India is currently under a strong grip of the real estate market as the realty sector

is continually growing in leaps and bounds. With the overseas clients making

hefty investments in Indian real estate, the prices have become sky-high. There

are several reasons responsible for the flourishing real estate trends in the Indian

market:  

The so called boom can be attributed to the enormous industrial growth,

which has resulted in a huge demand for commercial space. India is doing

exceptionally well being the most sought after destination for outsourced

business activities.

Also, the liberal FDI policies adopted by the Indian government inviting

foreign investments in the real estate market has added an extra spark to

the real estate business, which is already on fire.

The living standards have witnessed a drastic change from the past

centuries and also the evolving mindset of eyeing a property for an

“investment” purpose rather than a “lifetime shelter”. Thus, a property is no

longer a property only; now the newly coined term for it is “investment

property”.

The Real Estate industry in India witnessed unprecedented growth in a relatively

short span of time. With most companies having seen only the upward swing, the

economic downturn proved to be a litmus test. The realty industry today has

changed so much that each sector needs special skills to make it work efficiently.

All over the world, prices are fluctuating. Global agencies monitor trends in the

top influential cities. With many foreign investments in India and NRIs returning,

the Indian property market watch is on the top most of every big agency.

Companies with stronger fundamentals and ability to make quick strategic

decisions continued to operate, though with reduced visibility and size of

operations, the weaker ones found it challenging to retain their position and

image as a Real Estate developer. The purchasing power of the new generation

of Indians has increased. They are investing in real estate in a big way- in terms

of investment and assets. People have acquired refined tastes in housing needs

and become professional in dealing with builders. Financial companies and

banks have given a boost to real estate marketing as well. To add to this the

government has allowed foreign investors also to test the market conditions here

have helped. Every area of real estate be it industrial, retail space, malls, office

complexes, residential colonies, hospitals, clinics and other healthcare units have

a vast potential for growth.

Residential projects across segments have witnessed strong volumes. For

instance:

(i) Phase-III of DLF's residential project in Delhi, Capital Greens, received

encouraging response, and

(ii) Godrej Properties sold/booked 800 units at its mid-income housing

project in Ahmedabad, Godrej Garden City, within one week of launch.

Backed by strong sales volumes, developers in Mumbai and the National Capital

Region (NCR) have undertaken multiple price increases across projects over the

last 3-6 months. On an average, prices have increased by approximately 30 per

cent across projects in these regions. These are times when investors have been

worried about the sector.

As more opportunities grow for people to work they also wish to invest in places

close by to live in. Builders or developers in various regions are now separately

marketing each space. Even home loan companies and banks are independently

marketing the properties they are giving loans. This helps them to guide their

dedicated clientele and ensure the marketing trends remain closely monitored for

future development.

They generally have customer relationship executives who are assigned (usually

area wise) to assist customers in making decisions. They do have good

knowledge, are professionals on the job and customers do benefit if they are not

very familiar with various technicalities. Each company has its own marketing

device and portfolio to attract customers.

Various tie ups with groups in India and overseas have taken place this year with

increase in FDI. MGF Developments based in New Delhi and Emaar Properties

based in Dubai have joined hands in the first quarter of 2006 for investments

within the country. Nowadays most of real estate focus is on shopping malls and

residential complexes. In some areas down south, the thrust is on IT parks, and

corporate offices and resorts. 

However, on the other side everyone or every other executive does not feel the

real estate sector in India is being well marketed or managed. Yes, there are

some gray areas, which need to be covered up. For instance, foreigners who

wish to invest or firms who are looking at Indian partners are feeling the crunch of

bureaucracy and familial ways of working. This obviously makes it difficult for

them to do business. The potential is there but it needs to be tapped wisely. A

proper way is to have real estate marketing with the right professionals.

Everyone wants to cash on the business.

Buying a dream house or flat to reside is basically not a real estate investment.

Buying real estate with a view to generate income and capital appreciation is

considered as real estate investments.

Real estate investments can be further classified into residential, farmhouse,

commercial, retail, leisure. Leisure is a relaxation place where you can spend

free time or vacation.

Depending upon your risk tolerance and time horizon you can invest in real

estate at different risk levels.

It can be at the time of converting a rural land to urban land, or when a property

is under construction after a property is already developed.

Real estate as an asset class comes with its own unique characteristics of risk

and return. The return from real estate investing comes from capital appreciation

as well as regular income from rentals.

