Tag: India Real Estate

Realty portals push many property brokers out of business

BANGALORE/NEW DELHI/MUMBAI: Falling home sales and rising competition from real estate portals has pushed many traditional property brokers out of business while forcing others to work on wafer-thin margins.

The market for property brokers, who had flourished during the real estate boom not so long ago, has shrunk with builders and individual sellers preferring direct sales or the services of real estate portals that are ready to facilitate deals for free. The shrinking market is also driving down the number of applications for real estate broking licences.

In Bangalore, it has fallen by 10% over the last two years, said Rahul Pai, governing body member of Bangalore Realtors Association-India (BRA-I). “At the BRA-I AGM in August, members talked at large about the competition from various sources like internet portals that are posing stiff competition to the traditional brokers,” said Pai.

“This, added to the unfavourable market conditions in real estate, has made it worse for brokers. In fact, several small-time brokers have actually gone out of business and are coming to us looking for jobs.” The gloom is evident in Delhi, Mumbai and Kolkata too.

In Mumbai, builders are approaching clients and investors directly through in-house marketing teams, which offer dedicated service to prospective investors and help save the 3% commission builders would have paid to property dealers. Developers are increasingly using direct marketing initiatives like e-mails, text messages and pre-launches to push their offerings.

The few builders that are still working with brokers have reduced brokerage charges to 3%-4% from 6%-8% earlier. Most developers have also withdrawn the preferential location charges that were earlier being promised to brokers.

“All large developers who are members of CREDAI (real estate apex body) have their own marketing team or are in the process of developing their own sales team for better customer service and building direct relationship with customers,” said Harsh Vardhan Patodia, president, CREDAI Bengal and vice-president CREDAI National.

Gaurav Gupta, joint secretary of Raj Nagar Extention Association, said: “With the slowdown happening in the market, most developers are now getting into direct sales and cutting down on the cost of the brokerage.” Referral clients, too, are posing a threat to the broking community.

“Builders are now luring new buyers through their present clientele, eliminating the role of agents and brokers,” said Jyoti Shroff, partner at Bangalore-based real estate consultancy Tirupati Associates. “A reference of a prospective client gets the buyer up to Rs 50,000 discount. This has led to fall in our business by about 50%, especially in the last six months.”

Akhil Kapur of real estate brokerage firm AJ Housing said his revenue is down by 20%-30%. “The number of transactions has not changed but the price band of transactions has come down, which indirectly affects my revenue,” Kapur said. Brokers in Delhi echo the same sentiment.

“Transactions are not happening and there is no movement in the market. Our business has come down by more than 50%,” said Sumit Joshi, director, Real Credit Consultancy, a mid-sized real estate broking firm in Noida. “Brokers who are unable to sustain are relocating from premier locations to smaller offices elsewhere and are also trying their hand at other businesses.”

Websites, too, are playing spoilsport for brokers. “Certain developers are at the moment more bullish on the online sites and social media to promote their properties among NRIs and strengthening their direct sales,” Gupta said.

Bangalore-based Common-Floor.com is sending out chauffer-driven BMWs and Mercedes to pick up premium clients for sight visits—facilities that a broker would never be able to match. “There is now a market trend of online customer enquiries, which are being serviced directly by the builders, and this is picking up to the extent of 15% to 20% of the total sales in the below Rs 50 lakh segment. In this category, the main lead generation takes place through the project publicity and promotion,” CREDAI’s Patodia said.

Unlike the markets of north and south, the role of brokers was elementary in the east. But, over the past few years, the trend of brokers marketing a project had picked up in West Bengal. Following the rough patch now, brokers across the east are in a fix as builders endorse orthodox ways of direct sale.

“Kolkata market is not only run by end users but also salaried speculators, who do not live in the city. The latter generally seek brokers’ help to locate and zero in on a property. As investments have gone down in real estate, the broking market too has invariably seen a crash,” said Sanjay Jain, MD, Siddha Group, which recently sold 70% of its property through direct sales.

Source: The Economic Times

Realty feels slowdown pinch

The economic slowdown, inflation and steep interest rates have been dampeners for the real estate sector. But if these conditions persist, they can work to the advantage of home buyers — especially in the National Capital Region and Mumbai where property prices have soared unreasonably high. A price correction is highly probable.

“Developers with large unsold inventories of high-end and luxury units will have to lower prices as the current run of sales through innovative marketing and offers such as the 20:80 schemes are coming to an end,” Shweta Jain, executive director of real estate consultancy Cushman and Wakefield, says. Despite lobbying with the government for incentives, developers say there isn’t much hope of these coming, at least not until the elections due next year.

