So, Where’s The Real Estate Market Headed ?

It’s been almost three weeks since a word that’s usually been part of an economist’s vocabulary went viral, so much so that it could soon be the most mentioned word of 2016.

Demonetization. A word that’s part of every conversation, and every newspaper’s front page. It’s hit us, and hit us hard. For those who’ve had some sort of association with real estate, it’s hit even harder. And most Indians have some sort of association with real estate.

So, where’s the real estate market headed now?

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I know lots of you have an answer ready. It could be a short, one word, direction specific answer. You’ll probably counter question me next – Does such a question really need a blog post to answer it?

But what if I asked “which real estate market?’  Residential or commercial? Primary or secondary? Metros or small towns? Luxury apartments or affordable houses? Malls or high street?

The fact is that the real estate market is fragmented. And every sector will respond or has responded differently to demonetization.

Is the market headed south? Yes, it is. A correction is apparently going to happen. But how much and when?

How much depends on which sector we’re looking at. The primary residential market has already been in the grip of a slow-moving correction for almost two years. We had seen signs of it bottoming out over the past few months, and it was now time for a revival. There’s talk about Banks being with flush with funds, and a predictable interest rate cut will lead to easy lending, thus creating a demand for the white money driven primary residential sector. But for that to happen we need a new set of brave buyers to step forward and we also need the secondary market to correct more, and correct first.

That isn’t difficult. With cash drying up, most secondary market sellers, most of whom have made a profit (not extraordinary profits) will settle for all white deals, compromising on the cash part. The correction will thus happen by default. However, this will happen in markets like Gurgaon and Noida where high circle rates have always ensured that the cash component in resale deals remains low. A fall in secondary market rates will put pressure on developers to reduce rates till wherever possible.

Metros like Delhi and Mumbai where the cash component has traditionally been high are looking at a long period of uncertainty with buyers and sellers unable to agree on how to transact a deal. It’s important here that the money transiting through Banks doesn’t get withdrawn as cash. It needs to be leveraged by buyers and their lenders to ensure all white deals. Though they’ll be reluctant, sellers will have to compromise on rates. The percentage of compromise could be anything from 15 to 20 points.

But will a steep price fall create a demand? It will, if the fall isn’t too sudden and too soon. However, Indian investors and developers have a lot of inherent stubbornness, so they won’t be yielding or selling out soon. What’s going to make them come to terms with price cuts is the effect that demonetization has had on their primary businesses. If they need to put in funds, they’ll have to raise funds, and so they’ll have to sell out a part of their hoarded collection of real estate assets. And a really good real estate asset is always a good asset for a buyer on the look out.

So contrary to public perception, demonetization has affected every sector, not only real estate. But the public’s perception also is that the effects of demonetization are going to be positive, and if that holds true, then the real estate sector will come out corrected and reformed.

What about the rest of the real estate sector? Will talk about it in my next post.

 

 

 

 

Godrej Arrives In Greater Noida With Golf Links Villas

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Godrej properties, the real estate arm of the century old Godrej group, has arrived in Greater Noida. No, they’re not launching yet another high-rise apartment project, but something that’s closer to the ground.

Villas.

Villa’s that will encircle a golf course. A golf course that’s different from others. Ok, it had to be different from the golf course in its immediate neighbourhood,which is part of a well admired premium destination in the NCR. More about that later.

Talking of the NCR, do you know that what’s perceived as one of the furthest town in the NCR is actually the nearest if you measure distances in driving time, and not kilometres? It’s also undisputedly, the most beautiful town in the NCR. It actually doesn’t look like everything else in the NCR.

Don’t believe me? Drive down the expressway that takes you to Greater Noida. 30 minutes after you’ve paid the DND toll you’ll arrive at a different world. The world that Godrej is now arriving in.

Greater Noida and Noida started out as twins. Noida grew rapidly, fuelled by commercial development in its industrial sectors and residential developments along the Noida- Greater Noida expressway. Greater Noida, however grew slowly, it’s status changed from  being a twin to a younger sibling, however with a distinct identity – Wide, tree-lined roads. Mid rise apartments. A score or so of private universities and colleges.  Large industries and IT campuses. Spread out residential sectors. Sports arenas. It’s also the takeoff point for the Yamuna expressway. The takeoff word also reminds of the proposed Jewar airport, which most likely could soon be a reality. But what’s close to being a reality is the Noida- Greater Noida metro. In an advanced stage of construction, it’s your constant companion as you drive down the expressway.

