Understand property market dynamics

Learn from 2015 to invest in residential real estate during 2016

Year 2015 ended without bringing much cheer to the residential real estate sector, but it certainly will be remembered as the year that formed a solid base for future growth. Some major highlights:

• Relaxation in FDI rules will help more investment to flow in the country with two of the major obstacles removed: Minimum of 20,000 square metres of development, and a minimum capital of $5 million.
• Passage of Real Estate Bill by the Union Cabinet means a more vibrant, efficient and, most of all, more transparent real estate sector that is beneficial to both buyers and developers.
• Recommendations of the seventh Pay Commission to hike the salary of state as well as central government employees by almost 23.6% will have a positive impact on the demand side of residential real estate.
• A growing economy, reducing inflation and a rate cut of 50 basis points by the RBI will result in lower home loan rates.
• The launch of initiatives like Smart Cities, AMRUT and Housing for All by 2022 will create a revolution once they get into action mode. The groundwork is already happening.
• Despite the sector operating below par, it attracted investments of $8 billion or Rs. 53,000 crore. This might become the highest in the preceding seven-year period.

These factors can contribute significantly to the growth of the real estate sector going forward. However, one still needs to be pragmatic while making decisions related to purchase of residential property in 2016.

Points to take into account:

• Owing to the slump in the realty market over the past 2-3 years, there has been a lot of churn in the market in terms of demand and supply alignment. The days of humungous returns are past; returns will be more aligned to actual market forces instead speculation.
• More than ever before, investment decision must be preceded by a thorough due diligence and expert advice. The market will perform differently in different areas, budget ranges, configurations and typologies even if the broader parameters remain the same. The due diligence must involve a detailed background check of the developer and extensive research about the project in terms of whether or not the various statutory permissions have been obtained, its location, etc. If there is the slightest reason for doubt, expert guidance is a must to avoid getting trapped in the wrong project.
• In the case of under-construction projects, establishing a developer's cash flows is more important than anticipating ROI. The recent slump in the realty market has squeezed liquidity out of the system and further limited the ability of developers to build more projects or sell out the existing ones with ease. In other words, the developer's ability to fund a certain project to completion is a more important factor to scrutinize than how much profit one can rake in from investing in the project.
• Investment in the realty sector always involves risk; there is never a guarantee of assured returns. It is important for every investor to assess their resilience to and preparedness for risk.
• For end-users, there is no such thing as timing the market, because for buyers looking for a home for personal use, there is no right or wrong time. In fact, it is a buyer’s market right now. However, if one plans to enter the market as an investor looking for healthy returns, then it makes sense to time one's entry. The choice between opting for a wait-and-watch approach and an immediate entry must depend on how conducive the overall market is.
• The most important thing is not liquidity, but actual need. In other words, the first step must be to understand whether the identified property actually has exactly what one is looking for, or if it exceeds or falls short of those requirements. This applies equally to investors and end-users.
• Investors must look beyond the obvious. While mature markets might be safe bets, upcoming markets are where the action is and are key to earning better returns.
• End-users must do a rent vs. buy analysis. The current employment market in the country suggests frequent movement of employees across cities. In such a scenario, compromising one's job for real estate concerns may not make a lot of sense. Buying property in one's home town and renting it out while personally living on rent in one’s city of employment should be seriously considered.
• For end-users, understanding capital appreciation is important. If one is planning to invest in property with a loan, studying the identified market's performance in previous years as well as the future potential is critical. The performance of the rental market should not be ignored, either. Situations where one's outgo on interest or maintenance on a property is more than the generated income must be avoided.

To read more Mumbai and Thane Real Estate Resources, visit www.mchithane.org
Contact
501, 5th Floor, Plot No – A-123/4,
Odyssey IT Park, Road No. 9,Wagle Estate
Thane (W) – 400 604, Maharashtra, India
Mobile : (+91) 9833 4583 23 E-mail: mchithane@gmail.com

MCHI-CREDAI dedicates cricket event

Suraj Parmar MPL 3, T20 tournament is being held at the Police Gymkhana Grounds from February 12 to 21, 2016 with a mix of day and night matches

Suraj Parmar MPL 3, T20 tournament, which features some of the biggest names of the real estate sector celebrated its pre-launch event last week. The tournament is dedicated in the honour of Late Suraj Parmar.

The pre-launch was attended by Abhishek Parmar (son of Suraj Parmar), Pranav Dhanawade (1009 not out cricket world record holder), Sarah Jane Dias (Miss India 2007, actress and model) , actor Vicky Kaushal), Ajmera Group CMD Rajnibhai Ajmera and RR KABEL CMD Gopal Kabra.

