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Indian realty an underrated gold mine

Our expert believes that the institutional reforms introduced will go a long way towards reviving the sector and taking it to greater heights.

After nearly a decade long era crippled with economic and political uncertainty, the global economy has stabilised and is showing healthy signs of recuperation. A reflection of the resurrected economic environment came across in the International Monetary Fund’s latest World Economic Outlook (WEO). The projections indicate that the global GDP would grow above 3.5 percent per annum over the next five years.

India: Resurgence of the gem of emerging markets

Post the financial crisis in 2008, developing countries like Brazil, Russia, India, China and South Africa (BRICS) among others played a crucial role in driving the global economy forward. But over a period of time, unaddressed structural problems coupled with high currency volatility in these markets forced investors to move their money back to developed markets. While Brazil, Russia and South Africa were seriously affected by collapse in commodity prices and political instability, policy paralysis and worsening fiscal metrics crippled India’s growth story. But the tables have turned. With a stable government having comfortable majority in the parliament, the confidence has returned. India has now become one of the fastest growing economies in the world and would retain that status for the foreseeable future. India is projected to grow at the rate of more than seven percent, according to the IMF’s world economic outlook forecast. Its economic robustness is also substantiated by the performance of its currency. In addition to the improving macros, a slew of policy reforms taking place in the country have wooed foreign investors back to its shores too. The new government has implemented several reforms to streamline and formalise the economy across all sectors. The recent roll-out of the Goods and Services Tax (GST) could be the cornerstone in this endeavour too. The strong fundamentals, robust economic growth, political stability, controlled inflation and the lower interest rate regime have improved India’s chances of a sovereign ratings upgrade within the next two-years.

Indian real estate: A new paradigm on anvil

Real estate has been a key driver for the economy. However, poor transparency in the sector and dwindling consumer confidence had put the industry under strain in the past three to four years. The recent introduction of the Real Estate (Regulation and Development) Act, 2016 has pumped in a new lease of life into the sector. This is expected to weed out unorganised players from the industry and whip up buyer’s confidence, thus bringing buoyancy back into the sector. The subsequent stride in re-engineering momentum back into the sector was the government’s push towards ‘affordable housing’. By giving it infrastructure status, the government would attract private developers towards these projects. At the same time, home loan sops and interest subsidies under the Pradhan Mantri Awas Yojna would fire up the demand for these homes. These reforms will go a long way in enticing the institutional investors to invest in this sector.

Are investors responding?

The government’s emphasis on housing and its efforts to mitigate the risks in the real estate sector by introduction of RERA has not gone unnoticed by foreign institutional investors and also the sovereign and pension funds. A large number of these investors and funds has made changes to the portfolio allocation strategy allowing investment exposure to Indian real estate. The pension and private equity funds are investing in commercial assets (office spaces and malls) and also in under-construction residential properties. Not only foreign investors, but also domestic investors are raising funds to invest in this sector. Therefore, the future only looks optimistic.

Times Property, The Times of India, Mumbai

Realty PE spend to hit $100 b by 2026

Mumbai: With India emerging as an attractive investment destination, private equity inflow in real estate is likely to reach $100 billion (nearly Rs 6,37,772.5 crore) by 2026, a recent survey says.

According to Deccan Herald in the next 10 years, private equity inflow in the sector is likely to grow at 10% CAGR to $100 billion by 2026, with Tier-I and II cities being the prime beneficiaries of it. In the past 12 years (2006-2017) India has seen investments of $42 billion (nearly Rs 2,67,864.5 crore), while the next 10 years (2017-2026) is expected to see inflows to the tune of $58 billion (nearly Rs 3,69,908 crore), the report said.

“India’s attractiveness as a global investment destination has been steadily rising. We have seen numerous measures that have created a positive economic environment, bringing in key factors like transparency, accountability and ease of entry into various sectors in India. This gives India a fillip in attracting capital,” .

These initiatives would be the key factor for private equity to bet big on the sector in future. “We will see the flood gates open the time REITs are listed in the market. This would give the developers an option to exit or convert their holdings in to tradable stocks, through income generating assets. Further, with the current size of the economy and its steady growth with GDP pegged over 7% Year-on-Year for the next 35 years,”

Private equity inflows for the last three years in office and IT/ITES have risen by 150%.

Only 12k responses to BDA master plan

The Bangalore Development Authority (BDA) received only 12,569 responses from Bengalureans pertaining to the provisional master plan-2031.

The BDA had called for applications on November 25, 2017. Up till December, BDA received only 3,000 responses. The responses started to increase as the deadline came close. On the last day (Tuesday) BDA received 4,500 responses.

The BDA Town Planner, Thippeswamy N K, said
that these included the hand-delivered responses and e-mails. Those sending their responses by e-mail have time until midnight. Thus BDA is hoping that the number will increase.

Until Monday (January 22), the BDA had received 8,069 responses of which 3,062 were filed on Monday alone.

Thippeswamy said that the number of responses was fewer than expected. During the 2015 master plan, the BDA had received 9,000 responses. Despite the rise in population and greater awareness, the responses this time have been only marginally higher.

Looking at the rush at the BDA counters, officials had expected the numbers to be high. A majority of them had only come to gather details of the master plan, said a BDA official from Banashankari BDA office where the master plan was displayed.

‘Not everyone affected’

However, the Bengaluru Development Minister, K J George said that the responses should not be compared to the city’s population. The master plan does not affect everybody and only those who are affected or who seek clarification have responded. People should not conclude that BDA has not informed citizens or that many were unaware and the time given was less, he said.

