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With slowing economy & inflation, house prices to rise at slower pace in 2014

After years of double-digit growth, house price rises in major Indian cities are expected to slow to just under 8 per cent next year as a cooling economy and rising interest rates deter new buyers, a Reuters poll showed.

The survey of 11 property market analysts conducted over the past three weeks was for house prices in Asia's third- largest economy to rise 7.8 per cent next year, well below the current rate of consumer inflation of around 10 per cent.

The findings of the latest India housing market poll are similar to recent Reuters polls conducted in the United States, Canada, Britain, China and Brazil, where home price rises are also expected to lose momentum but not fall.

Home sales in India slowed this year and unsold inventory with builders has increased as economic growth in the broader economy has decelerated quickly to half the 10 per cent rate it was running at before 2008.

But the main problem, in a country where almost one-quarter of the population earns less than 50 cents a day, is the price.

"In some of the key markets in the country property prices are sky high, " said Sachin Sandhir, managing director at RICS South Asia.

"Due to uncertainty about the economy, high interest rates and rising inflation, developers are holding on to their prices, making some locations unaffordable."

Indeed, a 2, 000 sq.ft (185.8 sq.metre) apartment .. in the posh South Mumbai neighbourhood of Malabar Hill costs more than $2 million. That is not far from the average three-bedroom unit in Manhattan, New York City, which costs around $2.6 million.

Although the majority of homes in Indian cities are nowhere near that expensive, it shows how far real estate values in India's financial capital have risen. And dwindling incomes have put low-cost homes out of reach for many people.

Most of the urban price rises are expected to take .. place in the southern coastal city of Chennai, followed by New Delhi and its suburbs and Bangalore, while already high prices in Mumbai will likely stagnate.

Analysts gave property in Mumbai and Delhi, India's two biggest cities, an overall rating of 9 on a 10-point scale where 1 is extremely undervalued, and 10 is highly overvalued.

That is a much higher rating than in similar Reuters polls conducted around the world. Prices in the UK, which have re-touched record highs by some measures and are soaring in London, were rated 6, while those in Canada were rated 6.3.

Interest rate rises biting

The Reserve Bank of India's determination to bring down broader inflation in the economy has also slowed the market.

The RBI hiked its benchmark repo rate twice in September and November as it tries to rein in soaring prices and there is an outside chance it could tighten again at a meeting next week. It even nudged hesitant commercial banks to pass on the increases to borrowers.

A home loan of up to 3 million rupees ($49, 020) from the country's largest home finance company, HDFC, now costs 10.5 per cent per year, up 35 basis points since the start of the year. A bigger mortgage costs more.

Buying a house in India has traditionally been a sentimental decision, not for investment. But soaring prices in recent years has led a growing middle class to turn to real estate as a means of generating wealth.

Unsold inventory of development properties aimed at that new type of buyer is now a cause for concern, say analysts.

"How can someone take a long-term loan without income growth or guarantee?" asked Samantak Das, chief economist at Knight Frank India. "Inventory pressure on developers in Mumbai and Delhi is actually going up."

According to Knight Frank research, it takes nine quarters for developers in Mumbai to sell existing inventory, almost twice the five quarters it took in December 2011.

New launches in the city plummeted over 40 per cent compared to peak levels in 2010 as developers focussed on selling current inventories, according to their recent report.

   Over a month ago

“ Estate South- 2013”

First time in Hyderabad on 19th and 20 th Dec 13, TAJ KRISHNA

Key Speakers Confirmed:

