The Times of India: NRI investments in realty sector may rise 35% this year – Survey

Property

NEW DELHI: Property developers are expecting a 35 per cent surge in real estate inquiries from NRIs, with Bangalore turning out to be the hot favourite, says an Assocham survey. To tap the growing interest which comes at a time when the global economy is stabilizing and India is showing strong signs of revival, real estate companies are pulling out all stops by conducting property shows, exhibitions and opening overseas representative offices. Developers are also expanding their existing distribution chains and entering into strategic partnerships to encourage investors from this cash-rich segment, it said.

The survey was conducted among nearly 850 real estate developers in Delhi-NCR, Chandigarh, Mumbai, Kolkata, Bangalore, Hyderabad, Ahmedabad, Pune, Dehradun and Chennai etc.

Bangalore is the most favourite property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun, it added. The inquiries are primarily coming from NRIs residing in UAE, the US, Singapore, Australia, the UK, Canada and South Africa. This year, the demand is more for the high-end property and commercial buildings, according to developers. “With the revival in global economy, especially in the United States and Europe, people are more optimistic and looking for property to invest in. “Both small and big developers are focusing on the NRI base in the US, the UK and Asia Pacific region this year,” said Assocham secretary general D S Rawat. As per the findings of the survey, Ahmedabad (32 per cent) continues to be the most stable market in terms of demand and absorption of both residential and commercial spaces.

NRIs consider Ahmedabad as a safe place to invest in, with lenient government regulations for property investments. Pune takes the 3rd place (30.5 per cent), whereas Chennai (28 per cent) assumes 4th position and Goa (23 per cent) is at 5th position. In Delhi, there has been a 21 per cent rise in enquiries this year as opposed to last year from this segment and the majority of them have been for the residential segment. Catering to the growing demand among high-end segment, Delhi has also emerged among promising markets for real estate, the survey added.

Source: The Times of India

Financial Chronicle: Government funds and schemes for mass housing are the only way to meet housing for all target by 2022

2371-pk-paranjpe-cam02

Financial Chronicle, 10th September 2014: The Narendra Modi government, chief ministers, top realty honchos, urban planners, private equity firms, bureaucrats and bankers are meeting in New Delhi for two days to find a solution to the most vexed of all problems, finding a decent home for all Indian citizens, a task so mammoth that is easier said than done. The “Housing for All by 2022” conclave on September 12-13 convened by the National Real Estate Development Council (Naredco) will focus on a comprehensive roadmap to give a boost to the housing sector and try to meet the deadline to ensure a decent home for all Indians. Well begun is half done is a truism all right, but will Naredco, an autonomous self-regulatory body set up in 1998 under the aegis of ministry of housing and urban poverty alleviation succeed in its noble, if daunting, mission?

The statistics are heart breaking. At present, as far as urban centres are concerned, there is an estimated shortage of close to 18.78 million homes as first calculated for the 12th Five Year Plan (2012–2017) by the ministry of housing and urban poverty alleviation ministry (HUPA). This, more or less, still holds good. This includes households that exist in unsafe dwellings or unlivable environments. Of this, close to 56 per cent of the shortage comes from the economically weaker section (EWS) of society, while the remaining lies with the low income group (LIG) and other sections, which are even lower on the scale. The overall shortage of homes by 2022 is likely to rise to 30 million units as per government’s estimate, if supply remains at the current level. According to Anshuman Magazine, CMD at CBRE South Asia, an international property consultancy, the erstwhile government had set up a committee to develop a slum index at the city, state and national levels to sharpen policy focus on the urban poor. HUPA, slum data, released in March 2013 for Census 2011, had pointed out that around one out of every six households in urban India (17.4 per cent) lived in a slum. It had showed that well over a third of all slum households (38 per cent) were in cities with a population in excess of a million.

Manju Yagnik, an invitee member of the governing council of Naredco and vice-chairperson at Nahar Group, said based on the population trends, the present deficit in urban housing in India is around 24 million units. Considering the push in demand from redevelopment and shrinking size of households, a KPMG report (KPMG-Naredco funding the vision) estimates that there is a need to develop a total of 90 million (9 crore) housing units at a cost of $ 2 trillion, by 2022.

