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6 major trends in Indian real estate in 2017

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6 major trends in Indian real estate in 2017

By Ramesh Nair, CEO & Country Head, JLL India 

These trends will shape – or reshape – the Indian real estate sector in 2017 and beyond: 

Global capital flow into Indian real estate will increase further 

India is ranked fourth in developing Asia for FDI inflows as per the World Investment Report 2016 by the United Nations Conference for Trade and Development. That is endorsement at the highest levels – and real estate saw equity investment on a very visible return journey to India last year. Indian real estate has attracted $32 billion in private equity so far. The global capital flow into Indian real estate in 2016 stood at $5.7 billion. 

Though the historic high of 2007 (in terms of total PE inflows) was not breached, last year proved to be the second-best year so far. Despite Brexit and uncertainty around the new US President’s outsourcing and visa-related policies, private equity activity also looks healthy in 2017 – thanks to a strengthening and modernizing economy, and the growing reputation of India as an attractive investment destination. 

India’s Tier-I cities moved up to the 36th rank in JLL’s 2016 bi-annual Global Real Estate Transparency Index. The catalyzing factors for this were improvements in structural reforms and the more liberalized foreign direct investment (FDI) regime. Increased transparency brings higher investments into such real estate markets. 

Thanks to changes in its regulatory framework, India is now way more attractive to both global and Indian investors. Increased consolidation and transparency – and the launch of REITs (Real Estate Investment Trusts) this year – will further whet their appetites for getting a piece of the Indian real estate pie. 

 

Developers will revamp their business models 
Throughout 2016, the number of new residential project launches was lower than units sold. With all states staring at the approaching deadline to implement their versions of the Real Estate Regulation & Development Act (RERA), most of them will definitely fall in line. This landmark law will enforce hitherto unprecedented transparency and accountability requirements for developers into the system, and do a lot to increase consumer confidence. Consumer activism, which has already been making news in recent times, will increase in distressed ongoing projects. 

And it’s not only RERA that the Indian real estate sector anticipates with bated breath. 

The Goods and Services Tax (GST) and the Benami Property Act will also have a major impact on how many developers run their businesses. Demonetization shook up the older ways of working, but did not affect self-governing developers with the right products targeted at the working masses. The rest have realised it is time now to revamp their existing business models if they want to remain in business at all. Market watchers who had despaired of the Indian real estate market ever shedding its tainted image have every reason to perk up now. 


Currently, the residential property market is dominated by end-users – speculative investors are making a beeline out of real estate as an investment category. Residential demand is expected to pick up only towards the end of 2017 – but the recovery will be sustainable and based on much sounder market fundamentals than transient sentiment. 

The commercial office space sector will get a strong shot in the arm with REITs. Real Estate Investment Trusts will have an important and long-term impact on developers and present them with the choice of either ‘corporatising’ or risking take-over by their bigger and better-organized counterparts. The pressure from funding agencies will simply be too strong to ignore. 

Corporate developers like Tata, Godrej, L&T, Bharti, Mahindra, etc., will acquire more projects, and corporate houses like Birla are gearing up for their maiden innings in real estate development. Institutional funding will increase. 

Co-working: More of India Inc. will move into ‘hybrid’ spaces 
Co-working spaces are popping up across Indian metros as well as Tier-II cities, providing start-ups with flexible working options at affordable rents. At last count, there were more than 100 operators in this space across India, though there is still very limited supply of co-working spaces available. However, this segment is slowly but surely moving into boom mode across India, given the many advantages that such spaces offer: 
*Cost-efficiency 
*Employee motivation and retention 
*Boosted productivity 
*Firms focused on agility who house their innovation teams in co-working spaces can induce a quicker learning curve to integrate them into the entrepreneurial ecosystem 
*The perfect option for companies who need their client servicing teams close to their respective client sites in locations with low office vacancy

Certain co-working operators will prefer leasing out parts of or the entire areas of their co-working office spaces ‘anchor tenant’ corporates. In other words, co-working operators and corporates will move into a ‘hybrid’ sort of space and increasingly rely on each other. 

 

The sun rises on affordable housing 
Affordable housing in India is finally set to get the much-coveted infrastructure status. One crore houses are to be built in rural India by 2019, and this vital segment will now see cheaper sources of finance – including external commercial borrowings (ECBs). Re-financing of housing loans by National Housing Banks (NHBs) can give a further boost to the sector. 

A new Credit Linked Subsidy Scheme (CLSS) for the mid-income group with a provision of Rs 1,000 crore in 2017-18 was announced even before Budget 2017-18. Extension of tenure of loans under the CLSS of Pradhan Mantri Awas Yojana (PMAY) was increased from 15 to 20 years, and the Budget also increased allocation to PMAY from Rs 15,000 crore to Rs 23,000 crore in the rural areas. 

