In a few months from now, a uniform real estate valuing method will be put in place across the country. For that, the National Housing Bank (NHB) has prepared a draft of real estate uniform valuing methods. Speaking at a Banking Conclave organised by Federation of Indian Chamber of Commerce and Industries (FICCI) on Wednesday, Sridhar said, “Like uniform accounting standard, we also need a uniform valuation standard for real estate properties. We have already prepared a draft and are now discussing with valuers and bankers. Once, it is finalised, a uniformity will emerge in real estate valuation.”
Sridhar said NHB was scouting for a partner for the proposed Indian Mortgage Guarantee Company, where NHB owns 43 per cent stake. “AIG, which had proposed to take 41 per cent stake in the company, withdrew itself due to financial difficulties in October 2008. We are now searching for an alternative partner,” he added. Asian Development Bank (ADB) and International Finance Corporation (IFC) are the other partners of the company with eight per cent stakes each. Sridhar, chairman and managing director (CMD), said that some stakeholders/partners of Housing Finance Company had expressed interest in it. If they finally leave, Central Bank is willing to pick up their stakes, which would in turn strengthen Central Bank’s exposure in housing finance, he said. Hudco, UTI, NHB are the other partners in Central Bank’s housing finance company.
Ref:http://www.indianrealtynews.com/real-estate-india/uniform-valuation-standard-for-real-estate-to-be-effective-soon.html
Friday, July 31, 2009
Rs 13 cr Decline in Sobha Developers Q1 Profit
Realty major Sobha Developers has seen its net profit nosedive for the first quarter ended June 30, 2009, at Rs 12.7 crore, against Rs 50.5 crore for the same period in FY09. Income from operations stood at Rs 177.1 crore (Rs 346.8 crore). Sobha, which bore the aftershocks of the global economic slowdown, has seen a revival in fortunes in the first quarter compared with the fourth quarter ended March 31, 2009. Net profit in the first quarter increased 76.4% to Rs 12.7 crore from the fourth quarter, while total income was sequentially up 15.6% at Rs 178.6 crore.
“The real estate industry has seen clear signals of revival in demand during the first quarter. With the Indian economy growing at 6-7% and expected to achieve a higher growth rate in the next couple of years, real estate infrastructure industries are poised to play a more significant role. It will be a domestic-driven industry, growing at a much faster pace,” a company filing made with the bourses added. On its part, Sobha Developers has realigned debt, brought on board a private equity partner, besides successfully completing a qualified institutional placement (QIP) raising Rs 500 crore.
These steps, the filing goes on to say, have added the much-needed comfort in operations and have helped the company focus on progress in various projects across key cities, including Bangalore. The company intends to focus on debt reduction and cost optimisation and believes it is well-equipped to capitalise on the early revival in the Indian economy. As of June 30, 2009, Sobha Developers has completed 50 residential / commercial in-house projects and 146 contractual projects covering 31.9 million sq ft of built-up space.
Sobha Developers has currently 31 residential / commercial ongoing projects totalling 9.2 million sq ft. The company has contractual projects in several states like Karnataka, Kerala, Andhra Pradesh, Orissa, Tamil Nadu, Punjab, Haryana, the NCR, besides Maharashtra. On the bourses, the Sobha scrip was down 1.2% at Rs 219, with 3.5 lakh shares changing hands on BSE.
Ref:http://www.indianrealtynews.com/real-estate-developers/rs-13-cr-decline-in-sobha-developers-q1-profit.html
“The real estate industry has seen clear signals of revival in demand during the first quarter. With the Indian economy growing at 6-7% and expected to achieve a higher growth rate in the next couple of years, real estate infrastructure industries are poised to play a more significant role. It will be a domestic-driven industry, growing at a much faster pace,” a company filing made with the bourses added. On its part, Sobha Developers has realigned debt, brought on board a private equity partner, besides successfully completing a qualified institutional placement (QIP) raising Rs 500 crore.
These steps, the filing goes on to say, have added the much-needed comfort in operations and have helped the company focus on progress in various projects across key cities, including Bangalore. The company intends to focus on debt reduction and cost optimisation and believes it is well-equipped to capitalise on the early revival in the Indian economy. As of June 30, 2009, Sobha Developers has completed 50 residential / commercial in-house projects and 146 contractual projects covering 31.9 million sq ft of built-up space.
Sobha Developers has currently 31 residential / commercial ongoing projects totalling 9.2 million sq ft. The company has contractual projects in several states like Karnataka, Kerala, Andhra Pradesh, Orissa, Tamil Nadu, Punjab, Haryana, the NCR, besides Maharashtra. On the bourses, the Sobha scrip was down 1.2% at Rs 219, with 3.5 lakh shares changing hands on BSE.
Ref:http://www.indianrealtynews.com/real-estate-developers/rs-13-cr-decline-in-sobha-developers-q1-profit.html
43% Drop in Foreign Direct Investment
India received $2.2 billion foreign direct investments (FDI) in May this year, department of industrial policy & promotion (DIPP) secretary Ajay Shankar said. There is a 43% drop in the FDI inflow in May 2009 compared to $3.9 billion received in the same month of the previous year. The inflow of foreign capital into the country will improve now, as the country’s industrial output in June looks “promising,” Mr Shankar said on the sidelines of a seminar by Confederation of Indian Industry (CII). “We think, with liquidity improving and confidence in the economy rising, these (FDI) numbers should pick up,” he said. The government had scaled down the FDI target by $5 billion from $35 billion last fiscal.
In April 2009, FDI inflow had fallen by 38% to $2.34 billion from $3.74 billion a year ago. In the calendar year 2009 up to April, FDI inflow into the country slipped by nearly 46% from the year-ago period to $8.5 billion, as per the latest figures released by DIPP. Inflow of foreign capital dried up as foreign investors were reluctant to put their money in risky emerging markets but India’s 6.7% growth in 2008-09 when developed countries struggled with recession is expected to bring foreign investors back. In the first six months of 2008-09, FDI inflow was $27.3 billion compared to $24.5 billion in 2007-08. Cumulative FDI inflow from April 2000 to March 2009 was about $90 billion, as per DIPP data.
The department collects data on foreign investment from the RBI and releases monthly updates. Mauritius, with which India has a double taxation avoidance agreement, is the largest contributor of FDI into India, followed by Singapore and the USA. Services sector attracts the largest share of foreign capital, followed by computer software and hardware, telecommuniation, housing and real estate. Mr Shankar expressed confidence that there would be “continuous improvement” in industrial output. Official data released earlier this month had shown industrial output rising for the second straight month in May, fueling hopes of faster economic growth. Led by the consumer durable sector, the Index of Industrial Production (IIP) rose by 2.7%, its biggest increase since October 2008.
Ref:http://www.indianrealtynews.com/fdi-india/43-drop-in-foreign-direct-investment.html
In April 2009, FDI inflow had fallen by 38% to $2.34 billion from $3.74 billion a year ago. In the calendar year 2009 up to April, FDI inflow into the country slipped by nearly 46% from the year-ago period to $8.5 billion, as per the latest figures released by DIPP. Inflow of foreign capital dried up as foreign investors were reluctant to put their money in risky emerging markets but India’s 6.7% growth in 2008-09 when developed countries struggled with recession is expected to bring foreign investors back. In the first six months of 2008-09, FDI inflow was $27.3 billion compared to $24.5 billion in 2007-08. Cumulative FDI inflow from April 2000 to March 2009 was about $90 billion, as per DIPP data.
The department collects data on foreign investment from the RBI and releases monthly updates. Mauritius, with which India has a double taxation avoidance agreement, is the largest contributor of FDI into India, followed by Singapore and the USA. Services sector attracts the largest share of foreign capital, followed by computer software and hardware, telecommuniation, housing and real estate. Mr Shankar expressed confidence that there would be “continuous improvement” in industrial output. Official data released earlier this month had shown industrial output rising for the second straight month in May, fueling hopes of faster economic growth. Led by the consumer durable sector, the Index of Industrial Production (IIP) rose by 2.7%, its biggest increase since October 2008.
Ref:http://www.indianrealtynews.com/fdi-india/43-drop-in-foreign-direct-investment.html
Pride Group of Hotels Plan Expansion
Pride Group of Hotels, promoted by S.P. Group of companies, has embarked on a Rs. 800-crore expansion plan to open more five-star hotels, resorts and business hotels in a span of six years. The group, which at present has 1,000 luxurious rooms, will be opening more luxurious hotels, resorts and business hotels. Addressing presspersons here on Tuesday, S. P. Jain, Chairman, said the group had five-star hotels at Pune, Nagpur, Ahmedabad, Chennai and Bangalore. It would be opening luxury hotels in Goa this year and in Mumbai, New Delhi, Hyderabad and Alibaug in 2010.
For meeting the expenditure, the company will submit shortly the offer document to the Securities and Exchange Board of India for raising Rs. 200 crore through an initial public offering (IPO). Kotak Real Estate Fund has invested Rs. 45 crore and Primary Real Estate Investments, Mauritious Rs. 10 crore in the equity capital of Pride Hotels. The group plans to raise Rs. 300 crore through term loans. The balance would be met out of internal resources, Mr. Jain said.
For meeting the expenditure, the company will submit shortly the offer document to the Securities and Exchange Board of India for raising Rs. 200 crore through an initial public offering (IPO). Kotak Real Estate Fund has invested Rs. 45 crore and Primary Real Estate Investments, Mauritious Rs. 10 crore in the equity capital of Pride Hotels. The group plans to raise Rs. 300 crore through term loans. The balance would be met out of internal resources, Mr. Jain said.
Wednesday, July 29, 2009
Interest Rate Subsidy for Mid-Segment Housing- FM
Finance minister Pranab Mukherjee said that the interest rate subsidy for mid-segment housing would be routed to customers through commercial banks and housing companies registered with the National Housing Bank. He said to further provide stimulus to the housing sector, it will be allowed a tax holiday in respect of profits derived from projects approved between April 1, 2007 and March 31, 2008, if such projects are completed on or before March 31, 2012. ‘‘I expect the developers to pass on the benefit of tax holiday to home buyers by appropriately reducing their prices. I am sure that both the expenditure and tax-foregone initiatives would provide relief to a large segment of prospective home owners and help revive the real estate sector,’’ he added.
The interest subsidy is aimed at mid-segment housing loan borrowers from the lower middle to middle-income groups. Even on Monday, Congress MP from Mumbai (North) Sanjay Nirupam, while speaking on the finance bill, said 42.4% of Maharashtra’s population was urbanized and trends pointed to increasing migration to cities. With home loan rates climbing steeply, there was a case for providing relief to borrowers. Providing an interest subsidy and a targeted tax break also answers in part the demand that the becalmed real estate sector needs a leg up. The government’s message to the real estate developers is to lower prices and make housing more affordable for the aam aadmi.
The housing loan subsidy came with a slew of other concessions such as exempting road repairs and maintenance from the ambit of service tax while extending the sunset clause for tax holidays for industrial parks by a further two years up to March 2011 to boost growth in infrastructure. The FM clarified that service tax on new services and any alteration in the existing services as announced in the Budget would be effective from September 1, 2009. ‘‘It’s a welcome step from the government. The decision is sure to improve loan eligibility and affordability of a large section of the Indian middle class. It will also lead to increased activity with regard to real estate in the affordable housing segment which in turn will create employment,’’ said Renu Sud Karnad, Joint MD, HDFC Ltd.
Ref:http://www.indianrealtynews.com/real-estate-india/interest-rate-subsidy-for-mid-segment-housing-fm.html
The interest subsidy is aimed at mid-segment housing loan borrowers from the lower middle to middle-income groups. Even on Monday, Congress MP from Mumbai (North) Sanjay Nirupam, while speaking on the finance bill, said 42.4% of Maharashtra’s population was urbanized and trends pointed to increasing migration to cities. With home loan rates climbing steeply, there was a case for providing relief to borrowers. Providing an interest subsidy and a targeted tax break also answers in part the demand that the becalmed real estate sector needs a leg up. The government’s message to the real estate developers is to lower prices and make housing more affordable for the aam aadmi.
The housing loan subsidy came with a slew of other concessions such as exempting road repairs and maintenance from the ambit of service tax while extending the sunset clause for tax holidays for industrial parks by a further two years up to March 2011 to boost growth in infrastructure. The FM clarified that service tax on new services and any alteration in the existing services as announced in the Budget would be effective from September 1, 2009. ‘‘It’s a welcome step from the government. The decision is sure to improve loan eligibility and affordability of a large section of the Indian middle class. It will also lead to increased activity with regard to real estate in the affordable housing segment which in turn will create employment,’’ said Renu Sud Karnad, Joint MD, HDFC Ltd.
