Occupancy Certificate not mandatory for small builders in Hyderabad

Occupancy certificate will not be mandatory for buildings which come up on plots up to 100 square metres with height up to seven metres. The exemption is given to small builders as occupancy certificate (OC) is directly linked to electricity and water connections.

The amendments were incorporated in the new GO on Building Rules issued by the Municipal Administration and Urban Development (MA&UD) department on Saturday.

Also, civic bodies like Greater Hyderabad Municipal Corporation (GHMC), which releases building permissions, should communicate the approval or refusal of occupancy certificate within 15 days. If any officer fails to communicate, the civic body could initiate action against the officer. The GO said occupancy certificate might be issued to owners after collecting compounding fees, if there are any minor violations and deviations from the sanctioned plan.

For high-rise buildings, the OC should be released by the civic body after inspection and getting fire ‘No Objection Certificate’ from the AP State Disaster Response and Fire Services department. Until now, the town planning wing used to give OC without fire NOC. Two buildings where fire accidents were reported recently found to be having OC sans fire NOC.

The MA&UD department has also prepared a pro forma for commencement notice, completion notice and occupancy certificate by giving more clarity. The pro forma have been prepared so that a civic body could also receive them online.

Environmental impact assessment provisions have also been incorporated in the new buildings rules. As per the GO, buildings and construction projects that come up in 20,000 sq metres area and 1,50,000 sq metres of built up area and township areas development projects covering an area of 50 hectares and or building up areas of above 1,50,000 sq metres should get environmental impact assessment.

Director of Town and Country Planning (DTCP) B Purushottam Reddy said awareness programmes and meetings would be conducted across the state soon for licenced architects, town planning staff on changes in the buildings rules, especially on setbacks and road widths.

Ghodbunder Road witnesses rapid development

Ghodbunder Road is a state highway (State Highway 42) road that runs through the Thane district. This 20 km long road, which connects the Eastern Express Highway and the Western Express Highway, is witnessing rapid pace of development.

More than 5 million sq ft is under construction, most of which is residential; besides the road is dotted by retail, commercial, institutional projects, in the pipeline. Schools, colleges, hospitals, banks are coming while some restaurants and entertainment hubs are about to start in malls.

Cosmos Group, Everest Group, Hiranandani Group of Companies, Kalpataru Group, Raheja Developers, Prescon Developers, among others are some of the reputed developers having presence in this location. These projects are not integrated townships but residential projects built on 5-10 acres. These projects are gated communities that offer amenities such as swimming pool, sports complex, children‘s play area, clubhouses and gymnasiums. Proximity to Sanjay Gandhi National Park is touted as a positive with adverts reading ‘enjoy an unrestricted view of the Wild Life Sanctuary from your apartment.’

According to market sources, the average unit capital values at Ghodbunder road is about Rs 5400 per sq ft. The values have gone up by 20% in the last one year from Rs 4,400 per sq ft in June 2011 to Rs 5,400 per sq ft. However, currently there is little investor-driven activity and the prices are stabilising.

Looking at the commercial side, Hyper City mall and R Mall are operational on Ghodbunder road. According to local broker Rakesh S. Shelke, “Retail is concentrated at Waghbil and it basically comprises of clothes, jewellers, kirana stores, sweet shops etc. Typically a 250 sq ft shop is available for Rs 30 lakh. There are some offices such as banks, call centres and the office value ranging from Rs 110-120 per sq ft, amongst these most of the offices are small in size for about 500 sq ft. Other important commercial buildings include Regalia and Hirnandani.”

Infrastructure development is also taking place at a rapid pace. This road being a state highway (which connects eastern and western corridor) has over 5000 trucks plying everyday during early morning and late evening hours. To ease the traffic considerably, flyovers which are coming up at Majiwada, Manpada, Kapurbawdi, and Waghbil. In fact, the Waghbil flyover has just been commissioned. There are buses plying every ten minutes to Borivali, Kalyan, Navi Mumbai.

IT corridors ideal for property investment in Hyderabad

Property market in Hyderabad is concentrated along IT corridors like Hi-Tech City, Kondapur and Gachibowli. All categories of housing have been active in the city – multi-storey apartments, houses and villas. According to market sources, despite Telangana issue, demand has remained constant for both domestic and international property buyers. In some areas like Gachibowli and Hi-Tech City, demand for villas matches multi-storey apartments demand.

