2 June 2007

Volume 1, Issue 3

Chanakya www.marginfrastructure.com

MARG Constructions Ltd.

Want to make a Fortune of the Real-estate boom, dive to the Bottom

Businesses invariably talk about management guru C K facilities. Talking about prices an LIG unit is projected
Prahallad’s Bottom of the Pyramid theory, but rarely are to not cost more than Rs. 3 Lakh with a built-up-
they committed to it. There are not enough initiatives area around 400 Sq Ft and carpet area of more
taken on this regard apart from a few here and there than 300 Sq Ft whereas The MIG flat spread over
such as Aravind Eye Hospital and Tata’s 1 Lakh Rupee 600 Sq Ft would cost somewhere close to Rs. 6
Car etc. Innovations like these such as the Tata Car Lakh for a carpet area of about 500 Sq Ft. It makes
create a new paradigm altogether by carving out new sense also for the people because of the overall value it
market segments and reach a much broader base of the gives at a cheaper price point. Projects like these are the
pyramid. need of the hour. Any project which has all the basic
facilities, infrastructure and amenities with proper
Take for example the Real-estate market. According to transport connectivity is guaranteed to be set for a boom.
NCAER there are more than 100 Mn Households in India
who have an income of less than Rs. 90,000 and Corporate India has realized the potential of the people at
roughly 60 Mn between Rs. 90,000 to Rs. 2, 00,000 the bottom of the pyramid. Initiatives have already been
which constitute the Economically Weaker Sections or taken in this regard. A couple of companies have already
Low Income Group people. These sections cater to geared up towards this and are fighting a tough battle for
more than 90% of the huge untapped demand in this getting the Maharastra government’s Dharavi project.
housing market which has a deficit of 26.53 Mn in the
eleventh plan period 2007-12. But hardly any developer Another case is Chennai, where on the one side it is
has geared itself for them. Everybody is catering to projected to have an oversupply of commercial real-estate
Middle Class to Upper Segment which has started mainly for the IT segment and in OMR area specifically,
seeing prices gone sky-high with higher interest rates whereas the demand of 50,000 housing units in Chennai
from as low as 7% to 13% in a period of 3 years. Real- remains unfulfilled. But now things are changing for better
estate is at such a bubble that prices have started and MARG Constructions Ltd has already taken a
cooling down from 10% and up to 20% in areas like lead in this segment by visioning a Satellite City in
Bangalore, Gurgaon and Chandigarh. It’s a wait and ECR at the outskirts of Chennai within its SEZ at
watch for everybody from the customer as well as the Seekinakuppam, catering to Middle Income Group
developer. people. It has been conceived on the lines of PURA as an
independent town with all necessary urban amenities. The
Developers need to take a U-turn and understand the aforesaid Project by MARG will provide true value to more
market and the real needs of the people. There is a than 15,000 families for their hard earned money and also
greater need to provide Value to the buyers at this thereby change their lives.
time of high inflation which are now at 6%. Combined
effects of higher interest, inflation and speculation have
brought down a halt to the market. Economic Indicators
Home Loan Rate 11.25%
A step in the right direction here is an initiative of US $/Rs. Exch. Rate 40.90
Shapoorji Paloonji group of Mumbai. It is working on a Forward Premium 5.56%
Rs.1500 Crore Township project in Kolkata spread over Forex Reserve (Bn) US $ 203.99
150 acres with 20,000 dwelling units catering to the Bank Credit 28.2%
Lower and Middle Income Group in 60:40 ratio. It has Deposits 23.7%
not only its own Schools, Retail Stores, Hospital etc but Money Supply 21%
also a Central water body, Jogging Parks, Community IIP 11.3%
Centers etc apart from some higher end pay-to-use
Page 2 of 1 Chanakya.