Ref:http://www.indianrealtynews.com/real-estate-india/interest-rate-subsidy-for-mid-segment-housing-fm.html
Global Pension Funds Appreciate India for good Returns
Indian pension fund managers may have recently got the nod to dabble extensively in volatile stocks, but global pension funds from the US and Europe continue to back India for giving good returns. US public pension funds such as California Public Employees’ Retirement System (CalPERS), California State Teacher’s Retirement System (CalSTRS) and European pension funds such as Norway’s Government Pension Fund (Global), Denmark’s LD Pensions, Netherlands’ ABP Funds — all combined — have exposure to over 300 different companies listed in Indian bourses, apart from investments in real estate. CalPERS, the largest public pension fund in the US, has just reported the most severe (23%) decline in assets to $181 billion in fiscal 2009 but yet it believes India is one of the “most promising” investment destinations globally. CalPERS has over $320 million exposure in listed Indian stocks plus $100 million in Indian real estate via India Realty Fund and India Real Estate Fund.
“We believe markets, including India, are perhaps the most promising investment sector in the coming years. Accordingly, our global equity , private equity, and real estate sectors are looking to allocate increasing share of their portfolios-up to 50% — to such countries. India is promising, especially compared with so-called developed US and Europe,” a CalPERS spokesperson said. The fund administers retirement benefits for 1.6 million active and retired state, public school, and local public agency employees and their families. Norway’s Government Pension Fund (Global) — where the surplus wealth produced by Norwegian petroleum income is deposited — has exposure to around 215 Indian listed companies. According to an official of Norges Bank Investment Management, which is responsible for investing the international assets of the fund, emerging markets such as India have been ‘responsible for improvement in the returns’ clocked by international listed stocks portfolio.
Netherlands’ ABP and Denmark’s LD Pensions have exposure to Indian stocks worth over $500 million as per latest figures. These funds serve the needs of nearly 3 million European pensioners.
Ref:http://www.indianrealtynews.com/real-estate-india/global-pension-funds-appreciate-india-for-good-returns.html
“We believe markets, including India, are perhaps the most promising investment sector in the coming years. Accordingly, our global equity , private equity, and real estate sectors are looking to allocate increasing share of their portfolios-up to 50% — to such countries. India is promising, especially compared with so-called developed US and Europe,” a CalPERS spokesperson said. The fund administers retirement benefits for 1.6 million active and retired state, public school, and local public agency employees and their families. Norway’s Government Pension Fund (Global) — where the surplus wealth produced by Norwegian petroleum income is deposited — has exposure to around 215 Indian listed companies. According to an official of Norges Bank Investment Management, which is responsible for investing the international assets of the fund, emerging markets such as India have been ‘responsible for improvement in the returns’ clocked by international listed stocks portfolio.
Netherlands’ ABP and Denmark’s LD Pensions have exposure to Indian stocks worth over $500 million as per latest figures. These funds serve the needs of nearly 3 million European pensioners.
Ref:http://www.indianrealtynews.com/real-estate-india/global-pension-funds-appreciate-india-for-good-returns.html
Price Correction Encourages Gurgaon Real Estate market
Encouraged by price correction and lowering of interest rates, the real estate market, after a period of relative inactivity lasting the first few months of the year, witnessed improved levels of activity on the part of retail investors in the residential sector, especially in the low to mid-end housing segment, said experts as well as market analysis reports of the second quarter in 2009. CBRE Market View, India Office, published for the second quarter, said: “Level of enquiries went up and, more significantly, transaction velocity also increased marginally as compared to Q1 (first quarter) of 2009… However with most of the activity confined to smaller format offices, vacancy levels remain high. Most developers deferred plans for launching any new projects, the focus being on deploying the scarce resources on completing projects in hand.”
“The downward trend in rental values seen till now has actually been arrested. We expect them to stay put at the present levels over the next quarter. Depending on location, project and sub-market dynamics, the decline over the past 12 months has been anywhere between 25 to 40 per cent. However, values have remained steady over the last quarter,” Pawan Swamy, Managing Director (Western India) Jones Lang LaSalle Meghraj, said.
“In the current context, however, we are now looking at a significant increase in demand, with multinational occupiers beginning to look more favourably at investments” he added. Increased space availability and comparatively reduced cost of occupation in prime Grade A projects in the Central Business District (CBD) has led to a revival of interest in this location, a situation practically non-existent over the past year. As a result, vacancy levels have come down to the range of 7 to 8 per cent. Meanwhile, rentals in the Secondary Business District (SBD) category have come down by approximately 11 per cent over the last quarter, the CBRE report states. “There has been no significant growth in the IT segment — most of the activity we are witnessing is in the corporate sector, predominantly among multinational companies with multiple offices in the same city. Meanwhile, demand in the residential sector has already made a remarkably fast comeback, and capital markets are opening up,” Swamy said.
Meanwhile, Gurgaon witnessed an increase in transactions assisted by attractive leasing packages offered by most developers. “Companies that had postponed their expansion/relocation decisions are now ready to take advantage of the market and the options available for phased take-up…office leasing volume increased by approximately 3 to 4 per cent in the NCR during the second quarter. Increasing levels of corporate confidence should maintain the momentum in the second half of the year,” reads the CBRE report.
Ref:http://www.indianrealtynews.com/real-estate-india/gurgaon/price-correction-encourages-gurgaon-real-estate-market.html
“The downward trend in rental values seen till now has actually been arrested. We expect them to stay put at the present levels over the next quarter. Depending on location, project and sub-market dynamics, the decline over the past 12 months has been anywhere between 25 to 40 per cent. However, values have remained steady over the last quarter,” Pawan Swamy, Managing Director (Western India) Jones Lang LaSalle Meghraj, said.
“In the current context, however, we are now looking at a significant increase in demand, with multinational occupiers beginning to look more favourably at investments” he added. Increased space availability and comparatively reduced cost of occupation in prime Grade A projects in the Central Business District (CBD) has led to a revival of interest in this location, a situation practically non-existent over the past year. As a result, vacancy levels have come down to the range of 7 to 8 per cent. Meanwhile, rentals in the Secondary Business District (SBD) category have come down by approximately 11 per cent over the last quarter, the CBRE report states. “There has been no significant growth in the IT segment — most of the activity we are witnessing is in the corporate sector, predominantly among multinational companies with multiple offices in the same city. Meanwhile, demand in the residential sector has already made a remarkably fast comeback, and capital markets are opening up,” Swamy said.
Meanwhile, Gurgaon witnessed an increase in transactions assisted by attractive leasing packages offered by most developers. “Companies that had postponed their expansion/relocation decisions are now ready to take advantage of the market and the options available for phased take-up…office leasing volume increased by approximately 3 to 4 per cent in the NCR during the second quarter. Increasing levels of corporate confidence should maintain the momentum in the second half of the year,” reads the CBRE report.
Ref:http://www.indianrealtynews.com/real-estate-india/gurgaon/price-correction-encourages-gurgaon-real-estate-market.html
Govt Sops can Revive Real Estate Sector
Eyeing fresh signs of a revival in the economy, which should nudge growth back to 9% level by end-2010, finance minister Pranab Mukherjee announced fresh tax giveaways for housing and renewed the government’s commitment to more economic reforms and introduction of a single goods and services tax (GST) by 1 April. The move, expected to further boost housing demand in the economy especially in tier II cities, also seeks to quell growing criticism that the Congress-led United Progressive Alliance (UPA) is averse to second-generation reforms. Replying to the debate on the Finance Bill, which was approved by a voice vote by the Lok Sabha, Mukherjee renewed his efforts to strike political consensus on key areas of tax reform, including the introduction of a direct tax code.
The reply also calibrated a few of his 6 July Budget tax proposals, which are not expected to result in big revenue giveaways, thereby precluding the possibility of a marked increase in the Rs4 trillion fiscal deficit forecast for 2009-10. The stand out feature of Mukherjee’s calibration of tax proposals in the Finance Bill was the emphasis on boosting real estate through both budgetary support and tax changes. The budgetary support in the form of a 1% subsidy on the interest rates paid by people with a home loan of up to Rs10 lakh would cost the exchequer Rs1,000 crore in the current fiscal year, Mukherjee said.
Under Section 80 IB (10), income-tax deduction was given to real estate developers for housing projects approved before 31 March 2007. This has now been extended to projects approved between 1 April 2007 and 31 March 2008, provided these projects are completed on or before 31 March 2012. “We have been asking for an extension for a long time and I am happy that this step has been taken,” said Kumar Gera, chairman of the Confederation of Real Estate Developers’ Association of India. “The extension will benefit only those projects that were approved during this period, so it may not have an impact on all housing projects in all markets. It could have an impact on certain micromarkets.”
Among other key tax changes was the removal of service tax charged by contractors repairing and maintaining roads, and extending tax benefits given in the Budget to firms producing natural gas under the new exploration licensing policy to those producing natural gas from coal-bed methane blocks. The finance minister admitted he had to ignore many other post-Budget representations, which came his way, as the tax proposals had to mesh with the broad strategy of providing fiscal stimulus. “We must generate internal demand,” he said. The spillover of the fiscal stimulus provided last fiscal year and proposals introduced in the 6 July Budget have cost the exchequer Rs2.4 trillion, Mukherjee said. The fiscal deficit (extent of borrowings needed to bridge the gap between expenditure and revenue) is estimated to touch 6.8% of the gross domestic product in 2009-10.
The Budget estimates of the Centre’s net tax revenue in 2009-10 is Rs4.74 trillion, an increase of 0.19% over the previous year’s revised estimate. Economic growth, which received top priority in the Budget’s overall strategy, is showing signs of recovery, Mukherjee said, though he remained cautious about signals provided by an improvement in economic indicators such as May’s factory output. “I would not say we are out of it. Situation is still difficult.” Mukherjee assured the House that the government would continue putting in place reforms, including tax reforms, to facilitate growth. In the area of tax reforms, Mukherjee said he was confident India’s indirect tax system could stick to the 1 April deadline for transition to GST, even though some states such as Madhya Pradesh and Tamil Nadu have said the deadline might be premature.
“On broad national interest, there is no discordant view,” Mukherjee said, explaining why he remained upbeat about meeting the deadline. GST is India’s most ambitious indirect tax reform, which seeks to dismantle tax barriers that fragment India’s market according to state boundaries. The transition requires cooperation between Centre and individual states. The country’s tax reforms could, however, be negatively affected by the Opposition’s displeasure with the way the UPA has directed policy in areas such as international affairs. “A mere call for consensus is not enough. To have consensus on issues, the government should pre-consult the Opposition on issues of national importance. Unfortunately, the (government’s) conduct in the last two months does not reflect this,” said Prakash Javadekar, spokesperson of the Bharatiya Janata Party.
Ref:http://www.indianrealtynews.com/real-estate-india/govt-sops-can-revive-real-estate-sector.html
The reply also calibrated a few of his 6 July Budget tax proposals, which are not expected to result in big revenue giveaways, thereby precluding the possibility of a marked increase in the Rs4 trillion fiscal deficit forecast for 2009-10. The stand out feature of Mukherjee’s calibration of tax proposals in the Finance Bill was the emphasis on boosting real estate through both budgetary support and tax changes. The budgetary support in the form of a 1% subsidy on the interest rates paid by people with a home loan of up to Rs10 lakh would cost the exchequer Rs1,000 crore in the current fiscal year, Mukherjee said.
Under Section 80 IB (10), income-tax deduction was given to real estate developers for housing projects approved before 31 March 2007. This has now been extended to projects approved between 1 April 2007 and 31 March 2008, provided these projects are completed on or before 31 March 2012. “We have been asking for an extension for a long time and I am happy that this step has been taken,” said Kumar Gera, chairman of the Confederation of Real Estate Developers’ Association of India. “The extension will benefit only those projects that were approved during this period, so it may not have an impact on all housing projects in all markets. It could have an impact on certain micromarkets.”
Among other key tax changes was the removal of service tax charged by contractors repairing and maintaining roads, and extending tax benefits given in the Budget to firms producing natural gas under the new exploration licensing policy to those producing natural gas from coal-bed methane blocks. The finance minister admitted he had to ignore many other post-Budget representations, which came his way, as the tax proposals had to mesh with the broad strategy of providing fiscal stimulus. “We must generate internal demand,” he said. The spillover of the fiscal stimulus provided last fiscal year and proposals introduced in the 6 July Budget have cost the exchequer Rs2.4 trillion, Mukherjee said. The fiscal deficit (extent of borrowings needed to bridge the gap between expenditure and revenue) is estimated to touch 6.8% of the gross domestic product in 2009-10.
