Monthly archives "September 2014"

Real estate to benefit from focus on Economic growth and Infrastructure

The real estate market in India is poised to grow and expand on the back of strong demand for housing and office space. From both end-users and investors, the total new housing demand will be nearly 12 million units in the period 2013-17, as per a Cushman & Wakefield estimate.

This is in stark contrast to the trends over the past two years, when high interest rates and sluggish growth coupled with continued high prices across most cities led to slowing of demand for real estate. Inflation ruled high over this period, job opportunities were reduced significantly across industries, the rupee saw steady erosion against the US dollar and market sentiments reached an all-time low. The real estate market, both residential and commercial, saw a dip compared to the impressive growth during the period 2003 to 2010 when the Indian economy enjoyed an average growth rate of 8.2% per year. Growth rate for the last fiscal dipped to 4.7% falling from its peak of 9.3% in 2007-08. According to a Cushman & Wakefield report, new launches of residential projects in India dropped 12% in 2013 from a year earlier. Both luxury and affordable housing segment registered a decline of 25% and 72%, respectively.

The current high level of demand is however likely to outstrip the stock availability. Over the next five years, Indian real estate market is expected to grow at a CAGR of 20%, driven by 18-19% growth in residential real estate, 55-60% in retail real estate, and 20-22% in commercial real estate. KPMG estimates that the real estate sector is expected to grow by 30% by 2015 while the market is expected to touch $180 billion by 2020.

The International Monetary Fund (IMF) has projected 5.4% GDP for 2014. According to the National Housing Index, residential housing prices in 12 cities have already shown increase in prices in the quarter ended March, 2014, over the previous quarter ended December, 2013.

The government’s focus on the expansion and development of infrastructure such as highways, roads, ports, railway lines, manufacturing hubs, dams, canals, irrigation channels, etc., which will also lay the ground work for developing the 100 new smart cities, is expected to give a tremendous boost to the real estate industry. Among the major initiatives announced by the government in its maiden budget include:

  • Provision of Rs 7,060 crore for developing ‘100 Smart Cities’, as satellite towns of larger cities and modernizing the existing mid-sized cities
  • Allocation of Rs. 100 crore for Metro projects in Ahmedabad and Lucknow
  • Allocation to Urban Renewal (infra development) increased from Rs 5,000 crore to Rs 50,000 crore
  • Boost to road construction – Investment of Rs. 37,880 crore in NHAI for construction of National and State Highways. 8,500 kms to be completed this year.
  • Expressways to be set up along new industrial corridors – Rs. 500 crore for project preparation
  • Setting up new airports, inland navigation system, SEZs etc. through Public Private Participation

The quality and coverage of infrastructure services have a major impact on real estate markets and overall economic growth. Focused and timely implementation of infrastructure projects will not only restore confidence in the Indian economy, but it will also create mass employment opportunities nationwide, providing avenues for real estate growth and expansion across the country.

India needs to invest $ 1.2 trillion over next 20 years to modernize urban infrastructure and keep pace with the burgeoning urbanization, as per a report (India’s urban awakening) by McKinsey Global Institute (MGI). This kind of spending is sure to pump up demand for the real estate industry in India. Experts contend that the Delhi-Mumbai industrial corridor is one of the perfect examples of rise in the infrastructure industry which will cover most of the industrial zones with the parallel development of smart cities as well as efficient creation of a complete logistics network. A raft of other infrastructure projects, including expansion of mass transit systems, better rail and road connectivity, ports and airports, will uplift the quality of living for people in the cities and regions around it. As per the Census of India 2011, 377 million persons live in India’s cities, thereby constituting 31% of the total population. This is expected to increase to 40% by 2030, which makes it imperative for infra projects to be fast tracked in order to meet the challenges posed by the growing speed of urbanization.

New and emerging real estate corridors – such as Sohna, Yamuna Expressway and Dwarka-Gurgaon Expressway in NCR, Ulwe and Karanjade in Mumbai and Hennar Road in Bangalore are attracting a beeline of projects, buyers and investors due to the planned infrastructure and speedy connectivity in these locations.

