Mumbai Real Estate Picks up, Developers Cashing in on Positive Sentiments

The Indian real estate market has been picking up since Q1 2016. According to the 'Asia Pacific Capital Markets in Focus' - July 2016 by JLL, investors are looking towards development and debt products to gain or increase exposure to the real estate sector.

Several large financing deals are in progress for new launches or under construction projects by developers with good track record. The recent Real Estate Act (RERA) is also likely to bring higher transparency within this sector and help attract investor interest.

With a forecast of GDP growth in the 7-8% range for the Fiscal Year 2016-17, this seems to be the perfect time to invest in real estate. These positive market sentiments have encouraged developers across the metros to start aggressively marketing their projects once again.

Among them is Mumbai-based Dosti Realty showcasing 5 projects through their annual marketing program - 'Friendship Month Celebrations'. As part of the celebrations in August, Dosti Realty is offering customers phenomenal savings benefits across these properties.

"The response for Friendship Month has always been extremely positive and this is the 4th year that we are proud to have this celebration. For those looking at investment or end use, it's a once-in-a-year opportunity we give customers to purchase their dream home at prices that are a steal," said Deepak Goradia, Chairman and Managing Director of Dosti Realty.

The premium projects featured include Dosti Ambrosia, Dosti Imperia and The Majesta. Dosti Ambrosia is a 36 storey tower set amidst the sprawling 18 acres of Dosti Acres-New Wadala, a landmark in Mumbai.

This tower which is ready with the occupation certificate comprises 2 & 3 BHK apartments that offer residents an exclusive rooftop swimming pool, 40000 sq.ft of landscaped gardens, 2 club houses, a tennis court, stunning views of the sea/city and more.

Dosti Imperia located on Ghodbunder Road, Thane (W) consists of 5 towers, 4 of which are ready with the occupation certificate and includes 2 & 3 BHK apartments. The 5th tower - The Majesta is 70% complete and caters to connoisseurs looking for a lavish lifestyle, offering them 4 BHK suites with 7 decks, a 600 sq.ft. lobby at each level, stunning views of the Ulhas river/city etc. Residents here will enjoy a plethora of lifestyle amenities like squash court, party lounge, library, cafeteria and more within the complex.

The other projects in the offering include Dosti Vihar at Pokhran Road 1, Thane (W) and Dosti Planet North at Shil - Thane. Dosti Vihar already houses 1400+ happy families and now has limited 2.5 and 3 BHK's available. With ready amenities like an AV room, 3 large banquet halls, jogging track, cafeteria, senior citizens area etc, there is something for everyone. Planet North is a 25-acre township comprising 1, 2 and 3 BHK garden/hill facing apartments with a host of amenities within the 30,000 sq.ft clubhouse.

 "Both New Wadala and Thane are prime investment destinations in Mumbai. From 2002- 2016 property prices in New Wadala have increased over 100% and are likely to propel further post the proposed MMRDA makeover Plan. The Thane location has also seen exponential growth both in the commercial and residential sector. According to the Residential Investment Advisory Report, 2016 by Knight Frank , Majiwada-Kasarvadavali is projected as one of the top 5 investment destinations across 5 major cities in India," added Deepak Goradia.

JLL India Partners With Snapdeal to Market Residential Properties

Property Consultancy firm JLL India's Residential Services division has partnered with leading online market place Snapdeal in an effort to expand its reach in the Indian real estate market. The partnership will combine Snapdeal's deep penetration into the Indian online consumer market and JLL India's expertise in residential real estate marketing.

With the added capabilities of the Firm's recently launched dedicated residential marketing portal JLLR.CO.IN, this move will cement JLL India's leadership stance in the country's online and offline real estate markets. Effectively, customers looking to purchase residential properties on Snapdeal can now avail on-ground advisory and transaction services from JLL. 

While Snapdeal will provide a seamless online real estate platform to enable home searches, JLL will organise guided site visits, help clients negotiate with developers and assist with documentation and mortgages.

