, India will have 68 cities with population of more than 1 million, 13 cities with more than four million and there will be six megacities of 10 million plus. This will provide the country with huge opportunities," he said.

Rohit Gera, managing director of Gera Developments, said, "Given the RBI's stance on disallowing banks from lending for land acquisition, the sector requires funds from alternative sources. The first round of FDI in real estate brought poor returns to foreign investors, given the 2008 meltdown as well as the steep fall in the value of the rupee. It is heartening to see the confidence of foreign investors in the real estate sector. There is no doubt as to the demand and desire to own real estate by millions of Indians. To meet this demand additional capital is necessary and this capital in the form of FDI is a welcome step."

Rahul Paranjape, executive director of Paranjape Schemes Constructions Limited (PSPL), said good quality commercial space in key business districts has attracted investors as they offer attractive and steady returns. PSPL has developed a special economic zone (SEZ) in its township Blue Ridges in Hinjewadi. "The SEZ is fully leased and IDFC Alternatives has invested Rs 250 crore to acquire the entire ownership in it," he said.

Vishwajit Zawar, director of Marvel Realtors, said he has shared 30% equity in his project Edge to Capital First for a consideration of Rs 100 crore with agreed rate of return. "The project is selling fast and we have actually begun redeeming the equity stake of Capital First," Zawar said.

Sachin Kulkarni, managing director, Vastushodh Projects, said, "Investment of Rs 40 crore by Avenue Venture Capital in our project Anand Gram is the first PE funding in affordable housing segment. They have already disbursed Rs 20 crore and the remaining amount shall be disbursed within next three months. There is an exit route in equity buy back at the end of 36 months at a fixed rate of return."

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