The metro rides close to the 100 acres Godrej project site which is ringed by developed societies all around. The very expensive Jaypee Greens, with its magnificent golf course is the immediate neighbour I referred to above.

But surprisingly, Godrej Golf Link Villas are rightly priced. A 2400 sq ft villa built on a 100 sq yards plot has an approximate all-inclusive price of Rs 1.3 crores. A bigger 125 sq yards villa is priced close to 1.55 crores. There’s a bigger sized premium luxury villa too, 4400 sq ft built up on 220 sq yards. That Himalayan golf course that runs through these 100 acres is an intriguing attraction along with some sports and recreational facilities on offer. Why is it called Himalayan? Something we’ll find out soon.

But what we know is that Godrej Villas could turn out to be a good long-term investment. If you’re an investor who’s been holding onto to funds for the last couple of years, this could be the project where those funds could be parked. For those weary of living in apartments, an appropriate alternative. Looking for a peaceful, secure place to return home from work? This could be it.

Godrej have timed it right. Noida’s former twin and present day sibling is poised to grow up. Just wondering, from being Greater Noida will it someday become Greater-than-Noida?

Keep Calm And Keep Selling Real Estate

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Do these Keep Calm memes really have a calming effect? Or are they meant to be just smiled at and swiped away?

Can you really keep calm and keep selling real estate in these times?

There are good times, there are bad times and there are ordinary times. If you’re a real estate salesperson or specifically speaking, a real estate broker like me, you’ll guess which of these times are we experiencing right now. These are definitely not good times to be selling real estate, and whether these are bad times or ordinary times is something which will be determined by your attitude. And believe me, it’s your attitude which will help you get through these times, whatever they are.

But first, a little bit about the good times. What exactly were those? When the good times came, we thought they were better times than before. It’s only now, in hindsight that we’ve classified them as good times. What brought them about?

Real estate has periods of volatility. It has surges of  demand driven by the collective belief of investors, veterans or newbies, that the price of every bit of property bought now is bound to rise in the future. When fuelled by a flurry of new developer projects this demand remains unsatiated, bringing in hordes of investors. My first sales in real estate coincided with the beginning of this boom, sometime in 2009. And most of those sales were from walk-ins at sites. Eager and confident investors, in a hurry to ride the boom. From site walk-ins to office meetings to references, the sales kept pouring in. It was also a very competitive time but in spite of that, almost everyone made sales, and more importantly, money.

But there was always that uncertainty about how long the good times will last. We all knew that this is a cyclic sector and things can and will reverse suddenly. In 2014, that’s what finally happened. But no one wanted to believe it. It was like sitting in a cinema theatre, when the lights come on and the usher comes up to you and says “Hey, the show is over, get going”. We look at each other and say “Wasn’t this the interval?”

Now, whether the show is over or it is the interval again depends on your interpretation and most importantly, your attitude. If you walked out of the theatre, you walked out of real estate. If you stayed, you’ve been experiencing the longest interval ever in real estate.

So, how do you get the show running again? How do you keep calm and keep selling real estate?

First of all you should stop thinking about the good times, the sales you made and the money you generated. But don’t forget those times completely. For there’s something else also that we generated. Goodwill.

If after closing your sale you managed to follow-up with good after sales services, you probably made an acquaintance for life. Those acquaintances, those loyal clients of yours have stayed connected with you. Whether they’re stuck with unable-to-exit investments or were lucky to  have cashed out, you’ll notice they’re always eager to chat about the present day market conditions. So keep those conversations going. They might have turned cautious now, but they or someone in their family or circle of friends is a potential buyer. And you’re more likely to close a deal with such a buyer than with someone who’s fishing all over the market. So keep calm and keep talking.

Now real estate has always been a very uncertain trade. Even in the good times after you’d made a sale, you were unsure when your next sale would happen. You had to start from scratch, from zero. But somehow, you’d be off the mark soon. This is now a different innings. Getting off the mark is getting difficult for you’ve been stuck at zero for too long. But keep calm and face up. If you’re hungry for runs, they’ll come, if not in fours and sixes, they’ll come in singles and twos. But the days of being a solitary player are over. To score now, you need to be part of a team, sometimes a batsman, sometimes a runner and sometimes a 12th man. The independent real estate consultant aka broker will soon be a marginal player in this sector. So keep calm and be part of a real estate sales team.