The Budget estimates of the Centre’s net tax revenue in 2009-10 is Rs4.74 trillion, an increase of 0.19% over the previous year’s revised estimate. Economic growth, which received top priority in the Budget’s overall strategy, is showing signs of recovery, Mukherjee said, though he remained cautious about signals provided by an improvement in economic indicators such as May’s factory output. “I would not say we are out of it. Situation is still difficult.” Mukherjee assured the House that the government would continue putting in place reforms, including tax reforms, to facilitate growth. In the area of tax reforms, Mukherjee said he was confident India’s indirect tax system could stick to the 1 April deadline for transition to GST, even though some states such as Madhya Pradesh and Tamil Nadu have said the deadline might be premature.
“On broad national interest, there is no discordant view,” Mukherjee said, explaining why he remained upbeat about meeting the deadline. GST is India’s most ambitious indirect tax reform, which seeks to dismantle tax barriers that fragment India’s market according to state boundaries. The transition requires cooperation between Centre and individual states. The country’s tax reforms could, however, be negatively affected by the Opposition’s displeasure with the way the UPA has directed policy in areas such as international affairs. “A mere call for consensus is not enough. To have consensus on issues, the government should pre-consult the Opposition on issues of national importance. Unfortunately, the (government’s) conduct in the last two months does not reflect this,” said Prakash Javadekar, spokesperson of the Bharatiya Janata Party.
Ref:http://www.indianrealtynews.com/real-estate-india/govt-sops-can-revive-real-estate-sector.html
Tuesday, July 28, 2009
Real Estate and Other Sectors Woo Govt Employees
All eyes are now on the government sector. Government employees are being wooed like never before be it real estate, consumer durables and auto. In fact, banks are also introducing special schemes to woo the sarkari brigade. Maruti Suzuki India, for example, claims that 11% of their sales contribution came from government sector employees this financial year as compared to negligible contribution a year back. Similarly, housing finance company, Dewan Housing Finance, saw a sizeable rise in loan offtake from this sector. According to them, almost 40% of their total book size came from this category. And mid-scale developers such as Delhibased Piyush Group will be coming up with some special schemes in the affordable segment for government sector employees in a month. According to Anil Goyal, CMD of Piyush Group, they will we will be bringing some special incentives.
Banks are not lagging behind in these initiatives as well. UCO Bank launched a special scheme for government employees a few days back. “About 15 days ago, we have launched a special scheme to provide housing and auto loans to civil servants. We provide housing loan at 8% and auto loan at 9%. Since the launch, these schemes have been received quite well,” said S K Goel, CMD of UCO Bank. For other banks it is also a case of relatively lesser risk in lending. This largely due to the nature of their job profile. “Since there is uncertainty in the job market, a greater amount of due diligence takes place while sanctioning loans to private sector employees as compared to government employees ,” says Sujan Sinha, senior vice president and head of retail liabilities, Axis Bank.
In fact, government employees have even contributed to the turnaround of the auto industry. Maruti Suzuki India registered its Essex 4 recently with the Directorate General of Supplies and Disposal (DGS&D ), an arm of the Ministry of Commerce . According to a senior official of the company, a bulk of the government’s own buying is done through them. Their latest addition is the Essex 4 which they have included in DGS&D after the Maruti Desire was registered 3-4 months back. Focus models for them, however, are the compact cars such as Alto, Wagon R and Estillo which are in the range of Rs 3 lakh to Rs 4.5 lakh. These are the most popular buys for this sector. Other auto majors have a similar view. In fact, they believe that the industry managed to grow by a single digit growth in 2008 after witnessing a decline in the previous year only due to increasing demand from this segment. “Factors such as Sixth Pay Commission and attractive stimulus packages have helped a turnaround in the industry,” says Anil Dua, senior vice president, marketing and sales, Hero Honda Motors.”
And when it comes to the real estate sector, biggies such as DLF confirm the activity from this sector. “We do not discriminate between our clients. However, there is an increase in the number of government employees as their cash flows have not been affected due to slowdown,” said Rajeev Talwar, group executive director, DLF. Agrees Gaurav Bhalla, executive director of the Vatika Group. “We are seeing more people from the government sector buying as compared to earlier.” You could call this ironic for private sector employees or plain good luck for the public ones, but the fact remains that government employees have been the least impacted by the slowdown blues. They even got a huge jump in salaries after the implementation of the Sixth Pay Commission last year, and a part of their arrears are due this year.
In fact, leading consumer durable companies such as LG also contend to the fact that a significant part of the business has come from first time buyers which include rural sector and government sector employees. “The large part of the demand in the current calendar year has come from first time buyers and upgradation to LCD categories. A significant growth has also come from the rural and the government sector. They are holding the growth rate of the consumer durables industry, which may not have been the case otherwise,” says V Ramachandran , director, sales and marketing, LG Electronics India . Sarkari may well be the buzzword for the industry now. After all, with good business coming in from this segment, it’s no surprise why everyone is going ga ga over them.
Ref:http://www.indianrealtynews.com/real-estate-india/real-estate-and-other-sectors-woo-govt-employees.html
Banks are not lagging behind in these initiatives as well. UCO Bank launched a special scheme for government employees a few days back. “About 15 days ago, we have launched a special scheme to provide housing and auto loans to civil servants. We provide housing loan at 8% and auto loan at 9%. Since the launch, these schemes have been received quite well,” said S K Goel, CMD of UCO Bank. For other banks it is also a case of relatively lesser risk in lending. This largely due to the nature of their job profile. “Since there is uncertainty in the job market, a greater amount of due diligence takes place while sanctioning loans to private sector employees as compared to government employees ,” says Sujan Sinha, senior vice president and head of retail liabilities, Axis Bank.
In fact, government employees have even contributed to the turnaround of the auto industry. Maruti Suzuki India registered its Essex 4 recently with the Directorate General of Supplies and Disposal (DGS&D ), an arm of the Ministry of Commerce . According to a senior official of the company, a bulk of the government’s own buying is done through them. Their latest addition is the Essex 4 which they have included in DGS&D after the Maruti Desire was registered 3-4 months back. Focus models for them, however, are the compact cars such as Alto, Wagon R and Estillo which are in the range of Rs 3 lakh to Rs 4.5 lakh. These are the most popular buys for this sector. Other auto majors have a similar view. In fact, they believe that the industry managed to grow by a single digit growth in 2008 after witnessing a decline in the previous year only due to increasing demand from this segment. “Factors such as Sixth Pay Commission and attractive stimulus packages have helped a turnaround in the industry,” says Anil Dua, senior vice president, marketing and sales, Hero Honda Motors.”
And when it comes to the real estate sector, biggies such as DLF confirm the activity from this sector. “We do not discriminate between our clients. However, there is an increase in the number of government employees as their cash flows have not been affected due to slowdown,” said Rajeev Talwar, group executive director, DLF. Agrees Gaurav Bhalla, executive director of the Vatika Group. “We are seeing more people from the government sector buying as compared to earlier.” You could call this ironic for private sector employees or plain good luck for the public ones, but the fact remains that government employees have been the least impacted by the slowdown blues. They even got a huge jump in salaries after the implementation of the Sixth Pay Commission last year, and a part of their arrears are due this year.
In fact, leading consumer durable companies such as LG also contend to the fact that a significant part of the business has come from first time buyers which include rural sector and government sector employees. “The large part of the demand in the current calendar year has come from first time buyers and upgradation to LCD categories. A significant growth has also come from the rural and the government sector. They are holding the growth rate of the consumer durables industry, which may not have been the case otherwise,” says V Ramachandran , director, sales and marketing, LG Electronics India . Sarkari may well be the buzzword for the industry now. After all, with good business coming in from this segment, it’s no surprise why everyone is going ga ga over them.
Ref:http://www.indianrealtynews.com/real-estate-india/real-estate-and-other-sectors-woo-govt-employees.html
3-Yr Lock-In On FDI in Real Estate- Govt
July 27, 2009
The government is weighing the impact of a possible three-year ban on stake sale by foreign investors in real estate projects, a decision that could affect future capital inflows into the sector. Real estate developers had recently urged the government to reinterpret a provision in the foreign direct investment guidelines, so as to stop overseas investors from withdrawing their funds, beyond the minimum capital of $5 million, before three years of the initial investment.
This, they said, will help them tide over the current liquidity crisis. However, the commerce ministry is concerned that such a measure could be counter-productive. The government wants to keep the foreign investment policy as flexible as possible since the country now needs foreign capital to sustain the growth momentum. For any foreign investor, the exit strategy is as important as the entry strategy. If it is difficult to withdraw capital and redeploy it in another sector, then foreign investors could become reluctant to invest in real estate.
“We examined the proposal, but have not taken any decision and status quo continues. However, we cannot rule out any change in the future,” said an official, who asked not to be named, considering the sensitivity of the subject. The law says that in a cross-border JV in real estate, the foreign partner should bring in a minimum capital of $5 million. The funds would have to be brought in within six months of commencement of business. It also says the “original investment” cannot be repatriated before a period of three years from the completion of “minimum capitalization.”
This has been interpreted in such a way that funds above the minimum capital requirement could be repatriated within the three-year lock in period. Real estate developers now want to restrict this as the sector got badly hit by the economic slowdown and drying up of sources of foreign capital. Besides, players in this sector have very few alternative sources of funding locally.
Ref:http://www.indianrealtynews.com/fdi-india/3-yr-lock-in-on-fdi-in-real-estate-govt.html
The government is weighing the impact of a possible three-year ban on stake sale by foreign investors in real estate projects, a decision that could affect future capital inflows into the sector. Real estate developers had recently urged the government to reinterpret a provision in the foreign direct investment guidelines, so as to stop overseas investors from withdrawing their funds, beyond the minimum capital of $5 million, before three years of the initial investment.
This, they said, will help them tide over the current liquidity crisis. However, the commerce ministry is concerned that such a measure could be counter-productive. The government wants to keep the foreign investment policy as flexible as possible since the country now needs foreign capital to sustain the growth momentum. For any foreign investor, the exit strategy is as important as the entry strategy. If it is difficult to withdraw capital and redeploy it in another sector, then foreign investors could become reluctant to invest in real estate.
“We examined the proposal, but have not taken any decision and status quo continues. However, we cannot rule out any change in the future,” said an official, who asked not to be named, considering the sensitivity of the subject. The law says that in a cross-border JV in real estate, the foreign partner should bring in a minimum capital of $5 million. The funds would have to be brought in within six months of commencement of business. It also says the “original investment” cannot be repatriated before a period of three years from the completion of “minimum capitalization.”
This has been interpreted in such a way that funds above the minimum capital requirement could be repatriated within the three-year lock in period. Real estate developers now want to restrict this as the sector got badly hit by the economic slowdown and drying up of sources of foreign capital. Besides, players in this sector have very few alternative sources of funding locally.
Ref:http://www.indianrealtynews.com/fdi-india/3-yr-lock-in-on-fdi-in-real-estate-govt.html
Tax Break for Developers
July 27, 2009
The government will extend tax breaks for industrial park schemes and developers of real estate and road projects to stimulate the economy and lift growth to 8-9 percent by the end of 2010, the finance minister said on Monday. Pranab Mukherjee also told lawmakers in parliament the government would provide a 1 percent interest subsidy on home loans up to one million rupees ($20,747) for one year. Earlier this month, the government ramped up spending for 2009/10 (April/March) to support a fragile economic recovery, spooking financial markets with plans for record borrowing and its biggest budget deficit in 16 years.
But MPs and industry lobbies have sought additional tax relief to help beat a slowdown that saw the economy grow 6.7 percent in the year through March after 3 years of expansion of at least 9 percent. “With a view to providing stimulus to infrastructure sector to generate incomes in the wake of economic slowdown, I propose to extend the sunset clause for industrial park scheme by a further period of two years,” Mukherjee said. Monday’s proposals will be added to the fiscal year budget put forth by Mukherjee earlier this month.
“In India, the economic recovery has begun and I am confident that we will be able to reach the high growth rate of 8-9 percent by the end of 2010,” he said. Firms engaged in repair and maintenance of roads would be exempted from service tax, while developers would get tax breaks if they complete real estate projects by March 2012, he said. Producers of natural gas from coal-bed methane blocks would also be extended tax breaks. A tax holiday for firms engaged in food processing has also been extended. The agriculture sector needs to grow by 4 percent annually for the economy to expand by 9 percent, Mukherjee said.
Ref:http://www.indianrealtynews.com/fdi-india/3-yr-lock-in-on-fdi-in-real-estate-govt.html
The government will extend tax breaks for industrial park schemes and developers of real estate and road projects to stimulate the economy and lift growth to 8-9 percent by the end of 2010, the finance minister said on Monday. Pranab Mukherjee also told lawmakers in parliament the government would provide a 1 percent interest subsidy on home loans up to one million rupees ($20,747) for one year. Earlier this month, the government ramped up spending for 2009/10 (April/March) to support a fragile economic recovery, spooking financial markets with plans for record borrowing and its biggest budget deficit in 16 years.
