16 - 09 - 2020

CREDAI Bengal Daily News Update |16.09.20

Real estate demand expected to plunge 50-70% in FY21: CRISIL

The already languishing residential real estate demand is expected to plunge 50-70% year-on-

year in the financial year 2020-21, according to CRISIL. With demand going down, capital

values will remain under pressure across cities. CRISIL expects a price correction of 5-15%

across ticket sizes.

While demand for new units will see a sharp decline, the blow to customer collections will be

cushioned by advances against already sold inventory realised in line with construct ion

progress.

Isha Chaudhary, Director, CRISIL Research said, "Lowering capital values and attractive

interest rates augurs well for affordability which has improved by 10-30% across cities during

the past five years. Despite improved affordability, demand translation will be feeble led by

income uncertainty arising from pandemic coupled with weak investor sentiment emanating

from pressure on capital appreciation/rental yields in the sector over past few years."

Overall funding requirements are expected to rise as the hit in collections is expected to be far

steeper than the decline in outflows due to deferred construction.

The credit profiles of small-to-mid-sized and leveraged developers will be impacted than larger,

experienced developers with healthy balance sheets.

Sushmita Majumdar, Director, CRISIL Ratings said, "Larger, established developers have

ample financial flexibility, with debt-to-total assets ratio (a measure of leverage) estimated at a

five-year low of about 30% as of end-fiscal 2020. Many will also have access to steady income

from operational commercial assets. We estimate the increase in funding requirements for these

players at only 15-25% higher than pre-pandemic estimates."

Small-to-mid-sized developers, however, will face a sharp about 200% rise in funding gap this

fiscal. But their ability to borrow or raise capital is limited as debt-to-total assets ratio is

significantly high at about 75% as of March 2020.

Given tight liquidity, some of these players will be vying for tie-ups with larger established

names by way of joint ventures, joint development agreements, and development models to

benefit from their processes and financial flexibility, or resort to distress sale of assets to raise

funds.

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Newspaper/Online The Times of India ( online )

Date September 15, 2020

Link https://content.magicbricks.com/property-news/real-estate-demand-

expected-to-plunge-50-70-percent-in-fy21-crisil/116053.html

Model Tenancy Law Rs 3 lakh crore opportunity for real estate

sector, if implemented well

India has always had a strong demand for rental residential real estate. It has been an important

component in addressing housing shortages, especially in urban areas. Rental residential real

estate has allowed dwellers access to quality housing without actually investing in it. But the

absence of a sound and robust rental policy has been a deterrent for India's rental residential real

estate realising its full potential.

According to the latest research by Magicbricks, there are multiple reasons why landlords prefer

to keep their properties locked rather than putting them on rent. In the absence of a robust rental

law, landlords are worried about how to manage the expectations of tenants, tackle squatters,

and how to evict a tenant, who chooses to overstay. And a low rental yield in the range of 1.5-3

percent further discourages landlords to open up their properties for tenants.

This has resulted in millions of houses lying vacant in urban India. The 2017-18 Economic

Survey suggests that over 12 percent of the total urban housing stock is vacant and the numbers

of vacant homes have shot up to 11.1 million in 2011 from 6.5 million a decade earlier.

It is high time for these vacant units to come into the market. And, a big enabler comes in the

form of government's proposed Model Tenancy Law. Going by the first look of it, the proposed

law is a bold move and certainly the need of the hour that can change the contours of the rental

housing industry for good. It attempts to address three primary challenges:

Firstly, it will bring in more transparency in the relationship between the landlord and tenant

Secondly, it would be to increase liquidity in the market among homeowners, and

Thirdly, it would address the huge demand from India's 400-million millennial population.

Comprising 30 percent of the total population, the millennial population in India is the key

driver of rental homes demand

If implemented well, the law will play a crucial role in transforming the rental real estate market

from what was worth Rs. 1.53 lakh crore market in 2017 to an estimated around Rs 3 lakh crore

market by 2023.

