No Hope of Revival for Struggling Real Estate Sector this Diwali

Buried under high debt and inability of the developers to complete and hand over the pending projects well beyond the commitments to the hard-pressed consumers, the troubled Indian housing sector is not witnessing any festive activity this year despite the latest cut in the policy interest rate by the Reserve Bank of India (RBI), an ASSOCHAM survey has said.  

  

Based on the data and information collected from 250 builders in the Delhi-NCR, Mumbai, Bengaluru, Chennai, Kolkata, Ahmedabad, Hyderabad, Pune, Chandigarh and Dehradun, the survey found that the demand for new projects is hard to come while new launches have come to a trickle, marked by lack of consumer confidence and cash deficit of the builders.

Under such a scenario, the demand for new launches, if at all there are, has come down by over 50-60 per cent in Delhi-NCR and Mumbai while it is lesser by about 40-45 per cent in Hyderabad and Chennai. In Bengaluru, the activity has come to a total standstill, first by the demolition drive and then by Cauvery dispute agitation, adds the recent survey. 

“Whatever market is there, it is mainly for the end-users and not for investors, sale has been increased for the smaller units (2 BHK & 3 BHK)”, reveals the survey. 

“Customers are preferably looking for ready to move in property rather than going for under construction property. But not many properties fall in this category”, adds the Secretary General D S Rawat.

The resale or secondary market is also dull this festival season, marked by drop of at least 20-25 in prices this festive season. There is very little resale happening especially in the NCR and surrounding areas. Supply is in excess with private small time builders in the unorganised sector flooding the market with units.

The unsold inventory pressure in NCR region is the highest among all other cities. The NCR residential market still has an estimated 1,70,000 units of unsold inventory which is approximately 30% of the units under construction, adds the survey. As per the survey, there are nearly 8-10 million workers engaged in building and other construction activities who face uncertain future if the sector does not revive.

The ticket price 3-bedroom, 2 BHK and single room flats has seen correction by 30% in Noida, 25% in Gurgaon and 15% in some key areas of Delhi, yet the demand stays subdued

All approvals of real estate projects must be accorded in a time bound, accountable and simplifies manner, the ASSOCHAM said suggesting that the process and status of all approvals be made on line so as to bring transparency.

The property analysts have predicted that till March next year the demand for plots, houses and flats may drop by at least 15 to 20%. The housing inventory in the NCR area is huge as a large number of projects are coming up in the peripheral areas, said Rawat. 

Jain Group plans affordable housing projects in four cities

Kolkata: The city-based Jain Group is planning to build affordable housing projects across four east Indian cities, covering five million square feet of space at an investment of about Rs.2,000 crore by 2014-end.

The real estate firm is currently developing eight projects in Kolkata, Durgapur, and Siliguri in West Bengal and Bhubaneswar in Odisha.

It has recently launched a residential project, christened 'Dream Eco City', at Durgapur in West Bengal's Burdwan district.

"Under the first phase of this project, we have already launched 800 flats. The first phase of the project will be completed within 40-48 months," Jain Group executive director Rishi Jain told IANS.

According to Jain, the total investment in the first phase of the project would be Rs.350-400 crore.

The company said the unique residential project, spread over one million square feet, uses biophilic design, which means right from the designing stage, nature will form an intrinsic part of the project. It would also house a five-star hotel within the campus.

The firm would tie up with an international hotel brand for running it.

Jain said the real estate developer had planned two phases for this project and it would decide whether to come up with more phases based on the demand.

The group will also roll out two more residential projects in Durgapur -- one in 2013-end and another in mid-2014.

It is also developing a housing project at north Bengal's Siliguri at an investment of Rs.150-200 crore.

"We are planning to give possession by the end of this calendar year," the official said.

The group, having diversified into hospitality business, has already launched hotels in Kolkata, Siliguri and Durgapur. It has tied up with Best Western, the world's largest hotel chain, for its five-star hotel in Kolkata.

It has a plan to roll out 15 hotels around the country by 2015.

Godrej Properties unveils ultra-luxury residential project in Kolkata

Godrej Properties Ltd., the real estate development arm of the Godrej Group, has launched ultra-luxury residential project, Godrej Platinum, in Alipore, Kolkata, the company said in a statement.

Spread over approximately 1.4 acres, this project will have only 35 luxurious homes. Apartment sizes range between 3,762 sq. ft. per apartment and 5,075 sq. ft. per apartment with an average ticket size of Rs 10 crores per home.

Godrej Platinum enjoys good frontage on Burdawan Road within the peaceful and serene Alipore, which has established itself as Kolkata’s most desirable residential enclave. Renowned hotels, schools, hospitals, and shopping malls are in close proximity to Godrej Platinum.

The centrally air-conditioned apartments will have luxurious and spacious bedrooms with exclusive wardrobe areas. All apartments are designed to be intelligent homes and will be fitted with state-of-the-art home automation systems. Each apartment will have spacious outdoor private decks for entertainment. The residents of this project will also enjoy membership in Quintessentially – an exclusive international concierge club. In addition, Godrej Platinum offers a multitude of lifestyle and sports amenities including a well-equipped gymnasium, swimming pool, indoor games and dedicated kids play area.

