Thursday 20 September 2012

Why buy property or apartment in prime residential area in Kerala?

If you look at property trends in the major IT cities in India, especially Bangalore or Hyderabad, you would notice a peculiar trend. Once the influx of IT companies and IT SEZ's come into the city, the first areas to appreciate in terms of capital values and rental incomes is the CBD (Central Business District or City Center). 

In an earlier article we had mentioned how different factors affect property appreciation. Amongst these the proximity to CBD was a critical criterion in property appreciation. In Bangalore as more people moved in to the city in the last decade, the space crunch near CBD meant developers looked for areas where IT SEZ's could spring up. The first of these was Electronic city in Hosur road, which saw steep appreciation in 2003-2007.

During this period however as companies could not get enough space in and around electronic city, more companies moved to Whitefield, Sarjapur Road and Domlur which sprang up during late 2000's as attractive destinations. Since Senior management of these companies wanted plush real estate, property prices in these areas saw a major upswing in this period. The point we are trying to make is that as new areas emerge property prices sees appreciations of 20 to 30% year on year for a particular period, and then seems to stagnate or grow slower with time.

When it comes to Trivandrum, due to fewer options available for land within the city limits at places like MG Road, Kowdiar, Statue, Vazhuthacaud, Pattom etc., builders and developers are more likely to come up with projects in the suburbs or new areas in and around Kazhakuttam which have land availability at relatively affordable rates.

Now going back to the Bangalore scenario, today areas like Hebbal which came up as hot destinations in the last 2 to 3 years due to the proximity to Manyata Embassy Tech Park, has property values from 4000 to 8000 per sq.ft. The advantage is two fold with these areas, as they offer the resident a place close to work and about 30 minutes from the CBD. While the apartments in the CBD itself in Bangalore record values of upto 30,000 per sq.ft, those in Mumbai come to close to 70,000 per sq.ft. especially in South Mumbai.

So what's the takeaway? The Kerala real estate development seems to be following a similar trend like Bangalore. The Info park in Kochi or the Technopark in Trivandrum are the hot IT destinations at the moment. As time passes, new areas would emerge, however MG road and posh residential areas within proximity to CBD would only appreciate faster. A prudent investor or home buyer should thus look for prime residential areas if they have availability to sufficient funds to go for such a property. Rental values from these properties might be similar to a property in the suburbs in the short term, however capital value of the property would be much higher in the longer term. 

Whether values will touch 30,000 per sq.ft like Bangalore? Only time will tell. But one can be reasonably sure that a decade or two down the line, the reality in Trivandrum may not be too different.

Wednesday 19 September 2012

Kerala Real Estate Trends - Developments and Property in Kochi, Trivandrum and Kozhikode

Some of our customers have been requesting us to write about the prevailing trends in the Kerala Real Estate market. So we thought we will discuss about it in this article. Since Real Estate is an area where trends of price, developments could change not only at a macro level but also at a micro market level, it is quite a difficult task to pick one amongst these developments as a trend.

By definition, "Trend is a change or a general direction in which something is moving for a given period of time". To summarize trends in the Kerala Real Estate market, let us take a look at the major markets of Kochi, Trivandrum and Calicut. As you might know, most realty developments in Kerala follow a hub and spoke model with these three cities, getting the major share of attention when it comes to real estate investments and new developments.

Kochi: 

Kochi really was the real estate hotspot in 2007-2008, with developers like DLF, Sobha Developers, Ansals, Purvankara, Confident Group, Oceanus, Unitech, Nitesh Estates, Housing Development and Infrastructure (HDIL), Prestige Group, Emaar MGF descending and announcing projects worth over $2.5 billion. Sobha announced the Hi-Tech city in Maraadu, DLF purchased close to 4 acres from the State Government and HDIL purchased a 70 acre plot for developing an IT park. The result - Property prices shot up by over 60% during this period and developers had the last laugh as bookings were plenty, especially from investors. A look at the RESIDEX of Kochi  clearly tells the story wherein with a base of 100, property prices shot up over 2010-2011 but crashed in the following quarters. We have analyzed the speculative nature and the bubble formation in our earlier article on Kochi.