Around 45% Prospective Home Buyers Looking To Buy After RERA’

Bengaluru: The Real Estate Regulatory Act (RERA) has acted as a great confidence booster for prospective buyers, around 45 per cent of whom are now looking to purchase homes in the first quarter of 2018,

“Around 45 per cent of prospective buyers are looking to purchase homes in first quarter of 2018 following the great confidence boost RERA has given them. This is a positive outlook for real estate,” he told PTI at an event organised by the company here. RERA has brought in greater transparency, timely project delivery and organised development and has acted as a confidence booster for prospective buyers.

“It has accelerated the construction process and reduced overall costs for consumers by providing attractive discounts and innovative pricing schemes.granting of infrastructure status to affordable housing projects by the center in 2017 resulted in a 27 per cent increase in supply of newly constructed affordable homes in the first three quarters of the same year to some 26,000 units

He also said the consumer survey sentiment is clearly dominated by preferred budget range below Rs 50 lakh price as more than 70 per cent buyers are looking for properties in the affordable range.

“Bengaluru and Mumbai are showing signs of a healthy mix amongst the rest with as much as 14 per cent buyers going for the more than Rs one crore ticket price for homes

He also said more than 70 per cent of buyers prefer home loans as the primary and easiest finance medium over other options.

“In addition, inflation rates appear to have stabilised and lending rates have started to come down,” he added.

With innovative pricing schemes like possession-linked payment plans and subsidy schemes, buyers are also considering self-finance as their second-most preferred option with 20 per cent potential buyers in Chennai and Kolkata, Kumar said.

Affordable housing and stable property prices have slashed unreasonable ticket prices and made self-financing prospect look brighter, he added.

'Around 45% prospective home buyers looking to buy after RERA'

Doomsday For Lakeside Homes

Ulsoor Lake area is one of the prime neighbourhoods with high property rates. In the proposed buffer corridor of 75 m around Ulsoor Lake, there are 158 properties and sadly, they will be devalued in future. Cut to Bengaluru West. Around the 135-year-old Sankey Lake, there are 116 buildings on the buffer that cannot go in for re-development and resale would be a difficult deal.

For, if you own a property in the 88 sq km of buffer zone as notified in the Revised Masterplan 2031 — anywhere on the 75-metre buffer around lakes and drains — expect a shocker coming your way. Such properties will have to continue as it’s — without any scope for redevelopment — as authorities will not sanction revised development plan in the buffer zone.

Even as the deadline for filing suggestions/objections to RMP is round the corner (January 23), it doesn’t look like Bengalureans have realised what is in store for them. At least those living in the vicinity of a lake, a valley and a secondary drain.

This means, RMP 2031 has brought the value of properties in these buffer corridors to near zero. The 88 sq km of buffer zone translates into a staggering 21,000-odd acres — properties on this huge extent of land will lose its value. And government acquiring such properties by paying compensation as per market value doesn’t sound workable in the current scenario.

According to a property analysis done by residents’ group, Ulsoor Lake, spread over 123 acres, has 60.34 acres falling under the buffer zone. There are 158 buildings in the buffer corridor with an estimated population of 13,700. The 37-acre Sankey Tank has 116 properties, home to 1,044 people. In these areas, the realty market value is anywhere between 10,000/sqft and Rs 15,000/sqft.

Take this simple case: Imagine a 2,400 sqft property in any of these areas located in the buffer ring. The building owner cannot plan a redevelopment or a joint development with a builder. S/he will not get the revised building plan sanction from BBMP, citing the buffer zone order.

Urban affairs analyst V Ravichandar, also a member of BBMP restructuring committee, has some questions about the proposed 88 sq km buffer: What extent of it is built up? What is the plan for these built-up areas? If it is to remain as it’s and no future permission for redevelopment will ever be given (as is the situation currently), it runs the risk of owners neglecting these properties since there is no resale value. A similar thing happened on a large scale in South Bombay due to the Rent Control Act. Say, if 50 sq km of the 88 sq km buffer zone is already built up, what does the government plan to do?

Experts Seek Roadmap

“Paying for it through acquisition will be prohibitively expensive and unlikely to happen. How does one resolve this conundrum? It’s nobody’s case that we need to violate sound ecological principles in Bangalore, but we need a roadmap to fix it appropriately,’’ he said.

Buffer zones around lakes/drains have been a major point of concern for developers and landowners of Bengaluru. In fact, even before the RMP 2031, half a decade back, most of the lake-facing buildings were sold with a premium tag providing superior views. They are facing regulatory issues owing to new regulations, says Shrinivas Rao, CEO- Asia Pacific, Vestian Global Workspace Services.

“Smaller land parcels may be affected more. Whether there is a retrospective effect on under construction and already constructed projects, it remains to be seen,” he added.

The Buffer Zone Order

Toeing the National Green Tribunal’s last year order, the RMP 2031 notified that in case of lakes, 75 metre from the periphery of all water bodies to be maintained as green belt and buffer zone; 50 metre from the edge of the primary raja kaluve and 35 metre from the edges of secondary drains. The NGT has also ordered that this buffer/ green zone would be treated as no construction zones and RMP 2031 zonal regulations have taken into account NGT’s directions.

Move Curtails Bengaluru’s Growth: State in SC

“In a rapidly growing city like Bengaluru, such huge buffer zones around lakes and drains area are not at all required to be kept. There is acute shortage of land in Bangalore and if such buffer space is kept, it is impossible for the common man to have housing or work space. The land price is skyrocketing and with the buffer zone of such magnitude, it would virtually take away the ability of the city to grow. Small site owners will not be able to build a house.”

BUFFER IN OTHER CITIES

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