The Kerala RealEstate Market ReportJan – Jun 2012                  CEO, Nandanam Consultants                  An overview ...
Executive SummaryThe Kerala Real Estate market remains buoyant despite many a setbacksand slowdowns it has faced in the la...
About UsNandanam Real Estate Consultants was pioneered when our founder, Mr. K Ramachandran Nairrealized that most of his ...
aspiring customer is beginning to wonder if this is a real estate trend or is it a bubble that iswaiting to burst? We expl...
have a correlation as although disposable incomes have increased prices have run too fast.In summary, the information avai...
As Malayalees get set to celebrate their most awaited annual festival of Onam in the end ofAugust, real estate developers ...
For the sake of the investors, the developers and those aspiring to own their home in Kochi, wehope the predictions come t...
there could be a few differences. Some developers like Confident have come out with schemeswhich say "pay the rest" only d...
Crisil ratings for projects in Kerala - What it means for yourprojectCRISIL Real Estate Star Ratings provide city specific...
Why developers and owners prefer joint development forresidential projectsOwn a sizeable portion of land that you are look...
Seaplane Services in Kochi, Kerala. Now you can fly out ofwater!Gods own country would now also offer its tourists and cou...
The majority were NRIs, who were seeking the help of Chief Minister Oommen Chandy afterthey fell prey to one of the bigges...
A real estate consultant can help here with going through the papers. You could also refer to thepast history of the build...
From the developers point of view , every four to six months, as the approvals trickle in, he cankeep hiking the prices. P...
What deters home buyers from newly launched properties?Today, we see an increasing trend in the market towards ready to oc...
requirements from the property and assess if it is the right decision. Areas a real estate consultantcan look at include: ...
facilities, Parking space for 400 cars. For more read about it here:http://www.35thnationalgames.in/index.php/sports-infra...
Our recommendation is that if you want to see appreciation in the next 4 to 5 years for yourproperty go for locations in p...
7 factors which determine the value for your propertyResearch studies conducted across the world, especially in developed ...
and amplify real estate rates in areas which are in the vicinity of the proposed station. Thecorrelation with accessibilit...
transaction happened before six months or if the anchor property is more than 2kms away fromthe given property.7. Structur...
walls and paintings. More often than not your home wont come with the same embellishment oryou would end up paying for the...
So do you invest in Gold or real estate if you have surplus funds in your hand.If you look at all the asset classes for an...
A good time to exit would be 6 to 7 years after the property investment (about 2018), if yourneed so dictates. Going with ...
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Kerala Real Estate Market Report January - June 2012

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An overview of key developments,
information, news and research on the Kerala
Real Estate Market especially covering larger
cities like Trivandrum and Kochi. The Kerala
Real Estate Market Report is a compilation of
our most read articles on real estate as well as
tips and recommendations for investors and
home buyers.

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Kerala Real Estate Market Report January - June 2012

  1. 1. The Kerala RealEstate Market ReportJan – Jun 2012 CEO, Nandanam Consultants An overview of key developments, information, news and research on the Kerala Real Estate Market especially covering larger cities like Trivandrum and Kochi. The Kerala Nandanam Real Estate Market Report is a compilation of Consultants our most read articles on real estate as well as tips and recommendations for investors andSasthamangalam, home buyers. For further details, advise on Trivandrum buying or selling property and information on+91-80860-11012 hot property deals in Kerala, contact us at nandanamconsultants@gmail.com or visit us at July 2012 www.nandanamconsultants.in
  2. 2. Executive SummaryThe Kerala Real Estate market remains buoyant despite many a setbacksand slowdowns it has faced in the last two years. Some cities havewitnessed significant real estate activity especially Trivandrum, due tothe influx of Information Technology industry and softwareprofessionals. They bring with themselves higher aspirations in terms ofquality of life and higher disposable incomes which accelerates realestate growth.Cities like Kochi on the other hand are in the recovery mode after quitea large drop in prices over the last year. We expect prices to startaccelerating in Kochi and Kerala as a whole towards 2014, once therecessionary trends reduce post elections in United States and economicdevelopments kick in into the Euro zone.For the regular or new home buyer and the real estate owner, thisreport will throw to light precautions you must take while buying andselling real estate. A turbulent economy is both a cause for concern andalso an opportunity for significant growth provided investments aremade in a prudent manner. We look forward to hearing your feedbackon the first edition of the Kerala Real Estate report to help us make itbetter in the December 2012 edition.Happy reading! Wishing everyone a very happy and prosperous Onam!Yours sincerelyK Ramachandran, CEONandanam Consultants
