Companies & Sectors
2&3BHK home sales on the rise in Tier I cities

Sales of 2&3BHK homes are picking up in Mumbai, Delhi, Pune, Bengaluru, Chennai and Hyderabad

Real-estate developers and consultants have been claiming that one bedroom-hall-kitchen (1BHK) homes were the best-selling product during the July-September 2009 quarter. But this trend does not seem to be playing out in Tier I cities. According to data from real-estate research firm Liases Foras, sales of two- and three-BHK homes are on the rise in Mumbai, Delhi, Pune, Bengaluru, Chennai and Hyderabad.

“In these six cities, 2 & 3BHK homes have reported more sales than 1BHK homes; 1BHK is no longer driving sales for developers,” said Pankaj Kapoor, founder and chief executive officer, Liases Foras.

During the second quarter to September 2009, Mumbai Metropolitan Region (MMR) reported sales of 1,33,416 2BHK units, 5,855 3BHK units and 45,625 1BHK units. In the National Capital Region (NCR), 2BHK sales were 29,838 units, 3BHK sales were 4,932 units and 1BHK sales were at just 1,446 units. Similarly, in Pune, 2BHK sales were 10,843 units while 3BHK and 1BHK sales were 63,008 and 20,108 units, respectively. 
 
The trend is slightly different in Hyderabad where 1&2BHKs are driving the market. The city reported sales of 27,055 2BHK units, 24,966 1BHK units and 1,879 3BHK units. In Chennai and Bengaluru, 3BHK was the top-selling category. Chennai reported sales of 79,756 3BHK units while Bengaluru reported sales of 24,201 3BHK units. In the 2BHK category, Bengaluru reported sales of 19,705 units and Chennai reported sales of 59,047 units.
 
Developers will be keenly tracking the ongoing uptrend in the 2&3BHK segments. “This kind of data will help us to know which segment is reporting more sales, so we can design products and increase our supply accordingly,” said Niranjan Hiranandani, chairman of Hiranandani Constructions.

At the end of the September 2009 quarter, Chennai reported an inventory of 550,821 3BHK units and 321,984 2BHK units. Bengaluru had an inventory of 35,922 3BHK units and 212,887 2BHK units. NCR had an inventory of 3,31,023 3BHK units and 2,03,519 2BHK units. Hyderabad had an inventory of 2,88,771 3BHK units and 3,69,369 2BHK units. Pune had an inventory of 25,442 3BHK units and 3,65,017 2BHK units. MMR had an inventory of 3,04,344 3BHK units and 61.8196 2BHK units.

The improving market sentiment has reportedly prompted a few developers to increase prices by 5%-10%. However, they seemed to have learned a fundamental lesson during the economic slowdown of the past 18 months: that a sharp increase in prices is counter-productive. 
— Pallabika Ganguly [email protected]
 

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Online MF trading bane for distributors

Allowing trading in mutual funds through exchanges will benefit brokers as they can charge commissions from both buyers and sellers; but it may put small distributors out of business

Online trading of mutual fund (MF) units, which is expected to be implemented by January 2010, is likely to change the nature of MFs from long-term investments into short-term trading opportunities, just like equities. An online trading platform will mean less paperwork and investors can buy or sell MF units with just a mouse click or phone call. However, the new system is likely to benefit brokers more than investors, as they can charge brokerage from both buyers and sellers. It will also encourage brokers to entice investors to trade on a short-term basis. Moreover, investors who exit before the lock-in period will be charged an exit load which will benefit asset management companies (AMCs) and MF distributors.

“SEBI wants to allow more than Rs5 lakh crore of assets (under management of MFs) to be traded on the NSE to increase its turnover,” said an Individual Financial Advisor (IFA) who did not wish to be named. “While SEBI has provided brokers a platform to increase MF investments, distributors have been left in the lurch because SEBI has banned the levy of entry load on MFs. Now, there is no incentive for small IFAs like us to sell MFs.”

According to industry sources, many IFAs have started to exit the MF business as it is no longer profitable. Small distributors used to provide door-to-door service to investors but after the ban on entry load, the commissions received by them does not even cover their travelling expenses. The number of small IFAs has already declined drastically since the ban on entry load. These IFAs get only around Rs25 for an investment application worth of Rs 1 lakh, plus Rs50 if the investor stays invested for a period of at least one year. They are now getting together as a group to negotiate higher commissions from AMCs.

According to industry sources, if an investor stays invested in a particular fund for more than a year, the brokers will get only 0.75% or 1% as commission; so he is more likely to encourage the investor to exit in a bull run and earn his commission both from the buy and sell side.

“Mutual fund is still a product which requires a lot of concept-selling. Only 5%-6% of investors are investing in MFs; the rest are either not aware about MFs or have misconceptions in their mind,” said Hemant Rustogi of Wealthwise.

Online trading will increase the reach of MFs to 1,500 towns and cities through over 200,000 stock exchange terminals, but it is certainly not good news for distributors who are struggling to find new ways to market MF products.
 —Ravi Samalad
 

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FM’s High-handedness

What takes the judicial system years of deliberation to decide, is very brusquely undone by the...

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