What does the new-age buyer want?

Vineet Relia of SARE Homes talks to Lakshmi Krupa about financial innovations, Chennai’s fascination for villa projects, and the city’s changing needs…

Customers almost always come with a checklist these days, especially in suburban areas where we do gated communities. In Chennai, proximity to schools, health facilities and security are of great importance. They are not looking for super luxury but a good lifestyle at a low ticket price.

How different is it being an FDI developer in a traditional market?

In some sense, in the real estate market, we see ourselves as game changers. The real estate market usually has family-run businesses or one-man businesses but being a corporate body with an independent board helps us remain objective. There is no personal agenda and our projects are all from the capital provided by funders such as Morgan Stanley and Goldman Sachs.

You have announced a few financial innovations (such as pay nothing until possession after the initial 20 per cent). Is this your reaction to the current market scenario?

While we continue to believe that the market is as robust as ever, our innovation is an effort to reduce the financial burden on potential homeowners. Consider a typical buyer — a couple with double income, buying a home on loan. They apply for the loan and until possession they have to carry the burden of their rent and the EMI. Sometimes, projects are delayed due to approval issues and in these cases they save a lot of time with this offer.

There has been a marked increase in villa projects along OMR and GST over the last one year. What explains this?

We find that the Chennai customer wants to stay as close to the ground as possible. That’s probably why high-rises don’t catch their fancy as much as villas do. You own your own piece of land and it comes with the option of expansion later. In our projects, we are offering expandable villas that come with a pre-approved plan for expansion. Owners can build another room anytime they want to and not even necessarily through us but any builder.

Infrastructure-wise how does Chennai compare with other markets?

I don’t think a lot of people even know that Chennai has seen the highest amount of FDI in the last two to three years. A lot of activity is happening, especially around the Oragadam area, and a detailed Master Plan with more structure will take the city to a higher platform almost certainly.

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Places you can buy a house in 2013 and gain from price appreciation

If you are looking to buy a house for investment in 2013 and are not sure where you can earn the best returns , don’t worry. We bring you what experts say about real estate destinations that will give good returns over the next three-five years.

New Ground

In the last couple of years, the real estate market has changed remarkably in both metro cities and small towns. Prices have crossed the peaks reached before the 2008 economic slowdown.

However, in 2012, the companies grappled with economic uncertainty, low demand, fund crunch and high inflation. “High inflation and interest rates dealt a double blow to developers by increasing input and debt costs. Sales fell as buyers became wary of rising interest rates,” says Shveta Jain, executive director, residential services, Cushman & Wakefield (C&W) India, a property consultancy firm.

Still, the mid-end residential segment continued to generate buyer interest. This, and increase in prices of raw materials, pushed up prices in most cities.

Realtors will grapple with a lot of inventory and debt in 2013, say experts. “In 2013, developers will price projects more judiciously and offer a lot more pre-launch benefits. Those with large projects and inventory will be under more pressure to give discounts,” says Anuj Puri, chairman and country head, Jones Lang LaSalle India, a property consultancy.

The Union Budget can also be a milestone as the sector looks forward to big policy decisions and reforms, including the grant of industry status.

DELHI-NCR

The Delhi-NCR is the favourite of property consultants. With massive infrastructure works in the pipeline, locations such as Dwarka Expressway, Noida Extension and New Gurgaon are likely to attract a lot of buyers-both investors and end-users.

“The market, once driven by investors, has slowly shifted towards end-users, as the former’s cash position worsens and end-users step in to capitalise on low prices,” says Aniruddh Wahal, co-head, occupier services, DTZ India, a real estate consultancy.

Dwarka Expressway:

Since 2009, developers have started residential development along the upcoming Dwarka Expressway, an eight-lane expressway that will provide an alternative link between Delhi (Dwarka) and Gurgaon. New projects, expected to be ready by 2015, cater to the middle and high-end segments.