In periods of economic growth or stability, employment tends to grow to accommodate people looking to buy homes and businesses looking to expand office or retail space. An improving job market will not only bring greater numbers of fresh buyers in the real estate market, it will buoy consumer confidence resulting in increased consumer spending, which will drive demand for new homes and upgrading by existing owners.

Festive season sees a spike in Property Sales

Traditionally, property sales see an upsurge during the festive season, which commences from October and lasts till February-March, almost till the time of Holi. With Navratras and Dussehra heralding the beginning of the festivities, realtors believe this is the best time to woo buyers, as making new investments and purchases during this period is considered auspicious. After all, most Indians tend to link property acquisition with auspicious dates. And there is no better time than the festival period to turn sentiments conducive to making big ticket buying decisions.

It has been observed that activity levels in the property market increase substantially during this period. This year, the industry is hoping to close sales of at least 60,000 units across seven major cities, almost double of that recorded in the past two years. Average annual sales for the sector are expected to reach 200,000 units, with a good festival season contributing 30-40 per cent to the total.

Industry sources say that between 2012 and Q2 2014, around 4,81,000 units were launched in top eight Indian cities; Delhi-NCR, Bengaluru and Mumbai accounted for 27 per cent, 25 and 15 per cent respectively. The nascent revival in market conditions since the formation of the new government at the centre is making the industry look forward to liquidating substantial real estate inventory.

Playing on this positive sentiment, developers are pulling out all stops to woo customers into buying homes by offering special discounts and promotional offers. Some are offering lucky draws, discounts and pre-launch offers, scratch cards that could win buyers a foreign trip, a car, club membership or mobile phones. A few others have conjured up ingenious offers like a no EMI clause until possession. Besides, there are inaugural discounts for bookings, easy-payment options, stamp duty waiver, cash discounts and assured returns plans that many buyers would find appealing.

While these special offers and freebies help developers to tap potential customers, they also serve to unload the unsold inventory before fresh launches can be made. As many as 100 new projects will be launched during this festival season in the top eight Indian cities, but most of these markets continue to be also saddled with high levels of unsold stock. Data by a real estate research firm shows thathe Mumbai Metropolitan Region had an inventory of 53 months at the end of June 2014, while the NCR had an inventory of 45 months. Among other top Indian cities, Hyderabad had an inventory of 47 months, Pune 23 months and Chennai 26 months. Bangalore had the smallest inventory among major cities, of 19 months. An ideal market maintains an inventory of eight months.

Offering aggressive discounts and enticing promotional offers can help developers to liquidate their existing stocks swiftly. However, though festive discounts on property sales are known to speed up the decision making process of a customer, they are unlikely to affect his/ her choice of developer and project. This is so because while a customer may base his/ her decision for buying low value consumer durables based on festive discounts and offers, it is unlikely when it comes to a high involvement product such as buying a house. Factors like credibility of the developer, location of the project, amenities provided, construction specifications become the key drivers for property selection.

Given the fact that there exists plenty of end-user demand in the real estate industry, buyers would surely be more than willing to snap up products that offer good value for money and meet their expectations. Any additional discounts or offers along the way are bound to sweeten the deal further and will help to draw out more customers waiting in the wings. With the momentum in the business cycle picking up visibly over the past couple of months, let’s hope that this festive season packs a real wallop for the real estate sector.

Managing Quality in Construction

There are systems & processes, general standards, technical specifications and a range of management tools to be implemented for achieving Quality. In construction business, though these are established & practiced, it is however surprizing to note that the quality is not up to desired standards most times.

It is always vouched for by each member of management team, to say that they will not compromise on quality. However, to implement this, the management team would need to spend about 25% of their workday i.e. min. 2 hours. With so many important aspects of business needing management attention, they may not be able to spare such time. Hence, it becomes important for the organization to design systems & policies in a way that quality can be achieved with minimum time involvement.

Here are a few things that senior management can implement to ensure greater focus on Quality:

An attitude of not compromising: In construction, Quality is not achieved by following not only codes and practices but also by following an attitude. Attitude setting starts with having a Vision & Mission statement about quality. Policy development to focus on quality is the next step. This displays the commitment of Management and reiterates the attitude to the lower levels of organizational pyramid. A simple “plan do check & act” method needs to get integrated in every step till completion.

