State of Real Estate for the Month of September 2013 Phillipcapital (India) Pvt
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State of Real Estate For the month of September 2013 PhillipCapital (India) Pvt. Ltd. 9 October 2013 The month that was‐ Haryana’s affordable housing plan has received an overwhelming response with 100 applications so far. Early indications are that the affordable housing supply in the near future in Gurgaon (54 applications) will increase. Sobha Developers and Prestige Estates have reported strong new sales for Q2FY14 in Bangalore (Months of July and August would have contributed to the chunk as market sources indicate that September was sober) The key developments which took place in September – • Maharashtra Chief Minister Prithviraj Chavan has assured developers of speedy approvals and sort out all matters that are crucial for our industry, including speedier environment clearances. • Haryana's Town and Country Planning Department has received license applications from real estate developers for setting up affordable houses. Maximum number of applications for licenses has come for setting up houses in Gurgaon city at 54, followed by Sohna at 15, Faridabad at 10 while rest are for Jhajjar, Palwal, Rewari, Karnal and Nilokheri. Refer Page‐ 7 • The total relocations across top eight cities in the first half (H1) of 2013 was at 5.46 mn sq ft which was 2.5 times higher compared to the same period last year and is one‐third of the total leasing activity. Among the 8 cities, Bangalore recorded the highest proportion of relocations with a substantial increase of more than three times when compared to the same period last year. Companies relocated from CBD/Off‐CBD locations such as MG Road, Millers Road, Vittal Mallya Road and Residency Road to peripheral regions such as the Outer Ring Road. • Developers across the country are attracting buyers through several discount schemes/gifts with most common being gold coins, cash‐back on monthly rentals, customization, free parking and club facility, zero brokerage, upfront cash discounts among others. • Bangalore commercial market seems to be poised for big ticket deals (two deals translating to Rs14 bn). Volvo closing in on 1 mn sq ft space at Outer Ring Road in Marathahalli and an undisclosed buyer/lessee is in discussions with RMZ corp for commercial space. Refer page‐ 18 • Bangalore East supply pipeline strong ‐ The first half of 2013 witnessed a considerable uptrend in the number of unit launches with organized developers launching large affordable projects in peripheral areas such as Budigere Cross in the east, Anekal Road‐Attibele in the south, Tumkur Road in the north and Mysore Road in the western part of the city. Refer page‐ 14 • Commercial space continue to drag behind with office space leasing drops 20% q‐o‐q in July‐September 2013‐ Bangalore saw the highest take up of space‐2.9 mn sq ft‐‐ continued to account for 42% of the total demand for space across the top seven cities. • Mumbai Broker Speak‐ Situation remains grim as transactions have evaporated. Seems to suggest that distress supply in the market is increasing and supply from corporate bulk investments is hitting the market at lower prices (even lower than the cost of acquisition in extended suburbs such as Abhishek Ranganathan (+ 9122 6667 9952) [email protected] Taloja). • Takeaways from Nitesh Estates Management meet (including impact of Neha Garg (+ 9122 6667 9996) [email protected] subvention schemes on prices over last 18 months). Refer Page‐ 21 Please refer to Disclosures and Disclaimers at the end of the Research Report. 9 October 2013 / INDIA EQUITY RESEARCH / REAL ESTATE – SEPTEMBER 2013 Mumbai • Prithviraj Chavan builds bridges with builders' lobby, announces sops: Maharashtra chief minister Prithviraj Chavan has offered a number of sops and assured them speedy approvals and faster clearances from the government for real estate projects. The chief minister has assured us of speedy approvals and sort out all matters that are crucial for our industry, including speedier environment clearances. The meeting was attended by municipal commissioners from number of civic bodies in the Mumbai Metropolitan Region and senior urban development department officials. • Selling a 17‐acre project in South Mumbai, Lodha style – After buying a 17‐acre plot from DLF, the country’s largest developer, for Rs 27 bn in August 2012, Lodha has done everything to woo customers to the project in a rather slow property market in Mumbai. In all, the developer is building six towers of 75 storeys each and 12 villas around a six‐acre park on the 70 feet high elevated plot. The tower had two bed‐ room apartments starting at 1,305 sq ft with a price of Rs 24,471 or Rs 33 mn and three BHKs starting at 1,539 sq ft with a price of Rs 34 mn. The latest attraction in the project was Lodha’s tie‐up with US‐based realty tycoon Donald Trump, known for high‐rise buildings in Manhattan, for an 800‐foot tall Trump Tower inside the Park. • Mumbai high court allows redevelopment of buildings in Shivaji Park area‐ In a major interim