Track2Realty Exclusive: Sitting in the back bench of a real estate award night I heard two developers talking among them as to in which category are they getting the award. Did I hear it right? Not the nominated category, but the category of getting award? Even before the awards were announced, how come they know that they have already bagged the award?

What I heard the next was even more earth shattering news for me—how much did it cost you? I thought I had a “Stop Press” kind of “Breaking News” but I am told not to file the story by the then editor.

Is it because it is libellous and hard to prove is what kept me wondering for some time. Later I am told this is no news. The award racket in the world of real estate is something that everybody knows but nobody admits.

Well, I may be new to the world of real estate, but if this is the reality I prefer to be not just new but novice as well.

When I see the developers with a tagline of “India’s Most Awarded Real Estate Company”, I hang my head with shame rather than feeling optimistic about the realty company or its projects.

Why are the realtors desperate to beg, borrow or steal the award? Does it add value to their brand, sales graph or any other metrics in the collective consciousness of the society at large?

The business awards across the board have often drawn criticism for their selection process and partiality, but in the context of Indian real estate I feel it is an open and shut case of a price tag attached with the award.

Some of the more respected business awards are the ones who follow certain ethics in terms of transparency and established benchmark in terms of eligibility criterion.

None of this has even been seen in the real estate awards in this part of the world where awarding institutions, I am afraid whether they can be termed as institutions, are mostly B2B realty publications and other industry stake holders.

For instance, none of the international awarding institutions worth a mention have ever signed the awardee company as the main sponsor of the award night. If a nominated company or individual has been charge sheeted by the law of the land the very ethics of the award suggests the jury must disqualify his nomination.

However, it is strange to find a realty company being charge sheeted and Managing Director behind bars, still the Chairman receiving “Lifetime Achievement Award.”

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

By: Sachin Sandhir, Managing Director, RICS, South Asia

Track2Realty: Amidst a global economic slowdown as a consequence of the US fiscal cliff and Eurozone debt crisis, India’s growth forecasts too have been revised downward over the last three quarters of the year.

Even in 2013, it is unlikely that we will see a spurt in growth given the existing inflationary pressures and large fiscal deficit which could adversely impact the scope for policy stimulus in the country. Specifically in the real estate sector, despite the opportunities, the prevailing global and local market conditions have affected investor sentiment.

The Indian realty market once a preferred and safe-high return investment option, is increasingly seeing vary investors, amid sluggish sales and an overall slowdown across property segments.

While India and several other developing markets such as Brazil, Russia and China continue to be attractive to investors, the truth of the matter is that qualified professionals in realty business, that can provide the requisite advice and quality standards are in fact ‘few and far between’ and this does not provide the much needed comfort sought by investors to park funds in these countries.

While there is no shortage of capital flow globally, what’s dictating the flow of money is the level of professionalism and international standards which India needs to improve and sustain in order to attract and retain investment. According to industry estimates, the country has received approximately $18 billion in investments over the last 7 years.

However, performance has not been very lucrative with exists worth $3.4 billion and an average multiple of 1.25. Even PE firms are now finding it difficult to raise capital from institutional and individual investors alike, as most funds are faltering on returns.

India hasn’t really delivered since 2005 on the promise that it held as an investment destination. With 20% internal returns promised by most PE funds in 2005-07, the current rate of return is only 8-10%, less than half of what the funds aimed to achieve. Additionally, several funds are finding it extremely difficult to exit their investments.

Even foreign direct investments (FDI) in real estate between April 2009 and December 2011 have declined by a drastic 92% and accounts for only 1.94% of the total FDI inflow. Such diminished returns are prompting international investors to stay clear of the market, therefore most of the capital finding its way into the sector today is really domestic capital.

Given the overall economic climate, coupled with the increased incidence of property prices, high interest rates and low sales, along with dismal corporate earnings growth, weak employment scenario in the sector and fluctuating rupee value are keeping investors at bay.

