The paradox of Indian real estate

The paradox of Indian real estate

India has a huge demand for houses. Industry experts peg this number at 50 million houses in next 10 years – urbanization as a trend has just touched the tip of the iceberg. At a fundamental level, the underlying drivers of demand are strong – key drivers being:
a) High population growth, unlike some European countries that experience negative population growth and have a difficult time filling out existing inventory
b) Population becoming more affluent i.e. more people getting more money in their hands to invest
c) Cities like NCR, Mumbai, Bengaluru see other factors that drive further demand; high immigrant population – with several 100,000s moving in and out of these cities every year creates churn and opportunity; also these cities see demand from neighboring states e.g. the people who can afford it, in let’s say UP, Himanchal, want a secondary residence in NCR/Delhi
Despite this every one in three houses being constructed is still unsold, notwithstanding builders, brokers, online broking houses and now even e-commerce portals trying to entice customers with lucrative schemes and offers. The situation is alarming, there are more than 6 lakh units in top cities in India which will take multiple years to get sold. It is indeed paradoxical that there is supply and there is demand, yet no transactions.
What is driving this paradoxical situation is a market that is going through change; a market that is going through the pain of transitioning from the high-growth expectations of the past to a mature one that will see saner returns.
Developers, still carry significant memory muscle from the hay days, when projects would sell quickly, and everyone saw high returns in short periods of time. Some ambitious developers are still going 4 to 5x under i.e. they launch one project, and use the capital from initial sale to start a second project, then use the proceeds from the second project to start a third and then a fourth and sometimes even a fifth. Instead of using the proceeds to actually develop and deliver, they inter-link cash-flows and spread themselves thin. This strategy worked during high-growth periods, but in a slow market, where projects don’t sell as quickly, when one project is unable to sell, it puts the death-knell on all 4-5 projects. Such behavior/delays, not only seriously impact returns (IRRs), but dampens overall investment sentiment thus putting the market in a downward-spiral of prices not rising, unsold inventory, incomplete projects, leading to further depressed prices/returns. Unfortunately, we all have heard of cases where people have invested their life’s savings in projects that might not see the light of day.
Having said that, some projects are just strategically wrong. Real estate typically develops like an Indian tawa (the kind we make our rotis on!) – first the center gets heated and then gradually spreads outwards. Some developers, in their enthusiasm (did I hear, irrational exuberance?), have missed the mark and gone way outwards than currently supported by the market.
In addition, with limited structured financing options, builders raise capital from small time real estate investors. The investors need returns, which the builder gives by artificially inflating the primary price of the property. It has come to a point where the prices have gone beyond the affordability range of the end customers in certain regions. Builders realize this well enough but are unwilling to sell a product at last years price because that would break down their investor network.
End-users and investors alike, are both dis-enamored by poor returns and a lot more cautious for risk of being stuck with incomplete projects. Consequently, the industry is now shifting from a “pre-launch” to a build and sell model like developed markets, again signs of a maturing industry.
The real estate market is considered as one of the drivers of growth for developing economies. China has been very quick to bring in measures to make sure the engine is always running at optimum speed. When the market was getting over heated, they introduced regulations to dissuade buying second home. The same were eased recently as the economy slowed down. Our government needs to act with the same alacrity. The growth for real estate sector which is 6% of Indian economy was estimated to be 12-13% CAGR. That means 10% of Prime ministers target of 7% GDP growth has to come from this sector. Without a doubt, real estate has and will play an important role in the growth of this economy.
Whether the inventory remains unsold or is in the hands of speculative real estate investors, there is a desperate search for end-customers and real users – who remain elusive. So what will happen now?
Market will have to find a way that this inventory reaches the hands of people who will actually stay there. It is interesting to note that from historically being a seller’s market, real estate in India is now a buyers market. Each buyer has lots of similar options to choose from. As buyers, dictate terms – price discovery in the non-transparent real estate market becomes the main problem.
This is complete paradigm shift. Existing online players will struggle and will be forced to reinvent themselves. I expect entirely new transaction-oriented models (vs simple listing-based models) to come up to solve this problem. HDFC Realty’s ibidmyhome which does a reverse auction for new home buyers is one of the interesting new ways. Another possibility is to turbo-charge the real estate brokers who make the market, with information exchange systems similar to the MLS in the US and use them to drive sales. A Chinese company, FangDD has been extremely successful with this approach. It remains to be seen who breaks this paradox for India, but for someone who does, the prize money is huge.
Source – TOI Blog

