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Indian Real Estate Market Flourishes: 9% Growth in Housing Sales, 43% Surge in Office Leasing, Says Knight Frank

The latest report by property consultant Knight Frank India reveals a significant uptick in both the housing and office segments across eight major cities in India during the January-March period of fiscal year 2024. According to the ‘India Real Estate: Office and Residential Report (January-March 2024)’, released via webinar, housing sales witnessed a notable 9% annual increase, while office demand soared by an impressive 43%. This surge is attributed to heightened demand for luxury residences and premium workspace.

The report highlights a range of growth in housing prices, varying from 2% to 13% annually across cities including Delhi-NCR, Mumbai, Chennai, Kolkata, Hyderabad, Bengaluru, Pune, and Ahmedabad. Similarly, office rent experienced growth ranging from 1% to 9%.

In terms of figures, housing sales across the eight cities surged to 86,345 units in January-March, compared to 79,126 units in the same period last year. Concurrently, the gross leasing of office space rose by 43%, reaching 16.2 million square feet compared to 11.3 million square feet in the corresponding period of the previous year.

Commenting on the report, Shishir Baijal, Chairman and Managing Director of Knight Frank India, expressed optimism about the real estate market’s performance, noting robust growth in both the office and residential sectors. Baijal emphasized the significant surge in the housing segment, particularly in the higher price category of Rs 1 crore and above, reflecting buyers’ confidence in long-term commitments.

Baijal highlighted the sustained upward trajectory of the office sector, fueled by the country’s economic stability and the expansion plans of businesses operating in India. He noted a return to conventional office setups, with many companies reducing or discontinuing work-from-home policies, thereby further boosting demand for office spaces.

Expecting continued robust activity in the future, Baijal pointed to stable economic policies and favorable domestic conditions as key drivers of growth.

The report provides city-wise insights, showcasing Mumbai’s 17% rise in housing sales and a 29% increase in office leasing. Delhi-NCR saw a marginal 1% increase in housing sales and a significant 19% rise in office demand. Bengaluru experienced a slight dip of 2% in housing sales, while office demand remained flat. Pune witnessed a substantial 14% growth in housing sales and more than a two-fold increase in office demand.

Hyderabad witnessed a notable 15% growth in housing sales and a remarkable three-fold increase in office demand. Ahmedabad saw an 11% rise in residential property sales and an 18% increase in office demand. Chennai and Kolkata also witnessed growth in housing sales by 8% and 12% respectively, with Kolkata experiencing a decline in office demand.

The report also sheds light on trends in the office market, indicating that Indian businesses remain the primary drivers, constituting 37% of office demand. Global Capability Centres (GCC) and flex space operators also played significant roles in office demand.

Regarding the housing market, the report highlights a significant increase in sales in the Rs 1 crore and above ticket-size segment, indicating a growing demand for larger living spaces and an upgraded lifestyle. The weighted average prices have appreciated across all leading markets, with Hyderabad witnessing the sharpest rise at 13% year-on-year.

Overall, Mumbai retained its status as the most expensive market with an average price of Rs 7,891 per square foot.

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Delhi Government Begins Data Collection for Unauthorized Colony Development

The Delhi government has initiated the collection of essential data to formulate a comprehensive plan for the development of unauthorized colonies across the city. Officials have started gathering reports from various concerned agencies, including the Municipal Corporation of Delhi and Public Works Department, focusing on critical parameters such as the status of solid waste management, condition of roads, nature of borewells, and condition of sewer systems.

The multiplicity of agencies has long been identified as a major obstacle in carrying out development works and assigning responsibilities effectively. To address this challenge, these agencies have been instructed to furnish data of unauthorized colonies within their respective jurisdictions, categorized by Vidhan Sabha constituencies.

With over 30% of Delhi’s population residing in illegal colonies, the government aims to regularize and redevelop a significant portion of these settlements. Out of a total of 1,797 such colonies recorded in government records, excluding 66 affluent areas, 1,731 have been earmarked for regularization and redevelopment.

The data collected will include information on sewer lines management, legal and illegal borewells, and waste management processes. This comprehensive dataset will enable the government to plan redevelopment initiatives more effectively, focusing primarily on sanitation and water management in these colonies.

The initiative comes after recent observations by Lieutenant Governor VK Saxena regarding the unsanitary conditions in areas such as Sangam Vihar, prompting Chief Minister Arvind Kejriwal to direct the Chief Secretary to address these issues urgently.

