Mumbai, Feb, 21 (EPC News): Recently an acquaintance – a fund manager by profession – relocated to India to set-up a domestic PE fund here. He had invested in a Mumbai residential property strategically located close to the primary business district and an international school for his kid. This investment, done a few years back, helped him crystallize his plans for relocation to India and start his venture without spending time in finding the right location, house and school.

What I found most interesting was that he had not even considered eventually relocating to India when he bought this apartment. He had simply done it for investment five years previously.

To date, I have not met a single NRI who is not keen to buy real estate in India. Home ownership in this country is one of the most satisfying means available to them to stay connected to their motherland. Very often, such investments in their country of origin help them to maintain their relationships back home while they make their fortunes abroad.

A few weeks back, I met another NRI businessman – earlier based out of Madrid and now relocating to NCR on the heels of the Euro crisis – who was seeking to build a local business base here. Achieving this while resettling family on all fronts has not been an easy task for him. He is on the lookout for the ‘best’ location for a residential property in NCR and naturally finds the cost of properties in the prime areas staggering and beyond belief.

He had not considered investing in a property earlier. Completely out of synch with the market dynamics back home, he blithely assumed that his foreign-earned savings would make finding a luxurious home a breeze. He was ill prepared for the astronomical ticket sizes that now prevail.

The Way Of The NRI

Over the past few years, we have noted that NRIs are investing into residential real estate specifically in large Indian cities to build a back-up base in the country. This particularly applies to NRIs with professional/entrepreneurial ambitions who intend to set up businesses in these cities in the future.

Post the 2008-2009 global financial crisis, India has stood out as a showcase example of financial stability, specifically in terms of its conservative banking sector. More than anything else in the past, the GFC caused NRIs to seriously contemplate owning homes in India as their rattled confidence in all things foreign gave way to a yearning for familiarity and stability on both on the personal and professional fronts.

Rules Of Engagement

• NRIs have no restrictions limiting them with regards to how many commercial or residential properties they can own in India. However, there are restrictions on the repatriation of sale proceeds, which is limited to two units. Effectively, this means that NRI face no restriction while investing into commercial or residential real estate in India. However, when a NRI decides to sell and take the money back to the country of residence, he can do so with the sale proceeds of only two units.

• NRIs can invest into real estate by remitting funds to India through normal banking channels, or by invest through funds in NRE/FCNR/NRO accounts maintained in India. They cannot make payment via travelers’ cheque or foreign currency notes. They are also restricted from making any payments outside India or settling payments through exchange of funds outside the country.

• NRIs can avail home loan from Indian Institution approved by the NHB, and loan repayment can be done either through inward remittances, debit to a NRE/FCNR/NRO account, via rental income earned in India or by borrowing from close relatives residing in India. NRIs can also avail of home loans from the employer in India, provided specific terms and conditions listed by RBI are met.

• NRIs can mortgage residential property in India with an Indian financial institution without any approval from RBI. They can also mortgage it with a foreign financial institution with prior approval from RBI.

• NRIs can rent out their residential property without the approval of the RBI in India. Rent received can be credited to NRO/NRE account or remitted abroad. Authorised dealers have been empowered to allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs/PIOs who do not maintain an NRO account in India, based on appropriate certification by a chartered accountant confirming that the funds proposed are eligible for remittance and that applicable taxes have been paid or provided for.

No one can exactly predict the fate of any currency, or the stability of any economy. Economies are notoriously ‘subject to market risk’ – for instance, no one had expected that west Asia would see political uncertainty a few years back. However, when it comes to personal and career stability, there must be no margin for error. The current trends suggest that more NRIs are taking important decisions with regard to owning residential real estate in India as bulwarks in uncertain times.

By Om Ahuja, CEO – Residential Services, Jones Lang LaSalle India

Mumbai, July, 13 (EPC News): India’s real estate industry has always been beset by risk, and many unwary buyers and investors have burned their fingers on it. 