Hollow Bricks – An innovative solution

Hollow Bricks – An innovative solution to the construction industry

Many people are not aware or pay very little attention to the walls when it comes to building a house. More than the frills like paint colours, interiors and the elevation; the structure is very important. There are many factors that need to be looked while building and bricks are the basic units for construction purpose. A number of factors should be taken into account while buying them for construction. The quality and the strength of the brick are very important and this varies from place to place. Most of the bricks are fired in kilns which are manually operated. This does not give quality bricks since there is no consistency.
What you need is a quality, durable, energy efficient brick that is being manufactured in a factory. With the need for such kind of bricks, Wienerberger, an Austrian company which is a leading producer of clay building materials for wall systems, facades, roofs and pavers for landscaping, has introduced Porotherm – clay hollow bricks – to South India.
What is a Porotherm brick?
• Porotherm clay building bricks are horizontally perforated clay bricks.
• The Porotherm brick also has the same concept. The perforations of the brick give a unique walling system which facilitates thermal insulation resulting in cooler interiors in summer and warm in winter.
• The two most prominent features of Porotherm bricks:
1. Made of clay, 100% natural
2. With Perforations (Horizontal perforations for non-load bearing and Vertical Perforations for load bearing)
Here are 5 things that make Porotherm superior to other walling solutions
1. Light weight and faster construction:
Porotherm bricks are 60% lighter than conventional walling material. They are easy to handle so helps improve productivity in masonry. They majorly contribute in reducing dead loads i.e.(the non-movable loads on the building like the weight of the walls, doors, windows, floor tiles etc.). Hence leads to substantial saving on structural cost. Being light weight also helps in transporting the bricks to different floors, and this is a great advantage especially for high rise buildings. In most construction sites in India, use of cranes is negligible, at the sites depend on labourers who manually off load construction materials from tricks and carry them to the different floors. An average labourer can pick only one concrete block at a time owing to its heavy weight and this ultimately affects the construction timelines. In case of Porotherm, one can easily carry two to three bricks at a time, there by completing the wall much faster. Owing to uniformity on the sides of the bricks, lack of sharp edges, also makes it easier to handle the bricks.
Post wall construction, curing time required for Porotherm wall is less compared to conventional walling materials thereby allowing builders and owners relatively faster construction.
2. High compressive strength and life span:
Well…being light weight definitely doesn’t mean a weak product. Porotherm bricks possess high compressive strength of ≥3.5 N/mm2, which adheres to the IS 3952 standard. Porotherm comes with a life expectancy of more than 150 years thus making your building and construction an investment for generations. They are immune to fire as they already are fired at 1000o C with a fire rating of F240 or 240 minutes.
Also, the possibility of crack formation post wall construction is minimal, because of its low water absorption property which is less than 15%.
3. Thermal and sound Insulation:
Clay is inherently a good insulating material and bricks made of clay have thus been traditionally considered a sustainable building material. Porotherm bricks are highly advanced version of these clay bricks providing 45% better thermal insulation than conventional building material. They are India’s first Brick with lowest U value i.e 0.6 W/m2k(PorothermThermobrick) as compared to 1.8 W/m2k for solid clay brick and 2.0 W/m2k for solid concrete block. This excellent thermal insulation improves the efficiency of the building making the indoors cooler in summers & warmer in winters. They also provide more sound insulation with an average STC rating of 50Db.
4. Natural and Green :
The clay used in production of Porotherm is sourced from de-settling of dead water tanks and natural additive like coal ash, rice husk, saw dust and granite slurry. Porotherm encourages green and healthy living as no toxic or any chemical additives are used that can cause allergies and other health problems. It is 100% natural, with complete absenteeism of pollutants, Porotherm allows you to lead a comfortable and healthy life.
• The bricks are listed by Indian Green Building Council in green product category under- energy efficient product, material with recycled content and use of regional material.
• Porotherm is also rated by Green Rating for Integrated Habitat Assessment (GRIHA)
5. Energy saving:
The insulating property of Porotherm reduces the use of artificial temperature variation devices like AC and heaters giving the interiors a comfortable living environment, naturally…. This helps in reducing energy consumption. Exploring all the available options is a good idea but choosing the one that provides you a long-lasting durability, cost and energy savings is best thing that can happen for your building.
For more information on Porotherm Bricks and projects currently using the product, here is the link:
Considering all the dimensions of Porotherm, it is indeed a smarter choice over other conventional walling solutions available in India.
-By team Wienerberger, Wienerberger India
Real Estate