The introduction of the proposed Law augurs well for the government's Housing for All

initiative as the time has come to expand its ambit to rental housing as well. India's housing

requirements have been complex and till now policies have been mostly focused on building

Newspaper/Online The Times of India ( online )

Date September 15, 2020

Link

https://content.magicbricks.com/expert-corner/model-tenancy-law-rs-

3-lakh-crore-opportunity-for-real-estate-sector-if-implemented-

well/116052.html

homes and on home ownership. The government needs to take a more holistic approach that

must not only take into account existing challenges but also create newer opportunities for the

rental real estate segment to achieve its full potential.

Effective enforcement of the law: Policy-makers too need to pay more attention to contract

enforcement and property rights. Also, taking lessons from how RERA was implemented, one

must also be wary of the fact that housing is a state subject and any amendment of law by the

states may dilute the purpose.

Reduce anxiety in the relationship: The Law must attempt to increase convenience and reduce

anxiety in the relationship between the tenant and the landlord. It is much required since the

current laws happen to be very archaic. The new law, which seeks to establish a fair relationship

between these two parties, makes it easy to rent a house, to exit a house and smoothens the

process of staying there.

Increase liquidity in the market: Once the confidence boosts, it would in turn increase

liquidity in the market. While the average rental yield remains at 1.5 percent to 3 percent,

rentals across the country have relatively increased by 5 to 6 percent on an annual basis in the

last two years.

And with new models and tech disruptors invading the rental space with value added services,

the effective rental yield can go up to 5-6 percent. Simultaneously if the interest rate inflation

comes down it would lower the cost of debt, this would bring cheer among the landlords.

Encourage involvement of institutional investors: Keeping in mind that there are 11.1 million

vacant homes in urban India, the law should open up a world of opportunities for institutional

investors. Rental residential is a highly unorganised sector and the law is expected to create the

much needed legal framework for institutionalising this sector. This will also lead to purpose

built rental housing for urban migrants under various schemes paving way for institutional

investors in the rental segment.

Rise of organised players in managed rentals: The draft law has provisions for Property

Managers and it opens up a huge opportunity for a new bunch of players in the managed rentals

category. Over the last few years, we have seen the rise of some disruptors in the field of

student accommodation, co-living, and paying guests.

The addition of the role of Property Managers boosts the chances of these players for end-to-

end property management solutions. These managers now would be duty-bound by law through

a fair and transparent system to ensure collection of rent, getting repairs done, rental renewal,

resolution of disputes or any other matter related to tenancy.

To harness the full potential of the rental segment, the Model Tenancy Law needs to address the

needs of all the stakeholders. From enforcing the contract to making eviction easier, fixing

rent/security deposit as per market rate and increasing rents periodically, the Model Tenancy

Law needs to bring a structured and well-oiled system in place to deal with the highly

unorganised rental segment.

It also needs to create new opportunities within the segment to expand the business of rental

residential real estate.

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Realty Cos Line Up Offers to Push Sales in Festive Season

Real estate developers are betting big on the festive season to revive sales after it slumped to the

lowest in a decade in the first half of 2020 due to an unprecedented demand bust triggered by the outbreak of the Covid-19 pandemic.

From offering EMI payment for a year in case of job loss to giving extra area without additional

charges and offering attractive payment plans, developers are ready to roll out festive offers to attract homebuyers. Property consultants said after the lockdown developers have drummed up a decent response whenever they launched a value-driven sales campaign.

During the Ganesh Chaturthi, a plethora of offers from buyers attracted buyers.

“We do expect the sentiment to improve with a steady increase in economic activity, which will continue during the next few months. A lot of action will be in ticket sizes of ₹50 lakh–₹1.5

crore,” said Chaitanya Seth, partner - business consulting, EY India.

Newspaper/Online The Economic Times

Date September 16, 2020

Seth said the next quarter will be a great buying opportunity for fence-sitters, quick-decision

makers and another customer segment that can yield returns are NRIs.

“With most homebuyers worried about job loss, developers are coming up with schemes to pay up to 12 months of homebuyers’ EMIs. This way, a property is available at 80% of the value. Buyers also understand that this is the right time to buy,” said Priyatham Kumar, CEO of

Bengaluru headquartered real estate portal Homes247.