Its risk profile is quite different from equities and bonds and, therefore, its

performance has little correlation to the performance of equities and bonds. This

makes real estate an ideal diversifier to a portfolio of conventional investments.

The inherent risk of equities and real estate is termed high but at particular price

level this may be reduced and entries at such points can create long-term alpha

which may be difficult to beat. That wonderful time to invest in property when

prices were distressed is definitely gone. The investments in property now will

not yield super normal return.

However, that does not take away the importance of real estate in a portfolio.

Real estate provides both a regular cash flow of income to the owner in the form

of rent as well as capital appreciation. The compounding effect of the two put

together over the long term adds up to a very decent return. It is also a very

acceptable form of collateral for loans and provides an inflation hedge in a

manner quite similar to investing in non-perishable commodities such as gold.

Real estate has taken all the metropolitan cities by storm. Delhi and NCR are

already feeling the heat and the real estate graph will further ascend higher

owing to the forthcoming Commonwealth games in Delhi. In the wake of the

economic growth Delhi/ NCR are witnessing a burgeoning demand for retail

properties. The growth of retail properties is evident from the numerous shopping

malls standing proudly in almost every corner of Delhi/ NCR.

With retail properties holding the number one slot in the real estate market for

Delhi/ NCR, the demand for residential properties sits competently at the position

of number two. Thousands and thousands of people are thronging the real estate

market to purchase a residential property, more for investment sake rather than

for spending their whole life under its roof. Delhi/ NCR have several upcoming

township projects for residential purpose. The bigger and fatter pay packages

and loan facilities have led to a superior lifestyle, which has firmly set an

apartment culture in the city. Independent homes now seem outdated to many.

The growth of the residential townships relies on two factors: need and

investment.

The demand in commercial and industrial properties has also been soaring high

in the NCR region due to a sharp increase in the industrial growth and the out-of-

reach prices in Delhi. The increase in the number of business travelers/ tourists

will push the real estate sector in Delhi/ NCR to meet the growing demand for

hotel accommodation/ rooms. Potential customers are identified by criteria such

as age, race, religion, gender, income level, family size, occupation, education

level and marital status. Choose those characteristics of your demographic target

market that relates to the interest, need and ability of the customer to purchase

your product or service.

For example, a target market for a real estate developer selling luxury

apartments and flats would include professional married couples approximately

30 to 45 years old with young children, and with incomes of more than

Rs. 50000-1.5 Lacs per month.

Affordability is the altitude of aspirations, need and the budget of an individual

customer. The range may vary from place to place and from individual to

individual. The net value of affordable segment has increased over time with

increase in per-capita income across all the States.

The monthly carrying costs of an affordable home should not exceed 30 per cent

of the household gross income. Affordability is for ‘Aam Aadmi’, for whom house

is like a dream. This common man constitutes almost 70 per cent of the total

demand for housing.

Out of this, majority constitutes for nuclear families that would preferably opt for a

midsize apartment of around 700-1000 sq ft.

The ongoing condition of economic contraction has also resulted in improved

services to the customer. In order to shed off an image of being non-transparent

and unorganised, a number of developers increased their focus on customer

satisfaction.

A customer was provided the facility of checking the status of construction of his

property by logging on to a website. Earlier, this was possible only after visiting

the site and following up with the concerned officials.

With such initiatives, developers are fast changing their image as professionally

managed corporate houses, committed for meeting customer expectations and

empathetic in resolving the concerned issues.

The recent situation, however, has sent the message home. The Indian real

estate companies are urged to focus on customer satisfaction. The industry is no

more dominated by a developer, putting customer expectations at the backstage

and carrying on operations at his own sweet will.

More significantly, the ongoing correction in the real estate market has indicated

towards its fundamental strength wherein it tends to correct itself with any

excesses on the front of prices, and other demand relating factors.

Nevertheless, real estate companies are fast-learning to lay emphasis on

retention of existing customers and acquire new customers. The present times

have been calling for a fair level of flexibility, which even the real estate

companies have been expecting from their suppliers and service providers. At

the same time, many developers have found a viable strategy in forging

collaborations – leading to cost benefits, synergies, and mutual strength. The

potential areas of collaboration include supply chain, procurement, production

and brand promotion.

