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Relief for Developers as Govt Slashes Amenities Charges

In what could be termed a major relief for developers and home buyers, the state government on Wednesday slashed infrastructure and basic amenities charges by 50 to 75 per cent across various categories of buildings. The revised rates will come into effect from September 9, 2009. However, all projects which have been given approval, or for which demand notes have been raised by the regulatory agencies till Tuesday, will not stand to benefit. These projects will have to pay the amenities charges as per the earlier rates. The biggest beneficiaries of the government’s latest decision are people proposing to buy apartments in multi-storeyed buildings in Chennai and Chengalpet region, for whom, the amenities charge has been brought down from Rs 1,000 per sq metre to Rs 250 per sq metre. It works out to a reduction of roughly Rs 75 per sq ft. The revised rates will have to be paid upfront as a one-time payment for obtaining plan approval for buildings.
A government order issued in this regard on Wednesday pointed out that the government had taken into consideration the slump in the construction industry, dip in real estate sales and high rates of interest for housing loans while taking such a decision. The revised infrastructure charges for various categories of buildings are as follows: for multi-storeyed buildings which are commercial, IT, industrial or institutional in nature or that have a combination of such activities, the levy is Rs 500 per sq metre in Chennai and Chengalpet region. In Coimbatore and Tirupur region, the amenities charge for multi-storeyed buildings is Rs 375 per sq metre and in other regions it is Rs 250 per sq metre.
For multi-storeyed residential buildings across the state, a uniform infrastructure charge of Rs 250 per sq metre is applicable. For non-multi-storeyed commercial, IT, group development or special buildings (either ground-plus-three floors or stilt-plus-four floors) amenities charge is Rs 250 per sq metre in Chennai and Chengelpet region, Rs 190 per sq metre in Coimbatore and Tirupur and Rs 125 per sq metre in other regions. For institutional buildings which are not multi-storeyed, the levy is Rs 100 per sq metre in Chennai and Chengalpet region, Rs 75 per sq metre in Coimbatore and Tirupur and Rs 50 per sq metre in other areas. For non-multi-storeyed industrial buildings the amenities charge is Rs 150 per sq metre in Chennai and Chengalpet, Rs 112.5 per sq metre in Coimbatore and Tirupur and Rs 75 per sq metre in other areas.
Confederation of Real Estate Developers’ Association of India Tamil Nadu chapter president Prakash Challa, while welcoming the move, said, “We will directly pass on the benefit to the customers. We thank the government for heeding to our request. But we are disappointed that the government has not given retrospective effect to the GO. It will lead to unnecessary litigation because in our state a planning process takes two years. Buildings which were planned three years ago, when no such infrastructure charge was there, had to pay the levy because by the time their approvals came, the government had introduced the amenities charge. Hence, the benefit being given to new buildings should be extended to all projects which were cleared since April 8, 2008 (when the previous GO was issued).”

Navi Mumbai- Emerging Commercial Hub

Even India’s leading conglomerates have taken up commercial space here. The state administration has already shifted wholesale commodity markets to Navi Mumbai. So, you have endorsements from different segments that Navi Mumbai’s commercial real estate is much sought after,” he says. Suresh Haware, MD, Haware Builders concurs. “Even at the ‘nano’ end of the commercial real estate spectrum, demand is high,” he says. It is the small offices and shops’ segment that have witnessed the highest demand at Haware Builders’ commercial projects in Navi Mumbai, he reveals.
Today, industrial units in Navi Mumbai are relocating to locations in Raigadh district and commercial is the latest buzzword in Navi Mumbai’s real estate scenario, says Vijay Gajra of the Gajra Group. “Commercial options in Navi Mumbai span a huge price band. Growth of the residential segment in Navi Mumbai, prior to that of the commercial segment, actually works out in favour of the end-user today, as manpower resources are easily available,” he points out. “Commercial real estate in Navi Mumbai comes at competitive prices vis-à-vis other options in the Mumbai metropolitan region (MMR), with the added advantage of being located in a well-planned city,” adds Gajra.
IT/ ITeS SEZs and businesses that have anything to do with rail/road transport and logistics or shipping, are proving to be the next big segment in Navi Mumbai’s commercial spectrum, shares Mayur Shah, honorary secretary, MCHI. Ramneek Bakshi, principal of global property consultants, LJ Hooker, points out that MNCs view India within the parameters of the ‘Brazil, Russia, India, China’ (BRIC) equation. “When they look at India as a business entity, Mumbai takes prime position. When they start looking out for space, Navi Mumbai, which forms the third level of real estate pricing, is attractive for MNCs looking to set up shop in the Mumbai region,” he explains.
At the Norwegian consulate in Mumbai, George Mathew, honorary consul general, concurs, “If you look at real estate pricing trends in the MMR, Navi Mumbai fits the bill on many counts. However, the clincher is the price efficiency and developed infrastructure that Navi Mumbai provides,” he concludes.

RBI Makes Bank Lending Easier for SEZs

The Reserve Bank of India (RBI) has made it easier for banks to lend to special economic zones (SEZ). Several types of advances to projects in special economic zones have now been excluded from the definition of commercial real estate loans. Reference to SEZs as commercial real estate loans by RBI in a ’06 circular had made it difficult for those involved in these projects to raise funds. Real estate loans are considered risky and categorised as part of exposure to sensitive sectors which also include capital markets and commodities. There are also restriction on foreign investment in real estate.
Speaking to ET, LB Singhal, director general, Export Promotion Council for EoUs and SEZs said: “We had taken up this issue with the ministry of finance and the ministry of commerce. The matter was before the empowered group of ministers headed by finance minister Pranab Mukherjee, which had decided that SEZ should be treated as infrastructure.” He added that now with the central bank clarification, loans to those developing, operating and maintaining SEZs as well as setting up or acquiring units in SEZs will be part of infrastructure lending. “This would enable domestic institutions and banks to make funds available to SEZ sector on the terms and conditions which are applicable for infrastructure lending,” he added.
In the circular issued on Wednesday, RBI has sought to define a commercial real estate loan as one where the funds are used to acquire real estate and the repayment of the loans is out of proceeds of sale or rentals from the property. Bearing this conditions in mind, RBI has sought to differentiate between loans which could be classified as CRE exposures and those which were not. In the context of SEZ, RBI said that there are projects where there are arrangements to insulate the lease rentals from volatility in the real estate prices. This is done by locking into long-term lease agreements that outlive the loan agreement need not be treated as commercial real estate exposures (CREs).

