The Real Estate Industry of India

Previously in general people bought houses which would last a lifetime. In today’s world things have changed and this system has slowly become obsolete and faded away. The general public now think differently and more because the property market is flourishing, expanding and swelling up. The important and power word in today’s life is ‘Investment”. This has not only generated for the people in India but has also opened the doors to the foreign investors to take further step.

The Growth in the Real Estate Sector is rapid in India. The real estate has become a genuine excitement and joyousness for everyone. People have taken this in high spirits. Indian real sector has seen an unparalleled and remarkable success in the last few years. The villages adjacent to the metro cities have reached to the crowning point for the land prices. This has persuaded and influenced the farmers to sell their share of land for good money. The development in the real estate market embraces growth in both commercial and residential spheres. In the Indian economy the real estate industry is one of the fastest and is growing rapidly. In the last few decades India has seen tremendous and huge changes.

Hike in repo rate criticized by realty industry

Reserve bank of India announced hike in repo rate recently and this hike was highly criticized by the top developers of the realty sectors. Experts of the real estate industry believe that this hike will cripple the real estate sector and will put them through hard time. Every year realty sectors contributed a huge sum of money towards the growth and development of the economy and this hike will make lessen the profits of the developers. The repo rate is the rate at which other banks borrow from Reserve bank of India. The hike will put a negative impact on the realty sector. The rise in cost of home loans will lessen the property demand as the customers who are already burdened with home loan will not engage in new transactions.

Managing director of Omkar Realtors and developers Ltd also shares similar views, he said that realty sector is facing a hard time dealing with issues like hike in interest rates, inflation and slowdown in global economy. The interest rate has reached to such a level that the real estate industry will not be able to handle any more rise in the interest rates, it will damage the realty industry badly. There is shortage of apartments in urban areas. The realty developers are not able to complete their construction on time as result of which projects are being continuously delayed.

Metro connectivity dominating land prices

Real estate prices in the cities that have metro connectivity or which are in close proximity to the metro stations are comparatively higher than cities which do not have metro connectivity. In cities like Delhi where majority of middle class people travel by metro, prefer to purchase house in areas that have metro connectivity. The developers of real estate are expecting rise in property rates in the areas which are under the DMRC for metro projects. Every year the city witnesses jump in the rates of property by 5-10 per cent. The experts of the real estate believe that the areas which have metro connectivity or which are under development of metro route will experience jump of more than 10 per cent.

Interestingly in some areas the prices near the metro area where quite low when the construction was taking place and there very fewer buyers of that land but after the completion of metro route the prices of the land started to pick up slowly. The floor area ratio has risen from 3 to 4 which indicate that the construction that falls within 150-250 metres in proximity with the metro station will increase the number of floors; this statement was given by president of Bangalore realtors association of India.

Construction not affected by NAREGA: Jairam Ramesh

Jairam Ramesh, the union minister for rural development has slashed the allegation on National Rural Employment Guarantee Act. He said that NAREGA is not responsible for shortage of labour in construction and agriculture sector. He further stated that this scheme NAREGA has played an important role in life of rural people, agriculture wages have increased and migration of rural people to urban cities has also been controlled by NAREGA act as now people living in rural areas can earn by working in their village itself. Under this scheme adult member in rural family is paid sum of Rs.120 per day for a period of 100 days in 365 days.

In a statement made by Confederation of real estate developers association of India they held NAREGA responsible for shortage of labour for construction as the real estate projects are getting delayed and they are experiencing time and cost overrun. Now it has also become difficult to employ labour for the purpose of agriculture.Ramesh told the media that NAREGA act will help in controlling poverty because the majority of poor people in India live in villages and under developed regions. For a comfortable and healthy living, it is the duty of government to pay them more. The real estate sector is facing a difficult time due to the shortage of labour in construction field.

Gurgaon; New destination for realty developers

Gurgaon has become a hot spot for the realty developers, investors as well as for the local people. The main reason behind the popularity of Gurgaon is its good connectivity with the Nation’s capital and close proximity to the international airports in the city. With all these vital factors Gurgaon has become one of the most preferred locations for the real estate developers. It has acquired the status of Millennium city as the most prominent multinational are establishing their offices and business venture in Gurgaon. It has become hub of IT and BPO sectors as more and more companies are pooling into the market.

DLF ltd, the leading developers in India are the major developers in Gurgaon. There is DLF city and apartments in Gurgaon which are attracting the investors and buyers to invest in this region. Not only private developers but the government is also showing lot of interest for building up infrastructure in Gurgaon. Manesar, a place in close proximity to Gurgaon is emerging as the industrial hub for the national capital. The developmental projects are not restricted to just industrial infrastructure but they are also planning to build up commercial and offices complex, residential sectors, hospitals and education institutions.

