Demand for larger homes picking up

Mohammed Aslam, Head – Pune, Jones Lang LaSalle Meghraj:

Pune’s real estate market is pulling itself out of the doldrums brought about by the slowdown. Over the last three months, buyers have begun populating the residential market again and are beating a path to various developers’ sites in search of good deals. Apart from a resurgence in positive sentiments, this renewed demand can also be attributed to the fact that HFI has brought down home loan interest rates to 8-8.5% on fixed interest loans for three years, which stands in marked contrast to the 10-11% that prevailed just six months ago.

While Pune’s real estate market was in the deepest throes of the downturn, the 1BHK and studio apartments were practically the only moving products. Today, general buyers preferences have once again evolved to 2-3BHK flats. The most popular price tags currently fall within the range of Rs. 25-35 lakh.

The slowdown has brought about residential space affordability and availability in areas that were previously out of reach for middle-income buyers. Due to reduction in pricing, residential property buyers now have a choice of attractive deals in preferred areas like Baner, Wakad, Kondhwa, NIBM Road and Aundh. There is also a high level of interest in projects along Nagar Road, which now falls in the new IT/ITES growth zone and represents considerable future appreciation potential.

Projects that were put on indefinite hold during the financial crunch are now seeing the light of day, with construction once again on a war footing across the city. Projects that are due to be launched within the next six months are being advertised heavily. For projects to be launched within the festive season, developers are not offering freebies and esoteric incentives but are focusing on price discounts for limited periods. Some of the most significant launches will include those by Pharande Spaces, Gera and Panchsheel.

On the downside, we have been seeing the first stirrings of price escalations in Pune. Based on the fact that the demand revival is still in its infancy, this represents a worrisome scenario which seems to indicate that the slowdown did not deliver a sufficiently convincing message. Owing to the price-conscious buyer profile that generally defines Pune, demand for residential spaces will only continue to grow as long as rates remain rational.

RESIDENTIAL REAL ESTATE 2009 - WHERE TO INVEST

The economic slowdown has combined with the real estate market’s inevitable efforts to assume rationality. For Indian residential space developers, the dream run is over – but for the sector’s end-users, it is a time of opportunity. Properties that would forever have stayed out of the reach of India’s less privileged middle-class denizens are about to be put on the table.

Yes, it is a buyer’s market now. Residential rates are crashing across the country. Overheated pockets in our metros and the more prominent Tier II cities are now tasting humble pie. The residential property market in India will rise again – albeit at a more realistic rate.


ON INVESTING IN THE CURRENT SCENARIO:

• Returns on commercial real estate are higher, but so is the attached risk. Such properties are also more expensive, and smaller office spaces are in low demand at the current time.
• Residential properties yield lower returns, but are safer as long as they are chosen wisely. For city-based smaller investors, investing in studio apartments or 1BHK properties near known market drivers such as IT hubs, large manufacturing units and educational institutions is the most feasible and lucrative option. Smaller format housing continues to have a steady demand, especially in the metros where company staffers seek price-effective homes on rent. Cities like Mumbai, Pune and Hyderabad are perfect illustrations. Rental accruals on such properties represent a source of stable and steady income, while the capital value will invariably appreciate with time.



PRESENT ROI ON REAL ESTATE INVESTMENTS

1. Delhi Residential: 7-8%, Commercial: 11-13%
2. Mumbai Residential: 7-9%, Commercial: 11-13%
3. Bangalore Residential: 6-8%, Commercial: 11.5-13.5%
4. Kolkata Residential: 6-8%, Commercial: 11-12%
5. Chennai Residential: 6-8%, Commercial: 11.5-13.5%
6. Chandigarh (incl. Mohali, Panchkula, Zirakpur)
Residential: 6-8%, Commercial: 12-14%
7. Indore Residential: 7-8%, Commercial: 12-14%
8. Cochin Residential: 5-7%, Commercial: 12-13%
9. NCR Residential: 7-8%, Commercial: 11-13%


SCOPE FOR RESIDENTIAL PROPERTY INVESTMENTS:

Certain areas in many cities retain their mid-to-long term potential. While other areas in these cities are headed for correction, these locations will hold their own and even grow:

MUMBAI

Mumbai has witnessed some of the highest selling prices in the residential market till the beginning of this year. Clearly, those prices were not sustainable, since buyers for super luxury homes are shrinking fast. One of the focal areas was central Mumbai (specifically Lower Parel and Worli) which witnessed the highest price escalations. These now faces the challenges of the slowdown.