Owing to increased competition in metropolitan cities, developers opted to

diversify geographically as well. Tier II and Tier III cities thus came under their

radar. Interestingly, one can easily find developers cheering their strategy of

foraying in smaller cities, which are relatively less-affected of the ongoing

economic turbulence.

Flip through any newspaper that gets printed from Bangalore, and it is not

uncommon to find real estate companies putting out full page advertisements of

their projects.

Similarly, hoardings are back in action in the city showcasing real-estate

developments, and radio ads are also being resorted to. Companies are now

thinking out of the box and, in fact, 2009 witnessed a few prominent players

showcase their ongoing projects in a bid to find buyers for their unsold stock.

Today, most real estate developers have adopted marketing techniques that

seemed to hitherto be the ‘prerogative’ of consumer and lifestyle product

companies. The term ‘marketing’ no longer denotes the mere sale and purchase

of property, but also encompasses creating customer awareness. And this has

enabled the realty segment to graduate to more professional heights.

The result: they have their own advertising agencies; most of them have roped in

PR companies to manage their media relations; many have revised their

marketing and advertising budgets; and now do not even hesitate to participate in

various in-vogue, brand building activities.

In order to cut the clutter, one needs to think ahead of one’s time. People have

also become hugely quality and brand conscious. They are looking for an

‘address’, a lifestyle rather than just a home. Thus, in order to fuel this perception

in the minds of prospective customers, it has become absolutely necessary to

create a differentiator—which in turn leads to the creation of a brand, a premium

brand.

Brand establishment means rising above the ordinary. Once established, it

garners better trust, results in the easier marketability of projects and commands

a better price.

Some innovative, customer-friendly schemes include sale by invitation, a ready

sample house, the inclusion of a penalty clause in the agreement and optional

payment plans. Launch discounts, introducing projects to clients first before

opening them to the public and adopting a customised approach are some of our

other schemes.

Some builders even help the customer to choose the interior design of his house

before he moves in. In keeping with our brand value, they offer free interior

design inputs to their customers whereby they can sit with a designer who helps

them create a customised home layout solution fitted around their needs.

The real estate sector has become more brand conscious, corporatised,

customer friendly and has grown immensely in size. It has also become

competitive in terms of product innovation, pricing, quality and marketing

strategies.

With aggressive promotional campaigns on the one side, and favourable home

loan rates and a big push from banks and the government on the other,

developers were successful in stimulating buyer-interest during the second half

of 2009.

Well-designed advertisements are the ones which will stand out and assist

developers in generating product-level. Though developers are not willing to

come out with actual ad-spends, it is believed that ad-spends in the rejuvenated

market conditions could be significant.

Real estate developers are now banking on the star power of the likes of Shah

Rukh Khan, Amitabh Bachchan and Aishwarya Rai to endorse their projects.

Deepika Padukone is the latest to join these marquee names. Aspire Real

Estate, a Dubai-based developer, has signed up the actress as its brand

ambassador.

The trend of celebrities - from tinsel town and outside - endorsing real estate

projects started around two years ago. So while big banner draws such as Shah

Rukh, Aishwarya, Bachchan or even sarod maestro Amjad Ali Khan and his sons

represent the likes of DLF, Sahara and Omaxe, a host of smaller developers too

have started signing up celebrities to cut across the clutter. There are many who

aver that stars are being signed up more in an attempt to build brands than to

propel sales. A project sells on its own strength, so basically celebrities are

adding to the developer's brand equity.

The Delhi NCR region has witnessed a great number of residential projects in the

last 12 months and still the pace is picking up with many upcoming projects in the

next 24-30 months. This has resulted into the over supply leading to a slump in

the residential market in certain areas. The residential property rates and the

demand depend on the infrastructure of the area. Good infrastructure certainly

leads to higher rates. For instance the flat rates in Indirapuram range between

Rs. 2,500-2,800 per sq. ft. whereas in Noida it is about Rs. 3,500 per sq. ft.

Property rates in Kundli, Manesar and Sonepat region have appreciated due to

developing infrastructure and industries and the momentum is expected to pick

up. The land rates in Kundli belt started from Rs. 3600 per sq. y. which today is

Rs. 8,000-12,000 per sq. y. Government policies like home loan rates,

investment on infrastructure, SEZ status, etc will determine the pace of the

residential market in the NCR region. A two-kilometer flyover is under

construction which will take care of the Badarpur traffic bottleneck. Another

highway is being constructed which will begin from Kalindi Kunj, go around the

newly demarcated sectors of Faridabad, and end at Palwal. Hence, traffic that

does not have to go into Faridabad will bypass the city altogether, thereby

decongesting Mathura Road. Also, the government initiatives such as proposed

international airport, infrastructure development and other schemes in Greater

Noida are likely to provide impetus to property prices in future.

