Realty axis

Realty marketing firms go for hardsell

Faced with falling residential demand, they woo home buyers with cars, fitouts, parking discounts.
The Bangalore property market has entered the wooing phase with plot and home buyers being offered gratis cars, lifestyle accessories and clubhouse memberships as inducement.

People familiar with property market say this initiative, being led mainly by property marketing companies and a few investors or speculators, is unhealthy. They are doing this as they have put their money into properties at overheated locations and are now desperate to exit.

According to Shivram Malakala, executive director, Habitat Ventures, “In the Bangalore market, there are two streams at work. One is by the developers, where it is typically reduced down-payments to book, with balance payable on possession, or offer of add-ons such as home improvements, free interiors or free club membership.” This is typically provided by the developer directly or along with a financial institution.

“The second stream is that of the marketing companies, which market projects developed by third party builders and developers, offering freebies. Invariably, in these projects, a customer can buy without the freebies at a lower price as well.” One “concern” with this model is that after the sale is concluded the relationship is directly between the purchaser and the developer, with the marketing company with whom the sale was concluded being out of the picture.

“When looked at closely, these incentives do not have any significant monetary value. Rather, they are psychological encouragement put in place to catalyse the project’s off-take. Gratis offered by investors or speculators is valued around 12-14 per cent of the flat or plot price,” said Anuj Puri, country head, Jones Lang LaSalle Meghraj.

Shveta Jain, associate director, residential services, Cushman & Wakefield-India said, “In the present market scenario in Bangalore wherein supply has clearly outstripped demand, freebies of different kinds are essentially being used by different developers as a marketing tool to augment the sale of their products.”

“Most of the developers in Bangalore are offering to bear the pre-EMI cost. Some are also offering fitted out kitchens and discounts on parking space. But the big discounts have been offered by marketing agencies. To name one, Orange Properties, a marketing company, promises a free car for a property of a certain value and more,” she added.

Among the developer community there is no such thing as a free lunch, and this holds true in the present real estate scenario as well. In a period where ‘subsidised lunches’ are being offered by speculators, the developers are offering add-ons. Developers are just offering rate discounts but not below the base cost which includes the cost of land and construction.

Property developers, who are in the business for the last 10 years, are delaying new project launches and are only offering 3-5 per cent discounts on property values or free fit-outs.

“This trend is more product-specific than city specific and can be witnessed across most of the prominent Tier 1 and Tier 2 Indian cities. This strategy is not bound by geographical limits and it would be safe to presume that this is an international trend during the trough in business,” observed Jain.

This practice of offering freebies is not unique to Bangalore, but is also practiced in other metros in less-preferred locations and more prominent in Tier II cities.

“This phenomenon exists at some level or the other all over the world, but probably not with the lack of finesse and reservations that exist in India’s current real estate scenario,” added Puri.

Source - business-standard.com

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Major Fall Unlikely In Bangalore, NCR, Mumbai Office Rentals

Office rental prices are unlikely to see any major fall across the country’s three major business hubs National Capital Region, Mumbai and Bangalore even as the commercial realty markets in these areas are expected to witness a significant surge in supply, a leading real estate consultancy firm said.
While Bangalore is expected to witness further rise in the average office rentals, those in Delhi and adjoining areas like Gurgaon and Noida as well as Mumbai are expected to remain mostly flat in the short to medium term, CBRE said in its latest office market review for Asia-Pacific region.

Only certain small pockets in National Capital Region (NCR) and Bangalore could see a correction in prices in the near future, while any downward correction is very unlikely across Mumbai region, it said.

“The National Capital Region (NCR; including Delhi, Gurgaon and Noida) is expected to witness flattening trend in rentals over the short to medium-term,” CBRE said.
“However, some micro-markets with forthcoming supply is likely to experience a marginal value correction in the next six months,” it said, adding there would be significant additional supply in Gurgaon, Noida and Jasola in South Delhi.
CBRE noted that in preparation for hosting the Commonwealth Games in 2010, rigorous efforts have been made to improve infrastructure all across the NCR.

For Mumbai it said, that with over one million square feet of corporate office supply currently available and another nine million square feet ordinary office space expected to come online in the next two quarters, rental values are likely to remain stagnant.

Source - Noidascoop.com

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Home buyers, shop around for a good deal

Developers today are offering discounts, freebies and value add items. This includes discounts in values, freebies in amenities like free parking space or lifetime club membership, value adds like providing interiors and ready-tomove homes.

