UAE's NRI dilemma: Buy India property or not?

Mid-November, an international real estate advisory firm said India’s real estate sector will continue to remain an attractive investment destination with the possibility of prices in residential areas appreciating by 91 to 145 per cent in select cities over the next five years.

Knight Frank pointed out that despite the slump in the real estate market, Mumbai will continue to be the most promising investment destination followed by Delhi-NCR, Chennai, Pune and Bengaluru, Knight Frank Executive Director (retail, advisory and hospitality).

But by early December, the apex body of Indian developers asked its members to seriously consider “selling off maximum inventories by reducing prices.”

“The developer community is willing to consider the suggestions made by the Finance Minister P Chidambaram to unlock the value of the unsold stock. We have asked our members across the country to seriously consider the proposal to sell (the unsold stock) in maximum numbers,” Confederation of Real Estate Developers' Association of India (CREDAI) national president Lalit Kumar Jain said.

Do the above two statements matter for UAE non-resident Indians (NRIs)?

Ashish Mehra, who works in Dubai as an accountant, says: “It puts me in a Catch 22 situation. I have been hearing a lot about an impending correction in Indian property market… but I haven’t seen any. My top priority is to save to buy a home in India. And that’s what I am doing and I will soon buy a property back home.”

Kamlesh Mehra, a Dubai-based businessman, says: “I have already bought properties in Mumbai and they have given me a good return. For me, as an investor, I believe this is not a good time to buy in India. Dubai properties are cheaper right now than in Mumbai. I would invest here than in India.”

But buy off plan or a ready unit?

Some Indian property developers taking part in the 11th edition of “Indian Property Show”, starting December 13 to 15 at the Dubai World Trade Centre, say NRIs are looking at buying “off-plan” or, at least, with a realtor who is offering them a deferred payment plan.

Jatin Patel, VP Business Development, Bhartiya City, Bangalore, states: “Off-plan purchases have for years returned solid yields for the astute investors in the Bangalore property market. They have benefited from the discounted prices from developers as well as capital gains from a growing market by buying early.”

He adds deferred payment plans are designed to give an opportunity to pay over an extended period of time for example construction-linked plan.

“In this plan, one has to pay the cost in the form of pre-determined installments to the builder in tandem with the development of the property. The advantage of this approach is that it gives you time to pay up, the developer does not end up charging too much at the outset itself and hence the buyer does not have to forego interest earned on their own money by paying up too much too early.”

KR Raghavan, Vice President - Sales & Marketing, Ozone Group, also opines that NRIs are considering buying off plan as it saves pre-equated monthly installment interest towards loan.

A survey conducted by Sumansa Exhibitions, organisers of the “Indian Property Show“, has revealed 26.7 per cent of NRIs are looking to buy property as an additional investment, which is a six per cent rise compared to last year. 89 per cent of them will invest in properties worth Rs1 crore (Dh700,000) and above.

The survey, conducted among 16,000 NRIs across the UAE, found Mumbai, Bengaluru and Delhi featuring in the top five destinations list, suggesting that the larger Indian cities offer higher returns.

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18% of housing demand to come from top 8 cities: C&W report

The total new demand for residential dwellings during 2012–16 will be 11.8 million units across India, according to real estate consultancy Cushman & Wakefield.

Of this demand, top 8 cities will account for 18 per cent or 2.1 million units across categories.

The annual report "Evolving Paradigm – Future of Indian Real Estate" has been bought out in association with Global Real Estate Institute (GRI). The GRI is a global club of senior real estate investors, developers and lenders.

Of the demand in the top eight cities, the requirement in mid-segment is estimated to be highest at approximately 59 per cent or 1.3 million units, followed by demand in the high-end segment which is 4,51,000 units. The low-end housing demand is expected to be 3,62,000 over the next five years.

Sanjay Dutt, Executive Managing Director, C&W India, in a statement said, "The demand creation in leading 8 cities is reflective of the economic strength that these cities have. We see a higher demand in the mid-ranged segment in these cities."

The total demand for housing units is expected to increase at a compounded annual growth rate of 2.8 per cent across India, with Bengaluru expected to record the highest demand growth of 4.1 per cent followed by Pune and Hyderabad.

NCR is likely to see the highest demand of 381,000 units in mid and high-end segments during 2012 – 2016.

Southern cities of Bengaluru (338,546 units), Chennai (257,796 units) and Hyderabad (199,575 units) will account for approximately 45 per cent of the demand in mid and high-end segments.

Mumbai is expected to see demand of 188,708 for mid and high-end housing, Ahmedabad (173,394 units) and Pune (144,422 units) and Kolkata’s (77,000 units).

Source: http://www.thehindubusinessline.com/news/real-estate/article3964920.ece

'Realty firms postpone shopping mall construction in 8 cities'

Realty firms have delayed the construction of shopping malls in eight major cities due to large vacant space in the existing complexes, according to property consultant Cushman & Wakefield.

"The retail real estate market recorded a deferment of more than 30 per cent of retail mall space against the projected supply for the first half of the year," C&W said in a statement.

The consultant, however, said the deferment was necessary considering the high vacancy rates in the shopping malls and cautious approach adopted by retailers on expansion.

