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Stakeholder sentiment in the real estate industry turns negative in April-June quarter

NEW DELHI: The sentiment among various stakeholders in the Indian real estate industry has moved into the negative zone for the first time since the Lok Sabha elections in mid-2014, according to a report by industry body FICCI and property advisory firm Knight Frank India. 

The Real Estate Sentiment Index for the April-June 2015 period declined to 49 from 51 in the previous quarter and a peak of 63 in the July-September 2014 period. 

The future sentiment index, however, stood at 62 for the April-June 2015 period, indicating that the coming six months are likely to be better. 

"Despite delayed reforms in the economy and concerns across the globe, the Indian economy is doing reasonably well with basic fundamentals showing a strong foothold. However, notwithstanding the economic scenario, the current sentiment score, at 49, has reached the pre-election level and reflects a negative sentiment. Stakeholders (developers, financial institutions and other supply side stakeholders) believe that the current market scenario is worse compared to six months ago," said Samantak Das, chief economist and national director-research at Knight Frank India. 

He pointed out that delayed reforms seem to have affected the sentiments. "Another factor that has had a negative impact on the current score is the underperformance of the residential market. Majority of the respondents are of the view that the residential launches, sales and price appreciation are at a much lower level than six months ago. While the current sentiment is negative, the future sentiment score stands at 62. Though the score indicates that the coming six months are likely to be better, the continuous four-quarter fall reflects the waning stakeholder confidence," he said. 

The sentiment about the residential real estate sector has seen a constant decline with a majority of the stakeholders believing that prices are likely to remain stagnant in the next six months and one-third of them foreseeing a price correction in this period. Home sales have seen a consistent decline over the last ten quarters and survey respondents expect new launches and sales to drop even further by the end of 2015. 

On the commercial office space market, however, stakeholder sentiments continued to remain relatively strong. Respondents see demand for office space strengthening further in the coming six months and a majority of them expect rentals to firm up by December 2015. 



Source the economic time


Private equity investment in realty sector jumps over two-fold to Rs 8900 crore


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NEW DELHI: Private equity investment in the real estate sector jumped more than two-fold to Rs 8,900 crore till September this year as developers were forced to raise funds from PE firms to meet their capital requirements, property consultant Cushman & Wakefield said.

"This year alone PE funds have invested close to INR 89 billion (USD 1.5 billion) in the real estate sector until September 2014, more than double the amount invested during the corresponding period in 2013 (INR 42.7 billion/USD 0.7 billion)," C&W said in a report.

PE investments in the realty sector during the first three quarters of 2014 have surpassed the total investment levels for 2013 by 21 per cent, it added.

"This substantial increase in investments has been predominantly in under construction residential projects followed by acquisitions of leased office assets," the report said.

Total number of deals also increased to 46 in the first three quarters of 2014 compared to 40 in the whole of 2013.

"Post the global economic slowdown in 2008, the RBI had discouraged banks from providing capital to the real estate sector. This led to an increase in cost of capital for developers borrowing from other lending sources, which was quite high and availability for which was limited.

"To meet capital requirements, developers are increasingly partnering with PE funds," C&W said.

The consultant said that investment activity, which was vibrant in the first two quarters of 2014, gained further momentum in the third quarter.

"Investments worth INR 49 billion (USD 0.8 billion) were committed during the third quarter. While domestic funds contributed majorly (57 per cent) to the overall investments in 2013, foreign funds dominated in the first three quarters of 2014 with a 69 per cent share in overall PE investments," the report said.

In terms of locations, Delhi-NCR, Mumbai and Chennai witnessed increased investments from PE funds during the first three quarters of 2014, with an increase in both transaction volume and number of deals from the corresponding period last year. Investment levels in Bengaluru remained stable while it declined in Pune.

About 41 per cent (INR 36.7 billion/USD 0.6 billion) of the total investments during the first three quarters of 2014 was witnessed in Delhi-NCR, which is an increase of close to 6 times compared to the first three quarters of 2013. In NCR, the PE investments were primarily in leased office assets.

By asset-class, office sector attracted highest PE investments at Rs 4,420 crore. Residential sector witnessed investments of close to Rs 4,180 crore while retail sector saw PE investments of Rs 300 crore.

Investor interest in the hospitality sector remained low with no investments in the segment recorded till September 2014.

Source The Economic Times.


Know whether to rent or buy a house in your city

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Property prices in most cities are still out of reach for many and the high interest rates on home loans only add to the misery of the common middle-class Indian. Though owning a home is a dream for many, the financially-stretched individual is caught in a perpetual dilemma of whether to keep paying the rent or sign up for an EMI. 
The average age of a real-estate buyer in India is close to 30 years, the youngest across various developing markets.

