Falling rupee attracts more NRIs to Indian realty market

The Corridors by Ireo – Gurgaon’s Sector 67A

The Corridors by Ireo – Gurgaon’s Sector 67A

The rupee’s sharp dip against the US dollar has made temptations for non-resident Indian (NRI) to buy property with realtors expecting an increase of 35% in business enquiries from the expatriates this year, reveals the Associated Chamber of Commerce and Industry of India (Assocham) recent findings.

Releasing the Assocham paper on ‘Falling rupee sparks property boom from NRIs’, D S Rawat, secretary general Assocham said, “With the rupee riding low against the dollar, Indian residents are looking to accelerate investment plans back home”. The rupee has fallen by about 34% against the US dollar since August 2011 and crossed 65 against the dollar.

Assocham conducted a random survey of nearly 1250 real estate developers in Delhi-NCR, Dera Basi, Mohali near Chandigarh, Mumbai, Kolkata, Bangalore, Hyderabad, Ahmedabad, Pune, Dehradun, Chennai etc. The survey reveals that interest for buying property by NRIs have increased due to favourable exchange rates.

Read more: The Times of India

Bloom in the gloom

Despite a sluggish environment, real estate companies have managed to report healthy sales and profits in April-June, and have been able to maintain their profits mainly on the back of new project launches in new geographies. In fact, developers from the south have even reported strong earnings in the quarter compared to other parts of the country. This is due to reasonable prices in the region and also because the market is driven by end-users, experts said.

The country’s largest developer, DLF, has reported five per cent increase in its sales from a year ago to Rs 2,314.08 crore in the April-June quarter. Mumbai based developers reported moderate earnings as property prices remained high despite sluggish demand. Oberoi Realty’s net sales rose by 6.4 per cent to Rs 210.33 crore, while its net profit was marginally up in the first quarter. The company’s earnings were driven by sales of its existing properties.

Vikas Oberoi, chairman and managing director, Oberoi Realty, said: “We continue to maintain traction on the sale of residential properties and the rental incomes from our investment properties continue to give us stability. While the global and domestic headwinds have intensified, our order books remain healthy reflecting the confidence of our customers. We believe that reputed developers with sound financial standing will continue to attract healthy demand for their projects. We also welcome the Real Estate Regulatory Bill as it is expected to bring in transparency and accountability in the sector. We will continue to focus on being financially prudent while continuously exploring opportunities to acquire land.”

Read more: My Digital FC

How real estate brands will help homebuyers and developers

Moving away from a scenario where buyers needed to negotiate their deals with mostly unorganized companies against the backdrop of an unregulated environment, the situation is now set to change as most builders are taking up brand-building as a serious task.

With builders gradually recognizing the need to have a strong brand value and enhance customers’ overall experience, buyers could now look forward to superior quality of construction, internal and external amenities, facility management services and post-possession services, among other things.

On the other hand, developers believe that brand-building will help them garner better pricing from the market participants, given the rising interest from private equity funds, unorganized companies considering joint development agreements and Reits (real estate investment trusts) being relaunched.

What’s for the buyers?

Given the fiercely competitive scenario among real estate developers in India, brand perception becomes a critical yardstick for potential investors, evaluating options in the Indian realty space.

Better services: Many leading developers have moved away from the traditional set-up, where a single sales/marketing team manages multiple functions and have created different teams within the overall sales and marketing gamut.

Read more: Mint

Real estate developers appeal for rational regulation

There is an urgent need to rationalise the rules and regulations governing the real estate sector. Large portion of the inconsistencies emerge from archiac laws, guidelines that conflict with the development agenda of the economy, disparity in incentives given to larger projects as against the same given to smaller projects.

Also, the current FDI norms also make it difficult for smaller developers to access capital easily. This echoed by Mr Navin Raheja, President of National Real Estate Developers’ Council (NAREDCO). As an apex industry body that has a representation by the government and policy makers, NAREDCO is spearheading cause of a unified view on issues which are impacting the growth of the country.

While appreciating some of the steps taken by the government Navin Raheja mentioned that , “the Real Estate Regulation and Development BIll 2013 is a hugely positive step in this direction. But this can address the issues only in a limited way. The industry would be more than happy to coordinate with the government to iron out the inconsistencies prevalent in the system.

Read more: Money Control

FDI

FDI rose 16% to $1.44b June

Foreign direct investment (FDI) into India increased by about 16 per cent year-on-year to $ 1.44 billion in June, which is the lowest figure during the calender year.

In June 2012, the country had received FDI worth $ 1.24 billion.

During April-June period of the fiscal, foreign direct investment into the country grew by 22 per cent to $ 5.39 billion from $ 4.42 billion during the same period of previous year, a senior official in Department of Industrial Policy and Promotion (DIPP) told PTI.

The sectors that received large FDI inflows during the first quarter of the fiscal include pharmaceuticals ($ 1 billion), services ($ 945 million), automobile industry ($ 515 million) and computer software and hardware ($ 171 million), the official said.

The maximum FDI during the quarter came from Singapore ($ 1.85 billion), followed by Mauritius ($ 1.09 billion), Germany ($ 510 million), the Netherlands ($ 408 million) and the US ($ 315 million).

The official added that recent steps taken by the government are helping in improving the investment environment in the country.

The government has liberalised FDI policy in as many as 12 sectors which include telecom, tea and petroleum & natural gas.

Read more: My Digital FC

Infrastructure

Would the PPP way work for NCR Rapid Rail Transport System?

While most of the Public Private Partnership (PPP) infrastructure projects in the country face hiccups in execution, the first of its kind-NCR Rapid Rail Transit System (RRTS) project worth Rs 72,000 crore is all set to go the PPP way with 20-30 per cent of its funding coming from the private sector. But the recent experience of India with PPP in urban infrastructure projects narrates a tale of challenges ahead.

The private partner in NCR RRTS project is expected to be associated under the Build-Operate-Transfer (BOT) model which is a widely used in PPP mode. The potent factors that will decide the fate of the project will be the economic viability and the revenues that the project will generate. Expecting a daily ridership of 16.3 lakh by 2016 on the three proposed corridors, the major source of revenue for the project will be the passenger fares. About 80-85 per cent of the revenue will be generated from fares with the remaining to flow from advertising, rentals and property development, according to the feasibility report.

The major glitch in the Delhi Airport Expressline project, which is an example of why PPP does not work, was that its projected ridership was highly inflated and it expected 75 per cent of revenue to come from real estate development which did not happen at the desired pace, making the project a loss making entity.

Read more: Business Standard

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