Real Estate in the Hospitality Sector

Up until 2007, most hoteliers, investors and developers, were buoyant when it came to the growth prospects in the hospitality industry. They had enough reason to be optimistic, as every factor which would influence the industry, directly or indirectly, was on a growth trajectory. The global economic slowdown and its effect on the Indian economy, however, have doused the fire of excitement of even the most optimistic developers and investors. It has resulted in an extreme crunch for investment in the hospitality sector, coupled with a decrease in the demand for rooms.
One-fourth of the announced plans have fallen completely flat and the rest are hanging on the edge of viability. DLF, Parsvnath and other developers of similar cadre, have scaled down or slowed down their plans of expansion. Parsvnath, which had plans of adding at least 10,000 rooms, has now stopped acquiring land for any further plans, other than the 20 hotels for which they have already done the same. There have been reports that DLF has been in talks with various hotel companies, to sell eight to nine of their land parcels demarcated for hotel projects, to raise funds. Unitech too has sold its Gurgaon hotel project, in order to reduce its huge debt burden.
The million dollar question, now, is how to bail oneself out of stranded projects. Divesting a part of the stake in the project to gain capital may be one of the options. However, this may not be very easy in today’s market. The project maybe valued at a much lower price than what is expected and may leave the seller with a raw deal. One could also think of repositioning the project. Instead of increasing the investment requirement for a project by planning a high-end luxury hotel, one could look at serviced apartments and budget hotels, at the moment, to get through the times of credit crunch.
Another option would be to reduce the scale of the project. Phasing the project out in stages, where part of the hotel could be operational in a relatively lesser time and with lesser investment than earlier planned, would help ease the credit and liquidity crunch. There are quite a few operators who take a stake in the project as well. Accor is a good example of such an operator who has significant expansion plans in India. Tying up with the right investing operators would, however, not be as easy as these operators would choose only the best of the options available and they would have their own plans in place already. Going back to the lender may be an option worth visiting, to see if they could restructure the existing loan. One could also go for refinancing or extending the loan.
If the borrower has a good record, they could also look at finding a new lender as well, probably an HNI who would be willing to invest. However, if the only option left is to exit the project, the timing would need to be well thought out. If one waits too long for a good price, the price might just go lower. The government has been very liberal, when it comes to FDI regulations in the hotel and tourism industry. According to the government of India - Ministry of Commerce and Industry press note 2 (2000 series), 100 per cent FDI is permissible in the hotel and tourism sector on the automatic route, subject to the automatic approval clauses.
The additional restrictions, applicable to some sectors of real estate, such as area of development being at least 50,000 sq metres; 50 per cent of the project to be completed before five years; no repatriation of funds before three years from date of minimum capitalisation released in 2005; are not applicable to the hotel and tourism industry. Once the credit crunch situation gets better, the inherent demand in the industry that one senses should help attract funds easily, as compared to some of the other sectors. Some say the worst is over and India will be getting back on its feet soon. However, the key is not just to wait and watch, but to try and be one step ahead. Be ahead and decide on when to stop waiting. Only the best will survive and everyone is waiting to see who these companies really are.

Oman to Invest in Mangalore Based Township Project

A sovereign fund of the Sultanate of Oman is investing roughly Rs 620 crore, or $125 million, in Mangalore-based realty developer Mohtisham’s 300-acre integrated township, sources privy to the development said. The deal is probably the largest fund action in Indian tier-II real estate. Oman Investment Fund, through a Cypress-incorporated entity, is picking up 50% stake in Mohtisham Estates, a joint venture developing a 18-19 million sq ft project on the Mangalore-Bangalore highway.
When contacted, SM Arshad, Mohtisham, confirmed the investment. “We can confirm that Oman Sovereign fund has taken a stake in the project,” he said. He, however, refrained from divulging financial details of the transaction. Mohtisham is a nearly two-decade-old realty player with established ties in the Arabian Gulf. It is believed that the transaction was a direct one and did not go through a market process. Several Middle-East sovereign funds have been scouting for opportunities in India’s real estate and infrastructure sector as they have a liking for investments backed by physical assets and those are broadly in line with Shariah principles. Sovereign funds of Abu Dhabi, Saudi Arabia, Oman and Qatar are active in the country at the moment.
Oman fund’s investment would flow into the project in a phased manner and could even top $125 million, sources added. For a while now, sectoral experts have been predicting the emergence of big real estate play in India’s tier-II, or even tier-III, centres. And this deal could be one of the early precursors to a developing story. Sources said work on the project would start early next year and is likely to be completed over eight years. The first phase of the project is expected to hit the market in three years. The township will have residential units, a mall, schools, hotel and a special economic zone.
Real estate trackers are split on whether Mangalore is ready to absorb a massive development of this scale. But optimists believe investors in the project are possibly ahead of the revival curve in a city touted as an energy and education hub in the boom years. “The potential remains undiminished. ONGC has led the pack with significant investment initiatives. The city, given its proximity to Manipal, is already an education hub. It has large overseas linkages especially with the Middle-East and is an expanding port city,” explained one sectoral observer. The only downside is probably the communal clashes that rocked the city in recent years, and the emergence of an ultra conservative fringe that hurt the city’s cosmopolitan image.

Indiabulls launches High-End Residential Project in South Mumbai

Close on the heels of launching Indiabulls Sky, its high-end residences project in South Mumbai, Indiabulls Real Estate Ltd has now announced the launch of a mini-township, Indiabulls Greens, just 5 kilometers from Panvel station. Spread across a serene 25 acres in close proximity to the Mumbai-Pune highway, the project offers a good alternative for buyers from Kharghar and Belapur looking to upgrade to a bigger home and a better lifestyle.
Greens offers a slew of amenities that include: a clubhouse with a gym, a swimming pool, sports facilities including a cricket pitch, a school, hospital, convenient shopping facilities, dry & utility balconies, 24-hour power backup, ample parking space and a dedicated bus service to and from the train and bus station.
The facilities on offer here also include a service management system on-call, which ensures that the residents will find domestic help and other ancillary assistance without any effort. The landscaping of the project has been designed to ensure maximum greenery from landscaped walkways and eco gardens to dense perimeter woodlands. The inaugural rate for the project starts at Rs2,200 psf for the first 50 apartments.

Investors Scripting Real Estate Recovery

“These are investors who are taking an opportunistic view of the situation where prices have corrected considerably in many locations ,” says Sanjay Dutt, CEO business at Jones Lang LaSalle Meghraj (JLLM). He estimates that a good 40% of the stock sold in the last few months would have gone to investors. In Delhi-NCR , this figure might be higher at 50%. “Investors are back in good numbers and before the curve goes up, they want to buy. Some who have bought are already hoping to book profits during this Diwali ,” he adds. This could be a precursor to further improvement in investor sentiments, since investors would take this as a sign to look towards a sustainable run in the future.
Investors took flight from the residential real estate market when the market crashed last year and many have been shy of venturing back. The last few months though have seen a number of affordable launches at price points, which have stimulated the market . Most developers have launched mid-income housing in the Rs 20-40 lakh range, which has created a movement. While the short-term investor is there, interestingly, a good number of the investors are medium to long-term investors. “These investors are flocking to real estate because of the lack of other investment opportunities in the market at the moment,” says Ajit Krishnan , partner, real estate practice at audit firm Ernst and Young who feels the trigger for these investors was the drop in price points in the residential segment in the last eight months.
These investors are not purely speculative and are investing in real estate as a shelter against inflation , he says. Other investment opportunities today do not yield the same results. Developers on their part are insisting that a majority of the buyers in their projects are end-users . As there is no set way to differentiate investors from end-users , Unitech looks at consumer behaviour to judge one from the other. “Investors usually are not too bothered about specification details , do not go for site visits too often . We have not seen such behaviour at our projects. It appears that a large majority are end-users ,” says R Nagaraju, general manager of corporate planning at Unitech. Wherever prices have been brought down to attract customers , there have been investors but Aditi Vijayakar, executive director , residential services at Cushman & Wakefield says these investors are mostly long term. “These investors are using this decline in the market to buy another property which they can decide on selling after the project is delivered ,” she adds.
Alongside investors are endusers who are mainly interested in completed homes. “The question is of consumption. We are definitely seeing movement in completed properties which are being picked up end-users ,” explains Krishnan. Prices in the residential market in NCR-Delhi and Mumbai have started to climb up in the last months or so and Vijayakar warns that it is a little too early to raise prices. “In the medium term, it will not be sustainable for developers,” she says. There is a concern that the few end-users who have started to show interest might be deterred from making purchases if the prices of homes keeps rising.

Developers not to Pay Fine for Late Delivery if Specific Date is not mentioned on Contract

Real estate developers cannot be fined for late delivery of possession of a flat to an allottee if no specific date of its delivery is mentioned in the contract, the apex consumer body has held. The National Consumer Commission further held that the acceptance of the belated delivery of the flat in 1993 without protest renders it impossible for the consumer fora to award compensation to the buyer in this case.

