RBI rate cut may boost demand for real estate

The rise in demand will be mainly in tier II and tier III cities where prices are still affordable, say analysts

Banks have a 67% share of the housing finance market, estimated at `7 trillion as of 31 December. Photo: Hemant Mishra/Mint

New Delhi: The Reserve Bank of India’s (RBI’s) monetary easing could prompt a rise in real estate demand, leading to prices firming up after having dropped around 4% in the recent past, said R.V. Verma, chairman and managing director of National Housing Bank (NHB), the regulator for housing finance firms.

Builders with unsold stock may raise home prices, Verma said on Thursday.

“The Residex (index of property prices in various Indian cities) for January-March could reflect this trend. We are watching it closely,” he said.

RBI cut the key policy rate by 25 basis points (bps) in its 29 January review of monetary policy, and analysts expect it to follow an easy money policy to boost economic growth. Following the RBI rate cut, many banks announced cuts in lending rates, fuelling expectation of a pick-up in retail housing demand. NHB also reduced its prime lending rate, or the rate at which it it lends to other banks, by 25 bps to 9.75% the same day. One basis point is one-hundredth of a percentage point.

The rise in demand will be mainly in tier II and tier III cities where prices are still affordable, said Verma.

“There has been a position of oversupply, which has had a moderating effect on prices. Prices are down 3-4%, primarily in tier II and tier III cities, because this is where the demand for housing loans is concentrated under the slab of Rs.10-25 lakh,” Verma said. “However, because of the increase in positive sentiments and the likelihood of lending rates going down further, the demand may pick up again leading to a price rise in houses by developers which have been under pressure till now.”

Banks have a 67% share of the housing finance market, estimated at Rs.7 trillion as of 31 December. In the Trend and Progress of Housing in India 2012 report released on Thursday, NHB said the housing finance industry could see around 20% growth in 2012-13 from the previous year.

Industry experts said prices are likely to rise in some areas.

“In markets like National Capital Region (NCR) or Mumbai, there have been fewer launches, but pricing has not taken that much of a hit. Prices have been stable or have seen a marginal increase,” said Neeraj Bansal, director, real estate, KPMG. “However, in other parts, where demand has gone down significantly, the developers have been offering good discounts on available prices for ready properties.”

The outlook has become more positive following the cut in interest rates. “There is an increase in positive sentiment, which may lead to an increase in prices in select cities,” he said.

The industry also expects the budget will contain steps that will boost the industry.

“If the industry receives a stimulus, the following quarters post the budget can see more buying from end-users, which will invariably lead to a rise in housing prices,” he said. Bansal said Andhra Pradesh, Mumbai, NCR, Chennai and Bangalore may see house prices increase in the near future. According to some industry estimates, house prices could rise 5-10% in the next few quarters .

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Over 50% mall supply in top 8 cities deferred in 2012: Cushman & Wakefield

MUMBAI: The top eight cities in India witnessed 4.8 million sq ft or 58% of total expected mall space supply deferred in 2012, said property consultant Cushman & Wakefield. During the year, total mall space supply stood at 3.44 million sq ft.

The highest deferment of supply was recorded in Mumbai and Hyderabad where none of the planned supply entered the market, followed by Chennai with 87% and National Capital Region with 75% supply deferred.

Given that the actual demand resulting from announcement of FDI in retail would take 12- 18 months to start manifesting, many developers with initial plans for retail have pushed their projects for next year thus widening the gap between expected to actual mall supply for the year, said Jaideep Wahi, Director, Retail Agency, Cushman & Wakefield India.

Wahi expects around 12 million sq ft new mall space in 2013 with mix of deferred spaces as well as new projects.

During the year, total 10 new malls started operations with Bangalore witnessing the highest mall supply of 1.86 million sq ft. Rentals for retail space grew 20% - 60% in select micro markets in 2012, Cushman & Wakefield said in a report.

Mumbai saw the highest average increase in high streets rentals of approximately 16% year on year which was closely followed 14% in Kolkata. The high street of Vittal Mallya Road in Bangalore experienced maximum rise of approximately 58% in rentals closely followed by Colaba Causeway around 56% in Mumbai. Khan market remained the most expensive retail location with rental values at Rs 1,250 per sq ft and registered a rise of approximately 4% over last year.

