Tuesday, November 24, 2009

Property prices likely to go up in December

If you are looking to buy a house in Mumbai or in the National Capital Region be ready to take a big hit on your pocket. But south India may still hold a bargain or two, reports CNBC-TV18's Sunanda Jayaseelan.

Real estate developers have started hiking prices of their residential projects in Mumbai and the National Capital Region. So, if you are in the market to buy a home, you may want to look elsewhere like South India, for instance. Experts say prices in this region are still stabilising and in some cases, even correcting.

Let's take a look at price movements in the last quarter. Residential property prices in Mumbai rose 3-6% across developers. While NCR saw prices rise between 2% and 19%. Hyderabad, on the other hand, saw no hikes, while property prices in Chennai and Bangalore saw a dramatic correction. In some pockets in Bangalore, prices have fallen by as much as 5%.

Bangalore-based Sobha Developers has seen sales this quarter come in 57% higher that the previous quarter. It expects to have sold 2 million square feet of residential space by the end of this fiscal, and says volumes, rather than price hikes, will help it maintain margins. JC Sharma, MD, Sobha Developers, says, "As far as Sobha is concerned, we have good inventory. We don't see need to hike prices. I see us maintaining prices going forward."

But analysts say this trend may not last long. Anurag Mathur, MD - India, Cushman & Wakefield, says, "Prices are expected to go up by December. Not sharply, but it will still go up. I anticipate that happening at least in prime projects."

So, if you are in the market for a house, you will have to hurry. Industry experts say that developers are actually just adopting a wait-and-watch policy with regard to price increases. DLF for example, has already announced a marginal hike in prices in Bangalore. Experts point out that this could just give other developers the impetus needed to start price hikes again.

Property tax to be levied on vacant plots now Assetventures

LUDHIANA: The local bodies department has started its exercise to levy property tax on city residents, for which officers of the local bodies department held a meeting with their counterparts in municipal corporation (MC) on Monday.

In the meeting that was presided over by additional commissioner Kanwalpreet Kaur Brar and attended by officers of the house tax branch and department representative BR Gupta, a proposal regarding a transparent system under which residents could assess the tax on their property themselves was mulled over.

Talking to TOI, Gupta said the purpose of the meeting was to evolve a strategy for implementation of the tax in a transparent way. The department proposed that the tax would be levied on self-assessment basis under which the person who has to pay the tax would assess his property and himself turn up to the civic authorities on a monthly or annual basis to pay the tax. If he fails to do so, he could be charged 11 times more than the tax.

Sources revealed that the department is considering the idea to levy tax in the state on the lines of that in Ahmedabad, Delhi and Jaipur. According to this pattern, the state would levy tax on plots and constructed houses in the cities on the basis of cost of its construction and that of the land.

Meanwhile, Gupta also asked the civic body officers to give the figure regarding tax collected in the last and present financial years from rented commercial properties. This move was taken to understand feasibility of any new taxes to be levied.

At present, though the state has levied 15% of annual rental value (AVR) on the buildings used for commercial purposes, it is not charging any tax on vacant plots.

Tax dues: Drive to seal properties begins

PUNE: The Pune Municipal Corporation's (PMC) tax collection and assessment department has undertaken a drive to seal properties on which property tax dues have not been cleared despite issuing notices.

On Monday, four properties in Hadapsar and Kondhwa, on which property tax arrears totalling Rs 40 lakh were to be paid, were sealed.

The department's head Vilas Kanade said the drive will continue. "We appeal to citizens to pay property tax to avoid such action," Kanade said.

'Despite downturn, real estate market favourable'

Global economic crisis aside, the local real estate market looks optimistic.

This was the opinion of Thomas Justin, president of the Royal Institute of Chartered Surveyors (RICS). Speaking at the opening on Thursday of the two-day Caribbean Land Conference seminar hosted by the Institute of Surveyors of Trinidad and Tobago (ISTT) at the Crowne Plaza hotel, Port of Spain, Justin said emerging and developing countries were seeing a more promising real estate market than more developed first world countries.

He described the Caribbean real estate market as ’stable’, despite the global downturn.

’According to a global property survey, while most the world’s GDP (Gross Domestic Product) was dropping, office rentals and commercial rentals in countries like China, India, Peru are growing,’ he explained.

Justin, who admitted to being the ’messenger with bad news’ addressed this year’s theme, ’Land Development and Alternative Dispute Resolution in the Current Global Financial Dynamics’, and also shared some insight into the US real estate market.

’Portfolios are sinking. While there is a light at the end the tunnel, it is a long, long tunnel,’ Justin said. He described the past two years in the real estate industry as ’abusive’ even for an organisation as large as the RICS.

’We are one of the largest property organisations in the world, even with 3,381 members, portfolios dropped by 21 per cent per year for the last two years,’ Justin said.

He credited the Government’s Vision 2020 plan for the buoyancy of the local market.

