Subdued supply reduces mall vacancy, rentals to remain steady

While there has been a noted improvement in rental appreciation in the range of 7-9% in some of the main street locations such as Nungambakkam High Road (Chennai), Lokhandwala Andheri and Fort/Fountain (Mumbai) in the fourth quarter of this fiscal, Commercial Street (Bengaluru), Thane (Mumbai) and MG Road (Pune), Koregaon Park (Pune) have seen a q-o-q drop of rentals in the range of 3-4% due to limited demand, according to a report by Cushman & Wakefield on real estate markets in major cities covering office and retail sectors.

Due to unsteady economic situation and ensuing elections in India, the supply of new commercial space has been poor in major cities. According to the report, the Q4 2013 has recorded the mall vacancies of 14.5 per cent, compared to 15.5% in the corresponding previous quarter recording one per cent drop across top eight cities.

Chennai, Hyderabad and Kolkata were the largest contributors of commercial floor space clocking a total supply of 1.18 msf, the report said.

While Chennai witnessed a mall admeasuring 0.31 msf with Velachery becoming operational,  Hyderabad saw a mall admeasuring 0.43 msf becoming operational in Kukatpally and 0.44 msf mall opened in South Central Kolkata with dedicated zones for luxury and premium brands, the first of its kind in the city, the report said.

As for as rentals in the main street locations are concerned, moderate rental increase was recorded in the range of 2-4% in FC Road (Pune) and Kemps Corner/Breach Candy (Mumbai) micro markets.

The report also noted that while most established main streets across all cities have witnessed high demand from national and international retailers, Hyderabad showed negative trend due to uncertain political situation.

Certain emerging main streets in Bengaluru, Hyderabad and Kolkata have witnessed some traction. Apparels and food and beverages (F&B) retailers were witnessed expanding extensively in all cities. However, select main streets like Commercial Street (Bengaluru), Thane (Mumbai) and MG Road (Pune), Koregaon Park (Pune) saw a q-o-q drop of rentals in the range of 3-4% due to limited demand.

Lack of optimum sized ground floor plates in certain established main streets of Bengaluru and NCR proved to be a hindrance for many interested occupiers.

Limited supply reduces mall vacancy

Though mall rentals for most of the locations across major cities remained stable, in wake of limited availability and high enquiry levels, malls at Malleshwaram (Bengaluru) saw a quarterly uptrend of 12% while malls in Lower Parel, Ghatkopar and Thane in Mumbai had witnessed quarterly appreciation of 2-5%.

On the other hand, Mulund (Mumbai) recorded an over 15% drop in rentals due to tenants and shoppers preferring newer malls in Ghatkopar. Select locations in Pune and Chennai saw a quarterly rental correction of 4-9% due to slow transaction activity. In the wake of ongoing metro construction work and resultant traffic congestion problems, mall rentals in Western Chennai saw a dip of 4.5% q-o-q, said the report.

Commercial realty outlook for 2014

In the first quarter of 2014, nearly 1.61 msf of mall supply is expected across four cities – Pune, Bengaluru, Hyderabad and Kolkata. While two malls are expected in Bengaluru and Pune each, one mall is anticipated to become operational in Hyderabad. In Kolkata, new sections of an operational mall are expected to be open during Q1 2014

However, Chennai, Mumbai and NCR drew a flack with no mall is expected to be operational in 2014 from these cities.

Malls in most micro markets are anticipated to register a stable rental trend over the next quarter, apart from and Lower Parel in Mumbai, South Delhi in NCR and Vastrapur in Ahmedabad where rentals are expected to increase owing to churn, higher occupancies and sustained demand. Existing high vacancies in malls of Mulund (Mumbai) may lead to a rental decline in the coming quarter.

Rentals in some of the main streets in cities like Ahmedabad, Bengaluru, Chennai and NCR may witness an upward revision in the next quarter owing to healthy demand levels and limited supply, whilst they will remain stable in most of the other main streets.
 

Overall demand is expected to remain stable until the general elections expected mid-year, post which retailers will act on their expansion plans based on the new government’s policies, the report further said.

