REIT listing on mind, private equity firms look to invest in malls

Private equity firms are increasingly exploring opportunities to invest in India's shopping malls as such retail assets can be listed under Real Estate Investment Trust (REIT) portfolios. GIC, Blackstone, Canadian Pension Plan Investment Board (CPPIB) and Xander fund-promoted Virtuous Retail are among those looking to expand their retail footprint, especially after India eased the rules on REITs.

"Like office market, shopping centers offer great opportunity for consolidation in India for value enhancement by leveraging management expertise and re-positioning shopping centers. The size of the market is limited and spreads across tier 1-3 cities; first mover will have strategic advantage," said Sanjay Dutt, the chief executive of India operations at Ascendas-Singbridge, a Singapore-headquartered urban and business space solutions company.

Under the rules unveiled recently by the Securities and Exchange Board of India (Sebi), REITs are allowed to invest in under construction assets to hold up to 20% stake, doubling the previous cap.

This will allow for more portfolios to be listed. The regulator also allowed REITs to invest in two-level special purpose vehicle structure through holding companies (holdcos), subject to sufficient shareholding in the holdco and the underlying SPV and other safeguards.

Apart from listing through REITs, large funds are also diversifying into retail due to shortage of good quality office space in top cities. "There is a significant interest in rental income generating properties (core assets) from several blue chip institutional investors who have raised or allocated capital for this purpose. Retail is a good diversification (from office assets) as there is now sufficient operating track record for major malls across key cities in India," said Gaurav Kumar, managing director, capital markets, CBRE South Asia.

According to real estate consultant Cushman & Wakefield, the first half of 2016 witnessed the highest annual PE investments in retail with more than Rs 3,350 crore being invested, compared with just Rs 250 crore in the same period last year and the highest since 2008. The share of retail sector assets in cumulative PE investments in India has increased to 18% in H1 2016 from 2% a year earlier.

"The Indian retail market appears to have bottomed out from its slack and is expected to grow in the coming years. Factors such as positive economic outlook and large market potential continue to attract retailers to India," said Anshul Jain, the India managing director at Cushman & Wakefield. Some of the large transactions concluded in the first two quarters of 2016 included Singapore based GIC investing Rs 1,000 crore in Sheth Developers' Viviana mall in Thane, the Blackstone Group buying L&T's Seawoods Grand Central in Navi Mumbai for Rs 1,450 crore and Nambi Buildwell's Rs 904 crore acquisition of DLF Place Saket mall.

Mall developer Phoenix group is in talks with CPPIB to form a $300 million joint platform to buy land and develop malls across major cities. They plan to bring Phoenix's mall projects too to the platform and are in the process to buy out investors in some of the existing properties.

"Occupancy levels in malls are inching upward with steady rentals indicating that consumption is on the rise. With enhanced macro factors, retail is bound to perform better and this provides income flow to malls. Our interest in this segment is increasing due to these factors and we will continue to look for more opportunities," said a senior executive at an international fund, who did not want to be named.

According to Cushman & Wakefield, new mall supply increased to 4.8 million sq ft in the first half of 2016 from a mere 0.2 msf in H12015. This is the highest half-yearly supply in five years. Total new supply of about 13 msf across top eight cities is scheduled for completion by the end of 2018. More than 46% of this upcoming supply is located in Bengaluru and Chennai. With rising demand and declining new supply, the vacancy rates are expected to taper over the next one to two years, creating a more balanced equation between demand and supply.

Source: PropertyatNeoDevelopers.Wordpress.Com

Dwarka Expressway: Highway to Prosperity

This 18km-long expressway, after being declared a national highway, has started gaining a lot of prominence among buyers.

Areas Included: Sectors 37C, 37D, 99, 99A, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 110A, 111, 112, 113, 11 14, and 115

Current Status of The Corridor:

The Northern Peripheral Road (NPR), commonly known as Dwarka Expressway, is a 150-metrewide and 18km-long road which will connect Dwarka in Delhi with Kherki Dhaula on the National Highway 8 (NH-8) in Gurgaon.

The project was commissioned in 2007 and while most of the project (14km out of18 km) has been completed, it has not become operational as some key patches of the alignment are stuck in litigation.

The future of the corridor is linked to NPR becoming operational, as it presently lacks acceptable level of connectivity.

We present below the key points which summarize the present scenario with respect to NPR and also highlight the key challenges holding up the completion of the road.

Ministry for road transport, highways and shipping has recently announced the granting of National Highway status to NPR. As and when this actually happens, the land acquisition, construction and management of the road will be undertaken by the National Highways Authority of India (NHAI). This is expected to speed up clearance of pending hurdles. NHAI is now undertaking a Detailed Project Report (DPR) of the expressway. However, the timeline for the final notification and takeover by NHAI are not clear at present.

HUDA is planning to make 13.5km stretch of Dwarka Expressway operational soon. This stretch is free of litigation and most of the work has been completed. It will connect to NH-8 at Kherki Dhaula through an underpass or a flyover. This will provide much required connectivity between sectors and other areas of Gurgaon through NH-8, as well as the existing access roads.

The Haryana Urban Development Authority (HUDA) reached a settlement with residents in New Palam Vihar and Kheri Dhaula whose homes were to be acquired for implementation of the NPR. The litigation had been holding up road construction activity in Sector 110, towards Delhi and Kherki Dhaula, near NH-8. As part of the settlement plan, HUDA is to allot alternative plots to around 700 families in Sectors 37C and 110A. However, this process has not yet been completed due to difference of opinion between litigants and HUDA on various aspects of the land allotment plan. Consequently, construction activity on the incomplete stretches has not yet started.

The final 1.3km stretch of Dwarka Expressway which connects it to Delhi actually falls in Delhi and development here is the responsibility of the Delhi Development Authority (DDA). However, DDA has not yet acquired land for implementing this stretch of the road. No clear timelines are available on when this will be completed. Therefore, even if HUDA completes its part of the Dwarka Expressway, connectivity to Delhi might still not be available.

The Railway:

The railway over-bridge (ROB) on the Delhi-Rewari Line is yet to be completed. As the ROB ends towards Sector 99, a factory exists in the alignment of NPR. This factory is yet to be removed for work to be completed.

There are other flyovers planned at some critical junctions along the expressway, but their development timelines are not clear.

Present Residential Development:

Projects in the corridor are in various stages of construction with some having received part Occupation Certificate (OC). However, most of the projects are some time away from completion.HUDA is in the process of laying infrastructure in the corridor. This includes water distribution network, sewerage pipes, electricity and construction of various sector roads and completion of the Dwarka Expressway.

The real estate activity is at a low tide and new project launches have declined sharply as compared to the previous years. There is existing unsold inventory in the market along with options available in the resale segment.

The corridor offers options in apartments, high-end villas, and residential plots. The capital value is higher in sectors close to Delhi. Price in the re-sale market ranges from `4,000-9,000 per sq ft. The average price level in the re-sale market is `5,043 per sq ft.

Compared to the residential markets of Gurgaon, which are to the east of NH-8, the average price level is 30-40% lower.

Properties available in the corridor:

The corridor offers a wide variety of price ranges, although most of the apartments in the region are in the mid-segment. More than 50% of the supply is priced between `40 lakh and `1 crore. This supply is concentrated in the middle of the expressway. The supply costlier than `1 crore is mostly in sectors touching Delhi, and forms a significant 36% of the supply.

A small portion of the supply, amounting to 10% of the total, is priced at less than `40 lakh, and is mostly in sectors at the far end of the corridor, in sectors like 99A, etc. The corridor is relatively new compared to the rest of Gurgaon market, and almost 80% of the supply here is still under construction. This is also partly because of the construction delays faced by the projects here over the last 2-3 years. Overall, the market is tilting heavily towards 3BHKs, which form more than 50% of the total supply, followed by 2BHKs, forming another 30%--4BHKs and above form another one eighth of the corridor's supply, leaving just 5% for 1BHKs. The corridor provides a moderate range of choices for each bedroom configuration, with prices varying along the length of the corridor, dropping down as one moves west on it, and away from Dwarka's Sector 21. While the range of flat sizes is large, the majority of configurations of 1-, 2-, 3-, and 4BHKs are around 610, 1,150, 1,870, and 2,800 sq ft respectively.

