Kolkata Real Estate Updates

Mixed fortunes for Kolkata realty

Though investor confidence is pretty low, there is some demand from general users and prices are expected to remain stable for most parts of the year.

Difficult times don't last long. And that is one hope that the real estate market in Kolkata would look forward to in 2012. With apprehensions of a slowdown and a low demand looming large, the Kolkata real estate market — that had been witness to some exceptional deals and a buoyant residential market in 2011— may be heading along a bumpy road this calendar year.

Market sources admit that while the overall mood across the market is “cautious”, demand for homes and property prices are likely to be less susceptible to an upward movement currently. The ghosts of the 2008-09 economic downturn have returned to haunt developers and this might trickle down, affecting the demand for apartments.

Says Mr Saxena, Managing Director – Kolkata, Jones Lang La Salle India, a property consultant: “Investor mood is currently on the slide, and to a certain extent, it also reflects a low demand for apartments. While prices are expected to remain stable in 2012, the year will not be as good as 2011. People will be more cautious before investing.”

INCREASE IN UNITS

Despite the low levels of confidence, market sources are anticipating an increase in the number of available residential units during the coming year.

A good number of projects couldn't be completed in time in 2011, following elections and non-availability of clearances. These projects are expected to come up during the next year and add to the number of available units in 2012, Mr Saxena said.

GLOBAL ECONOMY

According to him, the real estate sector is currently pondering on the impacts that a second recession can have on the Kolkata market. A global slowdown and fluctuating rupee have forced developers to be sluggish in recent years.

“The fear of a recession is looming large over the economy, and this will indeed have an impact on a market like Kolkata (and suburbs), hit by supply (of apartment) constraints. Developers will need confidence and may go slow,” Mr Saxena adds. 

Mr Harsh Neotia, Chairman, Ambuja Realty, agrees to the fact that investor confidence is currently “pretty low”. However, there remains some demand from general users, which according to him, is a good sign. “Prices are expected to remain stable for most parts of the year. There might not be a drop as such in prices,” he told Business Line. 

Market sources too maintain that since there remains a demand-supply mismatch — with the demand for homes being far in excess of their supply — chances of a downslide in prices in Kolkata are minimal. However, a rise in price isn't likely to take place immediately. 

Data available from the National Housing Bank (for the quarter ending September 30, 2011) show that residential housing prices in 9 cities have shown a decline in prices compared to the previous quarter (April to June 2011), with a maximum fall shown by Kochi (9 per cent), followed by Hyderabad (8 per cent), Bhopal (7 per cent), Surat (7 per cent) Faridabad (6 per cent), Ahmedabad (4 per cent), Lucknow (4 per cent), Patna (3 per cent) and Kolkata (2 per cent).

GOOD YEAR

According to developers and real estate marketing firms, 2011 has been a good year for Kolkata developers. Four major buyouts and acquisitions were carried out during the year. These include Ambuja's buying out of Ecospace in Rajarhat, Rose Valley buying Chrome Hotels, PS Group buying DLF's land along EM Bypass and Pranlal Bhogilal selling off another plot in the area to a local developer. These deals accounted for transactions of more than Rs 1,000 crore during the year, thereby making the property market in Kolkata lucrative.

To top it all, Ashiana Housing too announced their entry into the retirement homes segment in the city; through their tie-up with Bengal Shriram (in the latter's Uttarpara project). Even price movements didn't have much of an impact on the developers, and decline in price, if any, was marginal.

DEVELOPER'S MARGINS

Mr Harsh Modi, Director, Eden Group, — which has projects worth a few hundred crore in Kolkata — hinted at the possibility of developers' margins taking a further hit in 2012. 

According to him, input costs have gone up already, thereby affecting margins. Further price rise in input costs are also possible. Apartments that have been pre-booked at a lower price, especially in the affordable category or mass housing segments, would now fail to offset the corresponding hike in input costs. 

“Developers who booked apartments at a lower price to gain financial advantage are likely to be hit the hardest. Overall, margins will continue to be tight,” he said. 

Kolkata realty caters to non-residents:

The days of real estate developers in Kolkata happily showcasing their offerings within the city, or at most the State alone, are no longer the norm.

On the lookout to capture a sizeable chunk of its bookings from the non- resident Indian (NRI) segments, city-based realtors are increasingly warming up to the idea of sponsorships and co-branding for events organised by NRIs and non-resident Bengalis (NRBs) during the festive season. Cultural events organised by the NRI and NRB forums remain another major draw for these companies.

According to industry sources, even as people are moving out of India in search of greener pastures, the aspiration to return to their place of origin remains. It is this aspiration that city-based real estate developers plan to cash-in on through their offerings. Says Mr. Santosh Rungta, Chairman, Rungta Group: “There is a sizeable pent up demand for property from people living outside the country.

“Making them aware of different companies and their offerings is indeed very helpful,” he added.

SPONSORSHIPS AND BRANDING

Be it city-based real estate companies such as Ambuja Realty, Jain Group and Highland Projects, or even NRI businessman Mr Prasoon Mukherjee-promoted Kolkata West International City (KWIC), companies have taken to sponsorships and branding to cater to the non-resident populace at various events organised by NRI and associations on non-resident Bengalis.

“Personally, I have received a number of queries regarding various Kolkata-based developers from those living aboard. Association by city realtors, with events abroad, can indeed be good for the property market,” Mr Rungta said.

Sponsorships apart, branding — for increased product visibility — is usually by way of setting up stalls, or through participation in conferences. This year, Ambuja Realty was one of the sponsors for Probash Parboni — a pre-puja carnival for Bengalis in London. The carnival was organised by a UK-based charity organisation, Panchamukhee.

Similarly, Mr Sumit Dabriwala, Managing Director of Highland Group, pointed out that his company has, for the last 10 years, participated in the North American Bengali Conference (NABC), an annual three-day cultural festival organised by Bengalis residing in America.

CONVERSION INTO SALES

But, “It is very difficult to quantify the conversion rate of such visibility campaigns in terms of sales or number of units sold,” says Mr Harsh Neotia, Chairman, Ambuja Realty.

However, industry sources maintain that at any given point nearly a third of real estate demand in Kolkata is from people living elsewhere.

Mr Mayank Saxena, Managing Director, Kolkata, at real estate consultancy firm, Jones Lang LaSalle, India, admits that sponsorships and co-branding do ensure a better visibility platform for city-based real estate developers and their offerings abroad. 

However, such visibility campaigns should be supported by foreign offices of the developer for better conversion into sales.

“Visibility campaigns work best when companies have a booking office abroad for NRIs and NRBs,” he added. 

http://www.thehindubusinessline.com/features/investment-world/personal-finance/article2704300.ece