Saturday, 3 November 2018

As real estate churns, it’s the customers now calling the shots

Real estate developers are customizing products and are paying attention to what buyers really want from their residential properties.

Bengaluru/Mumbai: Compact homes in the city or villas in suburbs? Credible developer or deep discounts? Ready-to-move homes or an under-construction projects? What is the elusive homebuyer looking for?

As the residential market undergoes a churn, it is the customer who is calling the shots, forcing developers to customise products and pay attention to what buyers really want.

Manasi Lahoti, 31, and her husband Manish, 35, both employed in the financial services sector in Mumbai, are house-hunting with a ₹60-65 lakh budget, for a home within city limits.

“We don’t mind compromising on the size and settling for a one-bed home but it can’t be too far, and be easily commutable. Today, price is negotiable but there are not many options,” Manish said.

In Mumbai, India’s most expensive property market, developers are shrinking home size and making them more affordable, with not many takers for luxury units.

An October survey of 300 builders by QuikrHomes said 50% of developers are launching affordable projects for under ₹50 lakh per home, with Mumbai, Chennai and Kolkata leading the trend.

Builders also think that the blend of social media and customer experience can work wonders for sales. Virtual tours, presentations and customer experience play an important role.

“...Fulfilling customer experience matters now more than ever as the decision to take that final leap into buying a house depends on it,” it said.

Navin Makhija, managing director of property developer Wadhwa Group, said apartment sizes have significantly shrunk to make them affordable for the larger population. “There has also been a demand for homes sub-₹1crore. Large, credible developers never tried entering that space in a big way but with government’s Housing for All initiatives, they are seeing the mid-income and affordable housing segments as lucrative,” Makhija said.

This year, Wadhwa launched its township project Wisecity, Panvel on Mumbai’s outskirts with one-bedroom apartments (289 sq. ft to 400 sq. ft) priced at ₹25 lakh upwards. Nearly 1,500 units have been sold in the last six months.

Om Ahuja, chief operating officer—residential business at K Raheja Corp, said it is planning to launch a mid-income project in Airoli, with 3,000 units because of its huge potential.

Affordable homes, because of high land prices in Mumbai, are still being taken up only in the far-flung outskirts of the city, said analysts. Mumbai’s Marathon Group managing director Mayur Shah said the company is trying to bring in buyers into the city from the outskirts. Its newest project NeoSkies, in suburban Bhandup, is selling 199 sq. ft studio apartments for ₹43 lakh along with other kinds of units.

Anuj Puri, chairman, Anarock Property Consultants, said buyers in Mumbai prefer compact homes and want an all-inclusive price, with no added costs.

“Developers have realized that the luxury story will not work. Prices have corrected and more buyers are coming out because prices are getting more affordable,” Puri said. There is demand for smaller homes in the National Capital Region (NCR), but places like Gurugram have density norms so they can’t make smaller apartments. “NCR buyers research on the developer’s credibility and delivery track record. Besides the location, buyers want a sweet deal or an outright discount,” said Getamber Anand, chairman and managing director of Noida-based ATS Infrastructure Ltd.

Price is usually the main determining factor for young buyers, and affordability and compact homes are a common pattern in newly launched projects.

M. Murali, CEO and managing director of Shriram Properties Pvt. Ltd, said the brand of the developer is important to sell in Bengaluru and Chennai. Price and location, preferable closer to workplaces, come next. Homes priced at ₹40-50 lakh in Chennai and ₹40-70 lakh in Bengaluru are preferred by buyers.

“Even if you have a good price, but the developer is unknown, it’s difficult to sell. Buyers are more informed today,” said Murali. To tap into a broader buyer base, Shriram is launching 700-850 sq. ft homes for around ₹20-30 lakh.

“...Everyone is trying to work around products to fit in one-bedroom and studio apartments. Smaller size apartments that cost below ₹1 crore were hardly there in the past. This is what the market wants today and developers will only make what the market requires,” said Gaurav Gupta, director, Omkar Realtors and Developers. It has launched three projects in Mumbai with flats (1 BHK) priced at ₹76 lakh up to ₹1 crore. Apartment sizes are between 333 sq. ft to 387 sq. ft.