Even, funding avenues such IPOs, QIP and FDI which were being harnessed earlier have also started to dry up. Given the prevailing market conditions we are therefore, likely to see more structured deals where greater oversight and management from fund managers who have experienced investments across all stages of the property lifecycle.

Now at the year end it is time we conceptualized the idea of a compendium of yearly handbook that could serve as a ready reckoner to the sector, the media, HNIs and the investors who have keen interest in the Indian realty market. Focus 2012 is our earnest endeavour to capture some of the twilights of 2011 and unveil what lies ahead in the year 2012.

2012 is also the year that promises to be the turning point of the real estate business in India. While the glass half full and half empty syndrome continues, with drying funding options, debt burden, piling inventories and interest rate threatening the growth of the realty business, 2012 is also the time when the real estate is set to be exposed to reforms at the policy level and new sources of funding at the financial level.

Moreover, the projected urban growth also suggests real estate business will no more be an index of 10-15 cities. Though there are momentary hiccups but in the larger context the appetite for property is huge in India, both as a primal need and also as an investment instrument. This promises a domino effect in the capital market as well. After all, market capitalization of the real estate sector in India is just about 4.2 per cent of the total market capitalization, which is below the global standard of approximately 15 per cent, thus reflecting the scope available for growth of the sector.

Those who are keeping a close tab on the developments within the sector can easily vouchsafe that real estate needs to get into a dynamic mode. And this newly found eagerness to dynamism is finding expression in myriads of ways. The sector is changing hands, whether by second generation entrepreneurs or by educated professionals, and there is a level of seriousness in the ring. Realty companies are increasingly drawing big-ticket expansion plans, the element of consolidation is setting in seamlessly now, the financing climate promises to evolve more conducive after the recent churn out and there is an increasingly growing tilt towards professionalism.

Track2Realty Focus 2012 is a sincere attempt to holistically capture the essence of this interesting churning in the Indian realty sector. This comprehensive guide comprises of all critical linkages of the realty business. The macro hue has been added by bringing specific segments under the spotlight. All the indispensable catalysts to take realty business to the next level have been prominently highlighted in the yearbook to give it a truly comprehensive nature.

Apart from displaying a 360 degree approach in terms of coverage of the vast universe of the real estate sector, another crucial USP of the yearbook is its participative and collaborative nature. We have got the best brains from different verticals of the realty business as contributing knowledge partners to write on the most pertinent issues of the sector. The effort is to gather community wisdom and thus draw the real, big picture. Plus, a look at the perennial problems afflicting Indian realty sector makes this yearbook an indispensable companion for all the stakeholders in the industry.

In the absence of any serious academic research, the sector in terms of brand presence & cutting edge competitiveness has been lacking, to say the least. Since the first generation of real estate developers in India come from the grassroot level and had started from the scratch, many of the them have a disconnect with the new-age actual young buyers and discerning fund managers, for whom yardsticks of measuring the realtors’ presence, credibility and reputation goes beyond the traditional media format. However, the heartening fact is that the second generation realtors are fast gearing up to the realities of the emerging business, niche media exposure and real marketing ROI (Return on Investment).

It is in this background that www.track2realty.com was conceptualized and our growth chart within a year has proved we are on the right track. Even though we took a conscious decision of establishing our credentials as a news platform first, and not to get into property transactions, we get mails & phone calls on a regular basis where reputation of the builder and scalability of his projects are asked for. Many international property consultants and fund managers refer to us when it comes to understanding the Indian real estate market at a macro level and profile of a particular developer or given project at the micro level.

While we could foresee the future of impactful presence on digital format where global reach & online reputation management is the buzz word, the precise reason that we resisted our regular print edition is the fact that instead of competing with the existing publications we wanted to supplement them with our feature service, something that we managed to do quite successfully with a win-win situation in a short span of time.