The qualifying criteria for affordable housing were also revised to 30 sq. m. and 60 sq. m. on carpet rather than saleable area in the four main metros and non-metros respectively. This effectively increases the size of affordable housing market across India. Moreover, the demonetization of high-value currency notes will cause land prices to ease in the next few years – especially in far-flung areas around Indian metros and the Tier-II and Tier-III cities. The government’s dream of Housing for All by 2022 appears a lot more attainable now. 

Office sector transformation: From REIT to complete 
The first REIT listing is expected within the next few months, and prominent private equity funds such as Blackstone will likely be the first movers. REITs will attract institutional and smaller investors alike because of their inherent nature to provide regular dividends at relatively low risk. 

Smaller investors are especially excited at this new and easier investment opportunity because: 
a. Indian REITs will prefer to invest in commercial space developments – specifically the highest quality or Grade-A properties – because of the higher rental yields in this asset class; and 
b. Only 20% of an Indian REIT’s monies can be invested in development, which is the riskiest aspect. The remaining 80% of a REIT’s assets must be invested in income-producing property. 

The REIT potential in India is huge, with around 229 million sq. ft. of office space currently being REIT-compliant. Even if 50% of this space is listed in the next few years, we are looking at a total REIT listing worth $18.5 billion. Moreover, India’s stock of Grade A commercial assets is increasing, with REITs acting as a sure-fire growth catalyst. 

More industry consolidation on the cards 
Slowing sales and lack of financial prudence among several developers is leading to a fairly obvious conclusion – consolidation. The overcrowded real estate sector is going to become a lot leaner and meaner, with consolidation happening by ways of joint developments and joint ventures between landowners and/or small developers with bigger, better-organized players, smaller developers being bought out by larger players, and struggling developers cashing in their land banks by selling them to players with stronger balance sheets and appetite for growth. 

The pace at which this happens will depend on how much equity gets infused into the sector by the larger PE investors, and the strategy that foreign and domestic developers adopt. Some foreign developers have already entered the country, setting up base and obviously playing for keeps. 

Some investors and developers will take plunge into the market now, while others will prefer to ride the fence for a while; but one way or the other, consolidation will be the name of the game for the Indian real estate industry over the next five years. Larger players will peak in strength by around 2021, and smaller players will be eroded. Equity investment – or the lack of it – will play a deciding role. 

SOURCE: ECONOMIC TIMES

 

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Magicbricks Ads Singing And Dancing To Housing

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Magicbricks Ads Singing And Dancing To Housing

Magicbricks, the online real estate portal, launched India’s first musical real estate commercial. The platform offers over 14 lakh listed properties. With the dancing and the song ‘Property Ka Supermarket’ they hope to offer a shot of positivity.

The ad is about a young couple who are looking for their perfect home while sitting on their couch. Once the app fires up the couple is transported to a supermarket, where shelves are stocked with all sorts of homes. The song in the background goes like “One, two, three, four, saare BHK. Bungalow, villa, flats hatke. Ready-to-move-in any time, Possession mein ya hai time. Oonchi price, neechi price, sasta-sundar-sabse right.” It has also got a catchy tune for anyone to voluntarily start humming it.

The idea behind the ad was to communicate all that Magicbricks, a Times Group company, has to offer at every stage of the buyer’s expedition. Right from their range of properties to home-search related services like experts backing and buyer reviews.

Prasun Kumar, Magicbricks marketing head, points out, “There was genuine consumer interest that came back in the industry, believing that there’s a clean-up act happening and as a buyer, you’ll probably get better value for money now. However, due of multiple policy interventions, interest was not converting to deals.”

This obviously left the builders in anguish. According to the experts, consumers were desperately seeking reassurance. He added, “With this backdrop, we realized this festive season would be a window of opportunity to go to consumers with a different narrative. We realized the external factors are not conducive to a very emotional, melodramatic approach. We needed a mood refresher.” Thus the answer was Bollywood song and dance. Thus, stressing on the point of quality, trust, choice and best deals.

Another myth that it bursts is that buying a home is a man’s job. Kumar said, “The image is that real estate is a masculine category. This is also part of the challenge because all of a sudden 50% of your TG is out of your purview.” However, the fact remains that it is a joint decision of both man and woman.”

Nevertheless, not everyone seems convinced with the ‘property ka supermarket’ idea. Karthik Srinivasan, national lead, Social@Ogilvy points out that supermarket is generally where you get a lot of cheap things. Moreover, he isn’t very happy with the execution, as according to him it doesn’t do justice to the idea well enough. He adds, “I read the material that was released with the ad (Every agency does this.) It went ‘property ka supermarket’, first musical real estate ad, etc. It’s a tall claim. There is an interesting germ of an idea that is the property market is gloomy because of RERA and everything, and they wanted to make it light, musical, positive and buoyant. But the execution wasn’t as interesting as the idea itself.”

He concluded by saying, “What remains to be seen is if the houses do the real estate equivalent of flying off the shelves.”

Also Read: INIT Mumbai Wins The Prestigious Realty Plus Excellence Awards 2017

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Tanvi Group Fail To Deliver Homes And Declare Bankruptcy

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Tanvi Group Fail To Deliver Homes And Declare Bankruptcy

Another case of delay in project completion and possession has surfaced, once again escalating investment fears for home buyers. Tanvi Group is under scrutiny at present. The group has declared bankruptcy.

