Are risks in soft launches worth low prices?

Recently, a well-known New Delhi-based real estate firm went for a soft launch, or pre-launch, of its residential project at Gurgaon’s Dwarka Expressway at Rs. 4,350 per sq. ft. In other words, the project hasn’t been advertised yet but select investors/buyers have been apprised about it through the developer’s network of brokers and given an offer at lower rates.

The project has attracted many investors and end-users, who would have had to shell out up to Rs. 5,500 per sq. ft for a similar project in the same area.
For developers, soft launches are an opportunity to attract a large bunch of investors. But the low prices shouldn’t blind you to the risks that soft launches come with.
Says Anand Naraynan, national director, Knight Frank India Pvt. Ltd, a property consultant firm, “This is definitely not a good idea when there is no regulation over the practice. But since returns are higher when you invest at the time of launch this has become a national trend.”
The risks
Incomplete paperwork/approvals: At the soft launch stage, developers may not have the paperwork complete and permissions in place.
Says a Delhi-based resident, who booked in a project on the Noida Expressway at the soft launch stage, “I didn’t know at the time of booking that some approvals were not in place. Luckily, for me those issues have been sorted out, but what if they hadn’t been?” He didn’t want to be named himself or name the project.
At the time of soft launch, many builders do not disclose entire details such as map, land acquisition details and building layouts. So you put your money without even knowing the project’s details. “Often these investments are done on the basis of the developer’s track record. In many cases, builders do not give enough details on the project,” says another Gurgaon-based broker, who did not want to be named.
No regulation: What is worrying is there is no regulation in place in case something actually went wrong in the above-mentioned case.
At present, there is a no regulation that governs the practice of soft launch. It is for this reason that the draft Real Estate (Regulation and Development) Bill, 2011, has proposed that no promoter would be allowed to advertise about the project without obtaining complete permissions from the authority. Also, the draft says that the promoter will have to furnish all the details related to project, including sanctions and approvals.
Says Samarjit Singh, managing director, India Homes Pvt. Ltd, a pan-India brokerage firm, “State authorities and the government do not have any laws governing soft launches. However, people invest in such projects only to get lower rates. When the project’s construction advances, there is a decent appreciation in the property value.” As a brokerage firm, India Homes does not endorse investments at the soft launch stage.
“You will get the allotment only at a later stage. Companies usually show the receiving (initial booking amount) as proceeds taken in favour of a future project,” says Ajay Singhal, director, Avlon Group, a New Delhi-based real estate firm with projects in Bhiwadi and Dharuhera. Avlon Group does not follow the malpractice of soft launches in its projects.
No initial allotment: It is usually seen that developers take some initial deposit from brokers and end-users through cheques and book a flat without giving any allotment or flat number. Once the project is officially announced “open for all”, these initial buyers are considered first. At this stage, they are allotted flat numbers.
After these initial bookings, the company takes fresh bookings for the remaining inventory of unsold flats. The resident we spoke to has a similar story, “I got my tower and unit number only around the time my home loan was processed, not at the time of the initial booking. At that stage, it was just a piece of paper.”
Moreover, the developer may assure you at the beginning that your preference will be considered, that may not happen at the time of booking when the rush and pressure increases. Adds Singhal, “You may give a preference of a flat on the second floor but you may get something on the fourth or fifth floor. Your developer may give the same flat to someone else who has given a larger lump sum or asked for less discount.”
Risk of delay: Since there is no grievance redressal mechanism in terms of loss due to delay, you may get stuck. Therefore, your investments could be a risky one. “Only investors and deep-pocketed brokers have the capacity to absorb such risks arising out of a delay in projects,” says Ashutosh Limaye, head-research and real estate intelligence services, Jones Lang LaSalle India, an international property consultant firm.
Despite the risks, data shows that soft launches are pretty popular and investors jump at them. Data from Noida-based brokerage firm, Investor’s Clinic, corroborates the trend that soft launch has been a practice in the Indian real estate market. Mint has independently confirmed the trend. This clearly shows that there is little knowledge or realization about the associated risks among investors and buyers. So are these risks worth the low prices? We would say no. Go for it only if you can check each approval and permission of the project before booking, which may be practically difficult to find out since these offers are open for very short periods—about 10 days or so. Our advice: stay away from soft launches.