Akshaya developers plans to increase its business

Chennai: Real estate developer, Akshaya has planned to widen is presence over the country in the real estate sector and expand its services to the southern parts of India. The extension into the other parts of the country is also a part of its other plans according to which it aims to develop commercial properties, IT parks, health care and schools in the cities of the country.

According to T Chitty Babu, Chairman and CEO at Akshaya, they’ll be entering different other maret segments like healthcare, commercial property, retail, schools, etc which may be obtained through township projects. The company majorly focuses upon developing various real estate projects in residential sector from the past 16 years. He even added that he wishes to raise the capital of the company to Rs. 1000 crore in 2015 while unveiling the new logo for the company.

He said that the company would be focusing on the green building concepts adding that CRISIL would be rating their projects on a regular basis. On the expansion scenario of the company he said that they are having projects across Tamil Nadu and that in the next three years they’ll be foraying with real estate projects in three more states- Andhra Pradesh, Kerala and Karnataka.

Sobha, Paranjape Builders and many other developers targeting the senior citizen business

At a larger scale the real estate sector might be facing tough times, as there are real estate firms which are trying to explore new avenues to target to experience growth in their business. A new trend has started wherein various real estate firms have started building especially for the senior citizens. According to a census of 2011, there are around 10 crore Indians who are above 60 years of age.

There are various factors apart from the census reports due to which many real estate firms are focusing on projects only for senior citizens. Such factors include higher life expectancy, rising trend of nuclear families, lack of safety and security in cities, etc. Due to all these factors the senior citizens are becoming the best target for the ever confused real estate developers. Several services such as facilities management, easy access to healthcare services, security systems, spiritual spots, etc are made available to pull more and more customers towards these projects.

Many real estate firms such as Paranjape builders, Ashiana housing, Sobha developers, Rakindo group, Brigade group, etc have already started developing special projects for the senior citizens. Such projects are majorly based in Delhi, Pune, Bengaluru, Chennai and Coimbatore. LIC has also started developing with the name of care homes in Bengaluru.

Will the price of real estate projects fall now?

Now considering the ever increasing growth and massive widespread of real estate projects in India, the prices are expected to drop so as to help the middle class buy their dream home. From the modern age townships in Delhi and NCR to the tall apartments in Mumbai the real estate sector has left no stone untouched. It is spreading in each and every part of the country wherever the resources can be availed.

The price of real estate is expected to fall as the developers are always facing the crisis due to short of funds. It is clearly observed that in large parts of the country, especially the main markets of real estate the sales have been poor till the June quarter. The payment on sales which is indicated in the receipts is much less than satisfactory which also results in poor reports on the total sales.

Thereby considering the lack of sales it would be easily deduced that now the prices would come down, but actually it isn’t so at all. Sources of money for the real estate developers are not only their finished projects, there are always investors, banks and private equity capital to tap in case of need.

Diwali celebration in the real estate industry - Fireworks are less for developers this Diwali

Generally the time of festivals brings joy for the real estate developers as the rate of sales during Diwali goes up to a higher level. But this season it looks like the sales will not reach to the level of expectations of the developers. The reason for low rate of sales is slow economy due to which the confidence of consumer has fallen down. Indian real estate suffers with slow rate of economy. It has been seen in past years that during the months of October and November the sales of real estate goes up by 20-25% but this year due to high rate of inflation the growth of economy has slowed down which adversely affected the Real estate sector.

Many market experts, developers and brokers are preparing themselves for drop in transaction. The current booking prices and rate of interests are too high that the buyers are reluctant to invest in property for the time being until the rate of interests drops down. The Hiranandani group Niranjan Hiranandani said in a statement that this Diwali there will not be much lights and fireworks for the real estate developers. The developers tried their best to impress the buyers with new and fascinating festive offers but all their efforts failed as it could not increase the sales.

Faster growth of real estate with economy

A two day Real estate exhibition was held in Riggae at Ramada Hotel. There are more than hundred projects on display as more than 40 Indian property firms participated in this exhibition. This was the 19th Indian real estate exhibition which was organised by Indus. It is India premier management company for real estate exhibitions in collaboration with Kuwait events and exhibitions. The event was inaugurated by Satish C. Mehta,Indian ambassador to Kuwait. Mehta in his statement made to the media said that he is happy the way India’s real estate is growing and widening its horizons in international cities.