Is being just part of a real estate sales team enough to generate sales? Not necessarily. I’ve found that clients have become increasingly confused about what they’re looking for. We could blame it on the fact that it’s now a buyers market and a client is in no hurry to close a deal. They’ll also embarrass you by possessing more knowledge about the projects you’re driving them around to. Are you in your eagerness to close a sale discussing every available project in your city? Don’t do so. Stay focused on a few reputed, remunerative projects. Stay ahead of your client. Keep calm and keep focused on what you know.

The biggest advantage of being part of a sales team is that you’ll get to sell an exclusive project picked up by your team from a developer.That does away with half the competion. One half still remains, those are your colleagues. They’re friendly competion, you’ll win some, lose some and share some sales. All that’s there to be done is to create a buzz about this exclusive project.

A buzz? Now that’s another post !

At the beginning of this post I mentioned attitude. It’s a metaphorical synonym about keeping calm. So, keep calm and keep selling real estate. The sales will happen.

 

 

 

 

 

 

The Big Real Estate Shakeout Is Coming

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Will 2016 be the year when the big real estate shakeout happens?

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Here we are, expecting a turnaround but instead are about to run into something else. Something that might actually be good for the real estate sector. The big shakeout.

There’s been some good news. Residential sales are up across India on a quarter to quarter basis, but unsold inventory keeps increasing. This includes both under construction and ready to live units. So, what’s selling? What’s in demand? Just two things, ready to live properties and office space. We’ll come back to that later.

Real estate price have fallen over the past two years, but the decline has been so slow that it’s just not registering in people’s minds. You can’t blame them, when property prices zoomed, they rose sharply and stayed at a steady level. The reverse didn’t happen, but what happened next was a time correction. Sadly, its taken too long to be noticed.

It’s time investors, veterans or newcomers, sat down and considered what’s going on. It’s also time that developers seriously worry about what’s going to happen next.

Coming next, is the big real estate shakeout.

For property buyers, the current rates are as low as you’ll get. There may be a few distress sales available, but what hasn’t been sold till now will go off the market. A lot of investors have reconciled to the fact that they’re now virtually married off to their investments, and will have to wait for years before they consider parting with them. So, those premium properties won’t be available in the secondary market. A lot of not so attractive properties, in under developed locations or unfinished projects, will be always be available, but who’ll risk buying them? So, those older, veteran investors will be forced to stay away for a long long time. The first shakeout.

Now, if you were a first time investor who bought property a year or two ago, or even recently, you’ll see some limited appreciation coming in over the next two years. That’ll make you confident to buy again, it’s ironical what a small ray of hope can do. You are now the new investor, and once there are a few thousand such people we’ll see the market moving upwards again. The second shakeout.

Among developers, we’ll see a silent consolidation. Companies, or rather brands such as Godrej, Tata and a few more will find small developers eager to join hands or what’s even more likely, hand over project selling and development to them. We’ll see launches at rates which will make us look twice at an advertisement, and when it’s been offered by a reputed large developer we’ll probably want to check out the details. The branding of real estate is about to begin. This is the most important shakeout.

An unfortunate result will be that many small developer projects will get delayed or stalled, adding to the widespread negative perception about this sector.  Among these, projects selling smaller sizes, catering to affordable housing, will find the going slightly easier.

Speculative buying won’t return. We’re going to see the maturing of the real estate market. We’re going to see a steadying of secondary market rates, and a lot more demand for office space, resulting in a lot more construction for office space.

This is shakeout time in Indian real estate. We had it coming.

 

The Real Estate Bill Impact On Ordinary People

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Manjula Chaturvedi, 64 has had a smile on her face since morning. Vishal Bhagat, 39 is particularly cheerful today. Sanchit and Payal Sinha, both 28, have scheduled a busy weekend for themselves. Suresh Anand, 53 is on his way to office, earlier than usual.

This is an unusual day for these five people. There’s news been trickling in since last evening. A long pending piece of legislation has finally been passed by the Rajya Sabha. The Real Estate Regulatory Authority Bill, RERA is on its way to becoming law.

Manjula, a retired teacher has accumulated about 43 lakhs from savings and her late husband’s retirement payout. Two years ago she had decided to invest in a high rise apartment project in Greater Noida, but then most friends and relatives advised her to stay away from the real estate sector. They caustically remarked her funds were safer with her banker than with a builder. Safer maybe, but they were actually diminishing in value. While she was aware about the kind of returns real estate can yield in the long run, she was particular that her money be invested securely, and safeguarded somehow. And then, this morning’s newspaper headlines brought a smile to her face.