The other seniors members present from MCHI-CREDAI Committee were MCHI-CREDAI President Dharmesh Jain, Secretary Nainesh Shah, Sports Convener and committee member Shailesh Sanghvi and committee member Jitendra Jain.

Dharmesh Jain, President – MCHI-CREDAI, said, “This edition is dedicated to our dear departed friend, Late Suraj Parmar who was the face of young generation of real estate developers. This helps to bring the entire real estate fraternity together on one platform to offer our reassurance and commitment to the values Suraj Parmar stood for”

Shailesh Sanghvi , MCHI CREDAI Sports convener and committee member said “This year’s MPL is a ‘shradhanjali’ for Suraj Parmar. MPL was conceptualized three years ago keeping in mind the appeal and love of masses for cricket in our country. Today it has surpassed everyone’s expectation and has gone on to become one of the biggest corporate events in the country.

The event will also witness mini tournament for children of construction workers and a number of exhibition matches with senior advocates, solicitors and MCHI Thane unit. The matches are scheduled from February 12 to 21, 2016 at Police Gymkhana Grounds, with a mix of day and night matches. Participant teams are Nirmal Lifestyle, Kalpataru, Godrej Properties, Transcon Developers, Lashkaria Group, SRK Real Heights-Kavya, NRS Developers and MCHI-CREDAI itself.

To read more Mumbai and Thane Real Estate Resources, visit www.mchithane.org
Contact
501, 5th Floor, Plot No – A-123/4,
Odyssey IT Park, Road No. 9,Wagle Estate
Thane (W) – 400 604, Maharashtra, India
Mobile : (+91) 9833 4583 23 E-mail: mchithane@gmail.com

Know the top locations to invest in Mumbai

Amidst different thoughts and opinions, Mumbai realty has still managed to capture the interest of investors and end-users alike. Although sales traction has not managed to match the expectation of developers, financiers are glad that at least the market is moving.

Investing in suburbs

The suburban regions of Mumbai will grow more than the main city areas. Navi Mumbai and Thane being the most popular investment destinations, property prices are expected to move upwards in the next two-three years.

For Navi Mumbai, increased commercial activity is said to be the key contributor while Thane, Majiwada and Kasarvadavali seem to be the favourite destinations because of their established infrastructure and upcoming development. Thane has good connectivity, easy access to community living and offers all amenities in close proximity, while, Navi Mumbai currently lacks a proper transport medium. However, investors can expect a 100 per cent price rise in the next few years, owing to the upcoming infrastructure.

For investment in affordable hubs around Mumbai, a few locations that could be good for the home buyers. “Areas beyond Virar, Badlapur, Karjat and Panvel are can offer properties within Rs 30 lakh and also offer attractive returns over a period of time.

Put your property on lease

Another form of returns, i.e. rent also attracts a sizeable population of investors. For Investment prospects of Central localities for rental returns. “Wadala, Kurla East and West are good for investment and the most demanded property types are 1 and 2BHK units. Kurla has better connectivity with commercial hotspots of the Bandra Kurla Complex, hence, this area would give better returns. However, there are less takers for 3BHK units and that too in very limited localities”. The localities such as Andheri East and certain pockets of Ghatkopar where finding a buyer would be easy.

Will the market ever rise?

With lowered interest rates and availability of cheaper home loan rates, further cut in key rates might bring in better days for the real estate sector. As the appraisal period is approaching, increment in salaries can bring in a revival of the Mumbai real estate. Salary increments coupled with lower interest rates might attribute to a turn-around in the demand pattern in Mumbai. There are several new projects which are being launched at very attractive rates, offering wide range of options to investors.

To read more Mumbai and Thane Real Estate Resources, visit www.mchithane.org

Contact
501, 5th Floor, Plot No – A-123/4,
Odyssey IT Park, Road No. 9,Wagle Estate
Thane (W) – 400 604, Maharashtra, India
Mobile : (+91) 9833 4583 23 E-mail: mchithane@gmail.com

Waiting too long for a price correction?

When we talk about home buyers sitting on the fence, we are basically talking about buyers who want to buy a home but are indecisive. Implied therein is that such buyers have the capital to buy now if they choose to - they point is they are not choosing to. There may be many reasons for this. They may simply not have found the kind of home they are looking for as yet. Or, they have found it, but are waiting for home loan interest rates to come down. Or - and this is the most common reason for fence-sitting today - they are waiting for a price correction.

