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

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.

Seaplane Services in Kochi, Kerala. Now you can fly out of water!

God's own country would now also offer its tourists and country men, a sea plane facility, so that you can take right off from water!
 
The Sea Plane services are being launched in Kochi, Kerala. The state government has decided to introduce this facility in September this year as part of the Emerging Kerala Global Connect program. The government has taken measures to identify the area needed for this project. Once introduced, the service is expected to boost the water tourism of the state.

Emerging Kerala 2012 is scheduled to be held later this year in Le Meridien Kochi from September 12 to 14, 2012. Kerala, expects to close down investments by business magnets in projects such as Kochi Metro, Mono Rail, NIMZ project, High Speed Rail corridor and others through this conference.

The water transport terminal and office complex of Goshree Islands Development Authority (GIDA) is coming up at the authority's land on Goshree- Chatiath road. The GIDA has proposed to utilise the inland water resource available and would introduce modern and fast boats that provide residents a cheap, fast and safe mode of transport.

The tender proceedings of the Rs 6.33 crore project was completed by KITCO and according to GIDA officials Aluva FIT would initiate the project. The project is slated to get completed within one year, by August 2013.

Onam, Kochi Metro and Emerging Kerala expected to usher in property appreciation in Kochi real estate market

As Malayalees get set to celebrate their most awaited annual festival of Onam in the end of August, real estate developers in Kochi are the most anxious as well as exuberant. In stark contrast to the property correction which has been witnessed in Kochi over the last one year, developers believe that the gloom prevailing over the sector  will soon fade off and prices would again rise by 15 to 20% after Onam due to the triple bonanza - Onam , Emerging Kerala and the Kochi Metro launch.

In anticipation of a rise in price and demand for property near the Kochi metro stations, most developers have already bought parcels of lands in the proposed vicinity of where the stations have been announced. We had mentioned earlier why improvement in accessibility to mono rail or metro or LRT augments the real estate prices within a radius of 1-2 Kms of the station.

The end of Karkidakam masam and the onset of Chinga masam is considered an auspicious time for Malayalees. Most marriages, new business launches take place in this season and it is also an auspicious time to register a property. So Malayalees who are on the look out for property at the moment in Kochi, might be spoilt for choices by many developers. Developers also are hoping to close many new bookings in the Onam season and are preparing welcome bonanza's and discount schemes for home buyers. The key trend that is beginning to emerge however is that after the NRI driven demand, Kerala’s real estate market is now slowly turning in favour of the working class with a gradual shift towards the affordable housing segment.

Since common sense states that most users of the Kochi metro will live and breathe in the city, (than an NRI who would sit abroad), the demand for housing in areas near the metro station is expected to be real and measurable. There is a growing belief that the correction seen in the Kochi real estate market over the last many quarters, might be the prelude to a phase of stability in property prices.

In the interim some malls like Abad Nucleus at Maradu have also started selling individual shops, which is seen to be a new trend in the real estate sector. As per CREDAI Kerala, "Building rules which were amended three years ago, is the main reason behind the collapse of real estate sector in the state. Because of over supply, 40 per cent of residential properties have not been sold.In 2008, 10 new projects were announced in a month but now only one new project is announced in six months. In Thiruvananthapuram, the most happening place in real estate in the state, the property prices have doubled in 4 years."

For the sake of the investors, the developers and those aspiring to own their home in Kochi, we hope the predictions come true and the prices reign in, in Kochi and other parts of Kerala and offer stability.

Onam 2012, can then finally be one to savour and remember!

Kochi real estate market - Down but not Out. Fears of a bubble still strong.

If the statistics are to be believed, the real estate market in Kochi has seen a declining trend over the last 3 quarters starting June 2011. The drop itself is a staggering 32% over the quarters from Apr -Jun 2011 to Jan - March 2012 (data below) as per the RESIDEX index.  This also raises alarming noises amongst a section of the populace, who feel the real estate bubble in Kerala and specifically Kochi might be about to burst. The significant price correction along these lines in Kochi, can in no way be correlated with other 20 odd cities in India, some of whom have shown considerable growth over the same period for e.g. Chennai and Delhi.