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Friday, 17 August 2018

Getting ‘Real’ About Mumbai Real Estate

  • 17,000 ready-to-occupy homes for sale in Mumbai.
  • 1.50 lakh to be delivered in next 3 years.
  • Overall unsold inventory would fill 2,300 football fields or 7,700 cricket stadiums.
  • 46% of supply in Q2 2018 was affordable housing.
  • Cash creeping back into realty, but pace curtailed by the new regulatory environment.

Real estate is close to the heart of most Indians who at some point want to buy or sell a property. The reasons could be emotional and investment-driven, and often both. And, of course, nothing defines Indian real estate quite like Mumbai does.

Call it by any name you want to - India’s financial capital, Maximum City, or the city of dreams and opportunity. One thing is sure - it is India’s most expensive housing market. Property prices here had increased by as much as 7-10 times over the past 20 years.

Today, the average number of monthly incomes required to own a home in the city is the highest among its other counterparts. Depending on where in Mumbai you want to buy a home, you are putting anything between 67-90 times your entire monthly income on the line.

Growth Constraints

While Indian real estate is rarely out of the news, probably no city's real estate market gets as much media attention as Mumbai's. That’s not surprising, considering that merely 5% of the people living in the city today can actually afford to buy a home here, either outright or with a home loan.

Mumbai sees roughly 50 new people coming to live and work in the city every hour. Approximately 2-3 lakh Indians arrive in the city every single year, looking for jobs or to make their entrepreneurial dreams come true.

However, the city itself is not growing in tandem. It is hemmed in by water on three sides and cannot accommodate the circular kind of development - the kind that spreads outward from a central focal point - that we have seen in most other Indian cities.

In Mumbai, development can literally take place in only two directions - from the south towards the northern suburbs, and upward.

The Problems with Going Vertical

While building super-tall skyscrapers is one way around this limitation, how many can one build before the whole system breaks down.

A fully-occupied 40-storeyed skyscraper with 1600 apartments roughly consumes 6.5 lakh liters of water and 4,800 kilowatts of electricity per day.

Each new apartment must now by law have a car parking space, and the building itself must have a minimum saturation of amenities that make life worth living in it.

Moreover, every skyscraper puts immense pressure on the existing traffic infrastructure - and creates yet another urban heat island that degrades Mumbai's already depleted environment even further.

The Bane and Boon of Speculators

The major factor responsible for sky-rocketing prices in Mumbai were the speculators - investors who bought homes with the sole objective of selling them in the short-term but earning the fattest-possible profit.

Speculators made Mumbai their Mecca because of the impossibly high property prices, and they drove the prices even higher.

Many are tempted to believe that it is the developers who are responsible, but they are responsible only to the extent that they avidly courted speculators because they could sell many flats off to them in bulk.

By the time everyone realized the long-term implications of speculative activities, the damage was done. Today, Mumbai is right up there with Tokyo, New York and London as a city where everybody wants to live and very few can afford to, except perhaps in the most constrained conditions.

Price Correction

One of the major developments seen in Mumbai real estate in recent times was the slight price correction - meaning that Mumbai's notoriously unrelenting and ever-increasing property prices first stopped growing and then began falling. Over the last 3-4 years, prices in the city have dropped anywhere between 3-5% across several areas.

In the last one-and-a-half years alone, property prices corrected by 2-3%. One of the major reasons for this was the new regulatory regime implemented by the central government including DeMo, RERA and GST. This correction in property prices was largely seen in the secondary market where investors were in a hurry to exit.

Meanwhile, developers became more focused on launching only those projects that were high in demand – affordable housing. As per ANAROCK data, out of the total units launched in MMR, a whopping 46% comprised of affordable units in Q2 2018.

How DeMo Changed the Status Quo

In one stroke, the Modi Government sucked the wind out of many sails - but in the case of the real estate business, it literally burned the sails, tore down the mast and almost sunk the ship. Demonetization decisively addressed the infamous 'cash component' in Indian real estate.

