Good morning, it takes a major fire tragedy for us to get serious about fire safety at home and work.
It takes a big natural disaster, like an earthquake or a flood for us to get all worked up about buying insurance for our immovable properties.
It takes multiple building collapses and lost lives for us to start evaluating the quality of the structures we spend most of our lives in.
And….. hold that cup, we forget about all of it in about 5 working days.
That's who we are. And who is this newsletter to say, that that's wrong.
🏃♀️🏋️♀️🍌🥛
Word On The Street
📢 HDFC chairman Deepak Parekh is sure that India's housing demand is here to stay, and there are 3 big reasons for that:
1️⃣ Housing affordability is at its best
2️⃣ Liquidity conditions are at their easiest, and
3️⃣ Interest rates are their lowest levels ever.
🎙 “In over 50 years of my work life, I have not seen such a burning desire to be a homeowner than in these current times.”
Outlook: 🔼
📢 Billionaire investor Rakesh Jhunjhunwala wants Indian real estate developers to focus on affordable housing. With that as a background, Rakesh feels:
1️⃣ The return on capital for listed developers is 6 to 7% and this must go up
2️⃣ Real Estate Investment Trusts (REITs) present a compelling opportunity and are being well received by the investing community.
3️⃣ Commercial real estate will rebound big time and the warehousing-logistics sector, though at a nascent stage, is very attractive.
🎙 “If India has to develop, real estate has to develop.”
Outlook: 🔼
What's Hotter Than July In Miami
Housing, of course.
Because, Miami just beat New York City to become the most expensive housing market in the US, per this recent report.
In fact, Miami’s unaffordable homes problem had been brewing for a while, but when monied immigrants (yeah, there is such a thing) from the Northeast decided to relocate to the South Florida coast last year, rents engaged secondary boosters, shooting up 34% YoY in December 2021.
Got Some Numbers?
Yes. With Miami’s median home price of USD589,000 and average household income of USD43,401, the typical household will have to part with 78.7% of its income on homeownership costs.
🍎 In healthy market conditions, this figure does not exceed 30%.
It's About Multiplication Now
And, 80% of the salary is a lot of money for a major part of the city’s workforce, who are low-paid employees in the hospitality or service sectors.
For example, home health care and personal aides, would need to take home 2X of their median salary to rent a one-bedroom unit, and more than 3X their take-home to buy a house.
🙄🙄 - homebuyers in Monaco.
Weekend Conversation Starter
Real estate lawyers reading this, please know that a lawyer joke has never been cracked on Ginger Chai, like ever. And that's because we always knew the truth that research has only recently unearthed.
As Happy As Everyone Else
Per Reuters, new research has busted a commonly believed myth in the legal field: lawyers are an especially miserable bunch with high rates of mental health problems.
Fact: The percentage of lawyers with moderate to severe mental health issues is in line with that of doctors, veterinarians and dentists, and is significantly lower than that of people without a college degree, the study found.
Bigger Fact: The findings, slated to appear in the Journal of Empirical Legal Studies, do corroborate earlier research that says lawyers drink more than other professionals.
🤷♂️ Ignore it counsel, only the miserable count their drinks.
Is The ESG Climate Overshadowing The Weather?
As the real estate sector sets its crosshair on ESG commitments to pass scrutiny, weather driven risks to real estate may be inevitably getting out of its sight.
However, the risks posed by both carbon and water, are equally big and far reaching.
The Threat Is Legit
Per the much talked about book, Principles of Sustainable Finance, if sea levels were to rise by 1 metre later this century, then once-in-100-years flooding events would happen every six months in New York, every month in Kolkata and every tide in Wellington, New Zealand.
And The Associated Costs Are Huge
If flooding risks were to be seen in money terms, global losses could approach USD1 trillion or more per year.
In Kerala alone, INR 2,450 crore has been spent under the 'Punargeham' project to rehabilitate over 18,000 families living in coastal areas, where climate changes and tidal attacks pose a continuous threat to their lives.
In the US, structural damage to Commercial Real Estate (CRE) from flooding, is projected to cost USD13.5 billion in 2022, increasing to over USD16.9 billion by 2052.
But, But, But...
When real estate users and investors don't have the numbers-backed data to shake them out of slumber, the risk seems more of an unfounded paranoia. Plus, present day risk forecast data seems fundamentally flawed itself.
That's because there is a common misconception that the way physical risk looks today is the way that risk will look in the future – that today’s weather patterns will remain the same but worsen when, in fact, there could be very different changes.
For example, certain areas prone to flooding may actually get drier in the future or vice versa.
Where Have We Seen This Before?
Experts feel that this is a parallel to how we talked about carbon 10 to 15 years ago. People are talking about weather driven risks to real estate usage and valuations, but there’s not much evidence of policies being implemented.
Clearly, we need more of a sense of purpose, something that seems to be completely consumed by the sector's current ESG efforts.
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We are more than 6 weeks into 2022 already and the word ‘lockdown’ has not been spoken of, yet. To commemorate this feat, throw a small house party this weekend.
🍨 And, please don't forget to stock up on ice-cream if there are kids joining the do. They haven't tasted that stuff for a while now.
Have a great day. See you at the usual time, Monday. 💚
☕ The Crew@Ginger Chai