Sizes and prices of flats available for various room configurations:

Best Sectors to Invest in a Home

Based on rental demand in sectors:

The top sectors by demand are dispersed across the corridor, with Sector 37C, which commands nearly half of the demand for the corridor, being located on the farther end of the corridor from Delhi. The sector is closest to NH-8, among all the sectors on the corridor, and around 3km from Hero Honda Chowk. Sectors 112, 110A, 110, and 109 lie very close to Dwarka's Sector 21, and benefit from proximity to Delhi, and Udyog Vihar. Sectors 103 and 108 are located in the middle of the corridor, and figure on the list bases the supply of residential apartments in these sectors. The yields vary, ranging between a low of 2.2% and a high of 3.8%.

Based on home-buying demand in sectors:

The home-buying tendency follows closely with the renting tendency on the corridor as all the localities which have high rental demand will give better returns to owners and hence more people will be looking to buy in these localities. Consequently, six out of the Top Ten localities, by consumer searches for buying a house, are in the Top Ten localities by consumer searches for renting a house. Property prices available in the corridor are reasonable and provide potential return on investment.

Best Bedroom Configurations to Buy

Preferred buying and renting options:

As most of the recent demand is driven by end use rather than investment, buyers are looking for bigger apartment types in the market suitable for living.

As a result, the dominant BHK type for both, buying and renting-in is the 3BHKs, followed by 2BHKs. Here, 53% demand distribution is for buying 3BHK units and demand distribution for renting-in is 57% in the corridor.

Noteworthy is the fact that the demand for 4BHKs and above is more than the demand for 1BHKs, a phenomenon rarely seen in the other geographies of the country, and reinforces the preference of bigger apartment sizes by buyers in this market here.

Price Changes and Future Prospects

6 monthly change: -5% Yearly change: -7%

The average price of the Dwarka Expressway corridor has been falling for the last one year, mirroring the weakness in the overall Gurgaon market. The corridor has been witnessing fewer launches, and the sale transaction activity has been slow. Although the sales numbers were expected to pick up after resolution of the dispute for the land under Dwarka Expressway, this did not happen, and the prices have fallen by 5% over the last six months and by 7% over the last one year. However, we believe that prices have hit rock bottom, and will not fall drastically going forward.

Price Movement for Top Localities by Consumer Preference

Various localities in the corridor have given mixed price variations over the last quarter, with three of the two corridors witnessing a fall in the prices. Price changes have varied greatly, and there is no clear trend geographically. Hence, the price variations in the corridor are a result of seasonal trends, while having a downward pressure due to the weakness in the overall property market in the city of Gurgaon.

Why should Consumer Refer to it?

Investment Hotspot report gives a detailed description of forthcoming nodes of the city. The report details the current infrastructure status and future plans of the localities along the stretch. It details the type of properties available along with their configuration; current property prices and their future prospects. The report will help buyers choose the best sectors for investment.

Source: PropertyatNeoDevelopers.Wordpress.Com

9.6 mn sq ft Grade A office space absorbed in Q3

Nearly 9.6 million sq ft Grade A office space was absorbed during the July-September quarter of this year, a report said.

According to a study of nine major metros by property consultant Colliers International, office absorption witnessed sustained momentum, with Grade A absorption totaling 9.6 million sq ft, making it 28.26 million sq ft so far in 2016.

"Although Q3 2016 marked a quarter-on-quarter decrease of 7.6 per cent in gross leasing volume, we expect leasing activity to pick up in the upcoming quarters," it added.

As per the survey, southern cities dominated the office absorption pie with Bengaluru at the top (25 per cent), Hyderabad (20 per cent) and Chennai (11 per cent), followed by Gurugram (13 per cent), Mumbai and Noida (10 per cent), Pune (8 per cent), Delhi (2 per cent) and Kolkata (1 per cent).

"Vacancies are set to decline in prime commercial corridors on the back of rising demand momentum, especially in Bengaluru, Pune and Hyderabad," Colliers International's South Asia Director, Office and Integrated Services George McKay said.

He noted Bengaluru continues to go from strength to strength in terms of office absorption.

"This is good news for owners and developers, but is a challenge for office occupiers in many cases, as they face the prospect of higher rental rates and fewer options to choose from at least in terms of ready supply.

"Land markets in the main cities have become quite active as established and next generation developers are looking to replenish their land banks, to satisfy both existing and new client demand," he said.

As per Colliers, the growing office demand will outstrip supply in technology sector driven markets such as Pune, Bengaluru, and Hyderabad.

"This should therefore lead to downward pressure on vacancies and an upward pressure on gross office rents in these markets. In contrast, traditional commercial markets such as Mumbai and NCR are likely to remain stable in terms of rents and vacancy due to a stable demand and supply scenario," McKay said.

According to Surabhi Arora, Senior Associate Director, Research at Colliers International, the improving economic picture provides a favorable background for continued expansion in commercial property markets.

"Nasscom predicted 10-12 per cent annual growth in IT and technology enabled services until 2020 that should help the office market to remain strong in 2017.

"That said, a further impetus to growth should be provided by other macro-economic factors such as declining oil prices and increasing monetary easing facilitated by ongoing moderation in inflation," she added.

Source: PropertyatNeoDevelopers.Wordpress.Com

Investments in Gurgaon double to over $1 billion

Investors across real estate segments - residential, commercial and land – are rushing into Gurgaon which saw large sales across financing and land acquisitions in excess of $1 billion, double that of 2015.

Last year, Gurgaon market attracted around $500 million in investments as investor were in a wait-and- watch mode towards outlook and an expected recovery.

While land accounted for 42.55 of the total investment pie, followed by refinancing of residential assets at 42.1% and core assets (rented office property) at 15.3% respectively, estimates CBRE South Asia.

“Owing to its cosmopolitan status and conducive environment, Gurgaon continues to evince active interest from real estate funds, local and international developers as well as corporates. It has always been the investment gateway to NCR due to its critical mass in real estate development and existing social infrastructure,” said Gaurav Kumar, managing director of capital markets at CBRE South Asia.

Gurgaon commands a lion’s share of office leasing in the NCR region driving significant institutional interest as well as investment commitments to capture the growth wave of increasing lease rents and high sale prices.

Some of the large transaction in Gurgaon includes M3M acquiring 180 acres of land from Sahara Group for $180 mn for a residential project. Tata Realty and Infrastructure acquired a 25-acre IT SEZ zoned land parcel from M3M abutting Sector 58 near Golf Course Extension for $60mn. Additionally RMZ/QIA purchased a 730,000 sq ft IT Park from BPTP located along the Delhi-Gurgaon expressway in Udyog Vihar for $180mn.

“Gurgaon is the potential market for office spaces in north India and assumes a prominent position in RMZ acquisition strategy. We have already acquired a marquee asset from BPTP which we have christened RMZ Infinity, Gurgaon. We are exploring both greenfield and brownfield developments as a way of expanding our presence in north India, which we hope to take up to at least 5 mn sq ft over the next three years in this Gurgaon micro market of NCR.,” said Arshdeep Sethi, MD -Development of RMZ Corp.

“We foresee constraints on new office supply side in the future, opening up tremendous opportunities to capture significant market share. Even valuations in the recent couple of years, especially in residential, have been depressed. This, combined with the limited number of office players in the market, provides growth opportunities in terms of returns and market share,” he said.

Prominent funds like Piramal Fund Advisors, Xander, JP Morgan, Altico Cpaital, GIC and Blackstone have either invested or are evaluating opportunities in Gurgaon. “We will look at last mile financing for projects in advanced stages of construction and sales. We will also evaluate and fund projects wherein credible corporate houses such as Godrej have tied up, under joint development arrangements, with existing land owners and developers to market and construct projects under their corporate brands,” said Sanjay Grewal, CEO for Altico Capital.

The fund recently invested Rs 50 Cr transaction with Noida based Lotus Greens group for a residential project. It had earlier invested Rs 450 crore for a Sports City project with the builder.

The city also has couple of million dollars transactions in the pipeline with DLF’s rental portfolio of office assets alone estimated to attract over $1-1.3 billion for a 40% stake sale. Ascendas-Singbridge, a leading sustainable urban and business space solutions provider, has also recently announced an investment of $ 400 mn to develop an IT office SEZ in Gurgaon.

“Gurgaon is the focal point of economic growth in NCR and the second largest office market in India with significant investments made by large multinational corporations. With over two decades of experience in India, we will bring our best practices to ITPG and provide best-in-class business space and asset management services in Gurgaon,” said Sanjay Dutt, CEO, India Operations, Ascendas-Singbridge.

