Bangalore residential rentals stabilise

With the inventory levels going up across all micro markets, residential rentals are stable except in CBD and select other areas where high-end housing demand is predominantly driven by expatriates in the city. There are others who feel that rental market saw a hike by 20-30 per cent in the last one year before stabilising now.

In CBD areas, rentals are up by 8-10 per cent due to demand exceeding supply. There are realtors who say that the appreciation would be as high as 10-15 per cent due to the growing demand in central areas and the spurt in the influx of expatriates from Europe and US to the city.

The demand for leasing from expatriates is particularly for gated community development projects in proximity to international schools, says Farook Mahmood, CMD of Silverline Realty Pvt Ltd. The location varies depending on the work spot and availability of international schools for children. High end apartments in CBD areas and villas in areas like Whitefield drive demand where the rentals range from Rs 1 lakh to Rs 5 lakh per month.

Apartments in CBD areas command a higher price than other areas. Rentals range from Rs 20,000 to Rs 2 lakh per month for 2 BHK units depending on the location, proximity to landmark areas and amenities offered in the project. Similarly rentals for 3 BHK units range from Rs 45,000 to Rs 2 lakh per month, according to realtors.

A significant development is the expansion of commercial property market which in turn has boosted the demand for housing in the city. Even some of the call centre trainers are coming from abroad, according to realtors. Unlike earlier, the demand from expatriates for housing has gone up in and around the city.

For apartments, rentals are more or less stable except in a few areas where demand exceeds supply levels, says A Siddique Beary, director, Bearys group. Bangalore continued to top the charts with the highest office space absorption last year in the country with 11.53 million sq.ft. along with additional pre commitments of 5 million sq. ft for 2012. The influx of expatriates and the resultant demand for high end housing need not be overstressed further. The impact on high end housing especially from expatriates has resulted in rentals surging by 15-20 per cent in select areas, he adds.

According to Jones Lang LaSalle’s quarterly update, Bangalore market saw the absorption of 4,182 units in 1Q12 against 3,370 units in 4Q11, pushing the absorption rate up from 10.0% in 4Q11 to 11.0% in 1Q12. Unsold stock in the quarter totaled 32,978 units compared to 31,369 units in 4Q11, reflecting a vacancy rate of 51.1% down from 52.4% in 4Q11. This increase in demand was due to buyer sentiment shifting towards purchasing a property rather than paying high rents, as well as the entry of primarily investment buyers from other tier I and II cities.  XZ4UCQYVE5Y2

A total of 25 residential projects were launched across the city’s submarkets in 1Q12, offering 5,791 units in 1Q12 against 3,515 units in 4Q11. Meanwhile, eight residential projects comprising 1,009 units across different sub-markets were withdrawn from active stock as they were completely sold out.

Residential rents rose in 1Q12 due to the influx of people, mainly IT/ITES employees, into the city and are likely to increase further over the remainder of 2012 due to the expected improvement in IT/ITES employment.

Chennai retail mart buoyant

Chennai’s retail sector is gaining momentum with vacancy levels declining from 14.0% in Oct-Dec 2011 quarter to 13.5% in Jan-Mar 2012 quarter. The largest deal was by French Home furnishing retail chain Ebony Gautier, which took around 10,000 sq ft space in Express Avenue mall.

According to Jones Lang LaSalle’s quarterly survey, mall format stores in the CBD were in demand during the latest quarter. Canon Image studio, Gem palace, Lasya, Kryolan, Timex, Eye T world were some of the brands which occupied vacant spaces in Ramee mall during 1Q12.

Ground floor of office buildings continued to attract retailers, during 1Q12, Spectrum Shopper’s leased out around 1,900 sq ft of space in Ambit IT Park, Ambattur industrial estate.

Lack of new mall space helped high streets to gain healthy leasing during the quarter. LG opened two stores, one in Nungambakkam high road and another in Chrompet. Louis Philippe, Van Heusen and Zimson opened shops in Adyar, while Harley Davidson and Apple opened there stores in Nungambakkam. Roshan Lal women’s ethnic wear and Helios opened shops in Shanti colony, Anna Nagar, whereas Reliance Trendz opened its shop in Chrompet.