Trade up or Trade down - a Tricky situation for the Home-buyer

Ever increasing Real-estate Prices and From the customer’s point of view, it also
hardening Interest Rates are making might be possible that a further increase
things difficult for the home-buyer. Real- in property prices or interest can
estate prices have almost doubled completely forego him or her chance to
whereas other big ticket items such as a have his own home. This situation of the
Car, TV, and Air-conditioner etc are customer needs to be critically
getting very-very competitive. On a like- understood by the marketers while
to-like basis, factoring the change in planning their offerings be it house or
prices of three big-ticket items for a the car and electronics.
household such as a House, Car and
Consumer durable along with the change The “Heating” Hills
in the interest rate regime, the
cumulative EMI for a household has
There is a new trend hot-ting up, of
gone up from Rs. 24,500 over the
buying “Hot Homes” in “Hot” Hilly areas.
last 3 years to Rs. 51,000, excluding
“The aim of marketing is the down-payments.
Catching up with the already sky high
to know and understand realty prices in cities next are hilly areas
Taking Chennai’s example where the
the customer so well that like Shimla , Dehradun, Nainital Ooty,
price of a Two-bedroom apartment has
Kodaikanal, Darjeeling and Munnar. The
the product or service fits shot up from about Rs 15-20 Lakh to Rs
prices in cities vary from Rs. 3000 to Rs.
35-50 Lakh over the last three years,
him and sells itself.” 6500 for a normal apartment whereas
jump in the EMIs have trebled from
these upcoming hot realty properties in
- Peter F. Drucker about Rs. 12,000 to Rs. 39,000 per
hilly areas cost between Rs. 1500 to Rs.
month. Comparing that with
3100 for individual apartments, villas and
automobiles, if we take a Rs 3-lakh loan
luxurious resort style homes!
for a five-year period the EMI would
have moved up hardly by around Rs 400.
Shimla command a rate of Rs 2,200-
As for consumer durables, they generally
2,700 per sq ft, Nainital Rs 1,800-2,400,
now follow a 0% structured finance
and Dehradun Rs 1,850-2,500. Lonavala
model which includes four months’ down
and Khandala command a price of Rs
payment and the balance rolled over into
1,750-3,100 per sq ft. In south, the rates
eight EMIs. There is even a drop in
at Ooty range between Rs 2,200-3,000
prices of electronics goods as well. For
per sq ft, while Kodaikanal at Rs 1,850-
instance, the price of television sets has
2,500 and Munnar at Rs 1,750-2,100.
dropped by about 35-40% and that of an
air conditioner to about 10-15%.
The demand has spurred builders like
Omaxe, Parsvnath and Raheja
What is pinching customers are the high
Developers, to announce projects in the
prices and frequent increases in
hill states of Himachal Pradesh and
financing cost. The question which needs
Uttarakhand as well as in Kodaikanal in
to be answered is whether the customer
Tamil Nadu and Khandala.
will go for a house at increased costs
while also postponing the other two
important purchases? While its true that While Rudrapur has seen projects
consumers who have already their own launched by Omaxe, Assotech,
houses would be now facing higher Supertech and Samiah, Nainital is having
EMIs, also there will be those, who a five-acre township from Rahejas.
haven’t purchased the house might shift
their purchases towards other household Nearby Mumbai the Rizvi group is
items. Sensing this, automobile developing a large 250-acre bungalow
companies & white goods manufacturers scheme at Lonavala/ Khandala whereas
have been coming up with new plans the Sahara group’s Amby Valley is
and tempting offers for the customer already one of the most popular and
every other day. expensive hill projects beyond Mumbai.
Page 3 of 1 Chanakya

