Softening in credit policy useful for realty investors

The recent move by the Reserve Bank of India (RBI) in its annual Credit Policy has given some hope for investors within the reasonable housing phase. this can be being seen as a positive development for the property market. whereas investors stay cautious and watch for banks to announce the lowering of interest rates, realtors are optimistic of the state of affairs, however, hoping that inflation remains underneath check.

“While the speed cut of fifty basis points is unquestionably a ray of hope, it doesn't dispel the shadows nearly the maximum amount as is also initially supposed. It ought to be borne in mind that the Reserve Bank of India (RBI) has hiked interest rates thirteen times between March 2010 and October 2011,” says Om Ahuja, CEO – Residential Services, Jones Lang LaSalle India.

“While this can be understandable, given the continuing issues over inflation and liquidity within the market, the spate of rate hikes has created a compounded drawback for the residential land sector. The series of hikes within the past have conjointly affected the worth that builders placed on their properties, since their own prices of borrowing have increased. it's unlikely that property costs can return down thanks to this rate cut. In fact, it's terribly doubtless that there'll be an upward bias on property rates thanks to the anticipated improvement in sentiments of consumers who have thus far been sitting on the fence, looking forward to some signals of relief,” adds Ahuja.

Shrinivas Rao, CEO, Vestian world Workplace Solutions says the reduction in repo rate can boost economic growth and improve business sentiments that in flip can strengthen shopping for activity. However, the impact can vary across sectors looking on implementation of the cut by leading banks. “Leading lenders are doubtless to chop interest rates on deposits and loans. Home loans are doubtless to show cheaper. as an example, a twenty five basis purpose cut may lower home loan EMIs by Rs sixteen per Rs one lakh. A cut within the repo rate {will also|also can|will} cut back the interest on industrial loans that in flip will favour developers to avail cheaper loans, thereby providing traction to land activity. Cheaper loan rates are expected to draw in additional end-users, impacting the residential sales absolutely,” he says.

With banks giving loans at cheaper rates, developers are doubtless to like the bank loans as against non-public equity funds. However, a rise in market demand within the short term can drive capital values, thereby benefitting retail investors, adds Rao.

Work to resume at Noida Extension

Encouraged by positive indications from the NCR designing Board to travel ahead with the Master arrange 2021, the bigger Noida authority is going to re-schedule developmental work in and around Noida Extension.

There is additionally a transparent indication from the Allahabad high court on a review petition filed by the bigger Noida authority. So, you will currently breathe simple this dream house of yours. The uncertainty over completion of comes launched in Noida Extension seems to be lifting.

If the trend of those positive developments continues, developers and builders will restart construction work this month itself. they need been watching for this moment since the Allahabad high court verdict over the land row. Sources say that the Master arrange 2021 of bigger Noida has virtually been cleared and is awaiting a proper announcement of the sub-regional cell, Uttar Pradesh.

Anil Sharma, the vice chairman of Credai and therefore the chairman and managing director of Amrapali cluster, says: “This may be a relief for builders and developers whose comes are delayed since the dispute erupted over land acquisitions. when the Supreme Court verdict, that quashed the land acquisition of Shahberi, variety of comes were in limbo.”

In a writ petition range, Ramesh Kumar Bhagchandka versus UP and others, it's been said that the Master arrange 2021 doesn't have any approval of the NCR designing Board, that may be a statutory body constituted below the an act of 1985. in line with the act, a thought should 1st be ready and if necessary land acquisition would be done.

In the gift case of Noida Extension, the acquisition proceedings are undertaken and thereafter the land was sought to be utilised by allotment to builders for raising construction that go contrary to the arrange. below these circumstances, the petition says the proposed acquisition is against the law be put aside. during this context, the Allahabad high court has directed the bigger Noida authority to get clearance from the NCR designing Board for its master arrange, and then go ahead with the event method.

Experts say there's no provision for approval of the master arrange ready by the event authority from the NCR designing Board. the availability is barely for sub-regional plan; the Master arrange of 2021 was sent to the NCR designing Board for approval in 2006 and 2009, though.

According to the principles, the NCR designing Board will raise objections to the arrange at intervals sixty days from the time the arrange was submitted to them by the event authority. when the expiry of this era, it can not be challenged. it had been so that the bigger Noida authority urged the Allahabad high court for review of the choice over the master arrange.