PropTiger recently hosted more than 30 developers including Godrej, Brigade, Lodha, Mahindra Lifespaces, Emaar, Shapoorji Pallonji, PS Group and Merlin and showcased more

than 80 projects across the country. More than 15,000 buyers registered during the event and deal flow was better than expected.

“We are likely to see improved sales velocity during this festive season compared to prior

months of this financial year. We have seen significant growth in sales during the past month especially on the occasion of Ganesh Chathurthi,” said Mani Rangarajan, Group COO, PropTiger.com.

Apart from sales offers, lower interest rates are also helping drive transaction volumes.

Some companies are trying innovative offers. For example, Bullmen Realty India, a Noida

headquartered consultancy firm, will protect the buyers' funds and offer them double their stuck amount in case of non- delivery of projects by developers.

Another realty player, Gaurs group, is offering an easy payment plan with 10 percent down

payment within 30 days, 40 per cent within the first year and the rest 50 per cent at the time of delivery for its commercial project.

“We expect that with the beginning of the festivity months, the real estate market will emerge

stronger with better performance,” said Ankush Kaul, president (sales & marketing), Ambience Group.

Investors Clinic, another brokerage firm, said it was offering extra area depending on the booking amount paid by the buyers.

Some developers, who launched schemes in July and August, reported high numbers of sales

and are expected to double it during the festive season.

M3M Group said it recorded sales worth of Rs 1150 crore on launching its Unlock Gurugram campaign.“We realised ‘Unlock’ would be the most apt antidote for people to come out of their

fear zones and get into action, considering their financial security in the future,” said Pankaj Bansal, director, M3M Group.

Investors Clinic also claimed that the company sold scores of units through its innovative

property swap scheme.

_____________________________________________________________________________________________________________________

Correction in land prices will allow developers to build efficient

offices: Experts

Industry expert said that significant correction in land prices will allow developers to

build better and more efficient offices to make the entire office experience better. Experts

also said that many organizations are looking at temporary re -designing of their

workspaces as a way to save cost in the current situation.

Industry expert said that significant correction in land prices will allow developers to build

better and more efficient offices to make the entire office experience better. “The shape of the offices coming out of the pandemic will be very different from going in - hub

and spoke models, new office designs to promote greater collaboration and touch down points, and a change in density norms would be a few of the big changes expected,” said Anshul Jain,

Managing Director, India and South East Asia, Cushman & Wakefield. Most of the industry veteran believed that social contact is necessary.

“Six months into the pandemic, remote working has emerged as the new normal. It has

completely changed the landscape of the Indian workspaces,” said Amit Ramani, CEO and Founder, Awfis and Vice President, Indian Workspace Association.

According to Juggy Marwaha, CEO, Prestige Office Ventures, de-densification, contactless entry into the buildings would be the norm at newer workspace models.

Experts also said that many organizations are looking at temporary re-designing of their workspaces as a way to save cost in the current situation. ____________________________________________________________________________________________

Newspaper/Online The Economic Times( online )

Date September 15, 2020

Link

https://economictimes.indiatimes.com/industry/services/property-/-

cstruction/correction-in-land-prices-will-allow-developers-to-build-

efficient-offices-experts/articleshow/78127092.cms

Pandemic-induced slowdown sees home prices in India decline by

1.9% year-on-year

In the 12-month percentage change for the period Q2 2019 - Q2 2020, Turkey led the

annual rankings with prices up 25.7% YoY, followed by Luxembourg at 13.9% YoY and

Lithuania with 12.4% YoY. Hong Kong was the weakest-performing territory in Q2 2020,

with home prices fallen to 2.8% YoY.

Home prices in India declined by 1.9% year-on-year (YoY) in India during Q2 of 2020,

according to a global house price Index. As compared to Q1 2020, India moves down 11 spots in the global index, from 43rd rank to

54th rank in Q2 2020, in terms of appreciation in residential real estate prices.