  3. 3. About UsNandanam Real Estate Consultants was pioneered when our founder, Mr. K Ramachandran Nairrealized that most of his friends and relatives were finding it difficult to buy or sell a property inTrivandrum, within a short span of time, due to the opaque nature of the market. Mr.Ramachandran, ex General Manager, Finance of Asianet Satellite Communications with over 30years of experience decided to leverage his expertise in marketing, strategy and finance as thecornerstone of advisory services on real estate in Trivandrum.We know the intricacies of the Trivandrum & Kerala real estate market and offer an unparalleleddegree of personalized attention to our customers. With unrivaled knowledge of the city’s mostdistinguished properties and sought after neighborhoods, our associates are highly regarded fortheir professionalism, discretion, and creative thinking. We aim to solve three main issues whichour customers face:1. Lack of wholistic real estate market information- A wholistic picture isnt always availableto customers and most of them had to go with hearsay when buying or selling a property2. Missing out on the good deals - Most agents or websites offered property in an area for aparticular budget. However customers most often did not realise if there are other good deals outthere which they are not aware of.3. Budgets and aspirations - We go beyond aspirations. For most customers home is asignificant purchase of their lifetime. For others it is an investment. Since budget is a primarycriteria in buying and selling properties, sometimes aspirations like interiors, good locationand transparency are not always met when buying a property.Because intelligence is paramount, Nandanam has a dedicated research team that keeps its fingeron the pulse of the Kerala real estate market. We know how to identify emerging trends andmarket opportunities, recognizing neighborhoods that are on the verge of becoming the next hotspot. Our associates share and discuss market trends and listing information amongst themselves,and they possess in-depth knowledge of the many individual facets of the market—from villas toapartments to residential lands.Kochi Real Estate – An exploration of a property bubble &outlook for property prices in KeralaThe rapid growth of the housing market in India and especially Kerala in the recent years hadraised concerns about its sustainability and implications for financial and macroeconomicstability. As prices continue to spiral out of control in the Kerala property market, many an
  4. 4. aspiring customer is beginning to wonder if this is a real estate trend or is it a bubble that iswaiting to burst? We explore the nuances of this growth and try and draw conclusions based onavailable information.The bursting of asset bubbles in the housing market has often been associated with severeeconomic crises, especially, recessions caused by sharp reduction in spending as a result of lossin the consumers’ power to leverage against capital gains. The OECD Economic Outlook usestwo approaches to evaluating housing price bubbles. One is price-to rent ratio and the second isthe user cost of housing. One of the most significant factor that drove the growth of housingmarket in India in the recent years was the easy availability of bank finance at affordable interestrates. As per RBI, the retail loan portfolios of banks including housing and real estate advancesexpanded at rates ranging between 22-41 per cent in the last decade. The RBI has also tightenedthe grip on investments by asking banks only to lend 80% thereby reducing scope of a bubbleformation.ObservationsFor Kochi and Kerala, the user cost of housing has gone up significantly over the last decade orso. As per the Residex which tracks residential property prices in Kochi and other cities, keyindicators emerge:1. The property market in Kochi corrected by 15% from 2008 to 2009 due to global recession.2. The market bottomed out towards end of 2009, further falling by 12%. So in net the marketfell by 27% over the period of 2008 - end of 20093. The year 2010 - mid 2011 saw property prices climb by 35% in Kochi4. The property market tanks and falls by 32% is last three quarters in Kochi.InferenceThe growth recorded in point 3 above was not unique to Kochi. Chennai, Lucknow, Faridabad,Patna, Mumbai, Bangalore and Delhi also recorded significant property appreciation. Much of itwas due to the flow of capital post recession and positive sentiments about the India economyand GDP growth. Speculative investments by customers and NRIs were at its heights and peoplefelt there was no looking back. From the developers point of view, they wanted to cash in on thelows of 2009 and sell off most of their inventory at record profits - resulting in higher pricesevery quarter.Post mid 2011, no city in India, has recorded as significant a correction in property pricesas Kochi. Clearly indicative of the fact that the price increase was a bit too much, a bit too soonin 2010 - 2011. As per CREDAI "A lot of excess inventory was created which did not sell off.Developers were announcing ten projects a month during that period. "Key Ratios to consider(1) Price-to-rent has been on a rising trend since 2003. So although prices have been increasingrents in Kochi have not kept pace. (2) House price to household disposable income also dont
  5. 5. have a correlation as although disposable incomes have increased prices have run too fast.In summary, the information available at our disposal for Kochi clearly points to a speculativereal estate bubble which was created. However, in the back drop, the market has also correctedsignificantly over the last year with the real housing demand coming into picture today. Thebubble which was created was predominantly in the luxury segment since most of it wasspeculative investment by NRIs, but it was not much in the budget segment. To conclude,although ratios (1) and (2) above appear to be true, the prevailing correction in Kochi, gave ushope that prices would stabilize.Recent RESIDEX reportAs per the recent RESIDEX data released in June 2012, property prices in Kochi finally seem tohave stabilized over the last quarter after a steep fall over the last 3 quarters of over 30%.A close look at the RESIDEX index published by the National Housing Bank shows thatproperty rates in Kochi, across multiple parts of the city have more or less stabilized. We hadreported earlier about the fears of a bubble in the Kochi real estate market given the sharp drop inprices. If statistics are to believed the demons have left Kochi and all parts in the city exceptVytilla has seen property rates stabilize.This is good news for investors and real estate owners since it shows that speculativeinvestments are not happening at a frantic pace as was the case earlier. The demand is stable andgrowth should kick in once demand supply mismatch is corrected in the next few quarters. Itwould be interesting to wait and watch for the next quarterly RESIDEX index which would bepublished in a month or so to see if Onam festivities has helped increase demand for propertyand thereby lead to appreciation in rates.Onam, Kochi Metro and Emerging Kerala expected to usherin property appreciation in Kochi real estate market