Discounts would mean reduction in the upfront money the customer would be paying to the developer. Freebies like parking spaces would mean anything between Rs two lakh to Rs 15 lakh. In Borivali, for instance the parking charges are anything between Rs 2-3 lakh, beyond Andheri upto South Mumbai , it is anything between Rs 3.5 lakh to Rs 15 lakh.

Value-add interiors will include white goods like refrigerators, modular kitchens and so on. Ram Yadav, head, finance and strategy , Orbit Corporation says,

“It all depends on how you position your project. Builders are trying to put together all these three elements for their customers, but again, it is not across the board.”
Buyers can get good options and there is room for negotiations, point out industry sources. Builders are now ready to meet customers and are not wanting to let go of those coming in. Incentives are given across the table, depending on the project. Where there is 100% down payment, the incentives are greater. It can go up to 3-5 % depending on the developer and his need.

Explains Vivek Mohanani, director Ekta World, banks are giving advance disbursement facilities, based on the developer and his project besides profile of the buyer. Where the developer gets a lump sum amount in advance at an early stage of the project, he is ready to give more benefits to the buyer of say Rs 100-200 per sq ft. The benefits in such cases would be more compared to a project at its fag end.

“There are small discounts in the rates to accommodate customers,” feels Suresh Haware, director Haware Builders. Builders who have purchased lands at high costs will find it difficult to offer discounts but those who have bought at cheaper rates will, depending on the project, offer 2-5 % discounts. He adds that the rising interest rate costs means that banks too should come up with innovative products as their business too is affected.

Cash discount is the best discount, says Rajan Bandelkar, director, Raunak Group. Developers point out that a home buyer can get a good deal forhimself by enquiring with various builder offices on discounts being offered . Brokers too will be in the know of the best discounts available and projects giving value for money.

The overall mood of the home buyer with the interest rate costs and inflation is to wait and watch, says Devang Trivedi, MD, Progressive Group. He, however, adds that in new projects where a builder requires cash flow, he doesn’t mind going ahead with discounts.

Also where there are five to six builders coming together for a project, they would like to come out of the project at the earliest and would be offering discounts even to the tune of 20%, as they need to run the show. Such discounts will definitely trigger sales amongst the fence sitters, adds Trivedi.

There are builders who have opened their projects at Rs 8000 per sq ft and then after testing the waters, have brought it down to Rs 6250. Prajapati Constructions is offering open parking space and registration free of cost, which means a reduction of about Rs. 100/sqft in the price. Apart from this, flats not well positioned, like those facing busy roads, are priced Rs. 100 less per sq ft. If, say, the project price is Rs 5,000 per sq ft, with these concessions it would come down to Rs 4,800 per sq ft, says Rajesh Prajapati, director, Prajapati Constructions. Buyers can also look for more hefty discounts in case of flats held by investors who may look to reduce prices by around Rs 400-500 per sq ft.

He may not get the choice he would, with a builder, but if he finds a suitable apartment he stands to benefit.

Industry sources point out that while everybody is offering discounts, few are open about it. The reason being that in real estate traditionally, such non-Diwali offers are interpreted negatively, to mean the builder is under pressure.

Ram Yadav of Orbit Corporation argues that if a white goods manufacturer can make such offers why can’t developers, who are also in business, not want to position their projects and sell it with discounts and other offers. “You are pushing your volumes by doing it.”

Prajapati agrees there is a stigma attached to selling flats at a lower price or giving discounts to sustain sales. In the last few months however, there has been an unprecedented boom and even builders who have not been in favour of raising the prices, have been forced to do so in order to keep pace with their competitors. Now they are again caught in a trap and fear that too much publicity about sops given, would make them susceptible to undercutting in prices from competitors.

As the customer goes shopping, there is a funny side to it. Builders lament that there are customers who brandish their loan sanction letters from banks and tell them they have seventy per cent of the funds and the margin money, and hence would like to know what concessions the builder can give them. There are others who enquire about the sops being offered, only to say they would get back later after consulting their family, but to never come back; they have probably gone to somebody offering better discounts.

Source- Timesofindia.com

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Realty slowdown delivers late punch to buyers

NEW DELHI: Realty slowdown is delaying delivery of homes. Several developers have postponed execution of their housing projects as funds become scarce, demand softens and raw material prices rise. While some others are deliberately delaying projects in order to reduce supply as demand weakens.

