One lakh apartments may remain vacant in Bangalore by April

BANGALORE: Is Bangalore’s real estate market heading for a slump? Such is the impact of the real estate slowdown in Bangalore that the number of unoccupied apartments in and around the city is expected to touch nearly one lakh by April.

Citing the outcome of an “informal survey,” Inspector-General of Registration and Commissioner of Stamps H. Shashidhar told a workshop organised here on Tuesday by the Building and Other Construction Workers’ Welfare Board that these indeed were the current market trends.

Later, speaking to The Hindu, he said that the figure included both old and new apartments, i.e., those that had not been sold, those that had not been rented out and those now under construction. Mr. Shashidhar said that registrations of property in the State had reduced by 45 to 50 per cent, partially due to the ban on registration of revenue sites.
Infrastructure

Lack of infrastructure such as proper roads, drinking water supply and availability of schools had also contributed to the slowdown in property transactions. Moreover, people had become cautious while buying property and choosing only those which had clear titles.

It appears that only genuine users were buying the properties now while speculative investors were keeping themselves away from property transactions, he said.

Feroze Abdullah, realtor and proprietor of Feroze Estates, confirmed the slump in the sales of apartments, particularly on the outskirts of Bangalore in areas such as Whitefield and Marathahalli, over the last three months. He said his own business had seen a 50 per cent drop during this period. “There is more supply than demand. Prices in the last three years have risen unnaturally and the market is now seeing a levelling. But in the central districts, the prices are still high.”

Unrealistic prices, poor infrastructure and traffic problems had also contributed to the slump in sales of apartments, Mr. Feroz said. However, the builders have not reduced the prices of apartments hoping that they may pick up once the new airport commences its operations.

President of Karnataka Ownership Promoters Association A. Balakrishna Hegde maintained that the industry was expected to grow at a rate of 15 per cent this year and refuted any suggestion of a slump.

The upward revision of guidance value for property in Bangalore has deterred a number of apartment buyers from registering their property as the revision has increased the stamp duty burden. Over 50,000 housing units would be added this year in Bangalore, he said.

C.J. Roy, general secretary of Karnataka Township Developers Association, said that the real estate market had not gone down overall, though there was a small slump in prized locations

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Pune's high-end realty market gets red hot

PUNE: “It’s plain economics,” says Pradeep Kataria, a Pune-based chartered accountant who owns a flat in the upscale Modi Baug area of the city. “There is a shortage of flats in this area, so what I and some of my neighbours bought four years ago for about Rs 45 lakh is now being quoted at more than Rs 4 crore.” Mr Kataria is talking about the price for premium flats in Pune, a city once famous as a destination for pensioners with limited incomes.

Pune’s real estate market is growing sharply. There is a shortage of flats at the higher end of the price spectrum and, yes, price is not a barrier any more. A couple of years ago, when a developer breached the Rs 1-crore mark, it was regarded as a one-off event. Now, these premium flats get sold as soon as a project is announced. In fact, even Rs 4 crore is passe in the segment; prices being quoted now are around Rs 11 crore.

This trend is in line with that seen in the premium segment in other fast-growing cities, such as Delhi, Mumbai, Hyderabad and Bangalore. “There is an under supply of really high-end properties in Pune, which is why we sell the moment we announce a project, before any work begins,” said Vishwajeet Jhavar of Marvel Developers.

These high-end flats come with their own swimming pools, jaccuzis, etc. The target buyer is the 25-35-year-old professional, either returning from abroad or someone who has cashed in on the stock exchange boom. “Rs 1 crore is not a big amount anymore as earning capacities have gone up and lifestyles have changed,” said R Vasudevan, managing director, Vascon Engineers.

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Jilted real estate sector looks forward to RBI rate cut

The real estate sector that has been rocking in recent times, is now in news for the wrong sentiment. The Reserve Bank of India’s decision, not to cut interest rates has shattered the dreams of real estate companies that are already facing the brunt of a housing industry slowdown. The high cost of mortgage financing is stifling the sector.

RBI decision to keep interest rates unchanged in its third-quarter monetary policy review has left some developers and investors alarmed. A larger chunk of real estate companies was expecting a cut, especially in the backdrop of slowing home sales in major cities in the past few months.

