Normally the property consultants offer reports on everything and anything that happens in the real estate sector. In most cases their studies seldom differ. However their reports about office space demand trends in January 2013 are not supportive each other. On the other end, these reports seem contrasting each other.

The report of CBRE, C&W, DTZ and JLL are offering varying and contrasting facts. This contrast has created a number of issues for those who analyze the market so closely. The market watchers do not find it easier to reach out a conclusion from these contrasting reports.

Let us begin with the report of CB Richard Ellis. The American property consultant reported that the office space absorption has risen by 37%. It added that the absorption, compared to January 2012, is more this year.

Cushman & Wakefield came with another report. As per their report the office space absorption is done by 37%. This report is upside down of what was stated by CBRE.

The confusion stops nowhere here. But it is only the beginning point.

DTZ India was the next to present its report. It reported that the office space demand is up this year. However in their opinion the rise is only by 20%.

It means that this report too does not comply with the CBRE report. At the same time it does not contradict the report of the former.

Meanwhile Jones Lang Lasalle presented still interesting report. As per the JLL report the demand for office space is static and modest. The report states that the demand is neither growing nor falling but static and steady in comparison to the absorption rates in January 2012.

To summarize, there is no conformity among the property consultants with regard to  the office space absorption trends. While two of the property consultants report to have an increase in the office space demand, one reports a downfall. Still another report states that the office space demand is static and stable.

Om Ahuja, CEO-residential services, Jones Lang LaSalle (JLL) India, said, “In cities like Surat, the growth is directly related to increased income of people. High income has also spawned more nuclear families.”

Chairman CREDAI, Surat, Tarun Rawal said, “On-going development of mass transport infrastructure and planned town planning schemes in the city has given confidence to people to go to faraway places to live. Hence, small sector projects – 1,500 sq ft houses – have gained a foothold in the city.”

Surat was the only city where people used to buy and sell properties without documents, but now awareness is growing. “Now small units have started to come up in huge numbers,” said Harshil Daliwala of SNS Builders.

The city is estimated to be spread over in an area of 326 sq km. It could further expand by another 200 sq km. “There is a plan to convert Surat-Navsari into twin cities which will together have a population of 1.15 crore people,” Surat Municipal Corporation’s director of planning Jivan Patel said.

Add to that the confusion created by the new DCR (development control rules). Many builders now have to make fresh plans to accommodate the proposed changes about FSI; and the worst affected are those whose projects are already underway. Many of the launches have been put on hold, and construction has been stalled in many places. And for people who have already invested in these projects, the longer the deadlock lasts, the more they have to pay.

Buy or not to buy? Despite a profusion of analyses and research reports on housing prices and their future direction, home buyers remain as confused as ever. So it is little wonder that 37 lakh of flats remain vacant in Maharashtra, of which 4.79 lakh are in Mumbai. The Census Directorate data says that even Thane district has more than 5 lakh vacant flats.

“Why doesn’t the government or RBI (Reserve Bank of India) understand that the more they squeeze liquidity by raising interest rates, it raises returns on black investments even higher. If our country can bring down black element out of property, rents will fall, property prices will fall,” said a commentator.

The home-buyer, however, is at a loss. The Budget came as a flop, and a recent Crisil report says that prices of steel and cement will go up, which will probably be passed down to the end-user. And then, there is the proposal to hike on leave-license, which is going to make rentals expensive. There are some who expect matters to improve.

Pankaj Kapoor, MD, Liases Foras also had echoed similar thoughts. “The high prices are not fault of only the builders. The hike in stamp duty was uncalled for and it is too revenue-centric and indicates a short term vision.” Read Maharashtra Stamp duty hike: “Neither can you afford to own a home, nor take it on rent”

However, as most experts say, one can buy a home any time. “You never know what will happen next. And honestly, there is little evidence to suggest that customers have waited for better home loan or price options when they have to buy a home—because it is a necessity. So if you want to own a home, there is no bad time,” said an analyst.

The Sahara Group is engaged in discussions with Parsvnath to buy its commercial land near Connaught Place in New Delhi, according to sources. ICICI Bank is also among the contenders for the piece of land, it is learnt.

The 1.18-acre plot at Kasturba Gandhi Marg was bought by Parsvnath in 2008 for about Rs 200 crore, with the aim of constructing a retail-cum-office complex. But the realtor is now looking to sell it to cut mounting debt, currently at Rs 1,300 crore.

Although the Parsvnath management is looking for a price of Rs 700 crore, the interested parties are ready to sign a deal at Rs 600 crore, sources said. Property consultant Jones Lang LaSalle is advising Parsvnath on the deal.

Pradeep Jain, chairman, Parsvnath Developers, did not respond to repeated calls and e-mails. Mails to Sahara spokespersons did not elicit any response.

An ICICI Bank spokesperson said, “ICICI Bank has no plans to acquire this property.”

According to sources, ICICI is exploring the possibility of constructing a corporate house in the locality in partnership with Parsvnath, without acquiring the land.

Earlier, as part of its fundraising exercise, the company had entered into various deals with private equity funds.