Today after many quarters of decline, property prices in Kochi seem to have achieved some degree of stability. If announcements in Emerging Kerala go as planned, and Kochi metro is delivered within 4 years, there is scope for some happiness and real appreciation in a few years time. With a total length of 25 kilometres from Aluva to Pettah, the Kochi Metro would not only be the smallest of the metro-rail networks, but would also relieve the congestion in the city and pave the way for developments along the metro corridor. The other big development here is the Lulu shopping mall coming up with an area of 25 lakh sq.ft.

As far as micro market developments in Kochi are concerned, you need to divide the city into various zones and look at new project annoncements which are being made to get a pulse of the market. For further information, please contact our team at Nandanam and we will be happy to assist you with the same.

Kozhikode:

Kozhikode is not only the third largest city in Kerala but also the state’s second largest urban agglomeration with a metropolitan population of 20 lakh plus people. The major population of the city is employed in the Middle Eastern countries. Their remittances are the major source of economy of the region. The city has around 40 IT companies operating at the moment which is quite small compared to the number of companies in Kochi or Trivandrum. Given the proximity to Bangalore & Mysore (which are just 6 hours and 4 hours away respectively) and the presence of educational institutes like IIM Kozhikode, the city could prove to be a major IT hub in the coming decade.

Some interesting projects on the anvil at Calicut are the  HiLite City, a first of its kind urban integrated township with 32 lakh sq. ft. of residential, commercial and retail spaces awaiting completion by 2013. The total project cost of HiLite City is put at Rs.900 crore.  The other one is the mono rail project. As reported in the Hindu " The monorail project, envisaged by the Kerala Road Fund Board, has two components — the development of monorail for 12.60 km from Government Medical College Hospital to Meenchantha and the operation of exclusive buses to the Calicut International Airport. The estimated cost is Rs.1,018 crore." The Lulu group is also planning a convention center in Calicut once existing projects are completed.

Trivandrum:

As far as Trivandrum is concerned, majority of the developments have been happening in pockets like Vattiyoorkavu, Vazhuthacaud, Vellayambalam, Technopark etc. The influx of IT professionals to the city at Technopark, has given a major boost to the real estate developments in the city. You can read more about these developments here.

Trivandrum is also looking towards the monorail development to augment the growth in its micro markets, which might be located far away from the CBD or the IT hub. The development of international stadiums at Kazhakootam and Vattiyoorkavu have also increased real estate interest in these areas. When the 32 projects to be implemented in Thiruvananthapuram district were presented before the investors at the Emerging Kerala-2012 summit, only five project proposals were received by the government.The biggest project is the Engine Assembly Unit of Volkswagen at an estimated cost of Rs 2,000 crore which might be coming up at Trivandrum. Ravi Pillai, founder of the RP group plans to invest Rs.1,000 crore in Trivandrum to set up a world class convention center.

Tuesday 18 September 2012

Trivandrum Real Estate Blog - News, Trends, Property, Prices

The Nandanam Consultant's blog about Trivandrum its real estate, apartments, and news serves one single  mission - "Disseminate the truth to as many people as possible who are looking to invest in real estate in the state."

We recall a story at the moment. A customer called us one day to tell about his disappointment regarding an apartment. This was a flat he purchased going by a full page news paper ad in one of the popular news papers in Kerala back in early 2000's. 

The news paper ad from the reputed builder claimed three things 1) Never before price for the property 2) Great amenities & Luxury 3) Great Location. Being far away from Kerala at the moment, the customer had no way to validate the advertisement, but believed in these promises. He bought the apartment.

When we reviewed this ad (going by the archives), we found few things of interest: 

1) There was no promise of on time delivery 
2) The offer price caveat was typical of most builders to attract new comers 
3) The distances were not correct. There was a discrepancy of about 2 Kms of the actual location from what was advertized.

The result - people had no way of validating the property and differentiate its real value from the promised one. Five years hence when the property was still not handed over to the customer, to his dismay he found that he had nothing in the sale agreement to go back to in terms of penalizing the builder if the hand over had got delayed. 

Through our posts on this blog we hope we will enable you to make better purchase decisions for your property. If you like what we write , please feel free to share your comments and feedback with us. Your encouragement would help us even more in informing our customers and the general public of what to pay attention to in buying and selling your property.


