Mindspace Business Parks REIT, with an issue size of Rs 4500 crore, made its market debut on August 7, with a premium of nearly 11 per cent against its issue price of Rs 275 per unit. This, say real estate experts, may encourage more real estate developers to enter the REITs market and improve the fund flow into the sector.

The units of Mindspace Business Parks REIT owned by K Raheja and Blackstone is the second REIT to be launched in the country.

Mindspace Business Parks REIT made its market debut on August 7 and closed with a premium of over 10 per cent against its issue price of Rs 275 per unit.     The units of the REIT listed at Rs 304, reflecting a gain of 10.54 per cent from the issue price on the BSE. During the day, it touched a high of Rs 308.90, zooming 12.32 per cent. Later, it closed at Rs 303.87, up 10.49 per cent.

On the NSE, it closed at Rs 303, a gain of 10.18 per cent after debuting at Rs 302, a rise of 9.81 per cent.

Commenting on the listing, Jonathan Gray, president and chief operating officer of Blackstone, said: "Blackstone is honored to be partners with the Rahejas to help create India's second public REIT. Like Embassy last year, Mindspace has tremendous assets and a real commitment to producing shareholder value."

“Investors have demonstrated a strong interest for Mindspace REIT and this has resulted in huge over-subscription of the issue. Some of the key factors for the success of this REIT are strong developer credentials combined with positive outlook for commercial real estate, established portfolio that ensures stability of returns via rental income. This clubbed with the fact that the majority of distribution of income is by way of tax-free dividend works very well in investors’ interest,” said Ramesh Nair, CEO and country head (India) JLL.

This is a great sign for the future of commercial real estate in India as it shows market and investor confidence for the long term.

“REITs will allow greater participation from retail investors in the asset class. The commercial office space segment has been growing from strength to strength over the past few years with sustained growth in rentals across prime business districts. We expect this momentum to regain in the near future which would encourage more participants to enter the REITs market and improve the fund flow into the sector,” said Knight Frank India CMD Shishir Baijal.

Sharad Mittal, CEO, Motilal Oswal Real Estate Fund, said, “the listing of the Mindspace REIT at around 11 percent premium shows that a balanced product like REIT is preferred by both institutional and retail investors. Despite the recent weakened sentiment around commercial real estate, a diversified portfolio of grade A assets with strong rental collections as demonstrated by the Mindspace REIT finds flavor with the retail investor. This listing will augur well for future investments in asset backed financial products and commercial real estate in India.”

Experts also said that there could be one more REIT launched by the end of this financial year.

“Every asset in the market is currently chasing a huge amount of liquidity. There is enough liquidity in the global market and India still remains very attractive. The commercial office space story for India is still intact and returns are bound to be attractive. We would see one more REIT getting launched before the end of this financial year,” Anuj Puri, Chairman - ANAROCK property Consultants, told Moneycontrol.

It is important to note here that notwithstanding the lockdown and the pandemic, the listed commercial real estate players in the country have collected almost 97 percent of the rents in the April-June quarter. This indicates that the commercial real estate market continues to remain robust despite the focus on work-from-home and some reduction in commercial real estate footprint.

“Commercial leasing activity last year was around Rs 4 crore and this year new leasing is expected to be in the range of Rs 2.5 crore despite the lockdown,” Puri says, adding this accounts for almost 60 percent of leasing in 2019.

The launch indicates the coming of age of Indian commercial real estate market story.

“It was a one REIT stock story until now. Launch of a REIT by one more player adds to the maturing of the commercial real estate listed space. With the REIT market deepening there are clearly more avenues for larger foreign institutional players like pension, retirement funds and insurance companies to deploy long-term capital in asset backed space instruments,” said Anckur Srivasttava of GenReal Advisers.

REITs are listed entities that invest in income-generating properties and distribute at least 90 percent of their income proceeds to unit-holders through dividends. After registration with SEBI, units of REITs will have to be mandatorily listed on exchanges and traded like securities.

SEBI notified REIT's regulations in 2014, allowing setting up and listing of such trusts, which are popular in some advanced markets.

COVID-19 has changed the way we think or live and this will have an enduring effect on us for a while. A few of which will become a permanent part of our conscious, the ‘new normal’. As we foresee the industry, it has to resuscitate itself to recognize, comprehend, strategise and implement innovative ways to meet the emerging versatile demands.

Considering the changes in the present scenario, the industry experts were concerned whether the residential sector will bounce back any time soon. Nevertheless, the revival process has initiated sooner than people have anticipated it to. Among other learnings in this pandemic era, the importance of owning a home has restored its prominence.

There has been a notable trend in the property searches across the country as owning a property is now considered as a sense of security and assurance, avoiding the risks that can crop in while living in a rented space. Owning real estate is also seen as an important asset in one’s investment portfolio.