The current slowdown has curtailed the investor segment in the residential property market. The driver for what demand exists now are real end-users. In Mumbai, there is no dearth of those desperate to find homes within an affordable range - affordable housing is therefore now the silver lining on the dark cloud of today’s slowdown.

Mumbai has three different directions in which growth can still be observed. Appreciation is not a factor currently, but these are the areas that will sustain their prices – while other areas in Mumbai will correct.

1. The extended western suburbs - the Vasai-Virar sub-region. This region is known for budget housing.

• Drivers:

1. Economic drivers such as the MP SEZ by DHL, BIO tech SEZ by Mahindra and IT SEZ
2. Connectivity is going to increase by introduction of additional suburban trains from next year

Prices are in the range of Rs. 2500-3500/sq.ft

2. The area adjoining Panvel

• Drivers:

1. This region is benefiting significantly from trunk infrastructure enhancements such as the upcoming new airport, the Trans-Harbor Link, a railway terminus, mono rail etc.
2. Positive impact from the upcoming Mega SEZs by Reliance and others.
3. The expansion of JNPT.

Many developers have already initiated large township projects in this region. The price range are Rs. 3000-3800/sq.ft.

3. Bandra-Khar area

Prime property hunters are still focused on this area.

• Drivers:

1. It will witness increased connectivity by the Bandra-Worli sea-link, the proposed Metro Line 2 and also the upcoming Santacruz-Chembur Link road.
2. This region is always a preferred destination for prime property seekers because of its elite profile, and because of the high level of available shopping, healthcare, education and recreation facilities. Developers there are offering products in redevelopment schemes.

The prices range from Rs. 18000–25000/sq.ft.

DELHI

Currently, there is a definite slowdown in growth in the suburban residential market. Construction has stopped on new projects, resulting in a stabilization of rates for ready-possession flats. This scenario also reflects in Delhi, where the rates for good properties rates are now stable.

However, the areas around the 150-meter road that will eventually connect Gurgaon to Dwarka – specifically, Sectors 103-111 – have significant growth potential.

• Drivers:

1. Sufficient developments will come up in this area, and one can expect a year-on-year appreciation of at least 5-7% even now.
2. The area is currently under-developed – however, when residential projects there reach completion in 2-3 years, the appreciation will be between 30-35%.
3. A lot of this depends on the ability of developers to raise enough cash to complete their projects. Those who do not have the requisite finances will miss out on an extremely lucrative opportunity.

The current rates in this belt range between Rs. 2200-2300/sq.ft. In Dwarka, the rates are between Rs. 4000-4500/sq.ft and in the further locations of Gurgaon between Rs. 3500-4000/sq.ft.


CHENNAI

Chennai’s residential real estate scenario is considerably depressed at the current time. Developers who have projects along the once booming IT corridor are all set to reduce their rates by as much as 20%.

However, the Mogappair-Porur composite region continues to hold mid-to-long term investment potential.
• Drivers:

1. This overall location is very close to the prime residential catchment of Anand Nagar and also to Chennai railway station and the bus terminus.
2. The fact that it is not near the IT corridor also increases its potential.
3. The rates there are competitive at Rs. 2800-3000/sq.ft.

The expected appreciation for residential properties here is between 20-30% long term).


BANGALORE

Bangalore is surely feeling the brunt of the IT slowdown. However, established suburban areas like Koramangala, Outer Ring Road and Bellari Road continue to be good investment destinations. As in the case of Mumbai, appreciation is not a focal point in the current scenario - these are the areas that will sustain their prices, while other will correct.

Apart from these, Mysore Road –which encompasses the upcoming NICE corridor, has lots of future promise thanks to good connectivity to Mysore and many commercial developments being planned there.

Koramangala

• Drivers:

1. No scope for fresh developments
2. Close to Electronics City
3. Residential demand is high

Rates are between Rs. 7000-8000/sq.ft.