The project will use eco-friendly material and will integrate environment-sensitive passive architectural solutions to minimize carbon emissions. Features like electric car charging facility, rainwater harvesting, low VOC paints and water efficient fixtures will be incorporated in the project design.

Godrej Platinum is designed by world renowned architecture firm, Perkins Eastman, who are the Masterplanners and Design Architects for the Indian School of Business at Mohali and have to their credit many international landmarks.

Pirojsha Godrej, Managing Director & CEO, Godrej Properties said, ”We are very excited to launch our luxury residential project, Godrej Platinum, in Alipore. Through outstanding design, quality construction, and attention to every detail, we intend to ensure that Godrej Platinum becomes Kolkata’s most exclusive and desirable residential address for decades to come.”

No more mala-mall for India

Over 55% of the malls in Delhi-NCR region are vacant partly due to economic slowdown, poor designing, lack of robust revenue generation model and located in unattracted location, reveals the Associated Chamber of Commerce and Industry of India (ASSOCHAM) recent survey.

As per ASSOCHAM estimates, the total rate of vacancy in malls in Delhi-NCR is 55%, while in Mumbai it is 52% followed by Ahmedabad (51%), Chennai (50%), Hyderabad (48%), Bangalore (45%) etc. The position in the nearby town of these locations is much disturbing. 

ASSOCHAM conducted a random survey of all the shopping malls in Delhi-NCR, Mumbai, Kolkata, Bangalore, Hyderabad, Ahmedabad, Pune, Dehradun, Chennai etc between October and December 2012. The survey found that many upcoming malls have significantly been delayed and withdrawn due to lukewarm response from retailers. They will also face manifold hike in construction cost.

Commenting on the malls scenario, ASSOHAM Secretary General D S Rawat said that vacancy levels are due to poor location, poor design and poor parking facilities while some are operating at 60% occupancy others are struggling at less than 20% occupancy. The occupiers are finding difficult to manage economically.

The survey also highlighted some of the challenges the industry is facing, which include inadequate infrastructure, unavailability of retail space, multiple taxes, lack of clarity in policies and shortage of experts in areas such as supply chain and store management. Now, they are shifting from lease/rentals models to revenue sharing models and this is encouraging large number of branding showrooms to open shops in malls.

“Biggest shopping mall can feel like a pretty lonely place, majority of retailers said that they are holding back on new store openings and focusing on existing stores,” adds the survey. 

The sharpest decline in mall rental values are also recorded high in Delhi-NCR by 60%, while Mumbai also dropped by 58% in rentals followed by Ahmedabad (55%), Chennai (54%), Hyderabad (52%), Bangalore (49%), Kolkata (45%), Pune (42%) and Dehradun (40%), points the ASSOCHAM survey.

Nearly 82% of the retailers said that they are shutting down some of stores in areas where rentals are too high, and with the slowdown in consumption complicating things further, point out the survey.

Nationally, the vacant rates of shopping malls are 55% and will likely rise to 70% by 2015, according to the ASSOCHM analysis. More than 90 percent of shopping in India is still done at unorganised one-off shops, adds the survey.

Sunil Kumar Dhaiya, Co-Chairperson of ASSOCHAM Real Estate committee also specialising in malls said that the real estate prices and construction costs are rising but the retail business is not growing enough to absorb this. There are just not enough footfalls.

Retail rents are down 60-65% from peaks in 2010 and that's especially painful for developers, when servicing loans is expensive at 12-13 percent interest," said Rawat.

Nearly 76% of the shop owner’s said that increasing rents will not work because at the end of the day it has to be affordable for retailers to do business and the fate of the retail realty segment is intertwined with the retail industry.

The retail sector is forecast to grow rapidly, but mall rentals and valuations are not rising in of most markets, added Rawat.

According to the ASSOCHAM estimates, rental values of malls remained stagnant across Delhi-NCR, Ahemdabad, Mumbai, Pune, Chennai and Kolkata in the October-December 2012 quarter. However, certain micro markets in Ludhiana, Indore witnessed a growth over the quarter in the range of 10-15%.

There are approximately 1,200 shopping malls in India, the growth in the retail sector has driven a mall building boom across the country, with the total number of malls expected to increase to 1,500 by 2015 from 1,200 in 2012," added the ASSOCHAM report.

The malaise of high vacant malls can be seen in micro markets, such as Ghaziabad, Noida and Gurgaon, where retail has not picked up. Clubbing this with the fact that spending was really low, the demand for malls is likely to remain dull for the coming next 2013, commented Rawat.

The survey adds demand for mall space across most micro markets remained slow because of lack of fresh supply, conservative approaches from retailers and overall slowdown in consumer demand. Slowdown in retail demand in many micro markets has led to rental values either remaining stable or correcting marginally in the range of 10 to 15% over the previous quarter.