The Sea of Oppurtunities
The major South Indian real estate markets – Bangalore, Chennai, Hyderabad and Kochi till now were considered highly price sensitive. Changing this dynamic is the burgeoning IT sector and the rapidly strengthening industrial base which is augmenting the real estate demand in these cities. Briefing on the same is Sushil Mantri, Chairman and Managing Director – Mantri Developers Pvt Ltd (MDPL) and Swaroop Anish: Executive Director, Business Development – The Prestige Group,
What are the distinct features of the realty market of South India?
Mantri: It is observed that the real estate markets in South India have been steadier as they are end-user driven with stable economic activity, migratory population and an excellent socio-cultural background. The pricing of real estate in the Southern markets are more realistic and affordable that offer great value for customers. Investors have seen an appreciation of 15-18% annualized with the right developer.
Over the next few months, the residential market can witness of demand in activity amidst vigilant buyer sentiment across most of the tier-I cities in India. Demand in the Northern markets like Delhi NCR and Mumbai will likely remain subdued due to various pain points such as high price, inventory pressures and cautious home buyer approach, as opposed to a Bengaluru or Hyderabad or Chennai that have a positive traction in housing sales due to flexible pricing, easy payment options, quality of the construction, etc. The same is the case with office space absorption where the demand for office space in markets like Bangalore, Hyderabad, Mumbai, Chennai, Pune are rising.
Anish: The trend has been one of a gradual increase, with a defined year on year growth. Well-located projects have shown appreciation. Home loan rates in the domestic market are in the region of 9.25% and with further softening, they will provide a huge impetus for first homebuyers as well as those seeking to upgrade. We foresee a significant improvement in the market in the next 12 months.
Which cities are the major realty markets in the South?
Mantri: Bengaluru, Hyderabad and Chennai are going through a positive swing in terms of traction not just in the residential space, but also the commercial properties. With the increase in the number of start – ups that have come up in Bangalore and Hyderabad, there has been a considerable increase in migration of young professionals into these cities creating a demand for housing. Demand for commercial real estate has been increasing over the recent quarters as corporate entities consolidate and expand operations following a positive economic scenario. Business growth in India has been all about adopting global best practices, and it is expected that the demand for commercial realty will keep growing through 2016 and 2017.
Anish: Markets in Bangalore, Hyderabad and Chennai have been supported amply with a consistent demand for office space, showing job growth and a steady demand for homes. We see a steady increase across projects and more particularly, in the ones that have witnessed important infrastructure improvements in the locality, such as the Metro Line.
Which are the upcoming real estate markets of the South?
Mantri: At present, Hyderabad is seen as the most preferred city for developers to invest in, be it commercial or residential. The general attitude of the government of Telangana is investor friendly. The approval process at Hyderabad is quite fast, as compared to neighboring states due to pro-activeness of the Government. The average rent for a two-bedroom house in Hyderabad is Rs.15,000-20,000. The combination of affordability and upbeat business environment together is driving the demand for commercial/residential spaces in Hyderabad.
Anish: The two markets that show promise in Karnataka are Mangalore and Mysore. Both cities have attracted investment from real estate majors over the last decade. To give a fillip to both these markets, investments in industry need to be drawn to these centres, coupled with investments in infrastructure. Better connectivity between Bangalore and Mysore is one simple initiative which has been pending for long. Mangalore being chosen as one of the Smart City locations can certainly improve its infrastructure and attract investments in the industry.
The impact of announcements like Smart Cities, RERA, GST and Housing for All on the real estate sector
Mantri: The Government of India declaring the development of 16 Smart Cities in the South can give way to massive opportunities, particularly from the real estate perspective. Incorporation of ICT (Information and Communication Technology), energy efficiency and sustainability are an integral part of smart cities. The recent introduction of the Real Estate bill which became an Act by the government is surely going to bring good discipline to the real estate sector, which was overdue. Delay in government approvals for various certifications is an obstacle in real estate sector. With the new Real Estate Bill in place we are looking forward to the regulatory authorities to promote a single-window system of clearances of real estate projects. We are expecting that this Act will also make relationships between the buyer and seller more transparent and provide better disclosures.
In terms of urban affordable housing development, I think encouraging private sector participation would require a coordinated effort from both central and state governments. Some possible measures around the key themes like, strategic initiative for further impetus, strategic investments, simplified structural and procedural frameworks, introducing legal and regulatory reforms and empowering consumer for the greater affordability, may be expanded by the both governments.
Anish: The difficulties faced in implementing projects by developers can definitely be streamlined. Laws need to change with time, and facilitate creation of modern cities. The benefits of the RERA Bill are multifold. It provides additional comfort to homebuyers and regulates the operation and functioning of this business, thus making it more transparent. It will weed out unscrupulous operators and ensure a more pleasant home-buying experience. The benefits of the new enactment will be felt in the years to come as the respective states adopt the Bill.
Introduction of the Goods and Services Tax (GST) is likely to give the real estate sector a tremendous boost, as it is currently flailing under the burden of a flurry of direct and indirect taxes. Giving incentives to first-time homebuyers will help achieve the Government’s vision of ‘Housing for All by 2025’ and enable more people to invest in homes. The Government can also consider incentivizing developers to create affordable housing.
The growth & expansion plans
Mantri: MDPL started with an investment of Rs 10 Lakhs and in just five years has been able to double its turnover. The company has expanded its operations to Pune, Chennai and Hyderabad and diversified its portfolio to residential, retail, office, hospitality, and townships. As a responsible builder, MDPL has increased its Green Building footprint from 0.8 Million square feet to 10 Million square feet.
Anish: Having completed more than 195 projects covering over 67 million square feet, currently the company has 65 ongoing projects covering 70 million square feet and 36 upcoming projects aggregating to 48 million square feet of world-class real estate space across asset classes. Prestige Group is India’s only CRISIL DA1 rated developer with the financial rating of A- by ICRA. It has extended its expertise to Chennai, Hyderabad, Kochi, Mysore, Mangalore and Goa, giving each city the malls, large townships, tech parks, hotels, luxury villas and SEZs. Last year, we actively got into the warehousing market and will also be launching few large-scale IT developments in Bangalore. Simultaneously, we are also in the process of finalizing a piece of land in Pune for an IT Park.