Shishir Baijal, Chairman & Managing Director, Knight Frank India said, “The residential sector has been impacted by low demand across most markets in India. Further, the slowdown due to the pandemic in the global economy has adversely affected the real estate sector and the

purchasing power of homebuyers.”

In the 12-month percentage change for the period Q2 2019 - Q2 2020, Turkey led the annual rankings with prices up 25.7% YoY, followed by Luxembourg at 13.9% YoY and Lithuania with 12.4% YoY. Hong Kong was the weakest-performing territory in Q2 2020, with home

prices fallen to 2.8% YoY.

Mainstream residential prices across 56 countries and territories worldwide rose at an annual rate change of 4.7% on average, compared to Q1 2020 at 4.4%. According to the report, 9% of the surveyed global countries and territories registered a decline in a yearly price growth;

European countries occupy eight of the top 10 rankings in Q2 2020, which provides representations from the Baltic and Central and Eastern European nations as well.

”Whilst a lot will depend on when the economy opens up completely, the current softening of prices can be beneficial for the end-users to make their purchase decisions. Further, lower home

loan interest rate, can provide the right motivation for house purchase, ” said Baijal.

From the Asia Pacific region perspective: New Zealand and South Korea, which were initially seen to have effectively handled the pandemic, have registered mixed results. New Zealand slumped from second to 11th place in the rankings between March and June.

Newspaper/Online The Economic Times( online )

Date September 15, 2020

Link

https://economictimes.indiatimes.com/industry/services/property-/-

cstruction/pandemic-induced-slowdown-sees-home-prices-in-india-

decline-by-1-9-year-on-year/articleshow/78122299.cms

However, the country recorded annual price growth of 9%, making it the top-performing market

of Asia Pacific region. South Korea, where annual price growth was weak at 0.1% in Q1 2020, has seen an annual price growth pick up to 1.3% in Q2 2020.

The Global House Price Index tracks the movement in mainstream residential prices across 56 countries and territories worldwide using official statistics. ____________________________________________________________________________________

____________________________________________________________________________________

Newspaper/Online The Times of India

Date September 16, 2020

Noida, Greater Noida authorities to move SC over 8% interest

order

The authorities, at present, charge 12% interest per annum from private developers over

the land allotment cost. In case of default, the interest rate is increased to 15% and

compounded every six months.

Staring at losses of nearly Rs 10,000 crore this fiscal, the Noida and Greater Noida authorities have decided to move the Supreme Court for a review of its decision to bring down the interest

rate for land that builders pay to 8% per annum in line with SBI’s marginal cost of funds based lending rate (MCLR).

The authorities, at present, charge 12% interest per annum from private developers over the land allotment cost. In case of default, the interest rate is increased to 15% and compounded

every six months. And with the total dues of builders in the two cities currently being over Rs 26,000 crore, the SC’s order could result in a dent of up to 40% to the authorities’ coffers, officials said.

A Noida Authority official said, “We have estimated the restructured payment plan with 8%

interest rate. We would suffer losses to the tune of 30% to 40%.”

However, real estate experts and developers say that apart from incomplete projects, scores of

ready buildings in the twin cities stand to benefit from the SC’s decision. Over dues, the

authorities have held back the process of issuing completion certificates to these projects. The

case is expected to be taken up on September 21.

“About 1.50 lakh units currently remain stuck in the pending real estate projects in Noida and

Greater Noida. The SC’s decision is aimed at resolving the mess between private developers

and the authorities. Because of extremely steep interest rates, the pending amount kept growing

over the years,” said Pankaj Kapoor, the managing director of Liases Foras, a real estate data

analytics company.

Noida Authority has given out 116 plots to private builders, out of which only 43 projects have

been completed. Similarly, in Greater Noida, of 114 real estate projects, 67 projects remain

stuck.

Due to mounting dues, a lot of these projects became financially unviable and developers left

them midway after taking money from homebuyers.

________________________________________________________________

Newspaper/Online ET Realty ( online )

Date September 16, 2020

Link https://realty.economictimes.indiatimes.com/news/regulatory/noida-

greater-noida-authorities-to-move-sc-over-8-interest-order/78139688

Why no fire safety act in cities, asks Gujarat HC

The petitioner-lawyer asserted that as municipal limits are exempted, the authorities

cannot take penal action against such defaulters – building owners, managers etc. under

the Fire Safety Act.

