Good morning, growth in digital payment platforms is finally poised to disrupt the Mastercard-Visa duopoly.
Over decades, Visa and Mastercard have built ‘highways’ upon which global payments travel, and they’ve reaped big rewards. Both these companies are among firms with the highest margins in the S&P 500, at 65.6% and 53.3%, respectively.
However, as Amazon threatens to disallow Visa on its UK platform from next year, it is clear that merchants - who coughed up over $110 billion in credit card processing fees just last year - are not happy with this arrangement.
And thanks to fintech innovations like the UPI and other pay later platforms, its easier than ever before to bypass these payment ‘highways’ for fintech ‘hyperloops’.
😇 For real estate transactions, we have the good old RTGS/NEFT backbone anyway.
Affordable Housing: A $1 Trillion Investment Basket
India is witnessing a steady climb in its urbanisation rate and it is estimated that over 40% of Indians will be living in urban areas by 2040.
Resulting In A Serious Housing Crisis
Yes, India constitutes 11% of the world’s need-for-housing gap, translating to a shortfall of 35 million homes and this gap will only increase over time.
The Ministry of Housing and Urban Affairs’ demand-based assessment, has pegged the affordable housing demand at approximately 11.22 million houses as on date.
And An Opportunity
Per a recent Knight Frank report, the affordable housing sector today offers funding opportunities of about USD1 trillion, USD0.62 trillion to be precise, for private funds, following the government's special focus on this segment.
Sample this -
Of the total private equity (PE) investment in the residential segment in the last 10 years, only 17% has been allotted to the affordable housing category.
However, in the first quarter of 2021, PE investments in affordable housing was up at USD107 million, compared to USD368 million in the residential sector as a whole - a share of 29%.
Players Move In
To address this housing crisis, various funds and institutes have stepped into the affordable housing segment.
The largest of these funds is HDFC Capital Advisors (HCARE Fund), which has raised USD1.1 billion, primarily for use in long-term financing of affordable housing projects across 20 cities.
On-Ground Reports Are Positive
The Pradhan Manti Awas Yojana (PMAY) is to build 11.22 million urban homes by 2022.
Since the policy was launched in March 31, 2021, 11.3 million houses have been sanctioned and 4.8 million have been built and handed over.
With over 50% of all residential launches across top eight Indian cities in the last five years falling in the sub-INR 50 lakh segment, affordable housing is catching on, just like it needs to.
3X Property Tax To Cool Housing Market
“We’re witnessing sections of society being shut out of parts of our city because they can no longer afford apartments” - Berlin Mayor Michael Mueller.
The Housing Crisis Is Shaping Politics
Soaring property prices are forcing people all over the world to abandon all hope of owning a home and the fallout is shaking up governments.
- In July 2021, the cost of an apartment in Shenzhen, China was equal to 43.5 times a resident’s average salary.
- In Canada, Prime Minister Justin Trudeau has promised a two-year ban on foreign buyers if re-elected.
- In South Korea, President Moon Jae-in’s party took a drubbing in mayoral elections this year after failing to tackle a 90% rise in the average price of an apartment in Seoul since he took office in May 2017.
The Red-Hot South Korean Housing Market
Since President Moon Jae-in took charge, his government has rolled out dozens of loan curbs and tax measures which have done little to cool the property market.
Per reports, the average price of an apartment in the capital city Seoul has roughly doubled to 1.18 billion won when compared to 2016.
Now: 3X Real Estate Holding Tax
A revision to South Korea's real estate holding tax law will help the government collect 5.7 trillion won (USD4.8 billion) in such taxes this year, a three-fold increase compared to 2020.
After trying numerous measures that didn't work, the government revised the law last year, increasing the holding tax rate for homeowners, in another attempt to cool the country's red-hot real estate market. The changes took effect this year.
Post revision, the holding tax rate that owners of multiple properties have to pay per year was raised to as much as 6% from 3.2% previously.
Word On The Street?
🎙 "The government is shifting its responsibility over home price increase, the result of its policy failure, to us.", said Park.
📝 Park is among the 947,000 people or 2% of South Korea's 52 million population subject to the tax increase this year.
Half A Cup Extra
- Hong Kong’s Hang Seng to remove Evergrande from its China Enterprises index.
- For those who want to deep dive - Will real estate ever be normal again?
- Supreme Court orders NCLT to complete Jaypee Infratech’s insolvency proceedings within two months.
Proptech's Baby Steps In Kashmir
We often do blurbs on proptech and how billions of dollars are being invested in it to ease the way we conduct our real estate transactions, but this is a special blurb.
On our usual browsing spree for interesting news on our sector, we came across a tech led real estate brokerage - REK, one of the first in Kashmir.
Wow! Tell Us More
The REK Group, short for Real Estate Kashmir, has had an up and down journey over the last 12 years.
First started by three friends -- Asif Zahoor, Mohammad Shadab, and Mir Fanoon Rafiq, REK initially started off in 2009 with small renovation projects, but with the arrival of 2010 and some of the most turbulent days in Kashmir, the REK initiative was shelved.
The trio went on their separate ways in different countries, gaining more hands-on real estate experience and regrouped post 2015, with fresh ideas from Mohammad Asif Sheikh, and a consensus that the time to restart operations in Kashmir had come.
Tech Led Consumer Focus
Kashmir, like most real estate markets in India is largely unorganised, with unrealistic property pricing and unscrupulous deals dotting the transaction landscape.
In a welcome change from that market environment, the folks at REK are focused on consumer delight, listing only verified and right priced properties.
On their digital journey, after a long period of hesitancy from property owners, listings slowly started trickling in and today, REK uses a mix of social media, videos, a website and an application to make real estate easy for anyone looking at selling or acquiring property in the valley.
The Proof Is In The Numbers
🎙 “We normally receive more than 200 calls in a day. We have 70,000-plus followers on Instagram and 31,000-plus subscribers on YouTube. We have sold 90% of our listings so far and handed over more than 100 projects in the last 12 years."
"We are the only technology-driven real-estate firm in Kashmir; the one-stop solution for all real-estate requirements of Kashmiris,” Asif Sheikh recently quoted to the press.
Now to see how REK scales up its operations as the real estate market consolidates, while reforms make private equity investments more compelling than ever before.
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Have a great day ahead and see you bright and early tomorrow.
💚
☕ The Crew@Ginger Chai