Chanakya Volume I Issue III

8/14/2019 Chanakya Volume I Issue III

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www.marginfrastructure.com

MARG Constructions Ltd.

2 June 2007

Volume 1, Issue 3

Chanak a

Businesses invariably talk about management guru C KPrahallads Bottom of the Pyramid theory, but rarely arethey committed to it. There are not enough initiativestaken on this regard apart from a few here and theresuch as Aravind Eye Hospital and Tatas 1 Lakh RupeeCar etc. Innovations like these such as the Tata Carcreate a new paradigm altogether by carving out new

market segments and reach a much broader base of thepyramid.

Take for example the Real-estate market. According toNCAER there are more than 100 Mn Households in India

who have an income of less than Rs. 90,000 androughly 60 Mn between Rs. 90,000 to Rs. 2, 00,000which constitute the Economically Weaker Sections or

Low Income Group people. These sections cater tomore than 90% of the huge untapped demand in thishousing market which has a deficit of 26.53 Mn in the

eleventh plan period 2007-12. But hardly any developerhas geared itself for them. Everybody is catering toMiddle Class to Upper Segment which has startedseeing prices gone sky-high with higher interest ratesfrom as low as 7% to 13% in a period of 3 years. Real-estate is at such a bubble that prices have startedcooling down from 10% and up to 20% in areas likeBangalore, Gurgaon and Chandigarh. Its a wait andwatch for everybody from the customer as well as thedeveloper.

Developers need to take a U-turn and understand the

market and the real needs of the people. There is agreater need to provide Valueto the buyers at this

time of high inflation which are now at 6%. Combinedeffects of higher interest, inflation and speculation havebrought down a halt to the market.

A step in the right direction here is an initiative ofShapoorji Paloonji group of Mumbai. It is working on a

Rs.1500 Crore Township project in Kolkata spread over150 acres with 20,000 dwelling units catering to theLower and Middle Income Group in 60:40 ratio. It has

not only its own Schools, Retail Stores, Hospital etc butalso a Central water body, Jogging Parks, CommunityCenters etc apart from some higher end pay-to-use

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

facilities. Talking about prices an LIG unit is projectedtonot cost more than Rs. 3 Lakh with a built-up-area around 400 Sq Ft and carpet area of more

than 300 Sq Ft whereas The MIG flat spread over600 Sq Ft would cost somewhere close to Rs. 6Lakh for a carpet area of about 500 Sq Ft. It makessense also for the people because of the overall value it

gives at a cheaper price point. Projects like these are theneed of the hour. Any project which has all the basicfacilities, infrastructure and amenities with proper

transport connectivity is guaranteed to be set for a boom.

Corporate India has realized the potential of the people atthe bottom of the pyramid. Initiatives have already beentaken in this regard. A couple of companies have already

geared up towards this and are fighting a tough battle forgetting the Maharastra governments Dharavi project.

Another case is Chennai, where on the one side it isprojected to have an oversupply of commercial real-estatemainly for the IT segment and in OMR area specifically,whereas the demand of 50,000 housing units in Chennairemains unfulfilled. But now things are changing for betterand MARG Constructions Ltd has already taken alead in this segment by visioning a Satellite City in

ECR at the outskirts of Chennai within its SEZ atSeekinakuppam, catering to Middle Income Grouppeople. It has been conceived on the lines ofPURAas anindependent town with all necessary urban amenities. The

aforesaid Project by MARG will provide true value to morethan 15,000 families for their hard earned money and alsothereby change their lives.

Economic IndicatorsHome Loan Rate 11.25%

US $/Rs. Exch. Rate 40.90

Forward Premium 5.56%

Forex Reserve (Bn) US $ 203.99

Bank Credit 28.2%

Deposits 23.7%

Money Supply 21%

IIP 11.3%


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Ever increasing Real-estate Prices and

hardening Interest Rates are makingthings difficult for the home-buyer. Real-

estate prices have almost doubledwhereas other big ticket items such as aCar, TV, and Air-conditioner etc aregetting very-very competitive. On a like-to-like basis, factoring the change inprices of three big-ticket items for ahousehold such as a House, Car andConsumer durable along with the changein the interest rate regime, the

cumulative EMI for a household hasgone up from Rs. 24,500 over thelast 3 years to Rs. 51,000, excluding

the down-payments.

aking Chennais example where the

price of a Two-bedroom apartment hasshot up from about Rs 15-20 Lakh to Rs

35-50 Lakh over the last three years,ump in the EMIs have trebled fromabout Rs. 12,000 to Rs. 39,000 permonth. Comparing that withautomobiles, if we take a Rs 3-lakh loanfor a five-year period the EMI wouldhave moved up hardly by around Rs 400.

