Real Estate marketing trends for 2019
In the past decade, the real estate industry in India has witnessed dramatic changes in terms of customer engagement approach and marketing strategies. New regulatory policies like RERA are closely governing the real estate industry and boosting transparency & building confidence amongst the home buyers. Therefore, the industry is treating impactful marketing as an opportunity to venture into uncharted territories for marketing and tapping potential customers. Developers, channel partners, and consultants have to, therefore, be on their toes to devise innovative marketing strategies to tap the new-age buyer. Mere traditional mediums like billboards, newspaper ads and TVCs are no longer sufficient. Real estate players are now changing the rules of marketing and creating strategies to cater to the evolving consumer base of India. The upcoming year of 2019 is poised to see some fresh trends in marketing which are going to be aimed at addressing the new levels of consumer expectations and will need a customized and targeted approach.
DIGITAL INDIA: In the earlier times, most real estate players would have a media split of 80% offline media split of 80% offline media i.e. print, hoardings, SMs, BTL, events, exhibitions and 20% online media. However, in the times ahead, digital will become predominant and this ratio is much likely to reverse. Making people aware about the brand, starting off with a website and social media pages to keep the audience engaged and updated about the new and existing offers by the developer are becoming more prevalent today. MOBILE MATTERS: In the highly competitive era of technology and strategy, media platforms used by the business will get highly streamlined. Today the digital world is changing its directions and ways of making revenue. In the evolving times, mobile platforms will play a very crucial role. Mobile marketing can be an excellent tool to amplify brand awareness and secure insights of the consumer base. Adoption of this technology and innovative communication models can help monetize opportunities that will be emerging across the industry.
Source: Mid-Day, Friday 1 March 2019
Want to buy a house? Start small
Owning a house is on the wishlist of most people. This wish, however, can lead to trouble, if people stretch their finances to fulfill it. But postponing the purchase till one accumulates the necessary funds can also be a costly proposition—besides being frustrating. So, what does one do? Well, there’s a third option: affordable housing. A starter home—affordable, smaller—may not offer all that you had fancied in a house, but purchasing it can be a financially sound move. It works out to be rewarding compared to living on rent or splurging on a dream house by taking a large home loan. What makes the proposition even better is that the government has incentivized purchasing affordable homes for first-time buyers. Not only can homebuyers avail of interest subsidy on housing loans, but the tax on under-construction houses has also been substantially reduced. With these concessions in place, even the mid-range housing segment has become quite attractive.
Know the cost, temper aspirations: In their willingness to buy a house, people often overlook ancillary costs, even though these are quite substantial. “The overall cost of a house is not just the amount that you pay to the developer,” points out Rohan Sharma, Research Head, Cushman & Wakefield India. While one-time additional costs in the form of stamp duty and registration fee can add 5-6% to the acquisition cost, numerous recurring costs can put an additional burden on a homebuyer’s already stretched finances. Housing projects also usually ask you to shell out a tidy sum towards monthly maintenance charges. There’s also the added expense of property tax and home insurance premiums. Once you have invested in a house, you will also need to furnish it, which, again, can be a huge expense.
GST rate cut, strong regulations have made realty a buyer’s market
The government has made buying homes easier by slashing the Goods and Services Tax (GST) tax on under-construction properties. Rates have been cut from 8% to 1% for affordable homes and from 12% to 5% for regular units. Moreover, the size of what constitutes an affordable home has been too been revised. A 60 sq. mt unit in a metro and 90 sq. mt home in a non metro, valued at up to Rs. 45 lakh, will now fall under affordable housing. The government, however, has also eliminated input tax credit (ITC) benefit to builders, which the builders were required to pass on to buyers. Elimination of ITC could impact the base prices of properties. “In the affordable segment, sellers may marginally increase the product prices to partially compensate for their loss due to loss of input tax credit,” says Shveta Jain, Managing Director, Residential Services, Savills India. Prices could rise in the mid-range and luxury projects. However, competition may force some developers to keep a lid on prices, even at the cost of reduced margins. “To ensure that standing stock and under construction units get sold, builders may be forced to maintain their current prices,” says Girish Shah, Executive Director, Knight Frank.
LIC co offers hsg loans repayable till 75 yrs of age
In a bid to increase its share in the home loan market, LIC Housing Finance is offering loans repayable up to the age of 75. The move comes following a tie-up between the housing finance company and India Mortgage Guarantee Corporation which provides insurance against defaults. LICHFL informed that the partnership will help it provide long-term loans to non-salaried borrowers. For a small premium, IMGC will guarantee repayment of 20% of the outstanding loan. The one-time premium—between 0.9% and 1.5% of the loan—will be borne by the borrower and adjusted in the EMI.