The Commission passed the order on a plea of the allottee, Ashok Khanna, seeking compensation from the Ghaziabad Development Authority (GDA) for the late delivery of the flat and extra sum charged by it. “Where time is not the essence of the contract then the buyer, instead of rescinding the contract on the ground of non-performance, accepts the belated performance in terms of the delayed contract and then the question of any breach of agreement does not arise,” the Commission headed by Jstice Ashok Bhan said.

Parsvnath Developers will Sell Shares to Overcome Debt

The New Delhi-based developer aims to sell shares to institutional investors by the end of October, and the stake in a housing project this month to a private equity fund” Parsvnath Developers Ltd plans to sell as much as $100 million (Rs489 crore) of shares and stake in a real estate project as it seeks to trim its debt to one-third by March, chairman Pradeep Jain said in an interview. “The New Delhi-based developer aims to sell shares to institutional investors by the end of October, and the stake in a housing project this month to a private equity fund,”Jain said. In June, the firm got Rs90 crore from private equity firm Red Fort Capital for a stake in a New Delhi housing project.
Indian developers including Unitech Ltd and Indiabulls Real Estate Ltd have raised more than $2.6 billion since April as the Bombay Stock Exchange (BSE) Realty Index more than tripled from a 9 March low. Investors are speculating a decline in borrowing costs and property prices will revive housing demand in a nation with an estimated shortage of 24.7 million homes. “The quarter for the sector has been good, but the sustainability will have to be checked,” said Nitin Idnani, an analyst with Enam Securities Pvt. Ltd in Mumbai. “Any increase in prices may dampen demand.”
Shares of the developer rose 2.73% to Rs120 on Thursday in BSE trading. The stock has more than doubled this year, after plunging 90% in 2008. “The worst for the real estate sector is behind us,” Jain said. There’s a renewed interest by overseas investors, depending on the quality of the projects. Parsvnath, which expects to get about Rs5,000 crore from sale of homes over 24-30 months, aims to trim its debt to Rs500 crore by March, Jain said.

Gujarat Real Estate Developers to Visit Japan and Korea

Even as Gujarat chief minister Narendra Modi hopes to see the state, alongwith Japan and Singapore dominate the Asian economy, a delegation of 95 real estate developers from Gujarat will be visiting Japan and Korea to study and imbibe technological know-how of infrastructure in these Asian economies. The delegation, comprising members of Confederation of Real Estate Developers Assocation of India (CREDAI) Gujarat chapter, will be accompanied by members of Japan External Trade Organisation (JETRO) and Korean Chamber of Commerce and Industries.
“We will be leaving with Japanese and Korean delegation to visit these two countries to undertake a technical study of their infrastructure and try to bring those technology to Gujarat. Both Japan and Korea have exhibited some technology in building their infrastructure and developers in Gujarat intend to imbibe them to come up with some technologically advanced properties that are cost efficient as well,” said Jaxay Shah, president, CREDAI Gujarat delegation. The real estate developers delegation will leave for these countries from September 29, 2009 and return in mid October 2009, Shah added.
In Gujarat, JETRO has been in talks with the state government for investment on the Delhi-Mumbai Industrial Corridor (DMIC) - India’s mega infrastructure project in association with Japan. From Palanpur in Banaskantha to Valsad down south, the DMIC will traverse 38 per cent of its 1,483-km route through Gujarat. Moreover, the upcoming Dholera special investment region (SIR) will see a mini-Japan with several projects from the country. Apart from Dholera SIR and Dahej PCPIR, the Japanese have shown interest in developing Aliabet, a wasteland in the Gulf of Khambhat. During the Vibrant Gujarat Global Investors’ Summit (VGGIS) 2009, Japan had also been the partner country with the state government.

Developers Target Industrial Areas of Tier 2 & 3 Cities

The demand fundamentals of India are now focused around cities that have sufficient economic activity, be it industrial, service sector-driven or incentive-driven programs by the State Government. In Gujarat, which has seen considerable industrial progress, cities of Ahmedabad, Surat and Vadodara come readily to mind.
Baddi in Himachal Pradesh and Pantnagar and Rudrapur in Uttaranchal attracted a lot of residential developers, thanks to government policies. In the South, Coimbatore, Vizag and Kochi emerged, either thanks to a large investor segment or as the outcome of sufficient economic activity. Towards the West, Pune, Nasik and Nagpur are noteworthy in this context.
In all cases, developers positioned their development close to industrial hubs, targeting a totally different price segment. While this was a worthy ambition , it was poorly conceived as a plan since many of them did not factor in State Government-level regulatory challenges such as local municipal laws.

Real Estate Major IREO appoints Crayons News

Global real estate giant IREO has appointed Crayons Advertising as its media AOR following a multi-agency media pitch. The company is expected to spend up to Rs 50 crore in the next two months. The teaser campaign kicks off today in OOH and print. The TV campaign will break a little later. The OOH hoardings will be put up in Delhi, the NCR and Punjab, while the print campaign will break in newspapers and business magazines. This is the first time that IREO has appointed a creative and media agency. The creative duties are being handled by McCann Erickson.
IREO will pump $500 million in various infrastructure projects in India. The group has already invested $1.5 billion in India and is one of the largest investors in the country’s real estate sector. IREO has a portfolio of 13 projects located in prime locations around the country, and plans to pump in $500 million in various infrastructure projects over a period of seven years.

Changes in Indian Real Estate Affairs

Real estate in India has always been the playing field for entrepreneurs. This industry has witnessed unprecedented highs and frightening lows over the years. One is often left dyspnoeic with the continuous shifts in this sector. Due to rise in demand in the IT/ITeS sector and significant increase in FDI, the commercial and retail real estate markets experienced tremendous growth in the first quarter of 2008. Land deals accrued around Rs 23,000 crore with additional deals worth Rs 10,000-crore in the pipeline. The highest recorded land deal was Mumbai’s Bandra-Kurla Complex. However, it has not been an easy journey for all in the property market. Last year, the global property collapse exacerbated by the credit bubble burst resulted in reduced finance and business activity. Equity markets also remained lacklustre and raising money through IPOs proved to be difficult. Both real estate giants, Unitech and DLF, delayed the plans to raise money through REIT issues after witnessing unfavourable initial response.
Consequently, lack of funds forced developers into high interest loans. High credit amounts proved to be detrimental for property companies. Most companies borrowed a large portion of their land-development outlays up front and relied on advance sales to repay these loans. However, poor sales led to delays and massive cost overruns. According to industry estimates, around Rs 8,000 crore worth of projects had faced considerable delay by June 2008. The collapse of Lehman Brothers, in September 2008, was perhaps the most significant event that spiflicated an already floundering property market in India. It triggered a shockwave that rippled through the liquidity centric commercial and retail real estate markets leaving a trail of defaults, delays, and losses. Even though property prices have corrected by 22-42% in major cities over the last few months, 10-15% downside is further expected. Commercial real estate demand has languished as corporate firms deferred expansion plans to deal with the credit situation.
Negative absorption rate aggravated by falling rentals led to decreasing margins. Companies like DLF, with 40% of its portfolio in the commercial and retail space, reported 29% y-o-y decline in 2009 revenues while its net profit plummeted by 43%. Similarly, the top line was also distorted for companies like Ansal (-26%), Parsvanath (-60%), etc. Timely and synchronised measures taken by central banks and governments around the world restored balance and prevented a total collapse of the financial system. Thus, markets saw a mild recovery. According to Rajeev Rai, vice-president of Corporate Assotech Ltd, “To counter decreasing demand and to gain confidence of all stakeholders of Indian real estate, associations like NAREDCO and CREDAI decided to bring down prices of various properties by reducing overheads and marketing costs.
In some cases, ticket size of the property was reduced with reduction in size of apartment to make it more affordable for the masses.” As per a report by Grant Thornton, the total number of PE deals announced during the first half of 2009 stood at 93 with a total announced value of $2.89 billion with the highest proportion invested in real estate and infrastructure management worth $1.61 billion. Bhim Yadav, CEO, Falcon Realty Services Pvt Ltd, reckons, “A higher FAR not only brings in more supply to the market, it is also vital for creating room for more affordable housing and control the steep rise in prices, ultimately benefiting the common man.” The Mumbai real estate saw a sharp price correction. Average peak rentals fell 40–60%. While there was a slight mismatch with excess supply, (supply of over 30mn sq ft over 2008–10E vs expected demand of 22mn sq ft), the demand in Mumbai has been healthy.
UnlikeMumbai, commercial and retail space in NCR is expected to languish due to weaker absorption rate. As per Centrum, the average vacancy rate in malls across India was about 9% in Q408 and NCR had the highest vacancy rate of around 25%. According a study by Knight Frank India, average rentals in Gurgaon was down from Rs 120/sq ft to the Rs 51/sq ft while rents in Noida dropped from Rs 90/sq ft to Rs 44/sq ft. In conclusion, as market conditions stabilise, the financial markets will slowly pick up resulting in an improved liquidity scenario, stable government, and affordable prices. This may well serve to bring back the shine to this lacklustre sector.

