Track2Realty Exclusive:

The award winner in any given area has to have a crowd pleasing (read customer satisfaction) choice and not the whims and fancy of the organisers. Has any of the award jury in real estate ever gone to cross check the customers’ experience of these realtors? Most of the award winning realtors have piles of cases pending, ranging from law enforcement agencies to consumer courts.

Since many of the developers have not been able to meet up with the growing demand of the discerning home buyers, they seem to have taken a trophy route to glory which, at times, comes handy to impress the end-users and the investors in the market.

Most of these awards have absolutely no evaluation procedure to comply with the users’ experience. As a result, despite of bagful of trophies in the kitty, realtors are often short of consumer confidence.

If CIA could rig a Nobel Prize in 1958, Indian realtors’ sense of sponsored glory is not going to hurt the global economy or polity, at least. It may hurt the greedy investors have already burnt their fingers in the Indian realty market, but where such awards are going to hurt the most is the gullible home buyers who often take the credibility of the developers on sheer face value that has stamp of award writ large.

Track2Realty:

Prominent main streets of Delhi NCR like Connaught Place and Greater Kailash I, M Block markets witnessed expansion and entry of prominent international brands leading to a stable to upward rental trend in the rental values.

Due to healthy demand in Connaught Place, a sharp rise of 12% was witnessed over the previous quarter. The values in other markets remained stable with an upward bias owing to limited main street space availability.

Steady demand and expected churn is likely to push up the mall rentals in South Delhi and Gurgaon and main street rentals in Connaught Place (Inner Circle), South Extension I & II.

Driven by the interest from luxury retailers there were some significant few transactions in malls. Select quality malls in South Delhi and Noida witnessed rental appreciation.

Dearth of quality mall space and high demand caused a 10% q-o-q appreciation in Noida’s mall. South Delhi Mall space also registered a growth of approximately 2% in the same period owing to lease expirations and consequent churn in mall destinations.

Overall vacancy levels in malls dipped to 15.8% on account sustained leasing action in both main streets and malls. However, NCR was the only city to witness a marginal rise in mall vacancy level of about 1% over the quarter owing to increased in availability primarily in malls located in the peripheral locations. There was a deferment of approximately 500,000 sf of mall space in Delhi NCR now expected to be seen entering the market in the next few months.

Jaideep Wahi, Director, Retail Agency, Cushman & Wakefield India said, “Foray of international brands into premium malls and main streets is a trend that is here to stay in the Delhi NCR region. Superior quality retail options with ample visibility and considerable frontage in malls and main streets alike will see strong transaction activity. This will be responsible for escalating rentals in both main streets and malls. Transaction activity in niche segments like luxury and jewellery will gather further momentum. Food & Beverages segment is another segment to watch out for; organic growth is likely to happen not only in prime, but also upcoming locations.”

Nationally, there was only one mall of 1 million sq. ft. that got operational in Chennai while nationwide vacancy in mall spaces improved marginally by 1% over the last quarter. Activities were mostly concentrated on mall spaces rather than main streets due to non availability of quality space in the main streets.

This quarter witnessed the deferment of 5 malls amounting up to nearly 1.73 million sq. ft. with Chennai witnessing the deferment of 2 malls amounting to 530,000 sf.  While Pune witnessed the deferment of 1 mall of 700,000 sf mall space, NCR and Bengaluru witnessed the deferment of 1 mall each of 500,000 sf.

                                                                                          Source: Cushman & Wakefield

RETAIL RENTAL MOVEMENT IN DELHI NCR Q1 2013 (QUARTER ENDING MARCH 2013)

                                                                                          Source: Cushman & Wakefield

]]> http://www.track2realty.com/connaught-place-main-street-rentals-increase-by-12-noidsas-mall-rise-10-cushman-wakefield/feed/ 0 http://www.track2realty.com/omaxe-limited-promoters-to-dilute-stake-on-may-21-at-rs-148-per-share/ http://www.track2realty.com/omaxe-limited-promoters-to-dilute-stake-on-may-21-at-rs-148-per-share/#comments Tue, 21 May 2013 10:18:04 +0000 Track2Realty http://www.track2realty.com/?p=8600 Track2Realty: Constellation Capital Ltd and S.A. Finvest Ltd, the promoters of realty firm Omaxe Limited, have fixed the floor price for its offer-for-sale (OFS) at Rs. 148 a share.