  6. 6. As Malayalees get set to celebrate their most awaited annual festival of Onam in the end ofAugust, real estate developers in Kochi are the most anxious as well as exuberant. In starkcontrast to the property correction which has been witnessed in Kochi over the last one year,developers believe that the gloom prevailing over the sector will soon fade off and prices wouldagain rise by 15 to 20% after Onam due to the triple bonanza - Onam , Emerging Kerala andthe Kochi Metro launch.In anticipation of a rise in price and demand for property near the Kochi metro stations, mostdevelopers have already bought parcels of lands in the proposed vicinity of where the stationshave been announced. We had mentioned earlier why improvement in accessibility to mono railor metro or LRT augments the real estate prices within a radius of 1-2 Kms of the station.The end of Karkidakam masam and the onset of Chinga masam is considered an auspicious timefor Malayalees. Most marriages, new business launches take place in this season and it is also anauspicious time to register a property. So Malayalees who are on the look out for property at themoment in Kochi, might be spoilt for choices by many developers. Developers also are hoping toclose many new bookings in the Onam season and are preparing welcome bonanzas anddiscount schemes for home buyers. The key trend that is beginning to emerge however is thatafter the NRI driven demand, Kerala’s real estate market is now slowly turning in favour of theworking class with a gradual shift towards the affordable housing segment.Since common sense states that most users of the Kochi metro will live and breathe in the city,(than an NRI who would sit abroad), the demand for housing in areas near the metro station isexpected to be real and measurable. There is a growing belief that the correction seen in theKochi real estate market over the last many quarters, might be the prelude to a phase of stabilityin property prices.In the interim some malls like Abad Nucleus at Maradu have also started selling individualshops, which is seen to be a new trend in the real estate sector. As per CREDAI Kerala,"Building rules which were amended three years ago, is the main reason behind the collapse ofreal estate sector in the state. Because of over supply, 40 per cent of residential properties havenot been sold.In 2008, 10 new projects were announced in a month but now only one new projectis announced in six months. In Thiruvananthapuram, the most happening place in real estate inthe state, the property prices have doubled in 4 years."
  7. 7. For the sake of the investors, the developers and those aspiring to own their home in Kochi, wehope the predictions come true and the prices reign in, in Kochi and other parts of Kerala andoffer stability.Onam 2012, can then finally be one to savour and remember!How do you differentiate between apartments you want tobuy?Make the Right Choice for your apartmentLets say that you have shortlisted two apartments to buy in Trivandrum. Now assume that theyare almost in similar locations, with almost the same amenities, are from reputed builders and areavailable at relatively the same price. The question is what else do you factor in to decide on thisproperty and how do you differentiate which apartment to buy.We offer you a few tips to further narrow down your search results:1. Understand the Carpet Area, Super built up area and Built up area - Carpet area is thearea enclosed within the wall i.e. the actual used area of an apartment. Built up Area is the carpetarea plus the thickness of outer walls and the balcony. Super Built Up Area is the built up areaplus proportionate area of common areas such as the lobby, elevators, stairs, etc. Thus the shareof all common areas is proportionately divided amongst all unit owners and it makes up theSuper Built-up area.What is important here is to understand if both builders are charging for thecarpet area or the super built up area.2. Look at the payment plan - Most builders ask for a 15 or 20% down payment at the time ofbooking and then rest of the payments need to be made based on stage of construction. Here
  8. 8. there could be a few differences. Some developers like Confident have come out with schemeswhich say "pay the rest" only during hand over. This offer is excellent since it ensures that yourare not charged unduly by bankers for availing part of the loan if the project is getting delayed.The actual payment schemes by various builders could mean a difference of about 10 to 15% ofyour project cost , which could be around Rs.5 Lacs paid about 6 months in advance. Theopportunity cost of that capital would be around Rs.25,000. Hence you might want to negotiatewith the builder on payment terms and make it suitable to your needs.3. Look for small differences in finishing - For e.g. Vitrified tiles are stronger and lesssusceptible to wear and tear than ceramic tiles. Vitrified tiles can be further classified intoglossy-finish, rustic-finish (has a rough surface), satin-finish (shiny in appearance but has arough surface), imported, slab-size tiles. Check if the walls of the rooms will be painted withAcrylic Emulsion Paint and if the windows/Glazing will be Anodized/powder coatedAluminum/UPVC. Also check if the flooring will be of Anti Skid Ceramic tiles in the bathroomand other relevant areas.4. Undivided share of land - In many instances the builders of an apartment do not transfer theentire extent of land to the buyers of flats. Instead, they tend to retain a portion of the undividedshare which is subsequently misused leading to various complications. States such as Karanatakahave made it mandatory that the undivided share of the land cannot be registered in isolation andthey have to be registered along with the flats. Now why is this important?Imagine you are building a 2000 sqft home over a plot of 2400 sq ft land. In this case, theundivided land share is 2400 sqft and the super built up area is 2000 sqft. The undivided share ofland is thus equivalent to building a flat on that assigned land area. Over time, the value ofconstructed area depreciates while the value of land area appreciates. Say after 30 years, thebuilding is too old to stay and the entire complex needs to be rebuilt. What you own will be onlythe Undivided Land Share.Sometimes the builders might allot you a lesser land share or may not mention the land share inyou sale agreement or even worse they might claim the land share of your entitled land. If youare buying resale flats which are quite old (10+ years), undivided share is important to ensurethat you get the value of land at the time of reconstruction.
