Month: June 2013

Brokers turn developers as realty business booms

BANGALORE/ MUMBAI: PrashanthSambargi, partner at Bangalore-based real estate brokerage firm Mars Realty, is these days busy designing residential projects for two land parcels he owns in the IT capital of India. “I am now looking at smaller size projects with 18-40 units with 20 months’ turnaround time… big builders do not enter this segment,” he says.

Sambargi is among a growing group of property brokers turning builders, armed with huge savings from their booming business and a ground-level understanding of what homebuyers want as well as the issues faced by developers.

Like Sambargi, who plans to float a separate company for real estate venture while continuing with his brokerage business, many brokers are opting for smaller projects of 10-30 units in relatively cheaper locations to get into the capital-intensive business. Many are entering into joint development pacts with landlords or developers.

Silverline Realty, another Bangalore brokerage, has already floated a real estate arm. “We are looking at growing slow and not taking huge projects as the business is at nascent stage and there are many establish name in the market,” its director Zahed Mahmood says.

Started by Farooq Mahmood who earned a brokerage of 8,000 for his first deal, Silverline today owns large land parcel across Bangalore and has five residential projects with an average price of 7,000-10,000 per sft in the development stage.

It is entering into joint development with builders like Prestige Estate Projects to penetrate deeper in the market. “Our brokerage business is growing at 20-25% quarter-on-quarter and helps us channelise our resources into the new business venture,” Mahmood says.

According to property research firm PropEquity, 13,797 residential units were sold in Bangalore in the first quarter of the current fiscal, up from 9,742 units absorbed in the year-earlier quarter. “Bangalore has been performing well with a 58% increase in new launches and 42% increase in absorption in the first quarter,” Samir Jasuja, Founder and CEO of PropEquity, says.

Bigger markets of Mumbai Metropolitan Region and National Capital Region (NCR) saw absorption of 15,501 and 26,798 residential units, respectively, in the first quarter. Property business has been booming across Indian cities, helping brokers increase their business manifold both in terms of the deal value and the number of transactions. And most tend to park their money in a market they best know-property.

“Project delay hits your clientele. There are many projects, which have been delayed for years. My focus is on-time delivery and doing projects in smaller towns where land prices had not shot up,” says Deepak Kohli, director of Deep Realtors in Delhi, who has launched a real estate firm, Abode. Kohli, who started his real estate brokerage and consultancy business 15 years ago, now has three residential projects and one four-star hotel project in Vrindavan at different stages of planning and construction stages under Abode.

“Brokerage is still a lucrative business with raw income, but I do not focus on it anymore and has put it on the backburner,” he says. Another Delhi-based mortgaged professional Mrityunjay Kumar has started a 700-unit group housing project at Noida Extension in a joint venture last year.

“I had worked with builders for mortgage and knew the business well. However technical know-how and competing with big brand in the market continues to be a challenge as I have to depend on my colleague for it,” says Kumar, who has worked with Reliance capital as branch area manager and ICICI Bank, decided to foray into real estate seeing demand for low income homes.

Two decades-old broking firm Realistic Realtor is setting up a million sq ft mixed used commercial property in Gurgaon with investment from high net worth individual and small investors. The ground-level experience helps many broker-turned-realtors to deal with regulatory and financing hurdles that challenge new entrants.

Manoj Nihalani, MD at Mumbai-based Pacific Landmarks, says, “The ground-level experience we had as a broker helped us in overcoming these as we were aware how funding management and other things could be resolved through stock selling, incentivising customers and contractors.” New launches driven by higher sales across some of the major markets have made property brokers in big cities turn to real estate development business to tap the market.

Organised developers launched around 38,000 residential units in the first quarter of 2013 in major cities with mid-range segment constituting 60% of the total. Bangalore contributed 31% of the overall new supply in the top eight cities followed by NCR and Mumbai, according to real estate consultants Cushman & Wakefield.

