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Dip in borrowing cost, affordable housing to boost house purchases in 2015: Survey 

MUMBAI: Declining borrowing costs, improving employment outlook and availability of affordable housing projects are encouraging prospective home buyers to purchase new properties in 2015, a survey has said. 

According to a report by ZyFin Research titled 'New Home Purchase Sentiment Index', the regulatory changes including the recent Cabinet approval to the Real Estate Bill (Regulation and Development) are also expected to boost home buyers' sentiment further. 

The macro-analyt .. 

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Kharghar vs Mira Road: Which is better? 

By Surbhi Gupta, Magicbricks bureau 

What would you prefer- a home in new town with all luxuries beside you or an established locality with 'Mumbai' in your address line? Confused? Compare on and choose what suits you most. 

As per recent PropIndex edition, Kharghar and Mira Road are top two localities for buying properties. Interestingly, both of these ;localities are in different sub region as Kharghar lies in Navi Mumbai while Mira Road is a .. 

On one hand, Kharghar offers numerous new properties on sale, opportunities for earning rental returns more in Mira Road where demand for leased accommodation is high. Mira Road remains a favorite hotspot for struggling TV actors and filmstars, workforce employed in Malad and local traders working in Borivali and Kandivali because of affordable rents and an established infrastructure. 

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Housing sales improving; full recovery in next fiscal: CREDAI 

NEW DELHI: Housing sales have started showing signs of improvement but full recovery is expected only in the next financial year, realtors' apex body CREDAI said today. 

Amid rising consumer complaints, CREDAI asked aggrieved home buyers to first approach the industry body's Consumer Grievance Redressal Forum to resolve the matter. 

"Housing sales have started to improve. Transaction are happening in Delhi-NCR as well as other cities. Sales are expected to further increase during .. 

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Mumbai most expensive city for expatriates in India; globally Angola ranks No 1: Mercer’s survey 

MUMBAI: Luanda, the capital of Angola, has been rated the world's costliest city to live in, for the third consecutive year by Mercer's Cost of Living Survey 2015. Hong Kong (2), Zurich (3), Singapore (4) and Geneva (5) top the list of most expensive cities for expatriates. Asian cities dominate the top 10 costliest cities rankings along with major cities in Switzerland in the report.

India's most expensive city to live in, Mumbai (74), climbed 66 places in the ranking. The city, sa .. 

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May Construction Spending Up 8.2% Over Prior Year

Construction spending in the U.S. rose in May as both private-sector and government expenditures increased, the Commerce Department said Wednesday.

Construction spending increased 0.8% from April to a seasonally adjusted annual rate of $1,035.8 billion in May. That’s 8.2% higher than the estimate for May 2014, when (seasonally adjusted, annual) construction spending stood at $957.6 billion. May’s numbers beat the consensus 0.5% increase forecast by economists surveyed ahead of the release by Bloomberg.

In the first five months of 2015, construction spending reached $382.1 billion, 5.9% above the $360.8 billion spent during the same period in 2014.
May spending on private construction–which accounts for more than 70% of all construction spending–rose 0.9%, to a seasonally adjusted annual rate of $752.4 billion. Private construction includes commercial buildings, private schools, lodging and other non-residential private projects, as well as new single-family homes and apartments. Residential construction, at a seasonally adjusted annual rate of $359.5 billion, was 0.3% above April’s level, while non-residential construction stood at $392.8 billion in May, 1.5% above April’s pace.
Public construction rose 0.7% in May, to a seasonally adjusted annual rate of $283.4 billion. Educational construction stood at $65.3 billion, 0.7% below April’s rate. Highway construction was at a seasonally adjusted annual rate of $85.1 billion, 2.1% above April.
The Commerce Department survey of construction spending accounts for work done each month on new structures, or improvements to existing structures, for both the public and private sectors. Estimates include the cost of labor and materials, architectural and engineering works, overhead, interest and taxes paid during construction, and contractor’s profits.

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SHANGHAI—China’s housing sales showed signs of a turnaround in April, posting growth of more than 10% after falling in 15 of the previous 16 months, as home buyers waded back into the market following recent policy-easing measures by the central government.

While sales picked up sharply, other metrics such as investment and construction starts in the all-important property sector continued to show weakness.

China’s housing sales in the first four months of the year fell 2.2% to 1.49 trillion yuan ($240.3 billion) from the same period a year earlier, marking an improvement from the 9.2% decline in the first quarter, according to the National Bureau of Statistics on Wednesday.

In April alone, housing sales rose 16.0% from a year earlier to 485.4 billion yuan, according to calculations by The Wall Street Journal based on the official data. This marked only the second month of year-over-year growth since November 2013.

“The market is turning the corner,” said Frank Chen, an executive director of property consultancy CBRE.