As for consumer durables, they generallynow follow a 0% structured financemodel which includes four months downpayment and the balance rolled over intoeight EMIs. There is even a drop inprices of electronics goods as well. Forinstance, the price of television sets has

dropped by about 35-40% and that of anair conditioner to about 10-15%.

What is pinching customers are the highprices and frequent increases infinancing cost. The question which needsto be answered is whether the customer

will go for a house at increased costswhile also postponing the other twoimportant purchases? While its true thatconsumers who have already their ownhouses would be now facing higherEMIs, also there will be those, whohavent purchased the house might shifttheir purchases towards otherhouseholditems. Sensing this, automobilecompanies & white goods manufacturershave been coming up with new plansand tempting offers for the customer

every other day.

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

The aim of marketing is

to know and understand

the customer so well that

the product or service fits

him and sells itself.

- Peter F. Drucker

Page 2 of 1 Chanakya.

From the customers point of view, it also

might be possible that a further increasein property prices or interest can

completely forego him or her chance tohave his own home. This situation of thecustomer needs to be criticallyunderstood by the marketers whileplanning their offerings be it house orthe car and electronics.

The Heating Hills

here is a new trend hot-ting up, ofbuying Hot Homes in Hot Hilly areas.

Catching up with the already sky highrealty prices in cities next are hilly areaslike Shimla , Dehradun, Nainital Ooty,

Kodaikanal, Darjeeling and Munnar. Theprices in cities vary from Rs. 3000 to Rs.

6500 for a normal apartment whereasthese upcoming hot realty properties inhilly areas cost between Rs. 1500 to Rs.

3100 for individual apartments, villas andluxurious resort style homes!

Shimla command a rate of Rs 2,200-2,700 per sq ft, Nainital Rs 1,800-2,400,

and Dehradun Rs 1,850-2,500. Lonavalaand Khandala command a price of Rs1,750-3,100 per sq ft. In south, the ratesat Ooty range between Rs 2,200-3,000per sq ft, while Kodaikanal at Rs 1,850-2,500 and Munnar at Rs 1,750-2,100.

he demand has spurred builders likeOmaxe, Parsvnath and Raheja

Developers, to announce projects in thehill states of Himachal Pradesh andUttarakhand as well as in Kodaikanal in

amil Nadu and Khandala.

While Rudrapur has seen projectslaunched by Omaxe, Assotech,Supertech and Samiah, Nainital is having

a five-acre township from Rahejas.

Nearby Mumbai the Rizvi group isdeveloping a large 250-acre bungalowscheme at Lonavala/ Khandala whereas

the Sahara groups Amby Valley isalready one of the most popular andexpensive hill projects beyond Mumbai.


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Serviced Apartments - the new emerging alternative to Hotels

he sky-rocketing demand in the hospitalityindustry has pushed tariffs of luxury hotelsto the roof. Tariffs have now more thandoubled than what they were 4 years ago.

Average rates per room has increased fromunder Rs. 4000 to close to Rs.10,000 in thetop 6 metropolitan cities Mumbai, Delhi,Kolkata, Chennai, Hyderabad andBangalore. While Kolkata is still the mosteconomical at an average of Rs. 6000 from

Rs. 3000 4 years back, Bangalore is thecostliest at Rs.15000 from Rs. 4500 earliermainly because of IT developments and

non-availability of rooms.

The hotel industry is operating at anaverage occupancy of 85% in all these

cities as compared to 55-60% 4 yearsback. All these happenings have maderooms for an emerging alternative, Serviceapartments, which are much cost-effective,offering all the conveniences of a hotel withthe privacy and warmth of a home withmore space, more privacy & cheaper rates.