In January 2011, Parsvnath signed an agreement with SUN-Apollo India Real Estate Fund LLC for an investment of Rs 100 crore in its premium residential project at Ghaziabad—Parsvnath Exotica. SUN-Apollo had acquired 49.9 per cent stake in the project SPV.

Then, the company sold a minority stake in Delhi-based residential project Parsvnath La Tropicana to JP Morgan for about Rs 150 crore. Through the deal, the previous investor, Red Fort Capital, made an exit. The company had plans to construct an office complex at Connaught Place along with the PE firm.

According to realty experts, demand for land at prime localities has risen as corporate houses look to move their headquarters to such locations.

Anuj Nangpal, director-investment advisory, DTZ India, a real estate consultancy, said, “Organisations are increasingly signaling their arrival or resurgence by moving their presence into the centre of metros. The branding benefit of such ownership of prime real estate far outweighs the costs. Further, employees are also increasingly assessing their jobs and future basis of their office infrastructure and the pride in occupying prime real estate clearly impacts long-term retention.”

In a recent report, property broking and real estate consulting firm Jones Lang LaSalle said the Indian property market is poised to attract about US$3 billion, almost double last year’s US$1.6 billion, from overseas buyers this year.

Of this, one-third would be from home buyers and the balance from investors. This is despite the fact that property prices in India are at an all-time high.

According to a recent National Housing Bank (NHB) survey, property prices in big Indian cities have increased by as much as 43 per cent to 166 per cent in the last four years.

NHB, wholly owned by the Reserve Bank of India, lends to home-mortgage companies. It also regulates and refinances social housing programmes. In its report, the bank said Chennai had seen the highest rise in prices at 166 per cent. Bhopal was second with a hike of 117 per cent and Mumbai was ranked third with an increase of 87 per cent.

What then brings overseas investment to Indian property, when prices are skyrocketing? The answer is simple: Despite the global turmoil because of the financial crisis, the Indian economy has remained robust, largely due to domestic-driven demand.

According to Jones Lang LaSalle, India’s strong economic growth, rapid urbanisation, growing middle-class population, demographic advantage and increased thrust on infrastructure has worked in its favour. Buying property is especially popular among Indians living abroad, who all seem to want a piece of the homeland. That is why Indian property shows are burgeoning around the globe.

Dubai-based Sumansa Exhibitions has been holding Indian property shows across five countries. And every year the number of developers taking part in the shows and the attendees has grown rapidly.

Sumansa Exhibitions’ chief executive officer Sunil Jaiswal says: “We have held shows in the UK, South Africa, Hong Kong, Dubai and Singapore. They have been very well received by both exhibitors and visitors alike.”

This year Sumansa will hold the Indian Property Show in Singapore on April 14 and 15. It will be held at the Suntec Exhibition Centre’s hall 401 and nearly 40 developers from across India will be part of the show.

More than 200 properties will be showcased during the two-day exhibition. Sumansa expects the number of footfalls at the event to be much larger than the 4,000 that turned up at its last year’s event.

Photo by markehrWipro is the third largest exporter of the country of information and technology whereas with global revenue of $2.5 billion in the last year, Jones Lang LaSalle serves clients in over 60 countries from750 locations across the world, including 180 corporate offices. The firm is a forerunner in property and corporate facility management services, with a portfolio of approximately 1.4 billion sq ft worldwide.

The statement issued by JLLM contained “Riding high on its recent successes with Indian corporates such as Max India Group and Lavasa (of HCC group), Jones Lang LaSalle’s Integrated Facilities Management India team has won a facilities management contract with another Indian corporate giant – Wipro Technologies”.

“There is a vastly increasing demand for professional integrated facilities management services in India,” said Yash Kapila JLLM’s Integrated Facilities Management MD.

The coming together of two big corporations is a good sign for the industry.

On the interest rate front, market signals are positive. Most public sector banks have cut their benchmark prime lending rates by 0.75% to 12.5% effective January 1, 2009. The country’s largest mortgage finance company HDFC has also cut its lending rates by 0.5%. Even lending rate for loans below Rs 20 lakh for both from state-owned banks and HDFC are cheaper. However, there is still an uncertainty over the real estate prices. Builders are doling out freebies such as free registration, stamp duty waiver, free parking area or even a flat in another locality. But the rack rates have not come down.

“If there is indeed a genuine need for a home and the current market changes have resulted in the required affordability, one should go ahead and buy now. If the interest is more investment oriented, waiting till March 2009 might bring some better deals — however, this is a risk, since many add-on offers may no longer exist by then.” says Anuj Puri, chairman & country head, Jones Lang Lasalle Meghraj. A couple of years ago buyers were scrambling to buy a house as prices rose every month. Now, the tide has turned. Buyers are waiting in the sidelines expecting the real estate prices to fall. “Prices will fall further in historically over-priced pockets until demand picks up. The rationalization process should reach a peak towards mid-2009.” Mr Puri says.

So either the same house will be cheaper tomorrow or you can step up your budget so as to afford a bigger house. For those buying a house on borrowed money, it would be difficult to reconcile to a fall in real estate prices.