The society, as a whole, favours buying property and believes that the buy decision is the best to make irrespective of the ground reality. Combining this with a backdrop of expensive real estate and high interest rates, any misstep in a buy versus rent decision can wreak havoc on the personal finances of the individual and their families in the foreseeable future.  

Multiple aspects need to be evaluated before you can determine which is more practical between buying and renting property. Important factors such as the average monthly take-home salary, existing loan payments, expected EMI from the desired property and expected rent for the same property (can be identified with the nature of rentals in similar location), need to be taken into account. 

Also, you need to consider the benefits that can be availed by buying through tax savings. Having a right amount of liquidity after the payment of EMI should be a key point before deciding to buy a home. All this, together, can be difficult to grapple with may make decision-making difficult. 

To help you out a little, we did a research across eight major cities in India and evaluated them on three important aspects/ratios-- affordability to buy (compares the income with expected EMI), affordability to rent (compares the income with expected rent) and rent to ownership ratio (to compares the rental cost with expected EMIs). Here is the city-wise analysis: 

Bengaluru: The rise in the rental values from 2012 by 37.51 per cent is more significant than the buying values which are at 12.64 per cent., This shows that Bengaluru is the most-preferred place to rent. Being the most opportunistic place, immigrants prefer to rent a home. There was an increase in NHB index of the city by 7 per cent from 2007. For professionals with less than 20 lakh annual income, renting a home is more optimal than buying. Mysore Road and Old Madras Road are the most affordable places to rent or buy a home. 

Chennai: Chennai recorded the highest growth in the NHB index amongst all the major cities in India by 249 per cent over the past 7 years but the trends changed since the last 3 years as the property prices went down by 3 per cent while rental values increased by 10.75 per cent. Professionals above the annual salary of 20 lakhs can afford to buy a property in Chennai. Sholinganallur and Kolathur are the most affordable places to rent or buy a home. 

Delhi: Delhi is the second-most expensive city to buy a home. The average increase in the rental values since past 3 years was 29.05 per cent where the property price was increased by only 2.59 per cent. This can be understood as the city have majority of immigrant population where renting is more preferred. Recommended to rent a property irrespective of how much they earn. However outer areas in the National Capital Region (NCR) region like Greater Noida Expressway and Indirapuram may provide some opportunities to afford a home but that will result in increased travel time which would also add to the cost. 

Hyderabad: The city with the most-affordable property prices among the major cities in India. Hyderabad experienced a steep fall in the NHB growth as it recorded -5 per cent from the year 2007. The rental values increased by 1.93 per cent whereas the property prices have decreased by 11.35 per cent over the past 3 years. Hyderabad is the second-most affordable city to rent. Professionals with annual income more than ten lakhs per annum can easily afford to own a home. Areas like Uppal and Rajendra Nagar are the most affordable places to buy or rent a property.

 Kolkata: Kolkata showed a negative trend in real estate prices as well as rentals since 2012. Rental and buying prices have slipped by 8.55 per cent and 2.69 per cent respectively but the NHB index of the city has a growth of 106 per cent from 2007. Professionals with annual salary of 13 lakhs or more should prefer owning a home. Areas like Howrah and Jadavpur are the most-affordable places to rent or buy a property for individuals of lower income, but they are on the outskirts of the city. 

Mumbai: As usual the most expensive place to afford to own or buy a property, but in contrast people prefer to own a property rather than renting. For the past three years, rentals have increased by 13.07 per cent while the property prices increased by 49.87 per cent. The NHB index of the city has grown by 129 per cent. Buying a home in the city is not feasible irrespective of any salary level but some areas like Mira Road and Kalyan can be affordable for some income levels. 

Pune: Pune remained a buyer's market with an increase in real estate prices by 38.91 per cent over the past 3 years. This increase is largely due to an improved job market in the city. Also proximity to Mumbai and having comparatively lower real estate prices, it is more preferred location to buy a home. The rentals also increased by 21.21 per cent indicating the comfort level this city has to live for the professionals. The NHB index grew by 132 per cent from 2007. Professionals with salary of Rs 20 lakhs and above can buy a home in the city. Hadapsar and Kondhwa are the areas with the cheaper homes. 


