Tuesday, November 3, 2009

DLF to develop affordable housing in India Assetventures

India’s leading real estate company DLF is said to be working on plans to build around 1 lakh houses that would cater to middle class in the country.

These houses would be build in all the major cities of the country and would be priced at around Rs. 20 lakhs.

These new housing solutions could be offered under a different brand name in the coming years.

DLF rival Unitech has already announced similar plans to build affordable houses around the country.

The company has officially declined to comment on these reports.

Rentals rose even as capital values of real estate dipped Assetventures

Software engineer Ravi Kumar took a loan from a leading private sector bank and invested in the property market in 2008, at the height of the
realty boom. Today with values lower than what he purchased the property for, selling-out and exiting the sale is not an option for him.

With a stiff EMI to be paid out, renting out the apartment seemed a good idea. Kumar did not complain when he found rental values rising as the property neared completion. Today with high occupancy, the rental values are almost 15-20% higher than in March 2009.

Many people are facing this situation across cities in India. A Brix Research survey over 30 Indian cities showed that while capital values, which fell during the Jan-Mar 2009 quarter, rose from Apr-Sept 2009 but remained either lower than the previous values or at the same level.

However, rental values have registered a sustained rally from April 2009 onwards. Today it is between 15% and 50% higher than the September 2008 levels. A fact that buyers like Ravi Kumar should be happy about.

Says Chintan Patel, senior professional, real estate practice, Ernst & Young, "Rental values in mid-segment properties across prominent cities have witnessed an upward trend. Mid segment properties in key residential micro-markets of Mumbai (western and central suburbs) and NCR (East and North Delhi, Gurgaon) have witnessed sustained rise in rental values, in the range of 15-20%, over the last 5-6 months. Constricted supply of apartments for rent, coupled with strategic location offering good connectivity to prominent business districts of the city, have been instrumental in rising rental trends of some key micro-markets in these cities."

So, what other factors have really triggered this change? Take textile entrepreneur, Sumit Bansal, who was planning to buy a house for himself. The fluctuation in the real estate market since September 2008 has left him confused and he decided to take a house on rent till the markets stabilised.

According to RV Verma, executive director, National Housing Bank, "The real estate market today has shifted from being demand-based to need-based." According to the market researchers and brokers, rental housing has become a popular choice of housing owing to high and unstable capital values.

The Brix Research Quarterly Real Estate Value Analysis Reports have shown that rental values rose since April 2009 across almost all Indian cities. During the Apr-Jun 2009 period, rental values stabilised in most of the cities and recorded an appreciation in values during the Jul-Sep 2009 period.

Rental values for a 2BHK apartment have registered an average growth of 10-15% in most localities in the Jul-Sep 2009 period compared to the previous quarter.

Explains property investment adviser, Ashok Narayan, "Property values dropped 15-35% during the slowdown. Large developers such as DLF and Unitech started by completing existing projects rather than launching new ones. This trend continued across the country and projects which had been sold off drawing-boards saw the light of day. As projects neared completion, values rose by 15-20%. In established city areas property values dropped 10-25% during the slowdown but rose back to the same level when the sentiment improved. In newly-developed properties, rental values are today at least 15-25% higher due to projects being completed and occupied. In the established city areas rental values have risen by about 10-20% over the peak values before September 2008."

The Brix Research report shows that Gurgaon real estate market saw an annual appreciation of 10-15% in rental values in most localities during the Apr-Sep 2009 period as compared to the Jan-Mar 2009 period. According to city broker RB Singh, "This reflects end user demand for rental housing."

Other areas of the National Capital Region (NCR) such as Ghaziabad and Faridabad also registered an increase in apartment rental values. In Ghaziabad, during the Jul-Sep 2009 period, rental values stabilised and increased by around 13% as compared to the Apr-Jun 2009 period. This was due to the increased demand for 2 and 3BHK ready-to-move-in apartments in the city.