ISO 9000 System implementation with intent to make quality an integral part of system and not for branding sake, can help in developing the required attitude.

Though these factors cannot be directly interpreted, but these are evaluated to contribute to approximately 5% efficiency in overall costs through better employee & client retention, brand positioning, lesser rework, wastage reduction, labour productivity, better sales values, faster sales / inflows. Higher premium for better quality is not unheard of and has been the key justification behind success of luxury products.

Critical balance of brittle triangle: Cost, Time & Scope leading to Quality. The quality hence depends on how best the constructor has been able to balance between cost, time and scope. Market forces have traditionally defined the scope (the specifications of the project, the product mix) and developers were not prepared of eventualities like inflation of construction cost, labour availability or market slow down which took the real estate sector by surprise in last 5 years. Failure on any one aspect of the triangle has a spiralling effect leading to breakdown.

While some developers were still able to maintain the critical balance, it is becoming increasingly difficult to maintain standards of quality without maintaining the cost & time parameters. The risks affecting the cost needs to be evaluated early and sufficient contingency needs to be planned based on risk profile of project. The use of mathematical models like simulations can be used for quantitatively justifying contingencies. Labour migration pattern, monsoon planning etc. shall be incorporated early in the project planning. While keeping the above in considerations, the intent shall be to be risk aware and not risk averse.

Monitoring & managing the cost of Poor Quality / Rework: This is a great way of keeping tab on quality lapses. The average thickness of plastering shall be 12 + 3 mm, hence any thickness beyond this is cost of poor quality and not cost of plastering. This allows the project managers understand a quantitative impact of poor focus and hence improves the focus towards quality. A random audit of such cost can have even a higher impact.

Procurement Teams to ensure quality: Research indicates that tough negotiation is one of the key reasons of failure in reaching project objective. Value drivers of Procurement shall be to get the best possible quality in budgeted price. Instead, savings over budget has been used traditionally. Given that there is always someone who is ready to do it cheaper, this parameter is not the best to judge.

The success & value system can be driven by giving focus on diverting part of savings generated without compromising on quality. Procurement teams shall be provided with responsibility of diverting 25% of savings generated in procurement over budget, towards quality improvement. This 25 paisa against each Rupee saved will return back to the organization through better brand positioning, better sales and many more indirect benefits.

Value Engineering: Availability, durability, exposure conditions, construction friendliness and other factors play critical role in overall quality. Architects & Organizations shall include Value engineering as a critical step in design and execution.

Value engineering workshops shall be headed or monitored by senior management representatives and every project shall have a Value Engineering target to achieve. This will lead to research, new material considerations, testing situations & probably outcome that will lead to better value. Value Engineering on Product & Procedures entails:

  • Understanding – Determine the performance requirement & Function of the product. Why is the product required? What is the basic property required? What it must have? What it should have? What else is a desired trait? What it should not have?
  • Alternative Research – Brainstorming, Market research & Technical review of meeting the objective through alternatives.
  • Analysis – Quantitative Techniques like Cost Benefit, Time analysis, Life Cycle Analysis to select the product.
  • Finalization – The best top 2 or 3 alternative to be chosen to review the actual benefits with detailed testing and finalization of decision.
  • Implementation – Operationalization of new product along with necessary procurement order conditions like defect rate, acceptability criteria, technology transfer etc. In-fact poor technology transfer is one of the biggest reasons of failure of new technologies & products.
  • Monitoring – Monitoring the performance of the product to ensure that the product has delivered the desired result analyzed during the analysis stage of value engineering and documenting for future usage.

 

Learning from Experience & Statistics: Learning & Improvement is an important part of Quality cycle and it is important to implant statistical systems in quality management system to understand the success & failure rates. A basic matrix of quality review needs to be established by the management. This need not have any subjective data but information like following

  1. Consistency & Skill
    1. Standard deviation of concrete strength produced at site
    2. Ratio of unskilled to skilled labour
  2. Compliance
    1. Dimension Variation % in post concreting check of 10% random sampling
    2. Number of Non Conformance Reports (NCRs) with category of seriousness
    3. Inspection & test plan based finishing compliance %
  3. Cost of Poor quality
    1. Wastage % for tiles benchmarked to theoretical wastage as per drawing
    2. Days of labour deployed to repair/ rework
    3. Cost due to rework / poor quality
  4. Continuous Improvement
    1. Ageing of Non Conformance Reports
    2. Numbers of man hours of quality training conducted
    3. Trends of all statistical data

Such statistics will also make the team down the line aware and sensitive about the information being sought by Management and ensuring higher attention to quality.