  9. 9. Crisil ratings for projects in Kerala - What it means for yourprojectCRISIL Real Estate Star Ratings provide city specific all-round assessment of real estate projectsand help buyers benchmark and identify quality projects within their city.CRISIL Real Estate Star Ratings address two critical needs in the realty sector: improvedtransparency and objective benchmarking of projects.The key factors evaluated in the Star Ratings process are  quality of legal documentation,  construction related risks,  financial flexibility/viability of the project besides the background, and  track record of the project sponsor.Star Ratings is based on an eight-point scale that is specific to the city— from ‘City 7-Star’, thehighest, to ‘City 1-Star’, the lowest being Non-Deliverable Project.Some of the ratings given by Crisil for projects in Kochi and Trivandrum in Kerala are asfollows. The real estate ratings serve to increase the credibility of the developer on one hand andhelps the developer get financial funding. This also ensures for the customer good constructionquality in the project.As per ICRA Limited, “For end-users/buyers, Grading provides an independent and objectiveopinion on the risks associated with the developer’s ability to deliver in accordance with theterms, quality parameters, and time stipulated."
  10. 10. Why developers and owners prefer joint development forresidential projectsOwn a sizeable portion of land that you are looking to sell and make money? Wait. Have youconsidered JDA or Joint Development. JDA is one of the best options available if you own alarge piece of prime land in the city and are looking for prospective buyers. It could even fetchyou higher than market rates, provided you get sound advice on the JDA process and get thingsright. More about JDA below.It is fairly common to see developers and builders enter into development related arrangementswith land owners rather than making an outright purchase of the land identified for their project.Paucity of good parcels of prime land is one of key reasons developers go for such jointdevelopment through out the country.Land owners may grant rights to develop their land under an agreement entered on mutuallyagreed terms and conditions. The development rights itself can be granted in three differentways, such as by a joint development rights agreement, sole development rights agreement andthrough a development services agreement. Joint Development is the most popular amongstthese.As described in Mint "In a joint development rights agreement, the owner provides the land freeand clear of all title defects and encumbrances, and undertakes the development of such landalong with the developer. In such arrangements, the land owner continues to own the land andshares the responsibility to develop the building project along with the developer. " The landowner and developer can either agree on sharing revenue out of sale or lease of the built-upspace or owning the built-up space in an agreed ratio.The Supreme Court of India has given concurrence to this proposition in the case of CAT v.Fazalbhoy Investment. In this case, the court held that there exists a concept of dual ownership inIndia wherein one person can be the owner of the land and another person can be considered theowner of the structure on that land. From the land owners point of view, a JDA enables anindividual land-owner to cash in on the skyrocketing real estate prices, but at the same time, italso helps him/her to retain a portion of the land/property for his/her own use and living.If you are looking at entering into a JDA, you must pay due attention to aspects like Service taxand Stamp duty, otherwise you may land yourself in trouble while parting with your land.
  11. 11. Seaplane Services in Kochi, Kerala. Now you can fly out ofwater!Gods own country would now also offer its tourists and country men, a sea plane facility, so thatyou can take right off from water!The Sea Plane services are being launched in Kochi, Kerala. The state government has decidedto introduce this facility in September this year as part of the Emerging Kerala Global Connectprogram. The government has taken measures to identify the area needed for this project. Onceintroduced, the service is expected to boost the water tourism of the state.Emerging Kerala 2012 is scheduled to be held later this year in Le Meridien Kochi fromSeptember 12 to 14, 2012. Kerala, expects to close down investments by business magnets inprojects such as Kochi Metro, Mono Rail, NIMZ project, High Speed Rail corridor and othersthrough this conference.The water transport terminal and office complex of Goshree Islands Development Authority(GIDA) is coming up at the authoritys land on Goshree- Chatiath road. The GIDA has proposedto utilise the inland water resource available and would introduce modern and fast boats thatprovide residents a cheap, fast and safe mode of transport.The tender proceedings of the Rs 6.33 crore project was completed by KITCO and according toGIDA officials Aluva FIT would initiate the project. The project is slated to get completedwithin one year, by August 2013.Avoid falling into a trap in real estate buying in KeralaFor those who are not aware, it was a harrowing time for all customers of Apple A DayProperties last May 2011.