Infrastructure development like the International Airport, completion of the Outer Ring Road (ORR), about 30 radial roads, MMTS, metro, procurement of water from Krishna and Godavari rivers, etc are all attracting global MNCs and investors to start their operations in Hyderabad.

According to G Yoganand, CMD, Manjeera Group, “The city has witnessed second highest occupancy of IT spaces in India during last one year. Hence, this is the best time for property buyers because Hyderabad may witness property boom in the mid-term. IT Corridor is the best place for investment. The mode depends on the budget. A plot in a good location is always the best but you will not get loan.”

IT corridor areas like Gachibowli, Kondapur, Madhapur, Nallagandla, Nanakram Guda, Kokapet, APPA junction, Hi-Tech City are ideal for investment.

According to MagicBricks.com, Hi-Tech City has seen an increase of 17% in values of multi-storey apartments in the Jan-Mar quarter this year compared to Oct-Dec quarter in 2011.

When talking about where the maximum demand is coming from, Yoganand added that Hyderabad has investors from across the country. “Even now, many people from Andhra region are buying and they are not worried about Telengana. Whether Telangana or no Telengana, Hyderabad is the best place in India to invest for better appreciation. Hyderabad has the best infrastructure, cosmopolitan culture, no language barrier, less pollution, better weather conditions, and better connectivity by road, rail and airways to all important cities of India. Prices are also reasonable,” he added.

Infrastructure is a key reason for the increase in demand in Hyderabad as well as for the rise in property values. A major infrastructure development has been the commencement of the Phase I of Metro covering Nagole and Gachibowli, market sources say. Rakesh Sudam of Earthwide Properties pointed out that infrastructure like the Phase I of Metro will affect localities like Nagole, Uppal and Gachibowli. “Values are already rising here and are expected to rise by 5 to 10% in the next 3 to 6 months,” Sudam said.

Anatomy of Urban Investments in Mumbai

India’s growth story has many facets; one of the integral parts of growth – and arguably the most important one – is urbanization. In fast-growing economies, cities are significant investment and employment generators, which in turn carry the growth momentum forward. The sustainability and livability of any city depends largely on the quality of its infrastructure and real estate stocks. Needless to say, cities also require large sums of money to create urban asset stocks, including buildings and infrastructure.

Over last decade, India’s population grew by 18% while its urban population grew at almost double that rate (at 32%). Currently, about 31.2% of India’s population lives in urban areas. The country’s share of urban population has increased by almost 3.5% over the last decade. What is even more astounding is the increase in the built-up real estate stock in its cities and towns.

Data from the 2001 census shows that about 110 million ‘Census Houses’ exist in the urban areas, which indicates an increase of 39 million over the last 10 years. In other words, real estate stock shows a compounding growth of 4.5 % per annum as against the growth rate of 2.8% in urban population. Obviously, such massive growth needs adequate support from infrastructure.

However, the state of affairs with infrastructure in Indian cities is not very encouraging. Most of the cities still have to deal with issues in terms of roads, public transportation, sanitation, storm water drainage, solid waste management systems, etc. on a regular basis. With the volume of real estate stock increasing inexorably in the cities, there is an acute problem with the basic needs like energy and water in the store for urban India.

The private sector contributes most of the development of real estate stock; however, the responsibility of infrastructure development lies squarely with public sector entities such as ULBs and other utility companies – most of which are Government agencies. The investment pattern in our cities shows a similar trend – the private sector invests in the development of real estate stocks, while the public sector invests largely into infrastructure development.

The quantum of investments in most infrastructure projects is huge, and the agencies responsible for its development are seriously under-financed. They depend either on domestic grants like JNNURM or on intercalation financing involving bilateral and multilateral agencies.

In some instances, funds are mobilized from private sources in the form of Public Private Partnership. The private sector generally tends to shy away from investments into city-level infrastructure projects, as most of these projects are considered non-remunerative. They prefer to focus on investing into the development of real estate stock.

Mumbai – A Case Study

Mumbai, India’s financial capital, attracts massive investments – largely in the real estate sector. The city being the nation’s epitome of high real estate prices and land scarcity, huge sum of money keep chasing land in the city – while infrastructure augmentation lags behind. Way behind.

