Gurgaon And Mumbai Real Estate: The BJP Effect

santhosh kumarSanthosh Kumar, CEO – Operations & International Director, JLL India

The election of the BJP Government at the centre was just the beginning. Now, political control of Maharashtra and Haryana – the country’s most crucial commercial nerve centres – is also on the charts, and there is every reason to anticipate an unprecedented pace of revival in these markets’ real estate sectors. This revival will be largely driven by an increased inflow of real estate investments through Public-Private Partnership (PPP).

Mumbai and Gurgaon have the lion’s share of the pie when it comes to the Indian realty market, and both these cities have been witnessing tremendous growth in absorption of commercial spaces over the past couple of years. With the burgeoning growth in population and migration of people from smaller cities to these areas, there is huge requirement of residential spaces as well.

In terms of percentage, both these cities combined account for 30-35% of the total Indian real estate market. The office space supply in Mumbai is slated to be as high as 30 million sqft. by 2018, with a value of around Rs. 700 billion. In terms of residential units, there are around 1.5 lakh units under construction till date, with an estimated value of around Rs. 2000 billion.

The office space supply in Gurgaon is expected to be around 20 million sqft. by 2018, with a value of around INR 200 billion. In terms of residential units, there are around 80,000 thousand units under construction till date, with an estimated value of around Rs. 500 billion.

The BJP government at the centre has already made it lucidly clear that it will provide focused impetus to infrastructure growth in the country. This effect will be further amplified by the party’s formation of the State governments in Maharashtra and Haryana, with infrastructure in these two states becoming the biggest gainers.

Major PPP Infrastructure PPP Projects Pipeline – Mumbai: 

  • The Navi Mumbai International Airport at Panvel
  • The Mumbai Trans Harbour Link, which has been delayed since 2004, is expected to kick start
  • Expansion of Mumbai Metro

Major PPP Infrastructure Projects Pipeline – Gurgaon:

  • Expansion of the MRTS line in Gurgaon
  • Various residential projects coming up in the city.

The major bottleneck for the real estate markets in these two cities has been the complex and lengthy approval procedures. Developers in both markets are largely cash-strapped and need better fund flows to come up with new supply. We are now looking at a potential end to this deadlock – with the BJP coming to political power in Maharashtra and Haryana, there will be sufficient grounds to expect that the party will focus on clearing up procedural delays arising from various complex norms.

The ensuing boost to growth will not be limited to just Mumbai and Gurgaon. Given the limited land available for development in the two cities and factoring in the BJP’s strong focus on faster and more holistic growth, there is now added impetus for development in their peripheral areas on the charts, as well. Infrastructure such as highways and MRTS projects which will connect these areas to their parent cities will automatically boost their real estate markets.

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New Marketing Avenues For Real Estate Developers: Reducing Inventory, Building A Brand (Part 1)

shajai jacobShajai Jacob, Director & Head – Marketing & Communications, JLL India

Even as the Indian real estate market shifts into the second gear of recovery, developers whose operations had slowed down during the lull are still faced with multiple concerns. On the one hand, the very basis of their business is the launching of new projects (the only function that really defines a developer’s viability as a going concern on the real estate market). On the other hand, it is vital for them to clear piled-up inventory in order to generate capital and enable clearances for new projects.

Clearing unsold inventory is also extremely important from the point of view of retaining existing customers, as real estate investors show a high propensity for exiting projects which are not clocking up healthy sales. By all standards, many developers find themselves in an unenviable situation at a time when the market is headed into boom mode after a prolonged slowdown.

  • The Causes Of Unsold Inventory

When any business does not function efficiently, one of the most visible results of this inefficiency is lack of customers. In the services industry, this will be visible in reduced interest in the services offered, and little revenue-generating work on hand. In the case of product-oriented companies (such as real estate development firms), the evidence lies most visibly in piled-up inventory. Excess inventory happens when a company is left holding more of its products than the market is willing to absorb.

  • What Unsold Inventory Implies

Naturally, the visible evidence of excess inventory is regarded as bad for any business. It signals that the products are, for one reason or the other, not selling. In the case of Indian real estate, a very common misconception among buyers, investors and industry watchers is that developers saddled with a lot of unsold inventory are ‘paying the price’ of over-pricing their products. The assumption that follows is that reducing prices will catalyse sales.