Average mall vacancy across these cities stood at 20%, a decline of 1% over last year, partly aided by the large deferment of malls, the report said.

Ahmedabad witnessed the sharpest drop of 7% in mall vacancy levels even while it recorded the highest vacancy levels in 2012. Hyderabad, Mumbai and NCR witnessed marginal improvements of 1-2% each on account of increased leasing activities. Bangalore and Chennai witnessed approximately 2% rise in mall vacancies owing to influx of new mall space and a general non availability of quality mall spaces in these cities, the report said.

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Rental of high street locations in NCR up by 9% in January-March

NEW DELHI: High street shopping destinations such as South Extension, Karol Bagh and Connaught Place in the national capital saw up to 9 per cent rise in rentals in the first quarter of 2012, but malls in NCR did not receive much attention from retailers due to paucity of quality space.

In sharp contrast to the high street locations, rentals across the shopping malls in the National Capital Region (NCR) remained unchanged from the previous quarter and incidentally from the last year as well, according to a report by global property consultant Cushman & Wakefield (C&W).

"NCR's retail market was largely driven by leasing activities on the high streets where retailers showed greater interest," C&W said.

Rentals in South Extension (I & II) rose by 9.10 per cent, Karol Bagh by 7.7 per cent and Connaught Place by 4 per cent on account of increased enquiries from retailers and some significant leasing activities.

"Malls, on the other hand, continued to see cautious approach by retailers thereby witnessing limited supply and restrictive leasing activities," C&W observed.

The limited availability of quality space has been dithering retailers to commit to the existing space resulting in vacancy levels remaining unchanged at 28 per cent from the previous quarter, the consultant explained.

C&W tracks retail markets of eight major cities of the country including NCR, Mumbai, Kolkata, Chennai, Hyderabad, Bangalore, Pune and Ahmedabad.

Vastrapur in Ahmedabad recorded the highest growth in mall rents at 33 per cent over last quarter mostly owing to renewals of existing tenants at a higher value, while A.S. Rao Nagar in Hyderabad saw highest increase in high street rentals at 26.7 per cent, the report revealed.

"The first quarter of the year has been positive for the retail market and indeed over the last one year. While the mall space has been moving cautiously to ensure that demand to supply ratio remains stable to maintain rental values, the high streets continue to see increased demand and interest from a range of retailers," C&W Director (Retail Services) Jaideep Wahi said.

Mumbai's retail market remained largely stable with both high streets and malls rental unchanged over the previous quarter. But, malls at Vashi saw rise in rental by 7 per cent.

In Bangalore, Vitthal Mallya Road was the hot bed for retail action with both high street as well as mall space in the location recording a growth in rental values. High street rentals rose by 25 per cent and mall rentals by 14 per cent.

Kolkata's traditional high street locations of Park Street, Camac Street and Elgin Street recorded notable rise in rentals on continued interest from retailers. Rental at Park Street was up by 14.3 per cent in the first quarter.

Source: http://articles.economictimes.indiatimes.com/2012-04-25/news/31399036_1_rental-values-mall-space-jaideep-wahi

Experts debate urban housing challenge and the way out

Budget projects, vertical expansion and easy finance options could be the way forward to meet the surging demand of housing in the national capital region (NCR) as well as in the country. At the Mint Real Estate Conclave held recently, this was the consensus that emerged among a panel of industry experts and decision makers who debated on the challenges that confront the real estate sector amidst growing skepticism after the global economic slowdown.

Getamber Anand, vice-president, Confederation of Real Estate Developers’ Associations of India, pitched for relaxed monetary policy for the sector.

“The real estate sector has least Non-Performing Assets (NPAs) in comparison to other sectors like power. And yet, when it comes to giving us easy finance options, we are seen skeptically,” he said.

National Real Estate Development Council president Navin M Raheja too agreed. “We are prepared to take on challenges if the policy makers trust us,” he said even as he vouched for high-rise buildings as the solution to make up for scarcity of housing options.

Romi Roy, urban planner, DDA, said there was a need to develop civic infrastructure to cater to the rising number of homebuyers.

She also admitted that urban planners haven’t been able to deliver promising solutions to the problem of affordable housing and viable city infrastructure that could accommodate pressures of rising population.

Source: http://www.hindustantimes.com/India-news/Haryana/Experts-debate-urban-housing-challenge-and-the-way-out/Article1-787580.aspx