Obsolete Homes: The Decreasing Attractiveness Of Resale Flats

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

Historically, cities like Mumbai, Pune, Bangalore and Chennai have always enjoyed a strong resale residential market. This made sense – because of a lack of progress in terms innovation by developers for almost two decades, homes in old projects did not offer significant advantages over homes in older projects. Buyers were primarily focused on price and flat size, and the resale market tended to offer good deals on both counts.

This scenario has now changed visibly, and a new trend of ‘home obsolescence’ has now become a firmly entrenched market dynamic. Fundamentally, the process that renders homes obsolete can be compared to that of electronics and home appliances.

Because of rapid technological advancements and high competitiveness among suppliers of such goods, the newer range of products has very attractive added features that make older models redundant and undesirable.

Bloomfield poolObsoleting is also a very real fact in real estate, as well. Commercial spaces in ageing office complexes tend to evince less interest by occupiers because they lack the modern features of newer office projects. Likewise, residential projects which were developed as little as five years ago lack the attractive value-adds which are available in the latest projects.

Construction technology, design trends at a project and individual unit level, internal fittings such as plumbing, sanitaryware and electrical appliances have all taken a quantum leap forward in terms of functionality, user-friendliness, visual appeal and cost effectiveness.

In many cases, older projects often do not have adequate parking, common amenities and open spaces, as they were developed before the latest regulations concerning these were enforced. The combined effect of these has resulted in the rapidly reducing popularity of resale homes among home buyers.

While it is true that some resale properties offer more central locations, it is equally true that these locations tend to be beset by massive infrastructure deadlocks today. Also, older projects will lose in investment value at a rate proportionate to the age of the project.

In contrast, buyers who chose to opt for a brand new flat have several advantages. In the first place, they can opt to invest in an apartment at significant discounts while the project is still under construction.

Secondly, they benefit from the fact that such projects have fresher designs, are fully compliant with latest development regulations and have features such as rainwater harvesting and reserved parking. The units themselves have the latest electrical fittings and have superior layouts. Meanwhile, the investment value of new flats remains on an upward trajectory for several years.

While the resale market will doubtlessly continue to draw attention, more and more home buyers in cities like Mumbai and Pune will not settle for less than a brand-new flat.

Real Estate Revival In Festive Season Mode

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

The cloud of gloom and hesitancy that had overshadowed the nation’s real estate market since 2010 has finally lifted.

With the arrival of a strong, business-savvy and very determined government at the centre and the positive budget announced recently, stock markets and overall sentiment have revived. In a nutshell, financial confidence has returned to the Indian household, and this has special pertinence to the upcoming festive season.

While the previous year obviously had all the auspicious days on the calendar, the ‘can do’ spirit that traditionally embodies this period in India was still conspicuously absent. Fence-sitting, cash conservation and risk aversion were the watchwords.

It is remarkable how this scenario has changed for the better this year. The real estate market, which had been more or less holding its breath, has finally opened up again. The fact that home ownership is again high on the priority list of the Indian citizen is already reflecting in the building crescendo of festive fervour this year.

It is important to note that the Indian festive season is not just a collection of dates historically designated as auspicious for wealth building and property acquisition. This season is also a major fulcrum of financial planning for Indian households.

It sets in only after the closure of annual accounts and clearing of income taxes, leaving families with a clear oversight of their monetary capabilities. This factor, combined with the prevailing economic sentiment, will provide the cues for either extended caution or investments decisions.

Apart from the lifting of political instability and renewed confidence in the government, there are other key factors that have helped the Indian property market to revive this festive season.

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Developers in most cities have prudently desisted from raising their property prices despite the high escalation of input costs. They are aware that revival is not an event but a process, and that this process must be nurtured from green shoots to full-fledged bloom. As a result, the festive season of 2014 brings home buyers a vast spread of options that they can invest in.

It is inevitable that sustained market revival and the resulting improvement in demand will eventually come to bear on property prices. However, this is still at some point in the future. For now, it is still very much a buyer’s market and aspiring home buyers hold a clear advantage.

While this festive season will bring the usual gauntlet of freebies, astute buyers should not be swayed by inconsequential offers. This is an opportunity to zero in on the best of the available options, negotiate the best deal and finally make their dream of a self-owned home a reality.

Pune – A Prime ‘Smart City’ Candidate

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

With the new government’s sharp focus on creating 100 ‘Smart Cities’ in India, the subject of the ‘IT Effect’ the real estate markets of cities once again takes centre-stage. Needless to say, Pune is one of the cities with very notable IT presence.

The central government has earmarked Rs 7,600 crore for the development of 100 smart cities across India in the recent budget, and Pune should definitely be considered as a strong candidate. It is already an established ‘IT Destination’, with the success story scripted by areas like Kharadi, Hinjewadi, Magarpatta and Tathawade bearing witness to this.

Significantly, information technology has worked very well for Pune’s real estate market in the past, and it will continue to be its most decisive driving factor in the future.

The most important reason why information technology has such a positive effect on a city’s real estate market is the scale and quality of employment it generates.

Employees of information technology-driven companies – whether in software development or in the IT-enabled services of the BPO industry – enjoy very decent salaries and also career growth prospects. This factor positively reinforces their aspirations towards home ownership.

Naturally, real estate developers tend to launch residential projects in or around areas with lots of employment or emerging job opportunities. However, IT/ITeS catchments generate a whole new level of demand for homes, and developers obviously have to tailor their offerings according to the type of demand that emerges from a location.

For instance, employment catchments that generate a maximum number of jobs in support services for SMEs, trade or transportation companies will yield a demand for homes in the affordable range because the employees draw relatively modest salaries.

Locations in and around a city’s primary and secondary business districts generate a lot of senior jobs in the corporate sector as well as in back-office operations, so developers must aim to deliver residential projects that address a broader band of income levels.

IT-centric locations, on the other hand, present an altogether different real estate proposition in India. It is true that there was a lot of IT-driven speculation by both buyers and investors when the IT boom first took off in India.

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However, after the Dot com bubble which had been building globally between 1997 and 2000 burst in 2001, information technology in India went into a rapid process of evolution. Jobs generated by this industry became more stable, and its employees once again became a focus point for real estate developers as well as lending institutions.

Salaries in the sector began rising steadily, and more and more young Indians were sent abroad for training, only to return with higher aspirations, a wider world view and a taste for luxury. This is when cities like Bangalore, Hyderabad and Pune started to develop a notable market – and new precinct – for high-end housing.

The IT businesses that established themselves in India did not need to have their operations in the city centres. In fact, they preferred to open shop on the outskirts of these cities, since land and leasing costs were lower there.

This led to entirely new residential property catchments cropping up, and developers began launching housing projects in and around these areas. In fact, even retail follows the direction into which information technology points, which is why we see more and more malls coming up in IT-centric locations of Pune.

Some of the most prominent IT-driven real estate locations in Pune today are Aundh, Baner, Ambegaon, Kharadi and Undri. More and more areas will open up as the information technology wave continues to sweep the city, and Pune’s inclusion in the government’s ‘Smart Cities’ initiative would be a massive break-through for the entire city – both in terms of its overall economy and its real estate market.

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