But MPs and industry lobbies have sought additional tax relief to help beat a slowdown that saw the economy grow 6.7 percent in the year through March after 3 years of expansion of at least 9 percent. “With a view to providing stimulus to infrastructure sector to generate incomes in the wake of economic slowdown, I propose to extend the sunset clause for industrial park scheme by a further period of two years,” Mukherjee said. Monday’s proposals will be added to the fiscal year budget put forth by Mukherjee earlier this month.
“In India, the economic recovery has begun and I am confident that we will be able to reach the high growth rate of 8-9 percent by the end of 2010,” he said. Firms engaged in repair and maintenance of roads would be exempted from service tax, while developers would get tax breaks if they complete real estate projects by March 2012, he said. Producers of natural gas from coal-bed methane blocks would also be extended tax breaks. A tax holiday for firms engaged in food processing has also been extended. The agriculture sector needs to grow by 4 percent annually for the economy to expand by 9 percent, Mukherjee said.
Ref:http://www.indianrealtynews.com/fdi-india/3-yr-lock-in-on-fdi-in-real-estate-govt.html
Property developer Prestige Group Plans Houses in Rs 12-25 lakh range
July 27, 2009
Property developer Prestige Group is evaluating building houses in the Rs 12-25 lakh range as it believes this segment will bring in volumes. On whether this will be a viable option for the builder, Irfan Razack, Chairman and Managing Director, Prestige Group, said, “This depends on where we get land at reasonable prices. We will have to see where else to cut costs.
“Obviously, the size of the unit will reduce. We can’t go high rise - the houses will be spread horizontally and they will be in the outskirts of Bangalore, at least 30 km from the city. But we will provide the same ambience as in other residential projects.” This comes at a time when many real estate players have been making an entry into affordable housing of late. Razack also said that the industry is pitching for the formation of a Special Residential Zone in the country. “The Confederation of Real Estate Developers Association of India is in talks with the government for quality urban development.” The houses in the SRZ could be in the 400-1,500 sq ft range. They will cost 30-40 per cent lesser than the market rates today, he said.
Razack was addressing the media to announce the completion of two of its residential projects - Prestige Kensington Gardens and Prestige Wellington Park, which together house around 900 apartments, in Jalahalli in north Bangalore. Last month, the company opened the Forum Value Mall in Bangalore. Prestige’s most touted residential townscape project ‘Shantiniketan’ in Whitefield is “on the verge of delivery”, said Razack. Houses will be handed over in phases starting next month.
Ref:http://www.indianrealtynews.com/real-estate-developers/property-developer-prestige-group-plans-houses-in-rs-12-25-lakh-range.html
Property developer Prestige Group is evaluating building houses in the Rs 12-25 lakh range as it believes this segment will bring in volumes. On whether this will be a viable option for the builder, Irfan Razack, Chairman and Managing Director, Prestige Group, said, “This depends on where we get land at reasonable prices. We will have to see where else to cut costs.
“Obviously, the size of the unit will reduce. We can’t go high rise - the houses will be spread horizontally and they will be in the outskirts of Bangalore, at least 30 km from the city. But we will provide the same ambience as in other residential projects.” This comes at a time when many real estate players have been making an entry into affordable housing of late. Razack also said that the industry is pitching for the formation of a Special Residential Zone in the country. “The Confederation of Real Estate Developers Association of India is in talks with the government for quality urban development.” The houses in the SRZ could be in the 400-1,500 sq ft range. They will cost 30-40 per cent lesser than the market rates today, he said.
Razack was addressing the media to announce the completion of two of its residential projects - Prestige Kensington Gardens and Prestige Wellington Park, which together house around 900 apartments, in Jalahalli in north Bangalore. Last month, the company opened the Forum Value Mall in Bangalore. Prestige’s most touted residential townscape project ‘Shantiniketan’ in Whitefield is “on the verge of delivery”, said Razack. Houses will be handed over in phases starting next month.
Ref:http://www.indianrealtynews.com/real-estate-developers/property-developer-prestige-group-plans-houses-in-rs-12-25-lakh-range.html
Friday, July 24, 2009
Developers Start New Projects Leaving Old Projects Midway
Home sales in India may be on the rebound, with real estate firms launching new projects to tap a revival in housing demand, but Ajay Jain remains an angry customer of DLF Ltd, the country’s largest property developer by sales. Singapore-based Jain, 49, who signed up in August 2006 for a four-bedroom apartment in DLF’s Belaire project in Gurgaon, a satellite town south-east of New Delhi, is upset that he has paid the developer at least 85% of the cost of the flat—Rs2.4 crore—but only half the work has been completed so far at the site. At the time of booking, Jain said, he was told that the project would be completed in three years—by August 2009. After paying two-three instalments, DLF gave Jain the buyer agreement in February 2007, which said that possession would be given within three years of signing the agreement.
“Though DLF has collected the money for this project, they are not bothered about completing it and instead, they keep investing in other projects,” Jain said in a phone interview with . Belaire is likely to be delayed by 15 months, say real estate consultants. Buyers such as Jain—those who bore the brunt of the downturn along with developers—are in plenty. Since mid-2008, projects of almost every developer across cities have been stuck, delayed or shelved. Average delays have ranged from six months to a year. But what irks buyers even more now is that while several existing projects are stuck mid-way, developers have started launching new ones. These projects, mostly in the budget range, promise possession to buyers within two years, yet there are few signs that the pace of construction at existing, delayed projects will be accelerated.
DLF declined to comment as it was in the mandatory silent period ahead of its first quarter results, likely to be released later this month. Since mid-2008, projects of almost every developer across cities have been stuck, delayed or shelved. In November, the company’s chairman K.P. Singh had said its assets under construction spread over hotels, residential and commercial projects were delayed because of lower demand and an industrywide liquidity crisis. DLF’s Belaire and Park Place projects in Gurgaon are likely to be delayed by 15-18 months, say consultants. Belaire was to be ready by August and Park Place by October. A visit to the sites showed that both projects are far from completion. At both sites, only the structure of the towers are ready. The DLF website reflects as much: Structural work is in progress both at Park Place and Belaire, it says.
With these projects lagging, DLF launched 2.8 million sq. ft of residential projects in the first quarter of fiscal 2010, compared with 2.1 million sq. ft launched during the first quarter of fiscal 2009, according to a July report by Motilal Oswal Financial Services Ltd, a brokerage firm. This is true of other developers, too, who have launched new projects—mostly in the budget or affordable housing category—to generate cash flows even as their existing projects await completion. According to Motilal Oswal, real estate developers, including DLF, Unitech Ltd, Indiabulls Real Estate Ltd, Puravankara Projects Ltd and Housing Development and Infrastructure Ltd, have launched 36 million sq. ft of residential space in the quarter gone by, compared with 2.6 million sq. ft in the year-ago quarter, across cities such as Mumbai, New Delhi, and its suburbs, Bangalore, Chennai and Hyderabad. Of this, developers have already sold 44%, or 16 million sq. ft, of homes.
Unitech’s Fresco, Escape and Harmony projects, all within a 300-acre township, Nirvana Country in Gurgaon, look delayed as well. According to Unitech’s website, Escape and Harmony are to be delivered in the January-March quarter of 2010 and the first phase of Fresco is expected to be completed by the last quarter of 2009. But during a visit to the Escape construction site last week, site workers said construction had just restarted after a lull and it would take at least a year-and-a-half to finish the project. At Escape, only the structure is ready, but the landscaping within the project is still not done. Arvind Panwar, a buyer at the project, is visibly worried. He had bought a three-bedroom apartment in Escape for around Rs1 crore in July 2006. He had opted for a down payment plan, paying 95% of the cost of the flat at one time in return for a 10-11% discount on the base price of the flat.
Panwar, 35, who works with a tech firm in California, US, feels weighed down by loan instalments of around Rs70,000 every month. “I am worried because I am paying my (loan) EMIs regularly, but there is no clarity on when the possession of the apartment will be given,” he said. Panwar’s buyer agreement says the flat would be delivered within three years—a deadline that matures next month. “The penalty for delay that they have said they will pay (Rs5 per sq. ft per month) is nothing compared with the EMIs I am paying,” he said. “I have been getting lots of emails from Unitech and brokers on the new projects they have launched. I get frustrated when I see those mails.” Unitech had not responded to’s queries on email and text messages until late Wednesday. In Mumbai, with five projects still at various stages of construction and far from completion, local realty firm Neptune Developers Pvt. Ltd has launched two more this year.
A 125-acre affordable housing project was launched in March near Kalyan, about 50km north of south Mumbai, and an upmarket, 30-storey twin tower project in Bhandup, a northern suburb of the port city, in April. The developer is clear about the urgency to do so. “One needs to run the show and for that, one needs to keep adding cautiously to one’s portfolio even when times are not that good. We are only launching projects that will sell and ensure cash flow,” said Nayan Bheda, managing director of Neptune. The firm has sold 2,000 of 2,100 apartments in its budget housing project at Kalyan, said Bheda, and expects the development at Bhandup, priced at Rs5,000 a sq. ft, to sell out,too. The quantum of sales at the Kalyan project could not be independently verified by . A realty consultant seconds Bheda’s candidness. “Some developers are launching new projects in a particular price category to ensure cash flow to fund construction of its delayed, existing projects even at a lower profit margin,” said Ashutosh Limaye, associate director (strategic consulting) at Jones Lang LaSalle Meghraj, a property advisory.
Ref:http://www.indianrealtynews.com/real-estate-developers/developers-start-new-projects-leaving-old-projects-midway.html
Construction at Neptune’s projects running behind schedule has picked up after slowing down, Bheda said, without giving any more details. It doesn’t help, as a spokesman for Parsvnath Developers Ltd said, that realty firms see further liquidity pressure as buyers at older projects default or delay their instalments due to the developer. Bangalore developer Brigade Enterprises Ltd has nearly 20 projects at different stages of construction, each of which is lagging behind by at least six months from completion dates expected earlier, M.R. Jaishankar, chairman and managing director of the company, said at a press meet earlier this month. The Brigade Gateway-branded luxury apartments project in north Bangalore, for instance, is at least 10 months behind schedule and several blog sites on the Internet are flooded with complaints on the delay from customers there. The company has plans to enter the budget housing segment.
“Though DLF has collected the money for this project, they are not bothered about completing it and instead, they keep investing in other projects,” Jain said in a phone interview with . Belaire is likely to be delayed by 15 months, say real estate consultants. Buyers such as Jain—those who bore the brunt of the downturn along with developers—are in plenty. Since mid-2008, projects of almost every developer across cities have been stuck, delayed or shelved. Average delays have ranged from six months to a year. But what irks buyers even more now is that while several existing projects are stuck mid-way, developers have started launching new ones. These projects, mostly in the budget range, promise possession to buyers within two years, yet there are few signs that the pace of construction at existing, delayed projects will be accelerated.
DLF declined to comment as it was in the mandatory silent period ahead of its first quarter results, likely to be released later this month. Since mid-2008, projects of almost every developer across cities have been stuck, delayed or shelved. In November, the company’s chairman K.P. Singh had said its assets under construction spread over hotels, residential and commercial projects were delayed because of lower demand and an industrywide liquidity crisis. DLF’s Belaire and Park Place projects in Gurgaon are likely to be delayed by 15-18 months, say consultants. Belaire was to be ready by August and Park Place by October. A visit to the sites showed that both projects are far from completion. At both sites, only the structure of the towers are ready. The DLF website reflects as much: Structural work is in progress both at Park Place and Belaire, it says.
With these projects lagging, DLF launched 2.8 million sq. ft of residential projects in the first quarter of fiscal 2010, compared with 2.1 million sq. ft launched during the first quarter of fiscal 2009, according to a July report by Motilal Oswal Financial Services Ltd, a brokerage firm. This is true of other developers, too, who have launched new projects—mostly in the budget or affordable housing category—to generate cash flows even as their existing projects await completion. According to Motilal Oswal, real estate developers, including DLF, Unitech Ltd, Indiabulls Real Estate Ltd, Puravankara Projects Ltd and Housing Development and Infrastructure Ltd, have launched 36 million sq. ft of residential space in the quarter gone by, compared with 2.6 million sq. ft in the year-ago quarter, across cities such as Mumbai, New Delhi, and its suburbs, Bangalore, Chennai and Hyderabad. Of this, developers have already sold 44%, or 16 million sq. ft, of homes.