Over the past nine years, the Delhi government has already made significant investments in improving infrastructure within unauthorized colonies, including road networks, piped water supply, and sewer lines. With nearly Rs 5,000 crore spent in this regard, approximately 4,000 km of roads and streets have been re-laid, along with the installation of over 2,484 km of water lines and 2,091 km of sewer lines.

Looking ahead, the government has allocated more than Rs 900 crore for the upcoming financial year, aiming to further upgrade and develop a majority of unauthorized colonies by 2024-25.

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China’s Property Investment Sees 9% Year-on-Year Dip in Jan-Feb 2024

Amidst a backdrop of government interventions and market challenges, property investment in China experienced a 9.0% year-on-year decline in the first two months of 2024, according to data released by the National Bureau of Statistics (NBS).

Market Overview

China’s real estate sector commenced the year with signs of stabilization, as declines in property investment and sales moderated compared to previous months. Official figures revealed a 9.0% decrease in property investment and a 20.5% slide in property sales by floor area during January and February 2024.

Government Measures

Facing a prolonged downturn, Chinese authorities implemented various measures to revive the housing market. Notably, the introduction of a “whitelist” mechanism directed funds from state banks to selected local property projects, aiming to provide financial support where deemed necessary by city governments.

Furthermore, in a bid to stimulate demand, China announced its largest-ever reduction in benchmark mortgage rates, demonstrating a commitment to bolstering the struggling real estate sector.

Market Sentiment

Despite government interventions, market sentiment remains subdued, with indicators such as household loans, construction starts, and funds raised by property developers signaling ongoing challenges. Household loans, primarily mortgages, declined by 590.7 billion yuan in February, following a significant increase in January. Similarly, new construction starts saw a steep 29.7% year-on-year decline, reflecting the cautious approach of real estate firms amid prevailing uncertainties.

While government initiatives aim to provide stability and support, the real estate market in China continues to grapple with fundamental issues. The evolving landscape calls for sustained efforts to navigate challenges and restore confidence among investors and stakeholders.

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UP-RERA Mandates QR-Embedded Project Registration Certificates

In a bid to enhance transparency and empower homebuyers, the Uttar Pradesh Real Estate Regulatory Authority (UP-RERA) has introduced a revamped registration certificate for real estate projects. The new certificate, now digitally signed by the secretary, features an embedded QR code.

The redesigned registration certificate provides comprehensive details of the project, including its name, promoter’s name, registration number, duration, start and completion dates, and project addresses. Additionally, it outlines key registration conditions, such as the requirement for promoters to deposit funds in a separate bank account for construction expenses and project land costs.

Promoters are mandated by UP-RERA to prominently display the QR code-loaded registration certificate at their office and project marketing sites. This enables prospective and existing homebuyers to scan the QR code with their mobile phones and access project details, land information, approvals, and quarterly progress reports on the authority’s web portal.

Sanjay R. Bhoosreddy, chairman of UP-RERA, emphasized the significance of this new feature in promoting transparency and empowering homebuyers. Promoters are advised to incorporate the QR code on their websites, promotional materials, and social media platforms to ensure widespread accessibility of project information.

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Haryana Metro Projects: Strengthening Connectivity and Public Transport

In a bid to bolster connectivity and enhance public transportation options, the Haryana Mass Rapid Transport Corporation (HMRTC) is spearheading several ambitious metro projects across the state. Chief Secretary Sanjeev Kaushal, also the HMRTC chairman, announced significant developments during a recent board meeting.

One of the key projects entails establishing a metro rail link connecting Delhi to the National Cancer Institute (NCI) at Badsa in Jhajjar district. This initiative aims to provide seamless access to specialized cancer care services offered by NCI, situated within the AIIMS-II campus.

The Ministry of Housing and Urban Affairs (MoHUA) has granted approval for a fresh ridership assessment, conducted by M/s RITES, to gauge the potential demand for this route. Additionally, a techno-feasibility study is underway to extend the existing metro line from Ballabhgarh to Palwal, catering to the growing transportation needs of these areas.

Further expanding metro connectivity within Gurugram, M/s RITES has extended a detailed project report to include the Sector-56 to Vatika Chowk stretch. With 28 elevated stations along a 36 km route, this project aims to address the region’s escalating transportation demands.