Developers, however, differ regarding the depth and reach of RBI’s move. “The slowdown in transactions in residential sector is seen majorly in metros where the prices had gone fairly high. The small cities i.e. Tier II & Tier III cities, are not seriously affected by the bank rates, as the demand in the cities is much higher than the metros,” says Sanjay Mathur, Head Marketing of Pearls Infrastructure Projects Ltd

Interestingly, Avnesh Sood, Director, Eros Intercontinental, has a completely different take on this. “Slowdown is far from the metro cities. This is being seen more in non-metro cities. Speculation is minimal in metros as there are genuine end-users. In smaller towns, small and medium developers have already resorted to price correction but they cannot go any further on corrections due to their scale of operations”.

There is no doubt that the residential segment is seeing a fall in sales and a price correction. But large developers with good cash reserves, will not resort to price correction. It is the suburban & non-metro locations that are facing a slowdown. Unchanged rates will trigger another round of correction and developers will have to come up with innovative schemes like “Book now & pay later on possession” etc.

But opinions differ. “A severe price correction is still far off and may not happen at all. Demand is not exactly non-existent. As developers, we are quite optimistic that rate changes in the future will trigger increased sales activity and there will be decent growth between 2008-2010, as endusers continue to pickup property,” adds Sood.

The way forwards would probably be to focus on the affordable quality housing segment for the lower middle class, in the next 2 years. Developers and government bodies should join hands to focus on devising ways to increase the supply of middle income group housing.

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Realty companies dole out sops to woo buyers

Economic times reports
NEW DELHI: Call it a silver lining in the bearish market. Your dream home may become cheaper than it appeared earlier. With buying activity at a low in the residential market, realty developers are introducing scheme like EMI holidays (between booking and possession of property) to spur demand. Players such as BPTP, Era Landmarks, Parsvnath Developers, Pearls Infrastructure and Vipul have declared incentives to woo buyers.

Recently, a slowdown in property transactions and a correction in prices have been witnessed due to high interest rates and escalating land costs. “It’s time to be more realistic after having enjoyed all the optimism in the past. Incentives to attract buyers in this segment is definitely needed now,” Eros Group director, Avneesh Sood said.

Vipul’s vice president (sales & marketing), Brijesh Bhanote supports the argument. “The schemes are definitely a result of the negative market sentiment,” he said. The company will soon come up with a subvention scheme in which it will bear part of the cost of interest on customers’ loan.


Parsvnath Developers is offering a scheme at Parsvnath City in Sonepat where a buyer can just pay 15% of the amount and relax till the residential apartment is completed. No EMI will be sought till possession. A similar scheme has also been initiated by realty player BPTP — the customer needs to pay only 15% of the basic sale price and no EMI for the next two years. The company will pay interest to the bank during this period. Says managing director of BPTP, Kabul Chawla, “Such offers are in demand now. These schemes have met with an encouraging response from our buyers.”

Points out Omaxe vice president (marketing), Vineet Nanda: “It’s not exactly slowdown; most of the real estate developers are offering subvention schemes as the focus is shifting from investorbased customer to the end user.” Omaxe does not have any such scheme at present but might offer a subvention scheme in the near future.

There are other offers as well. Era Landmarks is offering a combination of schemes such as assured returns on investments, fully furnished homes, priority location for second booking and discount in other Era group projects. On the other hand, Pearls Infrastructure is offering a marginal discount to buyers and also special rates in bulk booking to its corporate clients. Pearls Infrastructure’s marketing head, Sanjay Mathur admits that the low market sentiments has been one of the reasons to introduce such schemes.

Going forward, one can expect more schemes and incentives from the realty groups due to the emergence of newer players in the market. Anshuman Magazine, chairman and managing director of global real estate consultancy CB Richard Ellis, aptly sums it up: “There will be adjustments in the times to come. Growing competition in the sector will ensure price correction as buyers will have more options.”