As the worsening economic conditions dampened sentiments, sales of residential and commercial assets hit a slowdown resulting in unsold inventories, choking builders’ cash flows. Premium segment sales crawled. In 2012-13 things worsened. Launches and absorption of residential properties in the top seven cities plunged by 37% and 23% during FY11-FY13, aggravating the sector’s structural problems, a Knight Frank report says. “Developers were caught in a trap — of ambitious expansion, decelerating sale, hardening interest rates, and weakening cash flows,” it says. Their capacity to service debts further worsened. Fund inflow through FDI too dried up.

All this piled pressure on developers to cut prices. “There’s an undercurrent to cut prices to push sales. Developers are short of cash. But this isn’t yet visible on the ground,” CB Richard Ellis MD Anshuman Magazine explains. There’s a demand for residential property. But, other than the poor sentiments, sky-high prices are slowing sales.

A developer explains: The problem lies with the fact that only parts of projects launched in the last three to six months are sold. The remaining inventory in the same project is unsold. The developer can’t slash rates for the unsold units. If he does so, earlier buyers who purchased when the project was launched, too will ask for reduced rates.

Jain says despite poor sales, many developers are still holding on to their quoted rates and the declines over the past quarters are marginal, But “there are expectations that prices would be lowered given the mounting cash-flow problem resulting from low off-takes, mounting input costs and debt servicing.”

She says the scenario is especially true in the NCR and Mumbai where developers have launched major high-end and luxury projects. End-user driven markets in cities such as Bangalore, Chennai and Kolkata are still recording reasonably healthy transactions as projects are priced more reasonably.

The market rates are likely to be first cut by investors who buy projects for the short term. Most of them bought around one to two years ago. Since then rates have appreciated by around 20% to 30% in the NCR and Mumbai. Now, with interest rates rising and prices stagnating for at least three months, many are tempted to sell and exit.

An investor says there’s little hope of prices going up in the next one year. At the same time, he has to pay 11% interest on investment, that’s if he borrowed money or lose a like amount in opportunity cost. Prices have appreciated since he bought the property and buyers are a lot fewer. So, the only way out is in cutting price and pulling out. Even then, Magazine says, this will take a while to happen because investors are still hoping that prices will appreciate.

Builders are putting up a brave face and saying there’s no scope of a major price slash yet. “Input costs have skyrocketed in the last year and we work on low margins,” Vineet Gupta, ED, Ajanara group, says. If prices have to be shaved, there’ll be no new launches, which will affect supply and in the long term, because demand is perennial, rates will rise. Ultimately, realtors won’t be able to build by cutting losses.

Source: The Time of India

Investment Windfall in Asansol-Durgapur belt

DURGAPUR/ASANSOL: At a time when the Rupee has taken a beating and the economy is floundering, the Asansol-Durgapur belt, also referred to as the Rurh of India, seems to have bucked the trend.

Be it central public sector or private sector projects, they are all progressing at a decent clip notwithstanding the minor time and cost overruns.

The Rs 5,000-crore 1,000 mw greenfield thermal power plant of Damodar Valley Corporation (DVC) at Andal has already commenced commercial generation and secured the energy needs of this rapidly industrializing belt.

The Rs 17,000-crore greenfield 2.5 million tonne integrated Iisco Steel Plant of SAIL is set to start commercial production in months. Once operational, it will mark the revival of a steel plant that everyone, including its employees, had given up on till a few years ago.

Construction of the Rs 5,000-crore Matix Fertiliser Plant of the Essar Group at Panagarh is progressing steadily. The NHDP of the Centre has sanctioned the six-lane conversion of NH-2 connecting New Delhi with Kolkata, expanding what is already the lifeline of the area.

The first phase of the Rs 10,000-crore airport city project is nearing completion. When it does take off in the first half of next year, it will shrink the world for those living in the region. Agriculture minister Moloy Ghatak is confident that the airport city will completely transform the socio-economic scenario of south Bengal.

Essar Oil & Gas Ltd is setting up the Rs 3,000-crore coal bed methane gas extraction project in Durgapur that will open new vistas in alternative fuel and green energy in the region. The pipeline network has already been laid.

Several companies like HR Johnson (ceramic unit at Panagarh) and Jayashree Tea (fertilizer plant at Panagarh) have evinced interest. DVC chairman RN Sen has also announced that the company will develop an unused 250-acre plot at Panagarh to set up an industrial park. The biggest paper unit in the east — Ballavpur Paper Mill — is planning to expand the Raniganj unit.

Pramod Srivastava, director of Allied ICD Services, eastern India’s only operational dry port at the Export Promotion Industrial Park (EPIP) in Durgapur, is extremely upbeat about the future. While the ICD handles 1,200 containers per month at present, he is confident that the figure will shoot up to 2,500 containers by next March.

P&H Joy Mining, the Indian subsidiary of US based Joy Global Inc, has purchased 25 acres in Andal to set up a manufacturing unit. Ardex Endura and Shyam Agro Foods have also taken land at the airport city as has Mission Hospital.

With industries pouring in, real estate sector is also abuzz with activity as some of the leading groups in the realty sector line up projects. Consumer goods firms and auto companies are also making a beeline to tap customers.

