Japan’s Sumitomo Enters Indian Realty Sector with $2 billion Gurgaon Projects

Japanese conglomerate Sumitomo Corp today announced USD 2 billion township project in Gurgaon as it forayed into Indian real estate sector in collaboration with local partner Krishna Group.

The 50:50 joint venture, Krisumi Corporation Pvt Ltd will build 5,000 flats, shopping mall, office space and educational institution at 65-acre land in Sector 36-A, Gurgaon abutting the Delhi-Mumbai industrial corridor's Global City.

The project, which will have a total built-up area of 18-18.5 million square feet, will be developed in phases, the two partners announced at a media round table today.

"I want to create a Japanese city here...The first phase will comprise 1.2 million square feet of

 built-up, consisting of 430-450 apartments and will be completed in 4-5 years," said Ashok                 Kapur,      Chairman, Krisumi Corp.

Krishna Group, a diversified business house with interests in auto components, media, travel, and entertainment seating, owns the 65-acre land parcel where the mini-township will be built, said Kapur, who is also the head of the Group.

"Idea is to create a niche which Indian market had not seen," Kapur said adding the apartment that may cost Rs 1-2.5 crore will have quality and facilities equivalent to those costing Rs 15-20 crore at present. Sumitomo Corp, which has done 300 real estate projects globally, will bring in the expertise and technology for Krisumi City. 

"India's real estate sector is going through an interesting phase. While consumer's expectations have evolved manifold, most of the traditional developers are finding it difficult to effectively cater to all their requirements," said Masahiro Narikiyo, Chairman and MD,

Sumitomo Corp India. Narikiyo said the Tokyo-based group has done projects in Japan, the US, China, Singapore, Indonesia and Vietnam. The company was attracted to India because it "is politically very stable among emerging markets," he said. "It is governed by democracy, the value we can share." Sumitomo Corp has sold over 50,000 (rpt) 50,000 condominiums in Kansai and in the Tokyo metropolitan area over the past 50 (rpt) 50 years. In the office building business, it operates about 3,30,000 square metres of office space in Tokyo and Osaka.

Kapur said the biggest challenge facing the Indian real estate industry today is quality, efficiency, and commitment to timelines, all of which is exactly what Japan is known for.

"Japan is already beyond RERA," he said .. adding that Sumitomo may enter into more such alliances in India later on. The project spread over 65 acres will be developed in 7-8 phases over 10 years. While the first phase with 1.2 million sq ft development will have over 450 apartments, the entire project will offer around 5,000 apartments.

“The biggest challenge facing the Indian real estate industry today is with regard to quality, efficiency and commitment to timelines, all of which are exactly what Japan is known for. We are certain that our partner, Sumitomo Corporation, part of the 400-year-old Sumitomo Group, with their extensive global experience in real estate development shall contribute tremendously in creating projects with endearing value for our clients as well as the local communities around it,” said Ashok Kapur, chairman, Krishna Group.

The joint venture company has got most of the approvals for the first phase, which will be launched later this year. The construction of the first phase of the project is also expected to commence this year.

Source : http://bit.ly/2EP74ZK

NGT says realty projects’ non-FSI areas to be computed for environmental nod

In a ruling that's likely to have a far-reaching impact on realty projects across the country, the National Green Tribunal has held that fire safety provisions, parking spaces and recreation grounds must be included while computing a realty project's built-up area to determine if it needs environmental clearance. Bringing these municipal issues within the scope of environment approvals for the first time, NGT's principal bench headed by Justice Swatanter Kumar imposed a fine of Rs 3 crore on Priyali Builders and directed it to halt construction at a slum rehabilitation project at Antop Hill locality in Mumbai.

The tribunal held that the developer has to pay Rs 3 crore under the Public Liability Insurance Act and an additional fine for not providing a recreation ground to project beneficiaries. It also directed the builder to halt construction and not create any third-party rights at the project.

The NGT had ruled in a case filed by Sunil Kumar Chugh, a beneficiary of the slum rehabilitation project, and his neighbor who had challenged the environmental approval granted to the redevelopment with a total built-up area of 29,150 square metres.

Construction had started in 2009 and environmental clearance was obtained in March 2014. The appellant had moved the court alleging that the builder did not obtain prior environmental clearance and violated regulations by not providing a recreation ground, parking spaces and provisions for fire safety.

