Reclaiming the river

Post deluge, Chennai Corporation is trying to clear the river banks, encroachments and other factors that created obstructions causing the city to flood. The PWD is reclaiming the land lost to slums, evicting dwelling along the banks and desilting the river. Building drains along the areas below sea level to stop flooding is another step taken by the PWD.

Activists point out those constructions inside the city done on water bodies include Koyambedu bus terminus, ring roads, Adyar Eco Park and several commercial compounds.  While the hutments amount to only 2% of the encroachments, the concrete constructions obstruct the free flow of the water bodies.

While the Adyar river at its starting point near the Chembarambakkam reservoir is around 190m wide, it varies and narrows down as it makes its way through the city to 60m in places like Saidapet.  The Government has estimated a cost of Rs 28 crore for this project of eviction and fencing of the river bank to avoid return of encroachments.  With assembly elections approaching, the question is whether the eviction will be done forcefully.

The city planners need to go through the data on sea level and water flows and the flood character of the topography before constructing. Laser terrain maps and study on the run off pattern of the rain water would help. All these at least to avoid a disaster in future.

ASK Group raises $205M in new domestic realty fund –looks for distressed developers

Diversified financial services firm ASK Group has raised Rs 1,400 crore (about $205 million) through its fourth real estate fund – ASK Real Estate Special Opportunities Fund II floated in October 2014, and will invest mainly in residential projects in Mumbai, Pune, Chennai, Bangalore, Delhi-NCR and Hyderabad over a period of 18 to 24 months.

The fund has a tenure of six years and two extensions of one year each will look at distressed developers for investments and invest purely through the equity route.

Sunil Rohokale, CEO, ASK Group, said the fund has about 60 per cent repeat investors. Most of these are family offices and ultra HNI investors. This is the group’s third domestic real estate fund raised in the past seven years. This is also the largest domestic pure equity realty fund raised in the industry in the past five years. The fund achieved its initial close in March last year. With the closure of this fund, ASK Group’s real estate private equity assets under management or advisory stand at Rs 3,500 crore.

Amit Bhagat, CEO at ASK Property Investment Advisors, the group’s real estate investment arm, said the new fund has committed 25 per cent of the corpus through two transactions. He didn’t give any details. The new fund marks a significant addition to the group’s realty investment platform. ASK Property has also scooped up Rs 1,000 crore (about $146 million) for its maiden offshore fund, people with direct knowledge of the development told VCCircle. It is yet to formally formally announce this offshore fund.
ASK Group, through its real estate funds, has committed Rs 2,000 crore in 19 projects. In 2015-16, ASK Group invested Rs 365 crore in a Rajesh Lifespaces project in Mumbai’s Vikhroli suburb, Rs 125 crore in ATS group’s Noida project and Rs 112 crore in Purvankara Projects’ Chennai unit.

Over the past year, the fund has exited three investments it made three years ago. It exited investments in Rajesh Lifespaces with 2.26 times returns, and in Pune with Amit Enterprises and Paranjape Schemes with returns of 2.53 and 1.8 times, respectively, it said in a statement.

Online auction of unsold properties by Magicbricks.

In an attempt to discover the right market prices for properties listed on the portal Magic bricks is providing an auction platform to owners, who have listed their properties and was unable to sell for more than six months.  The portal will do this for properties listed in NCR and Mumbai, to begin with, and later in other locations.

The intention is to discover the right prices for the property, agreeable by both the buyer and the seller.  The unsold residential stock in major cities has increased 21 percent from 932 mn sf to 1123.9 mn sf.

All the eight cities witnessed a rise in the unsold stock with Ahmedabad 33 per cent and Pune 36 per cent having shown a maximum increase, followed by MMR at 28 per cent Though the increase in unsold properties in NCR is only 14 per cent, it tops the chart with an unsold stock of 360 million sq ft, followed by MMR Region with 235.9 million sq ft.

Overall the transactions in residential space have declined by 30-70 per cent depending upon the location, according to experts and the auction model if proved successful could be the next big thing in residential space to bring back the sales momentum.