Earthquake resistant structures: Is your home on a shaky ground?

Earthquake is a major issue of concern. Over 58% of land in India is highly vulnerable to earthquakes and 38 cities fall under moderate to high risk seismic zones, Delhi, Chennai, Pune, Greater Mumbai, Kochi, Kolkata, Thiruvananthapuram, Patna, Ahmedabad, Dehradun are some of the cities falling in the vulnerability zone. 235 districts in various states fall in the high seismic zones IV and V.
“A large number of buildings constructed in the past have not been made earthquake resistant. Rising demand of housing and the consequent efforts for rapid supply has brought about a situation, where the requirements of safe building codes and practices have not been complied with.Arguably, the most important reason for unsafe construction is the lack of implementation and enforcingof the building codes. This, in fact has been the main cause of high losses among poor and middle class households” said Ajay Khetarpal, CMD of Sunhill Homes Pvt Ltd.
In urban areas, neither the urban land use planning has not been fully successful in keeping the populace away from the sources of potential manmade and/or natural hazards nor has the urban administration fully succeeded in enforcing safe building codes and practices. Some smaller urban settlements and most of rural settlements are more about lack of enforceability of the building codes by way of non- incorporation of the safety requirements in the building bye laws of local bodies/panchayats.
The effects are multifold. Unsafe buildings increase the likelihood of injuries and damages. And loss of dwellings as well as work areas brings about major strains on individuals and sustainability of communities and cities.
The approach, therefore has to be two-fold. One in respect of yet to be constructed structures and second in respect of already constructed structures.
Firstly, the yet to be considered structures. The critical aspects in urban areas thus are not the lack of technical excellence or their individual willingness to work in accordance with the relevant earthquake safety building codes but the gaps in enforceability, non-appreciation of the provisions, resource scarcity and to certain extents exclusion from organised urban sector.The critical aspects in rural areas thus are lack of technical excellence, non-appreciation of the provisions, poverty, resource scarcity etc..
Lack of legislative support in form of amendments in the town and country planning acts, land use zoning in hazardous areas, scheme of incentives for safety bye laws compliances and penalty for non-compliance etc. and the need for adequate training and sensitization of the technical personnel and other related officials of the local bodies/panchayat etc. which are responsible for implementing the byelaws for the building and other regulating other development plans add to the issues. General sensitization of the populace by way of regular programmes in this area is also a requisite.
As per official study, the housing shortage at the end of 11th Plan could be taken as 26.53 million houses for 75.01 million households. That is, more than 50% of the dwellings requirements have already been constructed. Same situation would go for the work areas. How many of these dwellings and work areas would be safe against earthquakes in anybody’s guess. The critical factors to be considered for already constructed structures are the high costs of retrofitting, environmental effects of retrofitting, availability of structures for retrofitting, alternative accommodation and other burdens on the occupants like displacement and costs.
Overall, rigorous short term and long term measures would be required by the Governments, Academia, NGOs and citizens.

On National Voters’ Day, Narendra Modi calls for proactive voter

From ballot papers we have moved to EVMs; earlier, if counting of votes could even extend beyond a day, it is now a matter of hours for the picture to become clear. Earlier, elections could turn extremely violent. Booth capturing prevailed in some parts but now violence and other electoral malpractices have reduced substantially. The past several elections across India have seen record turnouts. This is a positive sign but there remain several people, particularly youngsters who despite being eligible are not registered as voters.

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