The OFS, to take place on May 21, 2013, will see promoter companies Constellation Capital Ltd and S.A. Finvest Ltd; offload 25 lakh equity shares each of Rs 10 each, aggregating to 50,00,000 equity shares (representing around 2.88 per cent of the paid-up equity of Omaxe Ltd). It will take place at the separate window of the BSE and shall commence at 9.15 am and shall close the same day at 3.30 pm.

The OFS is being launched to meet market regulator SEBI’s norm on minimum 25 per cent public shareholding by June 30for private sector listed companies

As on March 31, promoters had 89.14 per cent stake in the company. Thus promoter companies will sell a total of 50 lakh shares, worth Rs 74 crore, on May 21, through the offer for sale route (OFS). After the sale of 50 lakh shares, promoters’ stake would come down by about three per cent to about 86 percent.

Track2Realty Exclusive:

The issue is when the award is being thrust upon by the industry stakeholders and the developers ever ready with a “beg, borrow or steal” spirit, the question of ethics and objectivity more often than not takes a back seat.

Sachin Sandhir, Managing Director-South Asia of RICS agrees that there definitely is an element of subjectivity and a fine line, when industry stakeholders organise awards – as it can lead to a conflict of interest.

“There are some bad examples that exist, however in the long run such awards cannot remain sustainable and will find few takers. Only those awards that provide an equal opportunity to all competitors and contemporaries, which are based on stringent evaluation criteria and a transparent process and backed by a reputed and respected jury panel, will be able to make a long standing mark on the industry. Only such awards will instil trust, draw the respect of stakeholders and be valued by the industry and consumer alike,” says Sandhir.

Ashwani Prakash, Executive Director of paramount Group believes the sector is going through revolutionary changes and it will be more creditable if independent awards are also instituted rather than just industry stake holders organising it. He, however, defends such awards saying while confirming an award to a project the USP and qualities of the projects are also revealed by the awarding organization. Buyers being a well-informed group nowadays, after going through such information evaluate the project and naturally derive confidence which ultimately affect the buying psyche of a buyer.

“An award to any real-estate project is conferred after it is evaluated on different yardsticks by the awarding panel. Any award conferred on the project definitely adds value to the project and at the same time explains the USP along with the other specialties of the project which had made the project an award winner. An award to a project at the first instance is a brand driver, once the brand is established and the philosophy of the promoter-developer and the quality of his product is known to the market it also becomes a sales driver,” says Prakash.

However, any neutral observer who has not been exposed to the murky world of real estate can make out that the awards, if not completely rigged, has got categories just so narrow that pretty much everyone comes out with an award.

How else could one justify a small developer with a standalone mall in Ranchi of the size of a local shopping centre coming out with a trophy that suggests he has innovation as his claim to fame in realty business?

…..to be continued

Track2Realty Exclusive:

Vipul Bansal, the Joint Managing Director of Mumbai-based Indiabulls Real Estate, who spent seven years with Indiabulls group, joined another developer DB Realty in Mumbai as its Chief Executive.  Rajesh Jaggi, Managing Director of Ashok Piramal Group Company Peninsula Land who was with the group for 14 years, moved to Everstone Capital, a fund management company promoted by Sameer Sain, as Managing Partner of the real estate business.

Among the real estate funds, Ramesh Jogani, Managing Director and Chief Executive of Ajay Piramal Group’s Indiareit, quit the firm to set up a venture. Jogani was a property developer before joining the fund manager.

Shishir Baijal, Partner, Everstone Capital, joined Indian arm of global real estate consultant Knight Frank as Country Head and Managing Director after its Chairman Pranay Vakil retired and its Vice Chairman Pranab Dutta was made the Chairman.

Even consultants have seen top level changes. In May, Sanjay Dutt, the Chief Executive at Jones Lang LaSalle (JLL) quit to join another consultancy Cushman & Wakefield as Executive Managing Director. In June, JLLI announced it had hired Cushman’s Anurag Mathur as its new CEO, Project and Development Services and Head, Emerging Businesses.

The question is why so much churn in a sector that craved for professionals to bring on board in its quest to emerge professionally driven only recently? E Balaji, Chief Executive and Managing Director at human resources company Randstad India, links the churn with the slowdown in the sector.

“One broad inference is that when a sector is going through difficult times, when sales are down and profitability is under pressure, companies make managements accountable for that. They expect quick turnaround and such churn could be a result of that,” Balaji adds.

Some others say the growth and maturity in the sector is responsible for the churn. At least half-a-dozen big realty companies, namely DLF, Oberoi Realty, HDIL, Godrej Properties among others have tapped capital markets in the last six years and listed on the stock exchanges.