“For example, if the property value drops to Rs 75,00,000 from Rs 1 crore (at the time of purchase) then you have to pay a difference in the home equity to the bank. Otherwise the bank has a right to take the possession of your house,” says Swapnil Pawar a financial advisor and director Park Financial Advisors.

At the same time, lenders are now demanding that home buyers come up with a higher margin if they want a loan. “Property prices have been overpriced in the recent times. So there is scope for significant correction. Similarly, even the pay cuts and the prevailing uncertainty over jobs and pay hikes have necessitated extreme prudence in the lending business,” says a private sector banker.

Taking a speculative wait-and-watch stance should be a game of experts, who are also willing to risk a loss if they time their move wrongly. Genuine buyers should buy as soon as prices are affordable. After a particular phase in a career, the growth in income stabilizes at 10-15%. That’s the best time to gauge the borrower’s affordability to buy a house. At times, couples often miscalculate their affordability.

Countries are grouped into bands such as Highly Transparent (Tier 1) and Opaque (Tier 5). India has moved up from Tier 4 (Low Transparent) to Semi-Transparent (Tier 3). The number of listed vehicles under real estate has increased in an improving regulatory and legal framework, although India continues to score poorly on market fundamentals and performance measurement.

Deloitte Haskins Sells partner Jayesh Kariya said, “Those with a strong financial background would still be able to hold on to the inventory but the ones with leveraged positions will give in to the pressure. The picture would be much clearer by the end of the current year. This period beginning from late December ’08 to March ’09 could provide a good buying opportunity for homebuyers”.

Developers are admitting that there aren’t too many transactions taking place. The festival season between Dusshera and Diwali has traditionally been the time when most families choose to move into their new homes. “Though enquiry levels are increasing, it is not translating to actual deals. Consumers are still hesitant,” said a Mumbai-based developer.

Hugo Boss luxury watches, which is being retailed by Titan Industries Ltd through about 15 to 20 of 250 World of Titan showrooms, will also be retailed through upcoming luxury retail malls, apart from premium departmental stores and premium malls in India, Harish Bhatt, chief operating officer, Titan Industries said. According to him, “We are open to selling luxury Hugo Boss luxury watches in luxury malls and premium departmental stores which provide an environment for accessible luxury watches. Besides this, luxury malls also provide scope for higher brand visibility.”

Luxury and premium goods distributor Brand Marketing India Private Ltd (BMI), promoted by the Mumbai-based Murjani Group has moved out of its four offices in Nariman Point (including one office at The Trident, Mumbai) and shifted to Metro theatre building in February this year. In Metro theater building, Murjani Group has set up its new 7,000 square feet office. This is to have ample quality real estate space in Mumbai for its office, Shehzad Karachiwala from Murjani Group said.

BMI has exclusive licensing rights to top global brands including Gucci, Jimmy Choo, French Connection, Calvin Klein, La Perla and Bottega Veneta. BMI brands are already sold in Mumbai’s Shoppers Stop, The Trident and Vama and will be part of Delhi’s luxury mall DLF Emporio as well as UB City in Bangalore. While luxury retailers Crossroads, Oberoi and the MBD Group are all hoping to launch luxury malls soon, new luxury brands entrants such as Armani and Miss Sixty too are vying for quality space in luxury malls.

According to Shubhranshu Pani, managing director – retail, Jones Lang LaSalle Meghraj, “Luxury brands look for quality retail-centric real estate spaces. 5-star hotels do provide quality spaces, but such hotels obviously have their own agenda and the environment is based more on hospitality than retail. Moreover, 5-star hotel spaces are limited and do not offer much scope for expansion, or the introduction of a healthy brand mix. Currently, luxury brands still find value in occupying space in 5-star hotels and are retaining these. However, thanks to the advent of luxury malls such as UB City and DLF Emporio, they now have alternatives and are beginning to benefit from the re-loaded, focused retail experience.”

Mr. Anuj Puri, chairman and country head, Jones Lang Lasalle Meghraj said, “Building bylaws and regulations differ from state to state and even city to city. However, it invariably turns out that property buyers are required to pay for construction that falls in FSI-free areas—areas of congregation, passage, and common conveniences. In a typical project, these areas do not tend to constitute more than 15-20% of the overall FSI. Nevertheless, all that a buyer would really wish to pay for is the exact amount of space available for personal use in the property, in other words, the carpet area”. Mr. Puri said that you can’t have a house without walls so the buyer ends up paying for the space occupies by the walls as well occupy, by this criterion, the buyer will have to pay for built-up area. Puri contends, “This is, of course, unavoidable.”
Also, if one takes an example of any of the projects in the country, he will find by a simple calculation that he is being charged extra. Let us say the developer is charging two thousand five hundred rupees per square feet as a basic rate. The buyer is interested in buying an apartment of 1,250 square feet. So the value of the apartment stands to be Rs 31.25 lakh. But this does not include the parking charges and maintenance charges. The price calculated does not include the preferential location charges either.