In actual fact, this argument can fail to hold water. Many times, other developers’ projects within the same price band, location and category are selling at a much better rate. The fact that some developers simply have better marketing strategies than others is either not perceived or not well understood. If a developer himself lacks insight on why his stock not selling despite good price points and the right location and specifications, it can have serious consequences.

Developers looking at piled-up, non-moving inventory may panic and make counter-productive decisions. A futile blame game ensues if the developer views the unsold inventory as evidence that his sales and marketing team is not performing optimally. While there can be a grain of truth to this, it is also true that sales and marketing teams are only as good as the strategy that guides them.

If a developer has invested heavily into a flawed or incomplete marketing strategy, he is too close to the problem to see it for what it is. Insight is further clouded if a particular marketing strategy worked well in the past, should logically continue to work now but is no longer cutting it.

Real Estate Marketing: A Constantly Evolving Concept

For a real estate marketing plan to succeed in today’s highly competitive environment, there are myriad factors that come into play. More marketing activities than ever before need to be deployed, and these new activities require specialized know-how and specifically trained and qualified manpower. Real estate is a product industry in which the rules of the game have changed drastically over the past decade, and will continue to change.

Today, maximizing engagement with the target market is everything. For a project launch to succeed, a developer’s clients need to have top-of-mind recall for his brand and his product. In the past, the resources available to a developer were limited to print advertisements, radio jingles, hoardings, word-of-mouth promotion and, of course, brokers. Today, clients need to be wooed across a much wider spectrum.

  • Social Media Presence

Not to put too fine a point to it, a developer who does not have a well-defined social media strategy today is a dinosaur doomed to extinction. Neither long-standing reputation nor excellent track record will help if these elements are not reflected online across multiple channels.

Today, approximately 243 million Indians spend a significant part of their lives online, and use the Internet to access and receive information of every kind. With the advent of e-papers, news portals and blogs, the manner in which information about anything travels has changed both in terms of direction and speed.

Platforms like Facebook and Twitter may have started off as mere social networking media, but today the power they wield in the world of business is beyond dispute. Companies of every stripe and description are investing massively into making their presence felt on these and other online platforms. It is literally a battle to stay relevant in a world that does not acknowledge the existence of anything anymore if it cannot be found online.

  • Staying Ahead Of Real Estate Portals

While the practice of maintaining well-crafted, informative and responsive websites has been a norm in the more developed countries for over two decades, Indian developers have only woken up to the need for this all-important calling card over the last 6-7 years. In this relatively short period, aggregator sites specialized in real estate deals and offerings have carved themselves the largest share of the online pie by investing exhaustively in search engine optimization and highly professional social media outreach.

The proliferation of these portals certainly spells good news for end users, because it gives them a more detailed oversight of what the market is offering than ever before. However, it is a different story for individual developers. The uniquely democratic business model on which property portals thrive hinges on showcasing as many projects and properties as possible. While developers can (and do) pay for higher ranking within this avalanche of options, the scope for focused branding and project-specific marketing on these projects is very limited.

Today, forging a distinct and prominent online identity is very essential long-term function for developers; but more importantly, an effective online strategy plays a critical role in the success of a specific project launch. In today’s market scenario, developers who lack a well-defined online marketing strategy invariably find their projects selling at a far slower rate than their competitors.

Vital Ingredients Of Online Visibility For Real Estate Developers

  • Dynamic Website: It is definitely essential to have a good company website which provides oversight of the firm’s projects. However, the ‘fill-it-and forget-it’ approach no longer works – websites need to be user-friendly, informative and kept dynamic with regular optimization and updated content. A static website with no fresh activity to attract traffic is driven off the charts by competing websites, portals and other platforms
  •  High Social Media Clout: Good Facebook, Twitter and LinkedIn presence with impressive and focussed followers is of prime importance, from a standpoint of visibility and branding as well as in terms of having a ready base of potential customers to address
  •  Engaging Company Blog: Blogs are an important tool in reputation management, and are different from websites by virtue of the fact that they speak to potential customers on a less formal and more interactive and informative level. On a company blog, a real estate developer can offer insightful commentary on the market and thus elevate the firm’s status beyond that of a mere product dealership. A company blog which is regularly updated with interesting information attracts high search rankings online. Importantly, content on a company blog must at all times find the perfect balance between useful information and overt promotion.