When buying or selling on an unorganized real estate market, trustworthy advisors are worth their weight in gold because they can make the difference between time gained and time wasted – and between financial gain and substantial loss.

When an experienced real estate agent guides a client through the intricacies of buying, selling or leasing property, he or she is basically ensuring that the client makes the right choices and is not taken advantage of. The wrong agent may, at best, lack the required competence  – and, at worst, take the client for a very expensive ride.

The qualities of a good real estate advisor

A competent real estate agent understands your requirements and is able to present clearly and impartially all available options that meet your needs. He maintains confidentiality, networks with other agents for your requirement and keeps your costs down. He listens to you, behaves ethically and does not try to rush you into a decision. He does all he can to get you the best deal possible – even if it means a lower or deferred commission – by pointing out to you the pros and cons of every option to help you make a better decision.

He gives advice on the risks involved in every offer before you, informs you of the available risk mitigation strategies and helps you with the paperwork. He communicates clearly – he will not tell you that every offer is the best. He has exhaustive knowledge about the local market, general market practices, rules, regulations and legal aspects that he shares willingly and succinctly. He performs the task he has been appointed for with the client’s best interest at heart.

He is professional, aggressively follows up on a mandate and adheres to all expected processes.

The Search

* Check the real estate agent’s background, review his track record and get references from past clients

* Evaluate his knowledge of the real estate market and its offerings as well as his willingness to go the extra mile for you

* Eliminate all prospective advisors who attempt to push you into a deal to make a fast buck or suggest unlawful shortcuts to legal procedures

When considering a real estate advisor, be clear on what you require of him or her. If you are not sure, use his expertise and experience to identify and crystallize your objectives – are you looking for an ideally located and appointed home for actual use, or are you more interested in investment potential?

Referrals from family, friends and colleagues are great sources for finding the right advisor. In the absence of such referrals, you can launch an initial search through newspaper ads and web listings. Interview at least two or three advisors in person and establish the person’s local expertise and database depth before you take a decision. Finally, clarify all aspects of the fees and ensure that these are in line with current market benchmarks.

Your choice of a real estate advisor has a direct bearing on the number of options you will have, the quality of information and the final price. By choosing the right advisor, you can save time and effort in finding the perfect home at the right price or selling your property at the best price possible. 

By Ramesh Nair, Managing Director – West India, Jones Lang LaSalle India

Mumbai, Apr, 13 (EPC News): According to the 2010 census, Mumbai now houses around 14 million people, which makes it India’s most populous city and the world’s second-most populous city.

It is also India’s richest city because it has the highest GDP. Unfortunately, it also has an extremely complicated and lopsided real estate market. Properties in the island city are notorious for being the most expensive real estate in India.

This has caused the city to grow far into the mainland in the north and east directions, and this has resulted in the working population having to commute at least two hours to and from work every day.

To compound it all, there is a massive annual inward migration of aspiring job seekers into Mumbai. The city has been bursting at the seams for quite a while now, and its infrastructure is rocking and reeling.

The point I am making is that ‘destination development’ in the Mumbai context is a tricky and very non-typical concept. I do not see destination development in this city in terms of projects, but in terms of locations.

This is because a well-conceived and executed residential project in Mumbai is still only as good as the infrastructure that makes its location accessible and capable of providing a certain level of comfort and lifestyle.

The inner city certainly does not offer much by ways of available land parcels anymore, and those that are available are hamstrung by infrastructure challenges. To my thinking, Mumbai’s residential property destinations of the future will be those that are seeing sufficient infrastructure development.

So, rather than singling out any project, I would like to stress on the fact that destination development and infrastructure development are joined at the hip in Mumbai. To make a destination project viable, it has to provide accessibility, open spaces and social conveniences such as shopping facilities, schools and hospitals.
 
•Powai stands out as a clear candidate for excellent destination development location because the Jogeshwari Vikhroli Link Road offers good connectivity between the western and central suburbs. It is one the prime examples of destination development in the country, having been positioned with the right mix of asset classes, fabulous architecture and the vision.