Efforts are also underway to explore innovative solutions like a double-decker viaduct for a potential metro line connecting Faridabad and Gurugram. Moreover, the Gurugram Metro Rail project, sanctioned by the Government of India, promises to significantly enhance intra-city connectivity within Gurugram, with tenders already floated for crucial aspects of its implementation.

Prime Minister Narendra Modi laid the foundation stone for the Gurugram Metro Rail project, connecting Millennium City Centre to Cyber City, marking a significant milestone in the state’s metro expansion endeavors. With various studies and assessments underway to optimize existing infrastructure and augment passenger capacity, Haryana is poised for a transformative leap in transportation infrastructure.

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Bombay HC: Co-promoter is also liable for flat delays

In a significant verdict, the Bombay High Court has declared that under the Real Estate (Regulatory and Development) Act (Rera), a co-promoter is equally accountable for refunding amounts in case of flat delays, regardless of whether they have directly received funds from flat buyers.

The ruling, issued by the Bombay HC, asserts that the definition of ‘promoter’ within the 2016 Act, effective from 2017, is expansive enough to encompass co-promoters, thereby extending their responsibility for refunds with interest under Rera regulations.

The decision, delivered on February 26, has stirred the real estate industry, legal experts note, as it addresses a fundamental legal query that many have been monitoring. Furthermore, it carries implications for numerous redevelopment projects in the city, according to legal pundits.

Justice S V Marne, in the ruling, delved into the legal intricacy of whether a co-promoter, who has not directly received payments from flat allottees, can still be held accountable for providing refunds with interest under Section 18 of Rera.

The case revolved around an appeal lodged by Wadhwa Group Housing Pvt Ltd against an October 2022 order of the Rera appellate tribunal. The tribunal had imposed refund liability on Wadhwa Group Housing, a co-promoter, in connection with an SRA project in Andheri.

In the project, which commenced with a joint development agreement in 2012, the constructed area slated for sale was divided between Wadhwa Group Housing and another builder, SSS Escatics.

The complaint, lodged by flat buyer Vijay Choksi to MahaRera, sought the refund of a partial payment amounting to Rs 1.2 crore, paid to the co-developer SSS Escatics. The refund claim was based on the developer’s failure to meet the project deadline of 2019.

During the legal proceedings, Wadhwa Group Housing contested its joint liability as a co-promoter, arguing that the amount in question was paid directly to SSS Escatics by the flat buyer and, therefore, only SSS Escatics should be directed to refund it with interest.

The court, however, dismissed this argument, emphasizing that the source of the payments received by the promoters is irrelevant in determining their joint liability under Rera regulations, even in cases where there is no contractual agreement between builders and buyers.

The ruling establishes a clear precedent regarding the accountability of co-promoters in real estate projects, redefining their legal obligations within the framework of Rera regulations.

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Surya Ghar Scheme: Empowering Homes with Rooftop Solar, Free Electricity for Millions

In a landmark decision aimed at promoting renewable energy adoption and reducing electricity bills, the government has greenlit the PM-Surya Ghar Scheme: Muft Bijli Yojana, allocating a substantial Rs 75,021 crore for rooftop solar installations and offering free electricity up to 300 units per month for one crore households.

New Delhi: The government’s latest initiative, the PM-Surya Ghar: Muft Bijli Yojana, received approval with a significant outlay of Rs 75,021 crore. Information and Broadcasting Minister Anurag Thakur disclosed the details after the Union Cabinet meeting, highlighting the scheme’s objective of facilitating rooftop solar installations and providing free electricity to millions of households.

The scheme, chaired by Prime Minister Narendra Modi, is poised to be a game-changer in ushering sustainable energy solutions into every household. Prime Minister Modi emphasized the transformative potential of the PM-Surya Ghar scheme, envisaging a brighter and greener future for all.

Key Features and Benefits of the Scheme:

Central Financial Assistance (CFA): The scheme offers a CFA of 60% of the system cost for 2 kW systems and 40% for systems between 2 kW to 3 kW capacity, capped at 3 kW. This translates to substantial subsidies ranging from Rs 30,000 to Rs 78,000, depending on system capacity.

Subsidy Application Process: Households can apply for subsidies through the National Portal, enabling them to select suitable vendors for rooftop solar installation. The portal facilitates informed decision-making by providing relevant information such as system sizes, benefits calculators, and vendor ratings.

Low-Interest Loans: Collateral-free, low-interest loan products at around 7% interest are available for households to install rooftop solar systems up to 3 kW, further easing the financial burden of adoption.