Anuj Puri, Chairman & Country Head, JLL India says, “Ecommerce is evolving rapidly and proving to be a major disruptor of traditional marketplaces. In November 2015, India’s internet user base was around 402 million - today, it stands at just over 462 million. There is no ignoring the power of the Internet and the online marketplace, and we will leave no stone unturned to leverage this power. This partnership underscores our mission to remain future-ready and ahead of the curve."

The JLL-Snapdeal partnership will provide customers get an end-to-end service spanning the entire home search and purchase process. Buyers will not be charged brokerage on deals in the primary sales space, viz. purchases from developers. Starting last week of March, JLL is hosting a unique online fest in partnership with leading developers with best possible deals across India and this partnership is timed to make the most of this strategic initiative.

Speaking about this partnership, Tony Navin, Senior Vice President, Partnerships and Strategic Initiatives, Snapdeal said, "The real estate category on Snapdeal has grown rapidly since its launch in August 2014. We have forged alliances with some of the most trusted names in the real estate industry to offer a range of housing options for our ever-expanding customer base in a hassle-free and transparent manner. Our partnership with JLL India's Residential Services agency will further enhance purchase experience for our real estate customers."

Indians find Dubai real estate more lucrative in 2014

LAHORE: Non Resident Indians in Dubai have shown overwhelming interest in real estate investment as according to a data available, NRI investment in Dubai property market stood at $2.27 billion, followed by expats from the United Kingdom and Pakistan in 2014.

Experts feel that the uncertainty of turnaround in Indian real estate market was the reason that more and more NRIs in Gulf are parking their money in locally, primarily on real estate investment. According to a recent report, New Delhi real estate market has witnessed 20-30 per cent fall in real estate prices in 2014 forcing a distress sale in secondary realty market.

According to the CEO of leading UAE real estate portal bayut.com, Haider Ali Khan, despite the sagging economic growth, Indians and Pakistanis invested heavily in Dubai real estate market in 2013-14.

Pakistanis have invested $1.23 billion in first six months of year 2014 and became third biggest country that has invested huge money in UAE, while people from UK have pumped in $ 1.36 billion in Dubai’s property market.

Haider Ali Khan said that Indians in Dubai have shown more interest than any other expats and have invested a whooping $2.27 billion during the first six months of 2014.

Khan said, “Dubai is the most attractive real estate market for many countries, primarily due to the reforms introduced after the financial crisis of 2008.” Adding that during the turmoil, many property developers had defaulted, shaking the confidence of investors.

Now, after the introduction of new laws, the real estate market is once again strengthening, he added.

Khan pointed out that most mature real estate markets are protected by law and the Pakistani government should gradually work to introduce some real estate laws, so that investor confidence improves and practices like the Biana system – 20% to 30% advance payment – should be stopped which hurts confidence. This will help the market mature, he added.

Indian developers look for new strategies to clear unsold inventory

Even as the Indian real estate market shifts into the second gear of recovery, developers whose operations had slowed down during the lull are still faced with multiple concerns. On the one hand, the very basis of their business is the launching of new projects (the only function that really defines a developer's viability as a going concern on the real estate market). On the other hand, it is vital for them to clear piled-up inventory in order to generate capital and enable clearances for new projects, writes Shajai Jacob, Director & Head - Marketing & Communications, JLL India.

Clearing unsold inventory is also extremely important from the point of view of retaining existing customers, as real estate investors show a high propensity for exiting projects which are not clocking up healthy sales. By all standards, many developers find themselves in an unenviable situation at a time when the market is headed into boom mode after a prolonged slowdown.

The Causes Of Unsold Inventory

When any business does not function efficiently, one of the most visible results of this inefficiency is lack of customers. In the services industry, this will be visible in reduced interest in the services offered, and little revenue-generating work on hand. In the case of product-oriented companies (such as real estate development firms), the evidence lies most visibly in piled-up inventory. Excess inventory happens when a company is left holding more of its products than the market is willing to absorb.

What Unsold Inventory Implies

Naturally, the visible evidence of excess inventory is regarded as bad for any business. It signals that the products are, for one reason or the other, not selling. In the case of Indian real estate, a very common misconception among buyers, investors and industry watchers is that developers saddled with a lot of unsold inventory are 'paying the price' of over-pricing their products. The assumption that follows is that reducing prices will catalyse sales.