Coming in New Marketing Avenues: Reducing Inventory, Building A Brand (Part 2):

  •  Troubleshooting – Fixing A Faulty Real Estate Marketing Plan
  • The New Public Relations Deal – Traditional Vs. Contemporary PR
  • Client Engagement – Ditching The Monologue And Starting A Conversation With Customers
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Bhiwadi – A Rising Star In NCR Real Estate

santhosh kumarSanthosh Kumar, CEO – Operations, JLL India

Bhiwadi is located is the Alwar district of Rajasthan, and is an emerging industrial destination in the NCR region. Located at just 40 km from Gurgaon, Bhiwadi is witnessing a shift from its erstwhile image as a mere industrial area to destination with full-fledged real estate viability. Being a part of the Delhi-Mumbai Industrial Corridor (DMIC), Bhiwadi is now an acknowledged as an investment zone.

Still primarily driven by its industrial sector, Bhiwadi encompasses the manufacturing centres of Chopanki, Khushkhera and Sare Khurd. There is a massive amount of additional industrial development activity planned by The Rajasthan State Industrial Development and Investment Corporation (RIICO).

Advantageously located along the borders of Rajasthan and Haryana, Bhiwadi has been seeing improving connectivity with Delhi and Gurgaon, which has reflected favourably on its realty market. Due to the relatively cost-effective land prices, growing housing demand and excellent connectivity afforded by the Delhi-Jaipur National highway (NH-8), there has been a spurt in new residential housing projects catering primarily to the people employed in this industrial belt as well as for people looking for reasonably-priced properties around established centres of Gurgaon and Delhi.

As a result, Bhiwadi has attracted the attention of various reputed developers primarily offering affordable housing projects, with only a scattering of luxury projects. The average ticket size for apartments in Bhiwadi is between Rs. 2400-3500/sq.ft, and the annualized appreciation to the tune of 5-10%, which is consistent with the overall market dynamics of NCR.

Apart from rapid residential development, Bhiwadi is also witnessing growth in retail and office spaces. For instance, Bhagat Singh Colony – the prime residential area of Bhiwadi – is also turning into a retail and commercial nerve centre. V Square Mall, located on Bhiwadi-Alwar Highway, is a multiplex-cum-shopping mall in the city. The mall-cum-office complex Sky View Tower, BB Mall and Ganapati Plaza are upcoming developments on the retail real estate front in this region.

Realising the potential of this corridor, government is working towards improving the social and civic infrastructure. Bhiwadi’s infrastructure is improving rapidly, with various projects on the anvil. The proposed Bullet train and Metro connectivity will further enhance Bhiwadi’s real estate investment attractiveness quotient. As a result, Bhiwadi is firmly on property investors’ radar.

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Mall Management – The New Success Mantra For Malls In India

Col  Ashutosh BeriCol. Ashutosh Beri, Chairman (West Asia), Project & Asset Management, JLL India

The Indian retail market has gone through a prolonged (and sometimes painful) process of transformation. With rapid development across the country, India has witnessed the emergence of a well-entrenched mall culture over the past decade. However, there are several malls in the country which are faring less than well.

Failing Malls – A Growing Problem

The not insignificant number of under-performing malls in the country definitely gives rise to concern. There is no dearth of instances where mall developers have scrapped the entire blueprint and business model and converted their malls into office spaces. The reasons for the lack of success of these malls vary.

Some of the challenges that the developers of these malls have not been able to address are providing for adequate parking and scientific people movement within the malls, coming up with a dynamic plan for upgrading facilities, attracting a suitable tenant mix and proper positioning.

Success Ingredients

There is now a distinct need for mall developers to introspect on the factors that contribute to either the success or failure of a mall. For instance, there is an increasing awareness among mall developers that leasing mall spaces as opposed to selling them is the way to go. Malls in which spaces are individually sold (or ‘strata sold’) tend to suffer from the absence of proper mall management – which is now the acknowledged fulcrum for success, regardless of how large or well-conceived the mall is.

There are basic parameters that mall developers must keep in mind at the very conception and design stage of their malls. Location is, of course, a vital ingredient for the success of any mall. Approach and accessibility, especially in terms of proximity to the key centres and ingress and egress of the mall, are equally important.