Health care is also one of the deciding factors in the real estate market scenario.

Huge upcoming projects like Escorts Medicity, Artemis Hospital (Apollo Tyres

Group), Paras Healthcare and a health care project by Fortis might change

Gurgaon's health map.

LOCATION MINIMUM RATE MAXIMUM RATE

FLATS

(Rs./sq.ft.)

VILLAS

(Rs./sq.ft.)

PLOTS

(Rs./sq.ft.)

FLATS

(Rs./sq.ft.)

VILLAS

(Rs./sq.ft.)

PLOTS

(Rs./sq.ft.)

DELHI 5950 - - - - -

NOIDA 2710 - - 4700 - -

G. NOIDA 2530 - - 3100 - -

GURGAON 3294 194 222 7000 1407 422

GHAZIBAD 1400 - - 3225 - -

FARIDABAD 1700 3510 - 3597 4030 -

KUNDLI 1846 1278 1333 2175 1444 1722

RUDRAPUR - 272 333 - 263 611

The rates for the residential upcoming projects in Delhi NCR clearly depict the

following facts:

i) There area many established national builders like TDI, Omaxe, DLF, Ansals,

Parasvanath, Unitech as well as some of the new entrants like Dynamic in the

real estate industry foraying into the suburbs like Greater Noida, Kundli and

Rudrapur.

ii) Same as the commercial projects, the rates of the residential projects also

depend on the factors like the location of the project, commercial viability i.e.

existence of any mall or multiplex in the vicinity of the residential project will

certainly lead to increased demand of that place thus resulting in higher rates.

For instance residential property rates in South Delhi are higher as comparison to

other places due to the development in this area and close proximity to place like

Gurgaon.

iii) The accessibility and the approach of a place is one of the major factors.

Introduction and expansion of Metro routes has certainly played a vital role in the

appreciation of property rates.

iv) There is a wide variety in residential upcoming projects ranging from the

investment, total built-up area, facilities provided by the builders like attached

servant quarter, furnished or fully furnished flats, penthouses etc to name a few,

number of towers in the project and number of floors in one tower, the payment

plan, etc.

LOCATION A B C

Min. Rate

(per sq. ft)

Max. Rate

(per sq. ft)

Min. Rate

(per sq. ft)

Max. Rate

(per sq. ft)

Min. Rate

(per sq. ft)

Max. Rate

(per sq. ft)

DELHI 6500 21000 7000 20000 31750 36000

G. NOIDA 5250 7200 - - - -

GURGAON 11000 22000 6200 14000 10000 12000

GHAZIBAD - - 6000 9500 6900 9900

FARIDABAD 22000 30000 8000 10000 6500 8500

MANESAR 6000 15000 - - - -

Number of Projects as per the location

Maximum number of commercial project are coming up in Delhi whereas

Gaziabad is attracting the residential developers. Tier II and tier III cities (non-

metros, towns, semi-urban areas) are witnessing a preference over tier I cities by

real estate investors. This may lead to the inventory pile-up in these cities in

future as leading real estate category A developers like DLF, Ansal, Omaxe

Group, Unitech Group, TDI Group and others are now foraying into tier II and III

towns like Manesar, Kundli and Rudrapur and the suburb areas of Gaziabad,

Greater Noida, Faridabad, etc.

Apartments and Flats in Noida:

The enormous industrial growth in Noida has led to a huge demand for

residential properties. Even though Noida offers a lot many residential options

like villas, penthouses, bungalows and condominiums it is the apartments and

flats which are basking in the glory. Apartments and flats have become a hit in

Noida due to the comfort, safety and the affordable price tag for stylish living. The

flats and apartments have been designed keeping in mind the different pocket

sizes. Thus, Noida offers flats or apartments which fit all the budgets ranging

from low, medium to high. This NCR region has all the facilities to be a residential

area. It has shopping malls, eateries, entertainment hubs, educational institutes

and what not. The apartments and flats come in all sizes from a single bedroom

to a five bedroom set. Famous builders are now targeting Noida for their next

project while some are already accommodating many happy residents.