The bigger Noida authority has currently clubbed its Master arrange 2021 with the newly written Master arrange 2031 and sent it to the Housing and concrete designing Department, Lucknow, for approval, to avoid the same scenario in future.

The Housing and concrete designing Department is getting ready sub-regional plans for development authorities like Yamuna, Noida-Greater Noida and Ghaziabad Authority. The sub-regional plans of Noida and bigger Noida have virtually been cleared.

 Impact of court’s verdict

After the court verdict that awarded sixty four.7% further quantity and 100% of the developed plot as compensation to farmers, Noida and bigger Noida authorities are issuing notices to any or all the developers and builders whose comes return below the disputed areas.

In line with the court verdict, the Noida authority has got to disburse Rs one,100 crore additional to the farmers, as compensation. The Noida authority has determined to depart this world five hundredth of this burden to the builders. Besides, facing serious money crunch, an additional burden of Rs nine,500 crore together with price of developed plots, the bigger Noida authority is already within the method of collecting cash at the speed of Rs two,015 per sq metre from builders and Rs one,465 per sq metre from individual residential plot allottees of Noida Extension. an additional Rs 550 per sq metre also will be charged from instructional and institutional allottees.

Noida Extension, over 3,000 hectares, contains Sectors one, 2, three and Ecotech thirteen. The bigger Noida authority allotted land to over 3 dozen builders like Amrapali, Supertech, Nirala, Eros, Antriksh, Earth, Ajnara, Gaursons, etc, at rates that ranged between Rs ten,000 and Rs eleven,600 per sq metre through open tenders. additionally, a complete of four,250 residential plots were allotted through lucky draw at the speed of Rs ten,500 per sq metre.

Builders are going to increase costs during this space at the speed of Rs five hundred per sq ft, to soak up the increased burden. Chetena Sharma, a buyer at Noida Extension, says: “The call to levy an additional charge can hit the property market. it'll not be cheap for middle-class salaried folks. For the common middle category, a house can stay a dream.”

Rakesh Yadav, the managing director of Antriksh cluster, says: “Undoubtedly, property in Noida Extension, that was earlier known for its cheap rates, can currently be costlier. we have a tendency to are absolute to revise costs as a result of this further burden including increasing value of raw materials.”

RBI interest rate cut positive for housing sector

For the first time in three years, Reserve Bank of India (RBI) has slashed interest rates by 50 basis points to 8%. This move will reduce the home, auto and corporate loan rates. A fall in interest rates of home loans spells relief for the common man who up till now had been postponing the decision to buy property due to increased prices and high inflation.

Anuj Goel, Executive Director of KDP Infrastructure believes that this is a good move from the RBI’s side as this will improve cash flow. “As the housing loan interest rate reduces, it facilitates home seekers to buy house and ultimately it will be beneficial for real estate industry. However, the move will only benefit new borrowers while the existing borrowers will have to grapple with the old rates,” he added.

Banks should allow existing home loan customers to reduce their interest burden by allowing them to re-price their existing loans at lower rates so that borrowers can switch to prevailing floating rates that are at a discount to the prime lending rate, Goel pointed out.

Navin Raheja, President, NAREDCO & CMD, Raheja Developers is happy with the move, saying that home loan EMIs will come down resulting in a boost to residential real estate. “But, the banker’s reaction to maintain the interest rates irrespective of cut in repo rates is a cause of concern because we feel that banks should pass the rate cut to the borrowers enabling them to invest in real estate,” he said.

Sailesh Kumar, Chief Operating Officer, Lotus Infra Projects Pvt. Ltd agreed with the view, saying that keeping in view the upside risk of inflation, the RBI could not afford to cut repo rate for the last couple of years.

“It seems that growth is likely to improve supported by pick up in consumption demand. The RBI has cut the repo rate which is a welcome step for real estate sector as high interest was impacting the demand on one hand and increasing the cost of construction on the other hand increasing the cost of construction,” Kumar added.

Gaurav Mittal, Managing Director, CHD Developers Ltd said that this step is slated to be beneficial for both the buyers as well as the developers who have been struggling with cash crunch in recent times. This significant move would reduce the cost of funds to home buyers as well as developers as it will allow the banks to lower down the interest rates. “This will ensure heightened property demand in the coming times. Removal of the pre-payment penalty clause will spread cheer amongst developers and would ensure fresh loans and hence boosting the market,” he added.

