Buying a flat? Don’t get carried away by the sample

The walls were beautifully done up, the fittings were exquisite and the rooms were very spacious. Vijayalaxmi Nayak and her family were so pleased with the look and feel of the sample flat that they immediately booked an apartment in the project by a reputed developer in Bangalore.

The excitement died down when the Nayaks got possession of the house three years later. It was nowhere close to what they had been shown. The flooring used ordinary tiles, the fixtures were not classy and the wall finish was quite plain. “In the sample flat, the rooms looked so big and perfectly done up, but actually the size was much smaller, and the ceiling too was not of the same height as showcased,” says Nayak.

There’s very little that the Nayaks can do now because the sample flat has long been demolished and they have no photographs or documentary evidence of what it looked like. Even if they did, it would not have helped. Chances are the developer had slipped in a clause in the agreement saying that it reserved the right to alter the specifications of the property.

The Nayaks are among the legions of buyers who are routinely taken for a ride by builders, who show them exquisitely designed sample flats. There’s nothing wrong in this exercise since showcasing sample flats is a standard marketing practice. “It is an actively used marketing tool for attracting potential buyers and is more effective than brochures and websites,” says Shveta Jain, director, residential, Cushman & Wakefield India.

The problem is that, as in case of the Nayaks, the real flat turns out to be very different from the sample offering. What you get isn’t what you see. The fixtures used could be very different from the designer sanitaryware you see in the sample. Atul Modak, vice-president of Kohinoor City Project, admits that some developers use fixtures and furnishings worth almost 2-3 times the price of the flat itself. This lends a premium look to the flat, which could deceive the customer.

You cannot blame potential buyers for getting carried away by the looks of the sample flat. Builders have many tricks up their sleeves that give false impressions to the buyer. For instance, there are no doors between rooms in a sample, which makes the flat appear more spacious than it really is.

Even the toilets and bathrooms are doorless. Some of the walls are merely glass partitions. Builders say this is done to allow buyers a better view, but the fact is that it makes the house look more commodious. The ceiling itself is much higher than that of the real flat.

The interior designers hired by the builders to do up the sample flats are experts at creating optical illusions. They know how to use lighting and place furniture in such a way that the house appears bigger. Even the furniture is an accomplice in this charade.

Source: http://www.indianrealtynews.com/real-estate-india/buying-a-flat-dont-get-carried-away-by-the-sample.html

NRIs on a property buying spree

To cash in on the rupee depreciation, non-resident Indians (NRIs) are making a beeline to buy property in India. Most developers Business Standard spoke to claimed a 25 to 30 per cent spurt in sales to NRIs over the last two months.

Since August, the Indian currency has fallen by around 20 per cent against the US dollar. According to real estate companies, brokers, analysts and consultants, this has triggered a substantial rise in the volume of property-related enquiries from NRIs. The actual deal numbers have also gone up considerably. Many NRI buyers are even buying multiple units for investment purposes.

Since NRIs earn in foreign currency, their buying capacity has gone up manifold with the rupee weakening against the dollar.

“In the last three months, we have sold more than 100 units to NRIs, a clear increase of more than 20 per cent over the previous quarter,” said R K Arora, chairman and managing director of real estate developer, Supertech. Arora said while the domestic demand had slowed due to high interest rates, interest from NRIs had shown a great surge.

Similarly, Sunil Dahiya, managing director of Vigneshwara Developers and senior vice-president of real estate association National Real Estate Development Council (Naredco), said some of his company’s existing NRI customers were wanting to invest more in property. Vigneshwara has already recorded a 25 per cent increase in sales to NRIs over the last two to three months. “Most buyers who were planning to buy two-bedroom apartments earlier are now switching to three-or four-bedroom apartments,” he said.

Raheja Developers, which is building tall residential structures in Gurgaon and Delhi, has also noted a similar trend, where every fifth booking of its recently launched project has been from an NRI.

At least 25 per cent of the bookings in the project has been from NRIs, compared with just 10 per cent in our earlier projects, said Director Nayan Raheja. “I attribute this trend to the decline of the rupee against the dollar. Now, to leverage on the trend, we are marketing ourselves in the US and Canada, as this is just the right time to invest in India.”

Lalit Jain, chairman and managing director of Kumar Builders and the chairman of another real estate association, the Confederation of Real Estate Developers’ Associations of India (Credai), agreed that NRIs were making the best of the opportunity. According to Credai, there has been a 30 per cent rise in enquiries from NRIs and 20 per cent increase in actual buying.

Yet another developer, BCC Infrastructure, has sold 100 of its 800 units to NRIs this quarter. “Yes, we can say this is partly attributable to the falling rupee,” said BCC Infrastructure Managing Director Kumar Bharat. He added that NRIs were also showing interest in industrial plots, as they wanted to establish business centres in the country, against the backdrop of the global economic meltdown.

