Realtors cut flat sizes in weak market HouseLiv.com

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Realtors cut flat sizes in weak market

Average size of apartments has shrunk 27% over the past five years from 1,400 sq ft in 2014 to nearly 1,020 sq ft in 2019.

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Realtors cut flat sizes in weak market MUMBAI:Market realities of ongoing liquidity crisis, changing buyer preferences and growing concerns about affordability have forced real estate developers' to reconsider their product strategies and prompted them to significantly reduce apartment sizes across seven important property markets.

Average size of apartments has shrunk 27% over the past five years from 1,400 sq ft in 2014 to nearly 1,020 sq ft in 2019. Mumbai, the country's most expensive property market, has seen the highest decline in apartment size by 45%, followed by Pune with 38% reduction in average unit size, showed data from Anarock Property Consultants.

Surprisingly, National Capital Region (NCR), one of the worsthit residential markets in recent years, has seen the least decline of merely 6% during this period to 1,390 sq ft, pulling ahead of Bengaluru where average flat sizes reduced to 1,300 sq ft in 2019.

“Among the major factors contributing to the escalating claustrophobia effect of shrinking apartment sizes, demand for affordable homes in metros tops the list. Also, buyers are increasingly looking to avail the government’s credit subsidy benefits for affordable housing. These require a home to be priced below .`45 lakh and not exceed 60 sq metre carpet area or 850 sq ft built-up area including overall loading,” said Anuj Puri, chairman, Anarock Property Consultants.

The reduction in sizes, particularly in the affordable segment, helps buyers to avail of the subsidies. Moreover, buying an affordable home also comes with GST benefits. The GST for affordable housing is 1%, against 5% for mid-segment homes.

“Home buyers are not interested in any space wastage and need more efficiency. Ticket size is proving to be a game changer, but liability also needs to be given importance while designing. We have reduced the sizes of our 3-bedroom apartments at two projects by 15-20% and it is supporting in sales conversion well,” said Rajat Khandelwal, CEO-Mumbai, Ozone Group.

In short, buyers get reduced costs and added benefits, but lose out on space. Developers get to attract more buyers, but many have had to shed their cherished 'luxury' market categorization.

Mumbai Metropolitan Region (MMR) has the least average apartment size among all top cities at 530 sq ft now from 960 sq ft in 2014. Average sizes in both MMR and Pune are calculated on the carpet area while for the remaining cities it is based on the built-up area.

The main southern cities of Chennai, Bengaluru and Hyderabad have seen size reduction of 8%, 9% and 12%, respectively, over the past five years. What also makes these cities unique is that the prevailing average sizes of apartments are among the highest, Puri said.

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On further analysis, it emerges that affordable homes priced less than .`40 lakh have seen the maximum decline in sizes over the previous years, while ultraluxury homes saw the least.

Bengaluru has seen maximum reduction in average affordable property sizes. In 2014, average size of an affordable unit was 1,070 sq ft area — this fell sharply to around 710 sq ft in 2019. Though the city has high demand for mid-segment properties, affordable homes are also attracting contemporary homebuyers.

Pune, India’s other IT hub, has seen the least reduction in sizes of affordable units at 20% in the past five years. This coincides with the fact that within the city, affordable homes have maximum demand and builders are wary of tampering with sizes.

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Karnataka Plans Major Relaxations In Who Can Buy Agricultural Land

Karnataka Law Minister said they are relaxing rules for industries to come up in Karnataka as they are facing a lot of problems due to the strict rules.

Karnataka Written by Maya Sharma

Updated : June 11, 2020 04:34 pm IST

Karnataka Law Minister said in the cabinet meeting a decision was taken to repeal all these provisions.

Bengaluru: The BJP government in Karnataka plans to make buying agricultural land much easier in the state. Until now, there were strict rules restricting who was entitled to buy agricultural land, but the state now says it will bring in a bill in the next legislature session to change that. 

Briefing the media after a cabinet meet, Law Minister JC Madhu Swamy said, "In Karnataka we have land reforms with different sections. 79A says only those who are having less than Rs 2 lakh income can purchase land. B means only an agriculturalist allowed to purchase land. C means we have to file all sorts of documents while buying land." 

He said in the cabinet meeting a decision was taken to repeal all these provisions.

"We are thinking on the lines if there comes a man who can invest for good technology in agriculture, we have to facilitate him," Mr Madhu Swamy said. 