Renewed interest from institutional investors has also prompted builders such as Vatika, Tata Realty, Hines and M3M to join hands with strong institutional investors to actively acquire strategic land positions within emerging areas of Gurgaon; a clear indicator of long term dividends from such investments.

“The past few years have been challenging for residential markets with stagnant off-take levels. In such a scenario, renewed interest by institutional investors is explained by several factors including current pricing for housing being at replacement cost levels, thereby providing limited downside risks for investments. Interest rates are at their lowest in the past five years,” said CBRE’s Kumar.

Multiple Chinese developers are evaluating Gurgaon as their first market for investment. Wanda, a prominent Chinese developer acquired 500 acres from the Haryana government for a green field industrial township.

In addition to the healthy investment activity over 12-18 months, the pipeline of future investments is even stronger. Institutional investors are bullish on the long term outlook with commercial office markets in overdrive and emerging areas of Gurgaon offering excellent residential development opportunities.

Source: PropertyatNeoDevelopers.Wordpress.Com

Office space demand sees sustained pickup across top cities

The demand for commercial real estate across the country is getting stronger and is witnessing a sustained momentum. The office space absorption across top 9 property markets has seen a sustained growth with total 28.3 million sq ft picked up during the first nine months of 2016, showed a Colliers International report.

Last year, commercial real estate in India registered a record absorption, and given the current momentum, this year is also headed in the same direction.

“The key office markets across India, especially in the south, continue to go from strength to strength in terms of office absorption, and with rents increasing significantly compared to prior years in certain micro markets. This is good news for owners and developers, but a challenge for office occupiers in many cases, as they face the prospect of higher rental rates and fewer options to choose from at least in terms of ready supply,” said George McKay, South Asia Director, Office & Integrated Services at Colliers International.

Colliers expects the leasing activity to pick up in the upcoming quarters and vacancies to decline in prime commercial corridors on the back of rising demand momentum, especially in Bengaluru, Pune and Hyderabad.

“Demand for commercial real estate has been increasing over the recent quarters as corporate entities consolidate and expand operations following a positive economic scenario. Demand for commercial real estate has been on the upswing across markets and we are experiencing it in our ongoing township projects in Panvel, Chennai and commercial tower in GIFT city near Ahmedabad,” said Niranjan Hiranandani, CMD, Hiranandani Communities.

“As I see it, business growth in India has been all about adopting global best practices, and I expect demand for commercial realty to keep growing through 2016 and 2017,” he said.

Expansion strategies by occupiers in ecommerce, healthcare and technology space are expected to increase in the overall occupancy levels. The growing office demand is expected to outstrip supply in technology sector driven markets such as Pune, Bengaluru, and Hyderabad. This should, therefore, lead to downward pressure on vacancies and an upward pressure on gross office rents in these markets, the report said. In contrast, traditional commercial markets such as Mumbai and NCR are likely to remain stable in terms of rents and vacancy due to a stable demand and supply scenario.

According to McKay of Colliers International, the demand for commercial spaces has resulted in land markets in the main cities becoming active as established and next generation developers are looking to replenish their land reserves to satisfy both existing and new client demand. During the first nine months of the year, occupier demand has focused on quality products in preferred micro markets in most of the cities, whereas startup and small-size companies showed an inclination towards serviced and co-working space.

Also, there has been an increased demand for leased out commercial assets in the market as indicated by a recent deal by Brookfield Asset Management to buy 4.5 million sq ft grade-A office and retail portfolio of Hiranandani Group in Mumbai's Powai suburb for $1billion.

“We expect an increase in office demand beckoned by improving Business Confidence Index which showed a 5.7% increase during April-July 2016. Other factors such as controlled inflation, falling interest rates indicate strong economic fundamentals,” Colliers said.

Source: PropertyatNeoDevelopers.Wordpress.Com

Why does it make sense to invest now in a buyers’ market?

Is this the right time to buy property? This is a common question asked by most buyers as real estate prices have been stagnant for the last two years. Home buyers are becoming even more cautious with residential reports suggesting that there is an inventory overhang in almost all markets. Having said that, this is perhaps the best time to buy as it is a buyers’ market and they should make the most of it.

The market is flooded with offers and incentives from developers. The reduction in the number of launches and stagnant prices in the last couple of years demonstrate that the market is in self-recovery mode and timing could not be more opportune than now for end-users as well as long-term investors to buy now.

Not only this, market forces have nudged the residential sector on the road to recovery. In fact, in cities such as Pune, Bengaluru, and Navi Mumbai, residential sales velocity has been on the upswing as evident from the last couple of quarters.

Beside this, there are other reasons why it makes sense to buy now. In the last two years, the office sector has also seen growth. The IT/ITeS, e-commerce, FMCG and BFSI seem to be in an expansion mode. This has not only created jobs but also a level playing field for future residential capital and rental value appreciation.

Additionally, it would not be wrong to state that the past few months have made home buying relatively cheaper. Lowering of interest rates on bank loans has bought the vigor back in the sector. Currently, the home loan rates are in single digits and at an all-time low. From the end users’ perspective, it means lower monthly EMIs and lesser interest burden.

Moreover, to bridge the gap between affordability and residential demand for quality homes, some banks have recently introduced new home loan schemes offering flexibility in interest moratorium and principal repayments.

Unlike before, such schemes are targeted at urban young working professionals who have both the appetite for home ownership and repayment capacity.

Lastly, the options are aplenty, even for ready-to-move in apartments. The countrywide slump in residential sales, high unsold inventory, and liquidity crunch has prompted property developers to introduce aggressive marketing tactics. With the festive season currently on, developers are offering modular kitchens, air-conditioners, international holidays construction-linked plans, no MIs until possession schemes, flash sales and cash discounts to buyers to tempt them to invest in their projects.

Though end-users have been waiting patiently for a price correction to take place in the realty market due to an oversupply, prices have already bottomed out in most of the cities. Improvement in macroeconomic sentiments coupled with better job prospects have started bringing in returns for the commercial sector and it is only a matter of time before the residential sector revives too.

Investors too have started pumping funds into the residential sector due to the relaxed foreign direct investment norms in the construction sector.

Some developers in cities such as Bengaluru, Hyderabad, Pune and Chennai have already received funding for future supply pipeline.

In view of the controlled inflation, decreasing interest rates on home loans coupled with tax benefits, this may just prove to be the right timing for buying a home for self-use. Investors with long term investment plans can also gain by driving a hard bargain.

Source: PropertyatNeoDevelopers.Wordpress.Com

Positive sentiments generated by RERA good for realty market

India’s Real Estate (Regulation and Development) Act (RERA) will boost transparency, discipline, and accountability in the property market. The Act entails a near-term drop in new project launches as fewer projects will be ready for registration; it will deter entry by smaller players due to higher holding costs; and it should make joint development more popular, says a report.

“Demand should benefit from new expectations created by the Act. Indeed, sentiment among buyers already appears to be turning more positive. This is good for the market in both the short and the long term. On the supply side, we expect a drop in new project launches in the short term. This is because our analysis suggests that fewer projects will be ready for registration as developers will wait to see how the new norms pan out and how other projects fare,” says a report titled Developers Get On Board - Implications of Real Estate (Regulation & Development) Act 2016 by Colliers.

The Act has brought in various consumer-friendly provisions that are bound to increase demand in the real estate market. There are certain consequences of RERA that should increase transparency and help improve overall confidence of the buyers. At the same time there are a few provisions that will create teething issues initially and cause a decrease in supply in the short term.

The mandatory requirement to have all approvals in place prior to commencement of sales will reduce the risk of project delays due to uncertainty in getting the initial approvals required to start construction. However, many approvals can only be sought on commencement or completion of the project construction when a completion certificate is acquired (e.g. completion certificate). There will not be any respite from delays on account of these approvals.

Fewer projects may be ready for registration after enactment of the Act as it does not allow developers to make a sale before they get all required project approvals. However, the approval process is expected to shorten in the next few years as the government is adopting an online mechanism. Thus, the drop in new project launches should only continue for a short term. The mandatory requirement to have all approvals in place prior to sales should increase holding costs for the project. This will increase the threshold to entry into the real estate industry; and will adversely impact smaller enterprises. Developers may face liquidity issues as banks, financial institutions and funds would prefer to enter into the project once it is registered with the authority. Smaller enterprises may find it difficult to venture into the market due to liquidity issues, the report says.