Suresh Anand had been preparing for this day for almost a year. He was aware of every clause in the RERA bill. He had kept a track of every proposed amendment, and knew of the pressure exerted by the builders lobby while the bill was being drafted. After all, he was part of that lobby.

Vishal Bhagat had also been tracking the RERA bill journey with great interest. He knew the passing of this bill just might be the catalyst that would turnaround the depressed real estate market. For a serial investor like him, a upswing in market rates during the course of 2016 would help him exit from a few under construction projects giving him fresh funds to invest in newly launched projects. Newly launched and covered by the RERA bill provisions.

Sanchit and Payal Sinha are both corporate executives, living in a rented apartment in Gurgaon. Their housing loan was swiftly approved an year ago, and they’d been getting calls from broker and developer offices offering attractive projects to invest in. But Payal was clear that she didn’t want to invest in a flat with an uncertain delivery schedule. She also didn’t want to sign on a one sided builder buyer agreement. A few months ago she had told Sanchit that the passing of the RERA bill was just a matter of time. And yesterday, that time arrived.

For these five people, and a few million more across India, a timeline now divides Real Estate – A pre RERA era and more importantly, a post RERA era.

Manjula Chaturvedi is aware that out of every cheque she hands over to a builder, 70% of its amount goes into an escrow account from which funds can only be used for that particular project. Payal and Sanchit realise that this will ensure that their flat, when booked, will get delivered in time. Suresh Anand wasn’t too happy about this, he’d have preferred a 50% limit, but then non diversion of funds would mean happier customers who’d again invest in any new project of his.

Sanchit is reassured to know that every builder will have to file details of all approvals with the state regulatory authority, clearly mention the carpet area, take responsibility for fixing structural defects for up to five years, and set up an allotees association within three months of handing over possession.

There’s one provision in the bill that has Vishal Bhagat very relieved. Whenever his installment payment got delayed he’s had to pay penal interest @ 18 to 24 percent to the builder. However on those projects whose handing over is delayed, and he knows all of his are running behind schedule, the builder has got away with a measly penalty of a few rupees per square foot per month of delay. But now he’ll be on a level playing field with the builder. The rate of interest payable in case of default or delay will be the same for Vishal as well as the builder. Vishal now expects speedier construction in new projects. He also hopes the ambiguity about the bill’s provisions being applicable to existing projects gets sorted out soon.

But Suresh Anand is against RERA being applied to under construction projects. He feels he already has a lot of work cut out to meet the bills provisions. But somehow, he’s upbeat. He foresees a revival in the market.

That could, and will definitely happen. Payal and Sanchit have scheduled a visit this weekend to one of Suresh Anand’s new housing project site which is being marketed as RERA complaint. Maybe, Manjula might be a visitor there soon. Vishal Bhagat was once a regular investor in Suresh Anand’s projects. His serial investor instincts have been reawakened.

 

 

 

 

 

Get Real On Real Estate

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Are you someone who’s spent 2015 hoping that before the year ends, the Indian Real Estate market will suddenly surprise you by turning about.  Somehow, magically?

Don’t hope. It’s not happening.

2015 was similar to 2014. 2016 could also be similar. Of course, most investors would hope otherwise. Everyone connected with Real Estate in India would hope so too. Developers who had bought large land parcels on which they’d launched a number of attractive projects, Investors who went on a booking spree in these projects, Real Estate consultants who urged these investors to quickly close deals, everyone’s got stuck in this quick sand of stagnancy which swiftly broke down the perceived unshakable foundation of Real Estate as an asset class.

Did we see it coming? No one did or maybe no one wanted to. This was one long Bull rally whose reversal seemed impossible. On a macro level Real Estate is so much like the stock market. In the latter, trends can reverse in a matter of hours. In the former, trends can take years to reverse, so many years that no one would remember the last reversal. Now, when was that?

2008. Remember how the housing bubble burst?

It’s history. Who cares? The market bounced back, right?

But what really happened next? A lot of affordable  projects were launched in the residential sector. The commercial sector, except for Malls, got ignored. Some developers launched commercial projects in far off areas, with an assured monthly returns commitment. As long as the market rallied investors got these monthly returns while the projects crawled along. In the residential sector, money began chasing money. Projects were sold out on launch, the secondary market saw unexpected appreciation. You could book and exit in a few months time. And then reinvest again. And again repeat the cycle. And then one day, you couldn’t exit. That day turned into months, and now it’s been a couple of years.