Rays Power Infra launches solar park in MP

In a bid to revolutionise the solar power sector, Rays Power Infra, the largest private solar park owner in the country, has announced the launch of solar park in Madhya Pradesh. The announcement was made at the recently held Solar Development Summit in Bhopal in which Ketan Mehta from Rays Power Infra was a key speaker.

The development of solar energy, which is a renewable and sustainable source of energy, will have long-term impact on the state's economy. Madhya Pradesh is blessed with plenty of sunshine and vast barren lands, and the establishment of a solar park will hugely benefit the State as businesses will be able to leverage world-class facilities with ready-to-move infrastructure, according to a news release.

The launch of the 50 MW Solar Park is significant, as it will contribute towards the state's power generation capacity. More importantly, the initiative will set new benchmarks in generating power in a sustainable manner.

Rays Power Infra has already popularized the concept of solar parks in Rajasthan and Andhra Pradesh by offering the lowest cost of electricity. Solar parks have become tremendously successful benefitting large industrial houses and contributing substantially to the local economy.

Commenting on the launch, Ketan Mehta, Director, Rays Power Infra Pvt Ltd said, "Rays Power Infra has harnessed solar power and made it available to large number of industrial houses in Rajasthan and Andhra Pradesh by setting up solar parks. We want to replicate the model and bring our expertise in harnessing renewable energy for commercial purposes in a sustainable manner to the state of Madhya Pradesh.”

“Madhya Pradesh government is bullish on renewable energy projects and we are excited to take up this opportunity. We are committed to the development of solar energy in the state," Mehta said

Rays Power Infra (P) Ltd is a pioneer in the development of green technology solutions that are environmental friendly, energy efficient and cost effective and are capable of delivering a quick return on investment. Started as a brainchild of IIT Roorkee professors and students, Rays Power Infra is one of the biggest and the first solar power service provider in India (on the basis of number of projects completed)

India to have more billionaires than UK, Germany by 2023

Chennai: In its recent wealth report Knight Frank has provided a unique insight into the attitude of ultra-high-net-worth individuals (UHNWIs) towards property investments and spending patterns across the globe and also given an annual analysis of wealth flow and property investment around the world.The report also said that India to experience 99% growth in the number of UHNWIs  over the next decade.
GLOBAL KEY FINDINGS

• Number of ultra-wealthy individuals across the world rose by 3% last year; and number of Ultra High Net Worth Individuals (UHNWIs) in 2023, is set to grow by nearly 30% over the next decade

• New York will overtake London as the most important city for the ultra-wealthy by 2024; three of the top five most important cities by 2024 will be in Asia
• The Wealth Report’s Prime International Residential Index (PIRI) confirms that Asian markets, led by Jakarta, experienced the biggest price growth in 2013, followed by Auckland, Bali, Christchurch and Dublin

• Asian Cities to see the fastest growth in the number of UHNWIs individuals in the next decade surpassing the total number in North America; USA will remain dominant in terms of number of billionaires over the next 10 years, despite growth in the east.  North America will still have approximately 30% of the world’s HNWIs in 2022, which is down from the current 34%.

• Top 5 future hotspots for investment are - Sao Paulo- Latin America; Istanbul- Middle East; Abu Dhabi- Middle East; Mumbai- Asia Pacific; Sydney- Asia Pacific Liam Bailey, Global Head Research said: “History, location and their long-established wealth mean that London and New York’s positions look unassailable, at least for now. It is further down our leader board that the real city wars are being waged. The main battleground is Asia, where a handful of locations are slugging it out in the hope of establishing a clear lead as the region’s alpha urban hub.”

