Track2Realty Exclusive

Integrated township as the future of urban living is an established reality. However, the future of integrated townships depends not only on the infrastructure development, but also creation of overall social infrastructure. Track2Realty delves deeper into the issue to find out the thin line that bifurcates between a successful case study and a dream unfulfilled.

When the infrastructure has been on a roll and the cities stretching its limit, the general argument that the Indian real estate offered has been that it is not the distance but the travel time that is the new criterion to buy a house. After all, the expressways and highways were making commuting less troublesome and hence a visible perception towards suburban living. However, with increasing fuel cost added to the lack of social infrastructure made many such dreams getting shattered.

And it is here that one needs to understand the difference between the suburban residences and the truly satellite town living. To put it simply, the answer lies in integrated townships, a concept that has been adopted well and proven in the West and even Far East, for over 3-4 decades, for addressing mobility issues. Integrated township is a holistic community living concept where contrary to wasting precious hours in commuting, walk-to-work is normally the pattern. An integrated township has everything that families need in close proximity from their homes—shopping malls, entertainment options, hotels, hospitals, schools, offices etc.

In the mad rush of urban landscape where mostly the weak urban planning, lack of public transport, longer travelling time to workplace and inadequate infrastructure adds woes to the property buyers rather than enabling them for a better living, integrated township is the only solution. In most cities, new development areas are not planned properly and therefore do not act as satellite towns, but merely as suburban residential areas.

Take the case of Rajiv Rai, a Chartered Accountant with a multinational software company. He commutes two hours daily to work in rush-hour traffic. He spends as much time, often more, on the journey home. Though driving is his passion, but given the bottleneck in the main city of Bangalore he was frustrated by the amount of unproductive time he spent on road.

Then, his firm took office space in an integrated township on the outskirts of the city. “It was a dream come true,” he says. “This township includes my office and I have taken a flat that is hardly 10 minutes walk. It has a shopping mall, multiplex, hospital, school and most of the necessary amenities within walking distance. Moreover, even when I am out of the city on official tours, I am sure of the safety and logistical security of my family,” says Rai.

The dream solution that Rai got may not be possible for many, despite of such intent in the integrated townships, in the current context of double-income families. It can nevertheless establish adequate, well-equipped office space infrastructure and offer lower rentals to attract companies, banks and corporate houses and create ample opportunities for residents. Apart from this, to smoothen communication between the township and the workplace for rest of the residents, the location of the township should be such that it is easily accessible from various parts of the city.

..…to be continued

Realto Express

Real Estate is at the epicenter contributing to shape up today’s world. The construction industry is also treated as the backbone in a developing country like ours but in recent times it has been seen slowing down by low margins, negative cash flow from operations, rising interest costs on high working capital , execution delays and poor corporate governance.

Initially the real estate companies were more concerned with the basic requirement of the customer and surprisingly they come up with just the satisfactory output. But nowadays with the help of IT solution, the real estate consultants are moving in multidirectional areas. Majority of the companies has changed the style of thinking in terms of Client’s satisfaction/Trust, Client’s referral, Brand awareness, Decrease in man power and Increase in employee’s efficiency, Automation in production of construction budgets and tracking transactions which in total further improving the real estate consulting industry drastically.

Even in a down cycle, successful companies use IT to reduce costs and improve operational efficiency. Through higher end connectivity solutions, an employee in the field might be able to electronically transmit up-to-date information to an IT system in the corporate office. The information is updated real time and provides management with information not readily available anywhere else. This long-term approach towards IT supports the company’s long-term goals and objectives. Companies using the IT approach will be able to move beyond elderly methods and will be able to achieve a competitive advantage in their marketplaces.

End customer (an investor or buyer) seeking for fast, accurate, reliable service from the real estate consultants. Client’s trust always goes to the companies who are providing them right information at right time and in professional manner. IT not only helps in keeping your customer happy but also provides you a data security and various data matrix to analysis the business performance, which helps you in making critical business decisions.

IT is becoming a driving force necessitating change in the way real estate companies market to their clients. Companies that are quick to adapt will survive and those that delay will find it harder than ever to survive against IT savvy competitors.

Employees of real estate companies are wearing more hats than ever. The traditional lines between departments such as investments, corporate leasing, sale/purchase, legal and others have blurred as departments have a need to share the same information. Investing in the IT integration of corporate wide information is essential in order to build a foundation to allow a company to achieve higher level, long-term goals. Effective use of IT is quickly becoming a prerequisite for industry as conservative as real estate.