When sellers become their own buyers an implosion is bound to occur. When developers see their funds drying up, they go super slow on construction. When an end user can’t shift into that Flat or office he booked years ago,  they’ll surely add their bit to the already negative perception about Real Estate.

So what’s happening now?

We’ve begun to see distress sales, we’ve started to hear distressed voices. This is when the market starts to bottom out. Investors and developers have inventories which they want to off load. Some desperately, some discreetly.

It’s time to get real on Real Estate. It’s time to buy Real Estate that’s real. Real enough to live or work in right away. A ready apartment, a ready office or shop. Buy it. Live / work in it, or rent it out. The rental market is booming. But that’s another article.

Get real on under-construction projects too. The journey from construction to finishing to registration can, and will be painfully slow. Keep looking for an opportunity to exit.

If you’re someone who’s sitting on funds to invest, then look beyond the metros and large cities. There’s very affordable land or realistically priced housing projects on offer there. If you’re willing to stay invested for a long time, you’re bound to get a return.

There are always some unknown opportunities available even in large cities. For example, if Delhi’s L Zone housing development gets all its clearances soon enough, this could just trigger off that Real Estate reversal that everyone’s hoping for.

2016 would then have a lot to look forward to.

 

Will Housing Go The Dotcom Way ?

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This article is not about housing.com, the realty portal that’s been much in the news recently. Let’s split this very user-friendly domain name and ask a simple question. Will housing go the dotcom way? Would you buy a house online, just as you’d buy a pair of shoes, or even a sofa set?

Let’s assume you’re looking to buy an apartment in a newly launched project.  You’ve seen that half page newspaper ad or have been chased by an online pop-up one and have now decided to drive down to the developers site. If you’re visiting one in Noida, then the drive’s a breeze, however in Gurgaon you’ll find that the final approaches to a few sites will severally test your vehicle’s shock absorbers. Anyway, you’ll finally arrive at a fenced off location which has a makeshift site office, and a couple of hoardings. You’ll also be surrounded by a few friendly brokers eager to show you around. By the way, if you’d have learnt about this project from your existing broker or someone who texted or cold called you, you would have been driven to the site.

Within a few minutes, the broker will reel off all that there’s to be told about the project. This done, he’d offer you a good deal too. A good deal need not necessarily be about the best rates available; it’s also about the follow-up services. But that’s another article.

So, you’ve been there, checked out the location, the approach and have formed a fairly good idea of how this project will look like in a couple of years. You’re now ready to fill up a booking form and write out a cheque. The broker solemnly hands you a ballpoint pen.

But what if this property was available to be booked online? Tempted by that persistent pop-up ad, you would have clicked onto the developers website and would immediately be drawn into a series of impressively designed pages. Site map, floor plans, price lists and a link to Google maps for the location. There’s also a CGI walkthrough of the project. And finally, a link to pay the booking amount online.

So, there you are staring at a web page, wondering whether to click on the payment option. You have been clicking on such links regularly to buy shoes and even once, a sofa set. But a house?

The chances are that you’ll shut down the web site and reach out for your car keys.

So, will housing ever go the dotcom way?

There has been a small beginning. A few properties are being bought online, a small fraction of the huge Indian property market. The buyers are mainly internet savvy consumers or a few NRI’s.

Let’s assume that a new housing project has been offered for online sale by a very reputed developer at a very good location. There’s a positive buzz about the project too.  Will you now revisit that payment page? Maybe not. At least, not yet.

What if the price offered online was much lower than that quoted by the developers sale team or your broker. That would definitely make you click on the payment link. But that link will not be available on the developers website. Where is it then?

We all know that most products are attractively priced on online shopping websites. The reasons could trigger off an online vs offline marketing debate, so we’ll steer away from that now. Your intended property could be available on a popular site like Snapdeal or Flipkart or even at a specialty realty portal like Housing.com at an eyebrow raising price. Would you buy it now? YES, you would.

It’s a win win situation for everyone. The sale adds to the GMV of the online retailer, the buyer gets a satisfactory deal and the developer besides getting a sale also gets an exposure to the very large customer data base of the online retailer.

The initiative to list a property online at such a portal has to come from the developer. They also can’t afford to antagonise brokers who provide most of the sale volumes at present. And online sales volumes won’t go up until the rates are attractive. It’s going to be a tough balancing act for developers.

It will take a while for buyers to move onto buying properties online. Many people still prefer to view and be told about a property rather than just read about it.

But eventually and inevitably, housing will go the dotcom way.