•In terms of accessibility, the Western Express Highway, S. V. Road and Linking Road along the western line have made Mumbai’s western suburbs very attractive to upper mid-income homebuyers who are seeking a better lifestyle. In fact, the direct road connectivity offered by the Western Express Highway has caused Thane’s Ghodbunder Road to emerge as an extended western suburban destination.

•In the Western Suburbs, Malad and Goregoan have been the examples of destination development in the past where developers like Raheja and Oberoi have created a cluster of excellent commercial office, retail and residential projects.

•Similarly, the Versova-Andheri-Ghatkopar Metro will make locations along its route very lucrative for both commercial and residential space developers.

•Navi Mumbai and Kalyan-Dombivali real estate is also going to hit some new high notes with the coming of the new International airport. The highest focus will be on Panvel and its immediately adjoining areas, since Panvel is Navi Mumbai’s last node and also the ingress for the Mumbai-Pune Expressway. A speedier focus on the development of physical and social infrastructure in the region will ensure that this region maintains its attractiveness as a destination on the Mumbai real estate map.

By Anuj Puri, Chairman & Country Head, Jones Lang LaSalle India

Mumbai, Apr, 12 (EPC News): Financial stress can adversely affect a persons’ psychological state. This negative psychological state has a tendency to percolate down to the affected person’s workplace and – in fact – into all social interactions.

Surveys have shown that financial stress is among the root causes of decreased performance at work and a steady decline in physical and mental wellbeing.

CAUSES OF FINANCIAL STRESS

The sources of financial stress are varied. In India, one of main causes is worry about the adequacy of retirement savings. Debt is yet another significant causative factor, as is worry about one’s ability to pay regular bills and housing loan installments. Most middle-class people in India are also under considerable stress related to their children’s education.

Almost 90% of all survey subjects indicated that they experience stress over the rate of inflation and the resultant changes in interest rate, and the fact that their pay packets are not keeping pace with it. An adjunct is stress created by joblessness or the fear of losing one’s job – which would create a financial deficit. A smaller segment of the Indian population experiences stress because they fear losing wealth that they have accumulated.

Lack of objectivity with the use of credit card can also cause stressful situations. Credit cards are a relatively new phenomenon in India, and many users tend to overspend with them. The financial woe this results in can be attributed to a lack of knowledge about credit card billing, hidden clauses and neglecting to read the fine print. In the age of plastic money, people are tempted to overspend and misinterpret their spending power.

A credit card purchase does not entail immediate payment and this can lead to a false sense of security. The result is invariably a lot of stress. The roots of most finance-related stress disorders are two-fold – lack of proper planning and a disconnection with the of one’s true financial position and future prospects.

DETRIMENTS OF FINANCIAL STRESS

Is financial stress itself a serious matter? If we consider that 80-90% of all ailments derive from stress, it certainly is. It has been proved that worrying excessively about one’s finances leads to heart disease, high blood pressure and in some cases alcohol and drug abuse. Depression related to haywire finances is almost a national mantra in India now.

Financial stress also has peripheral bad effects, meaning that it causes absenteeism and reduces am employee’s productivity.

TACKING FINANCIAL STRESS

One of the baseline commandments in financial stress management is – get help. Finances are a serious matter and no single person can have perfect oversight. Moreover, we tend to become stuck in false belief systems about money. For instance, we may believe that a certain investment scheme is the best only because we have no knowledge of other schemes.

Effective financial management calls for inside information into market dynamics and changing laws. Complacency about deteriorating finances is a known ‘killer’. We tend to ignore the increasing seriousness of a situation, allowing it to build up until it is unmanageable. People dealing with large amounts of money – such as businesspersons - should consult a qualified financial advisor.

Even at the grassroots level of household finances, two heads are better than one. Managing household finances is teamwork, not a one-man show. Couples need to communicate with each other over the state of household finances. They must also set weekly, monthly and yearly parameters for what needs to be purchased or invested in. Doing this will considerably reduce the levels of finance-related stress in the family.