Though he described the local market as a ’loose structure’, he said the continued development of projects like the National Academy of Performing Arts, the second academy in South Trinidad and the gas-powered electricity project for Tobago could only help the local real estate market.

Investors in DLF project want out

Seventy-eight investors have approached an arbiter for permission to exit a commercial complex being built by DLF in Rajarhat.

The eagerness to pull out is in sharp contrast with the haste with which some of them had put in money without reading the fine print and reflects the dramatic fall in the fortunes of real estate projects over the past one and a half years.

The 78 investors have sought their money back from India’s largest real estate developer, which is building the retail-cum-office complex named DLF Galleria.

The investors have filed the demand with the sub-divisional officer of North 24-Parganas, the designated person under the Promoters Act to deal with such real estate disputes. A hearing is expected on Tuesday.

The investors alleged that the project was running behind schedule but added that the prospectus did not mention a specific time frame.

“The project has made little progress. DLF must pay us back with interest,” said Rajendra Kapoor, who has formed an association of investors.

Kapoor said 22 more individual complaints would be filed on Monday and a hearing could take place on Tuesday.

A DLF spokesperson denied the allegation made by the investors. “We have all the approvals in place, construction at the site is in full swing and we are committed to deliver the project on schedule as promised,” the spokesperson added.

Anirudh Jharjharia, another investor, claimed that around Rs 100 crore had been forked out by 223 people for the project. The association represents an investment of Rs 30 crore, he said.

Asked why the prospectus was not checked with diligence, Jharjharia said: “There was so much hype in the real estate market during the soft launch in February 2008. And the developer was the reputable DLF. So everyone rushed in,” he said.

Realty sources said the price crash in the intervening months had buried the hopes of the investors to make a profit.

Kapoor said that if DLF returned the money, the amount would help him buy 80 per cent of a similar property in Rajarhat.


Residential property prices in north India inching up

Demand in the real estate sector has returned . And, with it, developers have raised prices of their products in most of the markets in north India However, prices in cities in south India have stabilised, with the exception of Bangalore, which is still witnessing a slight correction , according to a new report prepared by realty consultant Cushman Wakefield. Even after all this, prices are still lower than what they were a year ago. As the market has revived, a large number of developers have jumped in the fray with new launches.

This is expected to put some downward pressure on price points. However, with cash flow improving, developers may not go for distress selling soon.

According to the report, NCR and Mumbai have seen values climb up with the return of investors
and an end users interest in the realty market in the third quarter ending September 2009. Certain suburban markets like Noida and Gurgaon witnessed even higher growth due to heavily discounted prices in the previous quarter ending June - particularly in the new launches.

After a sharp decline in the last few quarters, capital values have started to strengthen and register marginal appreciation across most micro-markets . Cyclical demand with festive season has resulted in strengthening of prices. The launch of new projects catering to the mid-segment witnessed heightened activity resulting in price escalation. Gurgaon and Noida are the key locations to witness this activity and registered the highest growth, 19% and 16%, respectively, during the quarter.

Gurgaon witnessed the highest growth in capital values in the mid-segment over the last quarter. By September quarter, capital values of apartments in the suburban city are quoting in the range of Rs 4,000 to 6,500 per sq ft. In the periphery of Gurgaon, the prices are as low as Rs 2,400 per sq ft.

After Gurgaon, Noida witnessed the sharpest appreciation in the prices at 16%. This is essentially due to the increase in purchase activity in the new projects catering to the mid-segment , said the report. At present, the prices are in the range of Rs 3,200 to Rs 5,500 per sq ft.

However, values are still below their all-time highs by about 5-12 % in NCR, 10-20 % in Bangalore
, 6-18 % in Mumbai, 10-30 % in Pune, 6-12 % in Chennai, 7-20 % in Hyderabad, and 5-15 % in Kolkata.

Aditi Vijayakar, executive director (residential services) at Cushman & Wakefield said, “The price and the buyer’s sentiment are critical in the current market as key parameters influencing sales. Capital values in select locations in NCR, Pune and Mumbai are likely to see growth in the coming months. However, if prices increase too much too soon, there is a likelihood of them correcting again shortly; the ideal graph representing recovery should be gradual and in line with the demand that calls for a period of considerable stabilization before the hike. In the present scenario, the affordable housing segment holds the largest share of the demand pie and hence, any significant price increase in the high- and mid-segment would lead to another phase of corrections”

The appreciation of the rental values in the high-end residential locations of Delhi in the range of 8-12 % stands testimony to the increase in leasing activities in the region, the report points out. The rental value in suburban locations such as Gurgaon and Noida stabilized over the quarter despite addition of new stock due to latent demand in the region.

HDFC expects rates to firm up by 25-50 bps Assetventures

The country’s largest mortgage company Housing Development Finance Corporation (HDFC) expects interest rates to go up by 25 to 50 basis
points in the first quarter of the next fiscal. This was indicated by HDFC joint managing director Renu Karnad, who also told reporters that HDFC expects loan disbursements to grow by 22 to 25% during the current fiscal.