In the '60/40' formula, people would buy homes by paying as much as 40% of the selling price in cash, which was often unaccounted money. Black money was invariably hoarded in the form of the age-old 500 and 1000 rupee note versions, which DeMo in November 2016 rendered invalid and illegal.

At first, it was believed that only the secondary sales and luxury housing markets would suffer, primarily because these segments historically saw the highest incidence of cash components. However, the DeMo effect also percolated down into primary sales - or new homes being sold by developers.

Within a year, speculators had lost most of their previously voracious appetite for real estate – and with their exit, the worst stimulus for property price growth in a city like Mumbai also departed.   

While it is true that cash is slowly creeping back into the real estate market, its pace is now severely curtailed by the new regulatory environment. Certainly, the blatancy with which cash was previously funneled into the sector is a thing of the past now.

The Impact of MahaRERA

Though RERA is still in progress, it is becoming increasingly clear that unethical and deceptive business practices – not only by developers but also brokers and, in fact,any agency that promotes real estate – will no longer be tolerated.

We are now looking at a future where everything must and will be on record, all promises must be fulfilled and heavy penalties – including imprisonment – await those who don’t toe the line.

Many other things have happened at the government policy level, but what matters the most is how they have affected end-users.

Real estate is well on its way to shedding its image as the bogeyman of Indian business, and the ghosts of disastrous home buying decisions will no longer haunt buyers for the rest of our lives. RERA is a process and not an event, but the process is underway and many of us are breathing a little easier now.

The biggest impact of RERA and other key policy changes has been on property sales - and while there was doubtlessly a dampening effect on the real estate industry, it is good news for end-users of real estate - even in Mumbai.

Within the turmoil that came in the wake of the various real estate-specific policy upheavals, the customer has finally become king. When sales plummeted to all-time lows, property sellers actually had to think about their customers’ interests for a change.

What the Data Reveals

· There are about 17,000 ready-to-occupy homes up for sale in Mumbai,and 1.50 lakh more homes under construction which will assuredly be completed thanks to the stringent MahaRERA.

· If we assume a standard flat size of around 900 sq.ft. of carpet area, the overall unsold inventory in the city right now accounts for around 2,300 full-sized football fields or 7,700 cricket stadiums.

Developers here have to pay hefty taxes on unsold inventory, and that most of them are so cash-strapped that they cannot launch any new projects until they have sold what they already have on hand.

To sell this inventory, they have literally pulled out all the stops. We have already seen property prices in Mumbai drop by 3-4% in the last 2-3 years.

Such a scenario would have been unimaginable in Mumbai 5-6 years ago.

The latest Mumbai Development Plan 2034 has opened up areas which were previously barred from development, like the CRZ and salt-pan lands. Good in one way – there will be massive infusion of affordable housing. Not so good in other ways – it is bad news for the city’s environment, and it will put a massive strain on its current infrastructure.

However, we are also seeing a steady thinning-out of the urban population in Mumbai's central locations, with more and more people migrating to the new-emerging areas.

The trend of outward migration from the MMR will continue over the next couple of decades, not only because of the astronomic property prices and crumbling infrastructure, but also because these new regions are becoming the new employment hubs.

However, Mumbai's wealthiest inhabitants will definitely stay put in the city's ultra-expensive central areas. And as we can see all around us, the main city is working hard at improving the existing infrastructure.

These infrastructure projects are basically retention magnets for the limited but influential population segment whose economic lives are linked to the primary business activities in the city, and who can afford the real estate prices involved in owning homes in Mumbai’s most expensive locations.

Environmental Change

Mumbai was originally reclaimed from the sea by joining seven islands to create a shipping and trading hub for the British. We must definitely take climate change and infrastructure to counter it very seriously because the city's sea level is rising by about 1.2 mm every year.

NASA has confirmed that over the next 100 years, glacial melt may increase Mumbai's sea levels by around 16 cm. It has been estimated that the Indian subcontinent could lose 14,000 sq. km of land if the sea level rises by one meter.

For this reason, Mumbai is at high risk from climate change. The time to start bulwarking against it with adequate infrastructure is now.