Supply

No new supply was added in the city during 1Q12. Ten’s square mall coming up in Koyembedu, is ready for fit-outs and expected to come up during 2Q12. This will add around 150,000 sq ft of mall space taking the total supply of mall space close to 3 million sq ft.

No sales transactions have been recorded in the retail malls sector over the past few quarters as new malls in Chennai operate in the lease model.

Due to limited size of the market, Chennai retail segment including high streets deliver high returns on investments, which forces the investors to hold on to their investments.

Outlook

With the Union budget putting more money into the hands of avid shoppers, retailers are bullish about the surge in sales in the coming months.

JLL expects vacancy levels to rise in the next 12 months amidst the supply of more than 2 million sq ft. of mall space. Though vacancy rates are expected to surge, absorption in the new malls are also expected to improve amid flourishing residential and commercial activity in the suburbs.

Rental and capital values are likely to improve in select pockets of suburbs and in prime locations, while they will remain stable in the peripheral areas.

Old TNHB flats to make way for high rises in Chennai

The Tamil Nadu Housing Board is gearing up for a massive redevelopment plan in which 2,238 old rental apartments will be razed at 17 different locations in Chennai. Most of these apartments are located at Nandanam, Saidapet, Foreshore Estate and Kilpauk.

The board will develop 4,691 highrise apartment complexes at these locations at a cost of 680 crore, said housing and urban development minister R Vaithilingam in the assembly on Tuesday. They will be rented out to government servants and public as per TNHB guidelines.

TNHB will also construct 400 rental apartments at Anna Nagar West Extension and Thiruvanmiyur at 60 crore for government servants and general public. The board will also carry out repairs of its old rental apartments at 10 crore.

The minister announced a list of projects to be taken up by the board this year. The board will construct 3,662 multistoreyed residential units in two phases at 812 crore at Sholinganallur. Similar projects will be taken up at Kancheepuram, Thanjavur, Trichy, Madurai and Tirunelveli districts at 43 crore during the current financial year.

The Slum Clearance Board will construct 2,882 tenements at 145 crore at Srirangam, Trichy, Vandavasi, Tuticorin, Ramanathapuram, Orathanadu and Chennai. Under the Rajiv Awas Yojana, 1,404 tenements will be constructed at Athipattu and Ambattur at 108 crore.

BMC to get a year to implement new property tax model

An ordinance to grant the Brihanmumbai Municipal Corporation (BMC) a year to implement the capital value-based property tax regime was introduced in the state legislative council for approval on Tuesday.

The ordinance was approved by the state legislative assembly on Monday evening and is expected to gain a smooth passage in the council as well.

Minister of state for urban development Bhaskar Jadhav sought the ordinance’s approval in the council on Tuesday itself, but a discussion on it was deferred as some members from the Opposition benches,who wanted to participate in the discussion, were not present.

While proposing to grant the BMC a year’s time, the state urban development department made it clear that “there will not be any further extension”.

The government has permitted the BMC to issue provisional bills on the basis of rateable value fixed in 2009-10. The government has also proposed exemptions for offices of all diplomatic and foreign missions in Mumbai for payment of water benefit tax, sewerage benefit tax and tree cess.

Implications of guideline value revisions in Tamil Nadu

The government of Tamil Nadu has revised the rates of guideline value of land in all zones, including residential, commercial and agricultural land across the state with effect from April 1, 2012. This revision comes after five years with the last set of values having come into effect in August 2007.

The revenue policy note, presented in July last year, reflected that this change was due to be ushered in and speculations were rife over the last eight months as to when the revision wouldcome into effect. In November 2011, the proposed revision of values for each region was put up for public opinion in all the Tahsildar offices and reviews were taken into consideration, before the current set of rates were introduced in the state.