Monday 17 September 2012

How men and women differ in buying property - Choosing your living experience

You might think that the two genders significantly differ when it comes to choosing your dream home. To substantiate this, anyone who has read 'Men are from mars and Women are from Venus' would definitely stick to this hypothesis.

Compared to late 90s more single women are making property purchases in developed countries in the recent times e.g. United States. While price per square feet, location and other factors play an important role in choosing your home, recent studies have revealed that emotional parameters attached to what you "feel" a living experience in a property would be like, has a profound influence on the buying behavior.

For e.g. once you short list on the location for your home, the view from the balcony, the painting on the walls or even an aspect of the flooring could emotionally influence you into dropping or choosing to buy a house. Which is why at Nandanam, we lay stress on our customers and educate them about the living experience you get, beyond the aesthetics and quantitative measures like price and appreciation.

So why do single women especially in developed countries go for buying  homes. Because it instills in them an overwhelming feeling of independence and security as proven by most surveys. For men it appears that the size of the property and what you can do with it i.e. functionality are more important features as compared to their female counterparts. A sense of security and proximity to extended family was important in the women's purchase decision while for men proximity to their jobs was more important even at the expense of security.

Interestingly studies also point out that men require two or more visits to finalize their houses while women typically make a choice in just one visit to their dream home. Finally as experts point out, instead of an individual when a couple decides to move into a home, the male counterpart usually has a larger say in the financial decision and the female counterpart in the final stage of the buying decision.

When it comes to India, as families become more nuclear in nature, availability of services (proximity to schools, hospitals, malls, retail outlets etc.), security and good maintenance are of essence in choosing your dream home. Our advise to the home buyer would be to make a decision after prioritizing features you look for, thereby enhancing the living experience. A prudent decision on your home and its living experience can make a big difference between a bundle of joy and a handful of regrets once you move in.

Sunday 16 September 2012

Nandanam is on Facebook!! Great Deal - Flat for Sale near Technopark Trivandrum

Hey readers. As promised earlier , we are happy to announce that our Facebook page is now live at http://www.facebook.com/NandanamConsultants.

Nandanam Consultants - Facebook page


So what would we showcase on our Facebook page? For those who are interested in great property offers, there is one already for a Technopark Apartment on Sale at an amazing price. Check it out here. We would also feature pictures of new properties, updates on new launches, polls and interesting topics here.

So why wait? Do LIKE our page, stay tuned always and share your comments and feedback on properties on sale and hot deals on the Trivandrum real estate market.

Luxury amenities in the apartment market. What do you aspire for?

Snapshot at Lodha Bellissimo Mumbai

In India the useful life of an apartment is about 30 to 40 years as per most studies by experts. This is primarily due to the climactic conditions prevailing like humidity, temperature fluctuations etc. which have a significant effect on the the reinforced concrete and steel, the building blocks of an apartment building. 

Take the case of Japan. Building regulations and new techniques, ensures that life of apartments there could run over a 100 years and stand the rigors of earthquakes, floods and other natural calamities. Today with green buildings and modern construction techniques coming into the fray, we can expect future apartments to last over 70 to 80 years, which would be the ideal scenario in India.

When it comes to apartments, most builders advertise their properties as luxury apartments.To demystify, what luxury could really mean , we try and segregate options that builders provide in apartments into 3 different categories. If you are a traveller, you might have heard of 3-star, 5-star, 7-star etc for hotels. However in the case of luxury properties, no real segregation is in place today.