Now that rates are cut, consumer demand is expected to revive and overall sentiment will also improve. It is expected that banks will reduce the home loan interest by 50 basis points which will ultimately perk up the demand and will help developers to dispose off their unsold stock, Kumar added.

Rajesh Goyal, Managing Director (MD), RG Group said that the announcement in the new credit policy to cut interest rate by 50 basis points is a move towards the right direction. It will provide much-needed boost to the sector and a relief to home buyers.

However, Om Ahuja, CEO – Residential Services, JLL India does not consider this cut to be a positive move for the housing sector. It should be borne in mind that the RBI has hiked interest rates a total of 13 times between March 2010 and October 2011. “Given the ongoing concerns over inflation and excessive liquidity on the market, this spate of rate hikes as created a compounded problem for the residential real estate sector whose effects are not easily dispelled. The series of hikes in the past have also affected the price that builders put on their properties, since their own cost of borrowing has increased. It is unlikely that property prices will come down because of this rate cut, and it is the price of properties that is the decisive factor in residential real estate sales,” he said.

Bangalore residential rentals stabilise

With the inventory levels going up across all micro markets, residential rentals are stable except in CBD and select other areas where high-end housing demand is predominantly driven by expatriates in the city. There are others who feel that rental market saw a hike by 20-30 per cent in the last one year before stabilising now.

In CBD areas, rentals are up by 8-10 per cent due to demand exceeding supply. There are realtors who say that the appreciation would be as high as 10-15 per cent due to the growing demand in central areas and the spurt in the influx of expatriates from Europe and US to the city.

The demand for leasing from expatriates is particularly for gated community development projects in proximity to international schools, says Farook Mahmood, CMD of Silverline Realty Pvt Ltd. The location varies depending on the work spot and availability of international schools for children. High end apartments in CBD areas and villas in areas like Whitefield drive demand where the rentals range from Rs 1 lakh to Rs 5 lakh per month.

Apartments in CBD areas command a higher price than other areas. Rentals range from Rs 20,000 to Rs 2 lakh per month for 2 BHK units depending on the location, proximity to landmark areas and amenities offered in the project. Similarly rentals for 3 BHK units range from Rs 45,000 to Rs 2 lakh per month, according to realtors.

A significant development is the expansion of commercial property market which in turn has boosted the demand for housing in the city. Even some of the call centre trainers are coming from abroad, according to realtors. Unlike earlier, the demand from expatriates for housing has gone up in and around the city.

For apartments, rentals are more or less stable except in a few areas where demand exceeds supply levels, says A Siddique Beary, director, Bearys group. Bangalore continued to top the charts with the highest office space absorption last year in the country with 11.53 million sq.ft. along with additional pre commitments of 5 million sq. ft for 2012. The influx of expatriates and the resultant demand for high end housing need not be overstressed further. The impact on high end housing especially from expatriates has resulted in rentals surging by 15-20 per cent in select areas, he adds.

According to Jones Lang LaSalle’s quarterly update, Bangalore market saw the absorption of 4,182 units in 1Q12 against 3,370 units in 4Q11, pushing the absorption rate up from 10.0% in 4Q11 to 11.0% in 1Q12. Unsold stock in the quarter totaled 32,978 units compared to 31,369 units in 4Q11, reflecting a vacancy rate of 51.1% down from 52.4% in 4Q11. This increase in demand was due to buyer sentiment shifting towards purchasing a property rather than paying high rents, as well as the entry of primarily investment buyers from other tier I and II cities.  XZ4UCQYVE5Y2

A total of 25 residential projects were launched across the city’s submarkets in 1Q12, offering 5,791 units in 1Q12 against 3,515 units in 4Q11. Meanwhile, eight residential projects comprising 1,009 units across different sub-markets were withdrawn from active stock as they were completely sold out.

Residential rents rose in 1Q12 due to the influx of people, mainly IT/ITES employees, into the city and are likely to increase further over the remainder of 2012 due to the expected improvement in IT/ITES employment.