Unitech’s Fresco, Escape and Harmony projects, all within a 300-acre township, Nirvana Country in Gurgaon, look delayed as well. According to Unitech’s website, Escape and Harmony are to be delivered in the January-March quarter of 2010 and the first phase of Fresco is expected to be completed by the last quarter of 2009. But during a visit to the Escape construction site last week, site workers said construction had just restarted after a lull and it would take at least a year-and-a-half to finish the project. At Escape, only the structure is ready, but the landscaping within the project is still not done. Arvind Panwar, a buyer at the project, is visibly worried. He had bought a three-bedroom apartment in Escape for around Rs1 crore in July 2006. He had opted for a down payment plan, paying 95% of the cost of the flat at one time in return for a 10-11% discount on the base price of the flat.
Panwar, 35, who works with a tech firm in California, US, feels weighed down by loan instalments of around Rs70,000 every month. “I am worried because I am paying my (loan) EMIs regularly, but there is no clarity on when the possession of the apartment will be given,” he said. Panwar’s buyer agreement says the flat would be delivered within three years—a deadline that matures next month. “The penalty for delay that they have said they will pay (Rs5 per sq. ft per month) is nothing compared with the EMIs I am paying,” he said. “I have been getting lots of emails from Unitech and brokers on the new projects they have launched. I get frustrated when I see those mails.” Unitech had not responded to’s queries on email and text messages until late Wednesday. In Mumbai, with five projects still at various stages of construction and far from completion, local realty firm Neptune Developers Pvt. Ltd has launched two more this year.
A 125-acre affordable housing project was launched in March near Kalyan, about 50km north of south Mumbai, and an upmarket, 30-storey twin tower project in Bhandup, a northern suburb of the port city, in April. The developer is clear about the urgency to do so. “One needs to run the show and for that, one needs to keep adding cautiously to one’s portfolio even when times are not that good. We are only launching projects that will sell and ensure cash flow,” said Nayan Bheda, managing director of Neptune. The firm has sold 2,000 of 2,100 apartments in its budget housing project at Kalyan, said Bheda, and expects the development at Bhandup, priced at Rs5,000 a sq. ft, to sell out,too. The quantum of sales at the Kalyan project could not be independently verified by . A realty consultant seconds Bheda’s candidness. “Some developers are launching new projects in a particular price category to ensure cash flow to fund construction of its delayed, existing projects even at a lower profit margin,” said Ashutosh Limaye, associate director (strategic consulting) at Jones Lang LaSalle Meghraj, a property advisory.
Ref:http://www.indianrealtynews.com/real-estate-developers/developers-start-new-projects-leaving-old-projects-midway.html
Construction at Neptune’s projects running behind schedule has picked up after slowing down, Bheda said, without giving any more details. It doesn’t help, as a spokesman for Parsvnath Developers Ltd said, that realty firms see further liquidity pressure as buyers at older projects default or delay their instalments due to the developer. Bangalore developer Brigade Enterprises Ltd has nearly 20 projects at different stages of construction, each of which is lagging behind by at least six months from completion dates expected earlier, M.R. Jaishankar, chairman and managing director of the company, said at a press meet earlier this month. The Brigade Gateway-branded luxury apartments project in north Bangalore, for instance, is at least 10 months behind schedule and several blog sites on the Internet are flooded with complaints on the delay from customers there. The company has plans to enter the budget housing segment.
Situation Looks Grim for Kolkata Hotel Projects
f the city dreamt of emerging as a hospitality hub, that dream is fast turning ephemeral, with more than half the projects either delayed or close to being shelved. Of the 19 hotel projects that were to begin operations in 2011-12, adding over 5,000 star-category rooms, at least six have been delayed, five put on the backburner and one shelved following reversals that developers faced over the past year. The seven projects that are on track will add 1,365 rooms in the city and its surroundings. Though Confederation of Real Estate Developers Association of India (CREDAI) had warned of a 12- to 18-month delay in the hotel projects after tourist traffic dipped and corporate travel nose-dived towards the end of last year, the situation is turning grimmer.
“About four-five years ago, a flurry of hotel projects was announced in Kolkata,” said CREDAI Bengal president Pradeep Sureka. “At that time, investment sentiment was riding an all-time high, with Kolkata projected as the next big destination. Industry captains streamed in, triggering more frequent visits by executives. There was every indication that rooms would be occupied as soon as capacity addition took place. Hence, lot of hoteliers and real estate developers jumped in. But the situation has changed. Not only has Kolkata lost the prime investment destination tag, the meltown has jolted the hospitality industry,” he added. In fact, a lot of developers who had jumped onto the hospitality bandwagon are now trying to get out. “At a time when everyone is battling a financial crisis, operating in a non-core sector is a strict no-no. That is what many have realized,” Sureka explained.
A kilometre-long section of the Eastern Metropolitan Bypass between Science City and the SilverSpring condominium project, that was to emerge as a hotel hub, will continue to have ITC Sonar as the sole destination. The latter does have plans to add a super-luxury property with 450-plus rooms, but plans are yet to be finalized. “ITC’s expansion plan is definitely on. But it will take some time for a project of this size to take off,” said ITC Welcomgroup eastern region chief Ranvir Bhandari. There is, however, no discernible progress on the four star hotel projects in the neighbourhood. The promoters Emaar-MGF, DLF and Apeejay Surendra look content to keep the plots idle. “Companies will not pump cash into new projects if no returns are assured in two-three years,” said an executive of one of the companies. No one, though, was willing to make an official comment. Officials of The Park were not available for comment, while Emaar-MGF bosses maintained a stoic silence. A senior DLF official said construction would begin by the end of this year and completed by 2012. “We will start work once the liquidy crunch eases,” he said.
The only project on the Bypass where construction appeared to be moving full steam ahead is the Taj Gateway, near the Ruby island. Foundation piling is currently under way in the 200-room business hotel project. Another epicentre of the crisis that has struck hospitality projects is in New Town. Of the six projects proposed there, two are doubtful and two delayed. Realty major Bengal Unitech Universal, which took a hit following the meltdown, has put the convention centre in the backburner for now. Two hotels were to be located at this site. The only project that is still alive is Marriott Courtyard. But that, too, is delayed. Srishti Housing Development Co Ltd has finally begun construction on a 400-room hotel after a prolonged delay. “Our hotel will come up by 2011,” said company chairman Hemant Kanoria.
Salarpuria Properties and Ambuja Realty are the only projects that are close to being on track in Rajarhat. The former is setting up a four-star property, while the latter is nearing completion on the five-star project at City Centre 2. “We are negotiating with an international hotel chain to manage the property. The hotel will open in December or January,” said Ambuja Realty chief Harsh Neotia. Further down at the airport, the DS Group had planned two hotels a star and a budget property with 150 rooms each. Though the demolition of Hotel Airport Ashok is underway to make way for the new hotels, the regional head is not willing to make any commitments. “Clearances are being processed. No plan has been frozen yet,” project chief Tapas Biswas said.
Along Kona Expressway, another hotel project by Bengal Unitech Universal group is in freeze mode. But further south along the Hooghly, architects and planners are poring over the drawing board to finalize the Crown Plaza property at Batanagar. The only other projects untouched by the meltdown are those in the heart of the city. Both ITC Fortune on Loudon Street and Park Hyatt on Russel Street are set to open on schedule. Bipin Vora, chairman of the SPS Group that owns the property, said the hotel would be ready by Diwali. Sureka thinks the other projects would be revived once the economy looks up. “Everyone will take a fresh call in six-eight months,” he said.
Ref:http://www.indianrealtynews.com/real-estate-india/kolkata/situation-looks-grim-for-kolkata-hotel-projects.html
“About four-five years ago, a flurry of hotel projects was announced in Kolkata,” said CREDAI Bengal president Pradeep Sureka. “At that time, investment sentiment was riding an all-time high, with Kolkata projected as the next big destination. Industry captains streamed in, triggering more frequent visits by executives. There was every indication that rooms would be occupied as soon as capacity addition took place. Hence, lot of hoteliers and real estate developers jumped in. But the situation has changed. Not only has Kolkata lost the prime investment destination tag, the meltown has jolted the hospitality industry,” he added. In fact, a lot of developers who had jumped onto the hospitality bandwagon are now trying to get out. “At a time when everyone is battling a financial crisis, operating in a non-core sector is a strict no-no. That is what many have realized,” Sureka explained.
A kilometre-long section of the Eastern Metropolitan Bypass between Science City and the SilverSpring condominium project, that was to emerge as a hotel hub, will continue to have ITC Sonar as the sole destination. The latter does have plans to add a super-luxury property with 450-plus rooms, but plans are yet to be finalized. “ITC’s expansion plan is definitely on. But it will take some time for a project of this size to take off,” said ITC Welcomgroup eastern region chief Ranvir Bhandari. There is, however, no discernible progress on the four star hotel projects in the neighbourhood. The promoters Emaar-MGF, DLF and Apeejay Surendra look content to keep the plots idle. “Companies will not pump cash into new projects if no returns are assured in two-three years,” said an executive of one of the companies. No one, though, was willing to make an official comment. Officials of The Park were not available for comment, while Emaar-MGF bosses maintained a stoic silence. A senior DLF official said construction would begin by the end of this year and completed by 2012. “We will start work once the liquidy crunch eases,” he said.
The only project on the Bypass where construction appeared to be moving full steam ahead is the Taj Gateway, near the Ruby island. Foundation piling is currently under way in the 200-room business hotel project. Another epicentre of the crisis that has struck hospitality projects is in New Town. Of the six projects proposed there, two are doubtful and two delayed. Realty major Bengal Unitech Universal, which took a hit following the meltdown, has put the convention centre in the backburner for now. Two hotels were to be located at this site. The only project that is still alive is Marriott Courtyard. But that, too, is delayed. Srishti Housing Development Co Ltd has finally begun construction on a 400-room hotel after a prolonged delay. “Our hotel will come up by 2011,” said company chairman Hemant Kanoria.
Salarpuria Properties and Ambuja Realty are the only projects that are close to being on track in Rajarhat. The former is setting up a four-star property, while the latter is nearing completion on the five-star project at City Centre 2. “We are negotiating with an international hotel chain to manage the property. The hotel will open in December or January,” said Ambuja Realty chief Harsh Neotia. Further down at the airport, the DS Group had planned two hotels a star and a budget property with 150 rooms each. Though the demolition of Hotel Airport Ashok is underway to make way for the new hotels, the regional head is not willing to make any commitments. “Clearances are being processed. No plan has been frozen yet,” project chief Tapas Biswas said.
Along Kona Expressway, another hotel project by Bengal Unitech Universal group is in freeze mode. But further south along the Hooghly, architects and planners are poring over the drawing board to finalize the Crown Plaza property at Batanagar. The only other projects untouched by the meltdown are those in the heart of the city. Both ITC Fortune on Loudon Street and Park Hyatt on Russel Street are set to open on schedule. Bipin Vora, chairman of the SPS Group that owns the property, said the hotel would be ready by Diwali. Sureka thinks the other projects would be revived once the economy looks up. “Everyone will take a fresh call in six-eight months,” he said.
Ref:http://www.indianrealtynews.com/real-estate-india/kolkata/situation-looks-grim-for-kolkata-hotel-projects.html
Wednesday, July 22, 2009
Govt Targets More Foreign Investment in Real Estate
The government in India wants to make it easier for foreign property investors and in particular for them to put their money into projects that relate to the hospitality sector and tourism. It is looking at changing the rules to allow overseas investors to be part of smaller real estate projects. At present they are limited to investing in projects that cover a minimum of 25 acres. It is hoped it will encourage foreign investment in property developments in places like Mumbia, Delhi, Bangalore, Chennai and Hyderbad where it is generally not possible to find 25 acres of land for development.
The Department of Industrial Policy & Promotion (DIPP), which sets out the guidelines for direct foreign is keen on attracting more investors. It is proposing to waive minimum capitalisation for development projects which have hospitality and tourism facilities such as hotels, restaurants or entertainment facilities for visitors. The waiver would also be available if 50% of the built-up area in a project is devoted to hotel and tourism businesses, such as food courts, resorts and restaurants and if 20% of the total built-up area is used for hotel rooms.
The property industry welcomed the initiative and said they are long overdue. These steps, when implemented, will provide relief to high-value projects in cities and projects being developed for the tourism sector. The move comes as a relief at a time when the real estate industry is struggling with high levels of debts, strict lending conditions and a general slowdown in business.
Meanwhile there are signs that the hard hit commercial property sector is on the cusp of recovery. Values have fallen by up to 30% as many corporates have downsized and are not enthusiastic about paying high rents. But according to Anurag Bhatnagar, associate director at DTZ, although those with expansion plans are still staying on the sidelines they are making future plans and when they start spending recovery will follow.