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IPO market deflates as 2 major IPO's withdraw

New Delhi: Real estate major Emaar MGF on Friday decided to withdraw its initial public offering as the issue could not get fully subscribed.
“The decision has been taken due to prevailing adverse market condition...although the QIB and HNI portions of the IPO were fully subscribed and the overall book was closed to 90%,” the company said in a statement.
Emaar MGF, the joint venture between Dubai-based Emaar and India’s MGF Development, has said that it would consider IPO at an appropriate time.
“Given the prevailing sentiments in the capital markets, it was unclear how well the stock would trade post-listing. It has been considered wiser to revisit the market only when the demand and sentiment are stable and better providing greater value to investors”, it said.
Delhi-based Emaar MGF said that the company remains committed to executing its projects on hand and is well funded to ensure that the delay in IPO would not hamper its growth plans.
The company expects to return to the market at a later date when sentiment and liquidity conditions are better.
Emaar MGF entered the capital market on February one with an IPO of 10.25 crore equity shares of Rs10 each to be determined through a 100% book building.
The issue was scheduled to close on February six. The company had initially fixed the price band at Rs610-690, which later on was brought down to Rs540-630.
The company further slashed its lower band to Rs530 per share and extended the period of public offer till 11 February. The issue was originally scheduled to close on 6 February.
Emaar MGF is present in 26 cities in India and has 13,000 acre of land bank. The company plans to develop 566 million sq ft during the next nine years, of which 455 million sq ft is residential, 90 million sq ft commercial and 18 million sq ft for retail.

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Stock market correction triggers property downturn

Pune, February 2 The recent stock market meltdown has fuelled speculation of a slowdown in the city real estate because of a perceived liquidity crunch. Real estate consultants say cancellations, if they happen, would occur in the investor and speculator segment of the real estate market that comprise 20 per cent of buyers in the city.

“Some cancellations have already begun. After the stock market fell, a private developer reported five cancellations on NIBM road from clients who had lost money in the market,” said Ravi Varma, president of the Estate agents association of Pune (EAAP).

“Typically, profits booked in the markets are invested in real estate. However, builders are least likely to own up to cancellations, as it will further affect their stocks, if they are listed. Developers think that they can talk up the market,” he said. Varma added, however, that cancellations due to stock crash are very small and not likely to exceed two to three per cent of the real estate market.

Last week’s crash from around 22,000 points to around 18, 000 on Friday was responsible for wiping out nearly Rs 2 lakh crore, Rs 1.5 lakh crore of which was lost on the first day.

Deepak Kunjeer was one real estate consultant who admitted that the land market was headed towards a slump. “In the past two to three months, the sales have come down by half. This is especially true of areas like Kharadi, Wagholi, Kondhwa and Hadapsar. The same plots have been on sale for the last few months. Properties have not been moving or changing hands,” he said.

Kunjeer said the pre-budget months were normally slow and coupled with a global slowdown in the offing, a cascading effect is likely in six months’ time. “There is a 99 per cent chance of a correction happening unless there is something miraculous in store in the budget with major policy decisions in infrastructure and power sectors or in the case of allowing FDI funds,” he said.

However, most city developers dismissed the notion of mass real estate cancellations due to the stock market drop saying that they dealt only with “genuine buyers” and did not deal with the speculator community.

Some others said it was too early to say if the stock market effect would spiral down to real estate stagnation. “The effect, if any, will take at least three months to be visible in the market. Even if investors have lost money, their first reaction is rarely to cancel their real estate purchase,” said Manish Jain, Kumar Properties.

This trend is likely only in the high-end segment and not the middle class, or the working class who do not have a “risk taking appetite”. Irrespective of the sensex, the last three months have been slow and real estate consultants agree that prices have been on the upswing without any perceived value addition. This coupled with the pre-budget jitters and the law of averages makes a slump inevitable, they said.

The last real estate stagnation took place in 1996, which lasted for almost five years. In the ensuing boom, the last three years has seen real estate prices more than triple. The complementing growth in the economy, especially the IT players and now recently the manufacturing sector, encouraged developers to cater more to the high end segment.

“But now developers are resorting to raising prices arbitrarily. In the last two months, projects across the city have seen prices rise by Rs 500 per sq ft for no reason. Effectively, this puts a lot of property out of reach for the middle class segment,” said Mukesh Charbhe, real estate agent working in NIBM are Sopan Baug areas.