The mall must have adequate facilities and provide retailers with good accessibility to their stores, space for storage and staff utilities. Very importantly, it must get the parking equation right.

Untangling The Parking Knot

A mall that does not provide sufficient and properly planned parking in India is headed for disaster. In India, the issue of parking is a challenge to both mall owners and customers. Creating parking facilities when the cost of land is high is a very capital-intensive decision for a mall developer. This is especially true if such measures are attempted to be enhanced in retrospect. As a general guideline, developer must provide parking while keeping the size of the mall in mind. The decision on how much is needed and how much is sufficient is a critical one.

Rotation of parking slots is another important function, as malls experience more footfalls on weekends, during which customers spend more time in malls. Parking must not become an issue in high traffic periods. If a mall cannot provide enough conventional parking, it must have innovative parking facilities such as multi-level and/or automated parking systems.

Since convenience is of prime importance in a mall, the access and exits to car parking is yet another factor besides the parking area itself. The more successful malls even provide valet service to attract more patrons by providing them with more ease of access.

While the future may bring malls that have public transport connectivity, we are not quite there yet. Metros and buses connecting directly to malls can bring down the usage of personal cars, and play a major role in be dealing with challenges such as parking and increased traffic. Until then, mall developers are constrained upon to make the most of existing infrastructure.

The Mall Management Solution

The baseline philosophy behind the creation of any mall is that it must be a place that continually attracts people into its premises, keeping them engaged and tempting them to stay for longer periods. This cannot be done just by providing a massive number of shops. Today, Indian mall visitors expect various entertainment options and engagement mechanisms, as well. Malls cannot be just shopping complexes – they must be one-stop family destinations. If they fail at this, they invariably fail completely.

With these and other reasons why malls can potentially become under-productive and sub-optimal, mall developers are now discovering that professional mall management can be a catch-all solution. In fact, one of the most common causes for the failure of malls is that they were are not professionally managed and promoted. High-grade mall management is the single-most reason why some malls have managed to perform well even during the worst periods of economic distress.

Professional mall management is about a lot more than just keeping up the facilities in a shopping centre. It is about strategizing and implementing success formulae that have been specifically tailored to the mall. Often, a professional mall management firm can undo a significant amount of ‘done damage’ by reinventing the mall’s positioning, facilities and operations almost from the ground up.

Significantly, a mall management agency can result in operating costs reducing by between 5-7% in an up-and-running mall, and by up to 10% if it is engaged at the very inception stage.  However, the cost-saving element is just one side of the story. With the implementation of professional mall management, even a languishing mall can be realigned into a destination that provides the needed success ingredients – and an overall ‘experience’ for customer.

A mall management agency can re-engineer the shopping complex’ parking arrangements, tenant mix and internal customer traffic, and also assume the responsibility of promotional activities. Simultaneously, such an agency will ensure optimal staffing solutions and keep all facilities within the mall running flawlessly.

Not surprisingly, more and more Indian mall developers are now adopting the mall management mantra as a one-stop solution to ensure that their investments reap the best possible returns for them.

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Govt.’s FDI Decision Comes In The Nick Of Time

Anuj_PuriAnuj Puri, Chairman & Country Head, JLL India

The government’s decision to relax FDI rules in the construction sector literally comes in the nick of time for Indian real estate. During the current fiscal year until August, India has received FDI inflows worth USD 17.4 billion, or 70% of the total inflows received during the entire fiscal year of 2013-14. However, FDI inflows received by the Construction, Housing and Real Estate segment do not reflect the same sentiment.

The sector’s share in the total FDI has further slipped from 5.0% in the previous year to under 3.0% as of the current fiscal until August. In fact, its share has been consistently falling over the last six years since 2009-10, when it stood at over 20%. Meanwhile, developers continue to reel under high levels of debt, even as the channels of funding have shrunk.

The announcement has taken into consideration the proposals made by the DIPP. There has been a relaxation in norms related to built-up area, capitalisation and lock-in period.  Minimum built-up area has been reduced to 20,000 sq metres from 50,000 sq metres, and minimum capitalisation has been halved to $5 million from $10 million. The easier rules will help faster completion of projects delayed by a squeeze on funds due to elevated debt levels.

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