Bangalore Real Estate: Is Your Dream Home Actually A Lake Encroachment?

trivita royTrivita Roy, Assistant Vice President, Research and REIS, JLL India

Who isn’t fascinated by the idea of owning a home by a lake – a chance to live life amid greenery and nature even within the concrete jungles that cities like Bangalore are turning? Unfortunately, this dream could potentially turn into a nightmare if enough caution is not taken.

Recently, Bangalore has seen massive drives by the revenue department to remove encroachments from lake banks, lake beds and reclamations of these water bodies. This has led to major demolitions properties on encroached lake beds by the Bruhat Bengaluru Mahanagara Palike (BBMP) to reclaim the encroached lake land.

The major anti-encroachment drives along Sarakki Lake in South Bangalore, followed by similar drives at Banaswadi Lake, have created a battlefield scene in the city. About 35 acres of Sarakki Lake and more than 2 acres of Banaswadi Lake have been encroached. Many properties along these lake beds have been razed, leaving the occupants helpless.

Though most of this situation is irreversible, homebuyers should view future developments along lake beds with extreme caution. Many existing home owners are now questioning themselves and seeking reassurance about the legality of their properties.

Is there a solution – and is a solution even possible when even developments promoted by local development authorities have come into the cross-fire?

Chances of such situations arising will always exist, since the local authorities are evidently not taking up their responsibility of carrying out necessary due diligence whenever proposals for properties on such lands are submitted for approval.

Buyers can, however, follow certain additional steps as part of their own due diligence process before buying such a property. This additional check list may require support from legal experts to verify the documents involved:

  • Due diligence of the certified copies of registered title deed of the land parcel on which the property is to be built, to establish clear title of the land.
  • Based on the survey numbers mentioned in the title deed, the land use of the land parcel approved by the Master Plan of the development authorities should be checked. In the case of Bangalore, refer the latest Master Plan by Bangalore Development Authority (BDA)/ Bangalore Metropolitan Region Development Authority (BMRDA)/ Bangalore International Airport Area Planning Authority (BIAAPA)/ Directorate of Town and Country Planning (DTCP) based on the location of the land.
  • Based on the survey numbers, approval from the LDA (Lake Development Authority) for development of the property on the land must be checked.
  • In addition to these checks, which are specific to lake encroachments or encroachment of any environmentally-sensitive areas such as forest land, marshy land, etc., one should check the following approvals as well:
  • Height approvals or setbacks from BBMP
  • Water supply board, electricity board and sewerage board approvals
  • Proof of adherence to National Building Code (NBC) standards for safety from fire and other hazards, if applicable to the building.

Although no checklist can be fool-proof, these additional pointers serve as add-ons to the due diligence each buyer carries out personally. In the absence of any clear guidelines or a properly laid-out list of due diligence, these can serve as basic guidelines to avoid any future hassles.

With the growing sensitivity towards environment and increased awareness after the recent-year rulings by National Green Tribunal (NGT) in the National Capital Region, there will be new guidelines formed by various city development authorities to safeguard the environment. As such, properties coming within the purview of such areas may face an unfortunate fate. The added level of caution prescribed above can save buyers from the nightmare of having their homes demolished – and their investments sunk.

 

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Navi Mumbai – A Success Story Of Sustainable Urbanization

Subhankar MitraSubhankar Mitra, Local Director – Strategic Consulting, JLL India

The idea of creating a new city as a counter magnet to Mumbai was originally envisaged in the Regional Plan of Mumbai Metropolitan Region (MMR) in 1965. The actual planning process of this new city began in 1971 after the formation of CIDCO, a Government-owned company for development of cities.

The initiative was spearheaded by renowned architect Charles Correa and a specialist team of planners, including Shirish Patel, Pravina Mehta and Chief Planner R. K. Jha. Their vision was to create a combination of 14 mini towns or nodes, each to be provided with connectivity through well-designed roads, and later on through railway networks. Recently, the metro system was added to the original master plan.