Real estate executives must play a leadership role in the integration implementation and proper execution of resources and IT thus easing the transition as the lines blur. This requires a blending of people, technology, and connectivity.

While buying a house majority of the Indians have now matured to pay for ready-to-move property than a castle in the air. No wonder, despite the high appreciation potential, the new launched projects have few takers and there is hardly any market for a pre-launch offer. Thanks to the poor delivery of the real estate developers, unmet commitments and execution risk involved, at least the end users are not interested in new launches anymore.

More than seven out of 10, as many as 74 per cent, prospective home buyers across ten cities of India are negotiating for a ready-to-move property as it is easier to evaluate the probability of appreciation, the reasonability of the imposed rates by the builder, exact specifications being met or not. Out of the remaining 26 per cent, who opted for new launches for price discounts in recent times, majority of them, as many as 82 per cent, are now repenting their decision due to delay in project completion. Having burnt their fingers, nearly nine out of ten, 88 per cent, blame a nexus between developers and greedy investors that makes the new launches a hot property.

These are the findings of ten city survey by Track2Realty, the real estate market tracker. Track2Realty conducted this survey in ten cities-Delhi, Mumbai, Kolkata, Bangalore, Kochi, Ahmedabad, Chennai, Patna, Pune and Chandigarh between April 1 and 14. A structured questionnaire that was based on the choices & concerns, risk exposure & appetite, and their satisfaction index was given to respondents who belonged to a mix of mid segment and luxury projects’ buyers to understand the choice of qualitative and quantitative socio-economic groups.

Delay in the delivery is cited as number one reason of their reluctance to book a new launch by almost all the home buyers, 92 per cent. Default in design, construction quality and fear of faulty construction is what scares the home buyers, 70 per cent, to better opt for “you get what you see” project. Frustration of home buyers is not only with the small developers, but even the leading developers suffer from the trust deficit of buyers. Nearly eight out of ten, 78 per cent, say they have not got what was showcased as the sample flat.

The industry, as expected, is not amused with these on-your-face findings, something that everybody knows but nobody accepts. Lalit Jain, President, Confederation of Real Estate Developers Association of India differs with the survey findings saying that “ready-to-move in flats comes at a premium rate and the availability of such in the country is currently just 5 per cent.”

…..to be continued

The intelligence agencies, which carried out the assessment, include Investigation Directorates of Central Board of Direct Taxes (CBDT), Directorate of Revenue Intelligence, Directorate General of Central Excise Intelligence and Directorate of Enforcement. To another query, the Minister said there no information was available as regards distortion of real estate due to presence of terror-funds or black money in the real estate sector.

Palanimanickam further said the I-T Department takes several punitive and deterrent steps to unearth unaccounted money and curb tax evasion. These include scrutiny of tax returns; surveys, search and seizure actions; imposition of penalty; and launching of prosecution in appropriate cases, he said. The Minister said information technology is used in a “systematic” way for collection and collation of information to take anti-evasion action against tax evaders. The investigation wing of the CBDT probes cases whenever any credible information about evasion of direct taxes is received.

Track2Realty Exclusive

Many developers believe that slum redevelopment adds asset value appreciation to the existing properties in the vicinity. This is a primary concern when it comes to town planning and infrastructure development. They say when a slum is redeveloped; the infrastructural development of the area in and around it is bound to happen.

“Most of the big cities in India have slums in prime locations – for instance Besant Nagar in Chennai or Dharavi in Mumbai or Raghuvir Nagar in Delhi. Slum redevelopment enables betterment of living conditions for slum inhabitants and it contributes to a more effective and robust town planning. Hence, from a business point of view, while developers are entitled to get land in prominent areas of different cities at a cheaper rate, on the other hand they help contribute to the society. In my opinion, slum redevelopment is win-win for any developer,” says Monesh Vig, Head, Business Development Omkar Realtors & Developers.

Asking for a single window clearance on slum redevelopment projects, Shailesh Sanghvi, Director, Sanghvi Group says the only challenge that lies in slum redevelopment is to settle disputes and disagreements among slum dwellers and delay in approvals at the Government level. He asserts if there is a single window clearance in place, the process will become faster helping developers to reach faster to the objective of a ‘Slum free India’.