Mr. Anshuman Magazine, CMD, CBRE South Asia Pvt Ltd
Mr. D S Prasad, Director, Aparna Constructions Ltd
M Murali, Managing Director, Shriram Properties
Mr. Sista Vishwanath (Retd), Ex Chief Plng Officer, HMDA
Mr. Ankit Gupta , Associate Director, Mckinsey
Mr. P G Ganapathy , Senior Advisor & Adjunct Faculty , IIHS
Mr. Ramakrishna Rao, MD, Manbhum Construction Pvt Ltd
Ms Purnima Kamble, Partner, Foxmandel
Mr. Thirumal Govindraj, Director- Leasing, RMZ Corp
Mr. P Ravishankar, Jt. General Manager L & T Hyd Metro Rail
Dr Hari Prasad Kovelamudi, CEO, Apollo Hospitals
Mr. G Venkata Prasad, Head - Special Projects, L& T Realty Ltd
Mr. S Raghupathy, Executive Director, CII-GBC
Mr. Suresh Singaravelu, MD& CEO, K Raheja - Chalet Hotels Pvt Ltd
Mr. Bhattaram Ravi , Director-Engineering , CBRE
Mr. Sateesh Kumar, Chairman, Sweett Cost Consultant
Mr. K Senou, Head - Precast Initiative, L& T Ltd Construction Div
Mr. Satish, Managing Director, Preca Solutions India Pvt Ltd
Mr. Shroff Kaushal, Credai
Mr. Mohit Goel, CEO , Omaxe
Mr A S Sivaramakrishnan, Head - Res Services, CBRE
Mr Kiruba Shankar, CEO, Business Blogging
Mr Ram Chandnani, DMD – South India, CBRE
Mr Mathew Joseph, Reg Bus Head – TN & AP, HDFC Ltd

G Yoganand
Chairman, Estate South 2013 &
Chairman & Managing Director
Manjeera Constructions Ltd

Chitty Babu
Co-Chairman, Estate South 2013 &
Chairman & Managing Director
Akshaya Pvt Ltd


   Over a month ago

Chennai retail rentals flat in Q3

Rental costs for retail spaces in shopping centres in Chennai have remained flat over the past year, averaging Rs 43, 808 ($717) per square metre per annum in the third quarter of 2013. In contrast, property prices in nearby Bangalore appreciated 0.1 per cent year-on-year to Rs 57, 800 ($946) per square metre per annum in the July-September period of the calendar year, according to real estate consultancy firm Jones Lang LaSalle’s latest ‘The Retail Index’ report.

Delhi and Mumbai shopping centres have also seen retail rentals appreciate over the past year. In Mumbai, rentals rose 2.5 per cent between September 2012 and September 2013 to Rs 85, 112 ($1, 393) per square metre per annum, whereas rentals in Delhi increased 1.1 per cent to Rs 82, 301 ($1, 347) per square metre per annum.
Jones Lang LaSalle indicated that appreciation in rental costs in these metropolitan cities could see an uptick once some clarity emerges on the retail foreign direct investment guidelines. Once this occurs, foreign retailers are likely to make a beeline to set up shop in these cities, seeking to garner a slice of the country’s retail market, which is worth around $500 billion at present and poised to reach $1.3 trillion by 2020.
Among the Asia-Pacific cities covered in the report, mall rentals were the highest in Hong Kong, at a staggering $14, 488 per square metre per annum. Rentals in Sydney, second in the list, stood at half this amount, at $7, 180. Melbourne and Brisbane followed in third and fourth places. Guangzhou, China, was the fifth in the list.

Hong Kong is also the costliest space in Asia-Pacific to set up a High Street retail store, with rentals averaging $28, 839 per square metre per annum on Russell Street. In comparison, rentals in Delhi’s Connaught Place were a modest $1, 444 (Rs 88, 288) per square per annum, weighing in at 10{+t}{+h} on the list. But locations like Delhi’s Khan Market and Mumbai’s Linking Road were conspicuous by their absence on the list, even though rentals in these prime shopping locations are considered to be the highest in the country and among the costliest in the world.