The tribunal's order ends the malpractice of using only FSI (floor space index) area, and not the total built-up area, to evade obtaining environmental clearance, according to Aditya Pratap, advocate for the petitioners. Several builders ducked getting environmental clearance from 2006 to 2011 by passing the project's FSI area as the built-up area and stating that it was below the threshold, he said. "By ruling that built-up area includes both FSI and non-FSI areas, the tribunal has made this definition applicable retrospectively from 2006 itself, thereby bringing all projects approved thereafter within its ambit if they have crossed the 20,000 square meter threshold limit of built-up area," Pratap said.

Several realty projects allegedly evaded the ambit of environmental clearance by excluding non-FSI areas such as the lift lobby, basement areas and staircases while computing the total built-up area of the project.

Source: PropertyatNeoDevelopers.Wordpress.Com

Is opting for a subvention offer a good idea?

Booking a property for a small amount and paying the rest of the purchase price after possession might not be such a good idea.

As the year 2015 unfolds, it is time to review your options of buying a property in a market already burdened by oversupply, high prices and delayed projects. While the market is witnessing a glut, developers are keen to offload their share of inventory of unsold flats to prospective buyers.

To push sales, developers are willing to offer heavy discounts on the quoted price mostly in the form of semi- subvention schemes. There are several advertisements that have offers such as 10:80:10; 20:30:50 or ‘pay 0% now and don’t pay EMI till possession’. Under these schemes, the buyers are expected to pay 10% initially or nothing and the remaining amount at the time of possession. The subvention period is usually kept at 24 to 30 months.

Simply put, the deal ensures that you pay at least 10 to 20% of the total purchase value of the apartment on purchase and the rest of the amount after completion. However, while such deals seem attractive, they have their own share of problems.

Let’s look at the advantages first. For savvy investors and second property buyers, the deal may be lucrative. The rationale behind the investment decision is that the buyer gets to book a property by paying a small amount. He gets to pay the actual equated monthly installments after a period of two or three years. In case the buyer (read investor) is not in a position to bear the burden of EMIs after completion of the above period, he can sell the property.

At this stage he still makes a profit on his investment as the property is sold at the current market value or the revised rate at which the developer is selling his share of properties. Unfortunately, such deals are not good for the realty market in the long run as they encourage speculative dealings in the market and lead to creation of more vacant properties.

Now let’s discuss the problems buyers could face because of such schemes. The biggest and foremost risk is that of loss due to indefinite delay in completion of the project. As soon as the subvention period is over, the EMI based on the 80% or the remaining amount of the total value (or loan) will begin. This would be irrespective of the construction status. In case the house is not ready by then, and if the customer is staying on rent, he will have to pay both the rent as well as the EMIs.

Given that most of the real estate projects get delayed, one may actually end up paying much more than one had planned for.

What can you do?

Take a cue from the recently published notification by the Reserve Bank of India (RBI). The apex bank has clearly said that it is not in favor of such 80:20 or 75:25 schemes. The RBI has taken note of the fact that banks are making upfront payments to the builders and putting their money at risk. The premise has been that the home loan disbursal should be linked with the stages of construction of a building so that the money loaned by the bank does not get locked up in case of a dispute between the borrower and the developer.

So as a savvy investor, look for properties with long-term prospects of healthy appreciation. Go for a construction linked plan of payment. Stay invested for a slightly longer period. Property sold when it is ready for possession fetches more value than an under-construction property.

Source: PropertyatNeoDevelopers.Wordpress.Com

Office Space - Invest profitably in office

What are the pros and cons of investing in commercial property and how do you choose the right property.

The key advantage of investing in commercial property (office space) vis-a-vis residential property is that you can earn higher rental yields.

 While residential property can give you a return of 2-4%, commercial property can give a return as high as 6-9%.

Another advantage of investing in commercial property is that you can earn rental returns from it initially and use it for your own needs some time in the future.

For instance, you may be in a job at now but may want to start your own business or consultancy at a certain stage in the future-the office space will come in handy then.

The disadvantage of investing in commercial property is that capital appreciation in this asset class does not match that in residential property. Capital appreciation in residential property tends to be driven by both end-user and investor (or speculator) demand.

In the case of commercial property, however, the capital value tends to be more a multiple of the rental value. And rental value cannot keep rising very fast for too long; otherwise, it would make the cost of doing business prohibitive.