However, investing in a home is a decision of a lifetime and a decisive financial goal for most individuals. Considering the quantum of finances associated with buying a home, it can also turn into a hassle, if buyers do not observe proper guidelines. During this pandemic situation, with property regulations changing every other day, it is important to consult RERA during pre COVID and post COVID development impacting the identified residential project, before making the final decision on purchase.

In addition, it has become imperative to cross-check the developer background to understand their financial stability and the financial rating along with the shortlisted project. It will be favorable if the identified project is in advance stage of completion or should be ready-to-move-in, to avoid any deferment in handing over.

Moreover, at present, the combination of lower interest rates along with stagnant and abridged property prices are keeping the home buying prospect still attractive. With an additional focus on the security part of property deals, it has the potential to drive real estate sales across the country as well.

Keeping the view in mind, here’s what is defining the sector amidst the pandemic and why it will still be wiser to invest in your dream home:

Favourable government directives

With RBI slashing Repo Rates from 4.4 percent to 4 percent and reducing Reverse Repo Rate further to 3.35 percent, this has proven to be positive to the home buying sector, with a reduced rate of interest on home loans. In addition, RBI’s decision to extend the loan moratorium facility by three more months, can surely give a boost to the home loan borrowers, in order to manage their finances better during these unprecedented circumstances.

Furthermore, the government’s effort to extend the deadline for the Credit Linked Interest Subsidy Scheme to March 31, 2021, under the Pradhan Mantri Awas Yojana will have a positive impact on the middle-class strata. This will encourage them to fulfil their home-buying dreams, despite the prevailing economic challenges in the country.

The economic reform and stimulus package announced by the RBI and the Government of India will be an additional push to help sectors launch with a reinvented thrust, whereas the repeated policy revisions will aim at maintaining an even cash flow, amidst this major economic slowdown.

Change in property demand

The reluctance in investing in property was previously based on three primary elements: shorter returns, a higher rate of interest on home loans and the belief that renting a house is always cheaper than buying. However, the present pandemic situation is on the verge of changing this mindset.

Currently, owning a house is associated with an unmatched sense of security in this COVID era, where people are seeking to invest in a house of their own and that will be the silver lining going forward. The enduring weakness in the equity markets will further aid to the sentiment and revive consumer interest in the sector. The value of properties in the real estate market will, therefore, continue to be steady.

Rate of production versus rate of sale

Considering the present scenario, the production cost has increased for the developers as India was primarily dependent on China for steel, iron and other essential construction materials. However, at present with the production and imports being halted, developers are staring at accumulating higher production rates. Nevertheless, given the current market sentiment, this increment will not be passed on to buyers, and will just result in marginal profits. Buyers can expect property prices to remain stable in this scenario for the foreseeable future.

Moreover, to compensate on the increasing production cost, developers are opting for the emergent native supply chains, which will scale up the construction in one hand and avoid handover deferment on the other side.

All things considered and with prices being at a considerable rate with the aiding market curve, now is a great time for buyers to leverage this, and as a ripple effect, revive the Indian economy.

Around 50 percent stakeholders from the real estate sector are of the opinion that the situation for new launches will either improve or remain the same in the next six months, while 31 percent sees an improvement in residential sales. But there were mixed responses with regard to movement of prices, with almost half saying that prices will weaken and others stating that they would continue to remain around current levels or increase.

In terms of office supply, around 46 percent of respondents believe that new office supply will continue to deteriorate over the next six months, whereas the remaining 55 percent still believe that new supply will either improve or remain stagnant, according to findings from the 25^th Knight Frank - FICCI -NAREDCO Real Estate Sentiment Index Q2 2020 survey.

The survey covering the period April-June was conducted in the first two weeks of July.

In the case of office leasing, 27 percent respondents see an improvement in the next six months, whereas 73 percent believe that it will remain around similar levels or worsen.

Stakeholders’ outlook with regards to future rental markets improved by a few percent points, with 54 percent of stakeholders believing that the rental market will be under pressure for the next six months and 46 percent think that it will be the same or increase in the next six months.

“The residential market across the parameters of new launches, sales and prices continued to be muted in Q2 2020. In terms of supply of new residential units, 50 percent of the stakeholders said the situation for new launches will either improve or remain the same over the next six months,” it said.

With respect to sales, 31 percent of the stakeholders are of the opinion that residential sales will get better in the next six months. As many as 49 percent of the respondents feel that prices will weaken further in the next six months, while the remaining 51 percent think that prices will continue to remain around current levels or increase over the next six months, it said.

With continued economic stress and ambiguity regarding recovery, the current sentiments of the real estate stakeholders in India have been recorded at a low 22 in Q2 2020 (April-June). However, the stakeholders have shown moderate improvement in future sentiments for the next six months, albeit they remain in the pessimism zone, it said.

The survey indicated that the ‘future sentiment score’ of stakeholders, though still in the pessimistic scoring zone, has seen an improvement at 41 in Q2 2020 against the score of 36 in Q1 2020. This is attributed to an expected improvement in macroeconomic indicators and adaptation to new business models shaping recovery in the next six months.