According to Sah, LICHFL will be able to increase market penetration as it will be able to accommodate more borrowers and ease restrictions on profile of applicants, who face rejection related to work profile, workplace and credit history, among other reasons that may be unspecified by lending institutions. IMGC CEO Mahesh Misra said, “The housing finance industry is currently going through interesting times and large, stable lenders like LICHFL are ideally poised to leverage this opportunity. We are confident of scaling up this partnership significantly in a short time span.” Sah said LICHFL was looking at portfolio acquisition too.
Premium to make collector’s land freehold for housing drops to 15%
The Maharashtra cabinet has decided that the premium charged to convert collector’s land given for housing purposes to freehold land will be 15% of the Ready Reckoner rate, as against 50% proposed earlier. For conversion of leasehold land given for residential use, the premium will be 25% of the RR rate as against the 37% and 50% planned initially, taking into consideration the lease period. A senior bureaucrat said the premium for converting land given for commercial and industrial purposes would be 50%.
The bureaucrat said that while the revenue department had in its proposal in November last year prepared rates across five categories, these have now been brought down to three in an attempt to simplify the procedure. Mumbai has 3,000 housing societies on collector’s land, with most of the foreshore land being given as leasehold. “Of 1,800 leasehold plots in Mumbai, 1,300 are in the island city, while the other 500 are in the suburbs,” the bureaucrat said. The state, where land is regulated under the Maharashtra Land Revenue Code, has 22,000 housing societies in all on collector’s land.
Mumbai world’s 12th most wealthy city has the most ultra-millionaires in India: Report
Even as the distribution of wealth in India continues to be asymmetric, it seems the population of the rich is rapidly on the rise and swelling faster than in any other country. According to the latest issue of The Wealth Report by Knight Frank, launched globally on Wednesday, Mumbai ranked as the world’s 12th most wealthy city, bettering its No. 18 spot in 2017, while London secured top position despite Brexit concerns, reclaiming it from New York. India is also the leading country with 116% growth in its billionaire population and leads the growth of ultra high net worth individuals (UHNWI) globally. The number of billionaires in India has grown from 55 in 2013 to 119 in 2018, while the number of millionaires has gone up from 251,000 in 2013 to 326,052 in 2018. The number of billionaires from Asia is projected to rise by 27%, surpassing North America and Europe in four years.
While UHNWIs or ultra millionaires are defined as individuals with Rs225 crore worth of investible surplus, billionaires are individuals with Rs7,200 crore worth of investible surplus, and millionaires are those with an Rs7.2 crore worth investible surplus. If the number of UHNWIs in India is estimated at 1,947 at present, Mumbai houses 797 of them, Delhi 211 and Bengaluru 98, while out of the billionaire population of 119, Bengaluru is home to 33, Mumbai to 19, Delhi to 8 and the rest are scattered across the country and abroad. Cities in India are often overshadowed by Mumbai’s success, but Bengaluru, often dubbed as India’s answer to Silicon Valley, is expected to disrupt the narrative. Bengaluru tops the list of five urban centers across the world that are likely targets for future property investment, followed by Hangzhou, Stockholm, Cambridge, and Boston. While Mumbai still houses most of India’s millionaires and ultra millionaires, Bengaluru is where the concentration of India’s richest is to be found, with 33 billionaires who have made it their home.
Financial Engineering: Need of the hour for Developers
Over the last few decades, India has undergone rapid industrialization, most of which thrive in and around the metropolitan cities. The key driver of this rapid growth has been the steady increase in per capita income boosting urbanization. Another positive aspect has been a supportive economic scenario which has created an environment conducive for more MNCs to set up operations. Various initiatives like Skill India, Make in India, Start-up India, etc in recent times have significantly driven economic development. All of this, in order to be successful, has required ‘financial engineering’ as an underlying enabling factor.
De-coding Financial Engineering: So, what is Financial Engineering? In the real estate sector, it entails how to improve capital input, effective multi-site management, build-to-suit development, and effective construction management from start to end. The aim of effective financial engineering is to ensure efficiency and maximizing cost savings to deliver facilities that meet the requirements of the consumer and support business goals at the same time. Unlike the other developed countries of the world, real estate in India considers consumer as ‘The King’ and hence it’s crucial for the consumer base to understand the potential of their investment decisions. In order to do so, use of drones, a creation of Smart homes with the help of Artificial Intelligence and enhanced security measures with CCTV cameras and biometric machines have been of significance and will continue to play a big role.
Source: Mid-Day, Friday 8 March 2019
Self-redevpt of buildings gets Govt concessions
The cabinet approved self-redevelopment for societies on government, leased and private lands. It also decided to set up a one-window clearance system so that all permissions are given within six months. Under the Ease of Doing Business rules of the BMC, all permissions are to be granted within 60 days. The government has further said it will provide concessions in premium to be paid to the BMC for additional floor space index and transfer of development rights, besides concessions in premium for conversion from urban land ceiling to non-ULC, GST, stamp duty, a premium for open space deficiency, etc. Architect and activist Chandrashekhar Prabhu, who initiated the self-redevelopment proposal, said he is happy that the cabinet approved the policy. “It will liberate Mumbaikars from the tyranny unleashed by a section of builders,” he said. “I have worked for years to make this happen. The details are not yet known, but if the government has accepted my suggestions, it will be a game-changer for Mumbaikars. An original member of a society may not pay a premium for additional areas in their flat. Interest rates may be slashed, approval processes streamlined, GST benefits passed on to members. It may also mean more floor space, better quality and timely construction, and much more corpus for maintenance,” Prabhu said, explaining some of his suggestions to the government.