“To reduce holding costs, we anticipate that joint development (i.e. an agreement to develop between landlord and developer) will be a preferred mode of development; rather than outright land purchase,” the report says.

The intention of this provision in the Act is to reduce approval risk for the consumer, which is a prime cause of project delay. The intention is laudable; however, the Act does not cover the approval process under its ambit. Numerous stakeholders have called for a single window clearance for all approvals. However, a look at the approval process in other Asian countries and even the USA reveals that the time required for approvals in these countries is far less than in India, in spite of them also having multiple agencies providing project approvals. The key problem is the lack of clarity of norms, transparency and accountability in the approval process which needs to be addressed in India. Internationally, the time taken for getting approvals is three to nine months.

“We suggest that the Act should also address the process of getting all the approvals to commence a development project and set a maximum timeline (three to nine months) to get all necessary approvals. By addressing this issue, the holding cost of land can be reduced, and this benefit can then be passed on to the consumer in terms of lower prices,” the report says.

As for the requirement to keep 70% of the project proceeds in an escrow account, since builders or developers sometimes divert funds from one project to another, the new regulation dictates that for every project the developer needs to have an escrow account.

This step will remove a common perception amongst buyers that the money they pay for a project is siphoned away for other purposes, thus improving buyers’ confidence.

It was also recommended in the report that the government and industry should work together to set up courses and informative seminars for real estate professionals. For example, Real Estate Management Institute (REMI), in collaboration with CREDAI, Maharashtra Chapter has recently introduced a three week certificate course for real estate brokers. In the coming years; a real estate degree should be a prerequisite for registration with the Regulatory Authority. The real estate industry associations should encourage best practices and set high ethical standards for their members to follow. Organized sectors such as banks and financial institutions are more likely to invest in ring fenced projects, it says.

Source: PropertyatNeoDevelopers.Wordpress.Com

Overview - NCR Grows Far and Wide

A growing market with immense real estate development, Southern Peripheral Road, Dwarka Expressway, New Gurgaon, Sohna Master Plan, and Greater Noida West can be labelled as the NCR growth corridors.

Gurgaon Corridors

The sectors on Southern Peripheral Road are a mix of residential, commercial, public and semi-public, and industrial zones. Some infrastructural projects are already underway and one can see water lines, sewerage, storm water drains, electricity lines being laid, along with sector roads.

The dominant budget group in the corridor is `80 lakh-`1.2 crore constituting 47% of the housing supply. In addition, `60-80 lakh budget bracket has 13% share of the housing supply and the `20-60 lakh segment account for less than 10% of the housing supply. New Gurgaon offers a relatively less expensive residential option to consumers, along with integrated development of commercial and retail segments, making it a buyers' market. There is an over-supply of residential units in this stretch and transactions have been very slow.

The dominant budget segments are the `60-80 lakh and `80 lakh-`1 crore brackets with 33% and 30% share, respectively. The higher budget segment of `1-1.4 crore contributes to 18% of the supply.

Sohna Master Plan offers residential options for those who intend to work in Gurgaon but cannot afford to purchase a house due to the high, overall capital value in the city. Sohna Master Plan area presently offers properties across `20 lakh to `2.5 crore price brackets.However, majority of the supply is concentrated in the `4060 lakh budget segment with 45% share.

The second highest share is that of the `60-80 lakh bracket, with about 25% of the supply.

A healthy percentage of properties are also available in the `20-40 lakh bracket. Dwarka Expressway has residential projects and infrastructure (roads, water, sewerage, electricity) along the stretch is in various stages of development. Purchasing a residential option here is advisable for those who are looking for relatively less expensive options, with proximity to both Gurgaon and Delhi. The real estate activity is at a low tide and new project launches have declined sharply, compared to the previous years in the corridor.

There is an existing unsold inventory in the market along with options available in the resale segment.

More than 50% of the residential supply is priced between `40 lakh and `1 crore. A small portion of the supply (10%), is priced at less than `40 lakh, and is mostly in the sectors at the far end of the corridor.

Dwarka Expressway

Dwarka Expressway offers a relatively less expensive residential option to consumers, along with integrated development of commercial and retail segments. The corridor has potential to evolve into a stand-alone hub, independent of main Gurgaon. It will take at least another two years to be a fully-developed region. However, the silver lining is the announcement of NH status to the highway. Once the expressway comes under NHAI, it will help address many bureaucratic hurdles. Purchasing a relatively less expensive housing option makes sense as it is close to both Gurgaon and Delhi. A 2-3 year waiting window is necessary before the corridor gets proper physical and social infrastructure.

New Gurgaon

New Gurgaon offers a less expensive residential option to consumers along with integrated development of commercial and retail segments. It does not rely on Dwarka Expressway becoming operational for beginning habitation in the projects. Accessibility is an issue, with additional cost to be incurred by way of toll plaza at Kherki Dhaula. It will take 3-4 years to evolve into a mature residential hub. However, there are discussions to remove the toll plaza or remove the need to pay toll by residents in the area. Due to an oversupply in the market, and low transactions, buyers can negotiate good discounts from the sellers.

Southern Peripheral Road

The Southern Peripheral Road Corridor offers residential options to those looking to stay close to the established areas of Gurgaon like Sohna Road. It offers price advantage as the average price in the corridor is 20-25% less than that in Sohna Road or Golf Course Extension Road. While the corridor presently has teething infrastructure issues, these are much smaller in comparison to other major corridors like Dwarka Expressway. Given the much smaller extent of land-related issues, the timelines required for their resolution and completion of outstanding infrastructure is likely to be much smaller.
 
South Gurgaon

 
South Gurgaon offers residential options for those who intend to work in Gurgaon but cannot afford to purchase a house due to high overall capital value in the city. While the distance between Gurgaon and the corridor may seem large today, it is large only in a relative sense. Once the southern sectors of Gurgaon are developed and the corridor sees some development, this perception will most likely fade away. The land use plan under the Development Plan-2031 is spread across approximately 14,000 acre.The corridor is divided into 36 sectors of which 18 are dedicated for residential development.As per the latest update from the Department of Town and Country Planning of the Haryana government, a total of 38 development licenses have been given to various developers.These licenses cover development permission for 804 acres of land, covering mainly the residential (98.5%) segment. The balance area is for commercial development.

Noida Corridors

The well-planned Noida - Greater Noida Expressway Corridor provides land bank for development of offices, malls, schools, hospitals, and parks.The corridor provides a host of infrastructure facilities, including Delhi Metro and the Noida - Greater Noida Expressway.

More than 50% of the residential supply is priced between `40-80 lakh. Over one fourth of the supply is priced at `1 crore and above and is located near the beginning of the corridor, closer to Delhi. Most housing developments in Greater Noida West consists of multi-storey types with hardly any plotted or bungalow developments.

It does not have a self-sustained environment and severely lacks in basic social infrastructure. The region has been able to sell houses till now only on the basis of cheaper prices and a promise of the future. More than half of the properties in the corridor are priced under `20 lakh, therefore affordable. If nodes of Gurgaon and Dwarka Expressway seems a little steep on budget, consider Noida for investment. When combined, these hot spots offer a variety of properties suitable for all pockets.

Noida - Greater Noida Expressway

The well-planned Noida-Greater Noida Expressway Corridor provides land banks aplenty for the development of offices, malls, schools, hospitals, and parks. The corridor provides a host of infrastructure facilities, including Delhi Metro and the Noida - Greater Noida Expressway. More than 50% of the housing supply is priced between `40 and `80 lakh. Over one fourth of the inventory is priced `1 crore and above and is located near the beginning of the corridor, which is closer to Delhi.

Greater Noida West

Most residential developments are multi-storey apartments. Plotted or bungalow developments are scarce. Greater Noida West does not have a self-sustained environment and severely lacks in basic social infrastructure. The corridor has been able to sell houses till now only on the basis of cheaper prices and the promise of future development. The corridor is yet to see development of malls and markets. More than half of the properties in the corridor belong to the affordable category and are priced under `20 lakh. The next dominant budget segment is between `20-40 lakh, accounting for one third of the corridor's residential supply. Properties costing more than `60 lakh account for just 14% of the total listings.

Source: PropertyatNeoDevelopers.Wordpress.Com

Festive Season - A sign of revival for Real Estate Sector

The real estate sector is expected to show signs of revival during this auspicious festive season. After the prolonged slump in the realty market, the festive season is about to bring cheer as this is the time buyers want to make new purchases and investments. It is the perfect time to buy your dream home, as developers are giving attractive offers and discounts to its buyers.