The survey covers key supply-side stakeholders, which includes developers, private equity funds, banks and non-banking financial companies (NBFCs). A score of 50 represents a ‘neutral’ view or status quo; a score above 50 demonstrates a ‘positive’ sentiment; and a score below 50 indicates a ‘negative’ sentiment.

“With some macroeconomic indicators showing marginal improvement and with the impending festive season in the second half of the year, the stakeholders have shown improved sentiment compared to the previous quarter, albeit they have remained in pessimistic zone. At this juncture, we expect the lockdown to ease by the advent of the festive season, helping to revive economic activity and propel conversion of pent-up demand,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

There is a need for further demand-boosting measures to improve sentiments in the economy. For the real estate sector in particular, there is a need for measures such as additional tax benefits for buying/renting a house, added incentives for affordable housing, easing of credit availability for the sector and a one-time restructuring of developer loans to help the sector recover from this crisis, he said.

Future sentiment score

The future sentiment score inched up to 41 in Q2 2020, indicating a possible but cautionary revival for the real estate market. Improvement in macroeconomics and stakeholders adopting a new business model has created a hope for recovery in the next six months.

Stakeholder future sentiment score

Sentiment score of both developers and non-developers in the real estate sector has seen a marginal revival with scores of 39 each in Q2 as compared to Q1 2020.

Stalled construction during lockdowns and scarce availability of labour due to reverse migration are likely to result in project delays. Tighter lending norms and low demand on account of crisis-induced job losses and pay cuts will take a toll on developer cash flows. In light of such challenges, developer sentiments continue to remain pessimistic for the next six months.

With regards to funding, 47 percent of the respondents expect a further reduction in the credit flow to the real estate sector over the next six months, whereas 28 percent believe that the present levels of credit scarcity will continue for the next six months.

In the backdrop of the current liquidity, labour and raw material shortage, industry seeks hand-holding by the government to ease out economic distress. This could be done by reduction in taxes, levies; stamp duties and GST for stipulated time frame to generate demand shock which is imperative to kick start the economic uptick, said Niranjan Hiranandani, National President, NAREDCO, and founder and MD, Hiranandani Group.

In addition to fiscal stimulus, the industry pegs high hopes on a one-time debt restructuring, additional stress fund and enhanced credit flow supply to facilitate working capital requirement of businesses to revive back, he said.

Retail and institutional investors are flocking to REITS. You will see by end of the year close to 100 million sq ft listed at the exchanges. "We expect USD 2-3 billion investment to exchange hands by March 2021. Some vacancies at Tier II tenants and developments are expected," said Sanjay Dutt, Managing Director and CEO, Tata Realty & Infrastructure, Chairman, FICCI Real Estate Committee.

At 33, Bharat Singh checked another “must-have” off his list when he bought an apartment in a Unitech Ltd project in Noida in 2010. Now 43, Singh lives in Bengaluru, pays a monthly rent of Rs 50,000 and also an EMI of Rs 3.5 lakh to a private lender for his 4,500 sq ft Noida apartment that he is still waiting for.

Singh’s nightmare is being lived by 15,000 Unitech homebuyers in the National Capital Region (NCR), left in the lurch by the Delhi-based developer’s failure to complete and hand over their apartments, spread over 74 projects, by 2014 deadline.

“I was stuck between the financier and the builder. I decided to liquidate most of my investments to pay up my loan and reduce my EMI,” he told Moneycontrol over the phone. Singh pays his EMI at a hefty 12 percent interest rate even though home loan rates are at an all-time low.

The nightmare began to unfold in 2014, when Singh went to a bank to transfer his loan, struggling to pay the high interest charged by his private lender.

The bank refused, saying the land on which the project was to come up did not have a clear title and a loan could not be extended against the property.

“It was around 2014 that 10 of us got together and filed an application in NCDRC against the builder,” he said, referring to the National Consumer Disputes Redressal Commission, the country’s top forum for protection of buyers’ rights.

The experience has worn him out and he has sworn off the property market. “If I had invested all my money in a bank in 2010, I would have been richer by Rs 10 crore but today, I have nothing. I am a mere spectator and can only hope that the new resolution plan gets me my home,” he said.

The resolution plan that Singh is talking about has been submitted to the Supreme Court by the seven-member reconstituted board of Unitech, which was overtaken by the government early this year. The court on July 31 said the plan should be put on its website to invite suggestions.

The board, which has bankers and retired civil servants as its members, has promised to complete all Unitech projects and hand over apartments to 15,000 buyers like Singh staggered over four years.

“I am hoping I will get my property finally after four years and I can hopefully relocate to Delhi,” Singh said. “Even if it takes four years, so be it. The state that we are in, we buyers cannot be choosers,” he added.

The Unitech story

Unitech started off as a soil investigation company and was founded by in 1972 Ramesh Chandra, whose sons, Sanjay and Ajay, are the promoters now.