Infrastructure such as water supply, power, sewerage and rain water discharge was meticulously designed. The concept of holding ponds helped in preventing the inundation of streets and buildings even during heavy monsoon rains. Thanks to this planned approach, the quality of infrastructure at Navi Mumbai today is much better than in most parts of Greater Mumbai.

Navi Mumbai was added as the last mega settlement zone of the MMR region in ‘70s; other cities and conurbations already existed prior to the creation of this satellite city. Today, Navi Mumbai’s success as a city is vouchsafed by its tremendous growth over time. In a span of four decades, it has not only caught up with the existing settlements but has also become the second-largest settlement city within MMR in terms of population share. In the last decade, Navi Mumbai has grown at an incredible speed of 88%, which is the highest growth rate in the region.

subhankar table

(Source: Census of India)

Despite its fast growth, Navi Mumbai continues to be defined by a spatial openness which cannot be found anywhere else in MMR. Even given its high growth rate and burgeoning population size, the population density in Navi Mumbai – about one-third of the density of Greater Mumbai – is the lowest among all cities in the MMR region. This is one of Navi Mumbai’s key defining aspects and biggest USP as a real estate market – the quality of life available in this city.

Navi Mumbai also ranks high in terms of social indicators like literacy rate, which is over 95% among its predominantly middle income population, as well as social and civic infrastructure.

The success of Navi Mumbai can be largely attributed to the efficient integration of economic activities and infrastructure. Even before the development of the city, there were two major industrial clusters in existence here, namely TTC and Kalamboli. The new Plan envisaged growth of a new commercial district at CBD Belapur, an IT and Technology node at Mahape, wholesale and retail activity at Vashi, etc. All these economic nodes were later on integrated with the residential nodes by way of road and railway networks, and a good public transport system.

As the human capital in the city grew, it started gathering strength in the Knowledge sector as well. Today, the city boats of many additional economic anchors such DAKC, Mind Space, Reliance Corporate Park and Siemens, to name a few. The only disappointment was CBD Belapur, which failed to attract the corporate sector from South Mumbai as initially envisaged. Today, CBD Belapur in fact faces huge competition from Bandra Kurla Complex (BKC) in Mumbai.

What The Future Holds

Navi Mumbai is now poised at the next stage of transition, which is likely to be by way of expansion of its services sector. The city already has most key ingredients like good human capital, support infrastructure and land availability to become a strong service sector hub. What it lacks is faster and smoother connectivity with the existing commercial hubs of Greater Mumbai, particularly the suburbs. Without such linkage, there are definitely pitfalls to a smooth transition for Navi Mumbai’s economy.

There are two new major economic drivers are planned for Navi Mumbai – the proposed SEZs at Dronagiri, Ulwe and Kalamboli and the proposed international airport at Panvel. Both of these factors are expected to generate a massive amount of employment, providing a further impetus to the demand for commercial and residential developments.

The successive regional plans of MMR have laid emphasis on the further decongestion of Greater Mumbai. It is the high congestion premium that makes Greater Mumbai unaffordable, which is also under crushing pressure on its infrastructure, a victim to irreversible damage to its environment and overall degradation of quality of life.

The way forward for a more sustainable future of Greater Mumbai is to initiate a planning process that integrates it more closely and intensely with surrounding cities like Navi Mumbai. Only such measures will provide a vent-out for the crunched-up population out of the city.

Unfortunately, the proposed Development Plan of greater Mumbai (DP 2034) actually proposes a reversal of this concept. By increasing the FSI and diverting environment sensitive zones into ‘urbanizable’ zones, the message being sent is that decongestion of the city is not a priority anymore. For the larger benefit of the region, all DPs should be in line with the philosophy of the Regional Plan. The survival of Greater Mumbai will greatly dependent on the success of cities like Navi Mumbai.

 

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Mumbai Real Estate To See 6% Price Appreciation In 2015

Ramesh Nair PhotoRamesh Nair, COO – Business & International Director, JLL India

Don’t expect a major appreciation on your property in the next two years; returns on property likely only from the third year

 Given that average property prices across Mumbai have plateaued and sales remain sluggish, many home buyers are speculating if a correction will take place in 2015. These fence-sitters are watching the market movements keenly and delaying their buying decisions. Many others are simply unable to afford sky high prices in the city and are moving to suburbs or budget locations in the peripheral areas.