INDIA KEY FINDINGS

India- a booming land for the ultra-wealthy

• India on the sixth spot in the top 10 countries for billionaires as of 2013 with 60 billionaires; expected to increase to 119 with a 98% growth by 2023

• India to experience 99% growth in the number of UHNWIs  over the next decade

• The number of centa-millionaires  in India expected to double over the next decade, witnessing a 99% growth from 383 to 761

Most Wealthy Indian Cities

• The number of UHNWIs in India is expected to double over the next 10 years, rising by 126% in Mumbai alone and around 118% in Delhi, despite recent economic concerns

• Mumbai on the 4th spot with a 10 year UHNWIs growth of 126% among all global cities which is expected to increase from 577 to 1,302 by 2023

• Delhi on the 5th spot with a 10 year UHNWIs growth of 118% among all global cities; which is expected to increase from 147% to 321% by 2023

• Mumbai retains its position as the 16th most expensive city in the luxury home sector with an average price of 95.7 per sq. m.

Shishir Baijal, Chairman & Managing Director, Knight Frank India, said: “Wealth creation in India particularly is expected to accelerate with the number of UHNWIs expected to double over the next decade. This reflects a more positive outlook for India’s economy after 2013 was marked by capital outflows and a sharp devaluation of the rupee.”

Liam Bailey, Global Head of Residential Research at Knight Frank, added: “Continued global wealth creation particularly in emerging economies, has been a key driver for prime property markets. This trend looks to continue with a forecast increase of 28% in the total number of UHNWIs around the world by 2023. The growth of UHNWIs in China and India, coupled with an eye catching 144% increase in Indonesia and a stellar 166% hike in Vietnam, will help push the total number of UHNWIs in Asia up by 43%.”

Dr. Samantak Das, Chief Economist & Director Research, Knight Frank India: “By 2023, only three countries in the world namely USA, China and Russia will have more billionaires than India. During the next decade, at 98%, growth in billionaire count in India will be much faster than either of the global (38%) or Asian (66%) benchmarks. The out-performance in growth of UHNWI count in India (99%) is even larger when compared to the global or Asian benchmark.”

How to buy a foreclosure property

K Ramanathan

 

Foreclosure, the word we heard frequently in the media a few years back in the midst of economic crisis that struck the world. Many home loan borrowers in the US in particular had declared bankruptcy for they were unable to pay EMIs due to loss of employment or reduction in salaries.

Many lenders (banks, financial institutions), who had given home loans indiscriminately on high interest rates in the upswing real estate market, had to suffer due to sudden crash in real estate prices and loss of payment means for the borrowers, who had no option but to surrender their property to the banks for foreclosure.

There became the word a most talked-about in the US and other European countries. Foreclosure is an option given by a borrower to the banks, who could take back the property using court system if the borrower failed to honour the agreement of paying back the loan as per the agreement. The bank, once get the possession of the property can sell it at the market price and pay back the difference, if any, to the defaulter. 

The greatest disadvantage for the defaulter is that his credit rating will get a beating and he will not be given loans by any financial institutions for his future needs.  However, if the amount collected through ‘auction’ of the property by the bank is much lower than the balance loan amount, then the bank has the right to ask sureties, who stood by the borrowers at the time of signing the loan agreement, to settle the balance loan amount. In case, the bank was not able to realise the loan amount fully through auction or surities, it can take possession of other immovable properties of the defaulter like jewellery or valuable items equal to the standing loan amount.

Now, if one wants to purchase a foreclosed home there are certain advantages and disadvantages. One has to take several things into consideration before deciding to buy a home on auction by banks.

The greatest advantage is low price. The banks, which are selling a property, will have their own interest to realize the outstanding due amount with interest only. The lender thus, would be ready for negotiating on the basic prices of the home under auction.  So, those who wish to buy the bank property can bargain and even seal the deal for a lesser amount than the market price.

If one chooses to sell the home later, he or she will most likely to make a good profit as the buyer would have paid less amount at the time of auction. Many in India do buy such houses at a foreclosure auction, make necessary changes or repairs and then sell it and book profit.

Secondly, since the bank is selling the property, there will not be any encumbrances against the property and the sale deeds will be clear. So, the buyers need not have to unnecessarily spend money on legal charges.  Thirdly, the buyer gets the ready-to-move in house with, may be, with little bit of repair or alternation works.