Anuj Puri, Chairman – ANAROCK Property Consultants
Original Article:

Thursday, 2 August 2018

First signs of revival in real estate after demonetisation, says Knight Frank India report

The office market performed relatively better, with the first half of the year showing the highest transaction volumes for H1s in six years.
Transaction volumes in India’s top markets were up 13 percent, with Bengaluru clocking the highest number of transactions. 

Real estate consultant Knight Frank India’s H1 realty report reveals some green shoots in an otherwise sluggish real estate market.

The good news first: sales and launches in India’s property market are the highest they have been since demonetisation.

The bad news: that’s not good enough, according to industry watchers.

Indian real estate was in a sluggish phase even before the triple shocks of demonetisation, the rollout of Goods and Services Tax (GST) and the introduction of a new real estate regulator – a return to normalcy, therefore, is not much more than a step in the right direction.

Even so, there are some things to be happy from the findings of Knight Frank India’s report on the performance of the industry between January and June 2018, that looks at country’s eight biggest residential and office markets.

The housing sector is on a slow mend – on a low base, launches for the first six months of 2018 were almost 50 percent higher than the corresponding period a year ago, with just under 92,000 housing units being launched.

Around 74 percent of new launches were housing units being sold under Rs 75 lakh, which clearly shows the affordable housing story playing out.

Mumbai and Bengaluru led the way, accounting for almost 60 percent of units launched, and the otherwise sluggish National Capital Region (NCR) market saw new launches grow by 90 percent to 9,000 units.

Bengaluru led on the sales front as well, clocking a 22 percent growth to sell over 25,000 units in the first half of the year.

Mumbai and NCR displayed modest growth of one percent and five percent respectively, together accounting for 50,000 units sold.

The average project life cycle, which is the amount of time taken between the launch of a project and the sale of the last house in that project, remains high at six years.

In a boost for potential homebuyers, prices continued to slip downwards in major markets – Hyderabad was the outlier, showing an eight percent growth in prices over last year, and India’s most expensive property market showed the biggest decline in price growth, with houses nine percent cheaper than they were last year.

Neighbour Pune was close behind, with an eight percent fall in the price of houses and NCR prices remained roughly the same as they were last year.

The office market performed relatively better, with the first half of the year showing the highest transaction volumes for H1s in six years.

Transaction volumes in India’s top markets were up 13 percent, with Bengaluru clocking the highest number of transactions.

A total of 21.5 million square feet of office space exchanged hands during these six months, but trends showed that demand for Grade A office space continues to outpace supply.

Vacancy levels across these markets dipped to 12 percent as compared to 18 percent in 2014.
In an interesting trend, co-working spaces accounted for 13 percent of all transacted space during these six months. 

Monday, 16 July 2018


Your life insurance policy can make you eligible for a home loan, and also protect your loan liability. Here's how the right kind of insurance policy can work for your family and in your favour.

Picture this - you have taken a life insurance policy to ensure your family gets a substantial amount to sustain itself when you are gone. You have also taken a home loan to make a house for your family, but have not repaid the full amount before you bid goodbye to the world. In both these scenarios, your family will have your money, but no home. Here's why: When you took a life insurance policy, the first thing on your mind was your family and a secure life for them. And, when you took a home loan, you first factored in the repayment plan.

What you overlooked was the fact that in the unfortunate eventuality of your loss, your home loan would still be unpaid and your family could lose the roof over their head to the lending bank or financial company.

To avoid such a catastrophe, it is prudent to take an insurance cover for your home loan liability. Here's what an insurance expert advises.

"There are different loan insurance plans that include reducing balance cover, full loan amount cover, critical disease cover, permanent disability, etc. The premium amount differs with each policy offering," explains insurance advisor Nagesh Sharma, founder, Vertex Group. "You must go through the details of various products and benefits of insurance companies, and compare the premium and risk coverage and then choose the one that suits you the best," he cautions.


Various life insurance policy types come with their own benefits. The term life insurance cover is the preferred one in this category.


A term life insurance policy is a basic yet cheaper type of life insurance instrument that gives immense financial protection, especially if you are a home loan borrower. This is the preferred option because it is easier on the pocket and you can choose the life cover depending on your family's needs and the different stages of your life.