Regardless of how serious a financial situation is, it is never too late to get organized. Organization is they primary key for sorting out complicated finances. Effective organization calls for inputs from others and, when required, from experts.

BRINGING DOWN FINANCIAL STRESS

If one is already under stress from financial problems, planning is an extremely important factor. Often, one is tempted to throw good money after bad in hope of a quick-fix solution. When one is faced with financial stress, there are certain ground rules to follow:

•    Consult a professional financial advisor - A professional will know of ways and means that you are not aware of
•    Curtail spending until the crisis is resolved – This is no time for impulse buying as a stress-busting measure
•    If in debt, talk to your creditors and explain your situation frankly – Perfect transparency in such situation is a far better tool than evasion

OBJECTIVITY – THE ULTIMATE STRESS-BUSTER

We tend to run away from money-related problems rather than facing up to them. This is not even a temporary solution. The minute we accept such a situation squarely, we reduce stress because we are no longer trying to escape. Getting proactive about tackling financial problems means one develops a ‘game plan’. This means positive action rather than negative inaction, which displaces the anxious feeling of helplessness. To develop a game plan, we involve the help and advice of others. In other words, we are no longer alone in the stress-inducing situation and are strengthened in a situation where we feel impotent and weak.

By Jappreet Sethi, Vice President – Human Resources, Jones Lang LaSalle India

Mumbai, Apr, 11 (EPC News): Mall management is a huge movement in more developed and matured markets, especially where the mall culture has evolved significantly.

Australia, the United States and many European countries come readily to mind this in this context. In India, the phenomenon of mall management is now approximately five years old.

Typically, the Indian psyche is skewed towards self-sufficiency, and many mall owners had, in the past, addressed mall management as a simple facilities management function. However, with the increase in competition, quite a few developers have started outsourcing the overall management of their malls to professional agencies. This trend is likely to catch up as the battle for footfalls in malls gets bloodier.

Mall management in India began with simple facilities management functions, which basically encompassed the operation and maintenance of malls. However, the scope of mall management services has by now been elevated to shopping centre management, which very few companies have upgraded their capabilities to in the current scenario.

The expectations of clients are now on complete shopping center management, which is a drastic shift from the earlier model. There are various business models on which mall management service providers operate. The most basic model is based on a fixed management fee and a small variable component. In this model, the service provider acts a manager on behalf of the mall owners at a relatively low risk quotient.

A more evolved business model is based on the reimbursement of operation costs in addition to a pre-defined profit margin, in return for which the service provider has to perform and collect monies from the occupiers so that the cycle of revenues and expenditures is moderated from beginning to end. To amplify on this new model – there is a fixed chargeable component to a mall management service provider’s fees, which covers a certain portion of the outgoings and also encompasses a margin of profit.

Lately, a variable component has been introduced which is a function of the enhancement of the mall’s revenue generation by virtue of these services, and also the collection of monies from the occupiers. The scope for mall management in India today is tremendous to say the least. As of now, there are many companies with mall development aspirations who have ambitious plans for swamping the Indian retail market in the near-to-distant future, especially in Tier III and Tier III cities.

Of course, much depends on the Government’s policies on such proliferation going forward. If these companies go ahead with their plans for retail footprint expansion, the demand for professional mall management is going to increase manifold. In other words, it is an extremely vibrant business vertical. While Jones Lang LaSalle was the pioneer in this field and currently commands the largest share of malls under management by a single service provider, many other large companies have also stepped up their offerings from simple facilities management to more advanced models.

By Col. Ashutosh Beri, Managing Director – Property & Asset Management, Jones Lang LaSalle India

Mumbai, Mar, 21 (EPC news): Mumbai saw a steep rise in property prices during the boom period of 2008. However, the economic slowdown in 2009 led to a property market crash which made itself very tangible in Mumbai in the first quarter of 2009, stabilizing by the middle of year and rising again between the 3rd and 4th quarters.