We hope this categorization of Super Luxury, Essential Luxury and Basic Luxury, will help you understand what your luxury apartment should ideally be like:

Super Luxury

1. Design inspired by Worldwide designers e.g. Hiranandani Horizon, Bangalore
2. Prime Location overlooking a prime road or a business center e.g. MG Road
3. Premium concierge services like Quintessentially for apartments e.g. Lodha Bellissimo, Mumbai
4. Full Home automation

Essential Luxury

1. Internal and External Bar
2. BBQ Area
3. Golf Course
4. Lake or Sea Facing
5. Private Theatre
6. Yoga or Aerobic Studio


Basic Luxury
1. Gymnasium
2. Games Room
3. Swimming Pool
4. Squash and Tennis courts
5. Children's Play area
6. Landscaped Garden

So why would you invest in a super luxury apartment? While some of these super luxury apartments in Bangalore for example run into 3 or 5 crore rupees on launch, there have been examples where within a few years the square feet rate has run into 33,000 sq.ft after construction of the property is complete. This means a 3000 sq.ft. 4 bedroom flat runs into approximately 10 crore rupees. In Trivandrum or Kerala for that matter, apartments of the kind Super Luxury really do not exist at the moment. A vast majority would fall into the Basic Luxury or a handful in the Essential Luxury category.

When you choose a Luxury apartment where you aspire to live, do look for the credibility of the architects, designers and the builder and their track record of luxury apartments. After all you want the promises to be delivered as well.

Monday 10 September 2012

Need for real estate regulator. Keeping home prices under check.


India badly needs a real estate regulator. The Maharashtra Housing Regulation and Development Bill passed by the Maharashtra state assembly in July is a step in the right direction. The objective of the bill is two fold: bring about transparency in the real estate sector and empower the home buyers.

Most home buyers all over India, especially in the Metros, are subject to huge fluctuations in property rates plus a complete lack of transparency into the prices decided by the builders. Not only are the agreements one sided in favour of the builders (the customer has no recourse even if the projects are unduly delayed, but the reverse does not apply), tactics like pre-launch price, bookings using sample flats and non disclosure if the project is under financial strain is often hidden from the view of the customer. The result - A high degree of mistrust that has crept in over the last decade amongst customers about the real estate developers.

As reported in the Mint, the Maharashtra bill makes it "mandatory for builders to make complete disclosure regarding housing schemes or projects they are developing, where they are required to provide details of ownership of land, number of flats going to be built, the floor space index (FSI) applicable for a particular housing project and how they are going to finance the project."

The bill is a model which the Kerala government could imitate and adapt and tailor make depending on the conditions in the state. It will go a long way in driving more transparency in the sector, keep home prices under check and instill confidence in buyers who invest their hard earned money in buying their dream home.

Saturday 8 September 2012

Property Prices in India and around the world - Economist. Fair Value and Trend Analysis.

The  Government of Kerala  has declared a fair value of land in all parts of kerala . From the link here you could see the fair value of your property provided you can provide some minimum details on the tool.

Recently the Economist magazine reported trends in property value across the countries in the world, which makes some interesting reading. Out of the 21 countries that economist tracks 12 of them dropped in prices, and 5 of them gained. As per Economist "Many markets are returing to “fair value”, defined as the long-run average ratio of house prices to disposable income and to rents. Housing is now around or below its fair value in eight countries."

If we look at the charts below which shows property value trends in developed countries, over the last 37 years from 1975 to 2012, property values has shown tremendous gains. In some countries like Australia, the values have sky rocketed in the last decade or so. So while the largest market, United States is now picking up after a huge drop, the more a market is closer to its fair value, the prices seem to rise from thereon. In Spain which is reeling under the Eurozone crisis, prices have fallen 23% from their peak in 2007 (A note: Kochi prices fell 32% over the last three quarters and we now believe it has stabilized).


In the Asian countries, Hong Kong prices which were sky rocketing at 28% growth yoy is now growing at 6% yoy. Hong Kong prices had increased by about 67% since 2007 and followed only by Austria which reported a 23% increase since 2007. The biggest casualty of the price drop, Ireland has seen prices drop by 49% in the last 5 years.






So from an investor perspective in India, what does one make out of these global trends?

1. For one, it is clear that, after years of dizzying ascents, it seems like a big bulldozer has hit residential-property markets around the world and stabilized them to a large extent.

2. If you take the case of United States for example the housing bubble threw out some interesting facts. For many middle- and lower-middle-income Americans their home made up nearly all of their wealth. They were largely invested in a single asset that did very poorly in this period. Richer Americans, who held other assets, did not see such large declines. This demonstrates how important it is to diversify your wealth, even when you don't have much of it. It appears that there seemed to be a mentality that you should buy as much housing as you can afford, not as much as you need. That may be because of the pervasive view during this period that housing is always a good investment.

