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Indian Realty Faces Flat Sales, Stagnant Prices Next Year: Moody's

NEW DELHI:  India's largest realty firms will continue to experience a challenging operating environment over the next year characterised by weak cash flows, flat sales and stagnant prices, Moody's Investors Service said in a report on Tuesday.

"India's largest property developers will continue to face a challenging operating environment over the next 12 months -- including weak cash flows, flat sales and stagnant prices," the US firm said.


"Cuts in interest rates by the Reserve Bank of India, if passed on by the banks, will filter down to the property market, reducing the cost of borrowing for developers as well as buyers, and supporting demand," said Moody's vice president Vikas Halan, releasing the report on the property market titled "Cash flows to remain weak amid flat sales and high costs".

"But high home prices and declines in savings rates will outweigh these factors, particularly in Mumbai and Delhi, while more generally, the property market in India exhibits a notable degree of variation in terms of affordability," he added.

Timely execution of projects by developers have been stalled by delayed approvals and stretched liquidity in the past two or three years, which will continue to slow down cash collection, the report said.

"Given companies' stretched cash flow positions, we expect the execution delays to persist," it said.

Delays also reduce investor demand for new projects by locking up capital and reducing expected returns, the report added.

Developers like Indiabulls Real Estate, Lodha Developers, Unitech, DLF and Oberoi Realty will face maximum sales and cash flow pressure as property prices are the highest in Mumbai and Delhi.

Moody's said a few like Brigade Enterprises, Prestige Estates and Sobha Ltd. in Bengaluru will fare better owing to more stable housing demand.

Pan-India companies like Godrej Properties and Mahindra Lifespace Developers will experience tighter liquidity compared to their Bengaluru-based counterparts. However, their presence in markets like Bengaluru and Pune will help cushion the impact.

The aggregate sales volume for Moody's sample of top eight developers declined by 24 percent to 20.41 million square feet in fiscal 2013-14. Sales improved in 2014-15, going up to 21.1 million square feet, but continued to trail earlier levels.

Owing to frequent delays, home buyers prefer projects from large and reputable builders, which coupled with the limited supply of fresh inventory, has helped support the sales of large developers.

"Still, we expect their sales to remain flat over the next 12 months with affordability remaining a challenge," Moody's said.

"At the same time, despite the difficulties, we expect solid economic growth in India in 2014-15 to provide some support to housing sales, while the likely gradual easing of lending rates will boost investor confidence and investment activity," it added.

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Realty Trends

Home prices near most-affordable levels in over 30 years: HDFC

Home prices may have been on an upward spiral for many years, but the cost of owning a house in India remains near the most affordable level in over three decades, shows data compiled by mortgage giant HDFC Ltd.

The average price of a home, purchased with a housing loan, rose to over Rs. 45 lakh in the 2012-13 fiscal year -- marking the fourth consecutive year of uptrend from about Rs. 25 lakh in the year 2008-09, HDFC has said in a presentation.

However, factors like an even greater surge in the personal income levels, tax incentives and lower interest rates, have resulted into houses becoming more affordable to purchase, it said.



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India Property Investment Gyan

Major schemes for affordable housing to be modified: Girija Vyas

NEW DELHI: Major schemes meant for providing affordable housing to urban poor will soon be modified to make them more people-friendly, the government said today and invited the private sector to contribute more actively in this area. 

Speaking to reporters here, Housing and Urban Poverty Alleviation (HUPA) ministerGirija Vyas today said her ministry is modifying all the major schemes including the Rajiv Awas Yojana (RAY), Rajiv Rinn Yojana and the, Affordable Housing in Partnership scheme and added enormous budgetary support has been earmarked during the current plan period. 

Secretary HUPA Arun Kumar Misra told reporters that a fund of Rs 35,000 crore had been allocated to the ministry for the implementation of three major schemes, including RAY, which was being run in as a pilot project earlier under 12th five- year plan. 

He said the ministry would require approval from the cabinet for the implementation of these schemes and efforts would be made that through these funds 2 million affordable houses are encouraged. 

He said that in addition to the central government funds, banks and credit institutions would be providing funds for construction of affordable houses. 

Vyas said that with urbanisation, the number of urban homeless and area under slums had grown. 

Vyas said there was a need for private developers to develop economic models to foster affordable housing for economically weaker sections and lower income group households in urban areas as government efforts in this direction needed to be supplemented. 

Vyas also said a technical group, set up by her ministry, had shown that out of 18.78 million housing shortage in the country, 96 percent shortage is in EWS and LIG category and for this huge investments and private sector participation were required. 

Misra said the group set up by the ministry has suggested incentives for the affordable housing sector included concessions to development-related charges and service taxexemptions. 

It also sought direct tax rebates for affordable housing projects and inclusion of the sector in the 'infrastructure facility' he said and added the task force had felt that governments need to still provide direct capital grant support to affordable housing projects. 

Misra said that in the symposium held today where states, experts and private sector representatives were present, there was unanimity on many of the suggestions.

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Green Property- Eco Homes

Reclaim your city space: Projects in Delhi, Mumbai and Kolkata aim to transform lives

Three projects in three cities aim to transform the lives of people who live close by. The one in Mumbai hopes to transform a congested area into a green precinct; the one in Delhi converted an open drain into a walkway, while Kolkata hopes to bring the crowds back...