Ahmedabad: Ahmedabad is the most affordable place to rent whereas it stands second in the most-affordable city to buy a home. The city is still to be explored by the homebuyers. The NHB index indicated an increase by 109 per cent from 2007. However, the property prices went down by 17 per cent since last year. Professionals with an annual income level greater than 12 lakhs could easily own a home. Areas like Vastral and Vejalpur are the most-affordable places either to rent or buy a house. 

he emotional premium that we pay to say that we own a home is almost never measured. Remember that buying or renting a property is at the end a financial decision. And it is time we take well-calculated financial decisions to avoid financial pitfalls. 




Source: The economics time.


Office space absorption to reach 132 million sqft by 2017: Report

MUMBAI: Bullish on the revival of the economy after general elections, real estateconsultancy firm Cushman & Wakefield expects nearly 132 million sqft of office space, across the eight major metros, to get absorbed by 2017. 

However, the report said the current year (2013) will see a 26 per cent fall in office space absorption to around 22.5 million sqft over the past year due to the ongoing slump in the economy. 
The supply of office space between 2013 and 2017 in the top eight cities-Delhi-NCR, Mumbai, Bangalore, Chennai, Hyderabad, Ahmedabad, Kolkata, and Pune is expected to be around 143 million sqft. 
Of this 143 million sqft, around 90 million sqft are currently under various stages construction and is expected to get completed by 2015, the report said. 
"The office market is expected to remain attractive for occupiers with steady increase in absorption after a trend of decline in 2013. 
"With the economy expecting more stability in the post-election phase from 2015, the absorption trend is also expected to pick pace especially in established markets of Bangalore, Mumbai and Delhi-NCR," Cushman & Wakefield executive managing director forSouth Asia Sanjay Dutt said. 
The report said the absorption of office space will decline in 2013 over 2012, mainly due to the current economic slowdown, which has made many companies defer their leasing requirements. 
According to the report, office space absorption in top eight cities including is expected to be over 22.5 million sqft in 2013, a decline of around 26 per cent over 2012. 
However, going forward the trend in absorption is expected to pick up at a steady pace with 2015 with an estimated absorption of 28 million sqft. 
Dutt said that the commercial office sector has seen substantial deferment of supply in the recent times due to slack in demand and delays in regulatory clearances. 
"Similar trend is expected to continue in the next few years owing to issues such as demand from occupiers as well as funding issues that developers have been facing," he added. 
However, growth is expected to set in from the second half of 2014 when an increase in leasing activities both on account of entry of new companies into the country, expansion of existing companies and indeed relocation and consolidation activities that are expected to continue, Dutt said.

Source: The Economics Times, 2 - October - 13


Housing demand picks up in NCR; sales up 18% in January-June

NEW DELHI: Housing sales have risen by 18 per cent in the Delhi-NCR region during the first half of this year at 35,000 units, showing signs of improvement in the property market that has been facing slowdown in demand. 

"During H1 2013, the NCR residential market witnessed a total absorption of 35,000 units showing an increase of 18 per cent from H1 2012. This increase in sales can be ascribed to the high number of project launches in the affordable category," property consultant Knight Frank India said. 
The absorption in Greater Noida rose almost four times compared to the same period in 2012 suggesting a strong demand for affordable options, it added. 
Greater Noida witnessed sales of 14,300 units in H1 2013, as against 3,750 units in the year-ago period. 
The absorption levels dipped in both Gurgaon and Noida, largely due to increasing unaffordability of housing options available in these markets. 
"The NCR market is striving for a better equilibrium. Developers are focusing on project completion and deferring new launches," the consultant said. 
Knight Frank said that sluggish buyer sentiments have discouraged sales in some areas, but locations like Dwarka Expressway, Noida Expressway and Greater Noida would continue to lure investors. 
On supply side, nearly 49,000 units were launched during the January-June period, showing increase of 11 per cent compared to H1 2012. 
Nearly 5.4 lakh residential units are under construction in the NCR market. The unsold inventory is pegged at about 1.32 lakh units, comprising unsold units in ready as well as under construction projects. 
"The NCR residential market indicated signs of stability in H1 2013," Knight Frank India Chairman and Managing Director Shishir Baijal said. 
The developers are keeping new launches in check in order to bridge the supply and demand gap, he added. 
"Over the past two years, the NCR market has experienced a fall in launches by nearly 40 per cent compared to the peak levels of 2010. Both short term and long term moving average of launches confirm a plummeting trend," Knight Frank's Chief Economist & Director Research Samantak Das said. 
"However, demand has recently stabilised and improved in the last few quarters, which sketches a healthy residential market scenario for NCR and if the supply-demand gap tapers further, the region is likely to face an upward pressure on property prices," he added. 


Source : Economics Times 24 – Oct - 13


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