   Over a month ago

Govt open to modify Real Estate Regulatory Bill if needed: Girija Vyas
Minister says she will take up various issues concerning the sector with the Prime Minister and the finance minister, possibly next month

New Delhi: The government on Friday said it would modify the Real Estate Regulatory Bill if necessary, and sought to allay fears of developers on the proposed law that aims to bring in transparency and protect home buyers.
Addressing a meeting of realtors body Confederation of Real Estate Developers’ Associations of India (CREDAI), minister of housing and urban poverty alleviation Girija Vyas said she will take up various issues concerning the sector, such as taxation, delay in approval and scarcity of fund, with the Prime Minister and the finance minister, possibly next month.
“There is no reason for worry. The Real Estate Regulatory Bill will be your friend. We don’t want to bring in inspector raj. The Real Estate Regulatory Bill will be suitably modified, if necessary, ” she said.
The Real Estate (Regulation and Development) Bill, introduced in Parliament recently, has been referred to a standing committee, she added.
The industry has raised concerns that the Bill in the present form would push up prices by 30% and it wants a comprehensive regulatory authority covering all stakeholders of the realty industry, not just developers.
“We will hold discussions with the industry after the standing committee report comes, ” Vyas said.
Speaking on the sidelines, she said: “We have said that doors are open for negotiations. At present, the Bill has been placed in front of parliamentary standing committee.” CREDAI would also present its views to the committee, she added.
“I cannot say when the committee will give its report. Generally, their recommendations are accepted. We will also discuss and understand these people’s suggestions. We want regulation with transparency that is the basic purpose, ” the minister said.
Vyas said the government is keen on bringing reforms in all areas which are key for the housing sector development. “The sector has to grow. Flow of money should be there, ” she said, adding that the ministry would consider their demand of rationalisation in tax structure and increase in floor space area.
“Your issues will be taken up at highest level. I will meet the Prime Minister and the finance minister, ” she said.
Asked when the ministry will take up the issues with the Prime Minister, Vyas said: “Once we receive their problems and after sorting, we will take up their issues as early as possible with the highest authorities.”
“I will try to meet the Prime Minister with industry issues as early as possible, ” she said.
On chances of her meeting the Prime Minister this month, Vyas said, “it is difficult”.
The Real Estate Regulatory Bill seeks to protect home buyers from unscrupulous developers. It has provisions like jail term of up to three years for offences like putting up misleading advertisements about projects repeatedly. The Bill intends to make it mandatory for developers to launch projects only after acquiring all statutory clearances from relevant authorities. It makes it mandatory for builders to clarify the carpet area of flats as well.

   Over a month ago

Impact of Election 2014: Realty sector struggles with labour shortages

Elections for a new government at the Centre will be held between March and May next year.
"The situation is grim. The state elections have already impacted construction cycles and we expect that during the coming general elections. The election fervour is so high this time, especially in Bihar, MP and UP, we expect larger numbers to go back to cast their votes, " says Lalit Kumar Jain, chairman of the Confederation of Real Estate Developers Association of India (Credai), whose company Kumar Urban is building nearly 5, 400 apartments in and around Pune. "There would be about 25% shortage of labour, which is critical."
Projects are already delayed, says RK Arora, managing director of Noida-based Supertech, which is building 40, 000 homes in NCR. "A labour vacuum during the upcoming elections will only worsen the situation, both for us and the buyers."
While the impact would only be for a month or two, the situation is grim also because of a slowdown in the real estate sector and a large number of projects across the country already running behind schedule.
According to property research firm PropEquity, nearly half of the 9, 30, 000 under-construction residential units are likely to be delayed by up to 18 months. The real estate sector employs close to 1 crore people, most of whom are not on companies' payrolls.
Most of the workers employed by the real estate sector are not on company payrolls.
The real estate industry is already facing labour shortage of about 40% because of various reasons and this is likely to go up to over 60% by the end of the decade. For one, the government's MNREGA programme has pushed a lot of workers back to their villages as they can now get work closer home and wages too are decent.
The development of states such as Bihar is a factor already. Migration from the state, which made for over 50% of the labour employed in the real estate sector, has come down by a third in recent years, thanks to increased expenditure by the state government. This has pushed up labour costs in cities by 35-50% and many developers are struggling to find labour to finish projects on time.
A research by the Bihar Institute of Economic Studies shows that migration of labour from Bihar in the past few years is down 25-30%, and instead of moving to cities families are finding jobs in Bihar, either in state government projects or in NREGA schemes.
According to Credai, there is a shortage of 10 million workers in the construction sector as of date.
"Elections, both state and Lok Sabha, see unusually high movement of workers back to their home towns and it is a bit more accentuated in the metros. Work just stops, but it is not for long, " says economist Bibek Debroy. The industry is already gearing up. A Tata Housing spokesperson says the company anticipates labour shortage around the elections and is speeding up construction to meet its construction milestones.
"We have started to speed up work to cover up any gaps that we may see next year due to large number of workers giving work here a miss for their election visits back home, " says Sandeep Sharma, who supplies labour to builders in Mumbai.
Construction of 1 million sq ft of space requires 1, 000 workers, and according to research firm Liases Foras approximately 1 billion sq ft of space is being constructed in the residential segment.
"Shortage of workforce has been identified as one of the prime factors leading to project delays and construction overloads, an essential element to revive sentiment of buyers and investors, " says Sachin Sandhir, managing director, south Asia, at Royal Institution of Chartered Surveyors.
The real estate market across India is collapsing due to slowing economy and lower investor confidence. Additionally, delayed delivery of residential projects has become a significant issue for the real estate market, irking customers.
According to Jones Lang LaSalle, more than 25% of the committed supply has not been able to hit the market as per schedule. The National Capital Region's performance in terms of delivery of residential supply due in 2013 has been the worst across all the major Indian cities.