Even if an end-user were to buy a house today, she should not expect a major appreciation on the value of their property in the next two years. Only from the third year can they expect annualized returns of 10%. This is because average prices in the city grew only 7% in 2014 and are expected to grow around 6% by the end of 2015. This is meagre growth and if we compare it to the rate of inflation, the growth would become really marginal.

Buyers’ market

Builders are seeing an increase in the number of enquiries and expect the industry to see recovery in the months ahead. They are also doing their part to improve sales by offering discounts, freebies, waivers, festive offers and attractive schemes to entice buyers. In some areas, they are offering spot discounts of up to 10% on the base price of a property to buyers keen on making purchases. In other cases, buyers can negotiate the floor rise charges or get these waived off completely.

If you are one of those buyers, who are not in a hurry to move into a new house, you could book in the pre-launch stage of a project and get very competitive prices. For example, booking in a pre-launch project in south Mumbai can help you get a discount of about 8-10% easily. In one of the eastern suburbs, a pre-launch project is offering a price of around Rs8,000 per square feet (psf) whereas a completed project nearby is charging Rs 14,000 psf.

Stages of sales process in past four years in India

location graph

Source: JLL India Research

Several schemes are also being offered, especially in pre-launch projects. These include the popular ones like 20:80, 30:70, 10:80:10 and 5:80:15. Such schemes remain popular with many buyers although they have to pay higher base prices as compared to buyers who opt to pay a large chunk of the capital value right at the outset.

For example, the price could be Rs12,000 psf in a project for buyers opting to make use of such schemes vis-à-vis Rs10,000 for buyers going for construction-linked payment plans. In the same project, buyers paying the entire, or a large, amount of the total capital value upfront could get a price of Rs8,500-9,000 psf.

The reason why these schemes continue to remain popular are two-fold: It becomes easier for developers to attract customers and cover the interest payments the latter have to pay to the banks; buyers only pay a small percentage of the total amount and get a relatively risk-free investment opportunity.

Given the benefits, it seems like a good time for buyers to finalize properties. If a project meets your parameters, then you should go ahead and buy your dream house.

Special deals for investors

Developers have traditionally tried to attract high net individuals (HNIs). However, the latter are advised to be careful of the terms and conditions before going for such exclusive investment opportunities as these come with certain minimum requirements like a lock-in period ranging from 18 to 36 months; minimum area to be purchased ranging from 10,000 to 15,000 square feet and a 50% down-payment.

Not all investors would like to block such a big amount in a single project. There would be some HNIs, who would like to invest smaller amounts in real estate projects. They can book in pre-launch projects and sell off after the construction is complete, or immediately after taking possession, and get a good appreciation on their investment. At the same time, since they would pay a lumpsum amount at the time of booking, they can get additional discount in the range of 8-10%.

Promising locations

If you are interested in peripheral areas that would give a better price appreciation than established locations, you can look at Ulwe, Kamothe, Karanjade and Dronagiri in Navi Mumbai. These areas could see moderate growth in the coming years thanks to the upcoming international airport in Navi Mumbai and increased connectivity to Mumbai through the upcoming Mumbai Trans Harbour Link (MTHL).

The reason for a moderate appreciation is because these locations have already seen a good growth rate in the past, soon after the airport project was first announced. Sewree is another area in Mumbai, which could see moderate appreciation thanks to the MTHL. Parel, Chembur, Kanjurmarg and Powai could see appreciation primarily on account of excellent connectivity and end-user demand.

Other peripheral areas like Vasai-Virar, Boisar, Dahanu and Palghar could also see growth thanks to the upcoming bullet train project connecting Mumbai and Ahmedabad. Virar could benefit due to the upcoming Virar-Alibaug multi-modal corridor and the proposed elevated rail corridor connecting it to Churchgate. Another important project that could lift up property prices in Vasai and Virar is the proposed Delhi-Mumbai Industrial Corridor (DMIC). Peripheral areas offer affordable housing, which is end-user driven and is less prone to speculation.