“The industry is getting deeper and wider. It has really developed over the last seven years. Earlier talent used to come from outside. Now it has grown large enough that talent within is moving around,” says Dhanpal Jhaveri, Partner and Chief Executive at Everstone Capital.

According to Pranay Vakil, former Chairman of Knight Frank India, “Though I do not have an answer for the sudden churn in the sector, I believe the sector has matured now and enough talent with adequate experience is available now.”

V Hari Krishna, Director, Kotak Realty Fund, refers to the churn in the property funds as a “seven year itch”. “Since lives of most funds are coming to an end after their 7 to 8 year fund life and most of the guys had been there for that long, churning is bound to happen,” Krishna adds.

Why then are top executives hopping from realty companies to private equity and from PEs to consultancies?

Says Vakil, “Developers, funds and consultants are very well related and it depends on what side of the table you sit. If you sit on one side of the table, you can understand how the other party reacts.”

Having a professional team adds to the overall reputation of the company, even in the eyes of private equity funds and other investors. But with private equity funds deserting and investors preferring to be directly dealing with the promoters of real estate companies, the dynamics of a professional management at the helm of affairs is also changing.

The debate whether promoter-driven or professional-driven is a never ending one in the Indian real estate since promoters are mostly first generation entrepreneurs and have tested the professional management only in the last few years. Some of them still have a positive outlook, while many others seem to have burnt their fingers as well during the downturn.

Many of these developers are hence making strategic shift in their management policy with decisions yet again being vested with the promoters and pink slips to those who proved to be of mere ornamental value to the company.

]]> http://www.track2realty.com/promoter-or-professional-driven-iii/feed/ 0 http://www.track2realty.com/has-realty-hurt-its-cause-in-absence-of-informed-choice-over-regulator/ http://www.track2realty.com/has-realty-hurt-its-cause-in-absence-of-informed-choice-over-regulator/#comments Sat, 18 May 2013 04:22:48 +0000 Track2Realty http://www.track2realty.com/?p=8591 Track2Realty Exclusive: While the provision of a real estate regulator snowballed into a political controversy over the jurisdiction of centre-state relations, some sector analysts believe the developers have hurt their own cause by stiff resistance to the appointment of a central regulator.

What the sector perceived as a draconian instrument to tame their independent functioning, could actually have benefitted them in their quest for getting industry status and thus facilitating free flow of finance, including bank loan. Has it been a case of lack of informed choice for the sector, and hence policy resistance instead of policy advocacy?

Privately some of the developers admit that had the builders’ bodies came on board with the government this could have been a blessing in disguise. While it would have weeded out the fly-by-night operators out of the business, a regulator in place would have served three purpose—taking sector close to getting much sought after industry status, timely approval (after advocating for a level playing field for all state holders) and removing funding gap in the sector with clean money.

However, the absence of consensus within the sector made the initial low tone resistance of many of the states go loud and then buckling under pressure from states, the Centre decided to allow them to set up their own grievance redressal mechanism to protect property buyers’ interests from unscrupulous realtors.

This U-turn of the Housing and Urban Poverty Alleviation Ministry, by dropping the original provision to set up a central real estate appellate tribunal, only ensured the sector remains as a local business with no industry status in near future.

Had the sector evolved a policy advocacy formula, both at Centre and State level, most of the state governments would not have gone overboard to declare it as an infringement over the federal structure since real estate is a major contributor to the state coffers. What apparently seems to be the Centre’s plan to regulate the real estate sector by safeguarding consumers from land sharks hitting a road block, has actually been a case of policy advocacy failure for the sector itself.

Track2Realty Exclusive:

No wonder, while these award shops nowadays even travel tier-II & III cities for greener pastures, they compete among themselves to emerge as the numero uno of the award market.

Ritika Dhawan went on a house hunting spree in one of the most upcoming locations of Gurgaon, only to find that the location was manipulated by the property sharks who are misleading the gullible buyers and promoting a handful of developers’ projects who were offering good commission to these brokers.

With no trust on the brokers and herself having no background whatsoever of property market, she decided to do her own research & Google search about the credibility of the developer before putting her hard earned money.

Her search ended with the developer who could boast off as the “Most Award Winning Real estate Company”. However, it turned out to be one of the most repentful decision of her life and the trust that she could inspire with the award winning realtor was soon exposed to be a case of trophy in the greedy hands.

Industry insiders admit this is one of the well-known secrets of the sector which in the world of real estate is something that everybody knows but nobody admits.