Several projects across the country are getting delayed as developers aren’t able to generate enough cash to continue construction work. Projects are delayed by as much as 6 months to over a year. “Funding is largely unavailable. Those developers who can access funds are also shying away from it since it has become very expensive. In addition, income from sales of housing units has declined with the softening of demand ,” says Cushman & Wakefield executive MD Sanjay Verma.

All developers are facing the heat on account of high interest rates, which the country’s central bank has been hiking in order to tame inflation . Mid and small developers are faring worse as banks have almost shut their door on them.

“It is a tough time for real estate firms. A weak demand is affecting cash flow. Moreover, the cost of debt and construction has risen. How can one continue construction with the same pace in this environment,” says a senior executive at Omaxe.

Some developers cite usual reasons such as delayed government sanction and unavailability of men and material for the current unusual delays. “Till the last month, steel was difficult to procure even at a very high rate delaying execution of projects ,” says Gaursons joint MD Manoj Gaur.

Not all delays are forced by just funding or material constraint. Says Sanjay Verma of Cushman & Wakefield, “Some developers are not minding delaying projects as they feel a reduced supply of homes will help them sustain prices in the face of slowing demand.”

In such cases, early buyers in the project are surely going to suffer as they will have to wait for a much longer time for delivery of their dream homes. Verma feels the scenario in real estate is unlikely to improve for at least one year as interest rates are expected to remain high.

Source - Economic times.com

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Greater Noida farmers, UP govt arrive on agreement in land row

New Delhi (PTI): In an apparent softening of stand, farmers of Ghora-Bachera in Greater Noida on Wednesday left it to the UP government to seek legal advice on ways to provide them with the dues of land acquired from them in 2006.

On August 13, villagers had clashed with the police, seeking enhanced compensation for land acquired from them by the state government, leaving four dead in police firing.

UP Minister Thakur Jaiveer Singh and State Cabinet Secretary Shashank Shekhar Singh today held parleys with the Greater Noida Kisan Sangarsh Samiti here to discuss the issue.

After the meeting, Cabinet Secretary told reporters that the farmers have agreed to leave it to the state government to find legal ways to get them their dues.

He explained that once the compensation is given, no further compensation could be provided for the same land.

“However, we will take legal advice and look into demands made by the farmers for more compensation earlier. If there are provisions to give more compensation it will be handed over to the farmers,” he said.

The Samiti also submitted their charter of demands to the representatives of the state government. The demand included withdrawal of police cases, more compensation to those killed and repair of damaged property during the clash.

The state government said no further police action will be taken against the farmers and also announced to increase the compensation to Rs 10 lakhs each to next of those killed in the police firing.

The government also agreed to provide a plot to erect statues of the farmers killed in the clash. It also agreed to bear the entire medical expenditure of those critically injured in the August 13 incident.

source - the hindu

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Unitech: Realty Check, The Management Has Sounded A Cautionary Note

In its balance sheet for the year to March 2008, the Unitech management has sounded a cautionary note. “It is quite clear that after a fairly long bull run, the real estate sector in India has begun to show signs of slowing down to a more realistic equilibrium rate of growth. The first signs of market slackening were evident in the second half of FY08. The correction has become more pronounced thereafter.”

In the June 2008 quarter, revenues for the developer were up a somewhat disappointing 19 per cent to Rs 1000 crore y-o-y although the operating profit margin improved 114 basis points y-o-y to 59 per cent due to increased contribution from the residential segment. The profit after tax was pushed up by lower outflows on interest and a lower provisioning for tax.

The company has been able to rope in an investor for a project being executed by Shivalik Ventures—a joint venture between Unitech and local Mumbai developers.

Lehman Brothers Real Estate will invest Rs 740 crore for a 50 per cent stake in the first phase of the project to develop one million square feet in Mumbai.

The inflows should help ease Unitech’s cash flows — the company’s gross debt is estimated at around Rs 8,600 crore and analysts estimate that the average cost of the debt should be about 12 per cent. Outflows on interest had increased to Rs 280 crore in FY08 from Rs 120 crore in the previous year.

It is believed that a couple of the firm’s projects in Chennai and Hyderabad may have been pushed back because of delays in approvals. The firm has a strong presence in the eastern and northern parts of the country and residential projects account for close to 75 per cent of its land bank.