SEZs Regaining Prominence

Global trends suggest that barely 10 per cent of special economic zones (SEZs) that are planned actually fructify, says Mayur Shah, MD of SEZ Marathon Group. At Nexzone, his upcoming IT and ITeS SEZ site in the periphery of Navi Mumbai, Shah says that the global trend is reflected in India too. “Ninety per cent of the Indian SEZs that were to be announced have been dropped and the remaining 10 per cent will succeed,” he says. “Times will be positive, from now on,” he predicts. “All indications are that the markets in Europe and North America will be back to business, between April and September of next year,” he says. That will bring back smiles on the faces of Indian IT and ITeS companies and also BPO and KPO companies, but it will also create new challenges for them. IT and ITeS SEZs can prove to be among the best solutions for these challenges, feels Shah. World class infrastructure will be the key to the success of not just IT and ITeS SEZs, but also of manufacturing and industrial SEZs, says Shah. The tenants for these will be a mix of mid-sized Indian companies that will be looking to go global, as well as some of the large players in the respective domains, explains Shah.
Any marketing strategy in terms of SEZs should be directed at new domestic and international companies, gearing up to enter the Indian market and hoping to expand operations after deployment, points out Abhishek Kiran Gupta, head (research), Jones Lang LaSalle Meghraj. Commercial real estate specialist, Mohanjeet Sehgal, sees value-additions when it comes to SEZs, over the next couple of years. “Policy flip-flops and land acquisition issues have created a negative impression, especially when STPI was granted a year’s extension in the last budget,” he says. “However, when the STPI concessions cease, ultimately those who have space in IT and ITeS SEZs will be clear winners,” he insists. In Navi Mumbai and its periphery, he sees great potential for BPO and KPO companies at SEZs. “Marketing activities for SEZs were rather slow, till recently. Now, companies are comparing different aspects of leasing space in SEZs in Navi Mumbai vis-à-vis Mumbai’s central suburbs. It is decision making time, now,” he says.
Rajesh Gadgil has just made a presentation to a large company that is looking out for SEZ space in Thane. “SEZs totally change the outlook of potential lease tenants,” he says. It is not just the large players that are considering its positives, says Gadgil, who adds that smaller sized IT spaces will also get good demand from start-ups and small entrepreneurs. According to Ashok Kumar, principal and managing director, CresaPartners India, the target audience for SEZs and the issue of striking the right balance between portfolio and tenant mix, needs to kept in mind. While SEZs are needed to accelerate GDP growth and attract foreign investment, the ‘indecision’ on land acquisition and other policies has resulted in numerous SEZs not being able to take off, he points out.
SEZs are not a suitable or tempting platform for existing STPI-based companies seeking to consolidate, cautions JLLM’s Abhishek Kiran Gupta. “In addressing the target audience of large, new companies, the marketing strategy should highlight the fact that new companies can avail of the full tax benefits that SEZs provide and that these benefits will continue to be applicable as they expand operations,” he suggests. India is known for its entrepreneurial spirit and the IT, ITeS and BPO/ KPO sector are no different, shares Dilawar Nensey, joint MD, Royal Palms. “Lease rental is an important factor that impacts the small-sized start-up entrepreneur,” points out Nensey and innovative schemes may just help the IT/ ITeS/ BPO/ KPO entrepreneur get the right sized start-up for his project. Nensey echoes Shah’s thoughts that the sector is bound to flourish and that a unit in a SEZ makes long term business sense. “India will always remain an IT/ ITeS superpower and SEZs will be the key to ensuring that we remain competitive in global markets,” he concludes.

UBI Offers Lower Home Loan Rates

Union Bank of India (UBI), today said that it has reduced interest rates on its housing and auto loans as a part of a festival offer. The public sector lender would now offer home loans at 8.50 per cent for the first three years and at floating rate linked to its benchmark prime lending rate from the fourth year onwards for loans up to Rs 50 lakh, a press release issued here said.
For loans above Rs 50 lakh, UBI now offers a concession of 0.25-1 per cent over floating rates for the first three years depending the tenor of the loan. Interest rates for car loans have also been reduced by 0.75-1 per cent, depending on the tenor, the release said. For a tenor of upto three-years, the new rate will be 10 per cent and for a period between 3-5-years, the reduced rate will be 10.50 per cent, the release said. The festive offer will be effective from September 1 to October 31.

Realty Estate Developers Showing Interest in Land Acquisition

Following a slew of new launches in the affordable housing segment in the past few months, real estate developers in the country are once again showing interest in land acquisition. They are now also expecting “some price escalations” for residential properties, with easier liquidity and overall positive market environment in the second half of the year. “We believe developers’ appetite for land has increased, given easier financing conditions and availability of prime land parcels (which many developers do not have) at reasonable rates. Increase in both off-takes and unit prices has improved developers’ confidence to purchase new land, in our view,” J P Morgan analyst Saurabh Kumar said in a note to clients.
In recent deals, Indiabulls Real Estate won the four-acre Mantralaya modernisation project in Mumbai with a bid of Rs 1,376 crore. DLF Ltd, the country’s largest realtor, won a 350-acre plot in Gurgaon for about Rs 1,750 crore after two other bidders — Unitech and Bharti — were disqualified on technical grounds. DLF, however, still wants the government to ease policies to ramp up deals. “The overall demand is certainly firming up. All the developers have reduced property prices in the past so I don’t think any price hike can be expected in the near future,” DLF’s group executive director Rajeev Talwar told DNA. However, if demand continues to build up and supply gets restrained, the situation may lead to prices moving northwards. I think the government should ease the policies on giving clearances faster as that creates unnecessary delay in executing the projects,” he said.
Realty analysts and consultants are skeptical about the plan due to developers’ high debt. “That (price revival) is something skeptical to talk about right now. Most developers have raised money through capital markets by either a qualified institutional placement of shares or they are lining up an initial public offering. Companies which are heavy with debt or those who have reduced debt by raising capital should not look at purchasing land outright. However, if they have a fair debt position they can look at it,” Ambar Maheshwari, director-investment advisory at DTZ, told DNA. Omaxe chairman and managing director Rohtas Goel is optimistic of a price hike early next calender. “We have seen projects being launched at rock bottom prices off-late. The same projects are selling at a premium in the re-sale market, so you can expect developers to launch new projects at a higher price, we would also be looking at acquiring some key land plots,” he said.
Nitin Idnani, research analyst with Enam Securities, said, “Developers are still ready to buy land which can be monetised and [as for] those parcels located in tier 2 and tier 3 cities, developers still want to sell them off as it would be difficult to get returns on that land bank.” New Delhi-based developer Anant Raj Industries is also looking to buy distressed land from developers reeling under high debt and has started acquiring land in Maneswar and Bhagwandas. The company has allocated Rs 450 crore for land, on which it plans to build affordable homes. “We are negotiating for many land parcels, which we can get at discounted rates in the current market,” Amit Sarin, director, Anant Raj said.

