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Affordable housing is a misnomer
Suddenly, affordable housing is the buzzword in Indias real estate sector. Almost every developer who got hit badly in last year market meltdown is talking of getting into this segment that involves putting up houses for the masses.
Not everyone, however, is impressed. Deepak Parekh, chairman of HDFC, the company credited with setting up the housing finance market in India from the scratch, feels that in its present form, affordable housing is a misnomer.
In his letter to HDFC shareholders, Parekh said that although developers are now reintroducing one-bedroom apartments and, in the current falling interest rate scenario, buyers are making a comeback, the real issues are not being addressed.
"Affordable housing is not about box-sized, budget homes in far-flung places where there is no connectivity to work places and little surrounding infrastructure, Parekh wrote. "Affordable housing has to be able to cut across all income segments and has to make economic sense in terms of proximity to work place. The agenda for affordable housing requires a combined public-private collaboration and a strong political will to enforce change, Parekh wrote.
There is serious shortages of urban land at affordable prices in India, where encroachments, irrational land use and absence of urban spatial plans are the norm. The total urban land stock in India is 2.3% of its geographical area and it houses 30% of the country population, Parekh wrote. So, for the regular expansion of urban land area, the process of land acquisition and conversion of agricultural land for urban use need to be simplified. Secondly, the floor space index (FSI) should be increased--even if it means imposing an impact fee on those benefiting from higher FSI. And above all, with higher FSI, urban infrastructure also needs to be upgraded.
Parekh also called for the revival of state housing boards. He pointed out that the recent success of mass housing projects by MMRDA in Mumbai and DDA in Delhi proved that there is huge demand for good housing, provided the price is realistic and within the common man reach. "One is hopeful that state housing boards will reassess their role and performance. In the recent period, many housing boards have shifted their focus to merely selling land for profit and sitting on cash surpluses. Such profits should be mandatorily ring fenced and deployed only for affordable housing, Parekh wrote.
Acknowledging that the housing agenda is a daunting task for the new government, Parekh said the challenges of rural housing are very different from urban housing and hence solutions are also different. "For instance, key reforms such as permitting mortgage of agricultural land for residential purposes and introducing title insurance could give rural housing the much-needed thrust, he wrote. "One is hopeful that this government will be more sensitive to both the rural and urban housing needs of the aam aadmi (the common man).
The HDFC chief also looks forward to a real estate regulator. "There is such a compelling need for state level real estate regulators whose role would be to oversee and monitor the affordable housing agenda, promote real estate reforms, ensure transparency, especially by mandating that flats be sold only based on carpet area, and, most importantly, act as a platform to protect buyers from real estate fraud, Parekh wrote to his shareholders.
Parekh also brought to notice a growing trend of developers asking homebuyers for full upfront payment on start up housing projects under the guise of offering a substantial discount. Calling them "hawa mahal (castles in the air), Parekh said, "There are instances where homebuyers have made the entire payment despite the developer not having commenced construction at all. He warned that this seemingly attractive proposition could come with high risk.
Although real estate prices have come down, Parekh feels it could fall further. "Some correction in prices has happened but real estate prices are still high, the HDFC chairman wrote.
Global luxury brands feel realty heat
They are typically regarded as recession proof but luxury brands are now treading the cautious path. Soaring rentals, high initial investments and an unfavorable economy are not making things easy for this nascent industry.
Industry sources even said that while some players were pulling out of luxury malls, others were getting more choosy about locations after the global economic meltdown.
Neha Dagar, head, marketing of sterling silverware brand Ravissant says that they are more guarded this time round about their expansion plans. We are becoming very choosy. We have four stores in Mumbai and three in Delhi. We might look at avenues down South in the near future. It is only logical that in the current recession, brands will be more careful and will instead focus on conserving resources.
Global luxury brands are now looking at new avenues for lower rentals, revising internal cost structures and efficiency operations. Pinakiranjan Mishra, Partner and Leader, Retail and Consumer Products Practice, Ernst & Young, agrees that though luxury brands are usually not impacted by a downturn by definition, this time there seems to be an impact globally.
But while established luxury brands may still be able to tide over the current downturn, the newer brands may not be as lucky. Indigenous jewellery brand Amaris Regalia has cut down on promotional costs and ad budgets. The recession is affecting our expansion plans to an extent. Hence keeping our long-term vision in mind, we are altering short term strategies and using cheaper, effective alternatives, says Manoj Khanna, CEO, Amaris Regalia.
Established players on the contrary say that though a dip in sales has been seen, the impact could only be gauged in the times to come. Our plans have not been affected in any way. Yes, there has been a slight dip in sales of 10-15 % as compared to one s expectations. It is still early days yet to assess the impact, says Sanjay Kapoor, MD, Genesis Luxury, distributors and marketers of brands like Canali, Kenzo, Just Cavali and Aigner in India.
Louis Vuitton Moet Henessey (LVMH) Watch and Jewellery India MD Manishi Sanwal too agrees that though they have not faced any problems in their overall business plans or made any dramatic changes to their strategy, they are being far more active and vigilant now.
What is adding to the woes of the brands are the sky high rents quoted in malls and five-star hotels. Global real estate consultancy Jones Lang LaSalle Meghrajs findings suggest that the cost of real estate globally is typically 8-10 % or at the maximum 15% of the total cost incurred in running a store. However, in India the rates quoted are as high as $25 per sq ft, thus pushing the percentage of real estate cost to as high as 40% in some cases.
While luxury brands can typically afford to pay higher rents because of the pricing of their products and also business turnover, they are not achieving such results in India. India is still an immature luxury retail market that is more geared towards fpractical goods rather than a complete brand mix portfolio.