The Law Minister said they are relaxing rules for industries to come up in Karnataka as they are facing a lot of problems due to the strict rules. 

"They are going to Andhra Pradesh, Tamil Nadu because of these stringer rules. Now we have relaxed it, have decided to repeal all these provisions. Bringing in a bill In the next Assembly session," he added. 

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Mr Madhu Swamy said Karnataka has also doubled the limitation for the holding of land.

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Bangalore residential prices could go up in next few quarters: HouseLiv.com

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Bengaluru may see residential property prices going up in the coming quarters by 15-20 percent, even as demand picks up for both affordable and luxury segments in the city.

The commercial segment in the city has been impacted, as there was no new leasing In the last three months, according to CREDAI Bengaluru president Kishore Jain.

In an interview to CNBC-TV18, Jain said, as of now, prices are stable and there has been no reduction. However, several developers are looking at hiking prices over the next few quarters, citing rising input costs and a glaring labour shortage.

"Residential demand is picking up for affordable and luxury segments in Bengaluru. Quality of site visits have improved since we are only seeing serious buyers venturing. Earlier, 2 or 3 out of ten site visits would turn into prospects, but we are seeing that number now go higher to 4-5," Jain told CNBC-TV18.

Even while some other cities are seeing discounts on real estate prices, Bengaluru has seen no reduction in prices in any segment, Jain said, "In fact, many developers are looking to hike prices by 15-20 percent in next two quarters."

"Input costs are increasing and there is a big labour shortage,” Jain said, adding that he does not expect to see new launches of projects at least for the next two quarters.

The Confederation of Real Estate Associates (CREA) also told CNBC-TV18 that rental prices were stable in Bengaluru at pre-COVID levels and are not seeing a drop.

Demand for rentals has also picked up, and should go to pre-COVID levels soon, said Pradeep Joe, president of the association in Bengaluru.

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With attractive deals, real estate becomes buyers' market amid Covid-19 HouseLiv.com

With attractive deals, real estate becomes buyers' market amid Covid-19

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The price of a residential unit, on an average, is 9-10 times annual income in a city like Mumbai, and about six-seven times in most tier-one cities

Just before the lockdown began, Ritesh Chandra managed to sell his ancestral house in Uttar Pradesh. To avoid paying capital gains tax, this Delhi-based financial professional plans to reinvest the proceeds in another property in the National Capital Region (NCR), Lucknow or Jaipur.

He has searched online and prepared a list of prospective sellers. “I am waiting for the lockdown to end and will then do on-the-ground due diligence,” says Chandra. Like him, thousands of prospective buyers across the country.....

While luxury housing may see a 20 percent reduction in prices, developers are likely to offer freebies such as deferred payment plans to buyers investing in the mid segment.

Real Estate

Like every other segment of the economy, the Indian real estate sector too is reeling under the deadly impact of the coronavirus pandemic. But like it is with every crisis, this pandemic too may throw up opportunities for buyers as several cash-starved developers with unsold inventory may be forced to sell at discounted prices.

While luxury housing may see a 20 percent reduction in prices, developers would offer freebies to buyers investing in the mid segment. These may range from deferred payment plans to even a free Corona insurance that may address their fears of a job loss. Affordable housing may see a moderate price correction of 5 percent and also a fall in volume.

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For instance, a villa property in Mumbai's Worli area is in the market for a few months now. The buyer had bought it for around Rs 40 crore a few years ago and was willing to sell it for about Rs 30 crore four months ago. Today, he is willing to sell it at Rs 20 crore and yet there are no takers. This is almost at a price point of Rs 30,000 per sq ft, which is comparable to a high-end property in Gurgaon's Golf Course Road.

HDFC Chairman Deepak Parekh recently said that he sees a 20 per cent drop in property prices of unsold residential inventory, and advised developers to offload their stocks to enhance liquidity position. He also cautioned developers against over leveraging, which can affect their businesses in the long-run.

A report by HDFC Securities had noted that large NBFCs expect further 20-25 percent cuts in the real estate prices and a 25-30 percent dip in volumes for the financial year 2021 along with fiscal incentives like stamp duty waivers. This shall aid demand recovery. The market may consolidate in the hands of select large organised developers with strong balance sheet and access to bank funding. JDA/JV model will continue and land buying will take a back seat. Launches will get deferred and focus will be on completing existing unsold area.

An analysis by Liases Foras has also predicted that property prices may come down by 10-20 percent across geographies, while land prices could see an even higher reduction of 30 percent.