Chennai retail mart buoyant

Chennai’s retail sector is gaining momentum with vacancy levels declining from 14.0% in Oct-Dec 2011 quarter to 13.5% in Jan-Mar 2012 quarter. The largest deal was by French Home furnishing retail chain Ebony Gautier, which took around 10,000 sq ft space in Express Avenue mall.

According to Jones Lang LaSalle’s quarterly survey, mall format stores in the CBD were in demand during the latest quarter. Canon Image studio, Gem palace, Lasya, Kryolan, Timex, Eye T world were some of the brands which occupied vacant spaces in Ramee mall during 1Q12.

Ground floor of office buildings continued to attract retailers, during 1Q12, Spectrum Shopper’s leased out around 1,900 sq ft of space in Ambit IT Park, Ambattur industrial estate.

Lack of new mall space helped high streets to gain healthy leasing during the quarter. LG opened two stores, one in Nungambakkam high road and another in Chrompet. Louis Philippe, Van Heusen and Zimson opened shops in Adyar, while Harley Davidson and Apple opened there stores in Nungambakkam. Roshan Lal women’s ethnic wear and Helios opened shops in Shanti colony, Anna Nagar, whereas Reliance Trendz opened its shop in Chrompet.

Supply

No new supply was added in the city during 1Q12. Ten’s square mall coming up in Koyembedu, is ready for fit-outs and expected to come up during 2Q12. This will add around 150,000 sq ft of mall space taking the total supply of mall space close to 3 million sq ft.

No sales transactions have been recorded in the retail malls sector over the past few quarters as new malls in Chennai operate in the lease model.

Due to limited size of the market, Chennai retail segment including high streets deliver high returns on investments, which forces the investors to hold on to their investments.

Outlook

With the Union budget putting more money into the hands of avid shoppers, retailers are bullish about the surge in sales in the coming months.

JLL expects vacancy levels to rise in the next 12 months amidst the supply of more than 2 million sq ft. of mall space. Though vacancy rates are expected to surge, absorption in the new malls are also expected to improve amid flourishing residential and commercial activity in the suburbs.

Rental and capital values are likely to improve in select pockets of suburbs and in prime locations, while they will remain stable in the peripheral areas.

Old TNHB flats to make way for high rises in Chennai

The Tamil Nadu Housing Board is gearing up for a massive redevelopment plan in which 2,238 old rental apartments will be razed at 17 different locations in Chennai. Most of these apartments are located at Nandanam, Saidapet, Foreshore Estate and Kilpauk.

The board will develop 4,691 highrise apartment complexes at these locations at a cost of 680 crore, said housing and urban development minister R Vaithilingam in the assembly on Tuesday. They will be rented out to government servants and public as per TNHB guidelines.

TNHB will also construct 400 rental apartments at Anna Nagar West Extension and Thiruvanmiyur at 60 crore for government servants and general public. The board will also carry out repairs of its old rental apartments at 10 crore.

The minister announced a list of projects to be taken up by the board this year. The board will construct 3,662 multistoreyed residential units in two phases at 812 crore at Sholinganallur. Similar projects will be taken up at Kancheepuram, Thanjavur, Trichy, Madurai and Tirunelveli districts at 43 crore during the current financial year.

The Slum Clearance Board will construct 2,882 tenements at 145 crore at Srirangam, Trichy, Vandavasi, Tuticorin, Ramanathapuram, Orathanadu and Chennai. Under the Rajiv Awas Yojana, 1,404 tenements will be constructed at Athipattu and Ambattur at 108 crore.

BMC to get a year to implement new property tax model

An ordinance to grant the Brihanmumbai Municipal Corporation (BMC) a year to implement the capital value-based property tax regime was introduced in the state legislative council for approval on Tuesday.

The ordinance was approved by the state legislative assembly on Monday evening and is expected to gain a smooth passage in the council as well.

Minister of state for urban development Bhaskar Jadhav sought the ordinance’s approval in the council on Tuesday itself, but a discussion on it was deferred as some members from the Opposition benches,who wanted to participate in the discussion, were not present.

While proposing to grant the BMC a year’s time, the state urban development department made it clear that “there will not be any further extension”.

The government has permitted the BMC to issue provisional bills on the basis of rateable value fixed in 2009-10. The government has also proposed exemptions for offices of all diplomatic and foreign missions in Mumbai for payment of water benefit tax, sewerage benefit tax and tree cess.