www.arundevelopers.com

2012/07/19

Policy paralysis hit realty sector in big way: CREDAI


Policy paralysis hit realty sector in big way: CREDAI

NEW DELHI: Realtor's body CREDAI today said the government's policy paralysis has severely impacted the real estate sector which is facing stagnation in growth.

"The economy

is in a bad shape and there is an all round despair. We have been witnessing a widespread criticism -- in India and abroad -- and policy paralysis has impacted the real estate industry in a big way," CREDAI National President Lalit Kumar Jain said in a statement.

Jain said the government needs to appreciate the fact that realty sector supports over 250 other industries, contributes 11 per cent to GDP and is the largest employment generator after agriculture.

CREDAI, the apex body of real estate developers from across the country, has convened its governing council meeting in Delhi tomorrow to take stock of the housing scenario in the country, the statement said.

The meeting assumes significance in view of the fact that real estate has been experiencing stagnation in its growth despite the housing shortage touching 26 million, it added.

Jain said the CREDAI's governing council would chalk out a plan and then announce it.

Real estate sector is witnessing slowdown in demand due to high interest rates on home loans since last couple of years and economic slowdown in global as well as domestic market.

Almost all the developers have reported decline in net profit from last several quarters.

2012/07/17

Article: Numerous religious beliefs drive the Indian realty sector


Numerous religious beliefs drive the Indian realty sector


A saying goes that the best investment on earth is earth. In the words of Charles Dudley Warner : "No man but feels more of a man in the world if he have a bit of ground that he
can call his own. However small it is on the surface, it is four thousand miles deep; and that is a very handsome property . To own a bit of ground, to scratch it with a hoe, to plant seeds and watch, their renewal of life, this is the commonest delight of the race, the most satisfactory thing a man can do."

Especially true for Indians, for whom home ownership has the most positive and uplifting effect. How the face beams with a megawatt smile when they start talking about their own home... 'sadi kothi' (my house)!

A house is not just a house - it stands for safety, security and there is great deal of pride in ownership of this unique asset for an Indian. Owning a house is a keystone in financial and emotional security. You aren't buying a space to eat and sleep. It is where you go after a hard day on the job - it is your 'safe haven' .

India, with its unique social landscape, is driven by numerous religious beliefs and, for most people, they are sacrosanct.

To approach the Indian market one has to be mindful about these social realities. One significant trend is of buying during Navaratra and Diwali. In Indian real estate industry, it is common knowledge that one third of the annual sales happen during Diwali.

On an average, the festive season stokes up real estate transactions by 25-35 %. On the contrary the "Shraadh" period typifies stalemate and a complete lull in the industry . This period is utilized for marketing and research activities to set the ground for sales during festive season starting from Dussehra to Diwali.

The real estate market operates on trust, rather than it being a plain commercial deal. People find brokers, more from word or mouth and references and bestow full trust on these agents. Brokers have a great deal of influence on the decision-making process and house hunting of a common man; hunting a house without a broker is akin to fighting a legal battle without a lawyer.
Even though things are changing now, and investors keep a keen eye on the internet platforms that provide reams of data on every locality and project, the final call, however, is made with the 'trustworthy' brokers. The New Age broker is becoming much more professional with even the term 'brokerage' rechristened as 'transactions' !

The other important emotional driver during house purchase is the family. "Family is the real engine or driving force of Indian real estate market. Strong family ties play a pivotal role; even today, if a person is buying a house, he consults his full family before a final decision," says Sonika Khurana, Planning Head, Vardhman Estate & Developer (P) Ltd.

An individual may zero in upon a property , but a final call happens only with consensus of family members. The stamp of approval of elders is seen as a must.

Family often lends financial support, without any 'interest' and, at times, without any expectation of return of their money . How else would one imagine people at the beginning of their career in their early thirties buying homes in metros; bank loans notwithstanding, it cannot be without the support of their family. So whether it is parents, in-laws , siblings - all have a role to play in that home purchase.
Some prefer to buy house in proximity to their extended families. And even those who, due to professional and sundry other reasons, are living in another city or country, are very keen and particular about the 'safety' and 'security' of their parents. "I am looking for a flat for my parents aged 70 and 65 in Gurgaon . I am keen on a place for them which has constant power, water and most importantly , tight security," says Amol Mehta, a US-based NRI.

Rajeev Talwar, the managing director of DLF Universal Ltd, says: "A majority of customers are senior people - in their middle ages and beyond, since only at that time can one have this kind of affordability . One of the major reasons they come to this elite community of DLF apartments, besides exclusivity, is safety and security - something that their children , especially if they are living elsewhere , are very particular."