Indian real estate developers are providing the NRI’s to invest in housing as it is the best field to invest nowadays. Ambassador Mehta also said that Indian real estate is also attracting the interest of foreign investors. It is estimated that by the end of 2012, there is a requirement of around 26 million apartments which is the main reason why so many developers are roping in the real estate industry. He also emphasized that the growth of Indian economy is another reason for the increase in demand of real estate. The income of people in India is increasing which has influenced the real estate industry.

Land to be returned to the farmers of UP

In a recent judgment of the Allahabad High Court, the court has ordered three villages to be returned to the farmers. Farmers of around 64 villages of Noida, Noida extension and Greater Noida had challenged the acquisition of around 3000 hectares of their land acquisition is becoming a burning issue in the country. These lands of farmers are being taken for many purposes which primarily includes growth of the economy and the development of industrial sector.

Though the government policy is to draw a balance between the economic growth and the interest of the poor, but the reality is bending more to towards the former. Therefore the court has ordered that the lands acquired in Shaberi, Asadullapur and Devla villages to be returned to the farmers. The court went further to order that the farmers would also be returned with 10% of the lands where construction work had started. They would also be getting increased compensations on the land already acquired from the farmers. According to some resources, these orders would be very disturbing for the real estate companies and the final buyers of the developed projects.

Some of these lands have already been developed by various builders and also construction has been going on at full pace at some multi storey complexes.

DLF stocks fall:

The stocks and shares of the major realty firm of the country, DLF fell round 2% as a consequence of the statement by the stock market regulator, the Securities and Exchange Board of India (SEBI). The board has said that it would examine the allegations made by a Delhi based businessman against the realty firm. The capital market regulator has agreed to investigate the whole matter after the allegations of the Delhi businessman against DLF Sudipti Estates Pvt Ltd.

According to a real estate consultant, the company’s operations may not experience any impact due to the SEBI’s investigations but its goodwill can surely be impacted in the market. The businessman has accused the top realty firm for deceiving him for Rs. 34 crores. According to a draft prospectus filed by DLF for its public issue, it had included Sudipti as an associate company but in the later version of the prospectus of 2007, it wasn’t included.

If the businessman is to be believed than the Sudipti, DLF home developers, DLF estate developers are all sister concerns and part of the same group but DLF alleges that it is not so and both are managed by different persons. The Delhi High Court has directed the regulator to investigate the matter and subsequently pass an order within three months.

Real estate suffers with lacks of returns

Investment in real estate has always been famous in India as most the people here prefer to invest their money by purchasing property. The real estate sector is struggling to curb issues of maintenance cost, transaction and lack of returns. The people who are smart enough, invest in property and with the increasing rates of property the middle class range of people who had bought property when the prices were low have now become rich overnight. However, now the builder get higher amount of returns than the investors. Therefore, the real estate is palpable hence it is regarded as a good investment.

There is a misconception in the minds of people that realty sectors don’t give returns like that of equity. It is a known fact that if you property immediately after buying, you will not get negative returns. The negative returns are a consequence of cost spent in brokerage of stamp duty and difference of prices between the seller and the buyer. Majority of people don’t trade in real estate and prefer to hold it for a longer duration in order to get maximum returns. The real estate returns varies over a cyclical period of time. The best way to get maximum returns is allocation of assets.

Real estate investment is a safe bet

Real estate in India is making huge business profits for the developers and investors. For our previous generations it was like dream to buy a house for them. The ones who were having roof above their heads were considered to be settled in life than of those who did not had their own house. But nowadays EMI and home loans has made it simple and easier for people to buy their own house. Property is the first thing in which the middle class people plan to invest in. The majority of population in India is comprised of middle class people and their first dream is to purchase a house of their own.

In a report published by Price water house cooper, the popularity of real estate sector of India has been highlighted in report of Emerging trends in Asia pacific 2011. Among the construction business cities like Punjab, Haryana, Agra, Madhya Pradesh and Jodhpur are in the top preferences of the real estate investors. The 11th five plan provides high growth opportunity for the real estate sector as by the end of this plan India would be facing shortage of over 26.53 million houses. Leading company TATA has introduced their new home project which is named as Nano homes. The project aims at building around 32,000 houses in the rural areas.

5. Property firms like Unitech, DLF and DB realty hit hard:

Mumbai: Indian real estate sector, which helps in the country’s economic upsurge, is facing difficult times as the high interest rates push up the cost of home loans. Successive hike in the interest rates have made the buyers delay their purchase in hope of a fall in the interest rates. This situation has led to a knock off on the country’s top property firms like DB Realty, Unitech and DLF.