(http://www.livemint.com/2012/06/12192447/Are-risks-in-soft-launches-wor.html)

NCR is the largest residential market

  The NCR is the largest residential market in the country by sheer volume of residential units launched. Currently, it has more units than the combined tally of the other five metropolitan cities of Mumbai, Chennai, Bangalore, Kolkata and Hyderabad.
One reason is that the NCR has a huge floating population pouring into Gurgaon, Noida, Greater Noida and Faridabad every year, comprising higher, middle and lower-middle income groups from different parts of the country. Due to a lack of infrastructure and the steep prices of available land in other parts of the NCR, Gurgaon and Noida cater to the demand for major affordable and luxury housing in the area.

A new study by Knight Frank India says that nearly 86,000 residential units entered the market in the financial year (FY) of 2011-12 . Developers and promoters were able to gauge the pulse of the market and launched more affordable and mid-segment projects than premium projects during this period.
Nearly 40% of the units launched are in the Rs 25-50 lakh ticket sizes. As of March 2012, nearly 5,00,000 units were under various stages of construction in the NCR market. The vacancy levels have improved and stand at 36% in Q4 of FY 2011-12, compared to 40% in Q2 of FY 2011-12. Knight Frank India's report says that the market shows a positive outlook, as sales have picked up in Q4 of FY 2011-12 .
Market appreciation
Samarjit Singh, the managing director of India Homes, says that the property rates in Delhi and the NCR were on a steady upward rise till 2008, showing an increase of 25%, but fell sharply during the global slowdown which affected the real estate sector. They have shown an upward trend since mid-2009 and there has been a constant increase in property prices with prices growing by 50% since 2007,
Compared to Delhi and the NCR, the rates in Chennai went slightly down in the latter half of 2007, but since then they have grown almost 150% showing a steady upward trend. Mumbai has shown a balanced increase in property rates over the years and has been the only city to survive the slowdown of 2008-09 with no effect on property rates. It has shown a 50% appreciation in rates over the years. Jaipur property rates initially showed an upward trend from 2007 till early 2008, but then plummeted sharply due to the slowdown. Rates haven't recovered from the downfall, having fallen by almost more than 40% from the 2007 level.
The IT city of Bangalore has showed a very sharp fall in property rates right from 2007 and stayed on a declining trend till mid-2008, falling by almost 45%, but picked up steadily over the years. Rates showed a sharp upward movement in the first half of 2010 by gaining almost 25% but fell again within the same year indicating a correction in the rates, Samarjit Singh says.
Another report says that the NCR will have a total demand of 10.2 lakh residential units, 249 lakh sq ft for office and 66.6 lakh sq ft for retail spaces by 2013. With rising demand in residential, office, retail, and hospitality sectors, Gurgaon is top on the demand chart. Forthcoming worldclass projects, proximity and good connectivity to Delhi are a few factors driving these figures.

Under the new Gurgaon-Manesar Master Plan 2025, the availability of land for development and avenues for new growth corridors has opened up. The new master plan allocates 14,930 hectares for residential use; this is good enough for over 58 new sectors. Most of the new developments are taking place in these sectors.