Many of the award winning realtors don’t have even one flagship project to showcase but the overt branding packaged with a trophy lures the end-users and the investors alike. The moot point is whether an award, a trophy or a citation is a sales driven exercise or a brand driven exposure?

Some of the leading developers privately admit they stay away from the awards in the wake of realty awards getting bad press for rigging more often than not.

Requesting anonymity a Mumbai-based leading developer rather questioned why should realtors be greedy for awards anymore. With so many awards happening, it is the organisers who now need developers to buy the trophy and they are ever ready to customise even the category of the award to suit the business interest of the developer.

“More than we needing awards, nowadays awards need us,” is what this developer candidly said. Market leader DLF also dismissed the idea of getting any facelift with the award.  “For DLF, the satisfaction of all our stakeholders including customers is more important than any award. It gives us immense satisfaction when the value of our property appreciates,” says Sanjey Roy, DLF spokesperson.

…..to be continued

Track2Realty Exclusive:

“Most of the families now have second generation coming into the business and they are themselves well educated and qualified professionals. It is better to invest in them and groom them, since they are not coming on board as a stop gap career choice of a lucrative sector. Of course, this second generation qualified promoter also prefers to have professionals around him, but then the management control must be vested with the promoter only,” says a Noida-based developer requesting anonymity.

Another Mumbai-based developer agrees with this line of thought. According to him, when the market sentiments were bullish and foreign investors testing the Indian realty market, many of the relatively not-so-polished developers started hiring these white collared professionals to negotiate with their global counterparts in a language that they understood. Problem started when this skilled workforce started colouring the vision of the promoter and hence driving the management decisions.

The downturn, however, exposed many of them since they were enjoying the benefits of being in the right place at the right time. With sales nose diving, many of these strategists and marketing experts had no answer to offer.

“Look at the branding aspect of the business. For a promoter it is a mix of short-term goal of selling the project as well as the long term goal of creating top-of-the-mind-recall value. Whereas for a marketer, it is short selling the project which is the benchmark since he may not be looking forward to a long term career in the same company,” says the developer.

A Vice President with a leading MNC agrees to this premise saying unlike other sectors like FMCG, where a continuous brand campaign is directly proportional to the sales graph, in real estate dynamics of selling either through brokers, under writers or just plain marketing gimmick, is different.

Most of the professionals who joined real estate from other organised and professionally managed industries never felt at home. And hence their vision was to sell the project, and not create iconic brand, and then move away.

Some sector analysts believe it only makes sense for promoter-driven real estate companies to search for professional CEOs if companies have grown organically and have built a platform. Then only they would like to grow and probably list on the bourses. However, a survey of senior executives by Track2Realty at some leading and emerging real estate companies across the country shows that most believe the industry as a whole is ill-prepared for the management succession process, which could jeopardize a smooth transition of company leadership.

Ninety two per cent of the survey respondents said that real estate firms do not have adequate management succession plans, and nearly two-third do not feel confident that their firm could immediately select a new CEO if the promoter is forced to be out of operation. This suggests a disturbing lack of preparedness for management succession. Companies who claim to have succession plans in place are the ones where the children of promoters are having their studies abroad or trained on job.

“I see this as a huge challenge for the real estate industry. Not only does effective management succession planning reassure investors and employees of the firm’s ongoing and uninterrupted success, it drives the engagement, development and retention of top talent and strengthens the overall leadership bench of the firm,” says a consultant hired by some of the leading realty companies for HR services.

The nature of realty business demands one to get the hands dirty into every aspect, right from land purchase to material procurement and project execution. Many believe this is something that only a promoter can do. This is a fact which has been realised by even some of the fund managers and hence their foray into the business as a developer. However, the role of a professional in the realty companies has mostly been confined to their individual department alone.

…..to be continued

Track2Realty Exclusive:

Sunil Dahiya, Senior Vice President of industry body NAREDCO admits that if real estate has not been that vocal and pro-active on policy advocacy, it is because every policy will have 28 rules and regulation across the country. So, every rules and regulation deployed will have 28 different effects for the sector.

While a single solution is not possible, yet since the realty product is needed across the country, there is an urgent need for brainstorming as to how a customized policy advocacy for each region as a chapter and a common goal at the national level is achieved.

“Policy advocacy can only come out when there is a single consensus. We have been successful in drawing a single consensus around the Regulator Bill by discussion with stake holders in the state chapter. The draft has been carefully amended to protect the interests of all the stake holders in consultation with Consumer Helpline, Jaago Grahak Jaago, CCI, Finance Ministry, Housing Secretaries from states, ED, DRI, CREDAI, NAREDCO along with delegates from across the country. The draft has now gone to the standing committee of Parliamentary Affairs. So, our policy advocacy brought on the table aspirations of various stake holders and now it is going to the Parliament for debate,” says Dahiya.

