10122016-rel-01.qxd 12/9/2016 5:09 PM Page 1 c m y b CHANDIGARH | SATURDAY | 10 DECEMBER 2016 Rents to increase in next 12 months GEETU VAID Wait-and-watch has been the mantra that the real estate sector has been following ever since the announcement of demonetisation of ~1000 and ~500 notes last month. With buyers, sellers, investors as well as developers all waiting for opportune time to make their move, the RBI too joined the wait-andwatch brigade by maintaining status quo on repo rates earlier this week. Demonetisation has brought the sector to a virtual standstill and all the stakeholders were expecting the RBI to give some jolt to the catatonic sector by announcing a repo rate cut that would lead to lowering of home loan interest rates by the banks making buyers venture in the “cleaner” residential market. But with the RBI preferring to wait and assess the impact of demonetisation better before announcing any cut in key policy rates, there was widespread disappointment in the sector. Expressing disappointment and surprise over the move Shishir Baijal, Chairman & Managing Director, Knight Frank India said, “A rate cut could have been encouraging at this moment. However, it is disappointing that RBI decided against it. We were expecting a 25 bps cut, which could have given an impetus to the beleaguered real estate sector.” “It is a surprise move as the realty sector was expecting a cut which may have slightly offset the impact post demonetisation . There is extreme uncertainty in the sector which has led to almost a standstill situation of sales pan India as many customers are on the fence to see how the situation pans out”, said Samir Jasuja, CEO and Founder, PropEquity. “The RBI monetary policy announcement keeping REPO landing rates unchanged did not meet the expectations of the industry. Though it is a balanced move, RBI could have done much more. We expected a rate cut which would have helped in lowering the loan interest rates making Real Estate buying a reality for most buyers who were eagerly waiting for the rate cut,” said Rahul Singla , Director, MAPSKO. Cautious RBI dashes hopes Many saw it as another setback for the sector that has been battling slowdown for almost three years now. “This decision might drive the market away from investing in property for the next few months, until the Budget announcement offers some relief for the buyers”, said Rajesh Goyal, MD, RG Group. “The realty sector is already under immense pressure due to negative market sentiments and lost demand. Besides this circle rates in NCR parts like Noida, Greater Noida and Ghaziabad have been increased. Also Registry charges in Noida have gone up this year. Therefore, in such a scenario, rate cut was the need of the hour to pro- vide the much needed boost to the sector and to facilitating growth on the other hand,” said Deepak Kapoor, President, CREDAI Western UP . According to the last monetary policy review of this calendar year, the first one after demonetisation, the repo rate remains unchanged at 6.25 per cent, Reverse Repo Rate under the LAF at 5.75 per cent, Statutory Liquidity Ratio (SLR) at 21.5 per cent, Cash Reserve Ratio (CRR) at 4 per cent and Marginal Standing Facility (MSF) at 6.75 per cent, respectively. While repo rate cut is usually seen as a first step towards lower home loan interest rates, it has not always resulted in home loans getting cheaper. Since 2015 the RBI has cut repo rates by 150 bps but the banks have not been forthcoming in transferring the benefit to home buyers. There has just been a marginal cut of 26 bps in loan rates for consumers in the past year-and-a-half. However, all eyes were on NRIs have advantage in luxury market PRICE TRENDS TRICITY Locality Sector 21 Sector-33 Sector -38 Sector - 44 Sector-49 Sector 115 Sector-127 Ambala Highway Dera Bassi Panchkula sec 12 GURDIP SINGH NRIs have an advantage in luxury property market in India post-demonetisation as real estate developers in major cities of the country have ‘significantly’ dropped property rates, according to Singaporebased business analysts. “Given the recent demonetisation move, property rates have significantly dropped across various cities in India,” said Abhijit Ghosh, India Desk leader at PricewaterhouseCoopers (PwC) Singapore, an international financial consultancy. “Specifically, the luxury condominium range of property apartments has been badly hit given that one of the objectives of the current demonetisation move is to discourage all significant cash transactions,” said Gaurav Tijoriwalla, Manager, PwC Singapore. There has always been a trend for NRIs to invest in Indian luxury condominium apartments in the metropolitan cities of India, particularly such as Mumbai, Delhi, Bangalore and Chennai. Industry observers said Chennai-based developers are cutting prices by up to ~20 lakh on slow-moving projects. “Experts believe that we can soon expect a 10 per cent25 per cent discount in the luxury segment of residential condominiums and also in Wednesday’s monetary policy review as banks are now flushed with funds and there seemed to be no hurdle in the way of reduction in loan rates that would have injected some life in the residential market. “For the real estate sector, which is currently reeling under pressure from demonetisation a rate cut could have definitely allayed fears of a near-term loss of momentum”, said Anuj Puri, Chairman & Country Head, JLL India. “Rate cuts were required to spur investment. It could have significantly impacted the revival & growth of the market at this juncture. The rate cut would have reduced the cost of funds to homebuyers as well as developers”, added Gaurav Jain, MD & CEO, Jindal Realty Pvt. Ltd. Putting the onus on the banks to reduce home loans now developers as well as market experts hinted at need for some immediate measures to infuse some life in the sector. “We expect Avg Rental value (psf) in Rs 4-8 10-25 9-10 7-12 12-13 5-7 10-12 5-7 4-7 8-10 THINKSTOCK the upmarket areas such as Nungambakkam, RA Puram and MRC Nagar in Chennai,” Ghosh said. They have also forecasted Delhi property prices to offer 25 per cent to 30 per cent discounts and Bangalore to offer 30 per cent to 40 per cent discounts. NRI sources expects luxury property prices to drop by 25 to 30 per cent. Property transactions have plunged significantly in the last month. Bangalore