- 1. The Kerala RealEstate Market ReportJan Jun 2012CEO, Nandanam
ConsultantsAn overview of key developments,information, news and
research on the KeralaReal Estate Market especially covering
largercities like Trivandrum and Kochi. The Kerala Nandanam Real
Estate Market Report is a compilation ofConsultants our most read
articles on real estate as well astips and recommendations for
investors andSasthamangalam,home buyers. For further details,
advise on Trivandrumbuying or selling property and information
on+91-80860-11012 hot property deals in Kerala, contact us
[email protected] or visit us atJuly
2012www.nandanamconsultants.in
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. 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 citys
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 marketfrom 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. 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. 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. 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, Keralas 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. 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. 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. 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
developers ability to deliver in accordance with theterms, quality
parameters, and time stipulated." 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.
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. 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. 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. 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.