  12. 12. The majority were NRIs, who were seeking the help of Chief Minister Oommen Chandy afterthey fell prey to one of the biggest real estate frauds in the state. Apple-A-Day Properties abuilder based in Kochi, reportedly collected over Rs. 100 crore from buyers which included 125Indian expatriates in the Middle East.The company offered villas and apartments in the heart of the city of Kochi at attractive rates. Itused the goodwill of a couple of its completed projects to rope in buyers, but after it missedmany deadlines for its 11 new projects, customers cried foul. Some NRIs who invested over Rs.45 lakh each in the project did not see completion even after 5 years of the project. The firmsDirector and Managing Director went underground after the company allegedly went bust.Source: NDTVSo the real question is. How does an NRI or any investor avoid such traps and scams. Pleaserefer to our checklist below for common mistakes.1. Nominate or appoint a real estate consultant - Most NRIs in question were not able to trackthe progress of the fraudulent project. This is where services of a respected real estate consultantcomes into picture. They can keep you updated about the progress of the project and even deteryou from buying one if there are hidden dangers.2. Financial Leverage - Most real estate projects which run into trouble do so because offinancial leverage. Real estate being a sector with high working capital requirements, mostprojects are financed by banks. A project approved by a reputed bank like SBI or HDFC etc.itself shows that the bankers have done due diligence with respect to payback period etc. Thisactually makes it a lot safer for the investor to know that the project would be completed on time.3. Credibility of the Builder - Credibility of the builder can be ascertained either via qualityratings like ISO or ratings by CRISIL. If none of these are available, then one of the ways is toensure everything related to the project documentation is in place before you make the payments.
  13. 13. A real estate consultant can help here with going through the papers. You could also refer to thepast history of the builder.4. Timeliness - Variations of around 6 months etc in completion. are common in todays realestate scenario due to lack of funds availability. Anything beyond this should raise a doubt ortwo in your mind about possible date of hand over. Some reputed builders in Kerala like Skylineand SFS maintain a great track of timely completion.5. Safety over Price - If Safety is more important than price, one could look at a project which isready for hand over within 3 to 6 months. This means than you would have to pay about 15 to20% more than launch price , however you can be safely assured of the completion of yourproject.The Pre-Launch property game. Proceed with caution.What is a Pre-Launch projectA pre-launch project is one for which either the entire land has not been acquired (that is, thedeveloper does not have full legal sanction of the title), or clearances (like licences, landconversion and site plan) have not been obtained, or both. Developers are allowed to launch aproject only after all clearances, and full ownership of the land have been obtained. But when adeveloper cannot raise the entire amount needed to launch the project from internal accruals orequity, he turns to private financiers, investors and end-consumers by pre-launching it. Heworks on the premise that full legal sanction will come through by the time the project is ready.Techniques used by DevelopersThe marketing technique used in a Pre-Launch project is quite simple. It is "Enter Early and BuyCheap". The temptation and carrot offered by the developer to a customer mostly are:1. You get to choose your site or apartment you want to live in before everyone else. So you canchoose the right floor, best view, road side etc. etc.2. You get the best rate possible for the property only now3. The pre-launch rates would only be valid for about 3 months and then rates could be up by 200or 300 rs. per square foot.
  14. 14. From the developers point of view , every four to six months, as the approvals trickle in, he cankeep hiking the prices. Post full legal sanction he can launch the project and by then he hasenough bookings in his kitty.Perils of a Pre-Launch projectOne of our customers, brought a project called "Salarpuria Senorita" in Sarjapur Road, Bangalorein 2010. The Project was in Pre-Launch. Salarpuria being a reputed builder, put up huge signboards at the sight of the property and hoards of people walked into enquire. The project wasbeing offered Rs.300 per square feet lower compared to launch (which was scheduled 4 monthsaway). The promise was some one who books now, would get about Rs. 5 to Rs. 10 Lacs benefitdepending on final price and size of the unit. The booking amount for pre-launch was Rs. 5 Lacs.As the story goes, despite waiting for one year, the project was not launched. The personsmoney was stuck because in the interim other builders launched projects and he did not take themoney back in the hope that Senorita project would launch. Salarpuria finally returned back thepre-launch booking money with bank interest, leaving the person in question flummoxed andexasperated.This is typical of most pre-launches which do not take off. Six months would already be gone bythe time you realise that the promises are not being kept and the construction is not happening aspromised. By then, you would have sunk in between Rs 5-15 lakh . If you buy a plot in the pre-launch stage and the project is shelved, the only exit route is to approach consumer forums orcourts, unless the developer returns the money. The riskiest move is buying into a project forwhich the developer has not acquired the entire land.Checklist to avoiding perils in the Pre-Launch game1. Check the title deed. Reputed and credible developers start the project only after acquiring 100per cent of the land and will not shy away from showing the title deed2. Look for the developers residential housing track record.3. Be proactive and pull out if you start getting feelers that the pre-launch project is not going tolaunch in 4 to 5 months or if developers keeps giving excuses that approvals are coming shortly.