The state government’s decision not to make its Fire Safety Act, 2013 applicable in areas under

municipal corporations has drawn severe criticism from the Gujarat high court, which also sought an explanation as to why the eight municipal corporations in the state have been exempted from this law.

During the hearing of a PIL seeking action in the August 17 Shrey Hospital fire case, Chief

Justice Vikram Nath commented that not applying the law in urban areas is like a fraud on the people.

This was after advocate Amit Panchal filed the PIL and reminded the HC that the law that the state government enacted in 2014 has penal provisions for defaulters but unfortunately such

defaulters in urban areas such as Ahmedabad are exempt.

The petitioner- lawyer asserted that as municipal limits are exempted, the authorities cannot take

penal action against such defaulters – building owners, managers etc. under the Fire Safety Act.

After the Fire Safety Act came into effect, the state government did not imple ment it for more

than a year. This led to the filing of a contempt of court petition in 2015 by the applicant, on

whose 2009 PIL the HC had built pressure on the state government to address the fire safety

issue. This contempt application had also pointed out this inadequacy by highlighting a special

clause in the legislation by which the municipal areas have been exempted.

In August 2020, the PIL alleged that the state’s Fire Safety Act proves ineffective when fire

tragedies occur like the one at Shrey Hospital, where eight Covid-19 patients were killed, and at

Takshashila Arcade in Surat, where 22 young students lost their lives in 2019.

________________________________________________________________

Newspaper/Online ET Realty ( online )

Date September 15, 2020

Link https://realty.economictimes.indiatimes.com/news/regulatory/why-no-

fire-safety-act-in-cities-asks-gujarat-hc/78122856

Telangana's property registration revenue dips 53% between

April-July 2020

Buoyed by robust property transactions, the state government has been eyeing record

revenue which has doubled in just six years since Telangana came into being.

Telangana has seen a 53 per cent dip in revenue from property registrations in the April-July

period this year, as compared to the same period last year, due to the Covid-19 pandemic, lockdown and economic slowdown in general. This, despite the state making a significant

progress in transactions over the past few years. Buoyed by robust property transactions, the state government has been eyeing record revenue

which has doubled in just six years since Telangana came into being.

Data, exclusively available with TOI, reveals the slump this year compared to the income earned in the same period in 2019-20.

Interestingly, the state hit a peak of Rs 7,611 crore revenue last year as against Rs 2,746 crore in 2014-15 after gaining statehood.

This year, between April and end of July, the state could net only Rs 1,112 crore as against Rs 2,387 crore in the corresponding months last year.

In the month of April, Telangana had only Rs 21 crore income from property registrations

compared to Rs 537 crore earned in the same period last year. The revenue slowly inched up to Rs 440 crore this July, again though less than of Rs 574 crore

recorded in the same period in 2019-20.

National stock exchange director K Narsimha Murty said the city of Hyderabad will quickly help the state mitigate the loss.

“Hyderabad has latent demand for business as several investments are coming and it will soon convert into economic activity. Even the healing in the past few months is much better than

many states,” he said. 43% decline in docu registration in April-July

It will take just three or four months to get back to old growth trajectory,” he added .

Coming to the registration of documents, there has been a 43 per cent decline in the April-July

Newspaper/Online ET Realty ( online )

Date September 15, 2020

Link

https://realty.economictimes.indiatimes.com/news/regulatory/telangana

s-property-registration-revenue-dips-53-between-april-july-

2020/78122898

period with only around one lakh documents registered.

Since the formation of the state about 70 lakh property documents were registered. In the first year (2014-15), 8 lakh documents were registered and in the year 2019- 20, the number reached

16 lakh, reflecting the rapid growth in India’s newest state.

State planning board vice chairman B Vinod Kumar hoped that the robust rural economy will

bail out the state in the times of Covid- 19. “The slowdown is not specific to Telangana, but we

have done better than many states across India,” he signed off.

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