The Delhi/NCR region is more receptive than ever before, for investments in the commercial segment. After approximately 46% absorption recorded in the first half of 2016 in Delhi/NCR for the office space, the commercial segment is only expected to go up.

Mr. Ravish Kapoor, Director, Elan Group said that the real estate market has been sluggish but there is a definitive sign of recovery with the new reforms. With the onset of the festive season, the sales are expected to go up.

The recent reforms in the policies such as RERA, GST etc will strengthen the real estate sector and the buyers and investors will regain confidence in it. The festive season will be auspicious for the realty sector and bring a boom. The commercial realty will definitely see a steady rise. There is an increase in the buyer inquiries this festive season. As the real estate market is regaining its ground, there are more no. of people interested in investing into property. With the recent reforms such as GST, RERA etc the buyers and investors have gained their confidence back in the real estate. There has already been a visible improvement in the residential sector with the sales picking up by nearly 10-12%.  This is the best time for residential sector as people make new investments and purchases during this festive time.

A Gurgaon based real estate developer, MAPSKO’s Director, Rahul Singla said that festive seasons are also considered auspicious hence it is expected that the real estate will regain the lost ground. Though, a lot many other factors would contribute to this positive outcome. Gurgaon has grown on to become the Millennium city, but any further growth requires space and space is to be found in the newly developing areas of Gurgaon. The New Gurgaon and Dwarka expressway area are bound to see unprecedented growth in the coming days as the roadblocks to land acquisition has been cleared in New Gurgaon and the Dwarka expressway is about to be granted the National Highway status.

“Festive season has always been encouraging for the real estate market as a lot people believe in investing during these auspicious occasions. Buyer sentiments has improved towards Real Estate sector especially for the near completion projects and we hope festivities with further enhance it” added Mr. Vivek Singhal, President ( Corporate Strategy), M3M Group.

Source: PropertyatNeoDevelopers.Wordpress.Com

Dwarka E-way oustees to get allotment letters of alternative plots in 15 days

Public Works Department (PWD) minister of Haryana Rao Narbir Singh on Monday promised to give allotment letters of alternative plots to all the oustees of Northern Peripheral Road (NPR) also known as Dwarka Expressway in next 15 days.

If implemented, then work on remaining portion of much delayed Dwarka e-way can start in next few months and project can be completed within the deadline of June 2017. Dwarka e-way was mainly stuck due to delay in shifting of oustees from New Palam Vihar and Kherki Daula.

“Allotment letters for alternative plots to oustees will be issued in next 15 days,” said Narbir after meeting a group of oustees at his residence. Oustees had met minister to complaint about delay in issue of allotment letters of alternative plots by Huda even after more than a month of draw. Huda had conducted three draws in July and August to allot alternative plots to oustees of New Palam Vihar and Kkerki Daula, but allotment letters have not been issued yet.

Around 465 oustees from New Palam Vihar and Kherki Daula had applied for alternative plots out of which 90 (who had registry of property) were allotted alternative plots on July 31 and 75 oustees, who don’t had registry but have constructed houses, were allotted alternative plots on August 24. Another set of 79 oustees were allotted alternative plots on August 29, while remaining around 220 oustees with open plots were left out of the draw as Huda rejected their claims for alternative plots.

As per the final terms of settlement reached between Huda and oustees, people whose houses are coming in the alignment of Dwarka e-way will get six months from the time of receiving allotment letters of alternative plots to shift their houses. So if allotment letters were issued in October then Huda can demolish the houses in March to clear the land for construction of remaining portion of e-way.

Oustees also complaint about alleged irregularities in draw of lot to allot alternative plots. “There are few oustees who have not got alternative plots in the draw, while in some case size of alternative plots is not in accordance with the terms and conditions of final terms of settlement,” said Brijesh Mathur.

After listening to the grievance of people, minister assured that all the oustees will get their dues. Minister also directed Huda to conduct fresh survey of houses coming in the alignment of Dwarka e-way to compensate the oustees. “Development is important but it cannot be done by denying rightful dues of the people affected by the development projects,” said minister.

Source: PropertyatNeoDevelopers.Wordpress.Com

Realty sector to close year with Rs 43,600 cr worth PE transactions

Year 2016 is proving to be a bumper one for real estate and is expected to record the highest level of private equity investment in the sector since 2008. Based on the current pace of investments, Indian real estate is estimated to close the year with an inflow of Rs 43,600 crore through PE transactions.

More than half of this total - over Rs 24,500 crore - is likely to be invested in the second half of 2016, with the first half recording transactions of Rs 19,100 crore, says a report by global real estate services company Cushman & Wakefield.

Investments in office assets jumped 157% to Rs 4,236 crore in the first six months of 2016. Factors such as increased foreign investment and leasing activity, strong GDP growth and economic forecasts, improved governance and government initiatives have contributed towards attracting investments.

"Indian real estate has seen good traction from both domestic as well as global investors on the back of reviving economic confidence breaching previous levels. This bull run is expected to continue in the short term with more investments being made in completed/leased corporate assets and other commercial activities such as retail and hospitality and we expect 2016 to be one of the best years in recent past for the RE sector," said Anshul Jain, managing director-India at Cushman & Wakefield.

PE investment into real estate jumped 64% in the first half of 2016. The number of deals concluded during the period increased to 57, up 24% from a year ago. Domestic investors accounted for 63% of the investments in office assets owing to some big deals. Foreign investors brought in 25% of the investments and the remaining 12% was made by joint ventures of domestic and foreign investors, the report said.

The residential segment commanded the largest share of 44% of the total investments made during the first half, while commercial office asset class accounted for 22%. Retail gained the most, with its share of investments increasing to 18% from 2% recorded a year ago. Hospitality and mixed-use asset classes cumulatively accounted for the remainder at 17%. Domestic investors poured in 80% of the money put into residential assets, with the remainder being made by foreign investors.

Of the major property markets, Mumbai continued to attract the highest share of investments at 36%, followed by Delhi-NCR at 33% and Bengaluru at 11%.

However, by mid-2017, there could be a scenario of suitable projects drying up, with investments committed in most properties. Some developers may hold on to projects to cash in on the advent of real estate investment trusts (RIETs) and may only release their properties to such options, Jain said. The cumulative value of stakes likely to be sold by Indian developers in the rest of 2016 is estimated at between Rs 21,500 crore and Rs 24,000 crore.

With the improving economic outlook and an uptick in leasing for office spaces, some PE firms are increasing their portfolio of such assets, possibly with the intention of launching their own REITs. The relaxation in FDI norms in food processing, defence and pharmaceuticals is expected to attract investments, which, in turn, may boost demand in the real estate sector.

All of these are progressive FDI policies and effective implementation of the announced policies in infrastructure development, land digitization, RERA (real estate regulatory authorities) implementation, title insurance and the GST will be key to further growth, the report said.

Source: PropertyatNeoDevelopers.Wordpress.Com

Shopping malls above 350,000 sq ft most preferred by retailers

Global and domestic retailers seem to prefer bigger shopping malls to set up shop, with more than 40% of the respondents favoring malls of 350,000 sq ft and above, according to a survey by property consultancy CBRE.

"This allows them to gain access to a more varied retail environment ranging from supermarkets, cinemas, kids entertainment zones - thereby attracting greater footfalls," said the report named India Retailer Sentiment Survey.

Real estate cost, quality of shopping mall and incentives or rent-free period emerged as the top factors to influence the store location by retailers. Suitable store size or floor and right micro-market were among the other challenging factors for selecting the store location.

Occupation cost, size of mall and catchment area or location emerged as the top three factors impacting location selection in terms of malls. While, ease of access or parking, location and external ambience were the top factors impacting location selection in terms of high streets.

The National Capital Region, comprising Delhi, Gurgaon, Noida, followed by Mumbai continued to serve as gateway cities, featuring at the top of retailer expansion plans due to their high levels of brand consciousness and consumer purchasing power.

"A point to note is that fashion and apparel retailers in particular are able to generate higher sales in the 'all-season cities' of NCR as compared to other cities, further contributing to their popularity," said the report.

While the residential real estate segment continue to grapple with slow sales and rising inventory, office and retail segments are showing a strong growth.

Private equity investment in retail real estate surged to Rs 3,350 crore in the first half of 2016, the highest since 2008, according to Cushman & Wakefield.