Source: The Economic Times

Realty Bill welcome, but concerns remain: Developers

PUNE: Real estate sector experts have said the Real Estate Regulatory Bill, which was passed by the Union Cabinet passed on 4th june, was a welcome move and will pave the way in bringing higher level of transparency and accountability from the developer community, which for long, has been either self-regulated or working on best practices principles. However, some feel the bill should be understood with reference to business practices prevailing in different parts of the country.

Provisions such as opening a dedicated bank account for every project, strict penal action for delays and registration of brokers have been received well. The bill also provides for mandatory public disclosure of all project details like credentials of promoters, layout plan, land status, carpet area, number of apartments booked and status of statutory approvals, which addresses major concerns of the buyers about incomplete or fraudulent land acquisitions and pending clearances.

Sanjay Dutt, managing director ( South Asia) of real estate consultant Cushman & Wakefield, said the bill would institutionalize the sector, giving it the necessary fillip to move to a new phase of growth and development. “Besides protecting interests of end users, we also see this working positively in terms of attracting investments from domestic and international firms, which were skeptical about investing in Indian real estate sector due to lack of regulation,” he said.

“After the bill comes into force, we may see a noticeable slowdown in launches of new projects in the short and medium run, as getting all the necessary permissions is a long and tedious process. This may delay the entire process of launching a project unless the government comes up with administrative reforms to speed up the proceedings,” he added.

However, Rohit Gera, vice-president of Credai Pune Metro, said while there is a need to set up a better mechanism for customer protection against fly by night operators, practical “on the ground” aspects should also be taken into account. Also, the bill seeks to streamline the real estate business in North India, where the entire transaction process is different, he said.

“Currently, there is a backlog of 18 months for the single committee approving the projects, which require clearance from the environment perspective. I am extremely concerned if each and every project requires approval, which will delay their arrival in the market. This will lead to increased costs being passed on to the consumer. The delays will also create an artificial shortage, which will further increase the prices,” he added.

Hemant Naiknavare, president, Credai Pune Metro, said the union government’s bill has been drafted without really understanding the sector as a whole. “We are still unclear what will come in the bill. The state assembly too has passed the Maharashtra Housing (Regulation & Development) Bill, 2012, which is waiting for Union government’s nod. The state’s bill is approved with a lot of unanimity and we want that the Union government first approves the state bill and when the central bill comes into force, the state bill should be incorporated,” he said.

Firdose Vandrevala, chairman, Confederation of Indian Industry’s national committee on real estate and housing, said, “Retaining amounts realized from customers and placing them in banks would affect the cash flows for projects and more so for metropolitan cities, where land cost component is significant and already paid by the promoter. If at all such an account is to be maintained, the limit should be on the lower side and include payment of interest and EMI pertaining to loans availed for construction of the said project.”

Sticking points

* A possible slowdown in launches of new projects in the short and medium run

* The bill seeks to streamline the real estate business in North India, where the entire transaction process is different

* Retaining amounts realized from customers and placing them in banks likely to affect the cash flows for projects

* If each and every project requires approval, it will lead to increased costs being passed on to the consumer

* Confusion over the bill’s clarity as the state assembly too has passed the Maharashtra Housing (Regulation & Development) Bill, 2012

Source: The Times of India

E-auction of two Rajarhat plots fetches Rs 10.8 crore

KOLKATA: The Housing Infrastructure Development Corporation (Hidco) has again reaped rich harvest by selling off commercial plots in Rajarhat New Town through e-auction. The authorities have fetched a total of Rs 10.81 crore by selling two plots.

The authorities had invited offers for the plots in April this year. The e-auctioning took place on Wednesday. One plot, covering an area of 39.79 cottah, has fetched Rs 9.55 crore. The other one at Action Area I, covering 6.3 cottah, was sold for Rs 1.26 crore.

The response was very encouraging for the authorities, who have recently put up around 5 acre combining three plots in different places of Action Area- II and III for auctioning. The authorities have invited applications from bidders for a 2.5-acre retail-cum-shopping and office complex, a 1.13 acre for an educational institution and another 1 acre for an office complex. The plots will be given on a 99-years lease. The authorities are expecting a huge response for the 2.5 acre plot, as it was only last year that a similar plot broke all land-selling records after it was sold for a whooping Rs 51.13 crore.