Contractually aligned to deliver quality: The construction contracts are formulated to ensure that the project delivers to owner’s expectations. We often notice the statement “Time is essence of the contract”, but what about Quality? There needs to be better and deeper focus on quality to ensure contractual implementation.

Management shall ask the Procurement team to ensure the simple checklist on quality

  1. It is recommended that the Inspection & Test Plans which are reviewed during technical capability reviews are incorporated as part of contract. The same shall also be thoroughly reviewed by the consultants & architects.
  2. The penalties for non–compliance is generally not identified well in the contract, these needs to be incorporated & adhered to strictly.
  3. Submission of statistical data pertaining to quality is of prime importance and shall be in scope of contractor with penalty for non-compliance.
  4. Contract shall also allow the Project Manager to reject / hold the payment till rectifications to the satisfaction.

It takes over 4 years of theoretical study for one to become an engineer or an architect and one cannot appreciate the difference in quality without this knowledge. The senior management should never shy away from asking the engineers “what does the book say?”

Why Noida and Gurgaon should promote mixed land use development

In 2011, nearly 31% of the population (377 million people) resided in urban areas and by 2030 it is expected to become almost 50%.Increasing densities of people in urban areas has already led to problems of land shortage, housing shortfall and congested transit. As well as severely stressed basic amenities such as water, power and open spaces of towns and cities.

Overly strict separation of land uses produces inefficiencies in terms of transportation, eco-sensitivity, amenities and general living conditions. It is hence imperative to promote a balanced mix of uses that complement each other and lead to a better quality of living. An outstanding solution is mix land use development and projects. This has become empirical for urban revitalization in the modern context. It is fuelling demand for self-sustainable cities and townships due to an increasing demand for such properties from people wanting to live in self-sufficient environment.

Mixed land use development refers to projects that offer a combination of residential, institutional, business, retail etc. and integrating their functions. By deploying such varied nature of development, mixed-use townships present a holistic advantage for a resident’s eco-system.

This type of development is becoming popular now in both urban and suburban areas as it offers the most efficient use of land while providing a higher quality lifestyle. Mixed land use projects attract people to live, work and play in the same area. Advantages of mixed-use developments extend to reducing traffic, integrating residences, offices, and shopping into concentrated common areas, which can reduce and eliminate travel time.

As mixed-use developments offer the optimum solution to the demands of sustainable and responsible urbanization, urban planning and development agencies are increasingly adapting to such projects. Recently, the Noida Authority approved mixed land-use policy in certain sectors and pockets, which will allow offices, retail shops, eateries, and entertainment outlets in industrial and institutional sectors. Likewise, earlier this year, the Haryana Government decided to allow mixed land use in commercial zones, making it possible for developers to build residential properties in commercial complexes.

In the case of Noida and Gurgaon, the policy will prove to be all the more appealing as it will benefit the large number of MNCs, BPOs, KPOs, IT/ITeSs in these districts. Corporates who deal with foreign executives and have regular visiting employees in the company can temporarily accommodate them at the services or studio apartments or hotel and offer office space in the same premises to avoid daily traffic, save time and control expenses.

According to industry sources, Noida and Gurgaon are top two cities to fulfill demand of office space for corporate and MNCs. An expected improvement of economy will drive companies on expansion mode and Delhi NCR region is expected to require a total of 3.7 million sq. ft. office area in the current year. Given this scenario, mixed use development will prove especially beneficial for small or retail buyers looking for small and mid-size office spaces; as there will be greater choice unlike earlier when commercial and retail spaces were allowed to come up on land demarcated for commercial use.

In the long run, mixed-land-use development is expected to benefit both Noida and Gurgaon and make these two markets more buyer and investor friendly.