Ref:http://www.indianrealtynews.com/real-estate-india/govt-targets-more-foreign-investment-in-real-estate.html
The Department of Industrial Policy & Promotion (DIPP), which sets out the guidelines for direct foreign is keen on attracting more investors. It is proposing to waive minimum capitalisation for development projects which have hospitality and tourism facilities such as hotels, restaurants or entertainment facilities for visitors. The waiver would also be available if 50% of the built-up area in a project is devoted to hotel and tourism businesses, such as food courts, resorts and restaurants and if 20% of the total built-up area is used for hotel rooms.
The property industry welcomed the initiative and said they are long overdue. These steps, when implemented, will provide relief to high-value projects in cities and projects being developed for the tourism sector. The move comes as a relief at a time when the real estate industry is struggling with high levels of debts, strict lending conditions and a general slowdown in business.
Meanwhile there are signs that the hard hit commercial property sector is on the cusp of recovery. Values have fallen by up to 30% as many corporates have downsized and are not enthusiastic about paying high rents. But according to Anurag Bhatnagar, associate director at DTZ, although those with expansion plans are still staying on the sidelines they are making future plans and when they start spending recovery will follow.
Ref:http://www.indianrealtynews.com/real-estate-india/govt-targets-more-foreign-investment-in-real-estate.html
Nepal- Expecting Mini Real Estate Boom
Nepal may not be the obvious next property hotspot but the mountainous country between India and China is experiencing a mini real estate boom as wealthy Nepalese real estate investors seek a safe have for their money, it is claimed.
Government figures show the number of new apartments built in Kathmandu rose more than three-fold last year to 3,385 from 1,088 in 2007, as high land prices and poorly enforced planning laws made building upwards more attractive.
According to the Nepal Land and Housing Association, land prices have risen by 300% since 2003. There has also been an increase in the number of estate agents in the capital city, Katmandu.
Among those who are rushing to become involved in the booming property business is former Miss Nepal Malvika Subba who also had a successful career in television before opting for the less glamorous job of selling housing.
She is now head of sales and marketing at property developer Shangri-La Housing which builds luxury apartment, a new concept in the landlocked country.
Although unrest may put off foreign investors it is having the opposite effect in Katmandu as those living in unstable areas move to the capital and buy property as well as wealthy investors who want to put their money in bricks and mortar.
‘People see property as a good investment. Many people tell us that it is not safe outside the capital and they want to put their money in a safe place,’ explained Subba.
‘When I was offered a job marketing real estate, I said yes straight away, because it looked interesting and I could see that business was booming,’ she added.
Land has become a valuable commodity, mainly due to the decade long civil war between the Maoists and the army as people flocked to the relative safety of the capital. The influx pushed up land values in the city, explained Chiranjibi Subedi, a planning official in Kathmandu. ‘The number of proposals for new high-rise buildings and apartment complexes just keeps on growing,’ he added.
There are currently more than 250 high-rise blocks being built in the capital, according to the planning ministry. But a spokesman also pointed out that many apartments in Kathmandu are empty as owners cannot find tenants.
Ref:http://www.indianrealtynews.com/real-estate-india/nepal-expecting-mini-real-estate-boom.html
Government figures show the number of new apartments built in Kathmandu rose more than three-fold last year to 3,385 from 1,088 in 2007, as high land prices and poorly enforced planning laws made building upwards more attractive.
According to the Nepal Land and Housing Association, land prices have risen by 300% since 2003. There has also been an increase in the number of estate agents in the capital city, Katmandu.
Among those who are rushing to become involved in the booming property business is former Miss Nepal Malvika Subba who also had a successful career in television before opting for the less glamorous job of selling housing.
She is now head of sales and marketing at property developer Shangri-La Housing which builds luxury apartment, a new concept in the landlocked country.
Although unrest may put off foreign investors it is having the opposite effect in Katmandu as those living in unstable areas move to the capital and buy property as well as wealthy investors who want to put their money in bricks and mortar.
‘People see property as a good investment. Many people tell us that it is not safe outside the capital and they want to put their money in a safe place,’ explained Subba.
‘When I was offered a job marketing real estate, I said yes straight away, because it looked interesting and I could see that business was booming,’ she added.
Land has become a valuable commodity, mainly due to the decade long civil war between the Maoists and the army as people flocked to the relative safety of the capital. The influx pushed up land values in the city, explained Chiranjibi Subedi, a planning official in Kathmandu. ‘The number of proposals for new high-rise buildings and apartment complexes just keeps on growing,’ he added.
There are currently more than 250 high-rise blocks being built in the capital, according to the planning ministry. But a spokesman also pointed out that many apartments in Kathmandu are empty as owners cannot find tenants.
Ref:http://www.indianrealtynews.com/real-estate-india/nepal-expecting-mini-real-estate-boom.html
Cheaper Loans for Hotels and Hospitality Business
July 20, 2009
The cost of bank loans for firms engaged in the business of hotels and hospitality may decline, with the Reserve Bank of India (RBI) proposing to keep such loans out of what is considered to be banks’ commercial real estate (CRE) exposure. According to 7 July draft guidelines released by RBI, bank loans to entrepreneurs for acquiring real estate for their business would not be classified as CRE exposure. The central bank had sought comments and suggestions from banks on the proposed guidelines by 16 July.
Currently, bank loans to companies for acquiring real estate for hotels and hospitality are treated as CRE exposure and attract a risk weight of 100%. Depending on the risk weight, banks are required to set aside capital for loans. Under RBI norms, banks’ capital-adequacy ratio, a measure of financial strength expressed as the ratio of capital to risk-weighed assets, is 9%. This means that for loans carrying 100% risk weight, banks need to set aside Rs9 worth of capital for every Rs100 they lend.
Risk profile: A file photo of a Marriott hotel under construction in Bangalore. The proposed guidelines aim at bringing clarity in the classification of banks’ commercial real estate exposure. The proposed guidelines aim at bringing clarity in the classification of banks’ commercial real estate exposure. If these projects are not treated as CRE, their risk weights would vary according to the ratings of the borrower or the ratings of the project for which the loan would be given.
For instance, if a firm has an AAA rating, the loan would attract a risk weight of 20%. The risk weight could go up to 50% for an A-rated company. For 20% risk weight, banks would be required to set aside Rs1.8 worth of capital for every Rs100 loan; and for 50% risk weight, the capital requirement will be Rs4.5. Lower capital requirement brings down the cost of funds for banks and makes loans cheaper for the borrowers. According to bankers, the rate may come down by 100-200 basis points. One basis point is one-hundredth of a percentage point.
“The new guidelines, if implemented, will benefit companies in the business of hotels and hospitality that are currently classified under CRE,” said Rajesh Shah, senior vice-president (credit), Axis Bank Ltd, India’s third largest private bank. “Indian Hotels Ltd, East India Hotels Ltd and ITC Ltd, which have good ratings, will be able to take advantage of Basel II norms.” The rating-based capital requirement rules are being implemented under international capital norms known as Basel II. Under Basel I, all risk weights were 100%. But Basel II, being implemented by Indian banks, starting 1 April, encourages banks to rate their loans and set aside capital accordingly. Commercial real estate exposure, however, never falls below 100% risk weight.
While exposure to best rated firms could free up capital for banks as the capital-adequacy requirement would go down, under Basel II, they would need to set aside additional capital to take care of operational risks. “Loans extended for construction of a cinema theatre, establishment of an amusement park, hotels, and hospitals, cold storage, educational institutions, restaurants, etc., to those entrepreneurs who themselves run these ventures would not be classified as CRE exposure,” RBI’s draft guidelines said.
In the case of a hotel, it said, the cash flows would be mainly sensitive to the factors influencing the flow of tourism, not directly to the fluctuations in real estate prices. Under the guidelines, only those loans will be considered as CRE exposure where the lending is collateralized by mortgages on commercial real estate such as office buildings, retail space, multi-purpose commercial premises, multi-family residential buildings, industrial or warehouse space and hotels, and where the prospects for repayment depend on the income generated by the asset. However, even on these loans, if the repayment depends on the borrower’s operating profit or the quality of goods and services, the exposure may not be classified as CRE.
Besides, banks’ investments in mutual funds, private equity funds and venture capital funds that park money in real estate companies would be classified as CRE exposure. Though such exposure would not be directly linked to the creation or acquisition of CRE, the repayment from such investments would essentially come from the cash flows generated by commercial real estate.
The proposed guidelines aim at bringing clarity in the classification of banks’ CRE exposure and help banks in differentiating certain kinds of infrastructure lending. All special economic zone (SEZ) funding is currently classified as infrastructure lending, but RBI has proposed that loans disbursed for purchase of land for setting up and developing SEZs would be classified as CRE exposure. Such loans, however, would carry all concessions available for infrastructure lending.
Banks prefer a project to be classified under infrastructure lending because the risk weight of an AAA-rated infrastructure project is only 20%. Banks have an internal cap on how much they can invest in infrastructure projects and how much they can invest in CRE projects. Now we will have to consider which project falls into what category,” said an executive director of a Mumbai-based bank who didn’t want to be identified. Pram Desai, a research analyst with Mumbai-based brokerage Angel Broking Ltd, said, “These guidelines, if implemented, will make it easier for borrowers to get construction finance for a larger variety of projects. Construction finance has been a major concern for most developers during the downturn because most banks are cagey to lend to projects, unless they have a definite action plan and deadline to finish.”
Ref:http://www.indianrealtynews.com/real-estate-india/cheaper-loans-for-hotels-and-hospitality-business.html
The cost of bank loans for firms engaged in the business of hotels and hospitality may decline, with the Reserve Bank of India (RBI) proposing to keep such loans out of what is considered to be banks’ commercial real estate (CRE) exposure. According to 7 July draft guidelines released by RBI, bank loans to entrepreneurs for acquiring real estate for their business would not be classified as CRE exposure. The central bank had sought comments and suggestions from banks on the proposed guidelines by 16 July.
Currently, bank loans to companies for acquiring real estate for hotels and hospitality are treated as CRE exposure and attract a risk weight of 100%. Depending on the risk weight, banks are required to set aside capital for loans. Under RBI norms, banks’ capital-adequacy ratio, a measure of financial strength expressed as the ratio of capital to risk-weighed assets, is 9%. This means that for loans carrying 100% risk weight, banks need to set aside Rs9 worth of capital for every Rs100 they lend.
Risk profile: A file photo of a Marriott hotel under construction in Bangalore. The proposed guidelines aim at bringing clarity in the classification of banks’ commercial real estate exposure. The proposed guidelines aim at bringing clarity in the classification of banks’ commercial real estate exposure. If these projects are not treated as CRE, their risk weights would vary according to the ratings of the borrower or the ratings of the project for which the loan would be given.
For instance, if a firm has an AAA rating, the loan would attract a risk weight of 20%. The risk weight could go up to 50% for an A-rated company. For 20% risk weight, banks would be required to set aside Rs1.8 worth of capital for every Rs100 loan; and for 50% risk weight, the capital requirement will be Rs4.5. Lower capital requirement brings down the cost of funds for banks and makes loans cheaper for the borrowers. According to bankers, the rate may come down by 100-200 basis points. One basis point is one-hundredth of a percentage point.
“The new guidelines, if implemented, will benefit companies in the business of hotels and hospitality that are currently classified under CRE,” said Rajesh Shah, senior vice-president (credit), Axis Bank Ltd, India’s third largest private bank. “Indian Hotels Ltd, East India Hotels Ltd and ITC Ltd, which have good ratings, will be able to take advantage of Basel II norms.” The rating-based capital requirement rules are being implemented under international capital norms known as Basel II. Under Basel I, all risk weights were 100%. But Basel II, being implemented by Indian banks, starting 1 April, encourages banks to rate their loans and set aside capital accordingly. Commercial real estate exposure, however, never falls below 100% risk weight.
While exposure to best rated firms could free up capital for banks as the capital-adequacy requirement would go down, under Basel II, they would need to set aside additional capital to take care of operational risks. “Loans extended for construction of a cinema theatre, establishment of an amusement park, hotels, and hospitals, cold storage, educational institutions, restaurants, etc., to those entrepreneurs who themselves run these ventures would not be classified as CRE exposure,” RBI’s draft guidelines said.
In the case of a hotel, it said, the cash flows would be mainly sensitive to the factors influencing the flow of tourism, not directly to the fluctuations in real estate prices. Under the guidelines, only those loans will be considered as CRE exposure where the lending is collateralized by mortgages on commercial real estate such as office buildings, retail space, multi-purpose commercial premises, multi-family residential buildings, industrial or warehouse space and hotels, and where the prospects for repayment depend on the income generated by the asset. However, even on these loans, if the repayment depends on the borrower’s operating profit or the quality of goods and services, the exposure may not be classified as CRE.
Besides, banks’ investments in mutual funds, private equity funds and venture capital funds that park money in real estate companies would be classified as CRE exposure. Though such exposure would not be directly linked to the creation or acquisition of CRE, the repayment from such investments would essentially come from the cash flows generated by commercial real estate.