Credibility has been our benchmark and one of the reasons we could establish ourselves as a credible media entity is that we have always resisted the marketing temptations. Immediately after the launch of www.track2realty.com when we did a couple of expose about the wrong practices in the sector, a developer friend asked—What is your business model when you are hitting the same sector which is supposed to feed you? Our upfront take has been that we are not against the sector; rather our campaign is against certain wrong practices in the sector which will only benefit the overall realty and establish its credibility.

As and when there has been a genuine cause we have stood for the cause as well, even championing it in the form of a campaign. But, of course, we don’t entertain unethical trade practices, nor do we organize award nights to felicitate those who have been exposed for bringing disrepute to the realty business. Therefore, what we do always gets a receptive audience within the industry and the media by and large; whether it is the seminar, roundtable or the periodic survey. Hopefully we will take up a few more campaigns in 2012 as part of our media advocacy & activism for the sector. Our progression to the next level would also be based on certain ethics and in a transparent manner where we are determined to partner only with creditable groups and associations.

1^st of the series

When we launched Track2Realty as India’s 1^st e newspaper in January 2011, there were many questions before us—Is there a room for another news venture for the sector? Is this the right time to launch when the market is yet to recover? Added to such queries from media’s academic standpoint were reactions from certain B2B realty publications, visible uncomfortable with the presence of another niche media vehicle with a focused approach. After all, it was first 24×7 realty news venture, as against the existing weekend or the month-end publications. Eye brows were also raised on the projected target audience who were not just the realtors but also investors and the end users.

However, the team at Track2Realty was determined not just with a strong conviction but also backed by the research that suggested there is a discerning audience beyond the realty companies, not willing to wait for the weekend to know what is happening in the sector. The conventional media by and large has been missing the bigger picture, thus realty never getting its due. While there has been a bias against the sector with mainline publications hardly giving space to the realty news; the marketing supplements & B2B publications never catering to the end-users.

Real estate sector needed a 24×7 news platform of its own. It was not a case of “me too”, but “why not till date”? It is all the more surprising that a negative bias continues to happen with the sector which, from standpoint of economic wisdom is now country’s second largest economic activity and largest employment generator. From media marketing standpoint too, the growth of the advertising spend of real estate has been faster than even FMCG sector.

However, the sector by and large has been a victim of its own growth trajectory where some fly-by-night operators grabbed more eye balls than many genuine success stories. Recently at a seminar in Hyderabad the realtors were found cribbing against the arm twisting by some of the leading publications. However, they had no clear answer to why such arm twisting is not seen with other cash rich sectors, with even more advertising budget to spend, say for instance the FMCG sector.

And it is here that the real estate sector needs some serious brainstorming as to what kind of media policy they have adopted thus far and where has it led to the sector. To what extent has the overt media exposure for the sector with print & television ads, billboards, exhibitions and every other possible door knocking led to the upward sell graph? Most importantly, has it helped the sector or the respective realty companies in establishing respectability & enhancing the brand recall value as well?

By: Ravi Sinha

As the realty major DLF moves the Competition Appellate Tribunal (Compat) to challenge the Competition Commission of India (CCI) penalty of Rs.630 crore, the real estate sector will soon get an answer as to whether their business falls under the service sector.

The fact of the matter is that the CCI has used the rules of competition to achieve consumer protection. There is a blurred vision because CCI jurisdiction is on competition whereas consumer protection is a separate subject.

In the case of DLF, CCI has incorrectly defined real estate as a service with an objective in mind. The fact of the matter is that any real estate product ultimately gets transferred under Transfer of Property Act and not being governed by Goods and Service Act, even Finance Bill has classified it as deemed to be service not service.

It is not just the real estate fraternity across the country which is unanimous that in the complex business of real estate, market dominance cannot be defined by the sheer presence in a given geographical location or in a product market, but even the legal experts are mulling over the thin line that bifurcates between the competition related dominance and the consumer activism.

The CCI verdict came as a surprise to the sector and seemed to be a result of its jurisdiction overreach. If such a narrow definition of market dominance will define the real estate market, then such defiance of the boundaries of competition law is set to open can of worms for the CCI across the country.