Apartments and flats have the provision of a tight security round-the-clock and

making the essential amenities available at all hours for their residents there is

no doubt as to why they are leaving behind the craze of living in bungalows or

villas. These well-planned apartments also offer a lot of greenery in and around

the apartments. The government of Uttar Pradesh also has role to play in giving

the city a planned structure. Apartments are also nothing but an evolved form of

planning and comfort. Noida or the New Okhla Industrial Development Authority

was created in 1976 to define the commercial, residential and industrial areas

and to provide facilities as well as infrastructure to help these grow. It also

regulated and kept a check on the number of residential buildings being built on a

particular area. Proper drainage as well as garbage disposal facilities were also

provided. Noida authority was also set up to share the load of residential

properties of Delhi and provide cheaper alternatives to the Delhi people. Thus

slowly and gradually planned residential areas along with commercial and

industrial were developed by the Noida authority. Buying a piece of land and then

building it into your favorite villa, bungalow or independent house is a process

which is very expensive and time consuming. All these factors make the

apartments and flats score higher in comparison to other available residential

options.

Apartments and Flats in Gurgaon:

Gurgaon is a major revenue churner for Haryana with all the top multinationals

setting up their offices here. The city has undergone an exponential boom in the

real estate market owing to the growing industrial and financial activities. With so

many commercial establishments the demand for residential properties is

naturally bound to increase. Gurgaon has responded equally well to the

apartment culture and embraced it gracefully as well. World-class apartments

equipped with all the modern day comforts of life provide a sophisticated life style

to the top management executives employed in the world-renowned MNCs and

corporate firms. They come in attractive designs, at an affordable price and offer

all the luxuries. Different categories of flats and apartments make it possible for

all the home seekers having different budgets to own an apartment. Several big

players of the real estate market like DLF, Unitech, Parshvanath etc. are busy

constructing classy apartments in Gurgaon which have all the possible luxuries.

As the safety and facilities provided in the apartments and flats outnumber the

benefits of living in an independent house or a villa, apartments are flourishing all

over Gurgaon. If you dream of spending a lavish life then Gurgaon has plenty of

options for you.  The spacious 5 bedroom flats, attractive gardens, centralized

cooling, spa facilities, escalators, pools, golf course, cameras for security, play

grounds for kids and much more are sure to enhance your stand in the society. If

you buy an apartment in Gurgaon be assured of getting a high resale value and

rent for that purpose.

Apartments and Flats in Faridabad:

Faridabad is going to be the next big thing in industrial development and also in

terms of real estate. Already many investors have headed to Faridabad

considering its bright future which lies ahead. The HUDA Faridabad authority has

planned to build the next model industrial township in Faridabad. The real estate

market in Faridabad is becoming hot day by day as investors are realizing its

worth and also because purchasing a property in Delhi is becoming an almost

impossible dream for people with a low budget. Faridabad is all set on the path of

infrastructural growth. It has a well-connected railway and road network which

makes it accessible. Faridabad will also have the metro running through the

length of the city in the future. The economy is going to witness a rapid boom.

Many residential projects are already complete while some are still in progress.

Though Faridabad is a bit slow in catching up with the apartment culture, things

still look promising. Several reputed builders as well as the government has

ongoing residential projects while many projects are in the pipeline to meet the

residential demands of the people. A number of people are flocking towards

Faridabad for investment or residential purpose. Economical apartments and

flats are ready to lure the prospective buyers and tend to become more popular

in the coming days as they are comparatively low priced and are furnished with

all the comforts and amenities. Buying individual plots is very expensive and in

today’s world when time is becoming a rare commodity people prefer apartments

or flats where they can simply get their stuff reloaded. Living in apartments or

flats also provides a sense of security with a round-the-clock vigil at the entrance

of the society.

HUDA Faridabad has made continuous efforts to build the available plots for

residential, commercial and industrial purpose. The housing projects undertaken

by HUDA Faridabad have given a new shape to the city. It is accommodating

many people who aspired to own a house in Delhi but failing to do so have

headed to Faridabad. The economic growth and employment opportunities have

also attracted many to live in Faridabad. Faridabad is surely living up to the

expectations of the master plan to develop an NCR region so as to decrease the

population pressure on Delhi. Today, Faridabad houses thousands and

thousands of people in the comfortable, secure and classy apartments and fulfills

their dream of living under their own roof.