relief for residents of buildings in the Shivaji Park area that obtained commencement certificates from the BMC for the redevelopment of their properties before July 31, 2012, the Bombay high court has allowed the redevelopment of these properties despite the structures coming within the proposed heritage precinct. Judges said that those buildings which have received commencement certificates prior to July 31, 2012, could go ahead with redevelopment work. Those buildings where redevelopment plans have been sanctioned and they have been legally demolished between July 31, 2013, and August 13, 2013, should approach the BMC for further permissions. • Sea‐facing Mumbai duplex goes at Rs 135,000/sq ft‐ In the costliest apartment deal in the country, a sea‐facing duplex in a Malabar Hill building was recently sold for Rs 570 mn or roughly Rs 135,000 a sq ft. The duplex in the tony Darshan Apartments on Mount Pleasant Road was sold last month to the Bulchandanis, a prominent business family with interests in software, aluminium and real estate. They own three other duplexes in the same complex. • Mumbai sees 18,000 residential units launched in first half 2013, up 30%‐ Weak residential property market scenario in Mumbai has not deterred real estate developers from launching new projects in the financial capital of the country. The city has witnessed launches of around 18,000 units in the first half of the year until June, representing an increase of 30% over last year, said a quarterly report by Cushman and Wakefield. Of the total new launches, a majority of 30% were focused in the western suburbs of Andheri, Bandra, Malad and Goregaon. Navi Mumbai contributed 24% of the overall launches with the second phase of a large township project launched in Panvel. The central suburban stretch from Kurla to Mulund also contributed 20% of the new launches with two large projects launched in Mulund along with projects in Chembur, Kanjurmarg and Ghatkopar. • SoBo’s high‐end luxury homes find few takers‐ High‐end properties in South Mumbai have fewer takers in a gloomy economy. While property appreciation in Sobo, as the area is fondly called, has dropped to 10% from 30% two years ago, rental yields have fallen by more than half. Sale of new property has dropped 30% in the past eight to 12 months, with fewer investors and end‐users willing to buy expensive homes. For every 100 homes available for sale in a quarter, only six are getting sold. • SRA issues showcause to 300 builders‐ To pull up builders whose projects have been pending for years, the Slum Rehabilitation Authority (SRA) has sent showcause notices to over 300 builders who have failed to begin housing projects for the past – 2 of 23 – 9 October 2013 / INDIA EQUITY RESEARCH / REAL ESTATE – SEPTEMBER 2013 five years. The SRA has identified over 400 such projects. As many as 164 notices have been sent to builders undertaking SRA projects in the eastern suburbs. In the western suburbs, 160 builders had received notices so far. The SRA has also suggested crucial changes in the scheme to ensure successful completion of the housing schemes. Officials said the agency had suggested relaxation of Coastal Regulation Zone II (CRZ) norms to enable redevelopment in over 290 slum pockets affected by the norms. • Realtors hope to clear inventory on freebies, festival sales: Realty developers are hopeful of clearing a large portion of their inventory pile‐up during this festive season by luring in buyers with freebies and discounts, even as they sit tight on declared prices. Developers are likely to attract buyers through several discount schemes/gifts with most common being gold coins, cash‐back on monthly rentals, customization, free parking and club facility, zero brokerage, upfront cash discounts among others. in Mumbai region, which has been witnessing a major drop in sales for quite some time, developers like Lodha, Mantri Realty and Romell Group have already announced various discounts. While Lodha has offered Rs 2 lakh discount on spot booking for its 'Lodha Elite' project in Dombivli, Mantri Realty was offering 100 gm gold on bookings till September 18 for its upcoming Serene project at Goregaon. • Relocations in Mumbai have increased substantially in the first‐half of 2013 compared to the same period during 2012 with companies relocating from CBD locations such as Nariman Point, Ballard Estate, and Churchgate etc. to larger office spaces in locations such as BKC and Andheri‐east at rentals lower by approximately 55‐65 per cent. With IT/ITeS companies expanding to peripheral locations, FMCG, Pharma and Media companies opted for relocations to larger space at attractive rentals in the suburban locations of Mumbai such as Andheri‐East, Jogeshwari and Powai – 3 of 23 – 9 October 2013 / INDIA EQUITY RESEARCH / REAL ESTATE – SEPTEMBER 2013 Residential Projects ‐ Recent and New Launches in Mumbai/Pune Developer Name of the City Location Subvention Residential/ Size (In Sqft) Price/ unit Possession Project scheme Commercial Rustomjee Meridian Kandivali Charkop Village, Residential 1‐2 BHK Rs 9mn West Off M.G.