There are times - and cities - when it makes sense to wait for a correction, but it is always a calculated risk. Also, buyer indecisiveness is usually the result of confusion, not certainty. In today's scenario, potential home buyers receive conflicting information from a variety of sources. They hear or read of predictions that that residential real estate prices are bound to come down soon, and obviously do not want to risk incurring a loss by making a purchase decision at this point in time.

On the other hand, prices may not come down as predicted, and may even rise. If this happens, the intending home buyer will have missed the opportunity to buy at a lower price, and/or the properties that he or she had their eyes on all along may be sold to other buyers. This is not what they had hoped for while sitting on the fence, but it is often what happens.

Should an end-user - a person who intends to buy a home for personal use and not as an investor looking to sell it soon at a higher price and maybe rent it out till then - time the market? Investors can afford to wait and watch to see if prices reduce in an identified location. If they were wrong, there are always other opportunities. But an end-user buys a home because it is seen as ideal in terms of location, size, configuration and quality of neighbourhood. Such properties are often identified after a long and grueling search. If one finds such a home which meets all one's requirements and waits for prices to correct, one risks losing a lot more than just some money.

Of course, every end-user is also an investor at heart these days, in the sense that home buyers are very well-versed about the phenomenon of appreciation, look at their homes as hedges against the possibility of hard financial times in the future, and want to be able to bequeath a valuable asset to their offspring. This is absolutely logical. However, it should be remembered that real estate always gains in value over a sufficient number of years. The only exception would be if one has bought a home in a completely 'dead' area where no support infrastructure will ever come in, or from an unscrupulous builder whose project turns out to be illegal.

Prices may indeed come down to some extent in a certain market, but these are usually not price corrections but the kind of occasional fluctuations which are typical of every market. Waiting for such course corrections makes no sense if one is looking for a property that has a lot more work to do than merely gain in value - namely, a home in which one wishes to live in, raise a family and grow old in, and which allows the family to become part of a good neighbourhood and social fabric.

Also, one does not have to wait for a correction to get a better deal on an identified property. Unless it is the equivalent of a rare jewel of which only one exists and people are falling over each other to bid for it, the developer will be open to discussing better terms with a genuine buyer. In today's market scenario, this willingness to negotiate is, in fact, a given, and something that buyers can benefit from right away without waiting for anything.

In short, it does not make sense for home buyers to wait for a correction, and especially not in cities where properties are selling slowly but still well enough without developers having to resort to bringing down prices. In such cities, it is more likely that prices will remain flat for a while longer and then start rising again. The best plan for home buyers in such cities is to identify the properties that interest them the most and then negotiate a good deal with the developer.

To read more Mumbai and Thane Real Estate Resources, visit www.mchithane.org

Contact
501, 5th Floor, Plot No – A-123/4,
Odyssey IT Park, Road No. 9,Wagle Estate
Thane (W) – 400 604, Maharashtra, India
Mobile : (+91) 9833 4583 23 E-mail: mchithane@gmail.com

Longer tenures for younger borrowers

There is some good news for prospective home loan borrowers, especially younger borrowers. Banks are now becoming more liberal in granting loans to younger borrowers. They are now willing to offer home loans for tenures as long as 30 years to first time borrowers.

This will help both developers as well as Prospective homebuyers. For the property developers, it will help by increasing demand for property, thereby helping in liquidating inventories. At the same time, for prospective property buyers, it will help finance a substantial portion of the cost of a new home.

The Reserve Bank of India (RBI) reduced the repo rate by 125 basis points since January 2015. This has helped banks reduce their interest rates on loans as well. Banks are now trying to push the demand for credit to purchase homes. It is to be noted that till recently banks were comfortable lending with a maximum tenure of 20 years for a home purchase. Anything beyond 20 years was considered risky; the apprehension was that a borrower's ability to repay starts diminishing after this period.

However, in the changed circumstances, salary levels as well as expectations are high. Further, a loan is no longer a bad word. Youngsters are willing to take a higher loan amount for a longer tenure to purchase a property of their choice and need. As such, banks have also changed their strategy and are willing to offer higher loan amounts for longer tenures. Further, with the interest rates softening and the push by the RBI, the EMIs reduce and there is an increase in loan eligibility.

These long tenure loans are generally being given for properties valued at more than 1 crore. Banks are offering these loans to the salaried segment in the age group of 25-30 years who are at an early stage in their careers and at the same time have the potential to be high earners as they grow. Usually, younger borrowers have a problem in getting a higher loan amount in the initial stages of their career. The reason is that the salary levels are lower.