On disadvantage part, the buyer has to pay money in cash and will not have time to go for bank loan as banks selling such properties would want to realize the money at the earliest. Secondly, the previous owners, sensing that their property will go under the hammer, may do damage to their building, which can cost dearly for the buyers at a later stage. Thirdly, the buyers seldom get a chance to inspect the property with experts to understand the structural stability and other quality details.  

So, it is a big risk he takes when he buys a property from banks, whose quality he is not aware of.  On physiological part, the buyer should be aware of the fact that he gains the house at someone’s expense. Those who believe in vaastu and other structural measures prescribed by Hindu scriptures may find most of the houses do not comply with those standards

Ashiana Housing launches super luxury homes in Bhiwadi

Though, Bhiwadi is known for low and middle income housing, the next real estate boom town after Gurgaon, however, with the launch of Tree House Residences - an all luxury apartments by Ashiana it has slowly entered the map of luxury housing destination. The sample flat of first such luxury project is ready and shown to selected audience recently during Ashiana Housing’s ‘know your neighbour’ initiative.

 “Tree House Residencies” in Bhiwadi are for those who desire to live a statement-making lifestyle but cannot afford one in Delhi and Gurgaon.  The apartments are for those who believe in living with the state-of-art facilities. It is an exclusive, niche, stylish project with top-notch amenities for the modern buyer who aspires for a quality life.

The project consists of 36 extravagant apartments. To have nine levels in four towers spread in the area of one-acre land, each apartment is designed to provide a grand life style, maximum comfort and convenience.

Tree House Residencies are high-end apartments with a choice of thirty-four 4BHK apartments in the area of 3255 sq. ft. and two 5BHK apartments in the area of 3755 sq. ft. It guarantees excellence in the living archetype with a wide range of facilities like, in-house gymnasium, children’s play area, community hall and much more. They have ensured that everyday living is a pleasure at Tree House Residences with the membership of well-equipped facilities at Treehouse hotel, spa and club.

Among others, Tree House Residency customers will have an access to the club with facilities such as swimming pool, spa, food courts, gym, sports bar, restaurants, tennis court and business centre. For safety, it will have high-level security with fire sprinklers and fire hydrants.

Commenting on the launch, Vishal Gupta, managing director of Ashiana Housing Ltd, says, ‘We share a very special bond with Bhiwadi. Our every project in Bhiwadi seeks to bring about a constructive transformation in the lives of millions and build a world into the land of serene coexistence for every resident. The Tree House Residences will fill in the gap prevailing in luxury segment between Gurgaon and Bhiwadi.

Jumabhoy group launches luxury villas in Bangalore

SINGAPORE: The Jumabhoy family, once the richest Indian family doing real estate business in Singapore, is developing 61 luxury villas in Bangalore, and according to company sources more than 20 per cent of the villas have been sold even before a formal launch.

Being the first property development under the Jumabhoy family, Raffles Park, will have 61 villas spread over 15 acres in Bangalore, according to a media report.

The first phase, comprising 10 villas, was marketed in India and has been fully sold out while phase two with 15 villas, are being open to non-resident Indians and India-incorporated companies in Singapore.

 The Jumabhoy family, which was migrated from western India to Singapore in 1916, made a name for themselves in real estate, developing Scotts Shopping Centre and the Ascott.

At its peak, their listed Scotts Holdings had assets worth almost S$750 million and a presence in Southeast Asia, the UK and Australia.

But a split among family members led to a sale of its main property assets in the late nineties.

Now, members of the family's third generation - Iqbal, Asad and Mimi Somjee - are engineering a comeback through a real estate vehicle, Raffles Residency.

Raffles Park will be made available on a plot area of 4,500 square feet, with each unit is being sold for around S$1.32 million, reports channelnewsasia.com.

Iqbal Jumabhoy is upbeat about the project he has undertaken with his siblings Asad and Mimi Somjee.

He said: "Interestingly, we have not even launched it. We have had a preview in Bangalore, and on the back of that preview, we actually sold 20 per cent of the houses pretty much without a launch. And in Singapore too, we are doing very targeted meetings with people. And we are showing it for the first time here."