Lotus Greens unveils new brand logo

Lotus Greens has marked a very special day today in its journey towards creating a brighter future. A day that hosted a landmark event at the Taj Palace Hotel, attended by leading lights of the real estate industry, government, media and the corporate world. The momentous event saw the new corporate logo unfurled followed by important announcements about the company’s landmark projects in the NCR.

Lotus Greens today stands at the threshold of an exciting new era with the launch of a bold and strong new corporate identity. Inspired by the Lotus plant, which can live for over a thousand years, Lotus Greens is a brand that dares to imagine a world where all can LIVE THE DIFFERENCE.

The unique characteristics of the lotus flower are embedded in the Values that inform every step of Lotus Green’s journey from here on; just as the lotus is a source of happiness, the mandate is to strive with utmost dedication to create a happier future. The purity of the flower is reflected in the transparency that is brought to business, enabling an ethical and responsible approach to evolving communities.

As exemplified in the Corporate Vision statement – to protect the planet’s precious, finite resources and work towards a sustainable tomorrow. With clarity of thought that inspires communities and individuals and focus on responsibly developing a sustainable future, Lotus Greens is poised to ‘Create the Difference’, thereby, providing the canvas for people to thrive for generations to come.

In effect, becoming a trusted partner for life and helping everyone ‘Embrace the Difference’.

Barely a year and a half into its incorporation, Lotus Greens has built an enviable reputation around its green ethos and sustainability initiatives. Through our expertise, reliability, and quality, we are dedicated to creating a better tomorrow by building a legacy that will stand the test of time. We aim to create environments based on shared beliefs between us and our customers and among all the individuals who become part of the vibrant Lotus Greens communities.

The new logo has been designed by the reputed Dubai-based branding and design agency Brash Brands, whose accomplishments include working on renowned real estate brands such as the Burj Khalifa.

It is a day that looks to the future and symbolizes growth. With the unveiling of a vibrant new brand identity, it is time to take the brand to its deserving heights of glory. Lotus Greens believes its new logo and brand philosophy will drive an even stronger connect with the communities by encouraging them to share its philosophy of quality and sustainability.

Corporate dress designed by Suneet Varma for Lotus GreensMarketing and Sales Teams

Corporate dressing is part of business protocol today. Not just a matter of being smartly turned out, but a code of uniformity, expression of personality and projection of the corporate culture. The manner of dressing is our first impression to all the people we interact with. At an individual level, what we wear can inform others of our tastes, as well as give a peek into our intelligence, ambitions, emotions and outlook on life.

It is the same principle that prompts organizations to mandate a dress code for employees. Employee attire can be a significant factor in projecting a company’s professional image and shaping perceptions in the eyes of internal and external publics. Having a proper dress code goes a long way in instilling and inspiring confidence and trust among customers.

The manner of dress in workplaces can vary from uniforms to suits and everything in between. Not only does a dress code convey a professional demeanor, it also sets a professional tone in all facets of corporate communication.

This sensitivity and respect for customers’ perceptions have prompted our company to institute a dress code for its Marketing and Sales teams. “Our work environment sees frequent visits from customers, clients, and the public, so adopting professional business attire is essential,” says the Director of Marketing and Sales, Brijesh Bhanote. It was his brainchild that the Marketing and Sales teams at Lotus Greens should have a snappy dress code that articulates the company’s focus on professionalism and quality. “The point in having this policy is to show to visitors and outsiders that we are smart professionals who are diligent about work and take customer interactions with utmost professionalism and care,” he opines.

The corporate attire has been designed by Suneet Varma, an internationally renowned fashion designer famous for his couture creations. He is a master at styling and crafting formal wear for the most discerning of customers. The dapper dress code, comprising a beige suit, light blue shirt, tie, lapel and belt, is to create a distinct and striking identity for the teams. The ensemble was unveiled at a glittering event hosted by Lotus Greens at the Taj Palace hotel.

The decision to create a uniform at the workplace complements Lotus Greens unique brand personality – of a real estate developer that is committed to creating a brighter tomorrow. As visual credentials are just as important as the products and the services, the dress code as part of an overall new visual identity will help Lotus Greens convey a strong message about its work ethic.