It was among the biggest players in the Indian real estate space that was booming in early 2000, with a rapidly growing IT industry and services sector fuelling demand for houses and office space around Delhi.

This was also the time when India’s telecom sector was picking pace. And Unitech decided to take the plunge and that is when things started going south.

In 2009, its deal with Norway's Telenor for a joint telecom company, Uninor, got botched. Two years later, Managing Director Sanjay Chandra was arrested for his alleged involvement in the Rs 1.85 lakh-crore 2G spectrum case. A Delhi court in 2017 acquitted all the accused in the case, a decision that has been challenged by CBI and the Enforcement Directorate.

Unitech continued to expand aggressively, launching real estate projects and buying land parcels. The business soon ran into trouble. Sanjay and Ajay were arrested in 2017 for allegedly siphoning off homebuyers’ money.

Sanjay was recently granted bail for a month to take care of his unwell parents. Ajay continues to be lodged in Delhi’s high-security Tihar jail.

The arrests came on a criminal case lodged against the company in 2015 by 158 homebuyers of Unitech’s Wild Flower Country and Anthea projects in Gurugram.

A Supreme Court-ordered forensic audit in 2018 found that Unitech had collected Rs 14,270 crore from homebuyers between 2006 and 2014 and Rs 1,805 crore from six financial institutions for 74 projects.

Around Rs 5,063 crore of homebuyers' money and Rs 763 crore of financial institution funds were diverted to off-shore tax-havens, the auditor found.

ALSO READ: Supreme Court approves takeover of Unitech's management by Centre

The new plan 

Submitting the resolution plan last week, the board said it would take four years and Rs 5,000 crore to complete the units. The board can begin work within six months of the Supreme Court approving the plan.

“…possession of flats can thereafter be delivered as per the following tentative schedule: (i) within 1st 12 months: up to 2,500 units to be delivered; (ii)within 12 - 24 months: up to 6,500 additional units; (iii) Within 24 - 36 months: up to 5,000 additional units; (iv) Within 36-48 months: balance units to be delivered,” the board said.

Not everyone wants to wait for four years. “Lifts have already been installed. The amount of work left to be completed is negligible. All it will take is six to nine months—four years is not fair,” said Shikha Puri.

Puri, who has an apartment in The Residences project in Gurugram’s Sector 33, has bigger worries. In the last few weeks, NCR has been rocked by a series of low-intensity earthquakes. The residential towers stand next to an incomplete basement that posed a risk to the blocks, she said.

The work can be completed in four months and Unitech should evaluate the risks and complete the project on priority.

She said the buyers had collected up to Rs 2 crore each and would give it to the government to start the work.

The board says funds will be raised by using additional FAR, disposing of some land and homebuyers will be asked to pay the remaining amount. The board is also looking to tap a government-backed fund for completing stalled housing projects, banks and financial institutions.

It wants a Rs 5,000-crore interest and penalty waiver from the Noida Authority and banks.

According to estimates, Unitech owes the Noida Authority around Rs 8,000 crore, of which Rs 5,000 crore is in interest and penalties. Banks have to be paid around Rs 5,000 crore, with interest accounting for 40 percent of the amount.

The embattled firm has an unsold inventory worth Rs 3,000 crore and another Rs 6,000 crore worth of land, sources say.

Homebuyers will have to pay the remaining amount according to a schedule that will be put up online within 90 days of the plan being approved.

There is no provision of a refund or compensation in the plan.

“I believe that the proposal is a step in the right direction since it gives buyers some hope of having their homes eventually,” Vaibhav Gaggar, Managing Partner, Gaggar & Associates, said.

Though another four years could be demoralising that’s best homebuyers can get out of a hopeless situation, he said.

“If you were to expose a potential developer with the additional risk that he may have to pay a refund for old properties, you will never get anybody to complete the projects,” said Ajay Khandelwal, who has an apartment in Unitech Golf And Country Club in Noida.

The road ahead 

The resolution will take some doing. It will depend on several knots coming undone, say legal experts.

Supreme Court advocate Ashwarya Sinha, who appeared for a group of homebuyers, said courts, banks and financial institutes would have to accede to several requests, including waivers, for the work to commence.

“The courts will have to weigh in the balance as to why these privileges should be given only to Unitech buyers and not others Also, why should banks write off loans? This may have a cascading effect,” he said.

Eight years ago, most buyers were in a good financial position but some may not have funds to spare as the coronavirus pandemic has devastated the economy and caused job losses, he said.

Instilling confidence in homebuyers and getting them to pay the remaining amount could be a challenge, especially when they have another four years to wait.

But it’s a start

It is the first time in 10 years that a concrete plan is in place for Unitech buyers. The outcome will also set a precedent for all such cases.