Apartments and Flats in Ghaziabad:

Ghaziabad is in the initial stages of growth and development in real estate

market. Part of Delhi NCR region it has also played an important role in

decreasing the population pressure on Delhi. It has also helped in meeting the

exponential residential demand of Delhi by providing an accommodation the

people thronging Delhi. Apartments and flats culture though not a craze is

gaining ground slowly but steadily. Several well-known manufacturing & service

industry giants are setting their offices in Ghaziabad and gearing it up for the

slow but consistent growth. Being well-connected to Delhi, Ghaziabad has a lot

to offer in the coming future as it holds an immense potential for development.

GDA or Ghaziabad Development Authority has played an important role in giving

the city a planned look. It has undertaken several housing projects. GDA came

up with a Master Plan and took charge of acquiring plots and converting them

into housing projects. Several apartments and flats in the category of LIG, MIG

and HIG were constructed. GDA was responsible for the urban development of

Ghaziabad. The GDI now has plans of building around two and a half lakh of

houses along with some private builders. The Indirapuram project of GDA can be

cited as an excellent example of how GDA has been making sincere efforts to

provide affordable accommodation in the form of well-planned township and

apartments. The housing schemes of GDA inspired many private builders to

construct affordable and stylish apartments. Apartments are equipped with all the

basic amenities and comforts and also have tight security arrangements. The

vast array of facilities provided in the apartments and flats is attracting the buyers

more than the expensive independent houses which are not even considered

that safe.

Apartments and flats offer a lot many advantages when compared to

independent housing or the expensive villas and bungalows. Some of the very

basic facilities offered in apartments are 24-hour water and electricity supply,

security, well-designed and stylish interiors, elevators, intercoms etc. GDA has

also constructed a number of malls, hospitals, banks and educational institutes to

meet the residential demands.

Other Key Developments

Housing and real estate form the backbone of the country’s infrastructure and are

critical drivers of economic development. With the Indian economy growing at

over 7 per cent, the construction sector too has witnessed rapid growth. This has

been primarily led by the housing sector, which has got an impetus from

increasing urbanization and easy availability of housing finance. With

government policies emphasizing faster economic growth, the real estate sector

is projected to attract large investments in the coming decade.

Traditionally, investments in this sector have been constrained by the lack of

information and agreed standards. The resulting uncertainty ensured that

financial institutions were cautious in their exposure to residential and

commercial real estate projects.

In light of this uncertainty and in order to provide third-party opinion to housing

customers and financial institutions, CRISIL has developed two specialized

products for the construction industry, namely, Developer Ratings and Project

Ratings.

Developer Rating

Rating of developers’ track record in executing real estate projects as per the

agreed quality levels and transferring a clear title within the stipulated time

schedule.

Project Rating

Rating of developers’ ability to execute the specific project as per the agreed

quality levels and transfer a clear title within the stipulated time schedule.

These ratings are opinions based on a developer’s past track record in executing

real estate projects and are indicative of his ability to do so in future. Factors

such as construction as per the schedule and quality specifications, transfer of

clean title and sales track record are assessed while assigning the rating.

Developers with higher ratings will have properties that are legally sound and that

are completed and delivered on schedule.

Need For Rating

The Indian real estate market is highly fragmented and unorganised.

Transactions are based on market perceptions and are generally characterized

by uncertainty. Given the industry’s dynamics, a rating is needed to highlight the

developers’ customer focus, help them build their brand and improve market

perceptions. In addition, a rating also helps a developer to benchmark his

services with the industry. Finally, a rating not only provides comfort to customers

but also to financial institutions besides enabling the developer to access funds.

 Developer Rating - What it is and what it is not

It is not a credit rating of developers, but a rating of their project

development track record and ability.

It is not a legal opinion on the project, but it reflects the variability in legal

risks.

It is not an opinion on architectural design, but comments on the building’s

safety, inhabitable quality and adherence to norms.

It is not an opinion on the adherence to costs, but assesses the impact of

cost overruns on the project

Affiliation with Naredco

CRISIL has conceptualised the methodology for the real estate developer rating

in consultation with and after incorporating the relevant suggestions and

recommendations of the National Real Estate Development Council

(NAREDCO). The rating process has been developed after taking into account

the specialised needs of the sector. CRISIL’s association with NAREDCO

enables it to leverage the latter’s expertise and experience.