The new values affect all types of land including agricultural, residential, industrial and commercial property in urban and rural areas equally. With a rise of almost 300% in many areas, the reaction to this revision has been mixed. There are three main aspects that this change brings in, the first being the prevention of black money and the loss of revenue to the state and country.

“The revision is a welcome move and is set to usher in a cleansing of the real estate industry and land transactions across the state,” states A S Shivaramakrishnan, Head, Residential Services, Jones Lang LaSalle India, Chennai, a premier international real estate consultancy firm. “The revision of the guideline values equaling the market value of land in most part across the state will greatly enhance the transparency index of real estate transactions in the city and promote investment and growth in a big way.”

A major concern in India is cash transactions in real estate deals, which is encouraged by the divergence of guideline value and market value. People often register the transaction at guideline value (sometimes as low as 20% of the transaction value itself), pay the registration and stamp duties based on the guideline value alone (affecting the buyer of property) and reflects the accounted portion equivalent to the guideline value alone for capital gains and tax purposes (affecting the seller of the property). With such high degree transactions happening in cash in most deals, it had become rare to find buyers or sellers insisting on a fully transparent deal. This led to huge revenue losses for the state exchequer. This is not only illegal, but also creates a vicious cycle of investment of black money in the real estate sector.

“Major legal reforms are still required with respect to property valuation and land acquisitions,” says RS Nambi, a Tax and Legal expert and advisor to the World Bank. “An ombudsman and valuation officer in every registering office to examine and evaluate the transactions, disputes and divergences between published values and the market can go a long way in ushering greater fluidity to real estate transactions. This revision of guideline values is the first step towards preventing the loss of revenue for the state and unearthing black money. We have to wait to see how the latest measures of the budget with respect to bringing in TDS on amounts greater than 2 lakhs will apply to property sales this year. The capital gains tax that the seller has to pay is calculated on transaction value or guideline value, whichever is higher according to law. “

The previous year saw close to `3,200 crores worth of stamp duties and registration fees being paid for property transactions between October 2011 and March 2012. The revision is expected to boost the revenue in the state this year to a figure greater than `8,500 crores in 2012-2013. Targets for revenue collections for the month of March were set for all the sub-registrar offices across the state by the Inspector-General of Registrations.

With expectations of a hike in the values, there has been a rush of registrations and many people who might have otherwise waited to conclude their transactions, were pushed to finish them before March 31. “With a high number of transactions having happened in March, the target of 21 crores set for the Neelankarai SRO was successfully achieved by the middle of the month itself,” states Vimala Jayakumar who runs a document services outfit in Neelankarai.

“Usually, there are around 40 registrations per day and in March it rises to about 60-70 per day. But this year, there was a heavy rush in the last two weeks of March, with more than 200 registrations happening per day.” This clearly shows that the revision of guideline values will not only promote transparency and usher in more revenue to the state, but it will also act as a mechanism to force people to complete delayed transactions all at once and bring in a combined revenue to the state, which has been starved of funds. It is estimated that the combined revenue of 1000 crores has been collected by the state for the month of March 2012 through these transactions alone.

The Inspector-General of registrations chairs the committee formed by different sub-collectors across the state to determine the guideline values. The proposed values were published in November 2011 and public opinion was invited. Accordingly, they were modified before coming into effect in April of this year. Says Vimala, “Overall, the new values reflect the market rates. Wherever people disagreed with the rates, appeals were submitted and they were taken into consideration. The older and newer guideline values have been listed by survey number, street and category on the official website of the Registration Department of Tamil Nadu (www.tnreginet.net) and the website itself mentions that values relating to 1.1 lakh streets and over 29 million survey numbers.

While it is a great move to bring in transparency in the state’s real estate industry, there are some concerns as to how this revision will affect the public and developers. With steep revisions of up to 270% in most cases, the question on how this re-evaluation of property will affect the common folk remains. The hardest hit areas are the centers of urban development and the heart of Chennai city. “In the peripheral areas, it is business as usual even with the hike in values. Similarly, for multi-storeyed buildings, the direct impact is not as high, since the undivided share values come up only to 20-30% of overall values. The significant impact is within city areas where the values have jumped up to unaffordable levels,” says AS Shivaramakrishnan.