“Compared to December, January has been a slow month. There is definitely a 25 per cent reduction in sales. But there should be a correction as prices have been increasing randomly without justifying a rise,” he said.

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Another hypester on CNBC

It seems like this gentleman has a vested interest in some Mumbai real estate companies. If you look around Mumbai there are hundreds of towers under construction with most of them not being sold. These hired guns are responsible for hyping the market without any fundamentals. As for Chennai and other cities prices are still around 3-5k per sq/ft. In Mumbai we are taking of 8k+ on average. If other cities dont have purchasing power, how come Mumbai is different. Apart from the business community Mumbai is full of lower income neighborhoods. All you need to do is take the train and look at the mass number of people 10-15% of whom can afford the high prices. For the rest its life as usual in lower quality homes and shanties. Its high time these hype creating analysts are bought down to earth


Speaking to CNBC-TV18, Nalin Kumar of JM Financial said that markets like Mumbai will continue to see an upward bias in pricing. He added that tier III cities and Chennai will see price correction.

Excerpts from the exclusive interview with Nalin Kumar:

Q: We been speaking to the industry majors at large over the last couple of days and the overall sense is that with interest rates peaking off, prices could actually remain stable to slightly see a negative buys? Is that something that you concur with?

A: I largely concur with that it is more a function of the markets; some markets will see a negative in price and there are some markets, which will actually stay stable and certain markets like Bombay actually may continue to witness upward buyers.

Q: The more important in shadow on the Bombay realistic market could come from the Bombay Stock Exchange markets, the fact that they have sagged a bit and at least about 15-20% of their highs and it is not improbable that they could go down again. In such a scenario do you think that there could repercussions even in hot markets like Bombay?

A: I think Bombay is largely driven by the fact that there isn’t adequate supply at each level in the market. So Bombay will still do well. Having said that, if the stock market continues to remain weak or stagnating, people may use profits from one market to offset losses from another markets and that could have an impact on the real estate prices. But it really requires a sustained two-three month downtrend for this to happen. It won’t happen if markets are down and are weak and then come right backup.

Q: Could you give us some of the cities that you see a price correction in and consequently even a price appreciation in metros or in B or C cities?



A: In my opinion, Tier III cities will see the fastest decline in prices once real estate starts correcting. In terms of other cities, which have run-up fairly and rapidly, we have Chennai which is run-up fairly, quickly and that could see a correction. In north, NCR region has a lot of supply coming on and that could see a correction, of course the Tier II, Tier III cities like Chandigarh etc. have equal levels of pressure coming on them.



Q: What are the reasons that you expect corrections? Is it an oversupply issue? Why do you think the real estate market is headed for a correction in certain quarters?



A: There are multiple factors again which would bring the real estate markets to the correct levels. First of all and the most important in my mind is what the pricing is for the end user and many of these properties are now getting out of reach of the end user that it was designed for. So if we leave out the extremely premium end of properties, I think many of them which may have earlier being priced at a Rs 50 lakh price range are now worth a crore and so the end user kind of moves away and he can’t buy.



The second thing is there is too much investment into land, there is a lot of construction that is proposed to come up and once the supply eventually hits the market, you will see a significant stabilization in prices.

Q: One last word on this spate of IPOs that are starting to reemerge in the real estate segments specifically with regard to Emaar that they have to revise its price band to a little lower. Do you think some of these companies may be coming out of aggressive valuations at this point of time given the kind of momentum that the stocks have actually seen?

A: My sense is that eventually the market will find the right price point for capital raising exercises. Now the fact that a lot of real estate companies are looking to raise capital is reflective of the fact that they need to have cash on their balancesheets because hard times maybe ahead. They may have looked at aggressive valuations and the market has not been happy with those valuations and therefore they are coming back with valuations, which are slightly lower than what they had ideally been hoping for achieving.

Q: Do you think real estate prices in Bombay will stabilize or inch up?

A: I think the supply in Bombay is low and visible supply for the next 12-months continues to remain low and I feel that prices will stay static to rise upwards. I think it’s difficult for Bombay to drop dramatically.

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