The proposed guidelines aim at bringing clarity in the classification of banks’ CRE exposure and help banks in differentiating certain kinds of infrastructure lending. All special economic zone (SEZ) funding is currently classified as infrastructure lending, but RBI has proposed that loans disbursed for purchase of land for setting up and developing SEZs would be classified as CRE exposure. Such loans, however, would carry all concessions available for infrastructure lending.
Banks prefer a project to be classified under infrastructure lending because the risk weight of an AAA-rated infrastructure project is only 20%. Banks have an internal cap on how much they can invest in infrastructure projects and how much they can invest in CRE projects. Now we will have to consider which project falls into what category,” said an executive director of a Mumbai-based bank who didn’t want to be identified. Pram Desai, a research analyst with Mumbai-based brokerage Angel Broking Ltd, said, “These guidelines, if implemented, will make it easier for borrowers to get construction finance for a larger variety of projects. Construction finance has been a major concern for most developers during the downturn because most banks are cagey to lend to projects, unless they have a definite action plan and deadline to finish.”
Ref:http://www.indianrealtynews.com/real-estate-india/cheaper-loans-for-hotels-and-hospitality-business.html
India one of the best performing Market
July 20, 2009
The quarter ended June 2009 saw the BSE Sensex gyrating with elation after the results of the general elections, rising in anticipation of a path-breaking budget, only to sag in disappointment over just another run-of-the-mill budget presentation in July. Even after the negative reaction, however, the sensex quotes 40% higher than the lows of March 2009. I believe the worst is over, and India is emerging as one of the best performing markets.
Indian companies have begun to announce their June quarter results. I expect most sectors to report positive earnings growth; the exceptions would be metals and real estate. Overall sensex earnings for the quarter are likely to be 17% lower year-onyear; excluding metals and real estate. However, sensex earnings would be flat year-on-year and up 2% quarter-on-quarter. Twenty of the 30 sensex stocks would report positive earnings growth, led by Bharti Airtel and State Bank of India.
The last 2-3 quarters saw a stream of downgrades in analysts’ earnings estimates. The cycle of downgrades in Indian corporate earnings now seems to be behind. I believe the period FY08-10 marks a period of consolidation for Indian corporate earnings, similar to the period of consolidation during FY00-03. Post the consolidation, earnings grew at a CAGR of 25% over FY03-08 . Commissioning of a large number of mega projects coupled with recovery in the global and domestic economies would mark a repetition of the strong earnings growth trend and upgrades starting FY11, in my view.
Going forward, the big drivers for upgrade of aggregate earnings growth for Corporate India would come from cyclicals/high-beta names. We are yet to see major changes in estimates for these stocks, post the major downgrade in 2HFY09. These stocks are highly sensitive to business cycles, with small changes in assumptions resulting in large changes in earnings growth. MOSL estimates sensex EPS for FY10 at Rs 883, flat growth over FY09. Though 1HFY10 would see an 18% drop, sensex EPS would grow 29% in 2HFY10.
For FY11, MOSL estimates sensex EPS at Rs 1,028, implying a growth of 16% over FY10. The key contributors to earnings growth would be Tata Steel, State Bank of India, Reliance Industries, ICICI Bank, HDFC Bank, and Bharti Airtel. Of the 30 sensex stocks, 23 would contribute positively to earnings growth in FY11.
Sensex earnings would grow at a CAGR of 8.6% over FY09-11 v/s a CAGR of 10.1% over FY07-09. Though growth would decelerate, the magnitude of deceleration would be low. Sensex EPS CAGR over FY02-11 would be ~18%.
While I am enthused by the expectations of a bounce-back in corporate earnings growth, upgrades in earnings estimates would depend on a speedy revival in the global economy, buoyancy in domestic businesses, proactive government policy actions and near normal monsoons. The markets had built up high expectations from the Union Budget for FY10, which was presented in the backdrop of a very positive political mandate. However, the lack of bold reform-oriented measures and an inadequate disinvestment target for FY10 was viewed very negatively by the markets.
To be fair, the finance minister was faced with a challenging job. He had to walk the tight rope between stimulating growth and curbing fiscal deficit. The fiscal deficit estimate for FY10 has shot up to 6.8%, largely as a result of the stimulus packages announced earlier. That the FM chose not to roll back any excise duty cuts announced as part of these packages and that he even spared cigarettes from an excise duty hike, shows his leanings towards growth stimulation. Had the fiscal conditions been more benign, he would have had room to take more aggressive steps.
A small target on disinvestment in FY10 is disappointing . However, the positive intent of reducing stake in most state-owned enterprises is heartening and leaves significant scope to raise resources. The rural economy got another boost, with a 144% increase in NREGS allocation. Allocations to infrastructure development schemes for FY10 saw a meaningful increase. Other reforms such as oil price deregulation, and hikes in FDI/FII limits are still on the agenda and would be considered later. In the finance minister’s own words, “… a single budget speech cannot solve all our problems, nor is the Union Budget the only instrument to do so.”
It is also encouraging to note that the government , in its published medium-term fiscal policy statement, has made its intention clear to roll back fiscal deficit to 5.5% of GDP in FY11 and further down to 4% in FY12. What is not clear, however, is a roadmap for the same. Also, the monsoons continue to pose a worry. IMD has already predicted below normal monsoon season rainfall over the country as a whole. It had also predicted that the monsoons would cover the entire country by the middle of July; a further delay in the progress of the monsoons could have significant implications.
As the dust settles on the budget pronouncements , market attention would once again turn to quarterly earnings, global markets and the progress of the monsoons. Indian equities appear fairly valued at current levels, but I believe that the probability of earnings upgrades is high. I am also optimistic on the economic reforms front. The markets would continue to face turbulence for a while, throwing up good opportunities to invest.
Ref:http://www.indianrealtynews.com/real-estate-india/india-one-of-the-best-performing-market.html
The quarter ended June 2009 saw the BSE Sensex gyrating with elation after the results of the general elections, rising in anticipation of a path-breaking budget, only to sag in disappointment over just another run-of-the-mill budget presentation in July. Even after the negative reaction, however, the sensex quotes 40% higher than the lows of March 2009. I believe the worst is over, and India is emerging as one of the best performing markets.
Indian companies have begun to announce their June quarter results. I expect most sectors to report positive earnings growth; the exceptions would be metals and real estate. Overall sensex earnings for the quarter are likely to be 17% lower year-onyear; excluding metals and real estate. However, sensex earnings would be flat year-on-year and up 2% quarter-on-quarter. Twenty of the 30 sensex stocks would report positive earnings growth, led by Bharti Airtel and State Bank of India.
The last 2-3 quarters saw a stream of downgrades in analysts’ earnings estimates. The cycle of downgrades in Indian corporate earnings now seems to be behind. I believe the period FY08-10 marks a period of consolidation for Indian corporate earnings, similar to the period of consolidation during FY00-03. Post the consolidation, earnings grew at a CAGR of 25% over FY03-08 . Commissioning of a large number of mega projects coupled with recovery in the global and domestic economies would mark a repetition of the strong earnings growth trend and upgrades starting FY11, in my view.
Going forward, the big drivers for upgrade of aggregate earnings growth for Corporate India would come from cyclicals/high-beta names. We are yet to see major changes in estimates for these stocks, post the major downgrade in 2HFY09. These stocks are highly sensitive to business cycles, with small changes in assumptions resulting in large changes in earnings growth. MOSL estimates sensex EPS for FY10 at Rs 883, flat growth over FY09. Though 1HFY10 would see an 18% drop, sensex EPS would grow 29% in 2HFY10.
For FY11, MOSL estimates sensex EPS at Rs 1,028, implying a growth of 16% over FY10. The key contributors to earnings growth would be Tata Steel, State Bank of India, Reliance Industries, ICICI Bank, HDFC Bank, and Bharti Airtel. Of the 30 sensex stocks, 23 would contribute positively to earnings growth in FY11.
Sensex earnings would grow at a CAGR of 8.6% over FY09-11 v/s a CAGR of 10.1% over FY07-09. Though growth would decelerate, the magnitude of deceleration would be low. Sensex EPS CAGR over FY02-11 would be ~18%.
While I am enthused by the expectations of a bounce-back in corporate earnings growth, upgrades in earnings estimates would depend on a speedy revival in the global economy, buoyancy in domestic businesses, proactive government policy actions and near normal monsoons. The markets had built up high expectations from the Union Budget for FY10, which was presented in the backdrop of a very positive political mandate. However, the lack of bold reform-oriented measures and an inadequate disinvestment target for FY10 was viewed very negatively by the markets.
To be fair, the finance minister was faced with a challenging job. He had to walk the tight rope between stimulating growth and curbing fiscal deficit. The fiscal deficit estimate for FY10 has shot up to 6.8%, largely as a result of the stimulus packages announced earlier. That the FM chose not to roll back any excise duty cuts announced as part of these packages and that he even spared cigarettes from an excise duty hike, shows his leanings towards growth stimulation. Had the fiscal conditions been more benign, he would have had room to take more aggressive steps.
A small target on disinvestment in FY10 is disappointing . However, the positive intent of reducing stake in most state-owned enterprises is heartening and leaves significant scope to raise resources. The rural economy got another boost, with a 144% increase in NREGS allocation. Allocations to infrastructure development schemes for FY10 saw a meaningful increase. Other reforms such as oil price deregulation, and hikes in FDI/FII limits are still on the agenda and would be considered later. In the finance minister’s own words, “… a single budget speech cannot solve all our problems, nor is the Union Budget the only instrument to do so.”
It is also encouraging to note that the government , in its published medium-term fiscal policy statement, has made its intention clear to roll back fiscal deficit to 5.5% of GDP in FY11 and further down to 4% in FY12. What is not clear, however, is a roadmap for the same. Also, the monsoons continue to pose a worry. IMD has already predicted below normal monsoon season rainfall over the country as a whole. It had also predicted that the monsoons would cover the entire country by the middle of July; a further delay in the progress of the monsoons could have significant implications.
As the dust settles on the budget pronouncements , market attention would once again turn to quarterly earnings, global markets and the progress of the monsoons. Indian equities appear fairly valued at current levels, but I believe that the probability of earnings upgrades is high. I am also optimistic on the economic reforms front. The markets would continue to face turbulence for a while, throwing up good opportunities to invest.
Ref:http://www.indianrealtynews.com/real-estate-india/india-one-of-the-best-performing-market.html
Monday, July 20, 2009
India’s Retail Trade Not To Be Opened Any Further: Govt
July 18, 2009
In a signal that India’s retail trade sector may not be opened any further, the government Wednesday said the interests of small traders will be protected as the industry is the second largest employer after agriculture. “The government is fully committed to securing the legitimate interests of all stakeholders engaged in the retail business,” said Minister of State for Commerce Jyotiraditya Scindia. “The government also fully recognises the need to ensure that small retailers are not adversely affected by the growing organised retail and that there is no adverse effect on employment,” Scindia said in a written reply in the Rajya Sabha, the lower house.
In his reply, the minister also enclosed a study by the Indian Council for Research on International Economic Relations (Icrier), which says the country’s retail trade industry will grow 10 per cent per annum from $10 billion in 2006-07 to $496 billion in 2011-12. It said the organised retail trade segment of the industry, which presently stands at just 4 percent, will grow at a much faster pace of 45-50 percent, to grab a 16-percent share of the market by 2011-12. The study, however, made a pitch for opening up of retail trade sector, saying there was no evidence of a decline in overall employment in the unorganised sector as a result of the entry of large companies into the business.
The study also said farmers stood to benefit “significantly” by selling directly to organised retailers. “Profit realisation for farmers selling directly to organised retailers is about 60 per cent higher than that received from selling in the mandi (wholesale market),” the Icrier report said.
Ref:http://www.indianrealtynews.com/retail-market/indias-retail-trade-not-to-be-opened-any-further-govt.html
In a signal that India’s retail trade sector may not be opened any further, the government Wednesday said the interests of small traders will be protected as the industry is the second largest employer after agriculture. “The government is fully committed to securing the legitimate interests of all stakeholders engaged in the retail business,” said Minister of State for Commerce Jyotiraditya Scindia. “The government also fully recognises the need to ensure that small retailers are not adversely affected by the growing organised retail and that there is no adverse effect on employment,” Scindia said in a written reply in the Rajya Sabha, the lower house.
In his reply, the minister also enclosed a study by the Indian Council for Research on International Economic Relations (Icrier), which says the country’s retail trade industry will grow 10 per cent per annum from $10 billion in 2006-07 to $496 billion in 2011-12. It said the organised retail trade segment of the industry, which presently stands at just 4 percent, will grow at a much faster pace of 45-50 percent, to grab a 16-percent share of the market by 2011-12. The study, however, made a pitch for opening up of retail trade sector, saying there was no evidence of a decline in overall employment in the unorganised sector as a result of the entry of large companies into the business.