It is also a warning to all real estate companies. All the three cases – Amrapali, Jaypee and Unitech –spell out clearly how far courts can go to arrive at a resolution, say legal experts

The Supreme Court has asked the government’s construction arm NBCC to complete 42,000 Amrapali homes. NBCC’s offered to do the same for 20,000 Jaypee Infratech buyers in Noida and Greater but the National Company Law Tribunal made changes to the plan, which the construction company has challenged in the National Company Law Appellate Tribunal.

Owning a home is a dream of most middle-class families. For some, it is a symbol of success, for others, a sense of security.

Among Unitech buyers are people who invested their lives’ savings in the hope of living off a rental income with dignity.

“I am hoping against hope but I wonder if I will ever see that day,” said an 86-year-old buyer, who did not wish to be named. Not just him but hopes of 15,000 buyers are riding on that resolution plan.

Housing and Urban Affairs Minister Hardeep Singh Puri on Friday launched digital platforms of real estate bodies CREDAI and NAREDCO to market residential properties, besides releasing a guide book for affordable rental housing scheme for migrants.

The minister launched ‘CREDAI Awaas App’ and NAREDCO’s online portal ‘HousingforAll.com’ through a video conference. Puri released the knowledge pack of the government’s ‘Affordable Rental Housing Complexes’ (ARHCs) programme, which has been recently launched to provide rental accommodations to migrant and urban poor.

“We have launched these two portals. The idea came recently and we have been able to implement it,” Puri said. The ARHCs scheme, which has been launched under the Pradhan Mantri Awas Yojana – Urban (PMAY-U) as part of Atma Nirbhar Bharat Abhiyan, will help in providing dignified and affordable living spaces for urban migrants/ poor in need, he said.

The ARHCs scheme would also help real estate developers in retaining labour force on their sites, the minister said, adding that rental housing would be beneficial for young people.

Housing and Urban Affairs Minister Hardeep Singh Puri on Friday launched digital platforms of real estate bodies CREDAI and NAREDCO to market residential properties, besides releasing a guide book for affordable rental housing scheme for migrants.

The minister launched ‘CREDAI Awaas App’ and NAREDCO’s online portal ‘HousingforAll.com’ through a video conference. Puri released the knowledge pack of the government’s ‘Affordable Rental Housing Complexes’ (ARHCs) programme, which has been recently launched to provide rental accommodations to migrant and urban poor.

“We have launched these two portals. The idea came recently and we have been able to implement it,” Puri said. The ARHCs scheme, which has been launched under the Pradhan Mantri Awas Yojana – Urban (PMAY-U) as part of Atma Nirbhar Bharat Abhiyan, will help in providing dignified and affordable living spaces for urban migrants/ poor in need, he said.

The ARHCs scheme would also help real estate developers in retaining labour force on their sites, the minister said, adding that rental housing would be beneficial for young people.

The secretary said rental housing can be provided easily as the government has completed flats as well as vacant land. Moreover, it will be done through public private partnership.

Mishra said the proposal of model tenancy law will soon be taken up to the Cabinet for approval.

At the virtual event, Credai Chairman Jaxay Shah, Credai President Satish Magar, Naredco Chairman Rajeev Talwar, Naredco President Niranjan Hirandani and Naredco West President Rajan Bandelkar were present.

Tata Realty and Infrastructure Ltd MD and CEO Sanjay Dutt represented FICCI while Neil Raheja from CII took part in the event.

CREDAI Awaas App is a residential project discovery online platform through which buyers will be able to virtually explore and experience the projects from 220 cities across the country. The app aims to facilitate transparent home buying in India of RERA approved projects by CREDAI developers.

The coronavirus pandemic led developers to offer price discounts across projects in eight major cities to boost sales. As many as 44 percent projects offered discounts such as cash, GST, stamp duty, car parking waivers and subvention schemes, a new report has said.

Out of the 13,428 projects assessed by Liases Foras for its report titled Residential Real Estate Market Report – Tier 1 cities Q1 2020-2021, the weighted average price across Tier I cities have reduced by 4 percent since March 2020. NCR exhibited the maximum decrease in prices by 9 percent while it was a decrease of 4 percent in Bengaluru, Chennai, MMR and Pune.

The parameters considered for calculating the discount included quarterly change in builder quoted prices, discount on account of GST rebate, stamp duty/registration fee waiver, cash discounts, online booking discounts, free commodities like a gold coin, modular kitchen, car parking, white goods and discount on account of subvention schemes.

The discounted prices were estimated considering the impact of discounts and schemes developers offered during this quarter. Around 44 percent projects offered discounts such as cash discounts, GST, stamp duty, car parking waiver and subvention schemes. Out of the 13,428 projects considered across the eight cities, 8,860 were checked for discounts of which 6,046 projects did offer schemes, the report said.

In MMR, as many as 1,712 projects offered discounts followed by Bengaluru with 1,008 projects. In Delhi-NCR only 335 projects offered discounted schemes, the report noted.