 

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First-Year Real Estate Report Card Of The Modi Cabinet

9 Impressions Indian Real Estate Stakeholders Have about Modi Government – And JLL’s Take

Anuj Puri picAnuj Puri, Chairman and Country Head at JLL India

JLL India’s Research team is releasing a whitepaper on the first year of Modi government. A survey of the Indian real estate community, done as part of the research, reveals nine impressions, or misimpressions, of this government that exists in the minds of Indian realty’s stakeholders. We also provide our own views on each of these:

1. Much has been said, but little has been delivered

JLL’s view: Modi has taken several initiatives, the outcomes of which will be seen only in the medium-to-long term (i.e. 2-3 years). Initiatives such as developing affordable residential projects, robust infrastructure, financial inclusion of the LIG segment into the banking sector, etc., are important initiatives but require time to fructify. Critical evaluation of success at this stage may be premature.

modi2. Power is too concentrated

JLL’s view: This fear loomed large in the minds of several political and market analysts since the time Modi came to power. The highly centralised appearance of the government has moderated in recent times with decentralisation of power to cabinet members and states’ chief ministers. We agree that power should be further de-centralized to the grassroots level (i.e. district and panchayat level authorities) and this further downward percolation of power may take another year or two.

3. Land Acquisition and Rehabilitation and Resettlement Bill not progressing as expected

JLL’s view: There has not been much progress on the bill since the time it was first approved by the previous Congress government, and even after the recent amendments made in the Bill by the Modi government. Modi’s grand vision to build superior infrastructure, affordable housing projects and smart cities is related to the success of this Bill, which could be cleared by the Parliament after recommendations by the Joint Committee of Parliament come through in the monsoon session.

4. Clarity needed on ‘Housing for all by 2022’ scheme

JLL’s view: After having announced the scheme during the first Budget in June 2014, the government has remained silent on details. The market expected fine prints to come by in subsequent communications. The task of constructing 2.34 million homes every year as against an actual delivery of 1.2 million homes during the 11th five-year plan period (ending March 2012) is humungous. As of now, matters definitely do not look upbeat on this front, and the doubts being expressed are justified.

5. Smart Cities Mission cleared by the Cabinet but clarity needed

JLL’s view: As the definition of smart cities given in the note released by Ministry of Urban Development is too broad, different agencies have had different interpretation of the concept. Even though the union cabinet has cleared the Smart Cities Mission and allocated Rs 48,000 crore, there is a lack of clarity on identification criteria for the qualifying cities. 

6. The Real Estate (Regulation and Development) Bill still pending

JLL’s view: Construction delays in many real estate projects are the result of delay in granting statutory approvals. Cost of financing material costs rise exponentially as a result of such delays, and this has an adverse impact on housing prices. The Bill – that the government is currently considering sending to a select committee for review – does not cover the actions of approval authorities and largely attempts to curb malpractices at the developers’ end. We feel that the Modi government could have done more on this front.

7. E-commerce needs to be regulated

JLL’s view: E-commerce has taken the Indian retail market by storm, and has been growing at close to 35% y-o-y in the last few years. Stiff competition among e-commerce players has resulted in price wars that had impacted the margins of physical retailers. There is a need to regulate the online retail space and bring them on level playing field along with physical retailers. As of now, we see no evidence of efforts being made in this direction.

8. Anti-corruption needs to be a focus area

JLL’s view: The promise of bringing the Lokpal bill immediately had given Modi a marginal edge over the AAP party – the champions of the anti-corruption brigade – during the elections of May 2014. However, subsequent lack of progress or even convincing talk in that direction has been giving an impression that the issue is a low priority one for the Modi government. If not for this apathy, Modi would have performed better in the recently concluded Delhi elections.

9. Tax structures are complex and retrospective tax amendments continue to haunt businesses

JLL’s view: While the Modi government had expressed its strong intention of doing away with retrospective amendments, the issue still remains unresolved. Also, while simplification of tax structures has been spoken about, this will take some time to implement. If these tax issues are addressed properly, India would move forward in terms of improvement in World Bank’s ‘Doing Business’ rankings.

