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Realty sector in kozhikode upbeat about 2009
Source : The Hindu Property Plus Published On : 2009-01-03 City : Thiruvandrum

The sector grew in the range of 30 per cent to 40 per cent in 2008.

The year 2008 was eventful for Kozhikode city. The realty sector grew impressively in the range of 30 per cent to 40 per cent.

“Of course, we experienced a slowdown towards the end of the year, particularly in November and December. But that has not affected the overall growth,” says Nityanand Kamath, secretary, Kozhikode chapter, Kerala Builders Forum.

The scale of real estate operations had gone up. Builders who focused on small housing initiatives shifted to mega projects last year. “Our markets have matured considerably,” he says.

The year saw clients getting an option to choose from a variety of housing projects from apartments to villas. Over 1,000 units were sold in the previous year, says Ibrahim Kutty, chief executive Officer, Apollo Build Tech (India) Ltd.

Most builders in the city have made a significant achievement in mobilizing funds for their projects. “We have been able to meet the housing demand,” he says.

Genuine buyers

Kozhikode stands out in the realty scenario for varied reasons despite the global financial crisis emanating from the U.S. One of them is a clientele of genuine buyers. A majority of the clients are based in the Gulf Cooperation Council countries.

“Nowadays, people study before investing in any segment. And this has contributed to the boom in property business in the city. Importantly, domestic buyers keenly stick to the aspect of investing in apartments and villas,” Mr. Ibrahim Kutty says.

Last year saw the launch of several mega projects in the city. One of them was ‘hi-lite’ Hills, near Thondayad Bypass. The proposal is to construct commercial buildings and residential apartments.

According to K.P. Naushad, project director, ‘hi-lite’ Residency will have ultra-luxury living spaces and hi-lite Plaza, first-class commercial spaces.

Another ambitious project is Ritz Mareena of Galaxy Builders on the Kozhikode beach. It will be a 26-storey beachfront apartment complex with 100 units, including two penthouses, on 140 cents of land.

Aiswarya Builders, another Kozhikode-based developer, launched a villa project at West Hill Chug am in December. These will be eco-friendly villas, each having an area of 1,700 sq.ft on 5.5 cents of land.

Lifestyle Tower at Karaparamba is another mega project in the offing. Apollo Sea breeze, promoted by Apollo Build-Tec (India) Ltd., is a new initiative on the beach. The 10-storey complex will have two- and three-bedroom flats and two penthouses.

“There are 23 ongoing projects in the city. It will be an opportunity for the investors,” Mr. Ibrahim Kutty says.

However, builders cannot say if the growth will sustain in 2009. Some of the mega projects will take three to four years to complete. Long-term investors can definitely go for these projects. “But it is difficult to forecast about high-end products commanding above Rs.40 lakh for an apartment or villa,” he says.

People are always willing to buy apartments or villas in the range of Rs.25 lakh to Rs.30 lakh. Affordable housing is likely to work miraculously, he feels.

Mr. Kamath says the housing sector will be great unlike commercial spaces. But the city needs to keep track of the development activities going on. A mall opened in the city a year ago. A new one is coming up on Mavoor Road. The third one is at the Mavoor Road junction. “The entire segment is gearing up for future development activities,” he says.

The boom in the construction sector has not dropped off in Kozhikode city. One of the reasons for it is the remittances by non-resident Indians.

A report by a global economic research firm, Oxford Economics, says that emerging markets such as India will continue to grow even though developed nations across the world might have been into recession. It is a positive sign for the real estate business. The growth rate in India is expected to be about 5 per cent in 2009. And that will be reflected in a consumer State such as ours, developers say.

Development activities at the Beypore port and information technology projects will bring in more revenues for the city. Banks and insurance companies will have more opportunities and a greater role to play here, Mr. Kamath says.

However, all this depends on how fast the government will take measures to commission the Cyber Park in the city and the satellite city at Kinalur, near Balussery. “The realty sector relies on infrastructure projects. And that includes the widening of the Mananchira-Vellimadukunnu road. Both the State government and the civic body need to rethink on strategies for development,” he says.