“Covid-19 has started showing its impact. The reduction in sales and extensive inventory has forced developers to consider offering discounts and schemes which has led to city-level prices reducing by 4 percent on a quarter-on-quarter basis and 5.4 percent year-on-year basis. We have seen discounts in the range from 5 percent to 20 percent,” Pankaj Kapoor, Founder and Managing Director, Liases Foras, told Moneycontrol.

These discounts are expected to continue beyond the festive season.

“We will see builders doling out more discounts and freebies during the festive season which will lead to a further price reduction. Discounts are expected to continue as inventory and debts have started piling up and will be way too high for builders to hold,” he added.

As for sales, the report noted that Tier I cities recorded sales of only 26,379 units in June quarter (Q1 FY 20-21), a 59 percent drop from March quarter when the sales were 63,992 units. Sales witnessed the maximum drop in Bengaluru by 64 percent followed by MMR by 62 percent, Ahmedabad by 61 percent and NCR by 60 percent.

Unsold units decreased by 3 percent on a quarter-on-quarter basis and the current unsold across top 8 cities stands at 960,992 units. It decreased across the cities despite the low sales due to fewer new launches.

The unsold stock decreased maximum in Hyderabad (5%) followed by Pune (4%), Bengaluru (3%) and Kolkata (3%).

The months’ inventory shot up by 136 percent across Tier I cities and is touched 109 months in June-20. The inventory overhang in Chennai and MMR was the highest among the tier 1 cities at 162 and 137 months respectively followed by NCR with 135 months.

In Mumbai, the quarter-on-quarter sales decreased in all the suburbs with maximum reduction in New Mumbai by 82 percent followed by Central Suburb and Island city each by 68 percent, Panvel (66%), Western Suburb Extended (62%), Western Suburb (59%), Central Suburb Extended (58%) and Thane (43%), the report said.

Unsold stock in Mumbai reduced by 6 percent in Central Suburb Extended, 2 percent each in Western Suburb and Western Suburb Extended. • Unsold Stock reduced marginally in Island City, Central Suburb, Thane, New Mumbai and Panvel, it said.

In Delhi-NCR, the quarter-on-quarter sales decreased by 60 percent when the maximum drop was witnessed in Gurugram by 71 percent followed by Faridabad (65%), Bhiwadi (61%), Ghaziabad (56%), Noida (51%) and Greater Noida (49%).

The unsold stock reduced in all suburbs with Faridabad witnessing the highest drop of 4 percent.

The colonial authorities created an organisation with the sole purpose to redesign what was then Bombay to improve its sanitary and living conditions. The planned opening of the suburbs was, in fact, a result of this. Today, coronavirus has forced us to take a hard look at our cities, again. HT reached out to urban designers and architects to re-imagine and decongest four key spaces of our lives:
a classroom, a street market, an office and a congested residential area. A look at their designs and innovations.

Offices in times of Covid-19: Using tech to build a more agile workspace

The workplace in a post-Covid world needs to re-evaluate priorities and be prepared to respond with swiftness and agility to the next big disruption.

To start with, minimising the transmission of virus and other pathogens as well as ensuring employee health are top priorities for all organisations. To that end, we’ve looked at how reconfiguring the workspace to allow physical distancing, and using technology smartly can go a long way in upholding these new priorities. In a pre-Covid scenario, the open office plan that we worked with accommodated 50 people in the focused workspace with a total office capacity of 120 people. It comprised six types of spaces: High impact like the reception, which lent itself to face-to-face interactions; Plaza, like the pantry, which allowed free flow of movement; Learning centre, where people would sit and collaboratively work; Openand enclosed jump spaces, equipped with digital tools to allow teleconferencing and white boards to facilitate group discussions; Hive zones or focused work areas, which accommodated high density of employees; and Leadership work zones, for senior members of the company.

In the post Covid scenario, the reconfigured open office will seat fewer people, as the space allocated to each employee has increased with larger workstations and higher partitions, in keeping with social distancing norms. Agile workspaces like hive zones and jump spaces have been redefined. Close collaborative and communal spaces have made way for staggered seating; workstations are connected through digital tools that allow multiple users to work simultaneously and attend video conferences from their own stations; sliding panels create dynamic working and meeting spaces; and single occupancy pods and phone booths have been provided. Technology embedded in furniture allows workstations to be truly plug-and-play.

The reception, an area of face-to-face interactions has been replaced by a virtual reception that relies on smart technology and digital screens to convey information to visitors. Magazines, pens and pads, staple features of a reception, have been removed. Attendance systems have evolved to operate on facial and voice recognition technology. The carrying capacity of lifts, which lead up to a reception, is reduced to a fourth.

Technology can also be used effectively to minimise touch points like blinds, light switches, and toilets. Simple sensor-activated lights and faucets and smart window shades can be used, instead. Temporary plexiglass screens can be installed at various check-in points and hand-sanitiser dispensers as well as Ultra Violet phone sterilising stations can be placed in plain view.