However, there is a silver lining to this giant task. Ashutosh Limaye, head of research and real estate intelligence services at JLL India, a property consultancy, said due to faster growth in construction of housing stock as against the growth of households in the previous decade, the shortage in homes has fallen over the last decade. He is optimistic that this trend would continue under the present government because of the increased focus on housing for the masses.

But given the current shortage, close to 2.34 million homes will have to be constructed every year for the next eight years. During the 11th Five Year Plan period, the authorities could provide for around 1.2 million homes every year towards this purpose. Therefore, Limaye said there is a need to double the effort during the coming eight years.

This requires strong dete­rmination and systematic planning.

The rural development ministry has envisaged an expenditure of Rs 3.45 lakh crore to build nearly 30 million houses for the homeless by 2022 under the National Gramin Awaas Mission and this works out to a cool Rs 50,000 crore-a-year programme.

Naredco chairman Navin Rah­eja, C­MD at Raheja Developers, and Naredco president Sunil Mantri, chairman at Mantri Realty, will present the industry and hom buyers’ perspective. The conclave will discuss speedy clearances, standardisation and simplification of procedures involving aviation, environment, administrative bottlenecks, land acquisition, non-agricultural conve­rsion, affordable housing through PPP mode, legal issues, urban planning, technologies and innovation for creating new cities and issues related to SEZ and reforms. Raheja said the biggest problem in filling the huge housing deficit is high input cost. The developers cannot create affordable housing due to high land prices, long time approval processes, lack of single window clearance system, lower FSI, population density and ground coverage. “These factors take housing beyond the reach of the common man resulting into low supply of housing in category of EWS, LIG and affordable. The country is facing major deficit in these segments,” Raheja said.

According to Mantri, the requirement of creating 90 million houses would translate to a whopping $2 trillion fund requirement resulting into Rs 15.6 crore per annum, if the government wants to fulfill “Housing For All By 2022”. He said it would also require huge manufacturing, material, transportation and all industries dependent on the realty sector, would have to be accelerated.

Rahul Nahar, MD at XRBIA Developers, said the process of obtaining construction permits has become difficult over the last several years and is among the major reasons contributing to the delays in real estate development. He said according to the report of the Committee on Streamlining Approval Procedures for Real Estate Projects (Saprep) set up by the ministry of housing and urban poverty alleviation, a developer has to follow at least 34 regulatory processes for obtaining construction permits and it takes an average of 227 days. “Such delays in obtaining approvals and adhering to regulatory processes can raise the project cost by 40 per cent of the sales value,” Nahar said. He said the government is evaluating this process by the single-window clearance mechanism. Several cities in India such as Ahmedabad, Chennai, Cochin, Madurai, Ghaziabad, Pune, Trivandrum, Delhi and Kozhikhode have implemented the automated system for approving building plans, he said.

“Making real estate sector more tech-savvy, speedy approvals, tax subsidies in case of affordable segment of housing, and easy financing and FDI as an additional source of funds will help developers build more homes,” Nahar said.

Brotin Banerjee, MD and CEO at Tata Housing said that with a constant rise in population along with rapid urbanisation and increase in disposable incomes, he expects the demand to increase by 20 per cent annually at least for the next decade.
“Therefore, to tackle the demand of housing requirement of urban India in an effective and speedy manner, there is a need to make changes in the Land Acquisition Act 2013 to remove bottlenecks in acquiring land for projects,” he said. Banerjee also pointed out that it was important to pass the Housing Regulatory Authority Bill, 2013, at the earliest to enable single window clearances for housing projects. “The new housing policy should look to suggest some viable methods for making affordable housing possible in public-private partnership (PPP) mode,” he points out. “The primary reason for this gap in the supply and demand can be attributed to one important aspect – the cost of land in the urban areas, which does not aid in the construction of affordable homes for all,” JC Sharma, vice chairman and MD at Sobha Limited told FC. He said if the issue is addressed appropriately, the country will not only be able to meet the housing requirements for all but also be able to contribute to the GDP of the nation significantly.

Sharma said there was no traction in the affordable realty segment was because of the non-availability of land with clear titles. This will not only help the developers procure good land parcels but also help them pass on the cost benefits to the end consumers, making it ideal especially for the EWS and LIG, he said. “Faster approvals and digitisation of the buying and selling processes will also go a long way in speeding up the housing projects. Also, infrastructural support and the formulation of right policies coupled with some monetary benefits will aid the government in this noteworthy initiative,” Sharma said.