3. The case is not too different in India. During times of rapid ascent in property prices and going by trends world over, it is good to stop short and take a closer look and not go blind foldedly and invest. A well diversified portfolio consisting of government bonds, MF's, FMPs, VPFs would help a youngster in mid 30's to earn a good retirement income even if property crashes or stabilizes in the next decade.

4. To reduce the risk from your property portfolio, it is very important to do your ground research well and choose the property. Tie up with a good property consultant, who understands your financial situation and then advices you on the right kind of property go for.

5. Keep a track of price trends, fair value and other market indices to understand if you are over paying for your purchase or under selling on the property value. Negotiate well and don't hurry into your decision.

6. Take a long term view into investments and avoid short term investments unless you are aware of market realities.

Realty growth is here to stay in India and in Kerala, especially with burgeoning population figures in our country. But speculative investments in property, often made due to impulse buying and hearsay, may not be a good idea, unless backed by a good understanding of the overall market. After all the objective behind buying real estate may not always be a wish to own your home, but to become wealthier in the longer run. A good portfolio of assets and knowledge of how to build it, would always come in handy compared to risk prone, myopic investments in a few assets.


Thursday 6 September 2012

Financing a new property purchase in Kerala? Tips for a smooth ride

For a majority of people bank financing is the primary route to raising finance for buying property. This is a trend all over India. The real reason behind the strong real estate growth in the country has been the measures taken by RBI to prop up bank loans for housing.

Due to the formation of a temporary bubble towards the end of 2000, RBI changed the norms for bank finance from 100% to 80% of the property value, so that customers have to at least put in 20% of the money from their pockets for purchasing a property.  Most of our customers who come to Nandanam for advise on financing their home purchase usually have three queries: 1) Which bank or financing institution do you go for the home loan 2) How much do I have to pay upfront to avail the loan? 3) What documents would be needed?

Typically when we advise customers on financing their property, we try and understand their risk apetite. When it comes to liabilities, if you are a salaried employee your liabilities such as Auto loan, Home Loan and others should ideally not be more than 50% of your take home pay. This is because you have to also plan for monthly expenditure, education for children, marriage, medical expenses, investments (if any in mutual funds or shares or FD's) and contingency expenses.

The same applies to banks as well. Usually banks would finance based on 50% of your take home pay i.e. if your 50% equates to Rs.50,000 and you have no other liabilities, you could avail a loan of up to 50 Lacs for a period of 20 years. This means your net property value (excluding regn, stamp duty etc.) could be around 65 Lacs. The rules vary depending on the type of the property for e.g. residential flat or land or independent house etc.

For the question of which financing institution to go for, it purely depends on what you want to expect in terms of service, loan interest rates, other charges etc. As you might know, SBI has probably the largest home loan portfolio in the country and offers good terms to the home loan customer. But some people do not have the time and energy but rather prefer a home loan executive from ICICI or HDFC doing all the paper work. One inside tip which we would like to offer you is to have a good relationship with the manager of the branch from which you are availing the loan. For e.g. some of our customers availed bank loans from SBT and had a really good experience, when they faced trouble paying their EMI's. The bank on a case to case basis gave a little leeway to the customers if they could not pay their EMIs on time. For large private banks this may not be the case and you might have ended paying up some penalties. So the choice of the financing institution needs to be made based on a plethora of factors and a good property consultant should be able to advise you on the pros and cons of each.

With regards to how much one needs to pay upfront for the loan this again varies on a case to case basis with some thumb rules like we explained earlier. The real benefit which a good property consultant  brings to you is not only negotiating payment terms with the bank or HFC, but also in negotiating payment terms with the builder or seller of the property. To give an example, one of our customers liked a property near Technopark and wanted to buy it immediately on a short trip to India. For him what mattered was not the bank itself from where he availed the loan, but the upfront payment which was not there at his disposal at the given moment. Usually for doing the agreement, the builder would ask for 20 to 25% of the value of the apartment paid either completely by you, or partly by you and partly by the bank. In this case, the customer could avail the loan based on his salary, but he did not have all the money needed for the upfront payment. We helped negotiate with the builder, so that he could avail a 6 month time frame for the agreement and pay the money, instead of the usual one or two months which builders give customers once they pay the advance and book the property.