Navigation is another vital aspect to the new office plan. Where earlier the movement was more free-flowing, a post Covid office must stagger entry and exit times to decongest arrival and departures. For instance, multiple shifts for lunch hour can be formulated to control the number of people gathered near the pantry at a particular time. Creating separate lanes for to and fro movement also decreases chances of transmission of pathogens.

However, through a market-responsive urban renewal programme comprising plot redevelopment, plot amalgamation and street widening, the same density can be accommodated with better quality of life. Redeveloping the plots would mean an increase of the built-up area, which in turn guarantees greater habitable space per person. It would also mean wider streets with augmented infrastructure and planned retail and commercial outlets. Amalgamating plots would not only create larger dwellings, but also neighbourhood amenities and open spaces. The existing lanes and alleys should be retained for public access within these reconfigured plots. The main street can be given better pedestrian facilities, retrofitted with wider footways, landscape, and seating for the public, to create a vibrant environment.

Commercial real estate  has always remained an attractive asset class for high yield investment. Compared to other yield products like fixed deposits, debt funds, AA/AAA rated paper, investing in CRE provides various additional benefits especially to the NRI investor.

There are tech-enabled commercial property investment platforms that guides NRI investors to diversify their portfolio by investing in rent-generating commercial properties in Tier 1 cities in India. NRIs comprise of investors, who come from diverse backgrounds like oil and gas, financial services, technology, manufacturing, among others. Here are some of the benefits and potential pitfalls of CRE investing.

Commercial real estate’s attractiveness stems from the “yield”, the rental return that an investor earns from investing in a leased commercial property. Yield is nothing but rents/all-in price.

It is important to note that it is 'All-in' price and not purchase price. Many inexperienced investors wrongly calculate yield as rent/purchase price without factoring additional purchase costs like registration and stamp duty, lawyer’s fees, brokerage etc. These costs tend to add up to 10 percent to the purchase price and can therefore reduce the yield by 10 percent.

The yields on CRE can be between 7-9 percent, much higher than the 4-5 percent currently available on FDs or 7-8 percent on AAA debt funds. In situations such as the COVID-19 pandemic, NRI investors can increase their yield further by making use of the depreciation in the rupee/dollar exchange rate. A 5 percent depreciation can increase the yield from 8 percent to 8.4 percent.

nflation-linked return

Commercial leases have built-in escalation in the contracts of 5 percent per year or 15 percent every three years to account for inflation. This increases the yield on the return in-line with inflation keeping the real return post inflation constant. This is an often overlooked benefit of CRE investing that is attractive to long term real returns.

An inflation linked return helps NRIs create wealth in India without depleting the value of their investments or returns.

Capital Appreciation

CRE is a hybrid instrument that provides not just monthly cash flow and yield but capital appreciation as well. The underlying real estate and land appreciates in value over time providing a “kicker” to the overall returns. A 5-10 percent capital appreciation increases the total returns or IRR to 15-20 percent per year.

Market rent and micro-market vacancy

Market rent means the current rent in the market today if a new lease were to be signed. On the other hand, in-place rent is the rent that the current tenant is paying in the building you may be looking to purchase. Always, buy properties where the in-place rent is at or lower than the market rent.

This is because this makes it more difficult for the tenant to switch buildings for rental costs. If the rent in the market is Rs 50 per sq ft and the property that an investor is planning to purchase is tenanted at Rs. 60 per sq ft, the tenant has a very high incentive to vacate or renegotiate rents.

This also means that the yield is artificially inflated. Imagine the current COVID-19 scenario where a lot of tenants are looking to renegotiate rents. If the property has a lower rent than market, then it will be in a much better position for the investor to negotiate. Similarly, choose properties in micro-markets that have very low vacancy (<3-5%). When there is a lot of supply in a market, tenants get a lot more option to negotiate.

Due-diligence

Any property is as good as the legal title. A lot of the legal risks can be avoided by purchasing ready-to-move leased commercial properties with occupancy certificates in place. The receipt of OC means that the building has already satisfied all the municipal and government approvals required to begin operations. When an MNC tenant occupies a building they would also have done a legal diligence already. For verifying the title of the property and necessary document it is of paramount importance to consult a Tier 1 law firm.

CRE is a very attractive asset class for NRI investors providing stable cash flow and high risk adjusted returns.

Dwelling units to be built under the affordable rental housing complex (ARHC) scheme will comprise single bedrooms up to 30 square metres (sqm), double bedrooms up to 60 sqm and dormitory beds of up to 10 sqm carpet areas each.

The initial rent of ARHCs will be fixed by local authorities based on a survey of surrounding areas, operational guidelines issued by the Ministry of Housing and Urban Development stated.

To address the issue of affordable rental housing for urban migrants/poor through private/public bodies, the government has designed two models. The first model involves ARHCs on government funded vacant houses and the second involves construction, operation and maintenance of units by public or private entities on their own available vacant land.