“In Mumbai Slum Rehabilitation Authority (SRA) is taking active steps towards developing slums and changing the skyline of the city. Slum dwellers are provided with better amenities and developers are given extra FSI making it a win-win situation for both.  At least 1.2 lakh slum dwellers have been shifted to newly constructed houses in the last decade while another 1.5 lakh houses are currently being constructed across the city. The long term strategy is not only to make the country slum free in a time-bound manner but also to prevent future growth of slums by providing basic services and infrastructure such as sewerage, clean water, street lights, education and health services,” he says.

 So the verdict is out. The real estate developers are not shying away from getting into slum redevelopment. All that they want is clarity in policy guidelines and hassle free implementation of the project. Now it is Government’s turn to show the will power in addressing the issue. The Government can set up a committee to find out what is stopping the realty sector in getting into slum redevelopment which is a lucrative business and helps the society at large. Till then the reality of slum realty will remain a “No Entry Zone” for many of the developers, despite of their positive intent.

A UNIQUE MICRO-MARKET

Bandra Kurla Complex was created by MMRDA as an alternate CBD to Mumbai, with the express purpose of halting the further growth of offices and commercial activities in South Mumbai. Currently, BKC has a total stock of 8 million square feet of office space. An additional supply of 2.5 million square feet is expected in 2012 with the completion of The Capital, FIFC and TCG Finance Centres. Over the last few years, BKC’s G Block has gained prominence as the key location within this unique micro-market. The current vacancy level at Bandra Kurla Complex stands at 16%.

Major institutions that have independent buildings in BKC include IDBI, SBI, SEBI, BOI, Dena Bank, SIDBI, PNB, ING, NSE, NABARD, ILFS, ICICI, UTI, Citibank, Canara Bank, Bank of Baroda and Oriental Bank of Commerce. Other prominent institutions include the American consulate, Dhirubhai Ambani International School and The American School of Bombay. Currently BKC also has 2 luxury hotels – The Trident and Sofitel.

Despite the economic uncertainty which continues to haunt the BFSI sector in Europe and the United States, BKC’s office market continues to grow. Today, the indecision among tenants which defined 2010 and 2011 has eased. Over the last 24 months, the market needle has begun to point towards a landlord-favouring market.

This change in sentiments has come earlier than was originally expected at the beginning of last year, and can be attributed to the large deals by Citibank, Deutsche Bank and First Rand Bank – and also the lack of new quality supply in the market in 2013 and 2014.

OFFICE SPACE DYNAMICS

Leasing and buying activity at Bandra Kurla Complex continued to accelerate during the last two quarters. The rent correction appears to be complete, with most existing buildings and new projects recording flat rates or slight increases over the prior quarter. The overall stability of the market is a sign that it has bottomed out.

Market conditions in BKC have started to shift from tenant-favouring to neutral and a clearer transition into landlord-favourable is expected in 2013. Tenants prepared to make commitments in the short term continue to have leverage, but the window of opportunity to secure attractive long-term rental rates and quality space will begin to dwindle by end of 2012.

As it becomes harder to find value options in BKC, some tenants may move to lower-priced markets such as Lower Parel. Larger users are taking advantage of favourable market conditions to consolidate operations. However, smaller firms remain hesitant about making any moves until economic conditions improve further.

 THE FUTURE

 With the Diamond bourse soon to be operational in 2 million square feet of premises, the people churn at BKC will increase dramatically. How the MMRDA will address the management of this sudden onslaught of traffic remains to be seen. Other areas of concerns at BKC include the continued lack of F&B outlets and sufficient public transportation. The Metro project announced in 2008 would be a game changer; however, this project has been drastically delayed. The monorail project, now scrapped, could have been a significant infrastructure boost for Bandra Kurla Complex.

 Various infrastructure initiatives like the Santacruz–Chembur Link Road will help adjacent areas around BKC such as LBS Road, Sion, Kurla, Kalina and Mahim to develop, posing competition for BKC. Many senior executives who work in BKC are expected to shift their residence to Bandra, driving up residential prices in Bandra.

 UPCOMING SUPPLY

 Key projects in Bandra Kurla Complex over the next 2-4 years include:

• The Jet Godrej office project
• The Reliance headquarters-cum-convention centre
• Wadhwa’s C66
• Kotak’s headquarters
• Enam’s new building (to be completed in 2013.)
• Luxury hotels such as The Bellagio and MGM Grand will also be completed over the next few years
• Luxury mall by Maker Group

In the long term, older buildings such as Keshwa, Madhwa, Balarama, and Metropolitan will eventually come up for redevelopment which would increase quality stock of BKC.