When you invest in commercial property, know that returns could be affected by the economic cycle.When the economy witnesses a downturn, fewer new businesses are created. This affects the demand for commercial space, and hence the pace of increase in rental rates.

How to select the Right Property:

 
As in the case of all real estate projects, location is the most important criterion even in the case of commercial property.

Try to pick an area where economic activity is likely to grow at a robust pace in the future. It should also be a locality where a massive amount of new supply will not enter the market in the next few years. If that happens, your returns could be adversely affected. The building that you invest in should have a good front and should be easily accessible from the main road. If visitors have to pass through narrow lanes to reach your building, tenants may not find it attractive. It should also be close to a main highway and should have a bus stop nearby. A Metro line would, of course, be the icing on the cake.

If you plan to buy in a project that is still under development, you should examine the builder's previous projects. This will give you an idea of the level of quality you can expect from him.

How well the builder maintains his projects after handing over possession is another issue that you must pay close attention to. If the building is kept by a maintenance agency, check whether the it is doing a competent job.

“How well a building is maintained after you are given possession plays a crucial role in its ability to attract tenants,“ says Sanjay Sharma, MD of Qubrex, a Gurgaon based real estate consultancy.

When you are in vesting in a commercial property under construction, make sure that all the approvals are in place and the developer has all the papers to prove that the land on which he is developing the property is owned by him.

Shared Property:

In commercial buildings, you also have the option of becoming a part owner of a large plate area. The area you own may not be demarcated and walled off on all four sides.

The advantage of investing in a shared property is that the ticket size is low. The disadvantage is that disputes may arise among the owners. For instance, some of the owners may be ready to lease the property at a certain rate, while others may opt to wait until another tenant who is ready to pay a higher rent is found. Making unilateral decisions is impossible in such a property.

Exiting such an investment can also be more complicated than in the case of a standalone property. The biggest disadvantage of a shared property is that since the areas are not properly demarcated, legal issues could arise over ownership rights.

Armed with this fundamental knowledge, you can now make profitable investments in commercial property.

Source: PropertyatNeoDevelopers.Wordpress.Com

Realty regulation bill in final stages of consultation: Naidu

The real estate (regulation and development) bill 2013 will not ‘strangulate’ but regulate the sector, says housing minister Venkaiah Naidu.

The real estate regulation bill, expected to bring order in India’s chaotic realty market, is in the final stages of consultation.

Venkaiah Naidu, housing minister, hopes the regulatory bill will get cleared by Parliament at the earliest.

Speaking at the recentlyheld Credai conclave in the Capital, Venkaiah Naidu, minister, urban development, housing and urban poverty alleviation ,said he had gone through the contents of the bill personally. “We have taken the views of various stakeholders, including the real estate sector. Then we will go to the Cabinet shortly. Once the Cabinet approves (it), I am hoping we will get early clearance. Then we will go to the Parliament. If not in this session, at least by the budget session the bill will be a reality,” Naidu said.

The minister added that the state governments would get the freedom to frame rules under the Act, when it is passed by Parliament. The bill, which was introduced in the Rajya Sabha in August last year, seeks to protect home buyers from unscrupulous developers.

In February this year, the standing committee submitted its report on the bill, which provides for mandatory registration of all real estate projects. It also makes mandatory disclosure of information like details of promoters, layout plan, land status, schedule of execution, status of various approvals and carpet area. The bill seeks to enforce the contract between the developer and buyer and provides for quick remedial measures in case of disputes.

The government also plans to offer interest subsidy on housing loans to help poor section buy homes and boost real estate demand.” We are coming out with an interest subvention scheme for the housing sector for the economically weaker section (EWS) and lower income g roup (LIG) people and also partly to lower middle class people,” Naidu said on the sidelines of the Credai event. He said the government was moving towards reduction in interest rates, which were difficult to manage currently.

The theme of the Credai conclave was Clean India-Skilled India-Strong India. Over 1000 developers who attended the event from across the country took the pledge for a Swachh Bharat and to work towards garbage reduction and waste management.

Naidu also launched the Credai-JLL report on ‘Housing for All: Reforms can make it happen sooner’ at the event.