  15. 15. What deters home buyers from newly launched properties?Today, we see an increasing trend in the market towards ready to occupy projects. To understandfurther we looked at one of the recent surveys done by Track2Realty across 10 cities. As per athe survey done in ten cities-Delhi, Mumbai, Kolkata, Bangalore, Kochi, Ahmedabad, Chennai,Patna, Pune and Chandigarh following were some of the reasons why home buyers in India,prefer ready to move in flats. You can read more here.Possible reasons for preferring a ready to occupy property  Delay in the delivery is cited as number one reason to book a new launch by almost all the home buyers  Default in design, construction quality and fear of faulty construction  Nearly eight out of ten, say they have not got what was showcased as the sample flat.  Lack of amenities like the water splash as the swimming pool, clubs being no more than cafeterias and under-equipped gyms etc in their housing project  Home buyers prefer ready-to-move property because they can avail for tax benefits only after the possession of the house.  Immediate relief on rent and EMI is cited as one of the main criterion for choosing a property worth possession.  Possible artificial demand in a new launched project and after 12-24 months, prices can be realistic, if not outrightly downward.  Anxious to make sure who their neighbours would be and the overall community profile of the apartment.As per our analysis and understanding of the Trivandrum real estate market, most of the reputedbuilders like Skyline, SFS and Artech who have a history of project completions on time, dontdeal with issues 1, 2 and 3 which are the primary concerns for a home buyer. For new buildersone needs to be a little bit more cautious and ask a real estate consultant on their specific
  16. 16. requirements from the property and assess if it is the right decision. Areas a real estate consultantcan look at include: 1) Financial leverage 2) Clear documentation 3) Approval from banks 4)Contractors who are constructing the project (this could be different from the builder) 4) Gettingfeedback on existing projects.With regards to artificial demand, there are examples of that in the market. For e.g when DLFlaunched its project in Bangalore there was a huge demand for real estate space and then therewas a slump which made DLF cut the prices ultimately. However what we find is that realdemand truly exists in most places in Trivandrum especially within the city like Vazhuthacaud,Kowdiar or even MG road. Hence an investment with a good builder in an area within the cityshould allay most of the concerns of home buyers. For those who still have questions should seekhelp and trusted advice of a consultant.Where do you buy you next property in Trivandrum - A cueon real estate buying by location & developmentsThis is a question most home buyers struggle with. Where do I get the maximum appreciationwithin the Trivandrum city. Do I buy an apartment or a plot of land? We have another article onthat subject.The other question is do you go for something near Technopark or within the city? Thus its veryevident that the location of the property is not such an easy choice. We present a few tips here tomake your decision simpler.1. Real estate development in Kazhakootam & Rental income - Both sides of theKazhakoottam-Chackai bypass are infested with high rises. However off late there seems to anover supply and lesser demand for projects in this area. Hence you could get good bargains frombuilders on a new launch or yet to be sold property. The attractive proposition is the rent that onecould command in excess of Rs.10,000 for a 2 BHK apartment or in excess of Rs.15000 for a3BHK apartment.2. Within the city - new growth areas - Vattiyoorkavu and PTP Nagar are 2 upcoming areasworth consideration within Trivandrum city. The governments development project atVattiyoorkavu, coupled with the Greenfield Indoor Stadium at Vattiyoorkavu that is proposed tobe constructed in the available space in the Central Polytechnic Campus, Vattiyoorkavu,Trivandrum is sure to escalate prices in the area after 2013. The Vattiyoorkavu sports complex isset to have the following facilities -Indoor Seating Capacity – 5000, Indoor arena forBadminton, Basketball, Volleyball, Table Tennis & Lawn Tennis , Olympic size Aquatic
  17. 17. facilities, Parking space for 400 cars. For more read about it here:http://www.35thnationalgames.in/index.php/sports-infrastructures/new-infrastructure/224?start=1. These areas are also seeing budget apartments under Rs.30 Lakhswhich makes it quite affordable for a majority of the populace. s3. Vazhuthacaud - Vellayambalam - Sasthamangalam - This is an area within the city whichhas seen rapid increase in real estate rates. Partially due to the completion of road works, and lotsof new offices coming in. Hence a combination of residential cum commercial complexes can beseen springing up here. Rental incomes here could touch Rs.20,000 for a 3BHK which makes itquite attractive for those who are buying on EMIs. The current property rates are around 4500 to5500 per sq. ft. , however we feel this area has not touched the inflection point yet and ratescould increase to 7000 or 8000 per sq. ft in the next 4 to 5 years.4. MG Road - The most prime residential area in the city also features some new launches bybuilders like Power Link. With new towers coming up in the Ayurveda college region, if you canafford, MG road will be worth the bet in the years to come. The rentals here touch up toRs.25,000 a month.5. Mono rail connected areas- The debate on the mass rapid transport system lingers on withoptions like Mono Rail, Metro, LRTS etc. being considered. In Phase 1 - The 19 stations for theproposed mono rail would be located at Technocity Extension, Technocity, Pallipuram,Thamarakulam, Kaniyapuram, RVTI Junction, Kazhakootam, Karyavattom, Pangaparra GuruMandiram, Pangaparra C H Memorial School, Sreekaryam, Pongumoodu, Ulloor,Kesavadasapuram, Pattom, Plamoodu, Palyaam, Statue and Thampanoor. Phase I will culminatein front of the Sreekumar Theatre. In Phase 2 - 16 stations. Killippalam, Karamana, Kaimanam,Pappanamcode, Karakkamandapam, Vellayani Junction, Pravachambalam, Pallichal,Paroorkuzhi, Mudavoorpara, Balaramapuram, Vazhimukku, Pathamkallu, Moonukallinmoodu,Aalummoodu and Neyyattinkara.