Under the second model, private or public developers are free to construct a mix of single/double bedroom and dormitories (4/6 units). However, to ensure that such complexes are used for urban migrant/poor of economically weaker sections (EWS)/lower income group (LIG) categories and not misused for any other purposes, a maximum ceiling of 33 percent in double bedroom form in any project has been provisioned.

All projects under ARHCs shall be exclusively used for rental housing purposes for a minimum period of 25 years.

A dedicated escrow account will have to be opened for all financial transaction and the income accrued as rent will be maintained in a separate account by the concerned concessionaire or entity.

The Union Cabinet on July 8 had approved the ARHC scheme for urban migrants employed in industries and the service sector and in manufacturing sector close to their workplace in industrial as well as in non-formal urban sectors.

Government funded vacant houses

Under the first model, existing government funded vacant houses would be converted into ARHCs through a concession agreement for 25 years. Post that, those units in livable condition would be transferred to urban local bodies.

The rent will be enhanced biennially by 8 percent, subject to maximum increase of 20 percent in aggregate, over a period of five years, effective from the date of signing the contract. Same mechanism shall be followed over the entire concession period of 25 years, the operational guidelines said.

Concessionaire and tenants (including institutions) will sign a rent agreement abiding to applicable rules and regulations. Tenants will abide by the contract terms and vacate premises without any dispute. In the event a tenant is found indulging in any unlawful activity and fails to abide by the terms and conditions of the rent agreement, the concessionaire will have eviction rights during the contract period and his decision will be considered as final.

ARHCs could also be constructed on large portion of available vacant lands lying unutilised with industries, trade associations, manufacturing companies, educational or health Institutions, development authorities, housing boards, central/ state public sector undertakings (PSUs) and other such entities

Challenges still remain

Real estate experts told Moneycontrol that while this is a 'good initiative', there are issues that need to be addressed before it can have a tangible impact on the real estate market. The first is the cost at which the government would offers its vacant land parcels to be developed by the concessionaire.

The second issue is to do with the rental yield that is likely to accrue to the developer. In India, rental yields vary between 1.5 percent and 3 percent.

While the first model for development of ARHCs on government land may be viable, there may be challenges under the second model in following the PPP approach as the intended beneficiaries – migrants, street vendors and the poor – may not benefit, an expert said.

The second issue is to do with the rental yield that is likely to accrue to the developer. In India, rental yields vary between 1.5 percent and 3 percent per annum.

Experts also point out that while the first model for development of ARHCs on government land may be viable, there may be challenges under the second model following the PPP approach as the intended beneficiary – migrants, street vendors and the poor may not benefit.

“The reward equation and the monthly rent numbers do not stack up and even the operational guidelines suggesting a 14 percent IRR may not be exciting enough for a private developer or investor,” says Anckur Srivasttava of GenReal Advisers.

“Based on the operational guidelines, it seems that RBI would need to stipulate a separate category of infrastructure/real estate loans for ARHCs. The development models cited in the guideline annexure suggest a high loan-to-value ratio, low construction finance interest rates (around 8 percent) and 20-year repayment terms with only land being contributed as the private developer’s equity. Currently, we don’t see banks/financial institutions offering such terms for real estate or even priority sector affordable housing loans,” he said.

Pradeep Aggarwal, founder and Chairman, Signature Global Group, whose company is into affordable housing projects, said a commitment from an institutional partner like Life Insurance Corporation (LIC) is a must as cheaper funding can only come from such agencies.

“Unless such institutions do not have a stake in such projects, the developers may not be willing to participate in this scheme. The second issue is to do with the time that states would take to design these policies, lest these remain mere guidelines.

“Also, state governments will have to decide on reasonable rents. No migrant labour will be able to pay up to Rs 6,000 per month as rent. Viability is still a concern,” he added.

The government is considering allowing up to 100 percent foreign direct investment (FDI) in completed housing projects amid growing interest from overseas investors.

The Department for Promotion of Industry and Internal Trade (DPIIT) is evaluating ways to boost investment in the real estate sector, according to a report by The Economic Times.

"There are only limited sectors where FDI norms can be further relaxed and housing is one of them," an official told the publication.

Moneycontrol could not independently verify the story. If the FDI move comes through, it will help revive the sector that has been hit by the coronavirus outbreak and is an employment provider.

At present, 100 percent FDI is permitted through the automatic route in construction-development projects (except farm houses), contingent on a three-year lock-in period.

"We are studying the policy carefully as the restriction is largely aimed at preventing speculation in the sector," a source told The Economic Times.

In 2019-20, FDI in construction development was $617 million, much higher than the $213 million recorded in FY19, the report said.

The DPIIT is also planning to ease FDI norms in defence. The department is likely to move a cabinet note for seeking up to 74 percent FDI in the defence sector through the automatic route, as announced under the Aatmanirbhar Bharat Abhiyan.