Outer Ring Road and Bellari Road

• Drivers:

1. Close to IT hub
2. Outer Ring Road is close to Whitefield and is a commercial area.
3. New developments are coming up on Bellari Road, which is also close to the Devenhalli airport.

Rates – Rs. 3500 – 5500/sq.ft. Appreciation potential between 5-8% short term. Long term 10-15%.


PUNE

With Talegaon not picking up in the anticipated manner, Pune’s new growth corridor now encompasses Kharadi and Nagar Road. This can be safely considered as the most lucrative real estate investment zone for 2009-2010.

• Drivers:

1) Eon IT Park – 4 million square feet of prime IT space in the last stages of completion
2) Other IT SEZs as well as commercial ventures also on the anvil
3) Proximity to revamped airport
4) Improved connectivity, largely via the opening of the VIP Road connecting Viman Nagar to the airport
5) Imminent arrival of 5-star hotels such as JW Marriott, Grand Hyatt and Leela
6) Reasonably low entry costs:

Rates – Rs. 2700-3500/sq.ft


HYDERABAD

Hyderabad continues to hold its own in the current slowdown scenario, though significant growth has now been restricted to certain specific areas.

Residential real estate investment growth potential in Hyderabad will center primarily around Gachibowli and Tellapur.

• Drivers:

1) Proximity to the financial district, which is where the highest growth of IT and other commercial projects is happening
2) Could become another CBD over the next ten years
3) Outer Ring Road (Phase 1 in advanced stage, phase 2 scheduled after six months) in the vicinity will reduce commuting time of residents to key workplace locations

Rs. 3000-3500/sq.ft.

Appreciation in these areas will be about 5% in 2009 and might increase in further years.


MOHALI

Residential rates at Chandigarh have gone through the roof, and there is little scope for appreciation for now. Moreover, because Chandigarh is a planned city conceived on certain density specifications, which give rise to limitations on development. It is therefore not dynamic in real estate terms, which means it will not change much with time.

Chandigarh could not partake in the IT boom for these reasons. However, adjoining Mohali presents a completely different picture. The area called Greater Mohali, which encompasses the fast-developing Landra-Mohali Road area, is a very promising residential nexus. Pan India developers such as Unitech, Emaar-MGF, Ansals and DLF have snapped up land there for development into mega, multi-sector residential hubs. These will be highly organized cluster projects, and all the right drivers are in place:

• Drivers:

1) International airport coming up
2) Indian Business School coming up
3) Multi-terminal bus stand soon to be commissioned
4) 120 acre township with IT SEZ coming up

The investment opportunity here is in land, which currently sells at between Rs. 12000-14000/square yard. After 3-4 years, the land rates in these areas will surpass those in central Mohali, which currently stand at Rs. 30000-35000/square yard.


KOCHI

Kochi has the fast growing residential market in Kerala. The NRI investments has caused sudden spurt in residential demand in Kochi City. Apartment units have the highest demand owing to affordable prices and availability. In addition, high ranking of Kochi as IT/ITES destinations which resulted in demand generated by the infrastructure initiatives like the Smart City Project, Cyber City project, Infopark, International Transshipment Container Terminal Project, etc. Water fronts are the most sought out residential real estate destinations and usually gets a premium.

The prime residential areas adjacent to M.G. Road and along Marine Drive still command a premium with landmark projects asking for Rs. 7500/sq.ft

• Drivers:

1) Close to CBD
2) Attractive Water fronts
3) Huge demand for waterfront apartments

Peripheral areas of the city such as Kakkanad, Edapally and Kalamassery currently face a short-term oversupply of mid-range flats that are selling in the Rs. 2,500-3,000/sq.ft range.

• Drivers:

1) Close to the existing InfoPark
2) Positive impact from the upcoming Proposed Smart city and Cyber city in Kakkand
3) Solid infrastructure has lead to a diverse and robust economy and job creation. Commercial trade, a traditional sector of the economy, is being complemented by growing sectors such as IT/ITES (due to large scale IT parks and SEZ), BFSI activity and tourism.
4) Excellent connectivity resulting from a combination of airport, sea port, road and rail, has positioned the city for long term growth and competitive advantage.
5) A disproportionately large number of NRIs, or non-resident Keralites to be more specific, are investing from abroad and have increased demand for residential space.