To read more Mumbai and Thane Real Estate Resources, visit www.mchithane.org

Contact
501, 5th Floor, Plot No – A-123/4,
Odyssey IT Park, Road No. 9,Wagle Estate
Thane (W) – 400 604, Maharashtra, India
Mobile : (+91) 9833 4583 23 E-mail: mchithane@gmail.com

Steps to bridge the gap

CREDAI has initiated skill development training for construction workers across Mumbai

While the construction sector continues to grow at a rapid pace, it continues to be devoid of skilled manpower. In order to bridge this gap, CREDAI introduced its skills training program for construction workers across the country in line with the Pradhan Mantri Kaushal Vikas Yojana (PMKVY).

PMKVY is the flagship scheme for skill training of youth, implemented by the new Ministry of Skill Development and Entrepreneurship through the National Skill Development Corporation (NSDC). The objective of this skill certification and reward scheme is to enable and mobilize a large number of Indian youth to take up skill training and become employable and earn their livelihood. CREDAI is taking this initiative across the country through its member developers spread across 24 states and 156 city chapters.f

Under this program, CREDAI will initiate pilot projects through its training partner Rustomjee Academy for Global Career (RAGC) and conduct skill development training of 180 construction workers in Mumbai and MMR at various ongoing project sites of Dosti Realty, Mantri Reality and Keystone Realtors. Soon PMKVY will be taken to other developers. The program will impart ‘on-site and classroom training’ to the construction workers that will help in developing technical skills and safety. The candidates who successfully complete and pass the training program will be certified and rewarded by the government.

Jitendra Thakker, Chairman of the Committee for Skill Development at CREDAI, who is also a Board member of NSDC and a member of the Governing Body of CSDCI, says, “CREDAI aims to build a foundation of skills which will automatically translate into enhanced quality of output in the construction sector. We are also looking at soft skills training that will promote better livelihoods.”

CREDAI’s skilling initiative in Pune known as KUSHAL marks the success of the foundation of its skilling programme with more than 28,000 workers trained and certified. Two of these trainees have represented India on a World Skills Competition held in New Zealand. Parusharam Naik (19 years) and Tikam Singh (21years) won bronze medals in the task of brick laying and tiling.

To read more Mumbai and Thane Real Estate Resources, visit www.mchithane.org

Contact
501, 5th Floor, Plot No – A-123/4,
Odyssey IT Park, Road No. 9,Wagle Estate
Thane (W) – 400 604, Maharashtra, India
Mobile : (+91) 9833 4583 23 E-mail: mchithane@gmail.com

Looking back, looking forward

Navi Mumbai outperformed all other zones in Mumbai in Q3 2015 as per the 99acres.com Insite Report

The 99acres.com Insite quarterly report focusing on capital and rental price trends in the residential realty market across seven cities of India states that property prices per sq ft in Mumbai have stagnated in October-December 2015, as compared to the preceding quarter. The rental market improved by 4% in the quarter ending December 2015, as compared to the same quarter in 2014. Supply of properties within the range of Rs 40 lakh surpassed that of houses in Rs 1-2 crore and ultra-luxury above Rs 2 crore segments.

Narasimha Jayakumar, Chief Business Officer, 99acres.com, said, “Developers in Mumbai have taken cognisance of homebuyers’ demand, which is centred on the affordable and mid-income housing segments. To this end, the supply balance has tilted in favour of properties priced Rs 40 lakh and below, as opposed to apartments displaying price tags above Rs 1 crore.”

Price trend analysis
(October-December 2015 vs. July-September 2015)

Mumbai Metropolitan Region (MMR - Central Suburbs, Andheri-Dahisar, Harbour, South and South West Mumbai, Mira Road and beyond)

While the south west region of Mumbai boasted of minimal growth, all other regions either witnessed a downward trending property graph or a slight dip in capital values.

Vasai Road, a locality beyond Mira Road, saw capital values clocking a surge of 10% in October-December 2015, the highest in MMR.

The peripheral industrial town of Boisar recorded an average rise of 8% as a result of being a comparatively low-cost area.

Kanjur Marg (West), too, witnessed a growth of 8% owing to the recent improvement in rail infrastructure and the MMRC prioritising Seepz-Kanjur Marg Metro corridor.

Navi Mumbai

Replicating last quarter’s growth trajectory, Navi Mumbai’s market clocked a growth of 2% in Oct-Dec 2015, vis-à-vis the preceding quarter.

Despite the Navi Mumbai International Airport remaining embroiled in legal controversies, it offered hope to the micro-markets of Ulwe, Kharghar and Kamothe.