This example may not be hold good for all builders and all properties. Its the relationship that the property consultant maintains with the said builder or the property owner, and his experience in finance and expertise in agreement negotiations which really changes the game for the customer. The customer in question is really happy with his purchase and is paying his EMIs as planned. Also in terms of time value of money, the customer could avail the bank loan at a later stage and hence got more than what he desired.

Last but not the least, were some customers struggle with is documentation like Tax Returns, Pay Slips etc. It would be prudent on your part to check with your properly consultant, if you have paucity of time, as to what kind of documentation would be required to avail the loan. Even if you do not have everything in place, a good advisor can help with all of what is required for you to finance your property.

Bangalore or Trivandrum. Where do you buy your next flat?

For most IT professionals who have been working in Bangalore for over 5 years, the decision quickly crops up whether to go for an investment in Bangalore or Kerala.They have enough disposable income and most want to go for a bank loan which they can pay off in another 15 to 20 years with their earnings.

Bangalore is one of the most significant real estate markets in the country. Not only is Bangalore retaining its popularity as the favoured IT destination but is also attracting many NRIs, HNIs and investors to invest in the real estate market.The city however faces a crumbling infrastructure primarily owing to the migration of people from across India and other states. The government of Karnataka is doing its bit in Bangalore by developing the 2nd phase of the Metro as well as developing stretches of Outer Ring Road and making it a signal free corridor.

As far as Kerala is concerned. over the last decade NRIs primarily residing in Gulf countries have invested in real estate. It would however confuse a relatively new home buyer as to why propery prices in cities like Trivandrum are much higher compared to places like Bangalore. Taking an example, a prime residential apartment in Vellayambalam or Kowdiar commands a square feet rate of approximately 6000, whereas some of the hot upcoming areas in Bangalore like Sarjapur Road or Hennur Road commands in the the range of 4000 - 4500 per sq.ft.

The reason behind this is quite simple - Scarcity of land in "God's own country" along with escalating prices due to land grabbing. In addition the Kerala building rules which prohibit construction beyond a certain number of floors unless the building has appropriate road frontage and other parameters met, has meant that real estate developers have to shell out a lot more to buy the appropriate amount of space to raise a building.

The case is different with Bangalore. The new areas which have developed had previously been marsh lands or un-utilised space which is now being used for gated communities or residential apartments. The city is now spreading out towards Yelahanka (near the Devanahalli airport) and Kanakapura road (due to the metro 2nd phase coming up there).

Given the scarcity of land in Kerala and considering an influx of about 200,000 software professionals who are likely to work in the state by 2017, the property prices are only likely to increase. The increases would be much more pronounced within the city limits of Kochi and Trivandrum and the IT hubs compared to other parts. So a prudent investor looking for returns in 6 to 7 years, could look for a good deal in Trivandrum compared to a similar investment in Bangalore.  In Bangalore, growth in rates are much likely to remain steady and not go into a spiral. Expected increase in the short term should be around 10-15% per annum, given that new residential areas are springing up on a regular basis and there is still a lot of inventory being created in the city.

Having said that for a long term investment, Bangalore would still offer equally good prospects considering it could become a large metro like Mumbai or Delhi in about 15 to 20 years time. The choice ultimately resides with the buyer in terms of preference towards managing the property, place where he or she would like to get settled etc.

Wednesday 5 September 2012

Many houses lying vacant in Kerala! Who is to blame - real estate agents, builders or the government?

A recent report in the Hindu mentioned that there are a large number of unoccupied houses and flats in Kerala. Going by the report the statistics are staggering for a small state like Kerala with a limited population but a high density of population.

So why are the prices so high and why are so many houses lying idle, when the masses or the middle class can barely afford a budget apartment of their own?  One would wonder that with such low occupancy rates, the rentals or real estate prices should ideally be much lower. The empty houses are a result of speculative investments made in the last decade in Kerala plus a role played by the land grabbers or mafia as it is called. In a recent ruling,  the Kerala high court has ordered that loan defaulters should be given freedom to sell mortgaged land themselves at market prices and settle liabilities. This hopefully will avoid the mafia from lying hands on the mortgaged land at below market prices.