NHB Residex is a housing index and first of its kind in India, provided by the National Housing Bank (which is wholly owned by RBI) on a quarterly basis. The objective of the index was to provide transparency to the real estate market in the medium to long term. The index tracks residential price movements and is currently available for 20 cities in India and is proposed to be expanded to 63 cities, covered by the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). The index currently has a lag of about one quarter in providing data about the real estate market pertaining to a city.

As per the National Housing Bank "Actual transactions prices are considered for the study in order to arrive at an Index which will reflect the market trends. Primary data on housing prices is being collected from real estate agents by commissioning the services of private consultancy/research organisations of national repute; in addition data on housing prices is also being collected from the housing finance companies and bank, which is based on housing loans contracted by these institutions." 

In compilation of NHB RESIDEX the cities have been suitably stratified by administrative zones or municipal wards according to availability of the data. The sample size of price observations consists of 500-600 observations for each city. The index is computed by using Price Relative Method (Modified Laspeyre’s Approach). Under this method price relatives are calculated only once (at the basic stratified unit) and the weighted average of these price relatives leads to the index at next level. (Source: Hindu)

 Source: NHB Residex

 So how does one interpret the NHB Residex. The index is currently fixed with the year 2007 as the base and base index value as 100. If the value in Bengaluru was 100 in the previous quarter and 92 in the current quarter it shows an overall drop of 8% in real estate prices for the quarter.

DRILLING ONE LEVEL DEEPER INTO THE KOCHI REAL ESTATE DATA
 

A further drill down into the data provided by NHB on the Kochi market by locality is given below. As per the data, Fort Kochi Vili, Karugapalli, Vennala & Mammankalam has seen the biggest drop in real estate prices in the last quarter of around 23.75% (From 80 to 61) followed by Mattancherry, Chakkamadam, Cherralai; Panayapalli & Edakochi South which has seen a 20% drop in real estate prices.

Possible reasons that could be attributed to a slump in property values in Kochi are:

1. Slackening of demand due to high interest rates and inflation

2. Property rates hitting their peak from where they have started going downwards

3. Postponement of decision to purchase property on the part of the buyers

4. Oversupply of inventory and less sales velocity (number of units sold vs. number of units created)

5. Drop in speculative investments by HNIs and NRIs prompting a correction

CONCLUSIONS

Although the NHB data provides a good indication about the state of the market, it predominantly covers transactions which involve financing institutions. Thus a complete picture cannot be drawn from this data alone. Also since NHB looks at the overall market, there is no clear indication if specific segments like luxury apartments, villas have been more affected compared to budget properties which trade in the 30 - 60 Lacs bracket. 

Our recommendation for investors looking at Kochi as a property destination, would be to "not resort to speculative buying".  Since most fundamentals in Kerala for Kochi and Trivandrum are still strong, segments which have seen drop in property rates in Kochi, could further see a drop till the demand - supply mismatch is rectified.

Some protagonists also argue that the overall Kerala market is a real estate bubble waiting to burst. The NHB residex at present does not cover other cities in Kerala for us to compare if the Kochi phenomenon is something felt across Kerala. Going by the request of many of our customers, we are going to showcase an article about the so called housing bubble in Kerala and examine whether it is truly a reality or just a figment of somebody's imagination. 

You can write to us with your comments, suggestions or requests for any specific information on Kerala or Trivandrum real estate to nandanamconsultants@gmail.com

Is property appreciation in Kerala - A myth or a reality?

We have heard of news and read articles about property appreciation in Kerala in the last decade. The forecasted appreciation for real estate is about 20 to 30% CAGR in the next ten years or so. Courtesy Skyline builders, we now have some real statistics to show in terms of property appreciation in Kerala. Skyline is a reputed builder with a good history of completing projects on time. You can read about all their project appreciations here: Skyline appreciation chart

Our key takeaways from this data:

1. You should not look at the % values of appreciation in itself because they would draw a wrong picture. % values would depend on project location, new developments in the area, demand supply mismatch in terms of real estate buying etc.

2. On an average projects which are 5 years old in Kochi have seen a price increase of 2.5X i.e a CAGR of about 20% annually. CAGR is the cumulative average of the annual growth rates.

3. On an average projects which are 10 years old in Kochi have seen a price increase of about 4X i.e. a CAGR of 14% annually. Some projects like Crystal waters show a 10X growth or a CAGR of 25% annually.