“The Asansol-Durgapur belt is attracting the biggest investment in the state at present and the Andal airport city is poised to play a bigger role in its further development,” said Burdwan district magistrate Saumitra Mohan.

Asansol Chamber of Commerce secretary and Ficci member Subrata Dutta is delighted at the strong showing by both central public sector undertakings and private companies.

“Kobe Steel of Japan is setting up a Rs 5,000-crore steel unit in Durgapur.

Source: The Time of India

Real estate related cases highest at consumer court

GURGAON: In a city which boasts of highest number of consumer grievances in the state, cases of insurance default and real estate invariably occupy the top slot.

The Times of India get a large number of cases related to real estate. The number of consumers approaching us for non-delivery of flats in times has been increasing. We have a number of cases of cheating by the builders. This includes even the top builders in the city. We have several cases of builders who are repeat offenders. We have issued arrest warrants against them as well,” said an official of the Gurgaon district consumer disputes redressal forum.

The official said consumers also approached the forum with complaints against HUDA relating to disputes of plots.

“In Gurgaon, consumers are more educated about their rights. Of late, we have solved several cases relating their real estate,” said Raghvinder Singh Bahmani, president, district consumer disputes redressal forum, Gurgaon.

Consumer disputes relating to airlines and travel tourism, especially holiday clubs and resorts, is also higher in Gurgaon compared to cities in the state.

“The reason is that large number of technocrats, CEOs and top MNC officials keep visiting different countries. Case relating to airfare, baggage and deficiencies of the services of the resorts are much higher in Gurgaon. We have 19 cases relating to airlines and several cases against top resorts in the country,” said an official from the forum.

Cases relating to mobile phones, automobile, Bank ATM and Postal Delivery are also higher in Gurgaon compared to cities in the state.

Source: The Times of India

Make security measures must in buildings: Citizens

PUNE: Over 15,000 citizens, including members of civic organizations and political parties, have asked the Pune Municipal Corporation (PMC) to amend the draft Development Control (DC) rules to make security measures mandatory for new and existing buildings in the city in the wake of recent terror attacks.

The views were received through suggestions and objections to the draft Development Plan (DP) for old city areas.

“Pune is vulnerable to terrorist attacks. The state government’s suggestions, which recommend setting up security outposts, fulfilling fire safety requirements and constructing blast-resistant buildings among other things, need to be implemented. Neither the DP nor the DC rules suggest enough steps to meet these requirements,” stated a suggestion.

Following the blast at German Bakery in 2010, the PMC officials had said that the civic body would amend the DC rules making it mandatory for existing and new buildings to have security measures in place. However, no steps have been taken so far.

“Pune is no longer insulated from what’s happening around the world. First it was the attack on German Bakery and then multiple blasts happened on JM Road. Out city faces major security concerns. We insist that the PMC amends the draft DC rules and make required provisions to tackle such attacks on establishments and citizens,” said Rajya Sabha member and NCP city chief Vandana Chavan, adding that the NCP has incorporated this demand in its suggestions and objections document.

A few years back, the state government had appointed an expert committee under former principal secretary of the public works department M V Merani. The panel suggested certain regulations to be followed to ensure better safety in and around buildings. The special regulations envisage security outposts, approach roads with sufficient restraints to prevent direct movement of vehicles towards structures, a control room for security and electronic surveillance operations, light controls, fire-safety requirements and buildings with blast-resistant designs.

The Merani committee’s suggestions were discussed by party leaders in the PMC following German Bakery blast in 2010. One of the suggestions was to make it mandatory for developers to provide their own security set up and make it mandatory for them to submit a security plan with the building permission proposal.

A PMC official admitted that no concrete steps have been taken because the corporators and the civic administration have failed to reach any logical conclusion on the implementation mechanism to be followed.

“The panel appointed to hear suggestions and objections to DP should consider views that recommend improvement in security set up of the city. It is necessary to protect lives of common citizens,” said Ramesh Punde, a witness to blasts on JM Road last year.

City engineer Prashant Waghmare said, “The Merani committee’s suggestions are for public places. However, the PMC has already made it compulsory for housing societies to install CCTV cameras. The PMC will make every possible effort to ensure that security measures are incorporated in the draft DC rules. There are many logistics like cost and maintenance involved in making security measures mandatory and we have to work out the details.”

CCTV proposal still on paper

The PMC had recently approved amendments to DC rules making it mandatory to install 24×7 closed circuit television (CCTV) cameras at public places in the city. However, the PMC is struggling to implement the proposal. As per the proposal, shopping malls, market places, religious and historic structures, hotels, important tourist destinations, exclusive business buildings and offices of government and semi-government organisations would have to install CCTV cameras and make strctural changes to improve fire safety and security on their premises. The PMC has failed to work out implementation mechanism in this case.

Source: The Times of India