Tata Realty-StanChart PE JV in talks to buy M3M asset

A joint platform was formed recently between Tata Realty and Infrastructure Ltd and Standard Chartered Private Equity to acquire commercial assets in top micro markets of India. Tata Realty has made a commitment of Rs 1,800 crore toward the platform while StanChart PE has committed Rs 800 crore.
The commercial land parcel is located on Golf Course Extension Road in Gurgaon and is spread over almost 24 acres. The asset could be valued around Rs 500 crore, it is learnt.
The first project under the platform will be sealed either in Mumbai or NCR apart from looking at projects in Bangalore, Hyderabad and Pune. In Mumbai, it has bid for a 30-acre land parcel along the Thane-Belapur road.
The real estate arm of Tata Group is ramping up its commercial development and the infrastructure vertical that covers road projects, ropeways and light rail developments.
M3M hit headlines in late 2014 when it bought a 185-acre land parcel in Gurgaon from trouble-laden Sahara Group for Rs 1,211 crore.  SCB PE recently committed capital toward a platform along with World Bank’s IFC arm and Asian Development Bank for affordable housing to be developed by Shapoorji Pallonji.  It also has a platform with Mahindra Lifespaces to develop residential projects.
Developers and investors have shown renewed interest towards commercial development on the back of strong momentum in leasing and acquisition in office space. More than 38 million sq ft of office space was taken up in 2015, up 18 per cent from last year.
Stronger economic growth will drive office space take-up in 2016 as well and the focus of occupiers will continue in peripheral markets of top cities.
 

GDP projected to be 7.6% for 2016

The government is slated to release gross domestic product (GDP) data for third quarter of fiscal year 2016 on Monday. The economy grew by 7.4% in second quarter that ended in September 2015.

Domestic demand witnessed during the festival season is expected to support growth in the 3QFY16, even as global headwinds have had an adverse impact on manufacturing and exports.

The investment activity is muted due to low capacity utilisation in several manufacturing sectors, highly-leveraged balance sheets of infrastructure companies and stretched balance sheets of banks.

Consumer price inflation (CPI) averaged at 5.3% during the December quarter.

The private consumption is likely to drive growth on the expenditure side while services like trade, hotel, transport, communication, financial services and real estate are likely to drive gross value added (GVA) growth in 3QFY16.

 

RE on the revival path

Pricing is the key, when it comes to residential spaces and whether rain or shine there is always demand for a rightly priced residential space. Fewer amenities and higher prices never work favorably, forcing developers to offer discounts on the projects.

Experts at IKIA feel that with the strengthening of economy, there is bound to be more demand for residential space. As India makes strong strides on the path of development, interest in real estate investment is going to increase steeply over the coming years. Economic growth will result in a growing urban population and developers who continue to launch projects will benefit in the long run, even if the current market is slow. Ill-chosen locations with amenities that drive costs up may well be the reason for the current non demand.

Office spaces on the other hand, recorded 40 million sq ft of absorption of space in the top 8 cities in 2014. Office space segment will see a strong demand in the next quarters. Demand drivers are information technology, banking and financial sectors and e-commerce sector. Consolidation of office spaces by companies is a trend in major cities, resulting in leasing of large office spaces, and developers looking at making bigger floor plates.

Most of the new supply released during the quarter was concentrated in Gurgaon in Delhi national capital region, outer ring road, Whitefield and Hebbal in Bengaluru; IT corridor/extended IT corridor in Hyderabad; Airport Road, Kharadi, and Pashan in Pune; and Thoraipakkam/ Sholinganallur in Chennai.

Demand for smaller office spaces is growing fast as well, with thousands of start-ups mushrooming in cities such as Bengaluru, Pune and Mumbai.

Experts are expecting that leasing numbers in 2015 will cross the recorded ones in 2014.
 

Birla Estates make realty foray

Kumar Mangalam Birla, chairman of Aditya Birla group, has carved out the real estate business of Century Textiles to make a foray into Mumbai’s lucrative commercial property market.

Birla Estates will redevelop its properties in and around Mumbai. Birla estates have spent nearly 2500 crores in building projects that include Birla Aurora in Prabhadevi.

Carving out the real estate business is one of the first steps taken by Birla after taking over the company’s reigns from his grandfather, B K Birla. In the quarter ended December, Birla also increased his stake in the company to 50 per cent from 45 per cent by subscribing to the company’s preferential share issue.

With the realty plans, Birla will be one of the last players from the old generation of business houses to enter the sector. Earlier, the Wadias of Bombay Dyeing, Tatas, Godrejs and Piramals made successful entries into the sector by redeveloping old textile mills and plant properties into commercial and high-end residential complexes.

Real-estate analysts said getting into commercial properties makes senses as lease volumes are up 10 per cent on a year-on-year basis in calendar year 2015. Rentals are firming up and vacancy levels have dropped to 8-14 per cent from 20-30 per cent highs in 2008. This trend may sustain, and commercial market is expected to outperform the residential market over the next 1-2 years.
Century Textiles shares have lost over 20 per cent value since January 1 and closed at Rs 479 a share on Thursday.