In actual fact, this argument can fail to hold water. Many times, other developers' projects within the same price band, location and category are selling at a much better rate. The fact that some developers simply have better marketing strategies than others is either not perceived or not well understood. If a developer himself lacks insight on why his stock not selling despite good price points and the right location and specifications, it can have serious consequences.

Developers looking at piled-up, non-moving inventory may panic and make counter-productive decisions. A futile blame game ensues if the developer views the unsold inventory as evidence that his sales and marketing team is not performing optimally. While there can be a grain of truth to this, it is also true that sales and marketing teams are only as good as the strategy that guides them.

If a developer has invested heavily into a flawed or incomplete marketing strategy, he is too close to the problem to see it for what it is. Insight is further clouded if a particular marketing strategy worked well in the past, should logically continue to work now but is no longer cutting it. 

Real Estate Marketing: A Constantly Evolving Concept

For a real estate marketing plan to succeed in today's highly competitive environment, there are myriad factors that come into play. More marketing activities than ever before need to be deployed, and these new activities require specialized know-how and specifically trained and qualified manpower. Real estate is a product industry in which the rules of the game have changed drastically over the past decade, and will continue to change.

Today, maximizing engagement with the target market is everything. For a project launch to succeed, a developer's clients need to have top-of-mind recall for his brand and his product. In the past, the resources available to a developer were limited to print advertisements, radio jingles, hoardings, word-of-mouth promotion and, of course, brokers. Today, clients need to be wooed across a much wider spectrum.

Social Media Presence

Not to put too fine a point to it, a developer who does not have a well-defined social media strategy today is a dinosaur doomed to extinction. Neither long-standing reputation nor excellent track record will help if these elements are not reflected online across multiple channels.

Today, approximately 243 million Indians spend a significant part of their lives online, and use the Internet to access and receive information of every kind. With the advent of e-papers, news portals and blogs, the manner in which information about anything travels has changed both in terms of direction and speed.

Platforms like Facebook and Twitter may have started off as mere social networking media, but today the power they wield in the world of business is beyond dispute. Companies of every stripe and description are investing massively into making their presence felt on these and other online platforms. It is literally a battle to stay relevant in a world that does not acknowledge the existence of anything anymore if it cannot be found online.

Staying Ahead Of Real Estate Portals

While the practice of maintaining well-crafted, informative and responsive websites has been a norm in the more developed countries for over two decades, Indian developers have only woken up to the need for this all-important calling card over the last 6-7 years. In this relatively short period, aggregator sites specialized in real estate deals and offerings have carved themselves the largest share of the online pie by investing exhaustively in search engine optimization and highly professional social media outreach.

The proliferation of these portals certainly spells good news for end users, because it gives them a more detailed oversight of what the market is offering than ever before. However, it is a different story for individual developers. The uniquely democratic business model on which property portals thrive hinges on showcasing as many projects and properties as possible. While developers can (and do) pay for higher ranking within this avalanche of options, the scope for focused branding and project-specific marketing on these projects is very limited.

Today, forging a distinct and prominent online identity is very essential long-term function for developers; but more importantly, an effective online strategy plays a critical role in the success of a specific project launch. In today's market scenario, developers who lack a well-defined online marketing strategy invariably find their projects selling at a far slower rate than their competitors.

Vital Ingredients Of Online Visibility For Real Estate Developers

 Dynamic Website: It is definitely essential to have a good company website which provides oversight of the firm’s projects. However, the ‘fill-it-and forget-it’ approach no longer works – websites need to be user-friendly, informative and kept dynamic with regular optimization and updated content. A static website with no fresh activity to attract traffic is driven off the charts by competing websites, portals and other platforms      

High Social Media Clout: Good Facebook, Twitter and LinkedIn presence with impressive and focused followers is of prime importance, from a standpoint of visibility and branding as well as in terms of having a ready base of potential customers to address

Engaging Company Blog:  Blogs are an important tool in reputation management, and are different from websites by virtue of the fact that they speak to potential customers on a less formal and more interactive and informative level. On a company blog, a real estate developer can offer insightful commentary on the market and thus elevate the firm’s status beyond that of a mere product dealership. A company blog which is regularly updated with interesting information attracts high search rankings online. Importantly, content on a company blog must at all times find the perfect balance between useful information and overt promotion.