Policy makers have been worried that a prolonged property downturn would make things worse for the Chinese economy, which grew at its slowest pace in six years in the first quarter and will likely post its worst full-year performance in more than two decades.

On Sunday, the central bank cut benchmark interest rates for the third time in six months, a move that could help the emerging signs of improvement in housing demand. With the latest interest-rate cut, the effective mortgage rate on loans of more than five years has dropped to 5.37% from 5.61%.

Down payment requirements have already been eased for second-home purchases and local governments have been rolling back some of their restrictions on home purchases.

Policy makers are hoping such moves will persuade people to buy a home.

Alex Huang, a production engineer in Shanghai, is one such potential buyer who just might be convinced to take the plunge.

“I’m looking for an apartment near my office in Minhang district, and I’m more confident in buying a place in Shanghai rather than in my hometown, where prices are still falling,” said the 28-year-old Mr. Huang. He believes housing prices are more likely to appreciate in Shanghai than in Changsha—where he was born—a city around 680 miles west of Shanghai.

Average home prices in major Chinese cities are stabilizing, analysts said, and the sales momentum has picked up in cities such as Beijing, Shanghai and Shenzhen, where developers are still planning new projects. However, the situation in smaller Chinese cities remains weak, with plenty of unsold inventory.

“The situation is uneven. Home prices in tier one and some tier two cities are going up, but elsewhere, prices are still weak,” said Jinsong Du, a Credit Suisse analyst. He added that while housing sales were expected to pick up in the second quarter, especially on a year-over-year basis, the forecast for the second half was less clear.

Analysts also said that they anticipate further accommodative monetary measures from Beijing given that property starts and investment in real-estate development nationwide are likely to remain sluggish for some time as developers fear overbuilding.

New construction starts for residential and commercial property in the first four months of 2015 fell 17.3% from a year earlier to 358 million square meters. That compares with an 18.4% decline recorded in the first quarter.

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How do India’s historic buildings fit into modern cities?
India’s old cities are evolving on almost a daily basis as the modern needs of a rapidly growing population change the face of the urban landscape.

Gone are the wide verandas and courtyards of the old buildings as increasing land prices due to large-scale urbanisation and the failure to unlock new land for cities gives rise to high rise, compact blocks of flats.

“Balconies are a luxury few can now afford,” says Ashutosh Limaye, the national head of research and real estate intelligence service (REIS) at JLL India. “Since their inclusion in the floor space index (FSI), verandas have turned into guest rooms or sitting areas for growing families. Rooms with two sides open are no more, creating a dependence on air-conditioning. Changing by-laws have forced lower floor heights and have made the ground level into parking under stilts.

“Today’s norm is to build bigger, taller buildings instead of a cluster of smaller, shorter ones. This has led to numerous semi-private open spaces vanishing,” he adds.

Challenges posed by historical buildings

For the landlords of residential heritage buildings it can be a struggle to meet the constant flow of bills for the upkeep of their ancestral homes.

“Once a residential building receives a heritage tag, repairs can be carried out only in a certain way,” says Limaye. “In many Indian cities, there used to be very big houses or ‘Wadas’. Economically weaker landlords are now unable to maintain such properties. Such families need financial assistance as they become victims to the decisions of the Archaeological Survey of India (ASI) and state-level bodies, which are often taken unilaterally, without involving the opinion of these stakeholders. However, no guidelines exist to help these landlords.”

And there are big differences between the cities. Mumbai and Kolkata both have areas with Victorian-era buildings. However, in Mumbai , restoration and maintenance have been possible due to availability of space, broader connecting roads and other social infrastructure in the vicinity of historic buildings.

“The same has not been the case in Kolkata as it has congested roads and limited scope for restoration,” says Anshuman Barve, senior manager of regional markets at JLL India. “A major factor in restoration is the opportunity cost, which again helps Mumbai as the high costs of real estate here encourage investment in older buildings. The same is not true for Kolkata or even Chennai. ”

Working in a piece of history

India’s distinctive colonial style buildings, located in the older parts of cities which now often fall into the Central Business Districts, are now more likely to be used as office space by companies or local authorities – Connaught Place in Delhi or The Writers’ Building in Kolkata being prime examples.

But old city planning does not fit well with modern needs. Barve says these buildings were not designed to support vehicular traffic and their premises lack space for car parking, which is a major deterrent to corporate occupiers.

“It is also difficult to upgrade infrastructure in most of these buildings, set up air conditioning, tackle parking, carry out building repairs or maintenance, etc. There are, however, many buildings that have been successfully refit and now offer the luxury of modern amenities in the lap of tradition. If maintained well, these structures are preferred by businesses and travellers: for example, the royal palaces in Rajasthan and southern India that got converted into hotels,” he adds.