Appreciation in the peripheral areas of the city will be about 5% in 2009. We expect a 5-10% increase over the long term.

Rates - Rs. 2,500-3500/sq.ft.


AHMEDABAD

Ahmedabad, which has recently started leveraging its real estate potential for ‘real’ now, has some real residential hotspots coming up. For instance, there will be considerable economic activity with the arrival of the Tata Nano project, which will definitely boost the value of real estate in and around the corridor of Sanand.

• Drivers:

1) Located in an industrial region rich with SEZs
2) NANO plant coming up
3) Infrastructure upgradation in process
4) Good connectivity due to S G Highway and SP Ring Road
5) Good land availability
6) DMIC investment region
7) Low land prices (Rs. 650/sq.ft)

Some of the reputed developers active in this region include Pacifica Sahara, Savvy and Safal. Residential units are primarily villas, selling at rates between Rs. 2600-3000/sq.ft.

Prahlad Nagar is another good area to consider. It is surrounded by premium areas, has a high income population and the prices are still relatively low. It is also close to the new business district on SG Highway and has good connectivity to the core city. Rates range between Rs. 2300-3000/sq.ft

One should also mention the Sabarmati-Gandhinagar highway, which is close to the airport and Gandhinagar as well as the upcoming GIFT city and Ecopolis, has good connectivity and infrastructure and will soon see many institute campuses like NID, IIT and DAIICT coming up.

JAIPUR

Jaipur has witnessed some of the best-planned and balanced real estate developments in commercial, retail and residential space. While affected by the current slowdown, Jaipur still manages to sail through on account of its growing population and sound purchasing power. After all, residential real estate in Jaipur is primarily driven by the demand from its existing population, which is now expanding the city beyond its present limits. While residential projects within central locations of the city have witnessed high absorption, the city seems to be expanding towards two new prime destinations for residential development.

Two key destinations with the highest investment potential in residential real estate include Ajmer Road and Jagatpura (both suburban locations).

Ajmer Road (NH-8)

• Drivers

1) Availability of land parcels to support large expansive townships as against low land availability within city limits
2) Low land prices
3) Proximity to Mahindra World City; Mahindra’s SEZ being developed close to Ajmer Road having campus developments by Wipro, Infosys, Deutche Bank, among others; this makes the region a potential business hub of the future
4) Rapid connectivity to neighboring towns of Rajasthan as well as the prime city of Jaipur with NH-8
5) Presence of numerous townships being developed by established developers like Vatika, Omaxe, Ansal among others provide multiple options for sound investment

Rates - Rs 2500-3000/sq.ft.

Jagatpura

• Drivers

1) Proximity to South Jaipur, the hub of upcoming institutional, commercial and retail developments. The location is also close to the new airport coming up, which provides good connectivity
2) Availability of land parcels to support large expansive townships as against low land availability within city limits
3) Low land price points and entry costs attracting good investor interest
4) Rapid residential development accruing to large number of townships and group housing projects and townships in and around the area
5) An upcoming destination as a residential hub, with a large concentration of government housing projects as well; a new expansion zone for the city population

Rates - Rs 2000-2500/sq.ft.

Current Market Scenario by Anuj Puri

Anuj Puri, Chairman & Country Head, Jones Lang Lasalle Meghraj:

There has been a moderate-to-mid slowdown overall. Retail investments have shown a sharper decline than institutional investments.

Financial institutions are finding it attractive to enter projects at reasonable valuations in the current market situation. Retail investors in residential property probably need to wait and watch till after Diwali to get good value.

Mumbai, Delhi NCR and Pune would have been the best investment options three years ago. The returns were about 30% p.a. Despite the current slowdown, returns are likely to be between 20–30% if an investor holds on for the long term. In the short-to-medium term, they will be considerably lower.

Provided that one does not pay excessively for a property, and further provided that one holds it for a sufficiently long period, thereafter exiting at the right time, returns will be the same. Only the time-frame for these returns has changed – not the potential. It is now a matter of holding power and investor maturity.