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Builders Brainstorm On Navi Mumbai’s Real Estate Market Opportunities And Challenges

After decades of missed opportunities, CREDAI-BANM decides to go ahead with charting a plan to attract corporates to the city and create its own pull factors

Ramesh Nair, COO – Business & International Director, JLL India, and Ashwinder Raj Singh, CEO – Residential Services, JLL India

IMG-20150516-WA0019Developers in Navi Mumbai came together on May 16 under the aegis of Confederation of Real Estate Developers’ Associations of India and Builders Association of Navi Mumbai (CREDAI-BANM) to discuss the current status of real estate industry in the satellite city, how they can tackle challenges in dealing with different stakeholders and attract corporates to the city, which will lead to added demand for commercial, residential and retail spaces.

Devang Trivedi, president of BANM, started off by highlighting how developers had promised capital gains to investors and cannot bring down prices even in the current market scenario. He further noted that most developers in the city lacked an analytical approach to their work and that high-risk decisions were being taken on gut feelings alone.

The herd mentality that exists in the developer community of Navi Mumbai was lamented and he exhorted the fraternity to prepare for new challenges and changed realities by relying heavily on trends, insights, analysis and statistics provided by an international property consultant like JLL.

Ashutosh Limaye, national head of Research and real estate intelligence services (REIS) at JLL India, during his in-depth presentation, noted how Navi Mumbai could attract foreign investors positioning itself as an infrastructure-surplus city along with its status of being an educational hub in close proximity to Mumbai.

If Whitefield in Bangalore and Hinjewadi in Pune, which came into existence after Navi Mumbai, could be successful in creating IT hubs by attracting so many people and businesses, why could Navi Mumbai – with its superb infrastructure – not succeed in doing so? It was further pointed out that the ticket sizes and product offerings are not aligned to consumer needs and hence, the city is unable to tap its full potential.

There is no lack in demand, only a lack in supply of Grade-A product offerings. There has been a 52% appreciation in office rentals from the previous lowest levels seen in 2Q09. In the past, there have been healthy take-ups for Grade-A product offerings in the office space. Building-level infrastructure is not good in the city. Developers have been majorly focused on the residential category but only those who took help of research and insights have done well.

There is need to create credibility and proper branding around projects. There should be zero compromise on quality and corporate governance should be put in place to win private equity. Office leasing to the IT sector is around 40% of the total demand for leasing and foreign companies look for green, contemporary and energy-efficient buildings. Developers could focus on catering to such demand.

In the commercial space, Thane and eastern suburbs have been the push factors for Navi Mumbai but what the ‘satellite city’ misses is its own pull factor. The demand for residential property also depends on Mumbai. The need to create a positive brand (read pull factors), and not depend on push factors alone, was emphasized.

The presentation was followed by a panel discussion with Devang Trivedi; Mahesh Mudda, general secretary of Builders Association of India and CEO, NCCCL; Subrata Bandyopadhyay, CEO, L&T Seawoods Pvt. Ltd; Ramesh Nair, COO, business, JLL India; Ashwinder RajSingh, CEO, residential services, JLL India; V Suresh, director of Hiranandani Projects; Sanjay Kumath, senior VP, corporate strategy, Housing.com; Tapas Das, head – property and administrative services at L’Oreal India and moderated by Joy Sanyal, National Director, JLL India.

Key comments made by the panelists:

Ramesh: “People are impatient with the current government but should give them some time. India will see a lot of action – in the next two-three years – on different fronts, especially related to the bills and announcements made in the last two Budgets.

“This is a powerful group of developers but everyone is focused only on selling their own units. No corporate is ready to get into commercial property in Navi Mumbai. For this scenario to change, the city should be branded well and pressure should be put on the government to create jobs and office parks. This will lead to demand for residential and retail spaces too. A professional approach, branding with a clear focus on investors, strategic alliances/ partnerships along with corporate governance should be top priority for this group. The capital in real estate globally was $550 billion, last year, while India got only $1.5 billion of it. Let’s tap into this global capital pool.”