 Major developers like Ackruti, DB Realty and RNA who have land in and around BKC could bring additional mixed use stock which would improve the integrated nature of BKC. Land supply in the vicinity is also expected to come from major landlords of the Golibar slums, including Unitech, Rohan and Shivalik.

 he two big game-changes in the BKC micro-market will be the redevelopment of the MHADA Government colony, and the development of the 18-acre Reliance plot, which will also release 2-3 million square feet of office supply into the market, apart from Reliance’s HQ.

CREDAI

The recent announcement of a memorandum of understanding (MoU) between the Confederation of Real Estate Developers’ Association of India (CREDAI) and the Karnataka State Fire and Emergency Services (KSFES) Department on fire safety certification has raised quite a few eyebrows in the real estate industry.

Accordingly, the basic fire certification needs to be provided to builders within 30 days.

While it sounds like a positive move for the industry and a relief for all the 180 CREDAI members, the practicality of such a move is being questioned.

“It is not possible to speed up the process as the KSFES works manually while issuing such basic certification,” argued a builder, on condition of anonymity.

While an industry expert questioned how “credible” would the entire process be, if the issuance of a no-objection certificate (NOC) and a clearance certificate (CC), which earlier took months or even years, would now have to be completed within 30 days.

“Currently, the KSFES has been manually going through each drawing and then mulling over all the errors and suggestions. This consumes a lot of time. According to our MoU, we will be providing a software prepared by a company which would identify the errors in the drawing. It would indicate whether a particular project proposal is in acceptance of the norms by highlighting the faults in red colour. Then at the click of a button, the department can either condone or reject the proposal. The company has provided a similar software to civic bodies of other places like Mumbai, Pune, Ahmedabad, Nagpur and other places. Hence, their credibility is established,” asserted Sushil Mantri, under whose Presidentship CREDAI signed the MoU.

He argued that it is important to make this move as almost 90 percent developers are suffering because a handful of builders did not follow norms.

“CREDAI members are responsible for almost 60-70 percent output of the city. Further, to become a member of the confederation, they have to sign a code of conduct which covers all the approvals and rules. By delaying progress of approvals, not only do builders incur losses as production suffers, but also the revenue to the city and BBMP is further delayed,” he said.

However, the experts observe there is a need for a body which would govern the legalities of buildings constructed by local builders too, who are not with the CREDAI.

“The memorandum of understanding is surely a welcome initiative. It is crucial to raise the bar to National Building Code guidelines on all safety parameters,” said Shrinivas Rao, CEO-Asia Pacific, Vestian Global.

A LOOK AT SERVICE DELIVERY

The question is whether the short-staffed Karnataka State Fire and Emergency Services Department will be able to deliver.

The department has placed a requisition to recruit around 66 more people in their team, last year, after the High Court order asking to streamline and conduct regular fire audits.

However, they still have not been able to get these members to conduct the audits swiftly.

“It is true that we need around 66 more persons. But these members are going to be part of the special investigation team. The MoU with CREDAI would speed up the process which was done manually. Any new technological and other introduction is welcome,” said B G Changappa, Director, Karnataka State Fire and Emergency Services.

According to the MOU, the application and documentation process for NOC and OC will be streamlined through the implementation of a software.

This initiative aims at not only reducing the timelines for approvals, but will also bring about transparency and accountability to both builders and Government authorities.

A builder needs to obtain an NOC from KSFES before obtaining plan sanction from the BBMP.

Further, after construction, the Fire officials will inspect the building and provide issue the clearance certificate, only after which the BBMP will issue occupancy certificate.

Thus, obtaining the NOC and CC within 30 days after the submission of documents will shorten the time frame for building approval and building commissioning.

 By: Navin M Raheja, President, NAREDCO

Redefining Public purpose, as suggest by Parliamentary Committee, will impact infrastructure, industrial and township development severely.

Provisions of LA and R&R Bill should not apply to private acquisitions done by developers after direct negotiation with land owners/farmers. Privately negotiated prices, in almost all cases, are much higher than acquisition compensation suggested in the bill.

20% of developed land going back to owner is part of the LA and R&R bill, which will make township development difficult.

In case of township development, developer severs its link after completing the project, unlike industries. Implementation of R&R will be difficult.

Ceiling of 50 acres for urban and 100 acres for rural, beyond which LA and R&R will apply, will in all probabilities be lowered by States, if power to reset ceiling is vested in them.