Contractors say the rates for workers have increased in the past one year. "Wage expectations of construction labourers have grown by two to three times, " says Rituparna Chakraborty, founder and senior vice-president at TeamLease Services. A skilled person, including a mason, is paid 400 a day, while a labourer earns 350. Till a few months ago, masons used to be paid between 300 and 325 a day and labourers earned between 250 and 275 a day.
Realty developers have already started tweaking schedules and planning ahead to ensure smooth operations to avoid these delays that can put further pressure on their finances. Builders are also upgrading technology and providing vocational training to upscale the skills of the blue-collar workforce employed with them. Additionally, contractors are absorbing up to 10-15% escalation in labour cost.
"Labour costs are expected to increase by 15-20% on account of this. Good planning and risk management for such events is crucial, else entire schedules can get delayed putting pressure on finances, " says Basesh Gala, director of Mumbai-based Ravi Group.
"We usually engage labour through contractors and as part of the contract they are expected to manage the cost as well as the resources well to ensure operations run smoothly, " said Manju Yagnik, vice-chairperson of Mumbai's Nahar Group. However, Sharma says, "We typically absorb 10-15% escalation in labour cost, anything beyond that is expected to be shared by the builder."
Builders are expediting construction work by extending current shifts.

   Over a month ago

Multi-award-winning design by Duravit

The way in which we furnish our bathroom expresses our concept of life. We only discover the lasting value of a bathroom when we are still able to enjoy the design we chose many years earlier. The forward-looking interaction between useful design and intelligent technology is what ensures lasting enjoyment. And in 2013 Duravit AG managed to scoop no less than 14 prestigious design awards.

In addition to the new ranges, DuraStyle and Happy D.2, the SensoWash® shower-toilet and Inipi B compact sauna, the St. Trop steam shower and the OpenSpace shower enclosure were all prize winners. In fact OpenSpace, the innovative space-saving solution by EOOS, can now boast ten awards in all, including the iF Award in Gold (2013) and the red dot "Best of the Best" (2012). The Kiora Z kitchen sink was also commended. In addition to these awards, the manufacturer and outfitter of designer bathrooms once again received the Universal Design Award and the German Design Award.

The German Design Council's Iconic Award was presented for the first time in 2013. This international award focuses on outstanding, holistic architecture and interior design. The jury of renowned experts in architecture, interior design, design and brand communication was impressed by the design concept behind the DuraStyle complete bathroom range and awarded it the highest honour, the ‘Best of Best’. Happy D.2 by sieger design also scored points with the jury and was presented an Iconic Award of its own.