Service Apartments are more like a Businessclass hotel and also meet all kinds of shortterm and long term accommodation needsof individuals, corporate houses, tourists

and MNCs with quality living. Elegant,contemporary, tastefully done, it isequipped to decent standards in the

facilities it provides. Amenities includeround-the-clock security, power backup,leisure activities, housekeeping services,

home appliances, kitchen needs, toiletaccessories, laundry, telephone,

refrigerator, internet, worktable, andattached bathroom and so on. The feelingyou get is as if one is in the private space of

home and indulging in hotel service.

ariffs for a service apartment generallydepend on the length of the stay. It canvary from Rs. 7000 a month to over a lakh

a month for a well equipped 3 bedroomapartment with all the amenities including aswimming pool, gymkhana, a garden andmuch more. Not only is it economical for aprolonged stay but also very competitive forshort duration with tariff range between

INR 1,500 per day for a 1-bedroom/ studioto INR 6,000 plus per day for a 3-bedroomapartment. Whereas hotel rooms start from

Page 3 of 1 Chanakya

Rs.6000 in Chennai & Rs. 8000 inHyderabad, Mumbai and New Delhi costingmore at around Rs. 10000.

his new trend of service apartments hasreally caught on in India. The most viableand coveted cities for commercial propertyinvestments like Mumbai, Delhi, Chennai,Bangalore, Kolkata, Hyderabad, Ahmedabad,Pune, Gurgaon, Chandigarh, & Jaipur haveseen a sudden spurt in service apartments.

Hoteliers and prominent builders andindividuals see huge potential in the marketdue to the increasing demand for short term

housing for Multinational Companies, for

business travelers on extended stay and theescalating traffic to India for recreational

travel. Many real estate developers areinvesting on service apartments and then

leasing them out. Serviced apartmentsusually have better occupancy rates thanhotels. The occupancy rates in theservice apartment category stood at agood 74 per cent in 2005-06, and are

expected to grow.

aj Hotels, DLF, Oakwood Residence,

Singapore based Ascott Hotels and Resorts,

Sarovar Group; prominent names in thehospitality sector plan to catapult the idea ofservice apartments to the centre of the realestate industry. It is predicted that what willwork for the new players in the market insharing the boom will be quality of servicesoffered in terms of cost and accessibility todistant destinations.

Serviced apartments are also being seen asa lucrative option for savings for the big ITand corporate companies. The trend of

having own guest house/service apartmenthas caught on to key sectors like IT, BPO,construction and manufacturing.

Unfortunately no concrete statistics isavailable with FHRAI, nor any research data

available on the current market share ofserviced apartments. But Service Apartmentsconcept work fantastically, for the consumeraswell as the promoters. In the years tocome, it will emerge as a strong alternative

to traditional Hotel conce t in India.

Experience Home

away from Home


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News @ MARG

ICICI Securities has put a Buyrecommendation on MARG ConstructionsLtd.at Rs. 161with a potential price at

Rs. 385 and believes that the companyhas tremendous earnings growth

potential from its infrastructure projects.

Events

CII conference on Affordable Housing

for All, Mumbai - Jun 02, 2007

Workshop on Rainwater Harvesting -Design, Implementation and

Monitoring, Goa - Jun 12-15, 2007

CII Realty 2007 Future of Real-estate

In India, Mumbai Jun 22, 2007

INDIA

Tel.: 044 - 24541111

Fax: 044 - 24541123

E-Mail:[email protected]

Were on the Web!

See us at:

www.marginfrastructure.com

Spirit of Visioneering

MARG Constructions Ltd.

Team Chanakya

Subramanyam

Head - Strategic Planning

Ph: 044 2454 1111 (extn-304)

D.Joel K Pandian

DGM - Strategic Planning

Ph: 044 2454 1111 (extn-306)

Anup Choudhary

Asst. Manager - Strategic Planning

Ph: 044 2454 1111 (extn-308)

N.Gayathri

Secretary Strategic Planning

Ph: 044 2454 1111 (extn-315)

Documents

Chanakya Volume I Issue III