4. On an average projects which are 20 years old in Kochi have seen a price increase of 7.5 to 8X i.e a CAGR of 11% annually.

As you would see in Skyline's data the same may not apply to cities like Kozhikode or Kannur. The projection we could derive from this for investors looking to exit properties in a period of about 6 years is that they could estimate about a 20% annual growth in Kochi or Trivandrum. If you can stay invested for a decade you would get about 14% annual returns which is twice as much as you can get from government bonds or PPFs.To put this into perspective a 30 lac property will fetch you 1 crore 11 Lacs with a 14% return in 10 years and a 30 Lac property will fetch you about 90 lacs in a period of 6 years with a 20% growth rate. 

Also to keep in mind is the fact choice of property is crucial : a good choice could may make a difference in value of 2X over a period of 10 years. For more on choosing you property you can approach our experts via www.nandanamconsultants.in

Skyline Projects in Kochi

Appreciation Table

SI. No.	Name of the Project	Year	Sold Price/Sq.Ft*	Current Price/Sq.Ft*	% of Appreciation	Current Rental Value
1	Mansion	1989	375	3000	800%	5,500
2	Habitat	1990		4500		15,000
3	Springfield	1991	400	4200	1050%	12,000
4	Belair	1992	650	3800	585%	10,000
5	Green Valley	1992	1250	9000	720%	16,000
6	Marble Arch	1993	650	3200	492%	7,500
7	Queens Park	1993	615	9000	1463%	7,500
8	City Park - Oakwood	1994	950	3800	400%	11,000
9	Crystal Waters I	1994	950	9000	947%	8,500
10	Green Woods	1995	1350	10000	741%	18,000
11	Triton	1996	1100	7000	636%	25,000
12	City Park -Silver Oak	1996	950	3900	411%	11,000
13	Autumn Woods	1998	1450	12000	828%	20,000
14	Daffodils	1999	925	3000	324%	5,000
15	Green Valley	1992	1250	3700	828%	20,000
16	City Park -Pinewood	2000	950	3900	411%	11,000
17	Crystal Waters II	2000	950	9000	947%	8,500
18	Rosemount Homes	2000	1325	4200	317%	7,000
19	Ebony Woods	2002	1425	8800	618%	16,000
20	Emerald	2002	1450	4500	310%	13000
21	Tulip	2002	1050	3200	305%	6,000
22	Elysium Gardens	2002	1495	12000	803%	20,000
23	Marigold	2003	1070	3200	299%	6,000
24	Gateway	2003	1050	4000	381%	7,000
25	Solitaire	2003	1250	4550	364%	11,000
26	Florento	2004	1190	3200	269%	7,000
27	Homestead	2004	1490	6500	436%	16,000
28	Amity Park	2004	1390	4200	302%	16,000
29	Platinum	2004	1750	5000	286%	18,000
30	Orion Villas	2004	1650	12000	727%	25,000
31	Zircon	2005	1450	4000	276%	14,000
32	Opal Arch	2005	1450	3800	262%	12,500
33	Royale	2005	1890	4500	238%	20,000
34	Aster	2005	1325	3500	264%	10,000
35	Legacy	2005	1650	4200	255%	15,000
36	Melrose	2005	1450	3800	262%	10,000
37	Primrose	2005	1490	3400	228%	9,000
38	Orion I	2005	1450	4500	310%	13,000
39	Templeton	2005	1750	4200	240%	14,000
40	Topaz	2005	1675	5500	328%	20,000
41	Orion II	2005	1600	4500	281%	13,000
42	Riverscape	2006	2170	3300	152%	12,500
43	Palmshade	2006	1600	4500	281%	16,000
44	Lavender	2007	2250	3600	160%	11,000
45	Eminence	2011	3500	4250	121%	15,000
46	Imperial Garden	2011	4200	5000	119%	20,000
* Sold Price, Revised Price and Current Market Price are per sq.ft.

Skyline in Trivandrum: 

Appreciation Table

	Name of the Project	Year	Price/Sq.Ft*	Current Price/Sq.Ft*	% of Appreciation	Current Rental Value
	Domain	2007	1950	5000	256%	30000