Prakash Javadekar, minister for environment and forests, on the occasion, said, “The government has made the provision of e-clearance to bring in transparency and speed up the projects. While the government is working towards standardising rules for environment waste and clearances, “however we need affordable science and technology to improvise the current scenario of the realty sector in India.”

“We need to take policy-led decisions and take reality to the new heights by reducing the time span for clearance and red tapism. I also congratulate Credai for signing the MOU with IFC which will emphasise on following the standards of maintaining green buildings,” Javadekar. added

Ashok Gajapathi Raju , minister of civil aviation, said, “The housing and construction sector is a crucial sector which contributes a major share to the GDP. There is an urgent need to strive and create a level- playing field for the government and private players in this sector.

Source: HT Estates, Nov 29, 2014, Page 09

Connecting people to their Universe

Eco friendly cities will link up inhabitants to smart devices, businesses, public sector and knowledge institutions.

Unprecedented migration from rural to urban areas has necessitated the creation of smart cities. Their development is perhaps the only solution to the problem of unplanned urbanisation. The new government’s 100 smart cities, for which ` 7060 crore was allocated in this year’s budget, is part of this vision. According to a report by Resurgent India titled Smart Cities, by 2050, about 70% of the population will be living in cities. India will need about 500 new cities to accommodate the influx and smart cities offer a practical tool box to deal with unprecedented urbanisation.

Key Takeaways:
1.) Around 26 global cities and more than 90 sustainable cities are to developed by 2025.
2.) Around 50% of these smart cities will be from North America and Europe.
3.) The smart city market will be valued at $1.5 trillion in 2020.
4.) Out of this share, 38% of projects is likely to be in the smart governance and smart security segments.

What is a smart city?
It's an urban region that is highly advanced in terms of overall infrastructure, sustainable real estate communications and market viability. It's a city where information technology is the principal infrastructure and the basis for providing essential services to residents. According to Frost & Sullivan, adoption of the at least five of the eight smart parameters make a city smart. These include: energy, building, mobility, healthcare, infrastructure, technology, governance, education and citizen - all smart.

The Challenges:
1.) Longer time frames should be kept in mind, such that buildings and infrastructure are adaptable, ecological sensitive and intelligent.
2.) A smart city can take 8 to 10 years to build and perhaps even more time to attract businesses and people. Such a long term initiative requires commitment on part of the government.
3.) The success of the cities depends on residents, entrepreneurs and visitors becoming actively involved in energy saving and implementation of new technologies.

What are the parameters of a smart city?
1.) Smart Governance: Includes policies and digital services from the government that help adopt green and intelligent solutions through incentives, subsidies, etc.
2.) Smart Technology: Connects the home, office, mobile phone, and car on a single wireless IT platform. It includes adoption of a smart grid system, smart home solutions, a high speed broadband connection, and 4G technology.
3.) Smart Citizen: Must embrace smart and green solutions in daily activities. Be proactive in adopting smart concepts and smart products and lifestyle choices.
4.) Smart Energy: Uses digital technology through advanced metre infrastructure(AMI), distribution grid management and high-voltage transmission systems, and for intelligent and integrated transmission and distribution of power.

Smart Mobility: Enables intelligent mobility through innovative and integrated technologies and solutions, such as low emission cars and multimodal transport systems.

Smart Healthcare: Uses e-health and m-health systems and intelligent connected medical devices. Policies encourage health, wellness, and well-being for citizens and health monitoring and diagnostics as opposed to treatment.

Smart Buildings: Are green, energy efficient, and intelligent, with advanced automated infrastructure that control and manage lighting, temperature, security, and energy consumption independently.

Smart Infrastructure: Has intelligent and automated systems to manage, communicate with, integrate into intelligent infrastructure: energy grids, transportation networks, water/waste management systems, telecommunications.

“Urban migration and the physical expansion of cities and metropolitan areas are adding immense pressure on energy resources, environment, infrastructure, sanitation, health, public funds and other basic utilities. Cities, world over, are facing issues of congestion and pollution, while steep real estate prices and a lack of access to affordable housing are leading to the creation of a sense of instability. In developing and growing cities, governments are struggling to match the city infrastructure to accommodate the rapidly growing population.