Bimal Hegde, CEO at Chartered Housing, said at present there was not much clarity, mainly due to multiple definitions of the target group – economically weaker segment and low income group under different laws and existing schemes in terms of income and areas of the houses meant for them as well as the definition on low-cost and affordable housing.

“The department of financial services (DFS) is seeking clarity from the PMO on aspects such as whether the mission on low-cost on affordable housing is solely for urban people or for both urban and rural poor because the budgetary announcements is unclear on this aspect,” Hegde said. At the same time, DFS sought to know whether the existing urban and rural housing schemes need to be tweaked so that money can flow into these to achieve the objective, he said.

“Once all these and related issues are settled, the government can make inroads towards achieving it,” Hegde said.

Property consultants said despite the considerable supply, a majority of the urban housing infused into the major cities across India is beyond the purchasing powers of the EWS/LIG sections. “This is mainly because developers are by-and-large focused on launching luxury, high-end and mid-end housing projects which are considered safe from the perspective of risk and return,” Magazine said. He said to address the issue of housing shortage, particularly from the perspective of EWS/LIG sections, who constitute the bulk of the housing shortage, affordable housing is the need of the hour.

The number of impediments to the formulation of an effective affordable housing policy are manifold and wide ranging: escalating land prices, archaic building bye-laws, regulatory hurdles resulting in delay of project approvals and reluctance of formal financial institutions to lend to low-income/weaker sections. Of them, the real challenge before developers is inaccessible financing options for the EWS/LIG segment in urban India. Almost 70 per cent of potential low-income home buyers have informal income avenues, but need access to housing loans to buy a home. Needless to say, traditional financial players do not service this vast group. Growing interest in low-income housing finance is a very recent phenomenon; and it’s taken till 2011–12 for new entities, private players and established financial institutions to make an entry into the market. “For all intents and purposes, therefore, government funds and schemes for mass housing are perhaps the only recourse for India’s teeming urban populace,” Magazine said. According to Limaye, policy making in India has behaved reactively rather than proactively in the past. “This attitude needs to change to ensure housing for all becomes a reality,” he said.

For instance, Limaye said when a commercial area is being planned, authorities have an idea of the number of households that would need accommodation there. Similarly, when a large township project comes for approval from the authorities, they have knowledge about the infrastructure that will be needed around it. However, this information is rarely passed on to the related agencies. As a result, urban development ends up in a chaos. Limaye said timely information sharing and a more cohesive developmental approach from the authorities is a need of the hour. Hopefully, the conclave will keep that in mind.

Source: Financial Chronicle

Financial Chronicle: Affordable, not luxurious

Property

Despite a sluggish demand scenario, real estate developers are gearing up for the forthcoming festival season in anticipation of revival in sales – albeit with a subtle shift of emphasis. On their radars are not luxury residential houses for the well heeled but affordable housing for the masses. The aim is driven by simple economic logic, improving cash flows.

Most developers say that the sentiment index is looking up and with the government’s overweening emphasis on affordable and mid-segment housing, real estate companies have also changed their strategy by tilting their focus on affordable housing rather than high-end projects. For the last four-five years, developers had zeroed in on luxury projects as it undoubtedly generated better profits, but with the economy slowing down and sales dipping, developers found themselves struggling for cash flow. They reached the inevitable conclusion that it is important to be present across segments for generating healthy cash flow and are therefore changing their strategy, experts point out.

Says Sunil Mantri, chairman, Mantri Realty, “Definitely developers are once again focusing on affordable housing, except that the definition of affordable housing itself has changed. Property pegged at around Rs 50-60 lakh, with an area of 60 sq mt, is now being considered as affordable housing.” Given the low-end consumers’ virtually inexhaustible housing demands, there is huge rush for affordable housing and developers, naturally, have their eyes on the moolah. While it is true that luxury projects generate higher profits, for daily requirement of working capital, housing promoters are rethinking their strategies and have once again started to focus on affordable housing, he said.

In fact Mantri said that his company plans to launch a couple of affordable housing projects in the peripheral locations of Mumbai.

The sales have also started to show slight improvement month-on-month and are slated to get better with the advent of the festival season, which is a few weeks away.