“While the cost of land is already high in the city, the steep increase in guideline values will make it impossible for developers to be able to afford to get premium FSI for redevelopment projects. What this means is that, on old buildings that can come up for redevelopment with joint-development agreements between the owners and developers due to revision of the FSIs over the last two decades can be rendered unfeasible if the developer has to pay the kind of fees based on the new guideline values for the premium FSI that would be his profit centre. Any move to provide some incentives for redevelopment projects on 25-30 year old buildings are necessary to avoid bringing redevelopment to a grinding halt. The concern is that the move makes it all that more expensive and unfeasible for urban projects.”

“Similarly, peripheral development needs the social infrastructure to expand accordingly. In a city like Bangalore, this has happened in concentric circles and not in an unbalanced way like we are seeing in Chennai. With the city at a crucial stage of its metamorphosis, with major infrastructure projects like the metro in progress, a significant aspect that affects its citizens and growth itself is redevelopment of existing structures and buildings. New infrastructure is being built to raise a brand new city from the ashes of the former metropolis. This has been the story in cities all across the world, right from New York to Mumbai, where redevelopment has been key to boosting its growth ahead. Hence, while it is a positive move by the government to bring in equity in the values of transactions, it is important that the city and state authorities remember that the redevelopment of its buildings is necessary for growth. “

Construction industry moves from traditional to innovative building concepts

New eco-friendly engineered homes, building systems and technology are being introduced. We are moving away from the traditional method of construction towards the innovative concept of engineered residential homes. Noida-based Interior Craft has launched the unique concept of assembling partially constructed components manufacturing inside a factory. So, what’s different about this home?

Called Interior Craft Engineered (I.C.E) Homes, a sample building with this technology uses iron columns as supporting pillars, covered by shera board (fiber-cement composite) as substitute for cement, grade A steel beams, GI sheets, bison board for roof and membrane for water proofing, CFL and LED lighting etc. Propagating the need for green technology in all buildings, Interior Craft said that this building is ready within 3 months.

Eliminating the need of a large workforce and large turn over time, components such as supporting pillars, door head and roof structure, are built in a climate-controlled factory, away from the construction site and transported to the actual site for assembly. A structure built following this methodology is stronger, faster and economical as compared to buildings constructed conventionally.

Talking about the uniqueness of Engineered Homes, Anis Ahmed, Managing Director, Interior Craft said, “This home is durable and technically superior and has all the certifications of clearance as per the safety and environmental norms issued by the concerned authorities. Available at about Rs 2,600 per sq ft, the company has so far taken orders only for farm houses.”

G D Goenka’s farmhouse in Sultanpur, Delhi is the company’s next project. DC Architects are the design partners and Raj Nandini Estates Pvt. Ltd is the marketing partner.

Developers like M3M Ltd, Ambience Group, Eros Group have used Interior Crafts’ services like railing, gates, canopy, staircase etc. However, this is the first time when the concept of assembling a house at the construction site has been witnessed.

Pune property options offer value for money

India’s IT, educational and automobile hub is developing at a speedy rate, with improved infrastructure and a variety of housing projects, especially affordable ones. For home buyers, Pune serves as the next best destination for investment, say experts.

Looking at the eastern side of Pune, Kharadi, Wagholi and Hadapsar are the areas that are most preferred as residential destinations, offering a range of options for buyers.

Wagholi in the East, Undri, Pisoli and Mohammedwadi in the Southeast and Dhanori, Charholi in the Northeast are the upcoming locations in Pune, says Shantanu Mazumder, Branch Head, Pune, Knight Frank (India). He adds that Wagholi and Undri are the destinations to watch out for the highest return on investment and maximum buying of residential property is happening in Wagholi and Undri.

Prathamesh Dubhashi, who recently purchased a flat around Kharadi, better known as Kalyani Nagar Annexe, says, “Since the rate in Koregaon Park is skyrocketing these are the areas that one can look into if one wants to purchase a flat in this part of the city. The flat that I bought was within my budget with all the amenities.”