However, fact remains that all the stake holders were taken on board on the issue of regulator because the ministry took the initiative, while modalities were being debated within the sector ever since government came out with the idea of having a regulator.

Moreover, the Centre’s plan to regulate the developers has already hit a road block with several states opposing some provisions of the proposed bill. The proposals of a central regulator actually snowballed the issue like the NCTC (National Counter Terrorism Centre), and the Centre having no choice but to drop the provision of giving direction to the states under the Real Estate (Regulation and Development) Bill.

The school of optimism within the sector cites another case study to put forward the point that the sector is on its growth trajectory with policy advocacy. According to them, on the issue of much desired Single Window Clearance a committee has been formed under the ex Chairman of CCI, Dhirendra Kumar at the behest of the industry bodies, including CREDAI and NAREDCO.

The bodies are advocating for one department in all states to act as a nodal point for all online clearances in a time frame, instead of today’s multiple NOC regime. It once again raises the very same question—will states agree to it?

Policy advocacy optimists have it that it has to be promulgated at the Ministry of Housing level with a financial rider. State governments having wish list of grant and financial package from Centre will have to agree on that.

Arvind Nandan, Executive Director, Consulting Services, Cushman & Wakefield is candid enough when he says any talk of policy advocacy is meaningless unless the government is a willing party to come on board for dialogue and discussion. Developers alone can’t take policy advocacy forward because they have been a partner in crime with project delays and illegitimate source of funding in the sector.

“The idea behind policy advocacy must be to bring government and private players together for meaningful dialogue and discussion for the benefit of all stake holders, including the consumers. What is happening actually is that sector lacks vision on reforms and hence policy means different things to different stake holders. There are developers, financers, facilitators, occupier…Even when you say land owners, it can be either a developer or agriculture land owner, and to bring everyone on board for consensus you need credible industry forums. I am not sure unlike other industries a standalone face can represent the sector, since there is no superstar or charismatic leader in the sector today,” says Nandan.

No superstar to represent the sector, no consensus over its wants and needs and no sympathy in the collective consciousness of other state holders, including buyers and government; will all the builders’ bodies continue to flex muscles with money power yet function as a toothless tiger? Well, if lobbying of powerful players for individual interest continues and if the sector by and large resists a common meeting ground then policy advocacy is a far cry in the sector.

Track2Realty Exclusive:

Traditionally a family business, the manifold growth of real estate in the last decade and the emerging realities forced many companies to change their outlook. With realtors increasing their scale of operations from doing just one or two projects to multiple projects in many cities, and looking for foreign investment, most of the real estate companies went on a hiring spree of professionals.

The downturn, however, made them question the role of many of these strategists on board who made the best of it when the market sentiments were bullish. The bearish market brought to the fore yet again the debate whether real estate is better run by promoters or professionals.

Sachin Sandhir, South Asia Managing Director of RICS says historically real estate business in the country has been promoter led and has served the sector in good stead until this point. However, the real estate industry is in a constant state of evolution and subject to ‘change’ with the advent of new technology, regulatory reforms, and economic challenges. Some of these aspects have seldom been experienced by practitioners and entrepreneurs during their tenures, resulting in some resistance to adopting these new facets of real estate business.

“Therefore, there is a pressing need to adapt and learn new ways to do business and move towards greater transparency in the sector. Thus, the starting point for an image ‘make over’ lies in the ability of raising the bar of ‘professionalism’ and moving to a more corporatized and organised structure of conducting real estate business. Realty businesses are now increasingly turning towards professionals across functions such as valuations, quantity surveying, project management, facilities management, cost management etc., who are capable of staying abreast of the knowledge curve and strengthening their ability to survive the paradigm shifts taking place in global realty markets in order to win the confidence of consumers, regulators and investors alike,” says Sandhir.

By and large the professionals are taken on board for the sector to compete in an increasingly global marketplace. It is believed that real estate markets are to a large extent intrinsically linked and interrelated, and hence there is little choice but to embrace such changes.

This is all the more relevant for India, where even today the realty sector continues to be characterised by lack of regulation, transparency and a high degree of fragmentation.

Experts believe the lax in specialised education, has contributed significantly to the near absence of professionalism leading to a high degree of consumer dissatisfaction and a lacklustre image for the sector at large. These factors also affect the ability of the industry to perform in the future, in comparison to its peers.

…..to be continued