Mahesh: “A lot of positive change is happening at the national level since the time this government has come to office. They are laying down processes, tapping into global wealth and restoring lost faith in India internationally”

Devang: “The participative model of development was followed in the Navi Mumbai international airport project. If the same will be followed for NAINA, it wouldn’t see light of the day until all stakeholders have been bought on board. CIDCO cannot be the sole planning body for Navi Mumbai Airport Influence Notified Area (NAINA). A separate body is needed to plan the smart city; this cannot be a side activity of CIDCO. It is important to have the vision shared with the state government, villagers and politicians alike. Currently, there is no clarity or vision on the same. In the past, we have seen that with every new managing director of CIDCO, the vision and priorities have changed.

“Ministers are asking the industry to share our problems, looking for sustainable solutions to these problems and pushing bureaucrats to work. Unfortunately, bureaucrats are not acting up. They are still talking about how things would not work. I am, however, bullish and optimistic about the future as we have honest and committed ministers.

“Although buyers have started coming to Navi Mumbai out of their own will now, there is still an unsold stock of 1.25 crore sq ft in the city. Investors are largely out of the market as real estate cannot match the returns they expect in a short term. Another challenge is the huge supply in the periphery of the city.”

V Prabhu: “Navi Mumbai is one of the youngest cities in India. However, we have not catered to the youth here. In Europe, institutionalized rental markets are the norm. Young people, who cannot afford to own a house, go for these offerings. Very high quality apartments and studio apartments are available on rent unlike India, which only has houses being rented out by individual owners. Builders could look at institutionalizing the rental market.”

Subrata: “We will develop a transit-oriented development in L&T’s Seawoods project. The aim is to help people walk to their workplaces.”

Sanjay: “Navi Mumbai is like Rahul Gandhi, who wasted 13 years of opportunity presented to him and won’t get an opportunity to prove his leadership for the next 13 years. In other words, Navi Mumbai is a failed experiment, which could not realize its potential of being located so close to Mumbai. Buildings in Navi Mumbai look older than Mumbai. Most of them could soon go into redevelopment. Unless there is a change in the building infrastructure, people won’t move here.

“CIDCO is playing four roles in the city. In such a scenario, it cannot do justice with developers and businesses. Due to its focus on profit making transactions of auctioning land parcels at the highest possible rates has not helped ease the pressure on Mumbai’s housing.

“China has been able to develop 400 cities in 25 years. NAINA is an option, no doubt, but what about the 12,500 acres of salt pans that can bridge Navi Mumbai and Mumbai? Waterways could be developed in these areas. A look at Hong Kong and Singapore, in this respect, would help.”

Tapas: “When L’Oreal was looking for a one lakh sq ft Grade-A office space in Navi Mumbai, we searched for 3-4 months in vain. On the other hand, Pune and Bangalore gave us several options. Demographically, the city has 50-60% of highly-educated people working in MNCs living here. Yet, there is not a single multinational or corporate here.

“Navi Mumbai builders are not customer-friendly, whether the customer is an end-user or investor. The loading here is very high and the rental yield is low. Investors have not got returns that were promised five years ago on the basis of the upcoming airport and metro lines. Where is the airport or metro? Political interference in areas like Airoli needs to be stopped.”

Ashwinder: “Navi Mumbai should learn from Gurgaon, which is to Delhi what this city is to Mumbai. Gurgaon, which still doesn’t have a sewerage system, forget a good infrastructure, was able to brand itself so well that corporates and people shifted there in big numbers. Now one of the most struggling markets in the country, it was able to become a success story because there was just one developer, DLF, dealing with the corporates. Here, in Navi Mumbai, there are many builders and that didn’t help the city.

“Indians don’t like to go to places positioned as affordable housing locations. Branding makes all the difference and we should look at how India’s prime minister is branding India internationally. People in the other cities of India do not know about Navi Mumbai. Companies in Gurgaon will come to Navi Mumbai if you showcase this infrastructure to them.

“Developers should associate with leading brokers and advisors and earmark marketing budgets. Can we make Navi Mumbai the next ‘Silicon Valley of India’?”

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