Navin Raheja, chairman and managing director of Raheja Group, says his company has already launched many affordable projects and would continue to do so in the near future. For good measure, Raheja adds that around 70 per cent of Indians cannot buy houses due to high property prices. What that means is that focus on affordable housing is essential to cater to their demands, making affordable housing in the country a huge proposition.

Coupled with the economic situation, the government and the Reserve Bank of India have once again attracted the attention of developers and customers in the housing sector with two major announcements.

Finance minister Arun Jaitley announced major initiatives for the affordable housing segment earmarking Rs 4,000 crore, up from Rs 2,000 crore last year, to the National Housing Bank (NHB) for giving credit to housing finance companies for lending requirements of the urban poor. This was followed by an announcement from the RBI that allowed banks to raise long-term soft funds from the market to finance lending for home buyers for up to Rs 50 lakh for property values reaching Rs 65 lakh in six metropolitan centres – Delhi, Mumbai, Kolkata, Chennai, Bangalore and Hyderabad.

In other cities, the upper limit will be Rs 40 lakh for houses of values up to Rs 50 lakh. The RBI has not stopped there; it has said that it would review periodically the definition of affordable housing taking inflation into account. These steps have started to evoke fresh investor interest easing up funding options for developers. Further, deduction limit on interest for housing loans, the Urban Renewal Programme and the Housing for All Programme, will help in reviving demand. In terms of relief to the housing sector, the budget has allocated Rs 4,000 crore for low-cost housing schemes. Apart from this, relaxation of FDI norms for the affordable housing sector is likely to be announced soon. The Union budget has increased the income tax deduction limits under 80C, of which the repayment of principal on housing loans is a component. This limit has been raised from Rs 1 lakh to Rs 1.5 lakh. Additionally, the budget has also increased the deduction limit on interest payment for housing loans from Rs 1.5 lakh to Rs 2 lakh.

These two factors, on their own steam, are expected to lead to a vastly improved sentiment in the housing markets, obviously pushing up demand.

The real estate sector has been struggling for the last four-five years; investors have shied away because of poor returns, banks have turned cautious to lend at the back of several irregularities and defaults while demand fell drastically triggered by the economic slowdown.

However, most developers said that demand is expected to pick up beginning the festival season with the government’s focus on affordable and mid-segment housing.

Says Niranjan Hiranandani, founder and managing director of Hiranandani Group, “The company expects demand to revive as the festival season kicks in. Already, after the budget announcement the sentiment has changed.” However, most agree it would take at least another six months for a full-fledged revival.

Developers said what is required at the moment is reduction in interest rates on housing loan which would actually give demand a big fillip. With the government’s focus on affordable housing, investors and developers are focusing on the low-end housing spectrum across the country. PE funds, which got very poor returns from their earlier investments in real estate, became cautious about putting money where it mattered. But now, there is change in the air. The realty sector is on the path of revival and both commercial and residential segments are expected to perform well going forward, predict experts. During the month of July, for instance, housing sales remained muted and new supply saw a decline across leading cities. Nonetheless, a large majority of new projects were launched in the mid-segment, concentrated in micro-markets such as the Old Mahabalipuram Road/Grand Southern Trunk Road, Ambattur and Porur in Chennai; Marathahalli ORR, Old Madras Road, Whitefield, Hebbal, Thanisandra Main Road and Gottigere in Bangalore.

In contrast, residential real estate activity remained relatively subdued in Delhi NCR, Mumbai, Hyderabad and Kolkata during July.

Meanwhile, Pune is likely to attract significant supply addition as part of the proposed township developments by prominent developers in the peripheral locations of the city. Housing prices remained largely stable during July. Owing to less-than enthusiastic demand levels, premium residential locations—such as Chanakyapuri in Delhi and Golf Course Road in Gurgaon—saw a slight price correction. Conversely, strong demand coupled with limited availability led to a price appreciation in central Chennai, according to a CBRE report. Well, at the bottom position it has been in the last couple of years, the housing sector can only go up.

Source: Financial Chronicle

The Asian Age: Ease ECBs to boost housing

HOUSING 11

A massive investment of over Rs 16 lakh crore per annum is required in India’s real estate sector to achieve the government’s vision of ‘housing for all by 2022’.

