Good morning, with a 7:00 AM arrival in your inbox, chances are that this is the first newsletter you'll read in December.
With that crushing weight on our shoulders, let's start by telling you that the EU drug regulator has said it could approve vaccines adapted to target the Omicron variant within three to four months if needed, but that existing shots would continue to provide protection.
Caution over panic is the mantra for the last month of 2021.
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---------------Raise Price Ceiling To INR 65 Lacs.
Onion Kachoris go well with chai, while also being a great tool to understand how rising construction costs are pushing real estate developers to do the unholy - raise housing prices.
Ceilings Have To Shatter
Though the hide-and-seek game of Covid has thrown plans out of whack, rising vaccinations, low mortgage rates and developer incentives have been driving steady growth in housing demand, more so in the affordable and mid-segments.
But rising demand means every sale with a maximum price tag of INR 45 lacs - to qualify as affordable housing - is creating financial stress for builders and limiting options for the homebuyer.
Real estate developers have thus urged the government to revise the price ceiling for affordable houses to INR 65 lacs from the present INR 45 lacs, due to the cost of steel, cement and other construction materials going up substantially.
Word On The Street
🎙 Ashok Chhajer, MD, Arihant Superstructures, said to the press that the cost of construction has increased by 50% in recent times and criteria for affordable housing needs an upward revision ASAP.
The Year Ahead For Proptech
The last 2 years have taken a toll on many businesses but amid the gloom, there are also stories of some sectors that shone brighter than ever before.
Examples include retailers that were able to stay open through lockdowns thanks to their essential services status, online food ordering, and industrial real estate, which became hotter than ever as e-commerce skyrocketed.
Property technology (proptech) deserves a seat at that table, too, per the Motley Fool.
Proptech Trends in 2022
Treading forward, many real estate functions will go back to worldly ways, while the mundane chores no one wants to do in person will continue to be handled virtually.
Integrating The Two Worlds
But since virtual stuff has a limit when it comes to experiencing a property, expect to see an increase in proptech tools designed to integrate the virtual and physical sides of homebuying as seamlessly as possible.
So instead of one app for scheduling site visits, another for financing, etc., expect a move toward full-stack service platforms that can help coordinate the entire homebuying cycle in one place.
Facilitating Income From Assets
The pandemic has changed the way we live and work, leading to big shifts in the way we operate today, affecting the way we use real estate.
From remote offices, to storage space and the shared economy, proptech tools in the near future will focus heavily on letting property owners offer their vacant spaces - from tiny to huge - for various suitable uses, unlocking new streams of income.
The Startup Environment Is Lit
The recent past has thrown many new problems at us but it's also made many old problems more pressing. The good news is that this has led more entrepreneurs to find solutions to them.
Whether its selling property, leasing out a space that hasn't been performing well, or solving an entirely different real estate puzzle, there's a good chance a proptech startup has created something that might help.
💡 If not, you may have just unravelled the next million-dollar idea in proptech.
Houses Are For Living Only - Beijing
China’s real estate sector accounts for more than 25% of its economy, and with 8 out of the world's 10 most indebted developers hailing from the nation, officials are eyeing this as a threat to economic stability.
Backstory
Long before the Evergrande crisis surfaced, Beijing was well aware of its real estate sector's overleveraging problem.
Since August 2020, it began curbing real estate borrowing with the “three red lines” policy, which says that developers looking to refinance need to:
- have a 70% ceiling on liabilities to assets, excluding advance proceeds from projects sold on contract,
- a 100% cap on net debt to equity, and
- a cash-to-short-term borrowing ratio of at least 1.
Growth in real estate investment, which peaked at 38.3% in January, dropped to 21.6% in April, 10.9% in July, and 7.2% in October.
As Per Plan
This contraction in the real estate sector is however, quite in line with Beijing's expectations, which has indicated it will not deviate from its “houses are for living, not for speculation” campaign.
Vice Premier Liu He said officials should “focus on stabilising land prices, house prices, and stabilise expectations,” in order to “solve household’s housing problems and promote the healthy development of real-estate companies”.
Word On The Street
🎙 “There is the realisation that the former growth model – which involved high levels of debt, high levels of investment, and high levels of growth – doesn’t work anymore, and that it needs to shift to a more sustainable model, which means a slower pace of growth.” said Shehzad Qazi, MD, China Beige Book International.
Doing What All New Airports Do
Housing demand and pricing have a time-tested relationship with new airport developments.
On cue, with the opening date for the Noida International Airport just 3 years away, Greater Noida, Noida and Faridabad will see an uptick in real estate demand and price tags.
Gurgaon, Meet Your Match
Startups and corporate entities have always chosen Gurugram over Noida due to the proximity of Indira Gandhi International Airport, despite Noida's better infrastructure and access from Delhi - over Gurgaon.
Come 2024 and this differential will disappear, feel industry veterans. Already, buyer and investor sentiment in the real estate market in Noida is showing the early signs of an oncoming boom.
Early gainers will be the micro markets spanning the sectors of Greater Noida, Noida and Faridabad, which are closer to the location of the upcoming Airport at Jewar.
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Tomorrow again.
Hope you enjoy your mid-week cheat meal. 💚
☕ The Crew@Ginger Chai