Land for residential uses of weaker sections was included in “Public Purpose” according to LA and R&R bill. Its exclusion will severely impact the housing supply of this category.

Putting all land under agricultural cultivation in the same bracket as multi cropped land will make land acquisition for township more difficult. As it is, the ceiling of 5% on multi cropped land acquisition in a district was difficult to follow, taking acquisitions for all purposes together into consideration.

Track2Realty Exclusive

Experts in the urban policy and planning are of the view that since none of the traditional solutions have worked, it calls for fresh approach and out-of-the-box thinking to make India slum free. Pranay Vakil, Chairman of Knight Frank India outrightly blames the ambiguous policies coming in the way of slum redevelopment. He says there is no dearth of expression of interest and even some of the international players had recently tied-up with the Indian partners for the same. He urges the Government for consistency in policy guidelines if slum free cities have to be a realty reality.

“A developer taking risk should be assured that there is a policy guideline in place. Some of these slums in Mumbai fall into Coastal Regulatory Zones (CRZs) and there is no clarity over the policy guideline. Then a developer needs   Government machinery that will not have a hands-off approach. The process of policy can be democratic, but the process of implementation has to be authoritative. What will a developer do if 20-30 per cent of the slum dwellers resort to protest? A developer who has put in his money will not wait that some day some Government will take a decision. This is the reason that big developers are not getting into this segment. Only small time developers with political backing are coming forward for slum redevelopment. This has also given rise to intermediaries who in turn become specialists in wrong practices,” he says.

Navin M Raheja, Managing Director of Raheja Developers agrees that slum redevelopment is not like any other real estate business. It has several challenges at several fronts be it mafias, political agendas, bureaucratic hurdles due to lack of initiatives, over expectations of slum dwellers, financial insecurity as the land cannot be mortgaged and an extremely high risk of project getting stuck up in between due to several socio-economic issues.

The major problem in slum redevelopment is availability of alternative land for resettlement of slum dwellers, social issues, political agendas, gestation period, financing issues and above all the extortionist and blackmailing behavior of some section. Because of all these issues many projects failed at the initial stages and many projects are being held up due to these issues and rigidity of some of slum dwellers to shift at new place,” he says.

…..to be continued

The company is currently developing a 3,500-acre township Sushant Golf City at Lucknow, while the Megapolis township at Greater Noida is spread over an area of 2,500 acres.

“Our focus is housing and primarily development of townships for the middle and high-middle class people. In order to offer more homes to more people, we have applied for expansion of the two hi-tech townships to the UP government,” Ansal API Chairman Sushil Ansal said to PTI.

The company has applied to expand the Sushant Golf City to 6,000 acres, while application has been made to extend the Megapolis to 3,500-4,000 acres, he added.

“The applications are under consideration and the Lucknow project may receive the approval for expansion very soon. Both the projects are under development now,” Ansal said.

The company is developing about 70,000 units and 50,000 units at present at Lucknow and Greater Noida respectively.

“With the expansion, we will be able to offer a total of another 80,000 new units in both the townships,” Ansal said.

When asked about the size of investment that the company is likely to put in for the additional development, he said Ansal API is currently putting in about Rs 33,000 crore over a period of two decades and “it will increase proportionately”.

Talking about sales revenue, Ansal said: “From Lucknow we are expecting Rs 25,000 crore sales and it will go up by Rs 15,000 crore post expansion. Similarly, the Megapolis’ value will go up by another Rs 20,000 crore from Rs 30,000 crore.”

The company had earlier announced to fund these two projects through various modes, including internal accruals, debt and private equity raising.

Besides these two projects, the company is also expanding another township — Esencia — at Gurgaon by 200 acres, Ansal said, but did not share details.

The Gurgaon township is being developed in 112 acres of land with about 3 million sq ft of saleable area.

The company currently has a net land bank of about 8,500 acres in various locations across the country.

Ansal API today announced to convert its Ansal Institute of Technology (AIT) into Ansal University (AU) — a Haryana state varsity.

Commenting on this move, Ansal API’s education venture Sushant Group of Institutes Director C S Nagpal said: “AIT was affiliated to AICTE. However, it was very difficult to expand under AICTE. Even we cannot have our own syllabus according to the need. So we decided to transform it into a university.”

Although it will have reservations for concessional fees, normally a student will have to pay a minimum of about Rs 1.2 lakh a year to study at AU, he added.