Stcks of these firms have already hit year low this month. Also the realty index in the BSE, (Bombay Stock Exchange) have halved in terms of value from the figure in the last year and also some other firms have seen their share price plunge after the news of loans for bribe scandal which emerged in last October. According to the property analysts the situation is not quite rosy for the property firms as another hike is expected before the end of the year in fuel, labor costs and raw material costs. According to Mr. N Sridhar, group director, DB Realty, rising interest rates, input costs and delayed approvals have resulted in a slowdown in this sector. According to Mr. Pramod, Ambit Capital, developers will have to start reducing the unrealistically high prices to boost the sales again.

Real estate can only be revived by section 25 of the Indian Companies Act,1956:

Bangalore: Building law abiding apartments and sanctions by the authorities is passé. The customers expected such terms and conditions by the seller in the agreement for years. But now things have changed and according to most, for the better. Now, it is the time when the customers not only look for such terms in the contract but they also expect transparency in the project by the developer. It is the time when the customers are well aware of their rights conferred upon them by the law. But unfortunately the sellers are not in a position to offer much transparency in the deals.
The model which is currently prevailing in the real estate market of India is that sellers or the real estate developers collect money from the buyers in form of down payments from banks or other financial institutions against loans. This way the developer collects loads of public funds and also the monthly installments paid by the buyer even before the first brick is laid on the so called “project”. This way the real estate agents make good money for new luxury cars, swanky mobile phones and fully paid luxury holidays. Things like large sized sample flat or badly drafted agreements are the things which would directly go against such real estate agents. Now is the time when the country needs an authority or a law to govern such development in the real estate sector and punish the culprits. Now is the time when we need a holistic real estate development rather than a different formula of each real estate agent.

Realty to rise, not affected by boom

New Delhi: The real estate sector is expected to rise and not get affected by the global slowdown, but it won’t experience the same appreciation it has experienced in the past due to many significant factors. According to Mr. Anuj Puri, chairman and country head, Jones Lang LaSelle India, the middle income residential group is a good investment option. For the long-term investors the residential real estate sector is a profitable possession. But he advises that the investors shall not plough money in the early stages of project as they might face delays in the later stage. So the safest area to invest is the already developed projects. The real estate experts’ is of the opinion that the economic slowdown may leave an impact on the Indian real estate market but that won’t be a severe one.

The impact of the global slowdown can however be felt in the IT sector which may result into less demand for office space. According to Morgan Stanley, even if the global slowdown affects the developed countries by a percent, the Indian economy will experience around 6.5-7 % growth in 2011-2012 as compared to the original 7.8%. Even in the worst case the Indian economy will experience a growth of at least 7%.

2. Property Discounts are in as demand drops day by day:

Bangalore: Developers in the city are not publicly admitting this fact but the truth of the matter is that demand is lowering day by day and as a result the developers are giving discounts and freebies to the potential buyers in order to persuade them. In Bangalore the discounts are said to be around 8-15 % whereas in Mumbai where demand is much lesser the discounts are around 20-30 % on the listed price. A consultant at a q estate firm, Mars Realty confirmed that the discounts are being offered in the projects ranging from 70 lakhs- 1 crore. Century real estate has been offering great discounts to those who make accelerated payments for its luxury apartment project, Renata at Richmond road. The price was listed at Rs. 17,000 per sq ft, but it is said that buyers got the same land for around Rs. 15,000 per sq ft which is much less than the quoted price.

Lodha developers, a Mumbai based developers is offering a free trip to Singapore for the first forty people buying their project named Casa Rio at Dombivilli. In Mumbai some areas have experienced a steep downfall. Rustomjee had two residential project at Bandra, and amazingly one was sold earlier at Rs. 26,000 sq ft and the newer one is selling at Rs. 15,500 per sq ft. Another developer is offering a 25% flat discount to the buyer who gives 100% down payment.

1. High loan rates are affecting housing property in North India:

Chandigarh: Property prices in Punjab, Chandigarh and Haryana have experienced a fall up to 15% in last few months. Rising loan rates are seriously affecting the real estate market in North India as the otherwise booming real estate market experienced a fall up to 15% in last couple of months. The fall can be seen as a direct consequence of high lending rates as buyers could not avail loan easily because of the high return rate which is rising consistently. The private financers are the ones who are suffering the most in this situation as the buyers are delaying their decision of purchase due to the high rates of loan. The joint general manager of HDFC, Mr. P.C Srivastava emphasized that the rates of property has come down in some parts of northern India in recent months and the same could drop to some more extent.
The lending rates have increased by around 2% in the last year as a result of tight monetary policy adopted by the Reserve Bank of India (RBI). The real estate consultants pointed out that change in this direction can be seen from the fact that the high value properties have not experienced a good sale in the last year and have almost come to a halt. Now to face this situation and allure buyers many real estate agents have started a new policy of bearing the house loans of the buyers until the possession is handed over to them.