   Over a month ago


The main concerns of the real estate developers in the country are - The rising price of Land, labour and inputs, High burden of taxation, High cost of funding due to lopsided funding by banks, stunted cash flows, delays in NOC and other clearances and approvals besides the outdated FSI Norms. He emphasised on a need to restructure the approach to help the sector contribute more significantly to the Indian Economy.‛

According to Mr Reddy the key to this change should be by adoption of ‘Single-window and Online Approval System’ to facilitate this growth. The approving authorities will have to do away with their processes which are sluggish and cause inordinate delays in project plans approval etc which translate into a cost escalation of 35 – 40 percent in the construction costs. The customers can also benefit with a saving of 15-25% merely by cutting down the delays in the approval processes, and make the cost of purchasing a house much more affordable. He emphasized on the need to ensure that the delays do not take place at the approval stage and advised the governments to institute the ‘Single Window – Online Approval Mechanism’ as a mandatory reform in the proposal for Rajiv Awas Yojna instead of an optional reform and get it implemented at the earliest.‛

He urged the government to do away with the Floor Space Index (FSI) concept, take the approval process online and reduce tax burden on the industry. He reiterated that the real estate industry has a tax burden of 30-40%. This has to come down to less than 15%. The industry is paralysed by multiple taxation resulting in cost escalation and misery for the sector. Appreciating the policy of the government of Andhra Pradesh he said ‚Through an order AP government has removed the concept of FSI thereby allowing the developers with unlimited FSI for the projects abetting wider roads and having bigger plots. By this simple initiative, even with higher land costs, the flats are working out to be less expensive making the houses affordable. He urged other states to do away with the FSI concept and help the home buyers.‛

Speaking about the trends in the real estate sector Mr Reddy said, ‚According to McKinsey Global Institute report, over the next 17 years, the development of the country is expected to create 70 percent new jobs opportunities in the cities and these new jobs are going to be twice as productive as equivalent jobs in rural sector. In other words, we will witness urban transformation- the scale and speed of which has not happened anywhere in the world except in China. With this rapid urbanization, the urban population is poised to grow to 590 million by 2030. This expected transformation will, if handed well, provide the means to turn around the economy from slowdown to rapid growth.

Given the existing housing shortage estimated at 18.78 million dwelling units and the need for about 60mn dwelling units by 2030 as per the report by MoHUPA. The Housing & Real Estate sector is poised to grow rapidly in the next 15 years and require an investment of $ 1.2 trillion in this period. This will require a structured and massive housing program.‛ Commenting on the issue of funding for the real estate sector Mr. Reddy said ‚The realty sector suffers from another drawback. This sector faces several restrictive norms in accessing the bank finance. In India the funding to the realty sector is just 3 percent to developers, and 9 percent to home buyers. Due to inadequate funds access by the developers the growth of the sector is stunted. If the funding is made available from the banks both the growth of the sector could be raised and costs of the house flats could be brought down. ‚ He expressed his concern while comparing the lending percentages with other countries and said ‚The Indian scenario is disturbing as the lending percentage in US is 32 percent and in China it is 22 percent. Compared to these numbers, the Indian lending is just 12 percent when the lending to developers and to the home buyers is combined. He averred that this must increase and the banks and governments have to search their hearts whether the policies they are adopting are consistent with the growth ambitions.‛

On the issue of Taxation, Mr Reddy addressed that the National Habitat Policy suggests that the total registration charges has to be a maximum of 3% and urged the government to consider it as a mandatory reform of RAY and advice the states to implement to bring down the tax on housing. On the issue of Service Tax he said that the tax has become very complicated and burdening the prospective purchaser. To the extent of sales deed consideration of Sale deed , service tax should not be charged as registration charges are paid. Only on Works Contract service tax should be charged to avoid double taxation.

Speaking on RERA Bill, Mr Reddy said, RERA bill is another Act going to be targeted against the developer. Other stake holders such as urban local boards, electricity authorities, fire departments are not part of the proposed RERA, thereby they are not answerable for their delays but the developer has to bear the brunt. If the with proposed stringent provisions, if not modified, will increase the cost of the housing by about 30%. In conclusion Mr. Reddy said that with these measures industry will create huge supply of homes and create a competitive market there-by bringing down home prices.

   Over a month ago