Tag: property buyers

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

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

Adding more districts in NCR to increase land supply: CREDAI

NEW DELHI: Hailing the inclusion of three more districts in the National Capital Region, realtors’ apex body CREDAI today said the move will lead to additional supply of land for development.

It cautioned however that the government prepare a master plan for development of the region or else builders will start accumulating land, leading to rise in prices.

The property consultant said there would not be any immediate impact on the property market of NCR.

Yesterday, the National Capital Region Planning Board (NCRPB) included Bhiwani and Mahendragarh districts of Haryana and Bharatpur in Rajasthan in NCR.

“It is a futuristic decision with vast ramifications for NCR region. Reports foresee almost 11 per cent increase in urbanisation of this area by 2021 and to reduce the pressure on Delhi, there was urgent need to expand the area,” CREDAI NCR President Anil Sharma said in a statement.

Stating that land is in short supply, Sharma said it was essential to expand the area to meet the future housing needs.

But, he cautioned that merely adding these areas to NCR will not serve the purpose unless infrastructure is developed in a rapid and planned manner.

“The decision should be followed up with preparation and implementation of Master Plan as soon as possible otherwise builders will start accumulating land, leading to speculative price rise,” he added.

Jones Lang LaSalle India CEO (Operations) Santosh Kumar said: “Its a long term decision. There would be no immediate impact of this on the NCR property market.

“More land parcel will come in the NCR. These districts would get central funds for infrastructure development. The connectivity of this region to the national capital will improve.”

The consultant noted that builders might start buying land, but it is unlikely that project would be launched in this region.

Source: The Economic Times

Builders may have to register with Pune Municipal Corporation

PUNE: The Pune Municipal Corporation (PMC) is planning to start a mandatory registration process for builders so that they can be held accountable for constructions carried out within the PMC limits. No construction projects will be allowed without registration.

“The administration has taken the decision to avoid cases of building and wall collapse. If the builders are registered with the civic body then they can be held accountable for any mishaps. At present, there is no provision where the builders can be held responsible for accidents or poor quality work,” said Mahesh Pathak, municipal commissioner while speaking to TOI on Friday.

It’s only the structural auditors and architects who are registered with the civic administration so that they can be questioned and held responsible for any mishap. The same process will now be introduced to the builders.

“The officials at PMC’s building department are working on the legal process related to the registration, which will be completed soon. The actual registration process will start in one month’s time,” he said.

Pathak said the registration system will be set up along the lines of the Union government’s real estate bill. The bill has proposed that the each project should be registered with the local body.

However, the civic administration’s registration process will not be confined to registration for a particular project. There will be no separate registration for projects but the builder will have to register. It will be a one-time registration no matter how many projects he undertakes.

If the registered builder is found involved in wrong practices, he may be banned from working within the PMC limits, said Pathak. “After any complaints, the builders will be called for a hearing. If the complaints are found true and the builder is found to have made serious lapses in work, then his registration will be cancelled. The option to suspend the license during the inquiry period is also available,” he said.

The city has registered four major accidents of wall / toilet/ wada collapse in the last two months where seven people lost their lives. Last year, an illegal building in Taljai area had collapsed killing 11 people.

Currently, the city has around 7.5 lakh properties including commercial and residential. Each year PMC gets around 4,500 proposals seeking building permissions.

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