Also with the government clearing tax hurdles for real estate investment trusts (REITs), retail assets are increasingly witnessing rise in demand as it can also listed under a REIT portfolio.

New malls also registered the highest half yearly supply in five years at 4.8 million sq ft in H1 2016, against just 0.2 msf in H1 2015.

NCR accounted for the highest supply during H1 2016, grabbing 64% of the share in new supply during the first half of 2016, followed by Pune and Mumbai.

Source: PropertyatNeoDevelopers.Wordpress.Com

Alternate 4-lane road from Bajghera to Bijwasan to connect NPR with Delhi

Even as land acquisition process for Delhi portion of Dwarka expressway has just started, Haryana government, which has almost completed the Gurgaon portion of e-way, is keen on making this road operational at the earliest to provide an alternate connectivity with Delhi to reduce traffic load on NH-8.

In a hurry to develop alternate connectivity between Delhi and Gurgaon, crucial for solving the traffic and congestion issue of Gurgaon, Haryana government wants to connect e-way with Delhi with 4.5 km long four-lane road from Bajghera in Gurgaon to Bijwasan in Delhi, without waiting for NHAI to complete the Delhi portion of Northern Peripheral Road (NPR) also known as Dwarka expressway.

"Despite all the legal hurdles and other issues, Huda has managed to complement large part of NPR in Gurgaon and issues related to remaining portion, resettlement of oustees, has been resolved now," said chief minister Manohar Lal Khattar in Gurgaon on Sunday adding that completion of Delhi portion of NPR may take some time.

"We want four-lane road from Bajghera, where NPR ends in Gurgaon, to Bijwasan in Delhi. This alternate road will ensure alternate connectivity of NR with Delhi and it will help in making e-way operational," said Khattar adding multiple-connectivity between Gurgaon and Delhi is needed, at present there is only one connectivity NH-8, which causes congestion on expressway and traffic problem in large parts of Gurgaon. He said work on construction of Gurgaon-SPR (GSPR) which will help in movement of traffic from Faridabad and Delhi to Manesar and Jaipur will also act as another connectivity between Delhi-Gurgaon and reduce traffic on NH-8.

Union minister for road transport and highways Nitin Gadkari said land acquisition for Delhi portion of Dwarka Expressway has started. "NHAI will start work on the road by end of the year," said Gadkari. He added that GSPR has been declared national highway and work will start soon after completing the land acquisition.

The 27 km long NPR has around 18 km long stretch in Gurgaon while remaining 9 km stretch is in Delhi side. The work on the Gurgaon side of e-way is almost complete and remaining portion of the road is likely to be completed by March 2017. On the other hand process of land acquisition for Delhi portion has just started.

Huda administrator Yashpal Yadav said they have inspected the area and identified route for alternate connectivity of NPR with Delhi. "Bajghera near New Palam Vihar, where NPR in Gurgaon ends, to Bijwasan is around 4.5 km road," said Yadav.

In March this year, union transport minister Nitin Gadkari accorded national highway status to the stretch following Huda handed over e-way to NHAI.

Large number of people who had invested in several real estate project developed along NPR is likely to be benefited by making e-way operational. This will is also reduce traffic on NH-8 as people coming from Delhi can directly go to Manesar and Jaipur without using NH-8.

Source: PropertyatNeoDevelopers.Wordpress.Com

Trends That Will Reshape The Indian Real Estate Market

Among the many different factors influencing the way real estate in developed, transacted and used in India, there are five big major emerging trends that have both real-time and  long-term significance:

1. Co-working spaces finding favor with independent consultants, freelancers

With the growing start-up ecosystem across India and the central government creating an enabling environment for entrepreneurship, demand for office spaces matching such firms’ requirements has gone up in the last few years. Also, due to the rising number of freelance professionals or consultants in today’s globalized workforce, office communities or co-working spaces are gaining popularity.

Co-working spaces are popping up across Indian metros as well as tier-II cities, and are helping many start-ups get flexible working options at prices they can afford. These spaces offer desks at cheaper rentals and some also allow a rent-free period to tenants apart from utilities and an office-like look-and-feel to potential start-ups.

Some of the co-working places also work as incubation centers for the urban centers they are based out of. Interestingly, start-ups buying/ leasing real estate to sub-lease it to such tenants is also on the rise. At a rough estimate, over a 100 of such players are already active across India. This trend is slowly and surely catching up in India.

2. Crowdfunding beginning to take hold

Crowdfunding helps innovators and inventors raise money for launching their products or services through the Internet. The practice involves raising small amounts of money online, from many people across the globe, to finance a project or venture. While other industries have seen the emergence of a more dynamic crowdfunding scene, real estate’s popularity still has a lot of catching up to do.

Some experts have pointed at the maturing crowdfunding scenario in the USA, where the amount of money raised and size of deals as well as the speed at which they occur have all steadily increased. In China, the real estate industry is no longer the exclusive preserve of big investors, and property developers have turned to crowdfunding to help finance the construction of residential and commercial projects.

Although in nascent stages in India, crowdfunding can pick up here as well because the financials of many developers are stretched. With increased digitalization and transparency, investors can be expected to open up to this way of investing if they can expect good returns. Already, non-resident Indians can invest in the country’s real estate under the same conditions applicable to residents. Moreover, a marketplace is already bringing together real estate investors as also listing premium plots, apartments and villas. This sector is likely to evolve and grow in the coming years.

3. Transparency to increase and help attract more funding

Two-thirds of the real estate markets globally have shown progress in their levels of transparency over the past two years, according to JLL’s Global Real Estate Transparency Index (GRETI) 2016. India too made improvements in overall transparency scores by moving up four places, and its tier-I cities are expected to break into the transparent category in the 2018 rankings.

Out of 109 countries, the top 10 highly-transparent markets alone corner 75% of global investment into commercial real estate (CRE), highlighting the extent to which transparency drives real estate investment decisions. At a time when capital allocations to real estate are growing globally, investors are expecting transparency standards in real estate to be at par with other asset classes.

Capital allocations in excess of US$1 trillion will be targeting CRE within the next decade, compared to US$700 billion now. This growth means investors will continue to demand further improvements in real estate transparency. There’s also mounting pressure from the world’s growing middle classes to weed out corruption from real estate, which will speed up this pace of change especially in the semi-transparent markets. Social media will also help mobilize people in this direction.

4. Retailers looking favorably at office-retail complexes

For quite some time now, retailers have been roadblocked by a lack of available quality retail space. At such a time, office-retail complexes (ORCs) are emerging as alternatives to high streets, and even malls, for some categories of retailers such as F&B (quick service restaurants, coffee shops, fine dining, pubs, etc.) or BFSI (bank branches, ATMs, broking services, etc.).

Since most part of the day of a working individual is spent at the office during weekdays, retail services benefit immensely by locating themselves close to, or within, business districts. Retail categories such as telecom services, office formals, leather bags and accessories, high-end fitness centers, premium salons, eye-wear and mobile manufacturers are now all looking favorably at ORCs.

Of the total retail presence in office buildings across major tier-I cities, a dominant 26% is occupied by F&B and a significant 23% is occupied by retail BFSI outlets. While retailers get the dual advantage of paying lower rents compared to premium spaces in Grade A malls and closer access to their main target segment of office-goers, developers are also open to experimenting more with a mixed-use format rather than a standalone retail format. This way, they can allow for quality retail on the lower floors and commercial spaces on the upper floors.

5. Technology transforming real estate requirements across the globe

Tech-enabled workplaces are becoming more common across the globe. In USA, research on the budgets of clients’ interior build-outs are showing very interesting results, with IT costs as a proportion of overall construction budgets increasing rapidly. Earlier, they were around 5% of the overall construction budgets over the last decade.

More recent build-out budgets show the expansion of IT services from cabling and wiring to more than a dozen items for technology, including access devices, infrastructure, mobility, connectivity, data security systems, wireless connections and upgrades, business-specific apps, company-specific conferencing and presentation capabilities. All of these items can add up to 35% or more of a budget for a truly technology-focused company.

This theme is seen in every tenant build-out today, from traditional law firms to new campuses built by companies like Facebook and Apple. The aesthetics and prestige of an office, which were formerly the primary considerations, are beginning to take a back seat to the technology and the connectivity within buildings. Some corporate occupiers in India are starting to invest more in expansion of their IT infrastructure.

