Development area of 157msf, spread over 18,000 acres - Revised business plan of Lavasa now factors in development area of 18,000 acres, vs initial 13,500 acres. This entails development of 157msf, FSI of ~0.20x. The project now envisages 300,000 permanent residents and 2m visitors pa. Lavasa has a lake line length of 60 kms, and is spread across 100sq kms; equivalent to the size of Paris and one-fourth the size of Mumbai.
As per the Hill Station Regulations, Lavasa has been declared as a Hill Station over a proposed area of ~ 25,000 acres. The current business plan is for development of 18,000 acres out of the same and the company has purchased so far ~ 10,000 acres of land and further ~ 2,000 acres of land are in the agreement stage.
Development plan entails 4 periods, with Period 1 comprising of Dasve, Mugaon and Bhoini to be largely completed by FY13/14. Each of the periods would then have phase wise development. Dasve, the first town in this Period 1 will be ready by 2010.
Future launches to be primarily residential / commercial development; vs current largely comprising of institutional, hospitality and social infrastructure - Of the 157msf development plans, residential is expected to account for 64% and commercial (including offices, etc) to account for 20% while the balance 16% of the FSI development is towards hospitality, education and other social developments.
Thursday, January 07, 2010
Tuesday, December 29, 2009
Mumbai - Good Recovery, but Rentals Slower
Spate of new launches in the last 2-3 months, well spread over the city landscape.
Based on the market feedback, we understand that the volume off take was quick at the lower end of these price bands and slow at the upper end. Primary sale prices have risen rapidly (10-20%) over the last 2-3 months, around 15% shy of end 2007 peak levels.
Story will be different this time around, and unlike the previous bull market (prices went up 3-5x) prices will rise gradually. Residential rentals, though up from the bottom, are still at 25-30% below the end 2007 peak level (due to new supply), we believe. Further, Real Estate across the World suggests that rentals are a better reflection of the underlying demand, which will ramp slowly in view of significant supply.
On all India basis, we continue to believe that F10 will be the year of volume recovery, leading to 10% price increase in F11.
Based on the market feedback, we understand that the volume off take was quick at the lower end of these price bands and slow at the upper end. Primary sale prices have risen rapidly (10-20%) over the last 2-3 months, around 15% shy of end 2007 peak levels.
Story will be different this time around, and unlike the previous bull market (prices went up 3-5x) prices will rise gradually. Residential rentals, though up from the bottom, are still at 25-30% below the end 2007 peak level (due to new supply), we believe. Further, Real Estate across the World suggests that rentals are a better reflection of the underlying demand, which will ramp slowly in view of significant supply.
On all India basis, we continue to believe that F10 will be the year of volume recovery, leading to 10% price increase in F11.
Friday, December 11, 2009
Mumbai + Delhi Hottest Investment Destinations
According to a survey just published by Colliers Investment, Mumbai and Delhi are the hottest destinations. Here is a complete result of the survey
[City - Preference of Respondents, Upcoming Supply, %of Supply as Affordable homes, Price Trend]
[City - Preference of Respondents, Upcoming Supply, %of Supply as Affordable homes, Price Trend]
- Mumbai - 75%, 56K Units, 8% affordable, Mild Upswing
- Delhi - 53%, 3.3K units, 2% affordable, Still near the trough
- Bangalore - 52%, 45K units, 2% affordable, prices at trough
- Pune - 42%, 22.5K, 45% affordable, prices at trough
- Chennai - 40%, 44K units, 33% affordable and prices at trough
- Hyderabad - 30%, 28K units, 7% affordable, prices at trough
- Kolkata least favored state due to political parties which have hampered growth - 17%, 8.8 units, 45% affordable, prices just off the trough
Wednesday, December 09, 2009
Model Act + Regulations - Potential Problems
We studied the proposed Model Real Estate Act and here are some potential problems.
Prohibits development of land into a colony or construction of apartments for marketing without registration.
This will prove tough on small developers given its inflationary impact on project cost. The key concern here is whether licencing would occur at the Centre or State level licencing at the Centre level could prove detrimental.
Mandatory registration by a regulatory authority prior to each project launch; 36-month licence period; bank guarantee from developers
These steps would safeguard the consumer from false developer claims regarding carpet area, built-up area and flat development plan, as developers would be required to proffer these details to the registration authority prior to launch. Prices, however, may increase due to the bank guarantee clause.
Disallows the issue of advertisements or prospectuses inviting advances or deposits
This could have a negative impact on end consumers since the absence of advertisements would leave buyers in the dark about upcoming projects.
No deposit or advances to be taken by promoters without first entering into an agreement of sale
This will prevent any discrepancies in the sale agreement, thereby protecting the interests of end users. It will also discourage investor-buyers from entering into the market and fuelling price speculation.
The Big Question - How efficient this Regulator will be ? All Developers are Politicians or First / il-legal Blood of Politicians and hence the regulator won't be in a spot to pass orders like SEBI or RBI does.
Prohibits development of land into a colony or construction of apartments for marketing without registration.
This will prove tough on small developers given its inflationary impact on project cost. The key concern here is whether licencing would occur at the Centre or State level licencing at the Centre level could prove detrimental.
Mandatory registration by a regulatory authority prior to each project launch; 36-month licence period; bank guarantee from developers
These steps would safeguard the consumer from false developer claims regarding carpet area, built-up area and flat development plan, as developers would be required to proffer these details to the registration authority prior to launch. Prices, however, may increase due to the bank guarantee clause.