Builders may dole out freebies

Luxury real estate projects are bound to witness a reduction in prices across the country, anything from 10 to 20 percent depending on the location, city and the demand supply situation. These are units priced at Rs 2.5 crore and above, say real estate experts.

In the mid-segment category where units are priced between Rs 1 crore to Rs 1.5 crore, there may be a slight correction as developers may instead decide to offer freebies instead of direct discounts.

What's important to understand here is that this segment is popular with the fence sitters. The builder community may try to get into a demand boosting exercise to motivate this segment to buy.

"Reduction in prices or discounts alone may not be a motivator for this segment. The developer may decide to entice them with intelligent freebies," said an expert.

Builders going forward may decide to address this segment's chief fears which include a job loss three months down the line, a probably reduction in price or "what happens if I get corona".

Experts said that real estate builders would have to think innovatively to generate cashflows.

"The biggest challenge in the market today is the revival of demand. That can be achieved either by reducing property prices, bringing down the cost of financing or mortgage rates and introducing a better tax structure for both direct and indirect taxes," said Anckur Srivasttava of GenReal Advisers.

Builders may promise a price guarantee option to boost sales. This means that if a house is worth Rs 1 crore and if prices were to come down in a few months or the buyer were to lose his job, the developer as per this scheme, decide to buy back the house from the buyer and also offer a 6 percent interest on the amount.

This could ensure that the buyer not only gets back his money but also an amount equivalent to what he would have earned had he parked his money in a fixed deposit. A win-win proposition.

Some builders may decide to offer a Corona insurance for the entire family.

"Such schemes would go a long way in addressing fears of a job loss, fear of value erosion of a property and most important the fear of contracting the disease itself," said Srivasttava.

The buyer pool may shrink going forward but discounts alone may not do the trick. Deferred payment plans without subvention may become popular.

"One may see developers coming up with deferred payment plans such as 10:90 plan which means that the buyer may have to pay an upfront amount of 10 percent and 90 percent at the time of possession. Such payment plans may also be offered for ready-to-move-in projects," said Mudassir Zaidi, Executive Director- North, Knight Frank India.

This means that the buyer may have to pay 10 percent at the time of moving in and perhaps the remaining 90 percent within a year.

The sub-Rs 50 lakh segment may also see a correction of 5 percent, say experts.

The Rs 10 lakh to Rs 45 lakh segment may also witness a moderate correction with some freebies thrown in.

"This segment may also see a volume correction because of significant demand erosion as the savings of these people have been eroded during the lockdown," said an expert.

Some experts are of the view that real estate prices have remained stable for the last five years and with time correction already having taken place, developers may not have enough head room to reduce prices.

"Homebuyers' resistance to prices is much less today. The bigger issue is that of timely delivery and quality of the product being offered," said Samantak Das, Chief Economist and Head of Research & REIS, JLL India.

Going forward, some developers may decide to offer well-designed compact units to fit the buyers’ pocket.

Developers may also offer freebies such as GST and stamp duty waivers, additional gadgets in the house such as dishwashers thrown in. There may not be enough headroom to rationalise prices as prices have remained stable for almost five years now, he added.

In 2008, the real estate market was over heated. It had short-term investors and under writers, making it a sellers’ market. The price bubble led to reduction of prices by 20 percent to 30 percent. Developers’ have had a bull’s run five year’s prior to the Lehman’s crisis and their coffers were full. They therefore had enough head room to reduce prices.

Today, it is an end-users’ market. The market has been in slow mode for the last five years due to several reasons. It is still trying to come to terms with disruptions like RERA, GST implementation and the NBFC funding crisis.

The coronavirus outbreak is perhaps the fourth 'Black Swan' event being witnessed by the Indian real estate sector in since 2016, according to a report by ICICI Securities.

Recovery after the 2008 slowdown was faster as builders had enough buffer. In the present situation, prices have stagnated or come down significantly for the last five years. Despite prices being affordable, buyers are still cautious of investing in property. Timely delivery is their main fear.

In a crisis situation like today, a developer offering a 20 percent discount would also have its own set of challenges, says an expert.

"Homebuyers are wary of buying a high-ticket item such as a house. There are serious confidence and trust issues. A developer offering 20 percent upfront discount would be looked at with suspicion. There could be perception issues. Having said that, there may still be buyers, employed with sectors that are expected to do well such as FMCG, e-commerce, telecom, pharma, insurance, who may still want to buy property post the pandemic," added Zaidi.

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