Kolkata Real Estate Experts Suggest Sellers to Wait for Another six Months

While everybody is speaking about how good an opportunity it is to put in your money in real estate now, investors who intending to sell could do well waiting for about six more months to get some added advantage, say experts. “It depends on at what level they had entered. In another three to six months the market will be stable and input costs are anticipated to rise after that. Since there are no major projects that have been announced, there will be strain on supply. People should wait for at least six months before starting to sell,” said Pradeep Sureka, managing director of Bengal Park Chambers Housing Development Ltd. He added that ideally a twoyear wait would bring in maximum returns.
Debjani Mukherjee Sarkar, general manager — marketing of Bengal NRI and Varun Kathotia, director — marketing of Fort Group agreed. “In the past two months, the trend has shown that the market is picking up. The Bengal NRI, however, believes that people should wait for around six months to get an appreciation of about 10 to 15 per cent,” she said. “Land prices have not changed much and unless one can strike a very good deal, it is better to wait another four months before one sells a property,” Kathotia said. Some said in a couple of years, there would be major rise in property prices. “Those who had invested between 2005 and 2007, early 2008 had been the best time to sell off. At the moment, the market is slightly down and it is the right time to buy rather than sell. By 2011, there will be another 20 to 30 per cent jump in the market and that will be the ideal time to sell,” said Mayank Saksena, associate director of Joneslang Lasalle Meghraj.
“Two years from now, there will be a more than 30 per cent rise in prices,” said Sumeet Dabriwala, managing director of United Credit Belani Group. He added that people should wait for six months to one year because the condition at present was just the beginning of an uptrend. Many divided investors into different categories. “Selling will depend on when the person had taken possession of the property. If he is an old investor, this time is good enough to fetch him a profit and if he has been a recent investor, it will be better for him to wait for some time as the market has stabled and from here, it will only improve. In another year, the market will improve at least 10 per cent,” said Rahul Todi, managing director of Shrachi.
Rajesh Somani of Somani Realtors classified investors according to the amount of money they had spent. “People who had put in their money in properties of over Rs 40 lakh can sell them off as market growth in that segment is very slow but for investors under Rs 30 lakh, it will be advisable to wait for another six months, because the market is showing a positive trend,” he said. “The market has stabilised. People who had bought a correctly priced property will get better returns than bank interest, but those who purchased at exorbitant prices, expecting to make a fortune, will suffer a loss. Sellers who can afford to wait for another six months will get better return. The slowdown has put a check on speculative buying,” said Biswadeep Gupta, general manager of Eden City Group.
Sushil Mohta, managing director of Merlin Group, said two factors crucial to selling were whether the deal was mutually beneficial to both the seller and the buyer and whether it satisfied the consumer’s requirements. As long as these conditions were fulfilled, selling could take place. “Now, when the market sentiment has changed and developers have become more approachable, consumers are finding it easier to visit them and discuss in details their buying or selling decisions. Moreover, in such conditions, developers extend extra cooperation and added incentives to consumers, making deals more lucrative,” he said.
A few experts do not anticipate much of a rise in the near future. “Going by my interest, they should be buying, but realistically speaking, all buying and selling should be held for another three months,” said Kumar Shankar Bagchi, managing director of Bengal Peerless. Asked whether there will be a similar boom in two years, he said, “There will be, but prices will not soar to the level at which they were in the near past, before the financial crash. What happened was a catastrophe, caused by individuals who kept investing endlessly. They have learnt a lesson and I am sure that kind of situation will not rise again in my lifetime.” Harshvardhan Neotia, chairman and managing director of Ambuja Realty said he didn’t see any significant appreciation in the short run. “If one needs the money, one will have to sell anyway, but if one has the retaining capacity, one should wait for another couple of years before any considerable rise in property price,” he said.
“I believe that the decision should be based on the necessity to raise capital. I do not see any sharp increase in the value of real estate in the immediate future. Then again prices of real estate are dependent on location of the property and it is difficult to make a general statement,” said Santosh Rungta, president of the Confederation of Real Estate Developers’ Associations of India (CREDAI).

Real Estate Sector Recovering Worldwide

There are strong new reports that the global real estate market is hitting the bottom and some impressive positive news is coming from real estate markets around the world. In the U.S., the real estate market has yet to hit the bottom, but at least it is very close. There are 2 factors that would determine recovering the real estate market. One is when job losses stop and new jobs are created and secondly when the real estate prices are realistic reflections of what people can afford to buy. The news that the real estate market is recovering based on recent sales doesn’t really reflect real recovery. What is happening is that people are buying houses at bargain prices. The value of sales is up and this is a good sign but still the real estate market would probably start recovering by next spring.
Around the world there is positive news in India where there is a huge demand of the population for real estate that is the main factor for the real estate boom–and also in the Middle East where the population growth in 10-15 years is estimated to triple. The European real estate market mirrors what is happening in the U.S. There are some signs of improvement in Africa and Latin America but not as strong as in Canada, India and China. The Canadian Real Estate Association reported that realtors sold 50,270 units sold via the multiple listing service last month. That’s an 18.2 per cent jump from a year ago. It also marked the first time sales had topped 50,000 in July. Sales of existing single-family homes jumped 55 percent in the 2009 second quarter compared to the 2009 first quarter. Realtors sold 18,141 homes in the second quarter.
In China the strength of the property sector has been another big surprise. Property sales were up 53% in the first six months from a year earlier, according to a survey commissioned by the statistics bureau and published in the China Information News, while nationwide prices averaged across 70 cities climbed year on year in June. This masks the fact that in second and third cities prices have been strengthening much more. Property normally accounts for about 25% of fixed asset investment in China and is a key form of wealth holding for most Chinese. Optimism about housing prices will translate into greater consumer confidence.