The National Real Estate Development Council (NAREDCO) is the apex national

body of real estate developers. It is a self-regulatory body that aims to inculcate

ethics and a code of conduct into the profession. Its members include the

minister of urban development and food and consumer affairs, public sector

organizations and practitioners from the real estate sector. NAREDCO’s mission

is to improve the confidence level of lenders, investors and consumers by

bringing in professional practices through self-regulation and ultimately catalysing

the growth of the sector.

Benefits of real estate developer and project ratings

Real estate developer ratings will offer a useful comparative tool to the industry.

The specific benefits to each of the constituents is outlined below:

Real Estate Developers

Developer Rating gives real estate developers a tool to highlight their strengths

in legal procedures, project execution and marketing. It can thus be used to

command a better price.

Project and developer ratings increase visibility and substantiate the informal

word-of-mouth mode of appraising developers. This formalized process of

assessing capabilities provides comfort to investors, especially non-resident

Indian (NRI).

The rating also acts as a benchmark for developers and helps them to identify

their shortfalls vis-à-vis the best practices in the industry. This will lead to

continuous improvements in quality and services levels.

Further, a good rating can also help developers to mobilize institutional funds and

other financial services for their projects and enhance their ability to market the

project.

Customers and Investors

A good rating provides customers and investors the comfort that the rated

developer has a good demonstrated track record and that the project will be

completed on time with a clean marketable title transferred to him.

The rating also provides a higher level of security for investments, especially

those that have been made during the construction phase, thereby reducing

post-investment dissonance.

Banking, Financial and Lending Institutions

Historically, given the sector’s risk profile, institutions have been apprehensive

about lending to the housing and construction industry. A good rating gives an

independent third-party opinion on the developer’s performance and ability to

mitigate the high construction and market risks inherent in the sector.

Government and Regulators

The rating service gives an incentive to developers to maintain standards with

respect to legal and construction practices. This is expected to facilitate the

orderly growth of the sector, leading to a self-regulated industry framework.

To sum it up, India is all set to take on the real estate storm in a determined

manner at least for the next twenty years basking in the glory of being the hub for

real estate. Residential properties seem to rule all the metros as more and more

people agree with the idea of investment property. More than 80 percent of the

development in real estate comprises residential properties while the remaining

20 percent is held by offices, hotels, shopping malls and hospitals. Even though

residential properties hold the major share, there is still a dearth of houses for the

middle and lower classes.

World has come to recognize real estate or property investment as the safest investment on the earth. It has many benefits. People go for real estate when they want to invest their hard earned money safely.

Acquisition of real estate is an excellent investment strategy regardless of

whether the purchase of your main family home or just buy for investment

purposes. But finding and buying the ownership of real estate investment return

or lease is one of the most difficult facing investors. Real estate market is a developing country like India has gone up considerably. 

Real estate investment is capital intensive investment. You need money upfront to transfer the property.

Affordable housing is the buzz word in the real estate industry today. It refers to

housing units offered by developers at prices which are within the budget of low

and middle income groups of a society. With an ever mounting growth in urban

population, the demand for affordable housing is witnessing a constant rise.

There is a gap of 24.7 million houses in this segment which needs to be

addressed, keeping in mind the biggest challenge of rapid urbanisation.

There is also a need to develop innovative ways to reduce construction costs

without compromising on the quality of housing. There is also an urgent need to

look at the use of newer, energy efficient, environment friendly materials and

innovative construction technologies.

An affordable house has all the basic amenities to cater the daily needs of the

household and at the same time it should be cost effective and within the reach

of the maximum number of people. As per the market trend, Exotica Housing has

also introduced affordable houses and has tried to make the product cost

effective by in-house planning, introducing cost effective techniques and

adhering to the construction schedules which definitely saves the cost.

On the other end, they have tried to avoid luxury kitchens and other accessories

in the units without disturbing the comfort of the customers. This has not only

helped them in using the quality product adhering to the time line but at the same

time establishing their brand as a front runner in providing the affordable houses

to the customers.

For 2010-11, Exotica Housing would focus on an integrated marketing

communications approach, “to further enhance their brand equity, generate leads

and sales enquiries, and reassure the consumer that they are a high-quality

player with significant focus on delivery. The planned spend for the next financial

year would be based on “target sales and would be distributed appropriately

across channels to optimise their cost of sale”.