The builders point to the high land prices being the most critical cause behind the high costs of apartments. The implication being that budget apartments under 30 Lacs are no longer a realty in good locations in the state. Most of the real estate experts say that land prices in Kerala are predominantly controlled by the land mafia. This has lead to a steep rise in prices even in villages which has made agriculture unviable.

The total area under Paddy cultivation in Kerala has come down from 9 lac hectares in the past to just 2 Lac hectares today. That's a serious loss to the environment as paddy plays a significant role in replenishing ground water levels.

Kerala is the only state that has witnessed area under paddy farming falling continuously. Interestingly, this is happening at a time when paddy prices overall across the country is increasing. The economics and statistics department, government of Kerala, reveals that the area under paddy cultivation declined more than 74% in 32 years. Rice remains the staple food of Kerala and the annual consumption is estimated at 40 lakh tonne with more than 85% of the requirement coming from the neighboring states. Although cost of production is the main reason why many are giving up paddy cultivation, farmers are giving up paddy fields for non agricultural uses too.

Recommendation:

Budget Housing must be a priority - For the majority of the state populace, an affordable home remains a dream. The government should take proactive steps and bring in zoning norms like in other countries, which makes affordable housing a reality. Typically a house under 25 lakhs would be very affordable for a bulk of the population. Care must be taken while land allocations are done so that a certain percentage of government or cultivable land, converted into real estate or private land, is given to the budget housing sector.

Bring in Food Security and Self Sustainability - A huge overdependence on other states and reduction in agricultural land, does not augur well for the state in long run with regards to the environment and food stability. Kerala has had a dream run with funds from NRIs continuing to pour in to the state in the last two decades. However no one knows what is in store 30 years from now. To become sustainable and self sufficient in the long run, agriculture and food security are a must with industrial growth in the state. Hence farmers must be educated and given additional incentives so that their farm lands are not taken away and sold at exorbitant prices by land mafias, but instead are converted into thriving agricultural lands with high yields. Yields for agriculture in India are 3X to 4X lower compared to developed countries and their is huge scope for improvement with latest methods of farming. The real killer for Kerala would be if the masses have to shell out beyond their means to spend on food and housing, the two basic requirements of mankind.

Improve the Infrastructure and building rules - Current building rules in the state prohibit taller buildings unless access road and space requirements are met. In zones where a large section of the population stays, these rules must be revisited by the town planning committee. Vested interests of a few should not be kept in mind while making such rules. There is also a need to improve the road connectivity to villages and towns so that operating in a hub and spoke model, people can reside in towns and still work in the cities. This would bring down the burden on city land in Trivandrum, Trissur, Kochi and Kozhikode to a large extent.

Regulations on real estate agents and educating them - Real estate brokerage or agencies continue to be a lucrative field for people from all sections of society in the state. A real estate brokerage should ideally help in a transparent transaction while earning the confidence and trust of the buyer and a seller. Real estate brokerages in other countries is a very regulated and professional field. However same is the not the case with India. A person educated or uneducated could easily step in to this field overnight in the lure of money. The danger lurks when they try to make a quick buck as a middle man and trap the buyer into over paying for the property or the seller into under selling on the price.

If the negative trend of playing middlemen without ensuring transparency, goes unabated, it leads to land scams. The price of a property transaction has serious influence on near by properties. This harms customers and leads to a bubble in the overall market. The government should come out with better regulations and measures to educate brokerages so that the overall interests of the state and its people are kept in mind. It should also have standard reports which publish the ongoing rates of real estate transactions in a given area every quarter so that normal customers are not taken for a ride.

As is evident from this article, a slew of measures are required to contain the weed of exorbinant and unrealistic prices of land and housing in Kerala. A time will come soon, where there might be excess inventory and few takers for it. A much better thing would be for the state and its machinery to take control with proactive measures to ensure the common man has a house and a dream fulfilled!