Things Looking Good for Indian Retail Sector

FDI in retail must be allowed, insists Anshuman Magazine, CMD of CB Richard Ellis South Asia Pvt Ltd. “India’s retail trade is around $ 180 billion, which is almost 10 per cent of the GDP, employing more then 21 million persons. Policies should be more transparent and smooth, in order to attract foreign investors,” he justifies. “Like any other person who invests money, we need to understand that foreign investors will also expect returns. Perhaps the challenge lies in reassuring these investors,” he wonders aloud.
According to Dubai-based real estate consultant, Rajesh Bijlani, the news of retail chain IKEA putting its India entry plans on hold, indicates the prevalent scenario. “There is something in India’s policies and implementation that is keeping such major brands from entering right now, despite the fact that the economic indices are attractive to MNC brands,” he feels. “Many retail brands that have outlets in the UAE have shown interest in setting up operations in India, but little is actually working out in the near future, as compared to the potential. I guess we need to work out red-tapism and other issues that seem to be delaying the entry of these retail players at present,” he adds.
FDI is not allowed in multi-brand retail, only in single-branded stores, points out Bappaditya Basu, vice-president (retail), Jones Lang LaSalle Meghraj. “Foreign, single brand stores can open with an Indian partner and hold a maximum of 51 per cent stake, according to FDI norms. In the past, this was not allowed, which meant that only the franchisee route was available and it did not suit many of these brands,” he explains. Among the global retailers seeking to enter the Indian retail arena are Hamleys, Diesel, et al, reveals Basu. “Leading international brands like Burberry, Smallsmith, Kenzo, Bottega Veneta, Canali and Just Cavali were already present on a limited scale and have now changed partners, to open up more stores in India. There are also some international coffee chains eyeing India and scouting for partners,” he adds.
Ashok Kumar, principal and managing director, CresaPartners India mentions how the Emke Group, which operates the biggest hypermarket chain in the Middle East under the LuLu and Al Falah brands, is entering the Indian market by developing the biggest shopping mall in Kochi, in Kerala. “Crocs India Retail Ltd, the lifestyle footwear brand, will launch eight to 10 more EBOs in India. Similarly, Manchester United Food & Beverage Asia, with a mandate to set up casual dining outlets tapping into the popularity of the multi-billion dollar club, has done a recce of select Indian cities in recent months and followed it up by talking to potential investors. Leonidas, a Belgian chocolate producer and seller, has entered the Indian market by establishing its retail operations in India. It claims to be the only chocolate brand having its own exclusive store,” he adds. Similarly, New Delhi-based Grand Slam, one of the market leaders in high end fitness equipment, is planning to set up 30 more franchisee stores in tier-II and tier-III cities, by January 2010, adds Kumar. “Obviously, things are looking up and the Indian scenario seems receptive to FDI in retail,” he adds.
Rajnikant Ajmera, former president of CREDAI explains that the retail segment in India faces a simple challenge: global trends do not fit-in entirely, given that the end customer has a different buying pattern and motivators to loyalty, with regards to a brand or a location. “If you look at Mumbai’s retail story, initial projects faced all sorts of challenges. Some quietly shut down, were taken over or re-did their business plans. Issues pertaining to footfalls, the right size and mix of anchor tenants are still being learnt,” says Ajmera. However, global brands will definitely want to enter the vast Indian market, he adds. Kumar points out that the government has proposed setting up a retail regulatory authority, which will have jurisdiction over the organised retail sector, including single-brand stores and the wholesale cash-and-carry trade.
Amidst talk of a recovery from the global economic recession and the impact on real estate in India, Atul Modak, head of Kohinoor City Project says, “Global financial hiccups are a fact of life. They impact sentiment but will not stop economic growth in India. There is a demand-supply gap when it comes to quality commercial space. Prominent locations have and will always see terrific growth in residential space and this, in turn, will trigger the retail and commercial realty boom in any area,” he says.

Indian REITs Losing Overseas Opportunities

In a scenario where real estate is becoming out of reach for small investors, to invest and reap profits, real estate investment trusts (REITs) are a good way for the investor class to invest in the sector. It also benefits developers, as more funds are pumped into real estate. REITs/REMFs offer an innovative option for investors to buy and trade shares in the real estate sector and collect dividends from capital appreciation and rental incomes, explains Atul Modak, head, Kohinoor City Project.
REITs are generally classified into three broad categories - equity REITs, mortgage REITs and hybrid REITs. “The best benefit of REITs is fast and easy liquidation of investments in the real estate market, unlike the traditional way of disposing real estate,” he explains. However, it is important to have proper regulation and utilisation of these funds and total transparency in the whole process. For REITs to be a success and contribute to the growth of the economy, initial tax sops to the investors and REITs will be helpful, he feels.
REITs in the Indian scenario, are yet to take off, says Ashok Kumar, principal and managing director, CresaPartners India. “Certainly, we are losing out on such opportunities to overseas REITs, as it does not seem to be a priority for the government,” he regrets. The real estate sector in India is still complex and the regulators have to fix a lot of policies and valuation issues, in advance, for REITs to become functional, he adds. “If one considers the union budget 2009-10, there was no mention about FDI in real estate or REITs and REMFs. However, we hope that the FM will announce some relief for the sector, post the budget,” adds Kumar.
Realtor Bharat Mailk points to a paper, ‘Indian REITs: Are We Prepared’, by the ASSOCHAM and CRISIL and says that REITs in India would have the potential to hold at least five per cent share of the total global real estate market, by 2010. The size of this global market would touch US $ 1,400 billion, according to the paper. “According to the paper, by 2010, REITs alone would hold a market size of US $ 70 billion of the total real estate market, as the concept is gaining ground in countries like India and other developing nations,” he says, laying out the statistics. In the Indian context, REITs can help provide an exit route for developers, to revolve funds more efficiently. It will also provide opportunities to retail investors to participate in the real estate sector and provide asset diversification to corporate investors, besides building a vibrant secondary real estate market, adds Malik.
REMFs are the Indian version of the international REITs, adapted to the Indian mutual funds platform, explains Shobhit Agarwal, joint MD (capital markets), Jones Lang LaSalle Meghraj. “In the current context, while everybody is now working on entry and creating assets, the important question of who will buy these assets to provide an exit to the developers / investors needs to be addressed,'’ he points out. The leveraging allowed in the case of Indian REITs is the lowest (at 20 per cent of the value), compared to 35 per cent in the case of Malaysia, Hong Kong, Singapore, and Taiwan and 200 per cent in the case of Korea. This could result in a lower yield and because it is not really leveraged, the risk taken is also more,” he cautions.
Mihir Dhruva, CEO of Siddharth Group is of the opinion that REITs should be more preferred by the ‘low-risk, low-return’ investor segment. “Sentiments, which contributed significantly to the depressed market in FY 08-09 are now reversing,” says Dhruva. “This has been reflected in reports coming from different cities, showing revival of real estate transactions and REITs should have a positive response as a result,” he concludes.

ITDC plans to make Private Hotels, Realtors as Partners

Hotel-cum-tourism PSU, Indian Tourism Development Corporation (ITDC) plans to make private hotel companies and real estate players its franchisee partners. It launched the Ashok Alliance Scheme on Thursday, under which member hotels will be able to use the Ashok brand and benefit from the operational management expertise, marketing inputs and other resources of the ITDC Group. ITDC, in turn, would get 3% of the gross room revenues earned by these hotels.
The company has roped in two developers in Surat and Chandigarh, who will get to use the Ashok brand for properties developed by them. This will take the total number of hotels under the Ashok brand to 18. “We are in talks with a number of other real estate players and hoteliers to bring more hotels under the Ashok Alliance scheme,” ITDC vice-president Kuldip Verma said.
He said ITDC would add 5-6 more hotels at various locations through this alliance — three in West Bengal and one each in Manesar, Coorg and Malaut, Punjab. In the long run, it wants to increase the hotel count to 33 hotels.
In the past three years, ITDC has invested Rs 146 crore in refurbishing Ashok Hotel, Samrat Hotel and Janpath Hotel for the Commonwealth Games in New Delhi. The Organising Committee Commonwealth Games (OCCG) 2010 has declared these three hotels as ‘Games Family Hotels’ which have a total room inventory of 680 rooms. It is revamping its hotels at other destinations too.
ITDC had 34 hotels, of which 18 hotels were sold to private partners under the government’s disinvestment programme. The PSU is now left with 16 hotels, which it now plans to expand through the scheme.