Last December, the 220-member Sachin Cooperative Housing Society in Mulund, spread over five acres, decided to go in for self-redevelopment. The society appointed Knight Frank as a consultant for the project, estimated at Rs 700 crore. Some of the benefits of self-redevelopment, according to Prabhu, are that residents can expect extra carpet area of up to 60% in private societies and 300% in Mhada colonies. Most builders offer around 10-25%. On larger plots, there is no need for shifting to alternative accommodation. Hence, no insecurity about proposal completion or financial loss and there is guaranteed safety as members are not rendered homeless in case of non-completion Also, the term ‘corpus’, associated with the builder’s favor to the society, is replaced by ‘surplus’, which comes from sale of saleable flats and is distributed among members. Since amenities will be decided by members, they are bound to be better.
Buying a house on a subvention scheme? Tread with caution
With prospects of under-construction properties looking up following the cut in Goods and Services Tax (GST), interest subvention schemes offered by builders through tie-ups with banks are likely to come into focus. Along with discounts and freebies, such schemes could be promoted heavily to attract customers in what is seen as a buyer’s market at the moment.
How it works: Paying a small amount 5-20% upfront to book an apartment and deferring EMIs till possession will attract prospective home buyers who want to avoid the EMI burden till they move into the house. “The target group is home-seekers who are currently living on rent and wish to avoid interest payment in addition to rent,” says Shaji Varghese, ED, and Head, PNB Housing Finance. Such home buyers would find it difficult to afford both rent and interest servicing on the disbursed amount or pre-EMIs, before completion, making subvention schemes useful. The developers pay the pre-EMIs on behalf of the borrowers until a period specified in the contract or date of possession. “Loan disbursement is linked to the stage of construction, minimizing the risks for banks and borrowers. The developer undertakes to service the interest component of the loan until a specified period. This is an incentive offered to buyers instead of giving an upfront discount on the going rate,” says D.S. Tripathi, MD, and CEO, Aadhaar Housing Finance. Prior to 2013, when the RBI clamped down on such schemes, the disbursement was made at one go. This put both banks and borrowers at risk in case of delay or default by the developers. At present, it’s the bigger developers who are offering such schemes through tie-ups with banks and housing finance companies (HFCs).
Read the fine print: The involvement of banks may be reassuring for you, but ultimately, the onus is on you to repay the loan. Therefore, do the due diligence about the builder’s reputation and project credentials. Go through the project details on your state’s Real Estate Regulatory Authority portal to know the developer’s track record on delivery. While the developer may be picking up the tab for interest payment during the period of construction, you are not getting a free lunch either. “The same project will likely have two price points—one with subvention and another for a regular purchase. Prices could be 7-8% higher in the case of the former. There are other conditions you need to watch out for. “Some buyers could be under the impression that the builder will take care of interest servicing until possession. This may not necessarily be the case. Check whether the developer’s obligation extends till possession or only for a specified period,” cautions Varghese. In the case of the latter, the period could be around 2-3 years, after which, you will have to take on the burden even if the possession is not complete.
Budget housing on a rise, avg flat shrinks 27% in 2018
Apartment sizes in India have shrunk over the past few years. The top seven Indian cities collectively saw average apartment sizes reduce by nearly 17% between 2014 and 2018, says a report by Anarock Property Consultants. Mumbai Metropolitan Region topped the list with a 27% average decrease in apartment sizes—from 960 sq ft in 2014 to 700 sq ft in 2018. According to the report, a major factor contributing to the shrinking sizes is the rising demand for budget-friendly housing. With property prices going overboard, developers have been reducing sizes to align their offerings more with the actual homebuyer demand.
“Millennial homebuyers have already made it clear that they prefer affordability coupled with good location over larger-sized homes in the far-flung suburbs. Simultaneously, developers are intent on making their housing projects more pocket-friendly for a higher customer base,” said Anuj Puri, chairman of Anarock. He added that another reason for shrinking flat sizes is that most millennial homebuyers are averse to investing in higher maintenance costs and extra efforts that larger properties entail. “But this is not their only reason—they prefer to own smaller homes,” said Puri. Frequent ‘switching’ of cities is rapidly becoming the new normal for millennials on the lookout for faster career growth. Compact housing is also the fastest seller on the resale market, so such homes give millennials both locational and financial flexibility while simultaneously allowing them the security and investment advantages of homeownership
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