Sudarshan Malpani, regional director, integrated portfolio services and transaction management at JLL India, points out how some financial institutions that wanted to move out of such structures could not do so, due to legalities.

“There is inaction on the part of the government. Leases that were to be renewed in the early-2000s have still been pending in Mumbai. Then there is high maintenance involved in operating out of heritage buildings and it is very challenging to make any changes from the environment-health-safety (EHS) perspective. However, the high costs are offset by the lower rentals in such buildings,” he says.

From a valuation expert’s perspective too, it is tough to assess the value of such buildings. According to Limaye, more often than not, it is difficult to find comparable buildings and the value of their transactions for benchmarking purposes.

“The valuation has to be done by comparing these buildings to non-heritage buildings, which brings the evaluator to the next decision – whether to discount the price as the building requires refurbishment or rather put a premium for its heritage tag as there are some proprietary firms, which prefer heritage buildings and are ready to pay a premium for them. In such cases, special valuations have to be carried out,” he says.

With so much complexity hanging over India’s historic buildings, their future looks far from bright. According to Barve, unless new regulations for historical buildings come up, most of the buildings will see major vacancies in the coming decade despite their good locations due to increased infrastructure and safety concerns.

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Real estate crowdfunding takes off in China
China’s real estate industry is no longer the exclusive preserve of big investors, as property developers turn to crowdfunding to help finance the construction of commercial and residential projects. 

In June, China’s biggest commercial property developer Dalian Wanda Group and online payments services company 99 Bill launched the country’s first ever commercial property crowdfunding project to invest in building the next group of Wanda Plaza projects. With a minimum investment of Rmb1,000 ($161) and expected annualized rates of return of over 12%, the project (known as Stable Earner 1) is opening the world of commercial property to a whole new audience of individual investors.

It follows on from successful crowdfunding efforts from Greenland, Country Garden and Modern Land to support residential property projects over the past year.

For Wanda, crowdfunding is a departure from its traditional capital-intensive financing model and is expected to facilitate its restructuring into a “light-asset service provider”. Reports suggest the company is aiming to raise at least several billion yuan.

Joe Zhou, Head of Research – East China at JLL, says many of the country’s commercial property developers are adopting asset-light or capital-light strategies, similar to many of their counterparts in Europe and the US. Within the past year, Vanke – China’s biggest residential property developer – also has announced its transition to an asset-light strategy.

And with developers looking to own fewer buildings, opportunities are emerging for an increasingly wide audience. “Developers have been active in the past few years in getting equity investment for projects in China by partnering with domestic and overseas institutional investors. Crowdfunding is an alternative method for getting equity investment,” Zhou says.

Chinese investors flock to new opportunities

Appetite is strong for property crowdfunding projects in China. “Individual investors have been keen to directly invest in commercial real estate,” Zhou says. “As there have been no REITs in mainland China, many retail investors have chosen to buy strata titled commercial properties, but it often has been difficult to get decent returns due to poor property management, uncoordinated leasing/tenant mix and difficulties in repositioning. Crowdfunding provides retail investors with the opportunity for equity investment in commercial real estate.”

It also offers a fresh alternative for developers facing a sluggish market with tighter financial conditions. Following years of rapid growth, China’s property market has lost momentum, making cash harder to come by for many heavily indebted developers.

The growth of internet financing in both the real estate industry and the wider business community is, however, raising many questions for both the regulators who are cautious about growth of unregulated credit pools, as well as investors looking for a good home for their money.

Zhou says: “The major challenges stem from the concerns retail investors have about the outlook of the commercial property sector. In China, there have been many discussions about the oversupply of retail space and the huge impact of fast growing e-commerce on traditional retail.”

Read more about China’s retail challenges in JLL’s China60 report

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MUMBAI: Slum enclaves in prime localities of the city have turned out to be gold mines for private developers.

In an irony of sorts, some of Mumbai's most expensive luxury residential skyscrapers have been built on slum land as part of the state government's controversial slum rehabilitation scheme, popularly known as SRA. These slum sprawls are mainly located in south and central Mumbai where high-end apartments sell for between Rs 25,000 and  ..

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MMRDA receives highest-ever bid for TDRs

MUMBAI: The Mumbai Metropolitan Region Development Authority (MMRDA) has received a bid of 52,000 per sq metre, 4,800 a sq ft, for transferable developoment rights (TDRs) offered under an auction, which is the highest-ever bid received for TDRs in an auction by any government body.

MMRDA had put a total of 3.22 lakh sq ft of TDRs in Mumbai's western suburbs of Goregaon and Jogeshwari for auction. These TDRs generated through slum rehabilitation projects at Nirlon and Nesco plots in G ..

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