Records show that 35% of the proposed residential land is under the process of licensing.
The major new growth corridors in Gurgaon include extended Golf Course Road, Sohna Road, Pataudi Road, Manesar, Jaipur Highway and a concentrated growth in Bhiwadi and Dharuhera. Around NH-8, the sectors of New Gurgaon like 37, 37D, 80, 81, 82, 85, 86, 90, 9, 92, 93, 95, and 99 are having a tremendous response.
A proposal by Huda and other authorities concerned to allow developers do the sector roads is a positive development for these sectors. Vijay Gupta, the chairman CMD, Orris Infrastructure, says: "Another factor is the proximity of these areas from Dwarka-Gurgaon link expressway, which will help residents here bypass the traffic at Gurgaon toll near Delhi during peak hours. The gap between demand and supply is still widening. The earlier expansion plans of retailers have been revised. With high vacancy levels, developers are evaluating revenuesharing models to attract retailers. But, now, with the correction in prices, construction activities are picking up."
Developers like DLF, Unitech, MGF EMAAR, Chintels, Ansal, Orris Infrastructure, Antriksh, Assotech Ltd, Raheja Developers, CHD, among others, have already a good presence in the real estate market here.
(http://articles.economictimes.indiatimes.com/2012-05-26/news/31869503_1_property-rates-projects-than-premium-projects-ncr-market)

KMP, progress in slow motion

It was supposed to connect India's four busiest national highways. But seven years after the project was first conceived, the 135-km-long Kundli-Manesar-Palwal (KMP) Expressway is stuck up in a blame-game between the concessionaire and the HSIIDC. Also known as Western Peripheral Expressway, the KMP corridor passes through Palwal, Faridabad, Mewat, Gurgaon, Rohtak, Jhajjar and Sonepat districts.

The project has been delayed by more than two years following which the Haryana State Industrial and Infrastructure Corporation (HSIIDC) cracked whip on the concessionaire.

After the HSIIDC served a notice to the concessionaire, a blame game  ensued between it and concessionaire.
 The ambitious Rs. 1,915 crore project was allotted to KMP Expressway Ltd on November 14, 2005 on build-operate-transfer (BOT) basis with completion time of July 29, 2009.
Even two aerial surveys by Haryana chief minister Bhupinder Singh Hooda, first on July 10, 2008 and second on December 21, 2010, could not speed up the work on this project.
"The delay is not because of the fault on part of the concessionaire. Rather, the fault lies on part of the HSIIDC which has not acquired land to hand over to the concessionaire till date," said a spokesperson of the concessionaire.
According to the concessionaire, the HSIIDC has to acquire as much as 67 acres of land between Palwal and Manesar since most of the problematic areas are somewhere close to Sonepat.
"Besides land acquisition, change of scope in the project is another reason that has caused the delay.
The HSIIDC has agreed in principle to act accordingly," said the spokesperson.
The HSIIDC, on the other hand, has vehemently refuted the allegations of the concessionaire. It says it will impose a heavy penalty on the concessionaire for the delay, besides putting more restrictive measures.
"We will take all possible steps to tighten the noose around the concessionaire. A committee is taking care of the matter. May be in a week we will come clear on action against the concessionaire," said Rajiv Arora, MD, HSIIDC.
Till date, work on only 48 km of the 135 km stretch has been completed. The stretch is ready to become operational. The work on the rest of the road is still in progress.
"If the land acquisition issue had not cropped up, the stretch would have been covered up to the maximum level," said the concessionaire.
According to the government, had it invoked the penalty in July 2009, the concessionaire would have been forced to pay about Rs. 27 crore till April 2012.
(http://www.hindustantimes.com/India-news/Haryana/Road-to-progress-in-slow-motion/Article1-852362.aspx) 

Road Ministry considering building expressways on busy stretches

The Ministry of Road Transport and Highways is examining the possibility of setting up high-speed roads on routes with high vehicular traffic density, Parliament was informed today.

"The ministry is examining the feasibility of building of greenfield expressways on stretches with high vehicular traffic density on public-private-partnership mode," Minister of State for Road Transport and Highways Jitin Prasada told Rajya Sabha today.

These projects are being proposed along with appropriate development of real estate to make them viable, he said, adding that these projects are at a planning stage.

Meanwhile, the ministry is already in talks with the state governments of Delhi and Haryana for constructing two more expressways from Delhi to Jaipur and Chandigarh.

These are green field projects and expected to cut through separate routes from the existing highways.