Therefore, their performance in India is below the international benchmark, says Shubhranshu Pani, MD, Retail, Jones Lang LaSalle Meghraj (JLLM). But whether insulated from the slowdown or not, luxury brands are still choosing to be careful and adopt a cautious stance instead.
Offbeat is the flavor of the luxury season!
Luxury brands are unveiling unique promotional initiatives to appease customers. Call it a result of the recession or simply cutting an edge by way of unconventional strategies, luxury makers are making sure that clients are fascinated by an offbeat shopping experience.
So while Dunhill has enlivened its shopping extravaganza with tarot card readings all through November, luxury cosmetic brand Estee Lauder did extensive research and launched color shades specifically suited for the Indian market.
Italian luxury goods company Tods will showcase the fine art of shoemaking in Mumbai by an Italian artisan to educate Indian luxury buyers and Italian brand Valentino has a special service Valentino, By Appointment , for its well-heeled clientele.
Magic, Luck and Tarot is the central theme of the promotion at Dunhill where one customer will go on to win an elegant ensemble, either casual or formal, of their choice. So why a Tarot theme? A lot of people believe in tarot and fortune. Hence we thought this would work well with them.
It was a way of getting them excited and it has been received rather well by our clients, says Anjani Kasliwal, general manager, Luxury Brands, Brandhouse Retail, distributors of the brand in India. Anjani however does say that the promotion has not been planned to perk up sales. We did not decide to do this to boost sales. Sales have always been good.
We just did this to facilitate more interaction with our buyers, she adds. In another unique initiative, luxury cosmetics brand Estee Lauder recently launched six additional shades of Double Wear liquid and powder foundation developed specifically for Indian skin tones and a color collection called Jewels of Summer. I have always been inspired by the beauty and style of Indian women.
The Jewels of Summer color collection reflects the pinks, berries and metallics that look so beautiful on Indian women. I also wanted to incorporate our Signature golden fluted lipstick into the collection because of the shared heritage of gold between Estιe Lauder and Indian style, says Aerin Lauder, senior VP and creative director, Estιe Lauder.
Besides this, the brand offers lipstick giveaways to customers who visit the store on the opening day.
Going a step further, Italian luxury brand Valentinos special luxury service , Valentino By Appointment, offers VIP clients the indulgence to experience luxury shopping in the privacy of their home.
The team at Valentino puts together a small exclusive collection to suit the individual taste of the client. Whether to add to their own collection or if they are interested in buying a memorable gift for someone special they can enjoy it all in the comfort of their own home.
It is an unrivalled shopping experience for our esteemed buyer, says Sheetal Mafatlal, president, Mafatlal Luxury, franchisee and distributor of Italian luxury brand Valentino in India.
But besides unique promotions and services, there are also interesting educational initiatives lined up in November by Italian luxury brand Tods. An event organized by the brand in Mumbai will help customers understand the quality and the meticulous processes of making a Tods shoe.
In an interactive session, the Italian master craftsmen will engage customers and even ask them to try their hand at stitching the shoe! Now, that surely will make buyers appreciate the 100 steps involved in building a Tods shoe. Offbeat initiatives may be the focus. However the central strategy is just one: to woo the Indian luxury buyer.
INDIASUPERMALL FORUM
Indiasupermall is the real estate industrys information, marketing, advertising and sponsorship network.
Indiasupermall is developed to help people share and discuss common issues on the business of real estate investment and legal aspects in India.
Indian realty sector is immensely promising and most sought after for a wide variety of reasons. And the positive attributes of India is definitely going to help the booming property market grow by leaps and bounds in the near future. Indian economy is witnessing a continuous rise with 8.1 percent increase in the last financial year. This translates into growing demand for a share in real estate pie. Presence of a large number of Fortune 500 companies will attract more companies to this country thus creating more demand for corporate space. Also, Investment in India yields huge dividends. 70 percent of foreign investors in India are making profits and another 12 percent are breaking even.
In the light of growing demand for mall property guidance, Indiasupermall has been launched to help people discuss about the issues and views related to this sector. As Indian property market is still not well organized or transparent, there is always search for expert guidance on matters related to property transaction. Indiasupermall is developed to help people share and discuss common issues on the business of real estate investment and legal aspects in India. Indiasupermall is the first Indian online forum uniting the investment community and associated professionals. It provides a podium to interact people from all verticals of Indian real estate market.
Indiasupermall is designed to provide real-time, rich interaction and collaboration between real estate professionals and consumers online. This online podium offers discussion forums, all combining the simplicity and flexibility necessary to achieve successful communication. Through this online discussion medium, one can easily post queries / questions, get published and find quality responses and useful tips from real estate professionals around the globe.
Indiasupermall serves as a perfect meeting place for real estate professionals, buyers, and sellers to benefit from the posts and advices of regular visitors on this forum. This online easy-to-navigate platform is designed to find real estate information and services in a comfortable environment. Professionals from all verticals can discuss and share real estate issues related to major Indian cities, including Delhi, Gurgaon, Mumbai, Bangalore, Hyderabad, Chennai, Pune, Kolkata, and Ahmedabad to meet their real estate needs.
This platform offers open membership to visitors and it is committed to promote the mall boom in India. It includes mall updates and events across India and the world to make users well verse with the upcoming technologies and events. It also includes threads confined to regional and city specific zones for online realty discussion and conversation topics. There is also a section for NRIs to discuss and share information on mortgages, home loans and insurances, vaastu, property related laws, FDI, and other latest happening on the realty arena in India.
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INDIASUPERMALL FORUM
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