India widens foreign VC funds’ investment options

Indian regulators have opened the doors to foreign venture capital funds (FVCFs) beyond the select investment options they were being offered in recent times.
The decision, reflected in some of the communications between the Reserve Bank India and custodian banks of VC funds, could not only make life easier for foreign funds and widen the scope for their risk capital, but also boost foreign direct investment (FDI) in the country.
In the past one year, FVCFs, which were allowed to come in, were specifically told to stick to activities such as infrastructure, bio-technology, nano-technology, biofuel, IT-related activities for hardware and software development and a few other areas outlined by the government in the list of 10 sectors identified for tax benefits to VCs.
Recently, RBI, while giving the green light to some of the FVCFs, has said “if the FVC investor intends to make any private equity investments, then it may have to avail the FDI route”. This means that barring a few sensitive sectors, an FVCF registered in India is free to invest in almost any business in the country. For buying into firms which are outside the 10 sectors, the fund will have to either approach the Foreign Investment Promotion Board for FDIs where the board approval is required, or invest directly in areas where FDI is permitted under the automatic route.
Responding to the development, Vikram Shroff of the law firm Nishith Desai Associates said, “The regulator’s intention seems to be to allow FVC entities to invest beyond what is permissible under the Sebi FVC regulations, albeit under the FDI route.” Shroff, who advises several FVCFs, said, “Upon RBI clarifying, offshore venture capital and private equity funds may no longer need to set up separate entities for pursuing FDI in India.”
According to private equity circles, FVCFs have interest in businesses like BPOs, telecom, media and entertainment, among other segments. RBI’s latest stand, however, does not pave the way for FVCF investment in the real estate space — something the central bank forbids.
Fearing a real estate bubble, RBI generally insists on an undertaking from FVCFs that they will not invest in property firms. This, according to private equity circles, is unlikely to change. But on a broader plane, this is a welcome move by RBI and will encourage foreign investments, said Punit Shah, executive director of PricewaterhouseCoopers. “Of course, FVCs enjoy certain regulatory benefits under Sebi and Fema regulations, such as exit and entry pricing and lock-in relaxations. These will not be available for its investments under FDI route, but RBI has certainly made things convenient for the foreign funds.”
Interestingly, the RBI letter is also a rare instance when a local regulator makes a mention of ‘private equity’ — a widely-used generic term for which there is no regulatory definition in India. “It needs to be understood that venture capital and private equity are largely similar activities — only the stage differs. Both provide risk capital. While VCs fund early stage, PEs focus on medium to late stage companies. In several cases, the same fund undertakes both investment activities,” said Shroff.

India widens foreign VC funds’ investment options

Indian regulators have opened the doors to foreign venture capital funds (FVCFs) beyond the select investment options they were being offered in recent times.
The decision, reflected in some of the communications between the Reserve Bank India and custodian banks of VC funds, could not only make life easier for foreign funds and widen the scope for their risk capital, but also boost foreign direct investment (FDI) in the country.
In the past one year, FVCFs, which were allowed to come in, were specifically told to stick to activities such as infrastructure, bio-technology, nano-technology, biofuel, IT-related activities for hardware and software development and a few other areas outlined by the government in the list of 10 sectors identified for tax benefits to VCs.
Recently, RBI, while giving the green light to some of the FVCFs, has said “if the FVC investor intends to make any private equity investments, then it may have to avail the FDI route”. This means that barring a few sensitive sectors, an FVCF registered in India is free to invest in almost any business in the country. For buying into firms which are outside the 10 sectors, the fund will have to either approach the Foreign Investment Promotion Board for FDIs where the board approval is required, or invest directly in areas where FDI is permitted under the automatic route.
Responding to the development, Vikram Shroff of the law firm Nishith Desai Associates said, “The regulator’s intention seems to be to allow FVC entities to invest beyond what is permissible under the Sebi FVC regulations, albeit under the FDI route.” Shroff, who advises several FVCFs, said, “Upon RBI clarifying, offshore venture capital and private equity funds may no longer need to set up separate entities for pursuing FDI in India.”
According to private equity circles, FVCFs have interest in businesses like BPOs, telecom, media and entertainment, among other segments. RBI’s latest stand, however, does not pave the way for FVCF investment in the real estate space — something the central bank forbids.
Fearing a real estate bubble, RBI generally insists on an undertaking from FVCFs that they will not invest in property firms. This, according to private equity circles, is unlikely to change. But on a broader plane, this is a welcome move by RBI and will encourage foreign investments, said Punit Shah, executive director of PricewaterhouseCoopers. “Of course, FVCs enjoy certain regulatory benefits under Sebi and Fema regulations, such as exit and entry pricing and lock-in relaxations. These will not be available for its investments under FDI route, but RBI has certainly made things convenient for the foreign funds.”
Interestingly, the RBI letter is also a rare instance when a local regulator makes a mention of ‘private equity’ — a widely-used generic term for which there is no regulatory definition in India. “It needs to be understood that venture capital and private equity are largely similar activities — only the stage differs. Both provide risk capital. While VCs fund early stage, PEs focus on medium to late stage companies. In several cases, the same fund undertakes both investment activities,” said Shroff.
Ref:http://www.indianrealtynews.com/real-estate-india/india-widens-foreign-vc-funds-investment-options.html

Bandra-Worli Sea Link Expected to Boost Real Estate Prices by 10-15 per cent in Surrounding Areas

It’s a classic case of infrastructural development boosting real estate prices.The Bandra-Worli Sea Link seems to be doing more than just easing the traffic flow from north and south Mumbai. Experts in the country’s financial capital say that there could be an increase of 10-15 per cent in property rates in surrounding areas. “The Bandra-Worli Sea Link will not only provide relief from the agonising traffic, but will also trigger a major crowd influx, which will affect real estate prices. South Mumbai will have high demand .There are indications of a 10-15 per cent hike in property prices and this may effect connecting areas. Builders who are already selling flats in the area would go for a price correction immediately, says Rajesh Vardhan, managing director, Vardh­aman Group, a Mumbai-based real estate development company. In the same breath, he says it is time for a Nariman Point-Worli sea link as well.
Bandra-Worli Sea Link is a Maharashtra state road development corporation project, constr­ucted by HCC, India’s largest engineering contracting company. The road hangs in between cable-stayed bridges on the two ends namely, the Bandra and Worli Cable-stayed bridges of 500 and 150-metre spans, respectively – with the highest towers soaring to a height of 126 metres, equivalent to the height of a 43-storeyed building. The sea link was opened for general public on June 29. Not everyone, however, shares the same optimism. Shreegopal Maheshwari, broker attached to Mumbai-based Maheshwari & Maheshwari, feels that it is too early to see an impact on property prices. “It is just over a month since the link was inaugurated. We may see the real impact in six months.
Worli Sea face has, however, seen a drop of 10 per cent property prices due to increased traffic in the area,” he said. While the office properties in Mumbai generally continued to fall. “Mumbai continued to remain volatile in terms of rental values. Bandra–Kurla Complex (BKC) corrected by another 20 per cent over the previous quarter to settle at Rs 225 per sq ft/month. The location has also witnessed over 40 per cent correction over June, 2008. This has triggered increased interest in the location from corporate occupiers and approximately 1.41 million sq.ft was leased within this location. With the growing demand for this location, the rentals are expected to remain stable in short to medium term,” said a recent report by Cush­man & Wakefield.
Ref:http://www.indianrealtynews.com/real-estate-india/mumbai/bandra-worli-sea-link-expected-to-boost-real-estate-prices-by-10-15-per-cent-in-surrounding-areas.html