  18. 18. Our recommendation is that if you want to see appreciation in the next 4 to 5 years for yourproperty go for locations in phase 1 of this project. If you want to go for a budget plot orapartment and go for appreciation in 10 to 12 years look at areas in Phase 2 of this project. Goingby experience in other Tier 1 and 2 cities, a mass rapid system shoots up property prices by 40 to50% once the project is in working condition.The final choice of location of your property could be made keeping in mind thesedevelopments. However you can be rest assured that on an average you would get a return on18% odd on investments made in real estate in Trivandrum given the present trends. With theoutlook looking upbeat for the next decade the actual returns could be in excess of 20 to 30%. Soany time is a good time to invest in real estate in the city.Technopark Kollam has opened for bookingsTechnopark as part of the hub and spoke model of development is expanding its activities toKundra, Kollam, which is 63 km away from the Trivandrum Campus. This is to tap the Keralasunique advantage of uniform talent distribution, Infrastructure and supporting IT platforms, e.g.telecom, datacom and digital exchanges, excellent infrastructure availability and back-upsupport. Technopark Kollam is located in 44.46 acres of prime land beside scenic KanjirodeLake. This park is being developed as a Special Economic Zone.FACT SHEET:* Project area: 44.46 Acres* 22 Kms. from Kollam City* 70 Kms. from the Trivandrum International Airport* Location: On the banks of Kanjirode lake, a tributary to Ashtamudi lake* Type of development: SEZ* Basic infrastructure- power, water, roads, telecom, datacom, water treatment plant STP,Executive Hostel, Health, Club, Food Court etc.OFFERINGS:* SEZ Land parcels available for IT/ITES Companies and/or developers on long lease* SEZ Built-up space available on monthly rental basis to be ready by August 2012
  19. 19. 7 factors which determine the value for your propertyResearch studies conducted across the world, especially in developed economies, have usedmultiple methodologies to determine real estate values and the parameters determining it. Themost popular among these is the hedonic model which ascertains value based on the distancefrom the central business district (also referred to as CBD), access to light rail transport andexpressways amongst many other variables. The formula given below, shows the price functionin the Hedonic regression model as a combination of factors like structural characteristics (s),neighbourhood characteristics (n), and environmental characteristics (e). Price Function (P) = f (s1, s2, s3...sj; n1, n2, n3,...nj; e1, e2, e3,...ej) Source:WikipediaDrawing from some of the best research worldwide, we list down seven critical attributes whichhave been proven to affect property values:1. Access to Light rail transport (LRT) - Al Mosaind, Dueker and Strathman claimed apositive correlation between distance to LRT and property values. They argued that propertieswhich were within 500 meters of the LRT got a much higher value, since it improved citizensaccessibility to CBD and other job areas within the city. A perfect example is the monoraildevelopment within Trivandrum which could improve access to the CBD for the smaller suburbs
  20. 20. and amplify real estate rates in areas which are in the vicinity of the proposed station. Thecorrelation with accessibility seems to become void if the property is more than 1.5km awayfrom the station of interest.2. Distance to CBD - A study done in Ohio (United States) for a period of five years and anotherdone in Sydney (Australia) point out that distance to CBD is a critical determinant of real estateprices. Most researchers argue that this variable is more critical than accessibility mentionedabove,although positive correlation does exist for the latter. However as cities become polycentric with multiple CBDs instead of being monocentric, real estate prices would be determinedwith respect to proximity to a particular CBD in the zone or the suburb. At present only MG roadcould be considered as the central business district within Trivandrum with a majority of banks,retail and business houses located in the area. With new retail and business hot spots emerging atVellayambalam, Pattom and Kazhakuttam, new CBDs could emerge within the next decade in apoly centric model within the city and change the real estate pricing pattern.3.Clustering - As per the spatial distribution phenomenon, properties of a similar value appearclustered together than widely spread out.4. Promixity to Highways and Expressways - Properties located upto 2kms from majorhighways and expressways showed a much higher value and appreciation across many globalstudies.5. Proximity to Regional Shopping centers - Research has also shown than real estate which isin proximity to malls, and other regional shopping centers are more expensive than rest of thesample. At the same time, properties located too close to the shopping units saw a drop in realestate rates due to higher levels of noise, pollution and crowding on the streets. The buffer zonewas usually about 2kms from the shopping area, within which, the prices seems to be lower dueto above factors but increased incrementally after that.6. Comparable Sales Approach - Can and Megboulougbe in their research proposed thecomparable sales approach wherein they said that price history in the immediate neighborhood ofthe given property will have a spill over effect on the given propertys market value. The lesserthe distance between the anchor property (which got sold at a higher price) and the givenproperty, the more the impact on the value. This correlation seems to nullify if the anchor