Will affordability and quality hold the key in the real estate sector?

What will the year 2009 bode for the real estate sector?

The year that just passed had made a promising start, only cloaking the economic downturn that was in store. The decline continues into the New Year.

Banks, property developers and their customers hold their money back. The general advisory is grim.

The World Bank’s Global Economic Prospects 2009 has painted the grimmest picture so far. The situation in India is set to worsen with the growth rate next year projected to be fewer than six per cent. The Reserve Bank of India has sent out signals that its projections may undergo corrections.

So, what does 2009 hold for the real estate industry in Kerala? Real estate developers started admitting to falling enquiries and an even steeper fall in sales late last year.

The market is going through a much-needed correction. What is needed is affordable housing. It is time the builders took a look at it seriously, says a senior official of a housing finance company.

The business model may change. The real estate business will have to reconcile to thinner margins and a volume-driven business from now, he says.

The year may see the industry developing a new outlook — affordability and quality. Affordable houses now come at between Rs.20 lakh and Rs.30 lakh. For whom is it affordable? For the salaried class? Maybe, with the rising salaries.

As 2008 ended, the National Housing Bank called upon home finance companies to cut interest rates to boost the housing sector. S. Sridhar, Chairman and Managing Director, National Housing Bank, told presspersons in New Delhi that the bank was cutting rates and he expected the housing finance companies to pass on the benefit to borrowers.

Encouraging signal

The interest rate revision is a big boost for real property development as the New Year begins, says George E. George of Kerala Builders’ Forum.

He sees a genuine demand in the market. The market will go up despite a sales fall in the last three quarters.

The months of October, November and December in 2008 have been the worst for the industry, he says. But this is the time, again, for a correction.

Mr. George wants the building industry to get more professional, more organised and thorough in planning and visualizing the future. He sees that happening through the New Year.

The outlook on the housing finance industry for 2009 is encouraging, says A. Pitchaiah, Senior Manager of Can Fin Homes Ltd.

The recently announced loan package softened the interest rates and as such, those looking to borrow may get bigger amounts than that in the past few months. But the package is effective only till June, he adds.

During the past few months, the real estate industry has witnessed a correction and property prices are down. This provides an opportunity for new borrowers with higher loan eligibility.

The rates after June are unpredictable. This uncertainty is compounded by reports of salary cuts and job losses in many industries. The salaried classes are big-time home buyers.

Mr. Pitchaiah feels that it is time the developers came forward to reduce their margins, as the banks did by reducing the rates. The builders will find this feasible as the prices of construction material have seen some correction.

Despite the fall in sales and the number of enquiries, there is genuine demand in the market, feels Abdul Aziz of Skyline Builders and an office-bearer of the Confederation of Real Estate Developers’ Associations of India.

He says the enquiries, though half in number than those previously, are solid and encouraging.

Mr. Aziz has maintained throughout that the Kerala real estate market is backed up by genuine demand. The lack of speculation in the market means that the buyers have not gone away forever.

He feels that genuine buyers may be holding back their money, expecting prices to fall. The wait-and-watch attitude is driven by the global crisis. This is stronger among the non-resident Keralites who have seen recession in many developed economies.

Infusion of a certain amount of confidence will be the right boost for the real estate industry in the State, Mr. Aziz says.

Besides, his optimism stems from his perception that the Gulf market will hold firm if crude prices stay above $40 a barrel.

The non-resident Indians continue to be a rich constituency. Their savings have appreciated around 30 per cent over the past few months with the developments in the currency market. With the slowdown in the real estate industry, money is now flowing to the banks.

However, Mr. Aziz says, a deposit rate cut is likely in the immediate future. Some of the new generation banks have already announced rate cuts and this will encourage more money to come into the real estate sector.

While the optimism is backed by sound reasoning, a certain amount of caution prevents customers from taking the leap of faith.

But with confidence-building measures and the right intervention from the Reserve Bank of India, the real estate business may be able to see itself through trying times.

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