Speaking on the sidelines of a function marking the launch of the Real Estate Sensitive Index (Ressex), Ms Karnad said there was also concern over the rise in real estate prices which have gone up sharply in the wake of the recovery in capital markets.

In her speech, Ms Karnad said: “Even in today’s ‘affordable housing’ mantra days, the common man has to shell out more than an arm and a leg to buy his home. “In India, housing, if priced correctly, has an enormous demand. Given the acute housing shortage, it is unlikely that there will be any saturation in the market for a long time to come.” According to Ms Karnad, the real estate index, which has been developed by a private consultancy firm Liases Foras, will help consumers and lenders in taking a view of the housing market.

“In the last year alone, which was one of the toughest periods in economic history, the real estate industry in India managed to grow at over 16% YoY. As a contributor to GDP growth, current estimates place the real estate sector at 8.86% of GDP. At the same time, over Rs 230 billion is being proposed to be raised across 8-10 real estate IPOs within the next 6-12 months. The post-crisis events have shown us the importance of transparency, compliance and integrity in the business world, she said.

“The housing industry in particular, which addresses the needs of millions of consumers, requires a greater degree of sophistication in its reporting of accessible and value-adding information,” she said.

Biggest Indian-Canadian landlord eyes India's 'dream' market Assetventures

Canada's biggest Indian landlord Bob Dhillon, who started his company from the back of his car and now owns more than 6,000 rental properties across the country, is set to enter the Indian real estate market.

Dhillon, who has been invited by Prime Minister Stephen Harper to join him during his visit to India beginning Monday, is bullish on the Indian market.

"Despite the current slowdown, I am sure the Indian real estate sector will take off in a big way. We are ready to come here next year," says 43-year-old Dhillon whose Mainstreet Equity is the first Indian-owned company to be listed on the Toronto Stock Exchange.

Dhillon, who started selling homes at the age of 19 and became a millionaire at the young age of 21, says: "Today, India is a realtor's dream. It is the fastest growing real estate market in the world after (western) Canada.

Three things make India a dream destination for him, he says.

"One, 50 percent of India's population is below 25 and they will spur demand for housing. Two, a vast majority of Indians live in rural areas which are set to see a huge housing activity. Third, as prosperity increases, people's hunger for home ownership will also increase.

"These three things are any real estate man's dream," he says.

Dhillon, who was born in Japan and educated in India, keeps a close watch on the Indian real estate market and has made many presentations on it at various fora.

About his inclusion in the prime minister's delegation, he says: "Because the prime minister wants to focus on economic ties with India... He sees that Canada and India have a huge economic future.

"We have a new generation of Indian businessmen in Canada who will bridge these two great economies. We will bring financial and intellectual inputs into this relationship."

Dhillon says the visit of the Canadian prime minister could not have come at a better time as the worst of the economic slowdown seems to be over.

"We have two great like-minded prime ministers. Stephen Harper and Manmohan Singh are both economists and policy driven. The visit will definitely boost our business relationship," he says.

Interestingly, Dhillon's company has boomed even in these troubled economic times. In fact, he has smartly leveraged the current crisis to expand his company to take its fortunes to well over $1 billion.

Explaining it, he says: "We have flourished because of the type of real estate business we do. We own mid-segment apartments mostly in western Canada which was not that badly hit.

"Then we had a lot of cash flow which we used to buy back 40 per cent of shares. Further, we have taken advantage of low prices to buy more properties."

The Indian king of the Canadian real estate considers his upcoming 2,300-acre island in Belize (Central America) the jewel in his crown. He is developing it into a world-class tourist resort for Hollywood celebrities. The island amid pristine blue sea waters will have hotels, golf clubs, casinos, condominiums, high-end houses and other facilities.

The likes of Madonna and Leonardo DiCaprio will be its residents, says Dhillon whose family first emigrated to Hong Kong, then Liberia and finally Canada from Tallewal village near Barnala in Punjab.

Govt may scrap 3-year lock-in for FDI in real estate

To boost foreign direct investment (FDI) in real estate, the government may remove the mandatory three-year lock-in period for overseas investments in the sector.

The department of industrial policy and promotion (DIPP) has proposed this move, with a draft cabinet note on the proposal being circulated for inter-ministerial consultations. Doing away with this lock-in period has been a long-standing demand of Indian developers as well as foreign investors.

The government had permitted 100% FDI in the sector in 2005. However, this was subject to certain conditions such as a minimum capitalization of $5 million by the foreign investor and non-repatriation of the original investment for a minimum period of three years.

The liberalization of the real estate sector led to FDI inflows increasing from $151 million in 2005-06 to $2.03 billion in 2008-09. DIPP now argues that no sector, except defence, has a lock-in period. “Based on experience, this condition no longer seems necessary,” a DIPP official said on condition of anonymity.