Track2Realty Exclusive:

In the realty sector where a majority of operations are based on exchange transactions – adoption of transparency standards in interaction with investors and stakeholders alike, are major advantages that will help avoid a system break down.

With some regulatory changes having taken place in the sector over the last decade, there is increased investment in the sector, along with heightened competition and increased number of consumers that need to be catered too. Given the attractiveness of the sector to investors and businesses alike, over the last few years we have witnessed some large existing business houses and corporations foray into the sector and diversify their business lines.

Sachin Sandhir, Managing Director, South Asia of RICS is of the opinion that these, corporations are steeped in sound corporate-governance practices, which are implemented and advocated to boost investor confidence and enhance the credibility of the organisation, leading to lower capital costs and increased foreign direct investment.

“In fact, there are several organisations within the realty space that have made great progress in providing their institutional investors with the level of information and disclosure that is a prerequisite for an open dialogue and long-term relationship. Therefore, these new corporatized real estate businesses instantly draw on the strength of their brand positioning and attract their existing customers, on the premise that ‘quality’ is never a compromise and have definitely changed the outlook of the realty sector in the country,” says Sandhir.

Critics, however, assert for Tatas, Mahindras, Godrej, real estate had never been the real forte. Is it just greener pastured driving them? Experts believe there are various regulatory stipulations and hurdles that continue to exist in the sector; whereby company promoters, stakeholders, and business leaders continue to have to make complex decisions that direct the destiny of their overall business operations.

In doing so, they may have to discharge some essential, interrelated tasks which are the foundation for building trust in corporate governance and addressing questions of corporate accountability.

…..to be continued

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 Exclusive: On a closer look there are big and serious questions on the authenticity and prima facie it appears as if the categories have been customised to fit in the highest bidder.

I can understand that any nomination being snubbed by the jury cries foul and this happens across the world, but the award winner have 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.

If the fixation of awards is just a B2B exercise and not related with voting results of the user experience, what is the relevance of such fraudulently operated awards?

I am afraid many of such “surviving on award distribution” companies don’t even reveal the selection criterion, rational and methodology behind awarding the lesser mortal realtors while biggies in the fray often prefer to stand out of the mess.

As one such leading award manufacturer once admitted, “it is a cut throat and cluttered segment now. The success of award in our case is that most of the award winning realtors themselves comes to take the award, unlike others where junior executives are sent for the photo session and trophy.”

Short on consumer confidence and high on award list seems to be the mantra of survival for some of the realtors for whom purchasing such, often expensive awards also translates into foreign funds who are not high on due diligence in this part of the world. Isn’t it a racket of fraudulently duping both the gullible home buyers and greedy investors?

No wonder, it is the fly-by-night realtors and mid-size greedy developers who are there to pay for the awards and make it a self-publicised glory. Biggies in the realty business have often been staying away from such awards since they know their acceptance to the trophy will only lend credence to the award racket while they as developers will be bracketed along with trophy greedy realtors in the market.

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

Q.  Do you think real estate awards add value to the developer’s project?

Ans. An award is a powerful tool which helps developers gain recognition for project performance and excellence. Acquiring a credible award helps aide developers in enhancing their reputation and credibility, generating growth and building their brand. At the same time awards support sales to some extent by acing as a pull mechanism. However, this is also dependent on the credibility of the awards itself.

Q.  How far is an award a sales driver and to what extent is it a brand driver?

Ans. An award is more of a brand driver than a sales driver. Though it does help increase sales to some extent, as an award winning brand acts as a pull for consumers. RICS is supportive of real estate awards that are based on actual performance indicators and tangible evidence. Therefore, we believe that even projects even though they might be at the conceptual stage should be awarded on account of being a unique, path breaking or revolutionary idea.  However, in order to award a project as ‘best in category’, only completed projects which have been evaluated by a credible jury on stringent parameters through a transparent and open process. Such awards will definitely add value and drive the brand of developers.

Q.  How far does it bring confidence in the psyche of the buyers?

Ans. Winning an honour or award is beneficial at many levels.  Not only does it boost the motivation of employees, but also generates interest and awareness through an independent acknowledgement of the value of a product or service that a developer is offering and thus provides reassurance to potential customers. A developer who has been felicitated by a credible and noteworthy award will be able to induce consumer confidence not only in the business, but new and upcoming projects as well. Awards help consumers perceive developers and their business/projects as being reliable and trustworthy. This is definitely an added advantage in a market like ours, where there are extremely limited tools and avenues available which help consumers ascertain the background, reputation and credibility of a developer.

Q.  Most of the realty awards are organised by industry state holders only. Don’t you feel there is a need for independent awards as well?

Ans. 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. The Zee Business RICS Real Estate Awards, therefore put together a transparent process, where thorough due diligence was conducted to avoid any conflict of interest. The jury comprised of all experienced members of the property and construction industry, however were carefully selected to ensure that none had an interest in promoting any project/s in particular. Therefore, the Zee RICS Awards stressed on an extremely stringent and transparent evaluation process during the jury rounds, which in turn ensured a neutral and unbiased evaluation, which was achieved through deliberations, debate and discussions amongst jury members, based on their area of expertise and credentials.

Q.  Realty awards have often been accused for rigging. Your take on that?

Ans. 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.

]]> http://www.track2realty.com/element-of-subjectivity-in-realty-awards-sachin-sandhir/feed/ 0 http://www.track2realty.com/promoter-or-professional-driven-iii/ http://www.track2realty.com/promoter-or-professional-driven-iii/#comments Sun, 19 May 2013 11:13:17 +0000 Track2Realty http://www.track2realty.com/?p=8594 Track2Realty Exclusive: The debate of promoter versus professional driven realty companies gained momentum in the year 2012 because high attrition at the top level of realty sector has been in the news throughout the year. The Managing Directors of Indiabulls Real Estate and Peninsula Land quit in the month of October. So did the real estate heads of two property funds, Indiareit and Everstone Capital. Most of them either moved to other realty companies, starting their own ventures or shifting streams to join consultancies.

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:

“We strongly believe that the LBT which the government is trying to introduce is detrimental to both the developer and home buyer community. What it means is that home buyers who are already paying various taxes will need to cough up even more in the form of this new tax. The affordable housing is becoming a distant dream with additional new taxes being introduced from time to time. The primary motive of the government is to provide affordable housing and not to use housing as a source of generating revenue” said Vimal Shah, President of MCHI-CREDAI.

Developers who are already reeling under the pressure of sluggish economy will be forced to pass on this new tax to end-users. This will raise property prices, thereby hurting the prospects of affordable housing, which is the need of the hour” added  Shah.

We request government to reconsider in these taxing issues. The government should come up with policies which will help reduce burden on home buyers.

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