Realty Bosses Took Huge Salary Hike amid Slowdown Blues

India Inc was on a savage cost cutting drive in the latter half of 2008-09. Salary cuts and job losses became the order of the day. However, the big bosses of real estate companies of at least 4 major real estate companies such as Unitech, HDIL, Anant Raj Industries and Ackruti City took home nearly 2-10 times hike in remuneration compared to a year ago. An analysis of the annual reports of these companies shows that the salary hikes were greater in that fiscal when their businesses were caught due to economic slowdown. Wadhawans of Mumbai-centric Housing Housing Development & Infrastructure Limited (HDIL) are a good example.
Between Rakesh Kumar Wadhawan (executive chairman) and Sarang Wadhawan (managing director), HDIL paid them Rs 18 crore in salary and perks in the financial year 2008-09, 10 times more than Rs 1.72 crore a fiscal back in 2007-08. During the same period, consolidated total income of HDIL sank 27% to Rs 1,782 crore and consolidated profits after tax (before minority interests) took a harder 52% knock to Rs 677 crore. The stock price of HDIL fell over 80% to Rs 82 at March 09 end from Rs 500 levels in March 08.
In the case of Unitech - Ramesh Chandra (chairman), Sanjay Chandra and Ajay Chandra (both managing directors) received Rs 5.36 crore as cumulative remuneration in 08-09 nearly 60% more than the Rs 3.44 crore earned in 07-08 . This bountiful hike came at a time even as Unitech’s consolidated total income fell by 23% to Rs 3316 crore and profits after tax plunged 28% to Rs 1,197 crore. 57-year old Anil Sarin, copromoter and managing director of Anant Raj Industries , took home around Rs 1.28 crore in gross remuneration in fiscal 08-09 as against just Rs 37 lakh in 07-08 . Gross remuneration comprises salary, house rent allowance and company’s contribution to provident fund.
This represents more than 200% hike in remuneration - in a year when consolidated total income of Anant Raj dropped by 49% to Rs 322 crore and PAT dived by 53% to Rs 207 crore. The stock also fell from Rs 230 levels in March 2008 to Rs 40 by March 2009. “There are many issues in the real estate space. Corporate governance and the business model being two important ones. We do not like real estate much because we think that it’s very difficult to create value for the shareholders because most of them are capital guzzlers,” Sukumar Rajah, CIO of Franklin Equity (India), said.
Promoters Hemant Shah and Vyomesh Shah of Ackruti City took 40% hike in remuneration as executive chairman and MD respectively in fiscal 08-09. The older and 56-year old Hemant Shah received Rs 1.86 crore (Rs 1.30 crore in 07-08) while 49-year old Vyomesh Shah accepted Rs 1.65 crore (Rs 1.19 crore in 07-08 ). Ackruti’s total consolidated income fell just 4% to Rs 454.78 crore in 08-09 and profits after tax came down 11% to Rs 265 crore in 08-09 .
Ref:http://www.indianrealtynews.com/real-estate-developers/realty-bosses-took-huge-salary-hike-amid-slowdown-blues.html

Supreme Court Blames Influential People for Illegal Real Estate Construction

The Supreme Court today came down heavily on economically affluent people, bureaucrary and civic body officials for mushrooming illegal real estate construction in the country and ruled file notings by ministers or officials do not have any legal validity. “Economically affluent people and those having support of the political and executive apparatus of the state have constructed buildings, commercial complexes, multiplexes, malls etc. in blatant violation of the municipal and town planning laws, master plans, zonal development plans and even sanctioned building plans”, said a bench of Justices B N Aggarwal and G S Singhvi in a judgement.
“In most of the cases of illegal or unauthorized constructions, the officers of the municipal and other regulatory bodies turn blind eye either due to the influence of higher functionaries of the State or other extraneous reasons, the bench observed.”In most of the cases of illegal or unauthorized constructions, the officers of the municipal and other regulatory bodies turn a blind eye either due to the influence of higher functionaries of the state or other extraneous reasons, it said.
The apex court also said file notings ministers or officials do not have any legal validity. Its ruling came while dismissing an appeal filed by Sathish Khosla, President of Shanti Sports Club of India which claimed to run a cricket academy at a village in Delhi. One of the pleas of the club was that its illegally constructed sports club should not be demolished as the then Minister for Urban Development in 1999 had noted in his file that the construction be regularised.
Ref:http://www.indianrealtynews.com/real-estate-india/supreme-court-blames-influential-people-for-illegal-real-estate-construction.html

Chennai Realtors Using Illegal Guns

The recent shooting of ship captain Ilangovan and his wife Ramani has brought into focus the fact that a number of Chennai-based realtors are procuring guns from Madhya Pradesh, Uttar Pradesh and Bihar, and using them only to threaten others during land deals. The gun that was used on the couple was a country-made pistol and that is probably what saved Vasanthi, their daughter-in-law, when the gunman Rajan turned the pistol on her. Police said country-made guns are not effective and often do not have sufficient range. “Regular guns have a firing range of 50 to 60 yards, but country-made guns have a range of less than 15 to 20 yards. Even, if a person targets the chest, the bullet pierces only the thighs or legs,” sources said. Chennai, or even Tamil Nadu, does not have a hub for manufacturing lethal country-made weapons, but the guns are being brought in from the north.
“In case of the Neelankarai shooting, the accused may have been standing on the extreme right of the room after shooting the couple. He aimed at Vasanthi, who was running away from him, and she was probably out of his range. That is the reason why she did not sustain grievous injuries,” a senior police officer said. “Chennai and Tamil Nadu is not known for manufacturing illegal arms due to the effective policing and intelligence network here, when compared to other states in India. Recently, the illegal manufacture of rocket launchers by Maoists from Andhra Pradesh was busted in Ambattur Industrial Estate,” another senior police officer said.
Due to setting up of many IT companies in Chennai and TN, land value has risen rapidly and real estate is a booming business. “Many youth have entered the real estate business under various banners. The young men procure illegal guns from states where they are easily available and threaten rival gangs,” police said
Ref:http://www.indianrealtynews.com/real-estate-india/chennai-realtors-using-illegal-guns.html

Singapore Arm of Realty Major Indiabulls Plans to Raise Rs 676 cr

The Singapore-listed Indiabulls Properties Investment Trust, which is part of realty major Indiabulls Real Estate, is planning to raise up to 200 million Singapore dollars (about Rs 676 crore) through a rights issue. The proceeds would be used to pay debts of the company. Indiabulls Properties Investment Trust (IPIT) in a filing to the Singapore Stock Exchange has said it is looking at a rights issue for the purpose of “raising up to 200 million Singapore dollars of gross proceeds, for the primary purpose of repaying and/or pre-paying part of the borrowings”. Indiabulls Property Management Trustee Pte, the trustee-manager of IPIT, has submitted an additional listing application for the planned rights issue to the Singapore Exchange Securities Trading Ltd.
“Under the rights issue, new units will be offered to all existing unit holders (including Indiabulls Real Estate Limited, which is the sponsor of IPIT) on a renounceable and underwritten basis,” the firm said. According to Monday’s filing, the trustee-manager has not taken any firm decision in relation to the rights issue including the price. “The trustee-manager will make these decisions at a later stage depending on the financial requirements of IPIT and the prevalent market conditions at the material time… There is no assurance that the rights issue will proceed,” it noted. The filing noted that the trustee-manager is always in the process of evaluating various funding sources for IPIT.The Singapore-listed Indiabulls Properties Investment Trust, which is part of realty major Indiabulls Real Estate, is planning to raise up to 200 million Singapore dollars (about Rs 676 crore) through a rights issue.
Indiabulls Properties Investment Trust (IPIT) in a filing to the Singapore Stock Exchange has said it is looking at a rights issue for the purpose of “raising up to 200 million Singapore dollars of gross proceeds, for the primary purpose of repaying and/or pre-paying part of the borrowings”. Indiabulls Property Management Trustee Pte, the trustee-manager of IPIT, has submitted an additional listing application for the planned rights issue to the Singapore Exchange Securities Trading Ltd. “Under the rights issue, new units will be offered to all existing unit holders (including Indiabulls Real Estate Limited, which is the sponsor of IPIT) on a renounceable and underwritten basis,” the firm said.
According to Monday’s filing, the trustee-manager has not taken any firm decision in relation to the rights issue including the price. “The trustee-manager will make these decisions at a later stage depending on the financial requirements of IPIT and the prevalent market conditions at the material time… There is no assurance that the rights issue will proceed,” it noted. The filing noted that the trustee-manager is always in the process of evaluating various funding sources for IPIT.