They have taken 1000 crore as 50 percent advance for almost 500 flats in their Dahisar project. They have now filed for insolvency and all their project construction have stopped leaving the buyers in a lurch.

Almost 200 families have invested in their Kashimira project – Tanvi Eminence. The project started in 2010 with possession committed in 2013 however even after 7 years the construction remains incomplete and no sign of possession. More than 100 home buyers gathered at Kashimira in Mumbai to protest against the delay in completion of their housing project.

Tanvi Group is also accused of building 20 floors at Tanvi Eminence while they only have the permission to build 11 floors. Buyers have also registered a complaint at the Kashimira police station. According to sources, there are four partners namely Vijay Kumar Hegde, Sangeeta Hegde, Bhupat Lukhi, Dayabhai Sutaria in this project but due to their internal disputes, the projects have been left hanging.

A disgruntled buyer said, “Last seven years we all have been waiting for our houses. We have invested our hard earned money here. All we ever get is new promises and new dates of delivery. Due to builder’s internal conflict, they are playing with our emotions and money and this has been happening for the past 7 years. We even tried to cooperate with them but now all we want is our houses.”

One of the partners at Tanvi Eminence, Dayabhai Sutaria said, “I have filed lawsuits against my two partners Bhupat Lukhi and Vijay Kumar, for not cooperating with me and taking this project forward. My sentiments are there for the home buyers who have invested their money.”

While Vijay Kumar, Partner at Tanvi Eminence said, “Mr. Dayabhai is holding payment of more than 20 crores and Bhupat approximately 7 crore which is sufficient to buy the TDR and start construction. They are misleading all the buyers.”

There is no doubt that MahaRERA Act is tightening the noose around the developer community. However, according to legal experts, some of them may have found liquidation proceedings or the bankruptcy law as an avenue to escape the ambit of the state regulator.

Experts have predicted incidences of insolvency to go up going forward as builders may be able to transfer the losses to property owners.

As for the home buyers, it is in their best interest to check if the project they want to invest in is RERA compliant and all permissions are in place. Instead of delaying your decision to buy a property, it is better to make informed decisions to stay above any traps.

Also Read: 50% Growth For Nashik Realty Sector Since Ganeshotsav

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Insomniacs Bags The Digital Marketing Campaign Of The Year At The Realty Plus Excellence Awards 2017

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Insomniacs bags the Social Media Campaign of the Year at the Realty Plus Excellence Awards 2017

It is a big moment for the Mumbai-based digital media agency Insomniacs. They won the prestigious Realty Plus Excellence Award for the Raunak Group’s ‘Darr Ke Agae Ghar Hai’ campaign.

Raunak Group, an established realty brand in Mumbai, was going through the aftermath of the demonetization. They recognized the problem as clarity – consumers had no clarity and nor did they have a trusted source that they could turn to. The developers were sitting with folded hands waiting for buyers to knock their doors while the unsold inventory had become a huge cause of worry.

This is when team Insomniacs believed was the opportune moment to send out a strong message. Pranav Patadia, director, said “When an opportunity knocks at your door, you need to recognize it and make the most of it. We were given a challenge and we wanted to tackle it in a unique way; in the process offering a solution which has never been attempted before. The result of that effort is in front of us.”

The idea was to emerge out of the rumours and make people believe in the offers instead of just rotating advertisements in the market. When the market hit rock bottom, getting people to visit the project sites was a herculean task in itself. Thus the “Darr Ke Aage Ghar Hai” campaign was created.

The campaign was supposed to bring to light the many fears that home-buyers face today. “Darr Ke Aage Ghar Hai” engaged the masses on social media and dispel these fears, systematically and ultimately. One of the major fear-inducing problems the customers faced during demonetization was the prolonged delay in possession. Raunak Group with the team’s assistance aimed to successfully resolving this and many other issues.

Shyamal Mody, Marketing Director Raunak Group stated, “I congratulate the team for the award and the campaign that they introduced. It is a pleasure to work with such a dedicated team. Raunak Group sold inventory worth 50 crore for 1.23% marketing cost. The best part was that people could actually find solutions to their property problems and most of them ended by up a house for themselves.”

There was a lengthy ground research involved along with an impactful campaign on social media channels and on-ground activities. Even a micro site was created ‘A2Z of Darr’ which highlighted various home buying fears of a customer, providing detailed solutions for each and every problem.

The team managed a highly successful campaign with highest ever sales recorded by any real estate group. Govind Rai, Director, Insomniacs added, “The idea was to create a campaign for a larger impact. We were fully aware how the campaign could be advantageous on other media platforms. The fact that other ad agencies carried out our campaign talks lengths about its success.

It was indeed a well-deserved win. We congratulate the team at Insomniacs.

Also Read: Realty NXT Does a Survey On Why People Feel Scared to Buy Homes

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