The opening up of FDI in real estate in 2005 opened the floodgate for investors vying for a share in the juicy pie that Mumbai real estate represents:

Prime Land Deals in Mumbai City Since 2005

Since 2005, there have been many record-breaking land transactions in Greater Mumbai – mostly from NTC mill lands and by MMRDA at Bandra Kurla Complex (BKC). Some of the aggressive land purchasers were IndiaBulls, Lodha Developers, Piramal Sunteck, Wadhwa and Peninsula Land Limited, among others.

A whopping Rs. 276 billion have been invested in land in Mumbai since 2005 – and this does not even include the confidential transactions and investments made into Slum Rehabilitation projects (SRA) and other redevelopment projects. The sum of the unaccounted transactions could possibly be another Rs. 100 billion in the same time period.

Patterns of Investment in Land Over Time

In terms of investment sizes and the total quantum of investment, South Mumbai leads the pack, followed by the Western zone – primarily because of land auctions at BKC. The East zone attracted the least investments – most of them into defunct industries along LBS Marg. Interestingly, CIDCO at Navi Mumbai has also been able to mobilize massive funds through the auction of plots at different nodes. The level of infrastructure, social amenities and economic activities has pushed up the real estate prices of Navi Mumbai – and they are still rising.

From a city-level perspective, it is important to understand whether the large volumes of investments in land have actually delivered a proportionate development of real estate stocks in the city:

Prime Residential Unit Launches

The data indicates that about 2.5 lakh dwelling units have been launched in Mumbai over the last five years. Some of this stock has been constructed and delivered, while part of it is still under construction or at the approvals stage. If, for the sake of an argument, we consider the entire stock of dwelling units and the average investment for the land component per dwelling unit, it works out to over a million rupees.

In other words, the direct beneficiaries of these real estate investments are, at best, about 2.5 lakh households (considering one family occupying one dwelling unit) or less than 10% of the city’s population.

On the other hand, if we look at the investments made in the city’s infrastructure (which aims to cater to 100% of the population) the situation is very different:

Prime Infra Projects in Mumbai since 2005

Total investment (crores)

Monorail

 2,716

36 Skywalks

 735

MUTP Phase II

 5,300

MUIP

 2,648

Extended MUIP

 1,550

Mumbai Metro – Versova-Andheri-Ghatkopar Corridor

 2,356

Total

 15,305

The data indicates that the quantum of investments in mega infrastructure projects amounts to only 60% of the investments made in prime land in the city, approximately in the same period. If we look at the present status of these infra projects, most of them are stuck in various bottlenecks and running abysmally behind schedule. One of the main reasons for this is inadequate funds arriving far too sporadically.

On a hypothetical note – had the authorities had the kind of money that the private sector invested in prime land, the city of Mumbai would have been transformed much faster.

Going forward, the funds requirement for infrastructure projects will increase further. Many mega projects which are extremely critical in terms of enhancing mobility, clearing up traffic congestion and thereby improving the overall quality of life in the city have been planned:

To be added

Total investment (crores)

MTHL

 8,800

Worli Haji Ali Sea Link

 1,120

Mumbai Metro – Charkop-Bandra-Mankhurd

 8,250

Mumbai Metro – Colaba-Bandra Corridor

 9,400

Total

 27,570

The city of Mumbai needs additional investments of about Rs. 275 billion in the infrastructure sector over the next five years if these projects are to be completed on schedule. This is equal to the amount that the city has buried in its land. The paradox of the situation is that, despite sitting on such massive money resources, Mumbai is unable to generate to fund its most essential requirements.

Much of the investments in land, particularly in South Mumbai, have actually remained non-yielding. The complexities of the Development Control rules, the approval process and policy flip-flops have virtually kept the supply side down for several months. Investors have not been able to fully monetize their investments, and the end users have faced spiraling price rises despite economic slowdowns.

This would be an apt time for the authorities and policy makers to focus on breaking this deadlock. The need of the hour is to view real estate and infrastructure development in Mumbai cohesively, not as isolated phenomena. There are enough ingredients for solutions available within the system.

Buildings may get taller as Panel seeks higher FSI

The skyline of Indian cities could soar as the government considers permitting vertical growth with the aim of checking runaway realty prices and generating resources to upgrade urban infrastructure for future growth.

A Planning Commission steering committee, in its draft report, has recommended providing additional FSI (floor space index; the ratio between built-up area and plot size) as development rights, but said it should not come free of cost.