“Its proximity to the capital city and the international airport gives it an edge over other emerging destinations such as Noida-Greater Noida Expressway, Yamuna Expressway, Bhiwadi and Dharuhera,” says Wahal.

The area is divided into two parts-the northern region on the side of Dwarka and the southern region closer to Gurgaon. The north (Sectors 103, 106, 109-113) is expected to surpass the south in returns due to proximity to Dwarka and the international airport.

DTZ India says prices in the region will go up by 25-30 per cent per year over the next five years. Knight Frank has forecast an annual return of 16 per cent during the period.

Noida Extension:

Though developers recognise Noida Extension as a separate location, it comprises Sectors 1, 2, 4, 16B, 16C, 16D and Knowledge Park V of Greater Noida. It is close to Noida (10km from Noida City Centre) and 18km from Connaught Place, New Delhi’s prime business location. A proposed metro rail link will improve connectivity between Noida and Delhi.

“It is the most attractive location in the NCR for affordable housing and is expected to see yearly growth of 15-20 per cent in the next five years,” says DTZ’s Wahal. Knight Frank says properties in Noida Extension will give an annual return of 16 per cent over the next few years.

 

Quote:With options ranging from Rs 3,200-15,000 per sq ft and returns of 18-30%, residential real estate looks promising over the next five years.

SAMANTAK DAS Director, Research & Advisory Services, Knight Frank India

Greater Noida:
Situated around 40km from the south-eastern part of New Delhi, Greater Noida is emerging as an industrial region and an educational hub.

It has good infrastructure and is home to several big companies. It is connected to Noida by a six-lane highway operational since 2002. You can drive from Noida to Greater Noida in 15-20 minutes. The Yamuna Expressway, which has also become a property hotspot, connects it with Agra via Mathura. A metro link will connect it with Noida, Ghaziabad and New Delhi.

Greater Noida is an attractive location for mid- and high-end residential segments. “Though there was not much activity in last 15-17 months due to land acquisition and master plan issues, things are expected to pick up. The area may witness a year-on-year price increase of 20-25 per cent,” says Wahal.

MUMBAI

The Mumbai market was subdued in 2012 with prices rising just 2-7 per cent. The demand is expected to pick up in 2013, mainly in the mid-end segment. The eastern suburbs of Mumbai (mainly Chembur, Kurla and Wadala) are expected to provide good returns on account of lower prices compared with areas in central Mumbai and western suburbs.

Ulwe:

Ulwe is an emerging location south of the Panvel creek. It is connected with the Uran Road that connects it with the Thane-Belapur Road as well as the JNPT Road to Jawaharlal Nehru Port. While Ulwe is just 7km from Belapur, a commercial hub, five other office destinations are within the 22km radius. Once the Nerul-Seawood-Uran rail network is ready, Ulwe will be connected with major office locations through a mass rapid transport system. At Rs 4,000 per square foot, one can buy a one-bedroom flat here for Rs 20 lakh. Ulwe is the most attractive destination in the Knight Frank report, which says it may give an annual return of 20 per cent in the next five years.

Quote: In 2013, developers with large projects and inventory will be under more pressure to give discounts than those with smaller projects and limited inventory.

ANUJ PURI Chairman and Country Head, Jones Lang LaSalle India

Chembur:

Located in the Mumbai Metropolitan Region’s central zone, Chembur’s proximity to the Bandra-Kurla Complex and other office destinations will fuel demand for residential properties here, say experts.

The upcoming rail, metro and road networks such as the Eastern Freeway, the Santacruz Chembur Link Road and the Chembur-Wadala-Jacob monorail will boost connectivity to the area.

Limited land availability will limit new construction and keep supply under control here.

Knight Frank says prices here are expected to rise from the current Rs 12,000 per square foot to Rs 27,000 per square foot by 2017. This comes to an annual return of 18 per cent.