The authorities had earlier decided that all the plots in the township will be sold through commercial bidding only. Many of the plots have been put for e-auction, as officials feel that this would bring in more transparency in the bidding process. The entire e-auction process is supervised by quality controllers and bidding is done in a total transparent way. The bidders are given passwords and asked to give digital signatures. The process to bid others takes place online so that no malpractice can take place. In the first such land selling process through e-auction earlier last year, the authorities had sold a 2-acre plot for a 10+2 high school that fetched Rs 10.10 crore.

Source: The Times of India

Relief to builders, Centre relaxes green norms for high-rises

NEW DELHI: In what will be a big relief to builders in tightly-packed cities such as Mumbai, the environment ministry has done away with green clearances for high-rise buildings based on the width of the roads that they fall by the side of and the distance from fire-stations. It has left it to the state government to makes rules as they deem fit.

The move comes after several state governments — and Maharashtra in particular — had pleaded with the Union government to remove the regulations that the builders had strongly opposed.

The relaxation is expected to allow builders to put up higher multi-storey buildings on smaller roads and lanes in cities.

The rules required buildings above 60 metres can secure an environment clearance if they were on roads at least 30 metre wide. Such buildings had to be located within 2km of a fire station. Buildings between 45 and 60 metres needed to have an approach road that is at least 24 metres wide and at not more than 5km from a fire station. Buildings between 30 and 45 metres had to be located on roads at least 18 metres wide with fire stations not more than 10km away. Buildings between 15 and 30 metres required a 15-metre wide approach road, but no restriction linked to presence of fire stations was placed. The February 2012 regulations also required a no objection certificate (NOC) from the state fire department and the national or state disaster management authorities.

The provisions had been brought in considering safety measures for high rise buildings and increase in traffic in cities.

But after a lot of criticism that found support in the PMO, the environment ministry set up a committee under Planning Commission member K Kasturirangan to review these norms and other clearance conditions applicable to roads, SEZs and the real estate sector. The panel recommended doing away with the regulations and leaving it to the state governments to regulate the safety codes.

Source: The Economic Times

Homebuyers fear anti-forces may weaken bill

NOIDA: Even though homebuyers in GautamBudhNagar district have hailed the passing of the Real Estate Regulatory Bill by the Union Cabinet, they are sceptical and fear that some ‘anti-forces’ may weaken the proposal.

Buyers have planned to meet the Union housing and poverty alleviation minister Ajay Maken after studying the bill. They have also threatened that if the bill is not passed in the monsoon session, they will intensify their agitation and even stage a protest outside Parliament.

Buyers have demanded a proper implementation of the bill which is set to bring transparency in the real estate sector, while helping homebuyers in redressal of their grievances. Since a regulatory authority will enforce fair practice and accountability norms, buyers feel that there will be a decline in cases of property fraud which are rampant in Gautam Budh Nagar.

The investors have raised a suspicion that the lobby of real estate firms, in which money of politicians and bureaucrats is invested, may pose a problem in passage of the bill. “Except a few developers, even the big names in the real estate industry are habitual of cheating innocent investors. With the passing of the real estate regulatory bill, we hope that things will change,” alleged an office bearer of Noida Extension buyers’ association.

Developers on their part have welcomed the move of the Centre. “The real estate regulatory bill will even benefit the real estate players as it will develop professionalism and transparency. Even developers want a single window system as it will help in getting fast clearances of project plans. Apart from that, environment-related issues also need to be addressed,” said Amit Gupta, member Assocham and MD Orris Infrastructure.

“Implementation of this bill would definitely bring vigilance and accountability in the process and further bolster the real estate sector at large. This will result in a win-win situation for every stakeholder,” said Brijesh Bhanote, director (sales and marketing), The 3C Company.

Source: The Times of India