Of the approximately 55 million sq feet under construction currently, about 30 million sq ft is in the residential segment. In its balance sheet for the year to March 2008, the Unitech management has sounded a cautionary note. “It is quite clear that after a fairly long bull run, the real estate sector in India has begun to show signs of slowing down to a more realistic equilibrium rate of growth. The first signs of market slackening were evident in the second half of FY08. The correction has become more pronounced thereafter.”

In the June 2008 quarter, revenues for the developer were up a somewhat disappointing 19 per cent to Rs 1000 crore y-o-y although the operating profit margin improved 114 basis points y-o-y to 59 per cent due to increased contribution from the residential segment. The profit after tax was pushed up by lower outflows on interest and a lower provisioning for tax.

The company has been able to rope in an investor for a project being executed by Shivalik Ventures a joint venture between Unitech and local Mumbai developers.

Lehman Brothers Real Estate will invest Rs 740 crore for a 50 per cent stake in the first phase of the project to develop one million square feet in Mumbai.

The inflows should help ease Unitech’s cash flows the company’s gross debt is estimated at around Rs 8,600 crore and analysts estimate that the average cost of the debt should be about 12 per cent. Outflows on interest had increased to Rs 280 crore in FY08 from Rs 120 crore in the previous year.

It is believed that a couple of the firm’s projects in Chennai and Hyderabad may have been pushed back because of delays in approvals. The firm has a strong presence in the eastern and northern parts of the country and residential projects account for close to 75 per cent of its land bank.

Of the approximately 55 million sq feet under construction currently, about 30 million sq ft is in the residential segment. Analysts estimate the net asset value of the firm at around Rs 200 per share for FY 10. The stock currently trades at Rs 165.

Source: Business-standard 20-Aug/2008

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Greater Noida farmers demand dismissal of Mayawati government

Hundreds of farmers gathered here Monday demanding the dismissal of the Mayawati government and protested the acquisition of farmland by the Uttar Pradesh government at what they claimed were cheaper rates. At a massive meeting held at Ghori-Bachhera village, the farmers announced that they would meet President Pratibha Patil and United Progressive ALliance chairperson Sonia Gandhi to submit their demand for dismissal of the state government.
Farmers gathered from the nearby districts of Bulandshahr, Aligarh, Baghpat, Meerut, Muzaffarnagar and Ghaziabad to condemn the police firing on farmers on Aug 13 in which five people were killed and passed a resolution that the farmers would not allow further acquisition of their land.

Farmers’ leader Raj Kumar Bhati said: “The authorities forcibly acquire farmers’ lands at a very meagre price and then sell these at a very high premium - more than 100 times. The land is the only livelihood of the poor farmers. After the acquisition of land, the farmers become jobless and their unskilled generations do not get any job. Therefore, to save their families, no further land acquisition is acceptable to us.”

“If the land is required for any development, it should be bought directly from the farmer through negotiations at the prevailing market rate,” added Bhati.

The meeting passed a resolution that criminal cases filed against farmers be withdrawn immediately, the compensation amount to the families of the farmers killed in police firing be raised from Rs.300,000 to Rs.1.5 million and a job be provided to a member of the family whose land had been acquired, Bhati said.

Bijendra Bhati, district president of the Samajwadi Party, said merely the transfer or suspension of the guilty police officials was not enough. A case of murder should be registered against the then Circle Officer (Police) Kuldeep Singh.
Earlier, the district administration fortified the entire district by barricading the entry points at several places. Senior leaders Ajit Singh, Digvijay Singh, Sachin Pilot, and Mahendra Singh Tikait were reportedly stopped en route. Farmers’ leader Tikait was detained at Meerut while other leaders were arrested at UP Gate and Lal Kuan.

On Aug 13, about 2,000 farmers had gathered outside the Greater Noida authority office to demand higher compensation for the land acquired in previous years for infrastructure projects, including industries and an international airport which have now been shelved.