Vastu compliance and east-facing property are other beliefs that drive the choice of customers. "People usually prefer eastfacing property. As the Sun rises in the east, this direction symbolizes life," Sonica says, adding, "According to vastu principles, the main entrance of a house opening up to the east or the north is considered best."
In fact, there is a new emerging trend of hiring 'astro' architects. Neeta Sinha, an 'astro' architect, has a clientele who are a veritable who's who of Bollywood and the corporate world (like Amitabh Bachchan, Shah Rukh Khan, Kirron Kher, Karan Johar, Punj Lloyd, Kotak Mahindra, ICICI Ventures, Cox & Kings, among others).

http://articles.economictimes.indiatimes.com/2012-07-14/news/32675068_1_festive-season-real-estate-indian-realty-sector

Maharashtra Bill to set up real estate watchdog - Indian Express Mobile

2012/07/09

Real estate funds clock high returns


http://forbesindia.com/blog/moneyball/real-estate-funds-clock-high-returns/


Real estate funds clock high returns


Real estate funds have been investing in India for more than six years. They started investing int
o the Indian markets after the release of Press note 2 in 2005 which opened up construction and development for FDI. Institutional investment into the real estate was on a roll. Many of these funds who invested at that point in time are now heading for maturity and are exiting their prime investments. Foreign funds who invested into the Indian markets found it much tougher to operate as compared to their Indian counterparts.

Pranay Vakil of Knight Frank in a podcast has an interesting take on the hurdles that foreign funds faced while investing in the Indian real estate market and how some of them managed to survive.

According to a report by Jones Lang Lasale, out of the $13 billion invested in the real estate sector, about $3.2 billion of exit has been recorded through 80 transactions. In general, the returns to investors have been satisfactory. Indian real estate (RE) investors have returned around 24% of the capital invested. This performance, considering the global investment scenario looks satisfactory as the global average for RE investors in terms of returns works out to around 4.5%.

Real Estate has the highest share in terms of value

The majority of exits have happened in the residential segment followed by commercial office segment. Here it must be noted that post the financial crisis investors have mainly concentrated on the residential space as compared to office space and this call has reaped higher returns. Institutional Investors have realized that residential space is not much affected by global factors. Residential segment has remained resilient through out the financial crisis in most of the tier I and tier II cities resulting into good returns. Thus, 46% of the exit for RE investors has taken place in through the residential space. These investors also made heavy exit through land parcels which accounted to 22% in terms of asset class.

It is interesting to note that land is the only asset class that has given the highest return to investors. The exit multiple for land is around 4.75x. Mumbai and NCR-Delhi together account for nearly 72% of the total value of PE exits. These are areas that are on the radar for all the new funds because of the predictability of demand and ease of exits.

Land has turned out to be the best form of investment

Typically, for any PE fund manager the biggest parameter for any investment happens to be exit. More than 69% of the total exits have happened through promoter buybacks both in value as well as the number of transactions which are more prevalent in the commercial spaces.
Wachovia, HDFC, Kotak Realty, ICICI ventures and Indiareit are some of the funds that have managed to give above average returns while offshore funds were the biggest losers.

In an earlier chat with us, Pranay Vakil explained why real estate prices continue to remain high despite any demand.

Arun Gupta

2012/07/05

Rich households in India prefer disciplined investments


http://business-standard.com/india/news/rich-households-in-india-prefer-disciplined-investments/479331/
Rich households in India prefer disciplined investments
Rich households in India prefer disciplined investments
BS Repo
rter / Mumbai Jul 04, 2012, 00:26 IST
The investment allocation to debt by ultra high networth households (HNHs) increased nine per cent in 2011-12 and it remained constant for equities. Investments in real estate dipped seven per cent compared to 2010-11, although realty's share among asset classes remains relatively high since ultra HNIs expect healthy returns over the long term. But generally, the appetite to take risk was subdued, with greater preference for a disciplined rather than opportunistic approach, particularly in high-risk instruments like equities and real estate. “Alternative assets like art are yet to catch up as an investment avenue in India,” said Mukesh Agarwal, president of CRISIL Research.


“The fact that so many ultra HNIs said their spending habits had not changed due to the slowdown is an indication they do not expect the slowdown to continue for long. However, it would be interesting to see whether the caution that has crept into their investments would spill over into their spending if the economic crisis persists longer than expected,” he added.

Currently, metro cities account for more than half the ultra HNIs. But that may dip by 3.5 percentage points in 2016-17 as cities like Ahmedabad, Bangalore, Hyderabad, Nagpur and Pune would see an increased number of HNIs.

While ultra HNIs in non-metros were extremely conscious about which brand of school their child should go to, their counterparts in the metros factored various other attributes such as curriculum and the quality of faculty.

Similar to the first edition, this time also the study identifies three distinct profiles of ultra UHNIs -- the inheritor, the self-made or entrepreneur and the professional.

CRISIL used the 'Idea' method to establish the findings of the report, that is, Income and Demographic Analysis, using NCAER data of bucket-wise income, census data on the number of households and GDP growth.
Arun Gupta