Serviced Apartments - the new emerging alternative to Hotels

The sky-rocketing demand in the hospitality Rs.6000 in Chennai & Rs. 8000 in
industry has pushed tariffs of luxury hotels Hyderabad, Mumbai and New Delhi costing
to the roof. Tariffs have now more than more at around Rs. 10000.
doubled than what they were 4 years ago.
Average rates per room has increased from This new trend of service apartments has
under Rs. 4000 to close to Rs.10,000 in the really caught on in India. The most viable
top 6 metropolitan cities Mumbai, Delhi, and coveted cities for commercial property
Kolkata, Chennai, Hyderabad and investments like Mumbai, Delhi, Chennai,
Bangalore. While Kolkata is still the most Bangalore, Kolkata, Hyderabad, Ahmedabad,
economical at an average of Rs. 6000 from Pune, Gurgaon, Chandigarh, & Jaipur have
Rs. 3000 4 years back, Bangalore is the seen a sudden spurt in service apartments.
costliest at Rs.15000 from Rs. 4500 earlier
mainly because of IT developments and Hoteliers and prominent builders and
non-availability of rooms. individuals see huge potential in the market
due to the increasing demand for short term
The hotel industry is operating at an housing for Multinational Companies, for
average occupancy of 85% in all these business travelers on extended stay and the
cities as compared to 55-60% 4 years escalating traffic to India for recreational
back. All these happenings have made travel. Many real estate developers are
rooms for an emerging alternative, Service investing on service apartments and then
apartments, which are much cost-effective, leasing them out. Serviced apartments
offering all the conveniences of a hotel with usually have better occupancy rates than
the privacy and warmth of a home with hotels. The occupancy rates in the
more space, more privacy & cheaper rates. service apartment category stood at a
good 74 per cent in 2005-06, and are
Service Apartments are more like a Business expected to grow.
class hotel and also meet all kinds of short
term and long term accommodation needs Taj Hotels, DLF, Oakwood Residence,
of individuals, corporate houses, tourists Singapore based Ascott Hotels and Resorts,
and MNCs with quality living. Elegant, Sarovar Group; prominent names in the
contemporary, tastefully done, it is hospitality sector plan to catapult the idea of
equipped to decent standards in the service apartments to the centre of the real
facilities it provides. Amenities include estate industry. It is predicted that what will
round-the-clock security, power backup, work for the new players in the market in
leisure activities, housekeeping services, Experience Home
sharing the boom will be quality of services away from Home
home appliances, kitchen needs, toilet offered in terms of cost and accessibility to
accessories, laundry, telephone, distant destinations.
refrigerator, internet, worktable, and
attached bathroom and so on. The feeling
Serviced apartments are also being seen as
you get is as if one is in the private space of
a lucrative option for savings for the big IT
home and indulging in hotel service.
and corporate companies. The trend of
having own guest house/service apartment
Tariffs for a service apartment generally has caught on to key sectors like IT, BPO,
depend on the length of the stay. It can construction and manufacturing.
vary from Rs. 7000 a month to over a lakh
a month for a well equipped 3 bedroom
Unfortunately no concrete statistics is
apartment with all the amenities including a
available with FHRAI, nor any research data
swimming pool, gymkhana, a garden and
available on the current market share of
much more. Not only is it economical for a
serviced apartments. But Service Apartments
prolonged stay but also very competitive for
concept work fantastically, for the consumer
short duration with tariff range between
as well as the promoters. In the years to
INR 1,500 per day for a 1-bedroom/ studio
come, it will emerge as a strong alternative
to INR 6,000 plus per day for a 3-bedroom
to traditional Hotel concept in India.
apartment. Whereas hotel rooms start from
 News @ MARG Team Chanakya
ICICI Securities has put a Buy Subramanyam
recommendation on MARG Constructions
Ltd. at Rs. 161with a potential price at Head - Strategic Planning
Rs. 385 and believes that the company Ph: 044 2454 1111 (extn-304)
has tremendous earnings growth
potential from its infrastructure projects.
D.Joel K Pandian
MARG Constructions Ltd.
DGM - Strategic Planning
Events
Ph: 044 2454 1111 (extn-306)
CII conference on Affordable Housing
INDIA
for All, Mumbai - Jun 02, 2007
Tel.: 044 - 24541111 Anup Choudhary
Workshop on Rainwater Harvesting -
Design, Implementation and Asst. Manager - Strategic Planning
Fax: 044 - 24541123 Monitoring, Goa - Jun 12-15, 2007 Ph: 044 2454 1111 (extn-308)
CII Realty 2007 – Future of Real-estate
E-Mail:
[email protected] In India, Mumbai – Jun 22, 2007 N.Gayathri
Secretary – Strategic Planning
Ph: 044 2454 1111 (extn-315)
Spirit of Visioneering

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