The proposed 230 km Delhi-Jaipur expressway is likely to connect Manesar, Bawal, Kushkhera, Bhiwadi, Neemrana to the stretch for the Delhi-Mumbai industrial corridor and other national highway networks.

At present, National Highway 8 (NH-8) is the only high speed link between Delhi and Jaipur. The ministry is yet to workout the plan for Delhi-Chandigarh expressway.

(http://articles.economictimes.indiatimes.com/2012-05-03/news/31559127_1_expressways-highways-road-ministry)

Bhiwadi, a gateway of Rajasthan, is a sound alternative to Gurgaon

Today , Bhiwadi, in Rajasthan's Alwar district, has developed into a modern city. A number of industrial centres have come up in around Bhiwadi-Neemrana , Dharuhera, Khushkhera, Chopanki, Bawal, etc. 

Bhiwadi is the fastest growing industrial town on the outskirts of Delhi. A prime industrial town of the NCR and Rajasthan , Bhiwadi comprises three industrial areas: Bhiwadi, Chopanki and Khushkhera. Spread over nearly 5,300 acres, there are around 2,500 industries operating in these three places. 

Bhiwadi is located at the east end of Rajasthan in Tijara tehsil of Alwar district , 55km from the Indira Gandhi International Airport, New Delhi, 200km form the capital Jaipur, 90km from Alwar , 40km from Gurgaon, 60km from Faridabad and 5km from NH-8 (Delhi-Jaipur highway) on the Dharuhera-Sohna Road. All in all, Bhiwadi is extremely well connected and keeps you in touch with the world without the noise and pollution of a metro city. 

The Bhiwadi sub-region is playing a major role in the economic development of Rajasthan. Spread over 3,347 acres, and an additional 3,000 acres proposed for its extension , Bhiwadi has around 2,500 tiny, small, medium, large, industries including MNC industrial units manufacturing various types of products. They include industries like steel, furnace, electronics, engineering, textiles, pharmaceuticals, printing, cables, rolling mills, food processing , herbal care, etc. 

Bhiwadi-Dharuhera , with social and physical infrastructure and civil amenities in place, have emerged as a credible alternative to Gurgaon. The real estate sector has a robust future here along the NH-8 (Delhi-Jaipur highway). 

Some of the residential colonies and housing boards include Ashiana, Konark Oasis, UIT and Bhagat Singh Colony, among others. A fairly good number of healthcare facilities, including private clinics and hospitals, nursing homes and government hospitals are located here. Shopping complexes and malls are also coming up fast. Top-notch recreation facilities like Classic Golf Course, Wet & Wild Resort, Country Club Resort and Heritage Village are in proximity too. 

Ashiana Housing Ltd has just completed Utsav Care Homes, a housing society for the elderly, in Bhiwadi. Utsav Care Homes is a pragmatic concept that provides housing, support services and personalized care for elderly people who may need help with their daily activities, hygiene and health and medication management . It is a combination of home-living with professional and customized care: an option that makes it possible for senior citizens to maintain and in fact, improve their quality of life, while getting the nursing care they need at an affordable price. 

Vishal Gupta, the managing director of Ashiana Housing Ltd, says: "Care Home is a care-oriented service for senior citizens . It has a limited aspect of the actual medical treatment, unlike a nursing home where treatment is the key. It emphasizes more on assistance in activities of daily living like eating, bathing and changing clothes, as well as recreational activities for that age group. At present, seven care homes with 14 occupants have been launched in Phase 1." 

Bhiwadi is already acquiring a name for itself as a real estate destination and competing on an equal footing with Gurgaon in this respect. Already home to over 2,500 industrial units, Bhiwadi serves as a gateway to Rajasthan. Developers who have a presence here include  Avalon, Krish, Parsvnath, MVL (real estate division), Ashiana, Jagriti Infrastructure, Kajaria, M Tech, etc. 
For more details about this region contact us.

(http://economictimes.indiatimes.com/markets/real-estate/realty-trends/bhiwadi-a-gateway-of-rajasthan-is-a-sound-alternative-to-gurgaon/articleshow/13007509.cms)