Buyers benefit the most in possession-Linked Plans

The current scenario in Indian real estate market clearly reflects the mood of buyers. Developers are extending many offers to improve the demand, which clearly indicates that buyers are in wait and watch mode

Various media reports have suggested price correction for over last three quarters, but not much major correction in prices (with a few exceptions in some markets) has taken place. 

Developers are proffering bundled offers instead of negotiating prices. One such offer is the possession-linked payment plan, in which the buyer pays 20-25% of the apartment cost in advance and the rest on possession, says Om Ahuja, CEO – Residential Services, Jones Lang LaSalle India.

 The Benefits Of Possession-Linked Plans

A critical point here is delivery risk and exposure of credit to developer. Buyers see immense benefits in paying just 20-25% to the developer while booking and paying the balance amount on possession. This eradicates the risk of developer not completing the project on time, and of the developer going bankrupt and not having to pay for a product that is not yet ready. 

We are seeing buyers favouring this option against the construction-linked plans. In the developed world, builders have to complete the product before they can sell to their buyer. Selling before completion is called ‘off-plan’ and this can be approved by the local regulator, but only on the basis of a special request and the overall credibility of the developer. Such checks are missing in India. With possession-linked plans, the benefit to buyers must always be seen in the light of multiple risks.

Points To Check Before Opting For Such A Plan

Three critical safeguards that buyers must put in place before investing into such offers are:

Ensuring that the developer does not have two different pricing structures : (i.e. one for construction-

linked and another for possession-linked plans).  If there are two such different pricing offers, then the developer has already built in the cost of funding that is applicable for a possession-linked plan. This effectively means that the buyer is indirectly funding the developer, and that is not an attractive scenario.

Establishing that the developer has all necessary approvals in place : Buyers funding the developers without approvals is like any another non-approved deposit collection scheme that can catch the eye of financial regulators like SEBI and RBI. Buyers need to use caution while investing in any project where approvals are yet to come and there is a assured-return type of structure. These are very risky structures and have high chances of default and delay in terms of payments.

Reading the fine print : Laypeople generally do not read those critical few lines at the end of the document before investing, but there is a huge risk of losing money by such oversight. For instance, the connotations of terms such as ‘Act of God’ as well as other obscure verbiage in the terms and conditions present a risk to buyers that do not understand them. Any condition that de-risks or absolves the developer can be perceived as a risk of losing the 20-25% of the initial investment. It is therefore prudent for the buyer to review all points mentioned in such an agreement.

What Happens If The Buyer Defaults On Payments?

The developer will cancel the sale agreement and basis the agreement has the full right to forfeit the initial payment of the buyer. Reputed developers only forfeit part of the initial amount, not the full amount. This is normally captured in the options agreement that the buyer will sign with the developer.

Risks Involved In Possession-Linked Plans

Many times, buyers go for construction-linked plans and developers draw 90% of the amount from the bank providing home loan. Delay by the developer in terms of delivering the finished product can sometimes extend to 2-5 years or more, and for various reasons. Buyers continue to bear the interest cost for the amount that the bank has funded the developer with, but cannot enjoy the finished product.

In a possession-linked plan, the risk involved is limited to the initial capital of 20-25% that a buyer pays to book the apartment. Buyers clearly stand to gain from a possession-linked plan as it reduces their risk and ensures that they do not have to bear the cost of funding the developer with multiple open risks.

 

Because of various potential policy changes after the elections, these plans may not be available very long. It is therefore a very good time for buyers to invest in projects that offer possession-linked plans.  

Compact Comfort - The Enduring Studio Apartment

When the downturn hit the Indian real estate market, the only residential configurations which continued to see demand were studio apartments and cost-effective 1BHK flats, says Om Ahuja, CEO - Residential Services, Jones Lang LaSalle India. 

