Mumbai looks to work from bigger, cheaper homes – ET RealEstate

MUMBAI: Home buyers in Mumbai are dreaming big. Affordability and the ongoing pandemic-induced need for bigger homes is pushing the average ticket size of property deals in the country’s commercial capital up by 50-100%.

Average ticket sizes have grown to Rs 1.5-2 crore in the city up from around Rs 1 crore before the pandemic, developers and industry insiders say. The contrast is not only with respect to the average ticket size in the country’s most expensive property market, but also with regards to actual per sq ft prices that is allowing buyers to consider higher configurations.

“Homebuyers’ rising preference for relatively bigger homes is coinciding with the price benefit they are receiving and is leading to rise in average ticket size in Mumbai. While prices have eased, configuration of apartments being bought by homebuyers have moved higher marginally,” said Ram Naik, Executive director, The Guardians Real Estate Advisory.

Realty developers until recently have been aligning their offerings with market demand and shrinking apartments to make them affordable. However, the price drop and the need for bigger apartments has made them think again.

While other property markets like Delhi, National Capital Region, Bangalore, Pune and Hyderabad are also witnessing the rising preference among homebuyers for bigger houses, the trend is getting amplified in Mumbai that is known for compact configurations.

“People are looking to upgrade to bigger homes due to work from home and online education coupled with the record low housing loan rates, price correction and stamp duty benefit. This is the best situation one can be in terms of buying a property,” said Himanshu Parekh, property consultant operating in south and central part of Mumbai.

According to him, the rising preference for bigger size apartments is visible across segments including luxury homes that are also selling faster.

“Conclusion of deals for luxury apartments in Mumbai was taking time until now. But the pace has increased significantly over the last two months,” Naik said, adding that the firm has sold over 75 premium apartments worth Rs 300 crore in Sion locality of central Mumbai.

Bigger apartments are being favoured across the city’s micro-markets such as Mulund, Ghatkopar, Kanjur Marg and Chembur and western suburbs of Borivali, Kandivali and Goregaon and not just in central Mumbai.

“Post Covid-19, the bigger size apartments and apartments with balconies have come back in great demand. We have to manage good balance between the apartment size and ticket size to satisfy the customers’ new requirement wherein home has become the most secure place and investment as well,” said Rajeeb Dash, Chief Sales & Marketing Officer, SD Corp, a Shapoorji Pallonji and Dilip Thacker Group company.

According to him, the company’s both recent launches at central Mumbai’s Sewri and western suburb of Kandivali are seeing rising enquiries and sales of bigger size apartments.

The average size of new urban apartments being launched has gone up since the last few months, as homebuilders have also started reacting to the fact that people are spending more time at home.

By the third quarter of 2020, one-bedroom apartments in most urban areas increased to an average 500 square feet, up from around 400 square feet in March 2019, when the affordable luxury was in boom, brokers said.

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Ahmedabad: Work-from-home invites commercial property tax! – ET RealEstate

AHMEDABAD: At a time when a large number of offices has switched to work from home (WFH) mode to tide over the Covid-19 pandemic, it has proved costly for a local ceramic trader. The Ahmedabad Municipal Corporation has imposed commercial property tax on the trader for ‘commercial use’ of his residence after the officers found display of ceramic articles in his home.

The AMC has also directed Suresh Tahiliani, owner of the ceramic business in Naroda, to stop using a portion of his residence as workplace as he had earmarked a small space of the property as his office following the lockdown period.

Though Tahiliani stopped using the space as office, he was forced to move the city civil court against the AMC’s notice which also directed him to restore the property to its original status of “residential” . Last week, the court stayed any action on AMC notice at least till the civic body explained its position before the court.

Tahiliani had purchased a residential property, demolished the structure and rebuilt it in 2016. A year later, he obtained the building use permission for residential purpose. He has been paying property tax to the civic body under the category of residential property for two years.