Source: PropertyatNeoDevelopers.Wordpress.Com

Office rentals in Delhi NCR remain static in H1; Gurgaon sees marginal rise

Average office rentals in Delhi-NCR have remained static at Rs 77 per sq ft per month in the first half of 2016, compared to the year-ago period, according to property consultancy JLL India.

Submarkets of Gurgaon and Noida, however, witnessed a marginal rise, with average year-on-year rents increasing 1% and 5%, respectively, to Rs 75 and Rs 43.

Office rentals in Gurgaon's Cyber City is inching closer to triple digits. "The profile of tenants has changed in recent years. From being back offices with strict dependence on cost arbitrage, the tenant profile now includes consulting, high-tech engineering and design firms," said Santhosh Kumar, chief executive officer, operations & international director, JLL India.

"Presence of non-IT companies in such traditional IT holdouts has also increased," he added.

Delhi-NCR also had the highest vacancy rate of almost 32% in the June quarter this year, mainly due to inventory pile up at peripheral locations such as Manesar, Greater Noida and the extended parts of NH-8.

Bengaluru leads the way in vacancy rates, with only 3% of office space vacant as of the second quarter of 2016, followed by Pune and Hyderabad, with vacancy levels of 6% and 9%, respectively. Chennai comes next at around 12%, followed by Kolkata and Mumbai at around 19%, each.

In terms of having the most grade-A office stock, Gurgaon micro-market leads the way followed by Noida and SBD. Delhi city has limited grade-A supply, according to JLL.

Source: PropertyatNeoDevelopers.Wordpress.Com

REITS can have great investment potential

Though India is yet to see the launch of its first REIT, introducing this investment vehicle can create a vibrant market for commercial real estate.

Rajeev, aged 40 years, has a well settled job and a stable investment portfolio comprising equity shares and mutual funds. Apart from his routine investments, he has been able to accumulate an amount of 15lakh to 20 lakh which he wants to invest in a long-term asset. He has lately been reading about demand from multinational corporations (MNCs) for leasing commercial office space and complexes. He wants to invest the money in commercial office space so as to reap benefits of the increased demand of leasing commercial space from MNCs.

However, a standalone budget of 15 lakh to 20 lakh is insufficient to buy such an asset so Rajeev has no other option but to continue to put these funds in his existing portfolio of equity shares and mutual funds.

Many individuals like Rajeev are facing a similar dilemma. To help them, securities market regulator, Securities and Exchange Board of India (SEBI)has come up with an investment vehicle called Real Estate Investment Trusts (REIT)

What are REITs?

SEBI notified the REIT regulations in September 2014. REITs are trust vehicles which can raise funds from investors, acquire rent-yielding real estate, manage such real estate and distribute all of the income to investors. The concept of REITs was first introduced in the 1960s in the United States and then in other developed countries like Singapore, Japan and Canada.

REITs are functionally similar to mutual funds - they pool in the investments of many individuals and institutions and then put in this money in real estate assets. Thus, REITs as an investment class provide the common man an opportunity to invest in fixed income securities which also provide long-term capital appreciation and a natural inflation hedge. It also opens to small investors an arena, (rent-generating real estate assets) hitherto the monopoly of large investors.

As compared to a conventional investment in a real estate asset, investing in a REIT provides an investor much needed transparency and hassle-free access to a portfolio of assets, thereby ensuring that an individual does not become a victim of foul play by some developers. Some of the key regulations imposed by SEBI which make REIT well-regulated and investment-friendly are: Compulsory distribution of 90% of net distributable income earned by REIT to its investors; Specific norms in respect of portfolio of assets which can be held by a REIT; such as at least 80% of the value of REIT to be invested in completed and rent-generating properties Full and transparent disclosure of transactions with related parties Norms in respect of appointment and independence of valuer have also been put in place Audit of accounts of REIT to be done for not less than two times a year Well laid set of rights and responsibilities of unit holders, investment manager, trustee and valuer, etc.

Benefits of REIT:

Although India is yet to see the launch of its first REIT,the introduction of REIT is expected to create a vibrant market for commercial real estate in India. REIT has the potential of offering a perfect investment opportunity to small investors. It has democratized real estate investment by giving all investors the ability to invest in the real estate sector and gain the same benefits. We have listed below some of the benefits offered by REITs: Indian tax laws provide for beneficial tax regime for REITs and its investors, in line with the global standards; Ensure regular inflow of income with capital preservation and appreciation; Offer a natural hedge against inflation as commercial real estate rents and values have a tendency to increase when prices increase.

This has supported REIT dividend growth, providing retirement investors with reliable income even during inflationary periods; Offer easy exit opportunity and liquidity to investors; Provide developers with an alternate source of raising funds from public; Convenient way to invest in real estate assets instead of the conventional way which involves the tedious task of undertaking proper due diligence, completing property related regulatory formalities, etc. Assist in streamlining the real estate sector by removing investment gaps.

Investment Tips:

In spite of the fact that Indian markets have not seen practical application of the concept of REIT, still theoretically, investment in REITs is quite an easy and transparent process. SEBI regulations require units of REITs to be listed on a recognized stock exchange allowing easy trading of REIT’s units.

An individual can easily acquire the units of REIT from the stock exchange. SEBI regulations also provide that minimum subscription by each investor shall be merely 2 lakh with a minimum trading lot of 1 lakh.

Estimating any range of return from a REIT at this stage may sound like an early shot from the gun, however, it would be interesting to see if REITs as a vehicle are able to perform in the Indian real estate market and provide good post tax returns to its investors. The author is a partner and national leader - real estate practice, EY Abhishek Arora, senior tax professional, EY also contributed to the article.

Source: PropertyatNeoDevelopers.Wordpress.Com

India to be 3rd largest construction market globally by 2030

The real estate and construction sector in India is expected to be the third largest globally by 2030, contributing over 15 per cent to the country’s GDP, a joint report by KPMG and real estate body NAREDCO has said.

“The sector is expected to become the largest employer in India by 2022, providing employment opportunities to over 75 million people,” the report said.

India’s urban population is expected to increase by about 40 per cent from 420 million in 2015 to over 580 million by 2030. According to the paper, nearly 110 million houses would be required by 2022 alone in urban as well as rural India to provide housing to all citizens. This includes the current shortage of over 60 million houses, out of which around 20 million exist in urban areas.

Neeraj Bansal, Partner and Head, Building, Construction and Real Estate Sector - KPMG in India, said, “The recent policy reforms such as the Real Estate Act, GST, REITs, steps to reduce approval delays etc. are going to strengthen the sector. The sector players need to develop a global mindset towards quality, project delivery, work culture and governance. Strong steps are required to provide faster approvals, serviceable and clear title of land, long term finance and skilled workforce.”

According to the report, there are a number of infrastructure projects in the pipeline - 432 projects worth ₹6.5 trillion for roads, more than 400 projects worth ₹6 trillion in railways, 70 projects worth ₹670 billion for the development of airports and 75 projects worth ₹551 billion for the ports sector.

The report also highlights challenges such as land-related issues with limited funding from banks, limited availability of long-term funding, lack of manpower coupled with the conventional usage of technology followed by the lack of stable and predictive tax regime.

Source: PropertyatNeoDevelopers.Wordpress.Com

Global investors keen on Indian real estate

Global investors are looking at the Indian real estate sector with a great deal of enthusiasm, following the recent policy reforms, including Real Estate Regulatory Act (RERA), 100% FDI in construction and easing of REITs regulations, said Colin Dyer, CEO of US-based JLL Inc.

The reforms, according to Dyer, are helping property markets in India get more transparent, prompting institutional investors to increase their exposure in the country. "The penchant for development is clear from the efforts that the current government has made during the past two years or so. World's leading multilateral institutions and fund managers are taking a note of this and have bestowed their faith in India's progress," Dyer said in an exclusive interaction with ET.

"Currently, every metric, be it the Ease of Doing Business (by World Bank), Global Competitiveness Index (by World Economic Forum) or sovereign ratings (by S&P and Moody's), has shown India favorably, improving by a significant proportion."

He expects the private equity flows into India to remain strong in line with record levels touched in 2015 as the current developments with regard to RERA and REITs are major factors that could help improve India's transparency ranking further. India saw around $2 billion poured into realty sector by foreign private equity firms in 2015. "Given the speed with which reforms are happening, we expect Indian tier-I cities to progress from the 'semi-transparent markets' group to the 'transparent markets' group by 2018," Dyer said. In JLL's global real estate transparency (biennial) index for 2016, India's tier-I cities secured a rank of 36 amongst 109 countries, a major improvement from the 48th place it had secured in 2012.