Short-term investment would yield much lower returns. To illustrate:

Delhi / NCR- Residential: 7-8%, Commercial: 11-13%
Mumbai - Residential: 7-9%, Commercial: 11-13%
Bangalore - Residential: 6-8%, Commercial: 11.5-13.5%
Kolkata - Residential: 6-8%, Commercial: 11-12%
Chennai - Residential: 6-8%, Commercial: 11.5-13.5%
Chandigarh (incl. Mohali, Panchkula, Zirakpur) - Residential: 6-8%, Commercial: 12-14%
Indore - Residential: 7-8%, Commercial: 12-14%
Cochin - Residential: 5-7%, Commercial: 12-13%

These figures are a reflection of rising property prices and increased risk. Expected returns are higher in riskier markets.

Contributed By : Arun Chitnis

MAHARASHTRA – REAL ESTATE SNAPSHOT

by Anuj Puri, Chairman & Country Head, Jones Lang Lasalle Meghraj:

In India, as in other parts of the world, the vigour of the economy is mirrored in the demand for and prices of real estate. Reserve bank of India has estimated that the real estate sector represents approximately 5% of GDP, being the second largest employer in the nation. Real estate can thus provide a glimpse into the marketability of a state.

To my reckoning, Maharashtra represents in this regard a unique market model – it is an amalgam of high business and, as a result, intense residential and commercial real estate activity. In fact, its operative trends are so firmly entrenched that we have not witnessed any significant slackening in overall activity despite the economic pressures affecting many other Indian states. However, there is no denying that there has been an impact. The cities of Mumbai, Pune and Nasik would serve as suitable illustrators for the current scenario.

In Mumbai, affordable housing has become an elusive dream. Skyrocketing rate appreciation brought on by the continuing demand-supply mismatch has boosted residential home prices almost completely out of the reach of the common man. It is definitely not an investor's market right now, owing to the generalized slowdown. Prices are stagnating and there may be a correction in certain locations over the next twelve months. Of course, factors like specific location sector and property typology will play a role. End users are advised to study property trends before buying a home for genuine self-use. It is possible that the area they have chosen to buy into may see a drop in rates over the next six months to a year. Meanwhile, Navi Mumbai – the new growth sector – offers options both for those seeking affordable homes and those who seek investment opportunities.

Pune benefited for a considerable period from Mumbai’s unrealistic. The recession in the American markets has weakened the commercial and residential markets. The slump in the stock market has caused investors to start moving out. Second home buyers are keeping away and end users are cautious in their buying, awaiting price corrections. Despite the generalized slowdown, developers continue to have holding capacity and there continues to be demand for mid-segment homes, 80% of which is Pune is driven by software professionals and recently relocated manufacturing sector executives. The highest demand is in and around Hinjewadi, Kharadi, Magarpatta, in and around SP Infocity and in and around Phursungi and Hadapsar.

Nasik, whose residential market grew at a rather leisurely pace until about 2006, suddenly began showing significant annual appreciation rates from the beginning of last year. Nasik had begun emerging as a realistic alternative destination for buyers who were discouraged by Mumbai and Pune’s high rates. It offered low entry costs and, at the same time, reasonably attractive appreciation rates. Another reason was the increasing presence of the IT/ITES sector there. In recent times, Nasik has been witnessing rather healthy appreciation rates; because of its relatively late entry into the real estate stakes, it was insulated from the regressive dynamics currently prevalent in the rest of Maharashtra.

Despite the slowdown, Maharashtra remains one of the foremost contenders in the real estate sweepstakes. All sectors – residential, commercial, retail, industrial and hospitality –continue to show an upward curve in the long term.

Contributed By : Arun Chitnis

PROPERTY 2008 : The Largest Property Super Market

2nd April 2008

Property 2008 an exhibitive extravaganza is all set to become a one-stop destination for potential property buyers in Mumbai

Maharashtra Chamber of Housing Industry – MCHI’s Property 2008 – 12th Real Estate & Housing Finance exhibition will be held at the Bandra Kurla Complex, MMRDA Grounds, Opp. Citibank from 17th to 20th April 2008, from 11.00 am to 8.00 pm. The exhibition is organized by MCHI and co-organized by LIC Housing Finance & SBI. The Gold Partners are HDFC & ICICI & Silver Partners, DHFL & AXIS BANK.