Wadala:

Strategically located in the MMR’s central zone, Wadala is at a comfortable distance from the MMR’s main employment centres. The Eastern Expressway connects it with other regions of the central zone as well as business hubs in the island city. It is also connected through the suburban train network. It will also benefit from the under-construction Chembur-Wadala-Jacob monorail project as the Wadala-Chembur part is expected to be ready in 2013.

The regional development authority’s plan to develop Wadala on the lines of the Bandra-Kurla Complex may add to its appeal. Knight Frank says the area may give an annual return of 18 per cent over the next five years.

 

BANGALORE

This information technology (IT) hub saw steady sales in 2012, prompting developers to launch new projects. Prices in under-construction projects in growing submarkets have risen by 10-30 per cent in the past one year.

“The demand for houses is expected to remain stable or grow moderately in 2013,” says Wahal.

Bangalore is expected to offer an annual return of 15 per cent over the next five years.

“The city is the lowest in terms of capital values (compared with Delhi and Mumbai) and has seen moderate price appreciation,” says Jain of C&W.

The international airport and other infrastructure projects have shifted momentum towards the northern and eastern regions.

Kanakpura, Sarjapur Road, Bannerghatta Road, JP Nagar, Jaya Nagar, Whitefield, Varthur, Mahadevapura, CV Raman Nagar, Uttarahalli, KR Puram and Electronic City have emerged as the city’s main residential markets.

Hebbal:

The Bangalore international airport has made Hebbal an important destination. It has also emerged as an IT hub with several technology parks and companies.

Quote: In 2013, the demand for residential units in the top eight cities is expected to be 3.3-3.5 lakh as against the supply of 2.2-2.3 lakh units.

SHVETA JAIN Executive Director, Residential Services, Cushman & Wakefield India

KR Puram:

Closeness to the IT hub of Whitefield and Manyata Tech Park makes it a desired residential destination for IT professionals. KR Puram is located on the National Highway 75. The Baiyappanahalli metro station is just 3km away. The proposed Peripheral Ring Road and widening of the Old Madras Road will improve connectivity.

Office space leasing falls by 26pc in 2012: CBRE

The uncertainty in the global and domestic economic scenario has hit office space leasing as corporates remained cautious on expansion leading to a fall in absorption of office space by 26 per cent during 2012, global property consultant CBRE said today.

The total absorption of prime office space for 2012 was about 26 million sq ft in seven major cities of the country as against 35 million sq ft in 2011, according to CBRE’s latest report ‘India Office Market View Q4, 2012’. These cities are NCR, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata.

“The decline in absorption across key cities is primarily due to the continuing global and domestic uncertainty in the economy which is a deterrent for corporates in their expansion plans,” CBRE ( South Asia) Chairman and Managing Director Anshuman Magazine said in a statement.

For revival of demand of office space, Magazine felt that the economic reforms in India need to be fast tracked besides global economy has to show some improvement in growth.

The last quarter of 2012 (October to December) witnessed absorption of about 7 million sq ft of office space compared with about 6 million sq ft in the previous quarter. About 70 per cent of the transaction activity was dominated by the NCR (National Capital Region), Mumbai and Bangalore.

“Concerns over cost reduction and a cautious approach by occupiers had a negative impact on leasing activity across key markets in India,” the consultant said, adding that major corporates continued to review expansion plans and focused on improving existing space utilisation to control costs.

The total office space supply in 2012 was about 31 million sq ft compared to about 30 million sq ft in the previous year, despite the fact that a large chunk of the office pipeline lined up for the year was delayed into 2013, CBRE said.

Rental values remained largely stable across most micro markets, the report noted.

“Rents were stable in suburban office markets such as Gurgaon, Noida, Outer Ring Road, Whitefield, Hitec City and Gachibowli, amongst others,” the consultant said.

Most micro markets in Mumbai entered the downward cycle with the likes of Nariman Point, Bandra Kurla Complex and peripheral markets suffering from sluggish demand and increasing vacancy levels.

The consultant anticipates that downward pressures would continue to persist on most markets in the country in a short to medium term.