The panel said the charges for additional FSI and land-use conversions should be at least 50% of the circle rate in the area and should be determined professionally. It added that additional FSI should be permitted selectively.

The commission’s steering group on urbanization said the revenue from grant of additional FSI should be “suitably ringfenced for funding infrastructure projects to sustain higher FSI”.“The proposals, if accepted, would substantially increase availability of housing stock and moderate realty prices,” said an urban development ministry official.

Calling the present density regulations in Indian cities “archaic”, the report noted that Indian cities had the lowest FSI in the world. “This (densification) should be part of a balanced strategy for expanding the effective supply of prime land and, in the process, raising funds to finance urban infrastructure improvements,” the panel noted.

Commercial properties in Delhi witness stable values

Commercial properties in areas such as Paharganj, Jhandewalan, Motia Bagh and Daryaganj have witnessed stable values owing to numerous factors. Realtors believe that these are traditional areas and have old and dilapidated commercial buildings.

Secondly, since they are located in Central Business District (CBD) areas, roadblocks like traffic jams, uneven roads and poor connectivity are deterrents to growth here. That’s why these areas are seeing stable value trends with no major escalation or increase in the number of transactions, realtors said.

Praveen Sethi of City Properties said that capital and rental values in these areas are showing a stable trend. Another city-based realtor, Gaurav Bhatia from Properties & Properties said, “There are more queries than actual number of transactions. Availability of better commercial office space options in National Capital Region (NCR) such as Noida and Gurgaon is diverting buyer’s mindset.”

Balbir Singh, Chairman of Vardhaman Plaza reiterated that, “Once the problems like connectivity and traffic jams are addressed, the commercial values will take an upward trend.” However, there are some renovation projects also going on and old buildings are getting designed as per new standards to meet the demand but this will take some time.

To address these issues, there is a proposed plan of monorail in these areas within next 2-3 years. The plan is already approved and the basic work has also started, Singh said. This will speed up the travelling time to these areas and also resolve traffic issues.

Enhanced connectivity will definitely uplift these areas and improve the demand and number of transactions. Further renovated buildings with proper parking space, good infrastructure, security and other facilities will push the commercial property market, Sethi added.

The current capital values of commercial shop and office space at Pahar Ganj, Jhandewalan and Motia Khan is in the range of 9,000-30,000 per sq ft. With the proposed monorail plan combined with infrastructure facilities is likely to bring back buyers to CBD areas.

HDFC may reduce home loan rates soon

India’s biggest mortgage lender HDFC says home loan seekers can expect a 0.5-0.75% reduction in interest rates ahead of the festival season if the Reserve Bank of India reduces rates later this month.

“If market rates come down, it normally takes us two-to-three months to pass it on because our liabilities get re-priced,” HDFC’s managing director Renu Sud Karnad said. She said she was hoping that the central bank would reduce rates at its annual monetary policy review on April 17.

The RBI has raised interest rates 13 times since March 2010, by a cumulative 375 basis points in its efforts to tame inflation.

Costlier loans have forced potential home buyers to postpone their purchase decisions and have, in turn, impacted the real estate market. Homes sales in Mumbai have dipped by over 40% in the last one year while other cities have seen a 20% drop.

Karnad, however, said high interest rates have not had much impact on home sales falling in the Rs 20-50 lakh bracket, whether in big cities or Tier II cities, because the need and demand for homes in this price range continues to remain high. She said HDFC’s home loan portfolio has increased in the last one year, but did not share the numbers.

“There is no concern or worry among young, middle-income Indians wanting to buy a house except in Mumbai, which is expensive,” Karnad said.

While most cities across the country have seen steady home sales in the last few months, Mumbai has been a concern for developers as well as lenders. Karnad, however, said even in Mumbai sales are happening in the suburbs, where price points are still affordable.

Home loan growth in smaller cities too has been phenomenal. Cities like Baroda, Lucknow, Chandigarh and Salem have seen 30-40% 0growth in home loans. “These markets might be small and this growth might be on a smaller base, but the fact is that there is demand. What they need is better supply of homes,” Karnad said. She said that the market expects a 10-15% cut in home prices, which seems to be high. Karnad also pointed out that builders are faced with rising cost of construction. Prices of cement, steel and labour have grown in the last two months, she added.