Prathamesh explains, “Kharadi and Hadapsar were a few of the areas that I looked at while buying the flat. They have come up very well in the last two or three years with good residential as well as commercial projects emerging. One can expect a lot more development in the next few years. From numerous malls and excellent hotels that provide good eating options on Nagar Road to entertainment options in Koregaon Park, everything is in the vicinity. It’s close to the railway station as well as the airport.”

“For investment purposes Kharadi is the best option with a lot of upcoming projects that suits the budgets of all. Now is the time to invest in these areas as the prices are expected to escalate greatly in the coming few years.”

For Kharadi, the proximity factor plays an important role. “The upcoming locations are Kharadi and Wagholi,” says Sanjay Bajaj, Managing Director – Pune, Jones Lang LaSalle India.

Citing the reasons for these areas, Bajaj says, “Kharadi has come up because of its proximity to EON, Magarpatta, Commerzone, Gigaspace and Espace IT parks as well as its good connectivity to the airport, railway station and other places. It also has the best of Pune’s malls like Phoenix Market City, Inorbit, Jewel Square and Amanora in its neighbourhood.”

“Wagholi presents buyers with a clear affordability and value-for-money factor and also has extremely high investment potential.”

Pune west has also seen great improvement as the east and the areas responsible for this are Wakad, Kondhwa, Baner, Hinjewadi, Pirangut, Balewadi and Tathawade.

“The upcoming locations in the west are Wakad, Balewadi and Tathawade, and Wakad is one of the destinations to watch out for investment. Maximum buying is happening in Wakad and Hinjewadi,” says Mazumder.

Abhishek Rajagolkar purchased two flats in the last few years, both in the western corridor of the city, Hinjewadi and Pirangut. He says, “I needed a spacious place and the price ratio worked better in the flats available in these areas. It is the fastest developing part of the city. The IT and automobile boom has led to some very good projects in this area. Purchasing property here has been a good return on investment for me. It’s also closer to Mumbai. The upcoming industries and the proposed airport at Chakan will also foster the growth in this region. One big investment and this region will come up extremely well. Maximum buying happening in Pune as of now is Hadapsar and Kharadi in the eastern side and Baner, Wakad, Hinjewadi, Pirangut on the western side.”

Bajaj says, “Hinjewadi has two market drivers – its proximity to Mumbai and the employment opportunities that IT giants like Wipro, Infosys, Cognizant and Tech Mahindra have created in this belt.”

Shruti Sengupta purchased a flat in Kondhwa. She says, “We wanted a flat in this part of the city as its closer to my office. The rates in this area were lower than most of the surrounding regions. It is also very peaceful and full of greenery which attracted us a lot. It also offers easy accessibility to M.G Road, Koregaon Park. Also, it’s a self-sufficient area with malls and eating joints near-by and railway station and airport at vicinity.”

Ravet has also come up and has benefitted tremendously. Stating the reasons for the improvement, Shveta Jain- Director, Residential Services, Cushman & Wakefield – India, says, “The development in the area is in a much planned manner. Located in close proximity to Mumbai-Pune Expressway, it is considered to be an entry point of Pune. This area is being looked forward by the information technology (IT) professionals, as well as by the industrial work force, as it has easy accessibility to the Hinjewadi IT Hub, as well as Pimpri-Chinchwad industrial belt. The construction work on the 45-metre, grade separated, and non-signaled four lane Bus Rapid Transit System (BRTS) route joining Ravet to the up market Aundh is in full swing. This road will bring down the travel time to Aundh to less than 10 minutes. The industrial belts at Pimpri, Chinchwad, Chakan and Talegaon are now within easy reach from Ravet. With quality electric supply, as well as water supply, the precinct of Ravet holds an edge with respect to the other locations.”

Mazumder concludes saying, “With the growth of the economy in Pune, residential property rates in Wagholi, Undri, Wakad and Hinjewadi will only head northward.”