According to KPMG National Real Estate Development Council report, investment in housing needs to be doubled for which there is an urgent need to increase the borrowing limits under the External Commercial Borrowing (ECB) mechanism.

Currently, Rs 9.5 lakh crore is invested in the real estate sector annually, of which about 80 per cent or Rs 7.5 lakh crore is invested in housing development. The report has highlig-hted the need for increasing the borrowing limit of $1 billion allowed under the ECB mechanism for affordable housing development to $10 billion. The current housing shortage in urban areas is estimated at 19 million units. Out of this, about 95.6 per cent is estimated to be from Economically Weaker Sections (EWS) and Low Income Group (LIG) households, who cannot afford houses costing above Rs 15 lakh.

According to KPMG, majority of demand is expected to come from LIG and MIG segments of households in the next eight years. As per KPMG’s observation, lack of institutional funding over the long term is one of the major roadblocks in achieving the desired investment into the realty sector.

The maximum tenure of any capital at the moment is about 4-5 years leading to multiple rou-nds of fund raising by developers. Additionally, there are no formal lending sources available to developers to buy land, which accounts for about 20-40 per cent of the real estate project cost.

“The project life-cycle of a housing project from land acquisition to handover has increased considerably in the last few years affecting the affordable housing development. The FM and RBI should raise action to do some handholding by giving one-year gap to repay debt,” said Navin Raheja, chairman, NAREDCO, and the chairman of Raheja Developers.

Source: The Asian Age

Raheja Developers planning IPO in a year

“We have seen some revival in the sector in the last few months and we expect the trend to continue and the market will grow. We see this as the opportunity to raise equity funding,” Navin Raheja, Managing Director said on the sidelines of a Nardeco banking summit here today. He said the company might go public in the next one year and has already completed the necessary ground work. However, he did not specify how much money the company is planning to raise or how much stake he is ready to divest.

“We have prepared ourselves in this direction. We are complying with the necessary requirements for going public. So when the market is right we will list,” Raheja said, adding that funds will be used for expansion. When asked about the company’s debt position, Raheja said, “We are very comfortable as far as our debt is concerned. The fund that will be raised will be used for expanding our presence.”

The city-based developer has projects both in the commercial and residential segments.

Source: The Hindu Business Line

Live Mint: Raheja Developers planning IPO in a year

Initial Public Offering

Initial Public Offering

Wednesday, August 20, 2014 – Mumbai: Riding high on the revival in the real estate market, realty player Raheja Developers plans to go public in the next one year, a top company official said.

“We have seen some revival in the sector in the last few months and we expect the trend to continue and the market will grow. We see this as the opportunity to raise equity funding,” managing director Navin Raheja told reporters on the sidelines of a Nardeco banking summit on wednesday. He said the company might go public in the next one year and has already completed the necessary ground work. However, he did not specify how much money the company is planning to raise or how much stake he is ready to divest. “We have prepared ourselves in this direction. We are complying with the necessary requirements for going public. So when the market is right we will list,” Raheja said, adding that funds will be used for expansion.

When asked about the company’s debt position, Raheja said, “We are very comfortable as far as our debt is concerned. The fund that will be raised will be used for expanding our presence.”

The city-based developer has projects both in the commercial and residential segments.

Source: Live Mint

Business Standard: Raheja Developers planning IPO in a year

Initial Public Offering

Initial Public Offering

Thursday, August 21, 2014: Riding high on the revival in the real estate market, realty player Raheja Developers plans to go public in the next one year, a top company official said.

“We have seen some revival in the sector in the last few months and we expect the trend to continue and the market will grow. We see this as the opportunity to raise equity funding,” managing director Navin Raheja told reporters on the sidelines of a Nardeco banking summit here today. He said the company might go public in the next one year and has already completed the necessary ground work. However, he did not specify how much money the company is planning to raise or how much stake he is ready to divest. “We have prepared ourselves in this direction. We are complying with the necessary requirements for going public. So when the market is right we will list,” Raheja said, adding that funds will be used for expansion.

When asked about the company’s debt position, Raheja said, “We are very comfortable as far as our debt is concerned. The fund that will be raised will be used for expanding our presence.”

The city-based developer has projects both in the commercial and residential segments.

Source: Business Standard