In July this year, he was asked to pay commercial tax for the property for 2019-20 after civic officials found an office being run from the premises. Tahilani had no issue with paying commercial tax, but AMC issued him a notice asking to stop using the property for commercial purposes and restore the building to its original position.

Tahilani wrote back to AMC in October explaining how he obtained BU permission after reconstruction three years ago. It was only for a short time after the lockdown that the small portion of the premises was used as an office where ceramic articles were also showcased.
Ahmedabad: Work-from-home invites commercial property tax!‘WFH doesn’t mean setting up shop at home’

Ahmedabad Municipal commissioner Mukesh Kumar said the merits of the case would have to be examined. “Usually, WFH does not mean that you can set up a shop at in your house. WFH means having a personal workstation, a few files and a corner room to yourself. AMC does entertain applications for converting part of residential properties for commercial use, but then there is a procedure.”

“We receive applications from citizens for converting part of the residence for commercial use for requirements under Shops and Establishment Act or for obtaining professional tax certificates. But when people don’t reveal that part of their properties are used for commercial purpose we have to go by the book. At present AMC does not have any tax exemption policy WFH policies,” says a senior AMC tax official.

AMC did not respond to Tahilani’s representation, and he went to civil court. The AMC has not responded to the court’s notice and the court thus stayed any AMC action pending reply.

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Net office absorption seen at 31 million sq ft in 2021 – ET RealEstate

MUMBAI: Net absorption of office space in 2021 is expected to be at par with the last 10 years average of 30-31 million sq ft in India despite the challenges created by the ongoing pandemic, said property consultants.

The emergence of the Work-from-Home model given the lockdowns and safety of employees has impacted the demand for office spaces as only a fraction of employees are coming to offices. However, the numbers are expected to improve with the access to the vaccine.

“I am pleasantly surprised by the absorption. Honestly, I didn’t think that this calendar year will be 50-60% of 2019 absorption. In June, I would have said it would be between 16 to 19 million sq. ft, but now the net absorption is likely to be somewhere around 25 million sq. ft. It is surprising,” said Anuj Puri, Chairman, Anarock Property Consultants.

After the dip in net office absorption in the June-Septmber quarter, it started improving gradually.

“In comparison to Q2, the absorption went up by 63%, but if we were to compare Q3 of the last year, the absorption went down by nearly 47%. So, last year in the first nine month we saw nearly 32 million sq. ft. of net absorption. This year, in the first 9-months, we have only seen 17 million sq. ft. Hence, we expect this year to end with around 25-27 million sq. ft absorption and in comparison to 46 million sq. ft. last year, this is still a drop of 42-45%. 2019 was a very extraordinary year of 46 million sq. ft. It will be wrong to take that as a benchmark,” said Ramesh Nair, Country Head and CEO, JLL India.

According to Nair, the average of the last 10-year can be considered as a benchmark, which is around 31 million sq. ft. and there is a very good chance that in 2021 would cross that number. In 2019, it was 46, but a year before in 2018 it was around 36 million sq. ft.

While net office absorption has improved considerably, only a fraction of employees have returned to work place so far. The percentage is further low when it comes to information technology parks.

“Our research shows it is actually 8% at large campuses. There are two main reasons for it. There are many companies which have gone ahead and announced remote working plans till March 31, 2021 and employees don’t need to come to office. Secondly, employees themselves are not very confident given the public transport situation in the country. It is a gradual process. Occupiers are highlighting that things are improving but very gradually and WFH don’t work for everyone and people will slowly start coming back to office,” Nair added.

Puri echoes the thought. “We don’t think we are going to see people coming until the vaccine is there. It is 9-11% at various office parks and companies are not pushing their employees. Whether WFH works or not is a question mark, but until the vaccine comes in, the percentage will continue to remain low.