Opting for a term insurance plan that includes a critical illness health insurance policy, can work in your favour. In this insurance plan - if you are insured - in the eventuality of your suffering from a prolonged illness like cancer, you get a lump sum amount equal to the sum insured. You can then use this money towards your E M I repayment so it does not affect your home loan liability.


The home loan protection plan is an insurance policy issued by an insurance company and not by a bank or finance company. Unlike the term life insurance plan, a home protection plan is not available as a customised option. While a home loan protection plan can be taken separately from an insurance company - both, life and general insurance companies offer this - it is usually packaged by the bank along with a home loan. In fact, you are not eligible for a home loan protection plan without taking a home loan.

In the event of your demise during the home loan tenure, your insurance company will settle your loan with the lending bank under this protection policy.

Life Insurance policies above certain duration - usually after three years of commencement - can qualify for being given as collateral for seeking a loan. Most insurance companies have a predefined process whereby they can offer this facility. The lending institution would get the life insurance policy assigned to itself, which means the benefits of the policy would accrue to the lending institution till the time the borrower has not cleared the debt.

Depending from insurer to insurer, an interest is charged for the loan given. Repayment can be provided, and prepayment and foreclosure options are also provided. As a caution, one has to remember to repay the loan on time, else the benefits accrued on the policy would go to the lending institution, and in case of any exigency, the family would receive benefits only post clearance of the loan and accumulated interest and penalties.

Subhasis Ghosh,
EVP, Kotak Life Insurance


Tuesday, 10 July 2018

NRIs moving into the luxury housing market

Every one in four luxury houses sold in India last fiscal was bought by an NRI or non-resident Indian. A falling rupee, reduction in prices post demonetisation and policy reforms have increased India’s attractiveness for NRIs, who want to now head back home after earning big bucks abroad.

Properties in the ₹5 core to 10 crore bracket are the most favoured, with the maximum demand from NRIs in the UAE, followed by Canada, the UK, Saudi Arabia, the US, Singapore, Qatar, and Kuwait, Ankit Kansal, Co-founder and MD, 360 Realtors told BusinessLine.

Heavy investments

“On a pan-India basis, nearly one-fourth of the luxury market was dominated by NRI investors in FY 2018. We have markets like the UAE with a large NRI population which wants to come back to India as there are no post-retirement benefits there. Combined with the high disposable income overseas, NRIs are investing heavily in luxury projects,” he said.

Until 2013, NRIs’ bought under 20 per cent of the luxury properties sold in India. But in FY 18, the number has moved up. In the ₹ 5 crore to 10 crore backet, 29 per cent of the houses in Mumbai were bought by NRIs in 2018 while the number for NCR was 27 per cent, Bengaluru 24 per cent and Hyderabad at 18 per cent. These four cities are the most favourite among NRIs for property investment, according to 360 Realtors.

“The paradigm change due to reforms like Rera and GST after demonetisation has resulted in a radical shift, bringing in the much-needed transparency, accountability, and compliance system into the sector. This has enhanced confidence among domestic as well as global investor,” Niranjan Hiranandani, co-founder and MD of the Hiranandani Group said.

Increasing demand

A big advantage is that NRIs can benefit from reverse mortgage. “The amount taken from the bank as a consequence of this type of mortgage is not factored in the taxable income of NRIs. So they can enjoy the benefits of property in India while taking money from banks for its reverse mortgage,” said Ashish Shah, Chief Operating Officer, Radius Developers.

Hiranandani says a large chunk of NRI investment in Indian real estate comes into the luxury segment as the returns on investment in terms of rental income as also capital appreciation is very high. This is because the supply of high-end properties is limited while their demand is increasing.

The rupee hasn’t been very strong and this has been advantageous for people earning abroad, he added. A weaker rupee helps NRIs as they get more rupees in return for a dollar, bringing down their monetary outgo, Kansal said.

For both Radius and the Hiranandani group, who have been leading the launch of luxury projects, NRIs contribute about 15 to 20 per cent of sales. “The sales are concentrated around the initial launch of the project as NRI investors prefer to get in early and take advantage of the appreciation,” Cooper added.

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Source: BusinessLine

Thursday, 5 July 2018