The rate of price ascent picked up during 2010, hitting high notes of between 30-60%.  By the 4th quarter of 2010, residential property developers who had returned to the safety their home markets from their earlier national forays were building large land inventories, spending close to Rs. 20,000 crore in Delhi, Mumbai and Bangalore.

Significantly , Rs. 12000 crore were spent in Mumbai alone. This naturally resulted in extremely high land valuations, demanding higher average residential property sale prices based on the new appreciated capital values.  These land acquisitions were predominantly funded by NBFCs at 15%+ interest rates in an already volatile real estate environment, where sales volumes had plummeted by close to 50%.

Measures implemented by the RBI to curb inflation further aggravated the pain as interest rates went up. Clear directions issued by the large financial institutions and the Central Government led to a marked depletion of liquidity on the market, and this put considerable pressure on the developers. 

The challenges of low volumes, the increased cost of debt and higher land valuations left them with no choice but to introduce ‘soft’ schemes (promotions and incentives) to woo buyers with.

When this route did not yield the desired volumes, they began to solicit HNI-led investments at discounts of 10-15%, in addition to raising further capital at interest rates of between 21-25% from NBFCs.

After surpassing the peak valuations of 2008 by 20% in 2010, Mumbai’s residential property rates today are back on par with the 2008 benchmarks. This could be considered a correction, and it has come about as a result of an increasingly urgent need for capital by the city’s developers.

It is fairly certain that this correction phase will continue for the next 3 months and inevitably extend into the traditionally slower monsoon / vacation period.  As of now, prices have dropped in areas such as Parel, Lower Parel, Mahalaxmi, Bandra East, Andheri East, Goreagon East and Mulund and Kurla.

There are several other locations within Mumbai and Thane district that may not have seen a correction of more than 5-10%.  The overall sentiments of the market and the consistent rate of new project launches in Mumbai projects give a very clear indication of an impending oversupply by 2012, and a lot of developers in the most severely affected locations are currently open to closing sales at lower rates.

That said, the market has already begun responding positively to this correction. Given the continued job confidence, high salary increments / bonuses, the steady growth of the economy and potentially a good monsoon, Mumbai’s residential property market will bounce back by August and surge past the 2010 peak. The first to benefit from the coming upsurge will be strategically located and designed projects by reputed developer who have consistently shown construction progress at site.

By Sanjay Dutt, CEO – Business, Jones Lang LaSalle India

Mumbai, Mar, 18 (EPC News): The concept of international, standardized luxury floor space must evolve further before India can absorb the demand. Developers must come up with more imaginative ideas of differentiating their luxury malls from the run-of-the-mill.

The idea is not to attract mass traffic, but to offer an atmosphere of exclusiveness. In other words, luxury mall developers must learn to eliminate the commonplace components and introduce high-end features in their place.

The factors contributing to the advent of luxury brands include:

A heightened awareness and aspiration among affluent Indian shoppers

Increased density of newly affluent consumers

The fact that the Indian government has encouraged upscale retailers by allowing foreign companies to own a controlling interest of 51% in ‘single brand’ joint ventures
 
DEVELOPER CAPABILITY

Only developers with previous exposure to international standards will be able accommodate and adequately present international luxury brands in terms of the infrastructure and ambience, and a proven capability of catering to them, will be able to do so. The rest will have to settle for the usual upmarket mass brands. The criterion is not one of mere opulence, but refinement. There is also a matter of sustainability – the current demand for luxury brands will reach its most favorable proportions only in five years or so.

The luxury mall format is not inflexible, though the standards of floor-space and security must obviously go beyond those in a garden-variety mall. A luxury mall faces the tricky challenge of providing a synergistic atmosphere for competing, yet compatible brands targeting affluent buyers. It must provide a unique gateway to the luxury marketplace. Achieving this is a fine art, combining the most evolved concepts of human psychology, aesthetics and marketing strategy.
 
LOCATION

The location must be a suitable distance away from aesthetically unappealing components such as slums. It must be able to accommodate a good approach road and ample parking facilities. For all these reasons, the location need not necessarily be central. Discerning and affluent buyers are not necessarily averse to traveling some distances to reach an exclusive shopping destination. However, it must be at an appropriate distance from similar establishments. Generally, the location should have access to a catchment with a concentration of high-income buyers.
 