Model Solar Villages: Each district will develop a Model Solar Village to serve as a blueprint for rooftop solar adoption in rural areas, fostering community-driven renewable energy initiatives.

Incentives for Urban Local Bodies and Panchayati Raj Institutions: The scheme incentivizes local governance bodies to promote rooftop solar installations in their jurisdictions, catalyzing widespread adoption.

Payment Security for RESCO Models: The scheme incorporates a component for payment security in renewable energy service company (RESCO) models, ensuring financial viability for all stakeholders.

Reduction in CO2 Emissions: With an estimated addition of 30 GW of solar capacity through rooftop solar in the residential sector, the scheme is projected to reduce 720 million tonnes of CO2 equivalent emissions over the 25-year lifespan of rooftop systems.

Job Creation: The initiative is expected to generate around 17 lakh direct jobs across manufacturing, logistics, installation, and other sectors, stimulating economic growth and employment opportunities.

To avail the benefits of the PM-Surya Ghar scheme, households can register on the official portal (https://pmsuryaghar.gov.in), contributing to India’s clean energy transition and sustainable development goals.

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UK Housing Crisis: Regulator Urges Builders and Government Action

The Competition and Markets Authority (CMA) highlights the urgent need for increased housebuilding and streamlined planning processes to address the chronic housing shortage in the UK, driving up prices.

Amidst a chronic housing shortage in the UK, the Competition and Markets Authority (CMA) has emphasized the critical need for British housebuilders to construct more high-quality homes, while urging the government to streamline the complex planning system to facilitate swift action.

“Housebuilding in Great Britain needs significant intervention so that enough good quality homes are delivered in the places that people need them,” stated Sarah Cardell, Chief Executive of the CMA.

The regulator’s year-long study also announced an investigation into whether housebuilders share commercially sensitive information, potentially impacting competition within the industry.

Major housebuilders in the UK, including Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey, and Vistry, are under scrutiny as the equity index of UK housebuilders experienced a 2% decline in early trading following the announcement.

While the Home Builders Federation declined to comment on the investigation, it welcomed the focus on the planning system, acknowledging it as a fundamental barrier to housing delivery.

Housing scarcity has long been a pressing political issue in the UK, with skyrocketing prices and rental costs leaving many younger generations unable to afford their own homes. The government’s pledge to deliver 1 million new homes by an anticipated upcoming election falls short of its target of constructing 300,000 net new homes per year in England by the mid-2020s.

With less than 250,000 homes built across England, Wales, and Scotland last year, the CMA underscores the urgency for reform. Britain’s opposition Labour Party has pledged to address the planning system, aiming for substantial changes.

Amidst rising interest rates and living costs, the housing sector faces additional challenges. While the CMA acknowledges that potential anti-competitive behavior among housebuilders is not the primary cause of market problems, it expresses concern over its impact on competition and housing prices.

As the housing crisis persists, collaborative efforts between housebuilders and the government are crucial to overcoming barriers and ensuring the provision of quality, affordable housing for all.

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CAG Report Exposes Rs 172 Crore Loss and Systemic Irregularities in Sand Mining

A recent report by the Comptroller and Auditor General (CAG) has unearthed significant irregularities in sand mining operations in Telangana, leading to a staggering loss of Rs 172 crore in revenue.

The audit, titled ‘Sand Mining with Special Emphasis on Initiatives Taken to Curb Illegal Mining,’ covered the period from 2016-17 to 2020-21, focusing on three project offices of the Telangana State Mineral Development Corporation Ltd (TSMDCL) located in Jayashankar Bhupalpally, Bhadradri Kothagudem, and Karimnagar.

Among the findings, the CAG report revealed instances where contracts for sand raising were awarded to third parties by tribal development societies, in violation of established regulations. These tribal societies, despite being entrusted with the task, engaged non-local or non-tribal contractors for sand excavation, contravening the terms prohibiting subletting in the contracts. This practice not only undermined efforts to prevent exploitation of mineral resources by non-local entities but also resulted in an undue benefit of Rs 11.6 crore to the third-party contractors.

Moreover, delays in sand excavation were observed due to various reasons, including the state government’s failure to provide necessary clarifications on payment rates to sand-raising contractors and TSMDCL’s lack of action plans to adhere to agreed timelines with stakeholders. Consequently, the government suffered a substantial revenue loss of Rs 172 crore due to the delayed commencement of sand sales.