In Mumbai, rental values of apartments have risen by around 2-20% during the Jul-Sep 2009 period as compared to the Apr-Jun 2009 period. There has been a corresponding drop in apartment capital values during the same period. In Chennai, the rental values were more or less stable and saw a 5-10% appreciation during the Jul-Sep 2009 period.

The positive trend in apartment rental values has been reflected in smaller cities as well. Chandigarh witnessed a significant fall in capital values of apartments and plots during the Apr-Sep 2009 period but registered a growth in apartment rental values.

In the Jul-Sep 2009 period, rental values increased by around 10-15% as compared to the Apr-Jun 2009 period. Brijesh Bhabsar, a Rajkot-based realtor, said, "The rental segment is showing positive trends and is a preferred housing option among end users."

In the southern region, Kochi registered an increase of 5-37% in rental values post March 2009, as most buyers restrained from making large investments in the property market. Coimbatore and Visakhapatnam experienced a similar trend of 10-20% rise in the rental values of the end user dominated 2BHK segment.

Local broker such as David Bose of Coimbatore maintained that this increased demand for rental homes reflects the end user expectation that capital values will fall further. This is corroborated by retired bank manager RC Gaur, who lives in rented accommodation in Faridabad, wishes to buy an apartment in Delhi, but prefers to wait for the right time to make his investment.

So is it a good time to take up rented property right now? Is there a demand being seen? "Demand for rental space has risen over the last few months. The improvement since April is between 12-15%, depending on the economic drivers of each city. This is generally a good time to rent homes, depending on location-based dynamics," feels Raminder Grover, CEO-Homebay Residential, Jones Lang LaSalle Meghraj (JLLM).

Today the market is driven by the need of end users who are still unsure about capital investment in real estate and are taking the rental option in an unstable market.

Real Estate finding a new track in Indian economy Assetventures

A big impact of recession is seen in the worldwide market, where many big companies posted big losses, asked for a bailout and even filed for the bankruptcy. The recession had such an impact on the world over economy that even a core business of a particular country went in loss with many citizens pulling their hands off from investment part.

Same happened with the Indian real estate market, the most bullish sector where not many hesitated before putting their money forward for an investment related to some plot, flat, office, shop etc.

In the month of September 2008, when recession captured the world with a full grip, the real estate of India suffered a big loss session. All the major real estate players like Jaypee Group, Unitech and DLF came up with the schemes and rebates on flats to attract as many buyers as they can and sell off the reserve as soon as possible.

The cities like Mumbai, Delhi, Bangalore, Kolkata and National Capital Region accounts for big real estate business of the country with many property owners earning big money from the rental income from homes and offices.

One can analyse the downfall of rental income in these cities as many fully constructed buildings are standing with a very less space occupied with them and that too on a small amount of rent in comparison with the rentals of 2007.

This downfall was not limited to the rental part of real estate industry but the pure buying and selling of properties also came to a halt after financial crises reached the Indian economy.

With the global economic crises on one side, leading players of real estate India like DLF and Unitech are focusing more on the repayment of debts as soon as possible.

This has resulted in big real estate players selling their personal office properties, shifting their focus from core property business to some other businesses like insurance and hospitality and selling off some part of the company by getting listed on the capital market.

However, according to the recent study conducted by several industry watchers, the real estate of India is coming back on profitable track with the demand for offices is increasing in major cities like Bangalore and Mumbai, however Delhi and NCR are still far from witnessing growth in demand as many are expecting further fall in rentals here.

Besides the growth factor in office and shop rentals, a slight growth is also seen in the buying and selling transactions of properties.

With the Indian economy coming on track again, the demand for flats are seen rising in past one month. The real estate developers like Amrapali, Parsvanath and Unitech are nor registering some potential bookings on their order books.

The recent festive season has also added some profits to the real estate industry when many were keen on buying a new home.

During the last festive season, a very low rush was seen for the real estate buying but this year, the banks came up with some attractive home loan schemes with the help of rebate provided by Reserve Bank of India.

Anshuman is a professional real estate property consultant in India and investing in Indian real estate from years. To know more about real estate india, reality projects as sheth heights chembur, neelkanth greens thane, please visit: www.paisawaisa.com