Wednesday, 10 June 2015

As domestic demand dries up, realty firms woo buyers abroad

With the demand for residential property drying up in India, real estate developers are increasingly turning their attention to non-resident Indians (NRIs) and people of Indian origin (PIOs) to try and dispose of their inventory.

While NRIs have traditionally been the target for the luxury segment, developers are now also looking at selling affordable and mid-income homes to them. These include residential properties priced between Rs.50 lakh and Rs.1 crore.

To push demand from overseas MARKETS, companies such as Mahindra Lifespace Developers Ltd, Godrej Properties Ltd and Sunteck Realty Ltd are either setting up offices outside the country or looking to strengthen their distribution channels abroad.

Besides, developers are also enhancing their presence in digital media, which has drawn a lot of customers abroad.

For instance, property developer DLF Ltd recently tied up with e-commerce website Snapdeal with the aim of attracting customers abroad while Bengaluru-based Sobha Ltd is looking to open a section on its website dedicated to buyers from outside India.

Developers are also trying to attract buyers abroad by offering freebies such as assured returns and special discounts in property exhibitions organized outside the country for NRIs. Besides, companies are coming up with structured deals and buyback schemes to attract overseas INVESTORS.

Unsold inventories have piled up over the last few years, taking a toll on most real estate firms as they try to cope with poor MARKET sentiment.

According to a report by real estate consulting firm Liases Foras, unsold inventories in six major cities stood at around 668,000 units in the fourth quarter of the last fiscal year, with the National Capital Region (NCR) recording the highest inventory period of 71 months, meaning a project or an apartment took almost six years to be sold.

According to experts, NRIs account for 20% of the primary residential demand from the top 10 cities in India. Developers are aggressively targeting Indians living in West Asia, Singapore, the US, Australia and the UK.

“Earlier, developers looked at NRI markets as a source for generating high-end demand but, with changing fundamentals, developers have started looking at the NRI MARKET to generate core demand as well,” said Tanuj Shori, chief executive officer and co-founder Square Yards, a real estate advisory firm.

Mahindra Lifespaces, which opened its first office outside the country in Dubai, said Indians in Gulf countries make up a good portion of its international sales. It aims to cater to demand for both premium and affordable houses from Indians in the Gulf region. The company is also looking to open offices in the US and Singapore soon.

“Traditionally, developers went to look for the premium segment primarily from INVESTOR point of view, but we believe there is a huge opportunity in the affordable segment because as India grows there is going to be reverse migration. These people will come back and they will need housing here,” said Arun K. Nanda, chairman, Mahindra Lifespaces.

The company garners about 16% of its overall sales from overseas markets and expects to increase it to 25% over the next 3-4 years .

Kamal Khetan, chairman and managing director of Mumbai-based Sunteck Realty, said, “We were not focusing much on the international market. But now in the last 20 days, we have sent an entire team to Abu Dhabi, one team to Hong Kong and another to Dubai to understand Indian buyers there and try working with channel partners there.”

He said sales from overseas buyers contribute about 14-15% to the company’s overall revenue, and that it is likely to increase to 22% in the next year.

Liases Foras chief executive Pankaj Kapoor said the rupee depreciation against the dollar has made it cheaper for NRIs to buy property in India. The relative price arbitrage is what is being sold by the developers, he added.

“Prices across the cities have not moved up over the years, but the dollar has gone up around 7% from Rs.60-64. This is roughly 6% discount; along with it the developers are also offering additional discounts to woo them,” Kapoor said.

Bengaluru-based Sobha said it has seen a huge traction from both international and domestic buyers for its recent Dream Acres project in the city.

J.C. Sharma, vice-president and managing director of Sobha, said the company has also identified pockets in the US for specific MARKETINGinitiatives for NRIs. Currently, the developer reaches its NRI buyers through its Dubai and Singapore offices.

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