Technically, studio apartments comprise of single large rooms that encompass the bedroom, living and dining areas, with compact kitchens and bathrooms attached. When they first made their appearance on the Indian residential landscape, studio apartments found favour largely with bachelors and small families who spend most of their time at work.

Even today, the demand for studio apartments comes primarily from software professionals and executives from the manufacturing sector. Such professionals have generally spent over a year stationed in a metro and find that they prefer to pay EMIs on an affordable, maintenance-friendly living unit rather than pay high rents for flats and serviced apartments.

There is a steady and inflexible demand for studio apartments, both in the metros and tier 2 cities. These apartments are usually the first to be sold out in a residential project that features them. Without doubt, they are the most cost-effective residential options for people who prefer to own rather than rent, especially in projects close to workplace hubs. Another factor that drives demand for such units is the ease with which they can be rented out or sold at a profit on the secondary market. This also makes studio apartments a prime target for investors. Moreover, studio apartments do not attract much maintenance costs and make for hassle-free purchases as well as resale.

The typical Indian home buyer prefers larger homes, and will go in for more generous formats whenever possible. However, the rate of property price escalations in our primary cities has narrowed things down considerably. Simultaneously, proximity to the workplace remains a priority in an evolving economy, and the studio is the logical choice for those who cannot or do not choose to buy larger units.

Studio apartments are also popular with mid-management level buyers who tend to reside in certain cities for extended periods. Rather than pay for a serviced apartment or hotel room, they prefer to acquire studio apartments and sell them off when they no longer need them. There is also a lot of demand from single working individuals and newly-married couples who need to set up a home immediately and eventually upgrade to larger sized homes later on. As already stated, the demand for such units on both the primary and resale market is consistently high. 

When the downturn hit the Indian real estate market, practically the only residential configurations which continued to see demand were studio apartments and cost-effective 1BHK flats. The demand for larger units has meanwhile revived considerably, but studio apartments are still the fastest-moving products on the market. The margins are low, but it is definitely a high volume vertical and many developers bank on such configurations as a sure-fire sales proposition, with almost instant absorption if the location is right. This provides them with instant working capital. The demand is even greater for furnished studio apartments, and many developers offer these as well.

The current demand for studio apartments is percolating down from the equally high demand for serviced apartments, and is still picking up from there. 80% of the overall demand for studio apartments in cities like Mumbai, Delhi NCR, Bangalore, Pune and Chennai is driven by software professionals and recently relocated manufacturing sector executives. Price points vary according to city, location and amenities offered, but generally range between Rs. 12-35 lakh.

Fitch predicts negative growth for Indian realty market in 2012

NEW DELHI: More negative news for the Indian realty market which is already affected by several macro-economic factors. Fitch, an international rating agency, has projected a ‘negative outlook’ for the Indian real estate sector in 2012 due to weak overall demand and higher construction costs, which are likely to continue to squeeze margins in 2012.

The ratings firm has pointed out that high interest rates as well as high home prices have reduced the affordability for home buyers.

For real estate companies, both material and labour costs have increased in 2011 and home sales, which had improved in the first quarter of 2011, have moderated significantly since and are likely to continue at lower levels in the first quarter of 2012 as well, reports Economic Times quoting Fitch report.

In the commercial office segment, oversupply of space continues in some markets. "However, the demand for office space is likely to be maintained at 2011 levels as the hiring momentum of the IT/ITeS sector, the major driver of office space in India, continues in 2012," says Fitch. The demand for retail commercial space, however, is expected to be low in 2012.

Declining profits for real estate companies has resulted in high debt levels for companies, and this is expected to continue in 2012, negatively impacting the creditworthiness of real estate companies. Going forward, the dependence on operational cash flows to fund growth and service debt is likely to increase. Fund raising options for real estate companies are limited due to the cautious approach of banks, weak equity markets and dwindling investment by private equity funds.

Improved macro-economic conditions leading to improved demand would have the potential to improve cash flows to real estate companies and see the outlook revised to stable. Also, the ability to judiciously use cash from liquidating existing inventories, which would improve capital structures, may result in the selective upgrades of companies in the real estate sector, even while the overall outlook is negative.