Average capital values in Sector-36, Kharghar, which houses CIDCO’s affordable residential project under the Swapnapurti Scheme, plunged by 5%, quarter-on-quarter.

In addition to the ongoing Navi Mumbai Airport Influence Notified Area (NAINA), the city has another achievement to boast, CIDCO’s smart city project.

Thane

Despite a slew of infrastructure improvements, Thane’s property landscape remained stagnant in October-December 2015, after clocking a minimal growth of 1% in the July-September quarter.

Patlipada’s real estate grew from 3% in the quarter ending September 2015 to 6% in Oct-Dec 2015 on the back of two premium projects.

Kapurbawdi’s capital sentiments flagged from 7% in Jul-Sep 2015 to 5% in the October-December quarter.

Bhiwandi and Kolshet Road, too, witnessed property prices appreciating by 5% during the time frame.

Rental analysis
(October-December 2015 vs. July-September 2015)

Mumbai Metropolitan Region (MMR - Central Suburbs, Andheri-Dahisar, Harbour, South and South West Mumbai, Mira Road and beyond)

Average rental values climbed by a notable margin of 4% in October-December 2015, as compared to the same quarter in 2014.

Sakinaka in Andheri East clocked an enormous rise of 17% each, year-on-year, on the back of metro connectivity.

Jogeshwari (West), where average rental values in the last one year escalated to the tune of 14%, had to thank the connecting bridge between the locale and Goregaon (East).

Rental rates in Chandivali and Powai in the Central Mumbai suburbs witnessed a decent jump of 12% in a year. Navi Mumbai

Navi Mumbai’s rental market witnessed an unanticipated growth of 7% in October-December 2015 on the back of strong IT/ITeS presence.

New Panvel boasted of a rise of 20% due to its excellent civic infrastructure, the Mumbai-Pune Expressway and the Uran-Panvel Road.

With the state government adopting the ‘Housing for All’ scheme, the comparatively affordable market of Ulwe clocked a rental growth of 17%.

The premium residential belt of Palm Beach and Belapur witnessed a growth of 16% each, year-on-year. Thane

Maintaining its growth pace on the rental charts, clocked an average rise of 4% between October-December 2014 and 2015.

Anand Nagar’s rental landscape witnessed a remarkable hike of 10% owing to its strategic location at a cross junction road, which facilitates quick travel to Kolshet Road via the locality.

The long-pending issue of broadening Pokharan Road No.1, which will ease bottlenecks at Vartak Nagar junctions has buoyed sentiment in Pokharan Road which recorded a rental hike of 10%.

Hiranandani Estate, which saw values escalating by 9% during the tracked time span, draws its demand from its excellent civic amenities, such as clean roads and educational facilities.

Supply analysis
(October-December 2015 vs. July-September 2015)

l Boasting of several upcoming and proposed infrastructure enhancements, Navi Mumbai strode ahead of the other zones in bagging nearly one-third of the total supply of apartments.

Prolonged lack of buyers have succeeded in altering the market dynamics of Mumbai. In the October-December 2015 quarter, the supply of properties within the price range of Rs 40 lakh, ousted luxury and ultra-luxury housing from its prime position.

l High capital rates and inequitable growth in income ensured that properties configured as 1BHK and 2BHK remained the most in demand.

Mumbai developers were focussing on completing existing projects, fixing their own businesses in a bid to win back homebuyers and clearing unsold stock. This trend is evident in the consistently dipping number of under-construction properties in the last three quarters.

Report highlights

With the exception of the south west localities, the property landscape of the Mumbai Metropolitan Region (MMR) has experienced a downturn, as a result of lofty price tags.

Navi Mumbai is set to witness Maharashtra’s first smart city project by the City and Industrial Development Corporation (CIDCO). It recorded an average capital growth of 2% in the last quarter of 2015.

The frequent policy changes in Thane’s real estate market and habitual stonewalling of core stakeholders when drafting vital industry guidelines, dampened developers’ sentiments. Average capital values in Thane stagnated between the last two quarters of 2015.

The highway infrastructure may receive a massive boost with the state government planning to pump Rs 28,000 crore in 21 projects spanning 1,500 km, in 2016.

Taking a step towards promoting real estate transparency, the state would grant new building permissions and conduct regular audits via e-platform starting January, 2016.

To read more Mumbai and Thane Real Estate Resources, visit www.mchithane.org

Contact
501, 5th Floor, Plot No – A-123/4,
Odyssey IT Park, Road No. 9,Wagle Estate
Thane (W) – 400 604, Maharashtra, India
Mobile : (+91) 9833 4583 23 E-mail: mchithane@gmail.com