Tuesday 4 September 2012

The Kerala Real Estate Market Report - January to June 2012


We are happy to share with our readers the first edition of the Kerala Real Estate Market report from Jan - June 2012 by Nandanam Consultants. The report provides an overview of key developments, information, news and research on the Kerala Real Estate Market especially covering larger cities like Trivandrum and Kochi. The Kerala Real Estate Market Report is a compilation of our most read articles on real estate as well as tips and recommendations for investors and home buyers.

You can download the report and read it here.

For further details, advise on buying or selling property and information on hot property deals in Kerala, contact us at nandanamconsultants@gmail.com or visit us at www.nandanamconsultants.in

Monday 3 September 2012

Kochi property prices seem to have stabilized after sharp fall

Property prices in Kochi finally seem to have stabilized over the last quarter after a steep fall over the last 3 quarters of over 30%.

A close look at the RESIDEX index published by the National Housing Bank shows that property rates in Kochi, across multiple parts of the city have more or less stabilized. We had reported earlier about the fears of a bubble in the Kochi real estate market given the sharp drop in prices. If statistics are to believed the demons have left Kochi and all parts in the city except Vytilla has seen property rates stabilize.

This is good news for investors and real estate owners since it shows that speculative investments are not happening at a frantic pace as was the case earlier. The demand is stable and growth should kick in once demand supply mismatch is corrected in the next few quarters. It would be interesting to wait and watch for the next quarterly RESIDEX index which would be published in a month or so to see if Onam festivities has helped increase demand for property and thereby lead to appreciation in rates.


Gold or real estate in Kerala. Which is a better investment?

Gold has traditionally been a safe haven for investors over the past many years. Malayalees flock to buy gold for most festive occassions, marriages and religious functions. Gold buying in Kerala has had a meteoric rise over many years and so has the gold prices touching 3000 rs. per gram this quarter.



So do you invest in Gold or real estate if you have surplus funds in your hand.

If you look at all the asset classes for an investor over the last few years, you can easily make out that in India, equities have barely given returns of 5%. The appreciation in stock markets witnessed in 2003 - 2007 was quickly wiped off in 2009 and since then equities have had a tough time. The prospects also don't look bright for equities until end of 2013. Stock trading has become a game of choosing the right stocks or on the contrary a fall in earnings. This has lead many stock traders to instead invest in Gold coins, ETFs and for retail consumers to buy gold from the market. Gold ETFs as per market stats has given standard returns of about 25% over the last 3 years which makes them an attractive proposition.

Let's take a look at real estate. If you consider property appreciation in Kochi or Trivandrum from 2009-2012, there was a steep rise as is evident from the RESIDEX india from 2010 to 2011 end. However prices have stabilised over the short term in 2011-2012 and investors who clinched deals in 2009-2010 really got good appreciations of over 30% in their real estate investments. But markets like Kochi are likely to offer stable growth of 10-12% over the short term and Trivandrum is likely to offer 18-20% in the short term considering the huge influx of IT companies and working professionals into Trivandrum.

Recommendation:

If you don't have liquidity right now to invest in Real Estate, build a corpus with the right investments maturing in 2 to 3 years

Build up a good amount of funds via Gold ETFs, NCDs (Non convertible Debentures) and FMP (Fixed maturity plans) over the next 2- 3 years which offer annual returns of 15-20% per annum. This will enable you to just have enough to buy a good property after this time. For it is likely, that real estate prices might again shoot up after a few years, once the surplus inventory lying in Kochi is sold out and real demand kicks in Kerala due to the influx of software professionals. To give an example with 20% return annually and an investment of about Rs.30,000 per month in the right asset class you would have a corpus of approximately 13 Lacs in a span of 3 Years. This might just be enough to help you make a down payment for a bank loan for an investment in land or an apartment. Over the long run, real estate is likely to surpass gold in terms of real returns.

If you have enough liquidity, scout for the good deals in the market. Go for a trusted advisor or consultant.

An astute investor having sufficient amount of funds should keep a close watch for good deals in the prevailing real estate market and make profits when the market growth kicks in 3 years time. A good time to exit would be 6 to 7 years after the property investment (about 2018), if your need so dictates. Going with a good property consultant should help you sail through and pick the not so evident good deals in the market.