RE and Farming

Few HNIs look at investing in farm land and going back to their roots in a very different way from earlier days. Agricultural research plays a crucial role in promoting diversified cropping systems. Currently, the public expenditure on agricultural research is only 0.7 per cent of the agricultural GDP.

Crop diversification is another big challenge. Experts feel that attention must be paid to include crops like pulses and millets and attempt to develop climate-resilient cropping systems. They have a crucial place in the country’s food security architecture.

Concentrated efforts are required to revive the agricultural extension system and build its capacities by both human resource as well as technical know-how. Organizations like the Agricultural Technology Management Agency (ATMA) and Krishi Vigyan Kendras need to be energised to become active agents of change in rural areas.

Public investment in rural infrastructure is known to leverage substantial private investment and generate significant local employment multipliers. Available evidence shows that even as the overall rate of women’s labour force participation has declined, there has been high labour force participation of women from poorer households, especially in times of increasing agrarian distress.

There is also the challenge of employment generation and figures show that non-farm jobs to be created has to be at least thrice as much as the current growth rate of 5-6 million jobs per year. Sectors like agro-processing and value addition to agricultural produce offer huge scope for local employment and for greater control by the local producers over the value chain.

How does this impact real estate scenario?

A general permission is available to NRIs or PIO to purchase only residential/ commercial property in India. There is no restriction on the number of residential/commercial properties that an NRI or a PIO can buy. The name of a foreign national of non-Indian origin cannot be added as a second holder of a residential/commercial property purchased by an NRI or a PIO.

A foreign national of non-Indian origin, resident outside India, cannot acquire any immovable property in India by way of purchase without the RBI’s nod.

He does not require the RBI’s permission for this. A person resident outside India (that is, an NRI, a PIO or a foreign national of non-Indian origin) cannot acquire agricultural land/plantation/farm house in India by way of purchase.

The Government can bring in policies which will ensure that these buyers continue farming on this land. This is will ensure that the latest technology from countries other than India is implemented and a sustainable agriculture practice is adopted. Whether it is traditional farmers or the newer generation, the ecosystem approach to agriculture will benefit the environment and the nation. The traditional farmers can be offered subsidies to adapt to the new practices.

While the concept of vertical farming is still a dream, let us ensure that the next generation does not lose out on the certain things money can’t buy – and one of them is seeing and feeling mother earth and listening to the earth’s soul.

 

All roads lead to Poonamallee

Poonamallee was unaffected by the recent floods in Chennai and now this locality is the favored destination for many home buyer today.  This residential market id categorized as affordable, mid segment and is looking at catering to upper segments as well.

The connectivity, infrastructure availability, civic amenities are driving the growth. The proximity to manufacturing facilities and office spaces is another advantage that is fuelling the demand for housing in this locality. Those employed in the IT/ITES sector, educational instituitions and manufacturing sector in and around Sriperumbudur and Oragdam prefer to buy their houses here.

The prevailing land rates are Rs. 1,000 to Rs. 3,000 sq.ft, depending upon the location and basic infrastructure. The average rental rates in these locations vary between Rs. 8,000 and Rs. 15,000. A whopping 81% demand for housing in area is for affordable segment making this a locale to head for.

Development around this corridor means development of the micro markets up to Sripeumbudur along the NH4 and further towards the Greenfield airport.  For any kind of development in

Poonamallee lacks railway connections, but the development of a dry port and green field airport at Sriperumbudur, four-laning of the roads from Hoskote to Dobbaspet and from Mulbagal to Renigunta via Chittoor, a dedicated high-speed freight corridor, and the development of Chennai-Bengaluru expressway is needed. Also, the Bus Rapid Transit System has been proposed across five corridors, among which one is the Koyambedu to Poonamallee stretch.

 

Migration by investment in property

HNIs or High Net Worth individuals who are willing to invest 3.5 crore or more can now buy property in US, Canada, Australia or small countries like St. Kitts and Nevis, Grenada and Dominica in the Caribbean.

There are two separate categories for investment – active and passive. The active investment requires the person to start a business and the passive one is where he will invest in property or bonds.

For individuals who want to expand their business internationally, nations like the Caribbean have low taxes. These investments are tickets to future citizenship enabling the individuals to move from country to country without a visa and permit them to residency in these countries.

The requirement is that the money trail needs to be legal and established. The criteria for investment can be different – while in the US funds are necessary at the time of  application, certain countries like Spain allows you to buy property and own it.

 
Passive investment is easier but one has to be aware of the risks they may face.  Certain countries have a cap on the investment amount as well.

Countries willingly accept investors in business, since this will generate employment and results in economic growth. While it is an added advantage to be professionally qualified, these programs that enable an individual to migrate based on investment made in the foreign country is becoming popular.