The narrow definition of relevant market has been skewed by not taking into consideration the secondary and investment markets before arriving at any conclusion. In addition, it has failed to undertake the economic research and correctly apply the SSNIP (small but significant non-transitory increase in price) test to arrive at its conclusion.

As the DLF moves Compat to challenge the verdict, the relevant question today is will it stand against the legal scrutiny? 
As far as the agreement and its clauses are concerned, it is a standard format and people are signing it after the due diligence.

More importantly, even the banks follow the same kind of format where the customer is expected to sign and agree the not-so-foreseeable clauses, including the interest hike in future.

The CCI which has been applauded in the past for some incredible work has in this case raised many questions than answered any. They have gone down a path of analysis that could be argued as common protection and not competition. In legal terms, a dominant firm should also be in a position to practice indiscriminate behaviour. Has DLF in this case gone beyond its liberty of freedom of contract? The answer is a clear No.

DLF too seems to be determined to challenge the verdict and take the case to its logical legal conclusion. It spokesperson says the company and its subsidiary continues to believe that it has a strong case. DLF’s optimism is not without any basis. After all, the question remains as to how come there is abuse of dominant market position between a company and buyers. If DLF restricts other companies, then only it will be a case of dominance in the market and its subsequent abuse.

In the given case there is an agreement between the two parties, clearly defined clause and no coercion. The CCI has taken into account a very small locus standi of market dominance. Basically, it is a case of imposition of its position on the sector where the CCI has exceeded its locus standi and the case in all likelihood will not stand against judicial scrutiny. If a property is being transferred to the consumer, how come it falls under the service sector? There is no service commitment between the developer and the customer.

Moreover, as far as service tax is concerned, in real estate it is charged on certain specifics like construction. But real estate is a composite act and can not fall under one service sector or any other. Real estate is a complex business where market dominance can’t be defined on the basis of one or two parameters. This market is so complex that across the country no one can claim a leadership position just because of sheer market share.

The fact of the matter is that the business of real estate neither falls under the service sector, nor the nature of the business allows a realty company to be dominant in a fiercely competitive market.

However, post the CCI penalty and the subsequent challenge by the DLF, it would be interesting to see the verdict coming out in the open. Till then, it is not the DLF but the CCI that needs a lot of arguments to establish something that does not seem to be tenable either by the law of natural justice or within the established law of the land.

After all, the market capitalization of the real estate sector in India is just about 4.2 per cent of the total market capitalization, which is below the global norm of approximately 15 per cent, thus reflecting the scope available for growth of the sector. Sadly, the image makeover and fair trade practices within the sector have been ignored by all the parties’ concerned-government, realtors and media. The media focus seems to be as disorganized and haphazard as the real estate sector.

When a team of journalists with thorough knowledge & background of real estate sector got together to come out with a professional e newspaper, we first asked ourselves-why track2realty? We strongly believe that we can provide an alternative and viable media vehicle to the sector only when we are self-analytical and self-critical. Most of the real estate supplements of the mainline newspapers and realty magazines are actually marketing brochures of the sector and there has been absolutely no attempt to track the real issues and concerns of the sector.

It is here that track2realty is determined to make a difference. We may not act as a consumer rights’ activist group, but this e newspaper will not be an extension of marketing brochure either. We are a professionally managed media outlet for tracking the real concerns of the industry, investors and the end users. We will also come out with the research paper on the sector, and our periodical survey will reflect the true concerns of the sector.

While we are providing news, views, reports and advisory to the readers, we are also providing a networking platform for the realty professionals. And last, but not the least, our grievance section will be an open forum for everybody including the end users. In our sincere attempt to track the sector and raise voice for a better & organized market, we may at times rub a section or two the wrong way in the short term perspective. But we are very much committed to emerge as the genuine & reliable voice of the real estate sector in the long term perspective.