Commenting on what gave him and his siblings the idea to enter the Indian property market, Mr Iqbal Jumabhoy said: "To start with, we had the land. The second part of it, was therefore, what to do with it.

“The easiest thing would be to sell it or team up with another developer. But the fact that we had an existing team of people within The WIRE Group - which is another company that I formed some years ago - gave us the courage to work on this together.

“The second is that Bangalore is the IT hub of India, and the consequence of that is that you have got a large number of senior professionals who have lived or worked abroad, and they come back with expectations and needs, which perhaps (are) not easily served by the existing products."

When asked what is next after Raffles Park, Iqbal Jumabhoy said: “We are currently in discussion on a couple of other projects. One of them is an extension to the existing Raffles Park, and we are in discussions with surrounding landowners.

 

“The second is a much larger project. That project, if it comes through, is with a landowner who owns between 150 to 200 acres of land. So that would be a slightly different kind of project," he further revealed.

How Does Inflation Impact Property Market

Contrary to the general belief, real estate prices do not necessarily react to inflationary conditions,   feels Arvind Jain, Managing Director of Pride Group.

It is interesting to note that how most people think of inflation. Apparently, the most prevalent concept of inflation is something like what happens to spectators at a cricket match. At some point during the match, the people in the front rows of the stadium rise to their feet to get a better glimpse of what is happening on the field. As a result, the spectators in the back rows cannot see the action clearly so they rise up too. Very soon, everyone is on their feet!

Another perception among most people is that inflation drives up the prices of everything uniformly. That is why it is commonly believed that real estate prices rise simply because the cost rise of everything. This is incorrect. The fact is that real estate prices will either fall or remain static in an inflationary environment.

Inflation is a dynamic that is largely dictated by the cost of credit. This is how it works - the cost of essentialities such as food grains and petrol rises, while the common man's income remains the same. In other words, his spending power reduces. Banks make a note of the fact that the baseline cost of living has increased and recalibrate their loan interest rates upward.

Because the cost of borrowing has increased while incomes have remained static, people become wary of taking loans for anything - including home purchase. The natural reaction from real estate developers would be to bring property prices down so that sales pick up again. This does happen in some cities and locations, but not everywhere. Here are the reasons.

Many developers are as dependent on the cost of borrowing as their buyers are. This is especially the case with smaller developers in Tier 2 or Tier 3 cities who have not launched many projects and have therefore not been able to create a self-sustaining churn of capital. Such developers are able to react to the reduced sales brought on by inflation by lowering their rates.

Such developers are able to do this because though the overall cost of development remains more or less constant, land acquisition costs are lower in smaller cities. Price reductions are the last recourse for ailing developers, but smaller developers with lower investments into their projects and greater dependence on the cost of lending can and will offer them if they perceive this to be the only option.

If even this last course of action fails, the developer goes bankrupt and is forced to surrender all business interests to the bank, or sell them to a more established player. This is, in fact, one of the integral factors of the process of consolidation, wherein more and more smaller operators give way to larger players. 

The scenario is different for larger developers who are active in the primary cities. Having been in the real estate business longer, they have been able to achieve a degree of capitalization that reduces their dependence of debt funding. However, their investments in the land required to build projects in the larger cities are naturally higher.

Such developers are not able to bring down the pricing of their properties despite a slowing down in sales. However, they are able to weather the inflationary storm longer because of their healthier capitalization. For this reason, established developers in larger cities will not use price reductions to boost inflation-impacted sales. At the same time, they cannot raise their prices in tandem with the natural laws of property appreciation, since this would impact their competitiveness on the market.

This means that in the case of well-located quality projects by established developers, inflation will have the effect of keeping prices static until reduced inflation brings down the cost of credit. Once this happens, prices will rise again without having gone down at any point.

It goes without saying that understanding how inflation impacts short and long-term property pricing in different cities, locations and projects can make a big financial difference to prospective home buyers.