The Highs & Lows South­ern Real-es­tate

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Es­tab­lished in 2011, Citrus ven­tures Pvt. Ltd. is a Ben­galuru based real-es­tate de­vel­op­ment firm. Shashid­har Pai, Man­ag­ing Di­rec­tor, citrus ven­tures, talks about the sce­nario of realty mar­ket in South In­dia.

The real-es­tate in South In­dia has a strong un­der­ly­ing de­mand in the mid­in­come hous­ing seg­ment driven by the tech­nol­ogy, au­to­mo­bile, man­u­fac­tur­ing and ser­vices sec­tor em­ploy­ees. Ban­ga­lore hous­ing can be sub­di­vided into plots, vil­las and apart­ments. We es­ti­mate that the mar­ket size of plots is ap­prox­i­mately Rs.3,000 Crore, for vil­las ap­prox­i­mately Rs.1,300 Crore and apart­ment’s mar­ket size is Rs.10,000 Crore. The com­mer­cial of­fice space cat­e­gory in Ben­galuru amounts to Rs.6,000 Crore with the five kilo­me­ter ra­dius of outer ring road (ORR) be­ing the fast grow­ing lo­ca­tion for com­mer­cial plug and play de­vel­oped plots. This area is ex­pected to have a very good ve­loc­ity and high value share.

In terms of con­sumer pro­file, Ben­galuru, Chen­nai, Hy­der­abad and Kochi are cos­mopoli­tan cities with prop­erty buy­ers pri­mar­ily in in their mid-30’s. The well-trav­elled, double in­come fam­i­lies with strong fi­nan­cial track record are well in­formed and de­mand­ing. Also, as their trans­ac­tions are mostly mort­gage backed with nom­i­nal cash com­po­nent, the de­mon­e­ti­za­tion im­pact was min­i­mal here, com­pared to the realty mar­kets of cities like Delhi and Mum­bai. The re­duced sales have led the de­vel­op­ers to opt for re­fi­nanc­ing their debt obli­ga­tions mainly through NBFCS and PES. The flip side of this de­vel­op­ment is the higher cost of funds and need for early exit. There­fore, the fi­nances of realestate de­vel­op­ers con­tinue to re­main stretched due to el­e­vated in­ven­tory and debt. It is es­ti­mated that debt lev­els of real-es­tate com­pa­nies will fur­ther in­crease given the neg­a­tive op­er­at­ing cash flows.

The req­ui­site of ur­ban af­ford­able hous­ing is space ef­fi­ciency and ba­sic life­style ameni­ties. The de­vel­op­ers need to de­sign such func­tional prod­ucts with rel­e­vant price point to at­tract buy­ers. For in­stance, all projects of Citrus Ven­tures in­clud­ing plots, apart­ment, town houses, stu­dios and vil­las are pre­ceded by mar­ket re­search and fo­cus group sur­veys to guide the pro­ject de­sign. We have com­pleted more than one mil­lion square feet of saleable area and an­other four mil­lion square feet is un­der de­vel­op­ment.

The ‘Hous­ing for All’ and ‘Smart Cities’ ini­tia­tives by the Cen­tral Gov­ern­ment are ex­pected to bring back the much needed mo­men­tum to the hous­ing sec­tor. We be­lieve that the hous­ing in the Rs.40 lakh price point will be highly sought af­ter. Smart cities con­cept will how­ever take 10-15 years to ma­ture. Based on our learn­ing from both these ini­tia­tives we are rolling out our first af­ford­able smart town­ship in Ban­ga­lore that will pro­vide a sus­tain­able, tech­nol­ogy backed in­fra­struc­ture on a com­pet­i­tive price.

In the same vein, RERA and reg­u­la­tory agency will usher in a com­pletely new ex­pe­ri­ence for cus­tomers. From a de­vel­oper’s per­spec­tive it calls for fi­nan­cial dis­ci­pline. In short-term RERA will lead to con­trac­tion of the mar­ket and in re­duc­tion of num­ber of play­ers. In ad­di­tion, given the need for higher fi­nanc­ing and in­creased com­pli­ances, prices will also go up by 10%. Though, GST in­tends to bring down the net ef­fec­tive tax­a­tion by uni­fy­ing dif­fer­ent Cen­tral and State taxes un­der one um­brella, given the con­di­tions for avail­ing credit it may be in­fla­tion­ary in na­ture. Nev­er­the­less, both the reg­u­la­tions will be ben­e­fi­cial in the long-run, mak­ing the end-user as the fo­cus and key driver.

the cur­rent eco­nomic slow­down has im­pacted the employment growth and salary

in­cre­ments re­sult­ing in post­pon­ing of large in­vest­ments in­clud­ing hous­ing. some of the re­cent guide­lines is­sued by the Na­tional green tri­bunal have put an­other span­ner in the works.

shashid­har PAI

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