property registrations have dropped to about 200 per day, compared to approximately 1,800 prop- commercial banks to transmit the reduced cost of funds in the form of cheaper home loan rates to customers over the next few months,” said Anshul Jain, Managing Director, India, Cushman & Wakefield, “Since now the banks are flushed with cash and don’t have to worry about reviving their bottom lines, they should be passing the benefits of the previous rate cuts to the end consumers. It will be indeed the single biggest factor in kick starting the economic activity in this stagnant faces. Hence we sincerely hope that both Finance Ministry as well as the RBI push all the banks to transfer the entire benefit to the end consumer for whose benefit it is meant, else these moves will severely stop short of benefiting the consumer,” said Amit Modi, Director, ABA Corp. “The residential market will see a pick-up in demand if the availability of home loan at lower rates is accompanied by rationalisation in home prices. However, the extent to which banks pass on the rate cut would determine the actual magnitude of benefit to homebuyers”, added Jain. However, in spite of the disappointment and criticism, the RBI move is a measured and prudent one in view of the uncertainty on the economic front. Going forward we can expect to see a rate revision in the JanMar quarter in 2017. erties before demonetisation. Mumbai is expected to see a 50 per cent to 70 per cent slow down or may even go to a no transaction period, India’s property enquiry portals, as observed by experts, have seen a significant dip, about 400 people per day asking from erstwhile number of 1500-1,700. There is no denying that the NRI community will be taking advantage of the situation and explore to invest in luxury condominium residential apartments in India, Ghosh said. — PTI c m y b Avg Capital Value (psf) in Rs 9000-14000 2000-4000 4000-5000 18000-20000 5000-8000 2000-4000 2000-3000 2000-4000 2000-3000 5000-1000 Source: PropTiger Datalabs Even as Buy vs Rent remains the ultimate dilemma for Indian buyers ,demonetisation is going to be good news for the rental market, especially in the residential segment. This is because more prospective buyers will prefer to stay in rented premises for some more time while waiting for prices to drop further, at the same time sellers in the secondary market, too, are likely to find renting out their properties more profitable than selling those in view of price correction in this segment post-demonetisation. The rental values of residential properties are, thus, going to see an upward thrust over the next few months in view of increase in demand. Overall, the average price of a house in the main cities across India has increased by 3.6 per cent compared to last year while rental values have grown at a faster rate of 4.9 per cent for the same period. This trend is expected to continue and rentals would see a greater increase. “We expect to see a correction in the price of real estate over the next 6 to 12 months. Customers would hold on to their buying decisions for this period. As a result, we expect to see upwards pricing pressure on rental properties as customers would look to rent out for a bit more time and wait it out,” says Nitin Vyakaranam, CEO of ArthaYantra, that released the 5th edition of its annual Buy vs Report earlier this week. With a likley spur in the home rentals business the online property portals, too, have increased their stakes in it. The most recent one to accelerate activities in this segment is housing.com. The realty portal has decided to reenter the segment from early 2017. “Last year, we had taken a strategic decision to close rentals in order to focus the company on home buying and selling segment, but now we have started preparing for the re-entry and plan to launch it early next year,” its Chief Executive Officer Jason Kothari said. “While we had planned to relaunch rentals towards end of next year, the recent demonetisation move has led to an advancement in the plans. Demonetisation Affordability factor Buy Bengaluru The garden city is an affordable buy destination for people with an annual income of over ~16 lakh Hyderabad Most affordable for buying as anyone with an annual income of over ~8 lakh can consider buying a residential property here Ahmedabad Ahmedabad is an affordable city for both buying and renting a residential property. People with an annual income of ~10 lakh and above can consider buying a residential property in this city. Pune Pune has been in demand for both buying and renting a residential property. People with an annual income of above ~18 lakh can consider buying a residential property. Rent Mumbai Most suitable for renting as even someone with an annual income of ~25 lakh cannot afford to buy a residential property. Delhi Suitable for renting as buying a property here is only suitable for people with an annual income of ~22 lakh Chennai Rental values here have increased by 9.10 per cent over last year as buying a property here is only suitable for people with an annual income of over ~22 lakh is expected to cause a slow-down in the home buying and selling, while it will likely spur growth in the home rentals space, making it an opportune time to relaunch the rentals business,” he said. ArthaYantra has developed a patented composite score "ArthaYantra Buy vs. Rent Score" (ABRS)™ to quantify the Buy v/s Rent decision and also explains the reason to buy or rent in a particular city. It uses a host of parameters including salaries, savings, tax and prices to arrive at a recommendation. ABRS addresses the important questions including how much a professional should spend for buying a home, and at what income can a professional comfortably take a decision to buy a house as against renting. The previous editions of ABRS covered the real estate buy and rental markets of 8 cities, including Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune. In the latest edition four new cities Indore, Kochi, Jaipur and Lucknow have been added. The four cities added in this edition were found to be more affordable for buying or renting a house. However, Hyderabad and Ahmedabad were found to be just as affordable. Mumbai continues to be the most expensive city for buying or renting a house followed by Delhi.
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