The eight major cities (Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, NCR and Pune) witnessed a fresh mall supply of 2.27 million sq ft during first half of 2012.

"Approximately one million sq ft of expected mall supply was deferred to second half of the year or next year. The overall vacancy rate for the major cities as of H1, 2012 stood at 19.6 per cent, marginally higher than the previous quarter.

NCR saw the highest mall supply deferment of over 80 per cent ensuring the city maintained 28 per cent vacancy levels. NCR saw only 1.2 lakh sq ft of mall supply in H1. Bangalore saw the highest mall supply of 1.5 million sq ft in H1 2012.

"This slowdown in mall construction need not be viewed as a negative growth indicator for the retail real estate segment. The current pace is, in fact, expected to help in maintaining a healthier supply to demand equation; especially for oversupplied micro-markets," C&W India Director Retail Agency Jaideep Wahi said.

"With high vacancy levels as well as cautious expansion plans of retailers, the deferment of supply is a necessary measure to bring stability in the retail market," he added.

According to report, the rental values across most mall destinations within these 8 cities remained largely stable, except for certain micro-markets in Bengaluru, NCR, Kolkata and Mumbai where mall rentals have seen a growth over the previous quarter in the range of 2-13 per cent.

Elgin Road in Kolkata recorded the highest growth in mall rents at 12.4 per cent over last quarter mostly owing to renewals of existing tenants at a higher value.

Some prominent high streets destination recorded higher increase in rental values as against malls, reflecting the bent of interest amongst retailers for high-street.

Select locations across Bengaluru (MG Road, Jayanagar, Koramangala, Vitthal Mallya Road) recorded increase in rental by 8-9 per cent over the previous quarter.

Camac Street in Kolkata saw the highest increase in high street rentals at 25 per cent followed by MG Road in Bengaluru at just over 9 per cent. Gurgaon and Pune also saw increase in high street rents by 7-8 per cent.

Source: http://www.deccanherald.com/content/263504/realty-firms-postpone-shopping-mall.html

Tamil Nadu govt to push for Chennai Mega Region

Chennai

With the city expanding at a fast pace, expectations for better infrastructure are running high.

The state government is mulling the CMDA’s proposal to declare Chennai Mega Region for better regional planning on the lines of Delhi, Mumbai, Bengaluru, Kolkata and Hyderabad, since the Chennai Metropolitan Area (CMA) extending to 1,189 sq km was declared four decades ago.

The second master plan has foreseen larger development outside the Chennai Metropolitan Area along the Rajiv Gandhi Salai (IT corridor), Grand Southern Trunk Road and Grand Western Trunk Road in areas around Sriperumbudur, Kelambakkam, Tiruvallur and Maraimalai Nagar. Sources said the CMA area will be extended up to 8,000 sq km. The CMDA has already submitted a preliminary report to the government in this regard.

Source: The Times of India, Chennai

Housing prices projects mixed trend

At a time of slowdown in real estate development, housing prices have more than doubled in three cities of Chennai, Faridabad and Bhopal in four years.

A National Housing Bank report released on Monday said three other cities Jaipur, Hyderabad and Bengaluru recorded fall in prices residential properties.

The Citywise housing price index, NHB Residex, incorporated in 2007 with a base of 100 said June 2011 quarter showed index for Chennai residential property prices have gone up to 248 from base 100 in 2007, which means property prices of metropolitan city surged 148 per cent during the period.

This is followed by city of Bhopal that has witnessed 124 per cent growth; Faridabad comes third with a rise of 120 per cent.

However cities like Jaipur, Hyderabad and Bengaluru have registered a downward trend with 36 per cent, 9 per cent and 8 per cent drop respectively.

“In India land policies have created distortions that have led to inordinate high prices in many key metro cities. In places like Mumbai and Delhi and some large metros, land constitutes 90 per cent of the cost of the house, which signifies we have wrong faulty land policies and with those land policies you cannot have a solution for affordable housing,” said HDFC chairman Deepak Parekh.

The report also revealed that total outstanding housing loans have been growing at a steady pace. While the growth was 21.71 per cent in FY11, it was 20.79 per cent in FY10. Housing finance companies had witnessed a decent growth of 16.12 per cent in FY09.

Meanwhile Reserve Bank of India (RBI) is advocating for inclusion of low cost housing loans under the priority sector-lending category. “We are trying to put housing finance for weaker section as part of priority sector. A committee is looking into it. Hopefully, by the first week of February this report will come,” said RBI deputy governor HR Khan on the sidelines of the conference.

Union Bank of India chairman and managing director MV Nair is currently heading the committee, which was constituted by RBI to look into various issues, related to priority sector lending. Proper documentation and due diligence standards are also under consideration to ensure that loans extended by banks are for the target segment, which need special attention and treatment, the terms of the report said.

The panel will also review current allocation mechanism for Rural Infrastructure Development Fund (RIDF) and other such funds.

“The apex bank is also trying to coordinate with government and market regulator SEBI for developing and broadening the corporate bond market. As much as 40 per cent of the total bank lending is for priority sector including agriculture and small sector industry,” added Khan.

Source: http://www.mydigitalfc.com/news/housing-prices-projects-mixed-trend-448