Disallows the issue of advertisements or prospectuses inviting advances or deposits
This could have a negative impact on end consumers since the absence of advertisements would leave buyers in the dark about upcoming projects.
No deposit or advances to be taken by promoters without first entering into an agreement of sale
This will prevent any discrepancies in the sale agreement, thereby protecting the interests of end users. It will also discourage investor-buyers from entering into the market and fuelling price speculation.
The Big Question - How efficient this Regulator will be ? All Developers are Politicians or First / il-legal Blood of Politicians and hence the regulator won't be in a spot to pass orders like SEBI or RBI does.
Tuesday, December 08, 2009
Inventory of Residential Apartments
PropEquity has done an excellent job of taking stock of the residential apartment inventory across various cities in India [Mumbai, Gurgaon, Noida, Thane, Bangalore, Kolkata, Hyderabad and Pune] for projects priced around INR 3 mn. Here is the latest availability chart. [Expandable]
Volume recovery in the residential segment has primarily been driven by improved affordability on the back of aggressive price cuts and reduction in mortgage rate.
Volume recovery in the residential segment has primarily been driven by improved affordability on the back of aggressive price cuts and reduction in mortgage rate.
Sunday, December 06, 2009
Affordable housing - Gripped by Fear of Excess
PropEquity research data highlights that developers who had hurried into this segment, to improve their cash flows at a time when high-end residential segment was suffering, are sitting with >40% unsold stock. Of ~0.1mn units that were launched between Nov08-Oct09, only 57% found buyers.
The real problem is Market has not improved fully and Developers have to tone down their expectations.
Already seems to be a crowded space; we believe this segment will always remain price sensitive and any steep price hikes will kill absorption, especially as competition is stepping up.As many as 11 realty companies have filed their DRHPs with SEBI (of which three have filed in the last week) looking to garner ~Rs 190bn (US$4.1bn) from the primary markets.
The real problem is Market has not improved fully and Developers have to tone down their expectations.
Monday, November 30, 2009
Mumbai Apartment Registration Rise
Mumbai's apartment registrations data reveals that demand remains strong despite 5-30% rise in prices in the past five months. Thus, while prices in many pockets in the city are new highs, registrations in October 2009 were the highest in almost two years. he data suggests that the increase in prices has failed to make a dent in residential demand in the city.
Also, the Reserve Bank of India (RBI) increased risk weightage on commercial real estate lending by 100bps, which is likely to result in a 50-100bps increase in borrowing costs. Mortgage rates could also come under pressure owing to inflation-related concerns. Headwinds of higher prices and mortgage rates are likely to weigh on real estate demand in medium term.
Also, the Reserve Bank of India (RBI) increased risk weightage on commercial real estate lending by 100bps, which is likely to result in a 50-100bps increase in borrowing costs. Mortgage rates could also come under pressure owing to inflation-related concerns. Headwinds of higher prices and mortgage rates are likely to weigh on real estate demand in medium term.
Tuesday, November 24, 2009
Corruption + Bubble - Allowing FDI Without Lock-In
The government may do away with the lock-in period for foreign direct investment (FDI) in the real estate sector that was imposed earlier in wake of worldwide realty rally and concerns of asset price bubble formation. The Department of Industrial Policy and Promotion (DIPP) has proposed the scrapping of the three-year lock-in for FDI in realty. The DIPP has already drafted a cabinet note on the matter which has been circulated to the Cabinet Committee on Economic Affairs (CCEA).
The lock-in period was a cautionary move as real estate, as a space, is generally more prone to speculative trading. The government, therefore, introduced a lock-in for foreign investment after it liberalized FDI in realty in 2005. The restrictions were also supposed to act as an inbuilt buffer in case of a global real estate crash as it would prevent sudden flight of capital. Well we want Foreign Money for Long Term Investments says Finance Minister, then why are you now removing the Lock-in ?
The move, however, would be counter to the intuition of the Reserve Bank of India which had in the latest quarterly review of its monetary policy raised the provisioning on loans meant for the commercial real estate sector to 1% from 0.40% citing potential of an asset price bubble formation. We wish Dr. Reddy was still the Governor of RBI, however, his strict and principled approach likely irked the then FM and was unfortunately shown the door.
I really hate to see this withdrawal happen under Dr. Manmohan Singh, but it is happening. Looting the Hardworking Indian Middle Class and transferring money to Foreign Investors.
The lock-in period was a cautionary move as real estate, as a space, is generally more prone to speculative trading. The government, therefore, introduced a lock-in for foreign investment after it liberalized FDI in realty in 2005. The restrictions were also supposed to act as an inbuilt buffer in case of a global real estate crash as it would prevent sudden flight of capital. Well we want Foreign Money for Long Term Investments says Finance Minister, then why are you now removing the Lock-in ?
The move, however, would be counter to the intuition of the Reserve Bank of India which had in the latest quarterly review of its monetary policy raised the provisioning on loans meant for the commercial real estate sector to 1% from 0.40% citing potential of an asset price bubble formation. We wish Dr. Reddy was still the Governor of RBI, however, his strict and principled approach likely irked the then FM and was unfortunately shown the door.
I really hate to see this withdrawal happen under Dr. Manmohan Singh, but it is happening. Looting the Hardworking Indian Middle Class and transferring money to Foreign Investors.
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