Global investors, including Blackstone Group, Singapore's sovereign fund GIC, Canada Pension Plan Investment Board (CPPIB), Goldman Sachs and Qatar Investment Authority, have already been investing in Indian realty assets for the last few years. Apart from these, several new funds are also eyeing investment and alliance opportunities here.

Foreign investors' appetite for Indian real estate is on the rise, owing to relatively better economic growth and, therefore, returns.

The current developments relating to RERA and REITs are major factors that could help improve India's transparency ranking further during the next assessment year in 2018. Given the speed with which reforms are happening, we expect Indian tier-I cities to progress from the "semi-transparent markets" group to the "transparent markets" group by 2018.

Consumers are looking for fool-proof information and protection against builder malpractices, and the Real Estate Regulatory Authority would take care of both these concerns, according to Dyer. Bringing approval authorities, too, under the ambit of the regulator will help reduce delays on that front and will be helpful for investors remove uncertainties from project funding.

However, the issue of affordability for mass housing would still remain and in that regard, successful implementation of the 'housing for all by 2022' initiative of the Modi government would be crucial. It is definitely a gigantic task and political will is of utmost importance to ensure that success is achieved, he said.

India's residential sector currently has unsold inventory close to its peak levels of 39 months. However, there is definitely a trend of this getting gradually reduced over the next 18 months or so.

"By no means, this indicates lack of demand for houses. In most cases, fence sitters are holding back purchases either for want of the right products or due to lack of market confidence. Therefore, all stakeholders currently feel the need to adopt confidence-building measures, including the developer and government. We hope that with RERA in place, we would soon see confidence coming back," he said.

Dyer does not foresee further price rationalization in India, given that discounts are already offered by many developers, particularly those with high inventory, of 12-15%.

However, few developers with execution track record have been able to sell their inventory in record time despite a slow market otherwise, and therefore, price may not be the real reason for sluggish sales in many cases.

Boost Fund Flows

Heightened investor interest is good augury for real estate. We do need to step up funds flow into the sector. In the mature markets, real estate accounts for about half the annual growth in GDP. The corresponding share in India though remains hardly 9-10%, which clearly needs to rise. The way ahead is to boost transparency in approvals and clearances for real estate projects, so that project follow-through is time-bound and smooth.

Real estate does offer attractive returns on investment for pension and other long term funds.

Source: PropertyatNeoDevelopers.Wordpress.Com

India's real estate sector is again emerging as key hub for investment

India's real estate is back on the radar of global investors and institutions with the country emerging as the other significant investment option in the wake of China slowing down, said Henry Chin, head of research for Asia Pacific at property advisory firm CBRE.

"The Modi government has played the role of a very good catalyst and in the last 18 months, interest in India has been growing among occupiers and investors alike," said Chin. He cited the example of large institutional investors such as Blackstone, Brookfield and JP Morgan who have a presence in India now and are investing large sums of money in the Indian real estate. Recently, Chinese developer Wanda group also evinced interest in developing large projects in the country, Chin said. While the residential real estate market in India has seen slow growth over the last many quarters, the last one year was particularly good for the office leasing segment in the country.

Chin said leasing activity has been good so far this year and will continue to be strong in the second half of 2016. "Last year, Bengaluru was the strongest among all Asia Pacific markets in terms of office space leasing, and demand for the city is continuing to grow," he said.

The demand for office space, he said, is coming from the IT and BPO sectors as well as from banking, financial services and insurance (BFSI), pharma, engineering and automotive segments. There has been some contraction in office demand from the ecommerce of late but companies in that segment have taken up more logistics and warehousing space as businesses grow. "We are also noticing that a lot of projects in the industrial parks space that were shelved by builders for sometime now are coming back on track," said Chin. According to him, global investors and institutions are also taking note of the changing regulations in India, especially those relating to real estate investment trusts (REITs).

"Most people are talking about Indian REITs. We think there are multiple factors for the success of REITs in any market. I think India is 50% there at the moment," said Chin. "There are still a few things on the tax efficiency front and on the regulatory framework that need some work."

India has around 200 million sq ft of REIT-able space available. Earlier this week, the Securities and Exchange Board of India (Sebi) proposed further relaxed norms for REITs, specifically on related party transactions, and also suggested allowing REITs to invest more money in under construction projects. If the proposal is accepted, REITs will be able to invest up to 20% in under-construction projects compared with 10% currently allowed.

Chin said the other piece of regulation that people are talking about is the Real Estate Regulatory Act (RERA), which, when implemented fully, is likely to help augment foreign capital flow into the Indian residential real estate segment.

Source: PropertyatNeoDevelopers.Wordpress.Com

HNI investors switching to commercial property

India's rich investors have switched to buying commercial property in place of housing over the last 15-18 months following a tapering down of property price appreciation in the residential real estate in top Indian cities.

Commercial property serves as a lucrative investment option with investors gaining from rental income as well as capital appreciation. Grade A commercial properties give 8-10% rental returns on the capital value depending upon interest rates. Investors have been buying properties ranging from 1,300 sq ft to 20,000 sq ft. Investors and buyers from destinations like Indore, Belgaum and Noida have been flocking to prohibitively priced office space in the financial capital of Mumbai, an unheard of phenomenon till now, says Vipul Shah, MD of Mumbai-based Parinee Group.

"Investors are looking to pick up even under-construction properties unlike before when only ready properties were being acquired. We have been able to conclude four outright transactions at our 0.5 million sq ft commercial project at Andheri (suburb of Mumbai) in the last two months, which is a much better pace than usual," said Shah.

Major residential markets in the country saw average residential property prices in the city and suburbs appreciate by only 3.3% in 2015 as against an average of 7% in 2014, a study by property consultancy JLL India revealed.

In the Delhi-National Capital Region, a big investor market, Bengaluru and Chennai have seen prices appreciating around 2% in the last quarter of 2015. The trend is similar in peninsular India too. Prestige Estates Projects has also seen more HNI investments in commercial property.

"We have sold 0.5 million sq ft in the last three months to HNIs as they are looking to build annuity portfolio as returns are better than residential projects," said Nanda Kumar OP, vice president and head of leasing at Prestige Constructions. In Bengaluru, micro markets like Whitefield, outer ring road and central business district has already reached its peak in terms of rental appreciation too, he said. "We will continue to see rental appreciating by around 7% annually."

"In the last year or so, investors have been keen on good commercial spaces, especially where infrastructure and quality of the building are sorted," says Aakash Ohri, executive director at builder DLF Home Developers, who sold around 600,000 sq ft of space in its new office building Two Horizon Center in the last one year for close to Rs 1,000 crore. Strong absorption across major cities in the country has seen rentals moving up in the last one year. According to data from property consultancy CBRE Asia, rentals in Gurgaon's Cyber City area rose 13% while those in Bengaluru's Whitefield and Electronic City rose 12%. Rentals in Hyderabad's IT corridor and areas such as HITEC City, Madhapur and Gachibowli rose by 14-20% in the last one year. However, rentals have stagnated in most parts of Mumbai and Chennai.

Abhay Khemka of Gurgaon-based brokerage Khemka Investments and Properties says whatever investor interest is left in the real estate market today is only for commercial property. "They have no interest in residential today as they are already stuck with apartments. It is a lot easier to exit a commercial property, especially if it is leased out, while it is very difficult to exit a residential investment today," said Khemka.

Builders too are scrambling to build more commercial space. House of Hiranandani is looking to foray into commercial real estate and firming up plans to increase its footprint in Bengaluru & Chennai. "We are looking at an inorganic expansion strategy to expand the commercial portfolio and is on the lookout for projects which have already kicked off but are stuck due to lack of funding or expertise," said Surendra Hiranandani, CMD, House of Hiranandani.

Commercial real estate witnessed a turnaround in 2015 after being sluggish for over three years. Cushman & Wakefield predicts absorption is likely to gain momentum with current pre-commitment levels across eight cities seen at 11.80 msf in 2015, which would give a fillip to the trend of large deals in 2016 amidst frenzied consolidation activity in the market. Most of the pre-commitments are likely to be absorbed in 2016, with the some of them spilling over to 2017.

Source: PropertyatNeoDevelopers.Wordpress.Com