Spread over an area of 25,000 sq. metres consisting 3 A/c halls, Property 2008 will have leading property developers and Housing Finance Institutions (HFI) participating from Mumbai, Navi Mumbai, Thane and rest of India along with International property developers.

Mr. Mayur Shah, Convenor, Exhibitions MCHI said, “This being home buying season, buyers want to settle in their new homes before school starts in June, this Property Exhibition will ideal opportunity to select property of choice & budget. As summer vacations commences many home buyers find this a perfect time to buy a new home and shift during the vacations as well.”
As many as a 100 + Real Estate Developers including Global Corporations and pan-India project-developers will be here to share the platform and negotiate interpersonally with around 1,00,000 buyers. In the Residential Property category, on display will be 1-5 BHK Flats, Duplex, Apartments, Penthouses, Bungalows, Row Houses and more. The Commercial Properties will display Retail outlets in Malls ,Multiplexes, Commercial Shops, Industrial Galas, Office Premises, Corporate Parks, IT Parks, SEZ. The Financial Products section, around 15 HFI’s & Banks, will offer spot home loans at competitive rates as well as home loan insurance.

The participants at this Mega Exhibition will display their properties from Mumbai, Thane, Navi Mumbai, Pune, Goa, Bangalore, Chennai, Delhi, Hyderabad, Kolkatta, Jaipur, Kochi, Lucknow, Nagpur, Nasik, Panchgani, Karjat, Neral, Sangli, Lonavala, Murbad etc. To add International color there would be participation from locations such as Dubai, Australia etc.

A JOB Fair again with a differenceThis time, Property 2008 will also play host to a unique 3rd Job Fair specially designed for the Real Estate Industry: The rapid growth in Retail and Infrastructure has created such an opportunity for specialization in quality manpower in the real estate industry that it will seek to provide professionals a well honed platform for growth and advancement in their respective careers. The Realty Industry will be looking at Professionals such as Designers Engineers Technical Experts Accounts Finance Customer Service Administration Purchase Management Marketing.

MCHI has constantly endeavored to bringing innovative ideas and concepts to the markets. Even globally, it is relied upon by the entire housing industry, in bringing together participants from India as well as abroad, giving it a clear edge in the minds and hearts of Mumbai’s home buying public.

Maharashtra Chamber of Housing Industry (MCHI)MCHI, formed in 1982 has now become the most prominent body of real estate builders and developers bringing together members dealing in real estate and construction industry on a common platform to address issues facing the industry. Members of MCHI account for providing more than 80% to 90% of residential accommodation in Mumbai and its vicinity, and helps both the Central and State governments in meeting their constitutional obligations – providing shelter to the shelter less. MCHI works towards raising awareness among the general public, real estate and construction industry while providing them with exhaustive information on projects and new developments in and around Mumbai. With over 400 well-recognized and reputed member builders, MCHI is affiliated with leading industry associations like FICCI, IMC and CREDAI.

Highlights of Property 2008

1. The only official and largest real estate exhibition of India being organised by the Official Real Estate Body MCHI.
2. 100 plus developers showcasing more than 1500 projects
3. 15 housing finance companies & banks participating
4. MCHI Job Fair being organised concurrently.
5. Exhibition covers an area of approx. 2,50,000 sq ft.
6. Over one lac footprints expected at the exhibition.
7. Air conditioned aisles, registration areas, coffee lounge, food courts & comfortable A/C business lounges for one to one discussion in the exhibition.
8. Free drinking water facility for visitors will be available.
9. Free shuttle buses running to and fro from venue and main railway stations, Bandra (E) & Kurla (W).
10. Ample Car Parking facilities with Valet Service.
11. Entry is free for the exhibition.
12. Legal advice on Real Estate & Home Loan counseling will also be given at no cost to the visitors.

For Further Information please contact Prakash Mondkar Sobhagya PR – Sobhagya Advertising ServiceHand Held – 9820669034Land – Line 22661286/22662979 Email- sobhagyapr@rediffmail.com


Contributed By : Minal Arora