According to Anshul Jain, MD-South East Asia and India, Cushman & Wakefield, people are scared but there is also a clear distinction between personal and work. They are out in markets, going everywhere buying stuff, but when it is about coming to offices, they are not keen because of corporate cultural issues.

Jain believes that there will be a lot of experimentation in the office set up in the coming months with work-from-home and other concepts but nevertheless, the future of commercial real estate is bright in the coming fiscal.

Overall office absorption has been impacted because of the WFH arrangements considering the pandemic. Impact is here to stay for few years, but not permanently.

“If we have to put a number for the next two year of how much real estate office absorption is going to be impacted because of WFH, it would be around 20-25% for the next two years,” said Nair at a webinar organized by Workplace Trends India.

The future of co-working is looking robust, as average co-working space has doubled during 2020 compared to 2019, they said.

“Average co-working space has doubled to 70,000 sq ft in 2020 from 35,000 sq ft in 2019. Enterprises are taking up space in co-working setup and these coworking players are now catering not just to freelancers and startups but to larger enterprises and hence they are taking up bigger spaces. The future of the co-working space is really bright,” mentioned Nair.

However, Jain believes that Co-working operators have to concentrate on enterprise clients to stay afloat.

“There were two-three different types of customers for Co-working or Managed office space. There were individuals, there were startups and then there was enterprise. The first two individuals and startups may continue to work from home and they may not come back until 2021, by 2022 they might come back, therefore focus on enterprises,” said Jain.

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High home loan demand triggers interest rate war – ET RealEstate

̥MUMBAI: A surge in demand for home loans in October has triggered a rate war. Kotak Bank is now offering home loans at 6.75% — the second reduction in less than a month. A host of banks are offering loans at 6.8% to 7%, resulting in the spread between these and government bonds narrowing down to 80 basis points (100bps = 1 percentage point).

Banks say that home loans are a safe bet and this is the only segment growing in double digits. Demand has been triggered because of work from home (WFH) needs, discounts by builders, reduction in stamp duty rates and interest rates being at an all-time low. The frequent changes in pricing among lenders seem to indicate that a rate war is brewing as the banks compete to grow the home loan book, which is seen as the safest category of loans.

In the last few days, Bank of Baroda and Union Bank of India had slashed their home loans to 6.8% and 6.9%. SBI recently announced discounts of up to 25bps on loans above Rs 75 lakh for customers applying from its app Yono. HDFC also offers loans at 6.9%.

Speaking to TOI, Kotak Bank group president (consumer banking) Shanti Ekambaram said that the lender was seeing an increase in demand for housing as the shift to WFH had resulted in homeowners looking for larger accommodation. Also, developers and state governments were offering additional incentives to home buyers.

“We are seeing demand back at pre-Covid levels and we want to open our doors to home loan customers as part of our acquisition strategy for long-term customers,” she said. According to Ekambaram, home loans were the best asset class, and offering the lowest rate enabled the bank to attract top quality customers.

While announcing the results, Punjab National Bank MD & CEO S S Mallikarjuna Rao said that home loans have gained momentum and are heading to pre-Covid levels. Home loans have been a major driver of credit, growing nearly 10% on a year-on-year basis to Rs 84,000 crore.
High home loan demand triggers interest rate warFor HDFC, home loan disbursements in October 2020 have been the second-highest in any month in the institution’s history. Mumbai saw the highest demand followed by Delhi and Bengaluru, while Hyderabad and Chennai were a bit slow. “The demand that we are seeing is largely transactions that were initiated post-Covid and is not pent-up demand. We hope that this will be sustained,” said HDFC VC and CEO Keki Mistry.

Ekambaram says that the renewed demand for housing is an opportunity for Kotak Bank, which was not part of the top-five home loan lenders. The bank now offers home loans at 6.75% for salaried borrowers with a Cibil score of over 750 and loan-to-value of 80% and below. For self-employed borrowers, the rate is 6.85%, all other conditions being similar. The same rates will be available for borrowers seeking balance transfers.

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