Smart Tag Claimants:
1.) Cities with a declining rate of growth and consequently declining tax revenues are forced to deal with obsolete infrastructure and systems. Therefore, it has become imperative that this issue of urbanisation is tackled keeping in mind the futuristic trends that technology and society are veering towards,” explain Archana Vidyasekar, team leader and Archana Amarnath, programme manager, Visionary Innovation Research Group, Frost & Sullivan. Perceptions of smart cities vary.
2.) Many cities claim the ‘smart’ tag even though most of their initiatives center around green concepts. Cities also launch initiatives to cover all areas with high fibre optic broadband network to become smarter. However, even though all of the above improve things, it is not an exact definition of smartness. There are many sustainable and green initiatives taking place across the globe but cities implementing the changes are often failing to leverage information and communications technology(ICT).
3.) What makes a smart city different from sustainable cities or ECO cities is its emphasis is on creating connections and systems, not only between millions of smart devices present in modern day cities, but also between businesses, public sector, knowledge institutions, and inhabitants of the city.

The Business Models: Build own operate or the BOO model is based on a smart city planner independently building the city infrastructure and delivering smart city services. The operation and maintenance of the services is completely under the planner’s control.

Build Operate Transfer: This model requires the planner to appoint a trusted partner to build the city infrastructure and provide smart city services for a particular area within a time period. After completion the operation is handed over to the smart city planner.

Build Operate Manage: The planner appoints a trusted partner to develop the city infrastructure and services. This partner also operates and manages the smart city services. The city planner has no further role. Most of the public-private partnerships are built on this model. Most of Indian smart cities will be built on this model.

Open Business Model: The planner allows any qualified company or business organization to build city infrastructure and provide city services. Some regulatory obligations are also imposed by the planner.

Funding Mechanisms:
1.) Most services are financed by central governments or cities. However, funding comes via specific funds for urban development/smart city initiatives.
2.) Public-private partnerships are funded and operated through a partnership of government and one or more private sector companies.

City Budgets: Where smart city projects are self-financed from public budgets in collaboration with central governments or state governments.

Private Investment: Whereby financing is done through commercial stakeholders, service providers, private investors and venture capitalists.

Source: HT Estates, Nov 29, 2014, Page 08

What’s causing the delay in single-window clearances?

If the new government actually provides hassle-free approvals to housing projects, residential prices can come down by 30% to 35%.

The Indian real estate market is in dire need of single-window clearances for residential projects, and this is something that the new government must action on a priority basis. The process of project approval must be revised so that developers can launch more projects and increase supply, which will help in keeping prices down. Owing to its specific structure, the current system is completely counter-productive. The lack of a streamlined projects approval mechanism is a symptom of India’s retrograde bureaucratic machinery which causes untold losses to all stakeholders.

It is a well-known fact that real estate is one of the major contributors to GDP, and this sector cannot perform optimally in a scenario where a bewildering multitude of agencies are involved in processing approvals for real estate projects.

If we study the massive numbers of clearances and approvals that are required for residential projects in India, the challenges that developers have to face become very apparent. The old English proverb ‘there’s many a slip between the cup and the lip’ is very apt here. The extensive efforts that a developer in India has to put in before a project is even approved for construction are not well understood.

Moreover, the procedural complications only increase once a project is cleared for development. A project can face a road block at any stage between construction commencement and completion because of some government department or the other delaying clearance or approval.

Developers face multiple repercussions because of these delays. In the first place, delays adversely affect the gestation period in terms of returns. Secondly, delivery timelines play a big role in determining the attractiveness of a project in relation to investors. The amount of confidence that end users place on a developer is directly proportionate to the pace of delivery.

Now expectations are big on the present government, which has assured the Indian real estate fraternity that it will pay due attention to its issues.

Prime Minister Narendra Modi has made it his mission to make housing affordable to all, but it is difficult to see how this can happen when the currently employed multi-agency approach to project approvals adds as much as 40% to the cost of constructing projects.

If the new government indeed provides single-window approval to housing projects, residential prices can come down by 30% to 35% as a result, says a real estate expert.

The introduction of a single-window housing project approval system would make it possible for residential developers to increase the supply of housing, which would not only help in addressing the country’s massive requirement for housing but also increase the government’s revenue collections from increased stamp duty and registrations.

Also, increased housing supply will mean healthier competition among developers, which will result in more rational and uniform pricing. Greater competition will also boost innovation in project designs.

These considerations combine to make a very compelling case for the government to finally make single-window approvals for housing a reality.

Source: HT Estates, Nov 29, 2014, Page 07