  21. 21. transaction happened before six months or if the anchor property is more than 2kms away fromthe given property.7. Structural attributes - This refers to the size and type of the property. International researchconcludes that number of bedrooms and washrooms tends to have a positive effect on theproperty value given that all other factors are the same. Strucutral attributes by itself pales intoinsignificance if spatial parameters mentioned above are not favorable for the given property.Centralised air conditioning and even presence of senior citizens in a property tends to morepropitious as per research.In summary a host of factors typically decide property rates and you can get a realisticapproximation of value based on these. Since studies of a similar nature spread across manyyears have not yet been conducted in Kerala or for that matter Trivandrum, the true sense of ifany of these seven factors have a particularly significant influence for real estate in the city is leftto be ascertained. These 7 factors could act as guiding principles in helping you choose yourdream home or property in the Trivandrum or Kerala market.Dont get carried away by a sample flatAlthough seeing is believing and experiencing your new home through a sample flat might be apulsating experience for a home buyer, there are fallacies with this approach. A sample flat isone of the marketing techniques used by builders to convince customers of what they can expectwhen they get to live in their proposed house. To the buyers misery, not many are aware of trickswhich could be used by builders in the sample flat. The marketing practice itself is not wrongand is more effective than traditional brochures or websites or emails from the builders point ofview.Factors to be considered while seeing the sample flat1. Sample flats outside of the original property - A sample flat constructed outside of the originalproperty could be deceptive. Most builders use the first floor of the property to showcase thesample flat to customers. A sample flat outside of the property might offer two or threebalconies, great views and look more spacious than the one which you are planning to buy,which is not standalone but in a bigger apartment complex.2. Great interiors - Sample flats usually come with exquisite looking furniture, well finished
  22. 22. walls and paintings. More often than not your home wont come with the same embellishment oryou would end up paying for the upgrade. To supplement this, the lighting and other artistic wallhangings used in a sample flat improves the aspirational value of the flat in the mind of thebuyer. Some builders might even choose furniture sets which fits just well enough in the givenspace, so that it gives a feeling to the buyer of having enough space within the apartment3. Thinner walls - Walls made of out wood or even gypsum boards could be used in sample flatswhich gives an impression of higher floor space. Gypsum which is used in the cement industryas a retarding agent, can also be customized in making the wall finish much more superiorcompared to cement plaster.4. Taller ceiling - A sample flat could also look bigger when it comes with a taller ceilingcompared to the original flat.Nevertheless customers dont have much of an option since most of the sample flats aredemolished before construction begins. And builders can put terms into the sale agreement thatspecifications might change later.Ways around getting deceived by a sample flat1. Look at 2 or 3 properties from the same builder to get an idea of the overall finish2. Look for builders who offer sample flats in the apartment complex than outside so that it ismore realistic3. Dont be mislead by the aesthetics and interiors of a sample flat. Use the sample flat as areasonable guide to how your home might finally be. To get a clear picture of your flat, look atthe architectural drawing and layout plan and discuss with the builder to avoid futuredisappointment.4. If you want to factor in the looks of the sample flat into your own flat, prepare a cost estimatefor the same or consult an interior design firm or a real estate consultant privy with the matter.Investment Advice – Real Estate or Gold?Gold has traditionally been a safe haven for investors over the past many years. Malayalees flockto buy gold for most festive occassions, marriages and religious functions. Gold buying in Keralahas had a meteoric rise over many years and so has the gold prices touching 3000 rs. per gramthis quarter.
  23. 23. So do you invest in Gold or real estate if you have surplus funds in your hand.If you look at all the asset classes for an investor over the last few years, you can easily make outthat in India, equities have barely given returns of 5%. The appreciation in stock marketswitnessed in 2003 - 2007 was quickly wiped off in 2009 and since then equities have had a toughtime. The prospects also dont look bright for equities until end of 2013. Stock trading hasbecome a game of choosing the right stocks or on the contrary a fall in earnings. This has leadmany stock traders to instead invest in Gold coins, ETFs and for retail consumers to buy goldfrom the market. Gold ETFs as per market stats has given standard returns of about 25% over thelast 3 years which makes them an attractive proposition.Lets take a look at real estate. If you consider property appreciation in Kochi or Trivandrumfrom 2009-2012, there was a steep rise as is evident from the RESIDEX india from 2010 to 2011end. However prices have stabilised over the short term in 2011-2012 and investors whoclinched deals in 2009-2010 really got good appreciations of over 30% in their real estateinvestments. But markets like Kochi are likely to offer stable growth of 10-12% over the shortterm and Trivandrum is likely to offer 18-20% in the short term considering the huge influx of ITcompanies and working professionals into Trivandrum.Recommendation:If you dont have liquidity right now to invest in Real Estate, build a corpus with the rightinvestments maturing in 2 to 3 yearsBuild up a good amount of funds via Gold ETFs, NCDs (Non convertible Debentures) and FMP(Fixed maturity plans) over the next 2- 3 years which offer annual returns of 15-20% per annum.This will enable you to just have enough to buy a good property after this time. For it is likely,that real estate prices might again shoot up after a few years, once the surplus inventory lying inKochi is sold out and real demand kicks in Kerala due to the influx of software professionals. Togive an example with 20% return annually and an investment of about Rs.30,000 per month inthe right asset class you would have a corpus of approximately 13 Lacs in a span of 3 Years. Thismight just be enough to help you make a down payment for a bank loan for an investment in landor an apartment. Over the long run, real estate is likely to surpass gold in terms of real returns.If you have enough liquidity, scout for the good deals in the market. Go for a trustedadvisor or consultant.An astute investor having sufficient amount of funds should keep a close watch for good deals inthe prevailing real estate market and make profits when the market growth kicks in 3 years time.
  24. 24. A good time to exit would be 6 to 7 years after the property investment (about 2018), if yourneed so dictates. Going with a good property consultant should help you sail through and pickthe not so evident good deals in the market.

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