The audit also highlighted deficiencies in monitoring and oversight mechanisms within the sand mining operations. Few sand reaches and stockyards were equipped with CCTV cameras and weigh bridges, leading to instances of vehicle overloading during dispatch. Furthermore, vehicles transporting sand were not outfitted with GPS or radio frequency identification devices for tracking and monitoring purposes.

TSMDCL was found lacking in the formulation of appropriate stock policies and maintenance of accurate stock registers, further exacerbating the regulatory shortcomings identified by the CAG. These revelations underscore the urgent need for comprehensive reforms and stringent enforcement measures to address systemic deficiencies in the sand mining sector in Telangana.

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Trends shaping the luxury real estate industry with focus on sustainability

During a recent conversation with ETRealty, M Murali, Chairman of Shriram Properties and Mallanna Sasalu, CEO of Provident Housing, discussed the trends shaping the luxury real estate industry. Key topics included sustainable construction and development, best practices for builders during project construction, and government incentives needed to motivate builders to develop more such projects.

When asked about the trends witnessed in the last two years in the luxury real estate market, Murali explained that these trends have been unfolding over the past 4-5 years. The implementation of RERA (Real Estate Regulation and Development Act) has led to industry consolidation, differentiating between professional players and amateurs. On the demand side, COVID-19 has led to a surge in demand for real estate development, particularly on the luxury side. This phenomenon began in early 2021, as people started looking to save extra money and even engage in moonlighting to increase their incomes. Furthermore, companies began paying better than before, which helped increase demand. 

Importantly, people have gone back to a savings mindset due to the pandemic, which has been crucial for the real estate industry. Indians are excellent savers, and for them, gold and homes are the most important assets. Before COVID-19, many were moving away from this mindset, but the pandemic brought them back to basics. The pandemic also led to people suffering and requiring more space, causing them to invest in additional rooms. This demand for space has contributed to the growth of the luxury real estate market.

The real estate market in India is currently experiencing a significant demand for affordable housing. This demand is expected to continue for at least the next decade, while the market for mid-premium and high-end properties is also expected to remain strong for the next seven to eight years and three to five years respectively. The Indian economy is currently performing remarkably well, and this trend is expected to continue, leading to further growth in the real estate sector.

In addition, rising input costs and land prices have made it difficult to develop affordable housing units that cost less than Rs. 50 lakh. As a result, the affordable housing market has shifted to include properties that cost between Rs. 50 lakh and Rs. 1.2 crore.

Meanwhile, there has been an increase in demand for luxury housing due to the realization that owning a home provides a sense of safety and security in light of the COVID-19 pandemic. This trend is expected to continue as the Indian mentality towards homeownership remains strong.

Overall, the residential development sector in India is currently performing well across all segments, with several layers of luxury housing available to cater to various markets.

The question raised is whether the increasing demand is driving builders to expand into different cities. In response to this, Murali states that the demand for real estate is growing in India due to the country’s bright economy, which is prospering under the leadership of the prime minister. The positivity and perception created by India’s progress is attracting the attention of the world, which in turn is driving the demand for real estate in the country.

The consolidation that has taken place in the real estate industry is a significant factor that is contributing to the growth of the sector. This is a common occurrence in all industries, and the real estate sector is no exception. Murali compares this consolidation to the one that occurred in the NBFC industry in the early 2000s, which eventually stabilized by 2005-06.

Murali notes that the real estate industry is now a well-established, qualitative place, much like the NBFC industry. The consolidation has resulted in only 50-60 real estate developers catering to 70% of the demand across the ten cities that matter in India’s real estate market. Each city has only 10-12 developers catering to 80% of the demand, which is a clear indication of the consolidation that has taken place in the sector.

Furthermore, as the demand for real estate continues to grow, credible large developers are looking to expand aggressively in this sector. This is because India is expected to grow further multifold, presenting a significant opportunity for growth. Joint development agreements (JDAs) are emerging as a popular option for developers, as these agreements provide a way to develop projects without having to invest a significant amount of capital upfront.

In conclusion, there is a significant supply of non-performing assets from banks, NBFCs, and institutions, as well as other developers who are stuck with projects that have yet to be completed. Murali estimates that less than 20% of these projects are being delivered, and even those that are delivered will take another 7-8 years. This presents a significant opportunity for those who are looking to invest in the real estate sector, particularly in the development management and JDA space.

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