Mumbai real estate: Boom and bust at the same time

MUMBAI: A recent wave of building collapses has brought attention to this city’s large number of poorly built structures. It feels as if every week brings fresh reports of a new disaster. The death toll is expected to rise with the monsoons.

News media and political attention have mostly focused on the vast stock of old buildings from the pre-independence period and immediately after. Yet old age wasn’t the cause of the collapse of a building in Thane, a city on the outskirts of Mumbai, that killed around 74 people in April. That building was still under construction. (And, like a majority of buildings in Thane, the construction was illegal – neither authorized nor overseen by any official agency.) Old age cannot explain the caving in of a 34-year-old building that killed at least 10 people near here last month either, nor the collapse of a building, about a decade old, that killed at least six people and injured more than two dozen last week.

Intangible factors, like faulty urban policies and unchecked real-estate speculation, bear the prime responsibility.

Most of the recent casualties have taken place in the far periphery of Mumbai, where one finds a sprawling landscape of hastily built residential blocks meant to absorb white-collar middle-class Mumbaikars who struggle to find anything even remotely affordable in the city. Many of them commute for hours daily in trains so packed that people routinely fall out – collateral damage of the speculative euphoria.

A bombastic real estate sector has simultaneously pushed up the price and heights of buildings, accelerated the speed of construction and lowered the quality of new structures in and around Mumbai. Many properties are conceived primarily as assets, to be bought and sold to investors. Owners often prefer empty flats because they can be traded more easily. This partly explains why, according to a government census in 2011, nearly half a million houses and flats are vacant in one of the most crowded metropolitan areas on earth.

Officially, the promotion of a vertical skyline has been justified on the grounds that high-rise structures are the only possible response to Mumbai’s huge population and land shortage. Dozens of skyscrapers, 300 feet high or higher, are under construction in Mumbai. Investors are planning to build, at around 2,300 feet, the world’s second tallest structure.

But the argument for verticalization has long been rejected by architects and city planners. Every vertical push also requires a horizontal spread – new high-rise inhabitants need access roads, open space and other services. Besides, the higher you build, the more expensive the construction and maintenance.

High-rise structures are also outside the budget of India’s low-income groups, which explains why, in the last decade, south Mumbai has seen both more high-rise buildings and a declining population.

Following the same faulty logic, the authorities are promoting the transformation of slums, which can be found in all parts of the city and where over 60 percent of the population is said to be living. Since the 1990s, the Slum Rehabilitation Authority has offered to let investors raze slums and redevelop the land, so long as they devote part of the site to new housing for the displaced residents.

Inevitably, that housing is squeezed into high-rises, in order to leave as much land open for development as possible. These structures are often shoddily built disasters. Maintenance is expensive, and rust, leaking roofs and cracked walls are common after only a few years. In addition, the buildings are not amenable to the kind of home-based economic activities and street retailing that characterized the old neighborhoods. Eventually, many sell and move out to a slum.

Source: The Economic Times

Easier ECB norms to create more affordable housing: Crisil

MUMBAI: The easing of fund-raising norms through the external commercial borrowing (ECB) route will lead to developers focusing on low-cost housing projects, says rating agency Crisil.

Earlier this week, RBI lowered the total experience of developers or builders for affordable housing projects to 3 years, against 5 years prescribed earlier to avail of ECBs.

Besides, the apex bank has also withdrawn the condition of minimum paid-up capital requirement of not less than Rs 50 crore for housing finance companies (HFCs) to avail of ECBs.

“Both, housing finance companies and developers, are the direct beneficiaries while home buyers will also benefit in terms of concessional interest rates and greater availability of low-cost homes,” CrisilBSE 1.80 % said in a report.

Crisil estimates that the cost of funding for developers will come down to around 9-11 per cent (taking into account the hedging cost) from the current levels of 15-20 per cent, depending on the current source of funds.

“In addition to the cost of funds, since the criteria of past experience has been relaxed, relatively less experienced developers will also benefit as it will enable them to launch new projects in the affordable housing segment,” it said.

Source: The Economic Times

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

Mumbai the most well liked destination for home seekers

On the Western coast of India lies the city of Mumbai. Popularly referred to as the city of dreams, Mumbai is witness to lakhs of pros smartly chasing their dreams and aspirations. These professionals are the first reason that drives the Real Estate Sector of Mumbai towards its quick growth and profit. For several such business-class folks and professionals as well, purchasing home in Mumbai is an investment that is usually profitable. There are reasons except for the profit that create Mumbai the dream destination of the Homeseekers.

It is an oft-heard remark that homes and properties in Mumbai have costs that can’t be reasonable by an average man. However, this is often not true regarding all the places in Mumbai. Homes in the developing areas of Mumbai will be bought at reasonable costs. The quick rate at that Mumbai develops ensures that these areas get developed in no time. If the budget permits it, then there’s profit in purchasing homes even in the developed areas. The worth of the property doubles up in no time as the costs skyrocket.

Region-Wise Property Rates

In Eastern Mumbai, the property rates starts from a very reasonable price Rs. 1200 per sq. feet around at areas like Karjat and Badlapur and might go as high as Rs. 29900 in areas like Dadar. The scene in Navi Mumbai is a small indefinite amount completely different because the rates don’t vary to a good degree. Purchasing Property in Airoli and near areas will price around Rs. 4000 whereas Panvel Properties will set you back by over Rs. 6000 at the moment. Property rates touch higher once you select purchasing homes in the Western Suburbs of Mumbai and also the scene is more or less a same for South Mumbai. So Many Choices!

If the house is for private use, one close to the office place will be simply found. The Real Estate of Mumbai is absolutely developed market and also the differing kinds of homes that are accessible, offer ample choices to the house consumers. Although the house is to be rented out or re-sold, it’s additionally viable possibility within the realty of Mumbai. Owing to the growing population of Mumbai and also the inflow of pros from completely different fields, leasing outs out or renting out of the property will be simply done. The Real Estate of Mumbai city saw the chance of foreign currencies once professionals from abroad landed up in Mumbai. It promptly given well furnished Homes in the style of American households and made use of the chance.

Purchasing a home in Mumbai is one among the safest investments, as Mumbai’s quick growth and development and also the rising population ensures that the rates of properties keep rising. This is often why the house consumers like Mumbai city for their investment.As, PropTiger is the renowned and is expert in real estate consultancy with gratifying services provided in the various zones of India.

Source: proptiger Blog