“Owing to the uncertain econominc environment, Indians living in the West do not want to put their savings in banks. They are investing in the Indian real estate market at a time when the rupee is ruling at record lows,” Dahiya noted.

A top representative of the Global Organisation of People of Indian Origin confirmed the trend of NRIs putting their money in the Indian property market more at this point due to the rupee dip. “There’s no better time than this to invest in Indian real estate,” he said. NRIs took quick decisions on buying residential property, he added, explaining how they reacted so quickly to the rupee-dollar development.

Anshuman Magazine, chairman and managing director, CB Richard Ellis (South Asia), told Business Standard the trend was positive as India had the highest appreciation in real estate. “However, real estate decisions take time to transact, unlike stocks, so it is difficult to give an industry figure,” he said.

Sanjay Sharma, managing director, Qubrex, a real estate consultancy, said: “It is difficult to assess how much of an increase in NRI buying has been because of depreciating of the rupee and how much because of seasonal trend.” He argued this time of the year usually saw NRIs buying property.

Source: http://www.business-standard.com/india/news/nris-onproperty-buying-spree/458868/

Property deals peak ahead of guideline value revision

CHENNAI: With the new market-based guideline values for property registration set to come into effect from January, builders and buyers in the state are rushing to seal deals before the charges go up. The number of property deals has seen a sharp rise ever since the plan to revise guideline values was announced. In November alone, the state government earned Rs 715 crore from stamp duty and registration charges.

"There is panic in the minds of buyers and builders, as stamp duty and registration charges will go up once the new guideline values come into effect. A huge number of transactions take place daily these days, especially in Chennai and Coimbatore," a senior government official said.

In all, the government realized Rs 3,965 crore till November in the current fiscal from property registrations, 23.17% higher than the corresponding period last year. The November earning is the highest for a month in the last 20 years. In 2010-11, the government's revenue from stamp duty and registration charges was Rs 5,020 crore, and this fiscal it's expected to go up to Rs 6,500 crore.

Guideline value is the minimum value of a land fixed by the government, based on which stamp duty and registration charges are calculated. The charges add up to 9% of the property value. The draft of new guideline values is expected to be published on December 15, and the final values will be announced in January. The values were last revised in 2007.

While Chennai, expectedly, recorded the maximum number of property transactions -- 3.45 lakh deals in the last eight months -- Coimbatore was close behind with 3.18 lakh deals. The reason can attributed to the fact that Coimbatore has become a preferred destination for tier-two investments in the state with many business houses setting up facilities in the city, thereby giving a push to the real estate market.

Members of the Confederation of Real Estate Developers Association of India (CREDAI), a body of organized real estate developers, have taken exception to the new guideline values proposed by the government saying they do not reflect the market reality.

If the guidelines values of properties on Oppanakara Veethi, Cross Cut Road, DB Road and Trichy Road in Coimbatore have seen a three-fold rise in the revision, properties on Dr Radhakrishnan Salai, Boat Club Road, Poes Garden, Gopalapuram IInd Street and Montieth Road in Egmore in Chennai have been valued eight to ten times higher, they say.

CREDAI president T Chitti Babu said they were not against revision, but "a multifold increase was not acceptable." "There is a need for a study to understand the market prices. Otherwise, it will lead to malpractices and actual transactions will not come into revenue records. The officials have also found justification in our demands," he said. A crucial meeting convened by chief secretary Debendranath Sarangi on tax revenue on December 19 will throw some light on the final guideline values.

Tamil Nadu is among a very few states that do not revise guideline values periodically. Hence, major discrepancies exist between guideline values and market prices of properties.

Source: http://timesofindia.indiatimes.com/city/chennai/Property-deals-peak-ahead-of-guideline-value-revision/articleshow/11054212.cms

Indian commercial real estate struggles in the fourth quarter

The Indian economy has grown steadily throughout the course of the year but interest rates have also gone up, and this has caused the output growth to decline and capital values have turned negative for the first time since 2009.

The level of financial uncertainty in Europe and America is having an adverse on India. China, Brazil, Russia and Japan are performing better but the uncertainty in the Western markets is affecting the real estate market in India.

Investor interest in India is in decline due to disparity between investor returns and capital values. Ramesh Nair MRICS of Jones Long LaSalle claims many developers in the larger cities are being forced to rethink how they structure and sell their office spaces.

“Many developers, especially in cities such as Mumbai, are today offering smaller units of space (even as small as 500-1000 square feet) in Grade A buildings. This is in sharp contrast to the scenario a few years back, where only much larger units were available. With banks and institutional lenders becoming more cautious about lending to the commercial real estate sector, demand for capital from private equity and NBFC funding has increased” he said.