COMPETITION FROM FIVE-STAR HOTELS?

Luxury malls will not face any competition from five-star hotels as retail destinations. Today, only about 1% of tourists residing in luxury hotels actually shop there, and then only for last-minute impulse buys. They actually get better and cheaper buys at duty free shops. Other discerning shoppers would rather have more under a single roof, and at more accessible locations.

Hotels do not offer anything different to customers – they already have fine dining and ambience in place. Luxury malls, on the other hand, have to establish the necessary infrastructure that recreates the ambience and enablement of 5 star hotels, so the rentals are higher by between 30-35%.

By Shubhranshu Pani, Managing Director – Retail Services, Jones Lang LaSalle India

Mumbai, Mar (EPC News): Buying land can be a time-consuming and expensive affair. Not only can the initial phase of buying it be quite complicated, but the cost involved in maintaining a purchased plot can also be quite high.

Moreover, there are often issues related to clarity on the title, and handling the regulation process can be quite tedious. The solution to this lies in buying non-agricultural (NA) land directly from a local authority.

While buying NA land, there is a standard proviso that it must be developed within a specified time limit. On the other hand, NA land situated at the fringes of a city’s limits can also be bought from private developers. Taking this route saves the buyer the hassles of obtaining the various approvals, since this has already been taken care of by the developer.

Clearing Some Myths

Tax benefits: It is commonly assumed that there are no tax benefits in buying land as against buying a house. It is true that, unlike a loan taken to acquire a property, the interest payable on a loan taken to buy a plot of land is tax deductible only if that land is used for generating income. In any case, the principal is not eligible for any benefit. However, the interest can be capitalized and added to the cost of acquisition of the plot. This can help in reducing the capital gain tax liability at the time of sale of the plot.

Cost: One does not need tonnes of cash to buy land. Even moderate investments to the tune of Rs. 5-10 lakh in a good location are quite capable of yielding worthwhile returns in the long term (usually 5-7 years, but 10-15 years is always a better bet).

Loans: Contrary to common belief, banks DO provide financing for buying land from statutory bodies or reputed developers. That said, it should be borne in mind that the interest rates for buying land are about 1-2% higher when compared to regular home loans. Also, the tenure of such a loan is restricted to a maximum of 7-10 years.

Liquidity: Since non-agricultural land is not easily saleable, the investor’s liquidity gets restricted. Land can, however, be used as collateral for securing credit from financing institutions. Though it does not provide any merit to the business proposal, it does take care of the cash situation.

Some Common Apprehension

Encroachment / Zoning Law Changes: The most common fear that someone aspiring to buy land faces is the encroachment of the property, or zoning changes. (The ideal way out for this is to buy into clearly demarcated NA plot schemes. Not only are chances of infringement low, but quick redressal is possible in case of complications because a large number of people are involved in these schemes.)

Payment: Land purchase transactions involve a lot of up-front capital, as sellers of NA plots may demand cash payment. This could lead to a lot of legal hassles later on. (Obviously, the solution is to ensure that one has adequate funds in one’s kitty before considering such a purchase.)

Caution!

NA Status: If the conversion of a plot of land to NA status is still underway, it means that the local authorities still retain the right to make changes in the plans submitted to them. In other words, the status of land acquisition rights by the Government (or any other authorities) for any purpose is not clear. The status of any particular plot number can change at any time within the plan

Individual Purchase: Buying land individually is risky from a title point of view. The development of basic requirement like road, water and electricity could also be costly. Even if these basics are already in place in a developed NA plot and the buyer constructs a farmhouse or weekend home on it, the maintenance of the property can be a challenge for a sole owner. Security is another issue to be considered. It is always safer to buy NA land in groups, in a society or from a developer who offers common facilities.

By Pinkesh Teckwani, Head – Land & Industrial Services (West India), Jones Lang LaSalle India