The police initially resorted to a baton-charge to disperse the farmers, who had intensified their agitation and wanted to storm the authority office. When the baton-charge failed to quell the angry farmers, the police opened fire in which five farmers were killed
Source IANS

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Greater Noida launched 30 mtrs and 40 mts houses

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Q2 sees residential market stabilising in the National Capital Region

Availability of new supply, shrinking demand from investors and rising interest rates have led to the `stabilisation’ of capital values in high-end and mid-range residential market across the National Capital Region, Bangalore, Mumbai and Pune during the second quarter of 2008. Gurgaon’s high-end segment was the sole exception, logging a substantial growth of 17 per cent in the last quarter.
The quarter also saw developers moving less aggressively on fresh project launches, and instead focusing on individual projects and increased amenities to generate buyer interest.

However, the rental market got a boost in the current economic environment, and saw increased demand for leasing of residential properties. However, despite this, rentals across most areas `stabilised’, barring a few projects in both high-end and mid-range sectors, since the first quarter, due to ample supply in the market, a Cushman & Wakefield report said.

According to Aditi Vijayakar, Director of Residential Services at Cushman & Wakefield, “The current economic scenario and the volatile stock market situation have changed the outlook for investment options in this sector. The market now is suited for long-term investors; more for end-users than for investors looking at short-term capital gains.”

“Home buyers have been hit the hardest by the current economic situation, which couldn’t possibly have come at a worse time (than) when the sector had already witnessed a slight cooling off in demand after a price cycle,” the report said. At a time when investing in a house has begun to be treated cautiously by end-users, the interest rate hike may lead to new home buyers keeping away from the property market at least for the time being.
On the bright side, various governmental policy decisions such as reduction in stamp duties, better infrastructure initiatives, focus on affordable housing, etc., are creating growth corridors across the country for new residential developments.

source - Sify.com

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Realtors To Correct Prices In 2nd Half. Festival Bonanza On The Cards For Home Buyers

Srinivas Raju, the media manager at Mudra Retar, has been reading about a slowdown in the realty market for quite some time. He, however, is yet to see price cuts that can make his dream home in Mumbai affordable.
Raju might not have to wait too long. Diwali might bring good news his way, as developers are expected to start correcting their prices in the festive season.

Pankaj Renjhan, managing director (Mumbai) at real estate consultant Jones Lang LaSalle Meghraj, said the realty market has fallen by 5-25% across India.

But developers still haven’t directly cut the prices of their properties and resorted to freebies and add-ons to push their projects. The festive season may throw up some discounts for home-seekers, who may also up their budgets somewhat to cash in on the real estate slowdown, said analysts.

Among the developers who are betting big on the festive season is Oberoi Constructions, a Mumbai-based real estate player who has lined up three projects for sale during Diwali.

Jones Lang LaSalle Meghraj’s Renjhen said he was expecting some selective stock movement in Diwali. “The movement will be driven by those who are being fence-sitters now,” he said.

India’s biggest property developer DLF will launch residential schemes in Kochi, Chennai, Hyderabad, Chandigarh, Lucknow, Gurgaon, Bangalore and Delhi for the season.

Ramesh Sanka, chief financial officer, DLF, said the company hopes to sell more units in the second half of the year. “The festive season is better for sales. It starts from
Ganesh Chaturthi, then Diwali, Sakranti and goes up to February,” he added. DLF will unveil some of its mid-income projects in Hyderabad, Amritsar and Ludhiana in the period.

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India Infoline analysts expect a recovery in volumes in the second half of the year as developers “launch a series of new mid-income residential projects at prices that are at a discount”.
“We have a massive land bank. Going forward, we will concentrate on executing our current and announced projects rather than on randomly buying land,” a DLF spokesperson said.

The spokesperson added that the company has enough land bank for the next `10-15 years’ and four years from now, it hopes to `develop an area of 50 million sq ft per year’.

Amit Sarin, executive director at Anant Raj Industries, a real estate and infrastructure developer in north India, expects higher cash flows in the second half of the fiscal. “The units we will lease in the second half will be more than the first half. The pipeline is almost ready. From the third quarter, we will have lease income that will contribute to our revenues,” Sarin said.

Vikas Oberoi, managing director, Oberoi Constructions, said that the projects would be `aggressively but correctly priced’.

“We cannot fool the buyers because it’s the buyer that first comes to know about the market situation,” he said, adding that freebies and sales gimmicks don’t work with the end consumer anymore.

“We won’t offer freebies because we feel the buyer is aware of how much a car or a world tour costs. Effective pricing is all that will take the realty game ahead. We are expecting good sales during Diwali,” he added.

Source - DNAindia.com

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