India has dropped to 19th place for its fourth quarter rental value expectations. This drop of 6 places was caused by available space rising at a much higher rate than the demand for the space.

Source: property-report.com/

Property Prices in India Continue to Rise, but Is the Market Overheated?

There are construction sites everywhere, especially in the new-age design townships of Noida and Gurgaon, but many are nowhere near completion as cash-strapped developers such as DLF seek to offload assets in an effort to improve cash flow.

It’s no secret that many builders are in a bit of a fix, but in spite of this real estate prices are not dropping significantly. According to a report in Money Life, a 1000 ft.² flat in Mumbai costs Rs98 lakh, which equates to more than Rs9,716 per square foot. Areas such as Noida have been hard hit by land scams, resulting in the majority of deals which have taken place over the last year and a half coming under close scrutiny. The supply has increased from 5 million square feet to an incredible 105 million ft.², but nobody is buying, and some experts now expect a sharp correction in prices.

The latest data shows builders in Mumbai have sold just 8.17 million square feet of property from a huge inventory of 116 million square feet. Other cities such as Hyderabad and Pune have had slightly better sales, and after all, Mumbai is one of the costliest places in the country. If property continues to sell at its current rate, Mumbai has an inventory of 40 months as it is currently showing a 22% year-on-year increase, while receipts for money received from sales show a 13% year-on-year decline. Delhi is faring even worse, as even though property in the city is much cheaper than Mumbai the value of real estate being sold is low.

While most of the cities in India are overpriced, Pune is proving to be slightly different as it is one of the least overheated and properties here are relatively reasonably priced, with sales figures being the highest out of the six major cities in India. An average flat costs Rs48lakh. Hyderabad and Chennai are also faring relatively well, and Hyderabad is still seen as being a good investment as flats tend to be larger than average.

In general sales volumes have been poor this year which might lead to expectations of falling property prices. At the moment this isn’t happening, but rising unemployment may eventually force the hand of developers seeking higher sales figures.

Source: http://realtybiznews.com/

No Diwali Joy's for Indian Realtors

The period around Diwali is usually the best sales time for Indian Realtors. But this festive season, volatile markets, double digit interest rates and poor consumer confidence in a slowing economy – has hit sales volumes, portending hard times for India’s real estate sector.

Sale 25-30% Drop

Some brokers and market experts are bracing themselves for a 25-30% drop in transaction volumes in India’s top 6 cities urging the October-December busy season, which, if it happens, could trigger a competitive spiral of discounting to get rid of mounting inventories and restore depleted cash levels.

But builders are holding on to price levels while buyers, reluctant to book flats at current price levels and interest rates firmly in double digits, remain convinced that it’s only a matter of time before the penny drops. Which side will blink first is still not certain, even though some builders concede all is not hunky dory.

NAME OF CITIES	INVENTORY		SALES
	Oct – Dec,2009	Oct – Dec, 2010	Oct – Dec, 2009	Oct – Dec, 2010
Mumbai Metropolitan Region - MMR	68.74	98.88	13.27	10.61
Pune	36.18	36.14	12.48	9.66
Hyderabad	54.56	47.78	6.60	5.07
National Capital Region - NCR	103.39	170.51	23.11	20.03
Bangalore	57.77	56.19	8.09	6.49
Chennai	22.66	31.69	3.23	5.04
Total	343.31	441.19S	66.79	56.90

Source: Liases Foras Real Estate Rating & Research

With high inflation eating away at their earnings and financing costs high, buyers are looking for a significant correction in property prices rather than some festive season freebies.

Builders Accept Reality..!

According to Mr. Pankaj Kapoor, MD of Liases Foras Real Estate Rating & Research, “Builders need to accept reality. This acceptance will lead to price correction and revival in volume. The drop in sales volumes to steep property prices, rising interest rates and poor supply of so-called “affordable housing” projects.

Mr. Samarjit Singh of Agni Property, a property brokerage said, “Usually, during the festive season, prices firm up and there are new launches as well. But this season, both the inventory and prices of residential properties have remained static.

The National Capital Region (NCR) comprising the satellite towns of Noida, Gurgaon and Faridabad bordering Delhi, which turned in good sales numbers in the past two years, is facing supply constraints.

This is particularly true for Noida, which has seen a slew of regulatory actions prompted by farmers’ agitation over land acquisition.

Mr. Anil Kumar, chief executive, Ansal API said, “As far as sale of plotted land and mid-income housing is concerned, demand is intact in NCR and good sales traction is expected during this season. However, sales may take a hit wherever there are issues of land title.”

Source: http://www.myreality.in/2011/10/no-diwali-joys-for-indian-realtors.html