The study also said farmers stood to benefit “significantly” by selling directly to organised retailers. “Profit realisation for farmers selling directly to organised retailers is about 60 per cent higher than that received from selling in the mandi (wholesale market),” the Icrier report said.
Ref:http://www.indianrealtynews.com/retail-market/indias-retail-trade-not-to-be-opened-any-further-govt.html
Reconsider Real Estate Regulatory Bill- ASSOCHAM
July 18, 2009
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has suggested review in Real Estate Regulator Bill in its current shape since many of its provisions are harsher and inimical to industry and concerned stakeholders. “Contrary to expectations, the draft bill does not allow Real Estate Regulator to act as an impartial arbitrator between industry/developer and various government agencies on one hand and the industry/ developer and consumers on the other”. For example, “while the Regulator will lay down and monitor strict timelines for execution of a project (with severe penal implications for the promoter/ developer), it will do nothing to address the inevitable delay and harassment that accompanies various approvals and make there timelines impossible to adhere to”, points out the ASSOCHAM.
In a representation addressed to the government, the ASSOCHAM has emphasized that the draft Bill is also discriminatory in as much as it keeps the government agencies/ local authorities/ statutory bodies engaged in the business of development of land or housing out of the ambit of the Regulator. Similarly, while the Bill treats the promoter/ developer in an iniquitous manner, it is biased in favour of the ‘allotee’. In addition the Bill is self contradictory as the Regulator is being given the role of licensing authority as well which is against basic principles of liberalized economy.
ASSOCHAM President Mr. Sajjan Jindal said, “Section 4 of the Bill has a provision which makes it mandatory for developer to take registration certificate from component authority for release of advertisements to seek buyers for their Real Estate projects. And if advertisement released is without registration certificate, developers are liable to punishment for a term of upto one year or fine Rs. 5,000/- or both.” According to ASSOCHAM, this is a sweeping provision and is clearly restrictive. The Regulator may have the right to check the veracity of the claims made in an advertisement but giving it a veto power in this regard is a clear violation of the right to conduct business and punishment are too harsh.
Likewise, the bill’s Section 5 under head of development of land into colony says that licence for development of colony should be given by competent authority and will be valid for three years and renewable from year to year on payment of prescribed fee. This too is a sweeping power and a recipe for corruption, according to ASSOCHAM. “It reintroduces the licence raj which is an anathema in this post–reform age. The terms too are stringent. The licence is valid only for three years while the various approvals for a project from a slew of government agencies alone take up to 18-24 months. Moreover, land is a state subject and each state authority may have different set of criteria for granting such licenses.” Therefore the aforesaid Sections need to be diluted as per requirements of industry and consumers.
Jindal said, “there are many other provisions in the Bill which require promoters of Real Estate to construct schools, hospitals, community centres and other community building and lay park in the colony or transfer such land free of cost/ at cost of development. This is again a harsh provision and shows callous disregard for freedom to conduct business and needs modification. Likewise there are many other provisions which need review and therefore the ASSOCHAM urges the government to launch a debate on provisions of existing Regulator Bill so that its harsher sections, sub sections are diluted with a consensus approach to ensure fair play for government, Real Estate developers and buyers of properties and dwelling units, said the ASSOCHAM Chief.
Ref:http://www.indianrealtynews.com/real-estate-india/reconsider-real-estate-regulatory-bill-assocham.html
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has suggested review in Real Estate Regulator Bill in its current shape since many of its provisions are harsher and inimical to industry and concerned stakeholders. “Contrary to expectations, the draft bill does not allow Real Estate Regulator to act as an impartial arbitrator between industry/developer and various government agencies on one hand and the industry/ developer and consumers on the other”. For example, “while the Regulator will lay down and monitor strict timelines for execution of a project (with severe penal implications for the promoter/ developer), it will do nothing to address the inevitable delay and harassment that accompanies various approvals and make there timelines impossible to adhere to”, points out the ASSOCHAM.
In a representation addressed to the government, the ASSOCHAM has emphasized that the draft Bill is also discriminatory in as much as it keeps the government agencies/ local authorities/ statutory bodies engaged in the business of development of land or housing out of the ambit of the Regulator. Similarly, while the Bill treats the promoter/ developer in an iniquitous manner, it is biased in favour of the ‘allotee’. In addition the Bill is self contradictory as the Regulator is being given the role of licensing authority as well which is against basic principles of liberalized economy.
ASSOCHAM President Mr. Sajjan Jindal said, “Section 4 of the Bill has a provision which makes it mandatory for developer to take registration certificate from component authority for release of advertisements to seek buyers for their Real Estate projects. And if advertisement released is without registration certificate, developers are liable to punishment for a term of upto one year or fine Rs. 5,000/- or both.” According to ASSOCHAM, this is a sweeping provision and is clearly restrictive. The Regulator may have the right to check the veracity of the claims made in an advertisement but giving it a veto power in this regard is a clear violation of the right to conduct business and punishment are too harsh.
Likewise, the bill’s Section 5 under head of development of land into colony says that licence for development of colony should be given by competent authority and will be valid for three years and renewable from year to year on payment of prescribed fee. This too is a sweeping power and a recipe for corruption, according to ASSOCHAM. “It reintroduces the licence raj which is an anathema in this post–reform age. The terms too are stringent. The licence is valid only for three years while the various approvals for a project from a slew of government agencies alone take up to 18-24 months. Moreover, land is a state subject and each state authority may have different set of criteria for granting such licenses.” Therefore the aforesaid Sections need to be diluted as per requirements of industry and consumers.
Jindal said, “there are many other provisions in the Bill which require promoters of Real Estate to construct schools, hospitals, community centres and other community building and lay park in the colony or transfer such land free of cost/ at cost of development. This is again a harsh provision and shows callous disregard for freedom to conduct business and needs modification. Likewise there are many other provisions which need review and therefore the ASSOCHAM urges the government to launch a debate on provisions of existing Regulator Bill so that its harsher sections, sub sections are diluted with a consensus approach to ensure fair play for government, Real Estate developers and buyers of properties and dwelling units, said the ASSOCHAM Chief.
Ref:http://www.indianrealtynews.com/real-estate-india/reconsider-real-estate-regulatory-bill-assocham.html
Analysing Mid Market Residential Segment
July 18, 2009
Is this is a good time to buy? How much are prices likely to drop? Should I wait or buy now? Unfortunately, the answer is not a simple “yes” or “no”. One needs to consider factors such as economic growth outlook, interest rates, job security, demand, credit supply etc, understand the overall dynamics of the real estate sector. Rough estimates show that out of the total 100% real estate market the residential segment weightage is approximately 75% whereas 20% is commercial office spaces and balance 5% comprises retail, hospitality. The mid market residential segment (residential properties between Rs 15 - 50 lakh) represents nearly 85% of total mortgage disbursements in India. Therefore, the mid market residential segment represents nearly 64% of the market. Almost 55% of mortgage finance disbursement for residential properties happens within the top seven cities and the balance 45% is shared by the whole country.
There was a dearth of two to three bedroom properties within this range of Rs 15 - 50 lakh within the greater metropolitan areas of major cities. Easy supply of money from equity capital sources created an artificial demand of land for the development of large township projects and SEZs. Everybody started announcing huge and multiple projects but ignored the calculation, execution and delivery capability perspective involved. Most developers started projects 10 - 20 times the total square footage of what they had delivered in the last 20 - 30 years. The various sources of institutional capital lapped up the story. However critical considerations like the nature and kind of organisation structure, management bandwidth, labour, capital equipment, machinery, project time were ignored.
The pricing of residential projects went up by 400 - 500% in most cities between 2006 - 2008. Interest rates also went up from an all time low of 7.00%, 20-year fixed mortgage to as high as 13.75% floating rate in 2008. This put a lot of strain on affordability. The stock market crash and job insecurity that followed the Lehman Brothers fiasco, drove away investors and actual buyers. The credit tightening from domestic banks and marked to market losses started reflecting on credit supply to the sector and the market went dead. Developers came stress with no cash flows from the sale of projects and rentals of commercial office spaces and retail spaces also dipped by as much as 50% and everybody started playing the waiting game and bottom fishing to get back into the market.
The most credible development companies, in the absence of retail buyers, could not find capital to complete under-construction projects. This led to delays and temporary abandoning of projects. Developers were forced to rethink strategies to get back cash flows and improve sales. This led to developers having a “Eureka” moment about affordable housing. Luckily for the markets better sense has now prevailed and several developers are re-pricing projects downwards and repositioning them as affordable housing. The banks have also selectively started lending to developers, albeit in small amounts and with strict performance criteria. The banks have also brought down interest rates and also restructured debts. This has slowly brought buyers to the market.
The worst seems to be over for the mid-market residential real estate asset class, although the same is not yet true for commercial office spaces and retail malls. This segment essentially drives cash flows as well as the major chunk of demand. This segment is also one which gets maximum bookings from actual user market rather than the investor bookings in percentage terms. Therefore, it is the lead segment in driving real estate markets. Unfortunately, it was the most neglected segment during the bull run of 2006 - 2008. Now that most developers have realised that this segment is bringing back buyers who were left out to due to affordability issues during the bull run, cash flows are likely to improve. There have been a few launches of affordably priced projects, which have seen a positive response from actual users. This has led to other developers following suit and taking advantage of the positive sentiment that has emerged towards affordable/mid market residential segment. The market will see a slew of such launches in the next three to 12 months, giving ample choice to actual buyers. Prices will stabilize for a while.
I do not anticipate any further downward movement in properties priced between Rs 15 - 60 lakh (1 - 3 BHK homes) within the metropolitan regions of the top seven to ten cities. Tier III and tier IV cities prices are expected to fall further, however a property corrected 30 - 40% from peak level prices available is an excellent buy. One should take a decision within next three months. This will be a good time to get best possible deal. I feel that residential housing prices have bottomed out and will see a consolidation here onwards . Prices will start firming up and stabilize for a while and by mid next calendar year we should see some signs of price escalation coming back driven by rising volume and demand.
However, before you conclude the deal, do a due diligence on the developer’s track record, talk to the financing bankers about the delivery capabilities of the developer. Only buy from a reputed developer and if possible buy a completed project or one which is nearing completion. Don’t succumb to the pressure from sales staff saying “if you don’t buy now, you don’t get an apartment of your choice”. It is wise to monitor the project site for 3 - 4 weeks from the time you first visit the project and observe the number of labourers, the progress of the project every week, take pictures for 3- 4 weeks of the site to see the progress yourself and be convinced that construction is moving at a good pace. Ideally over 4 weeks, a good developer’s project should go up by 2 levels. Avoid first time and small developers as they have limited capital and resources and may not be able to deliver on time. It is advisable to use a reputed broker to help choose the right project and right developer and get all the relevant information. The 2.00% fees you will pay them is money well spent in getting that dream home.
Ref:http://www.indianrealtynews.com/real-estate-india/analysing-mid-market-residential-segment.html
Is this is a good time to buy? How much are prices likely to drop? Should I wait or buy now? Unfortunately, the answer is not a simple “yes” or “no”. One needs to consider factors such as economic growth outlook, interest rates, job security, demand, credit supply etc, understand the overall dynamics of the real estate sector. Rough estimates show that out of the total 100% real estate market the residential segment weightage is approximately 75% whereas 20% is commercial office spaces and balance 5% comprises retail, hospitality. The mid market residential segment (residential properties between Rs 15 - 50 lakh) represents nearly 85% of total mortgage disbursements in India. Therefore, the mid market residential segment represents nearly 64% of the market. Almost 55% of mortgage finance disbursement for residential properties happens within the top seven cities and the balance 45% is shared by the whole country.
There was a dearth of two to three bedroom properties within this range of Rs 15 - 50 lakh within the greater metropolitan areas of major cities. Easy supply of money from equity capital sources created an artificial demand of land for the development of large township projects and SEZs. Everybody started announcing huge and multiple projects but ignored the calculation, execution and delivery capability perspective involved. Most developers started projects 10 - 20 times the total square footage of what they had delivered in the last 20 - 30 years. The various sources of institutional capital lapped up the story. However critical considerations like the nature and kind of organisation structure, management bandwidth, labour, capital equipment, machinery, project time were ignored.
The pricing of residential projects went up by 400 - 500% in most cities between 2006 - 2008. Interest rates also went up from an all time low of 7.00%, 20-year fixed mortgage to as high as 13.75% floating rate in 2008. This put a lot of strain on affordability. The stock market crash and job insecurity that followed the Lehman Brothers fiasco, drove away investors and actual buyers. The credit tightening from domestic banks and marked to market losses started reflecting on credit supply to the sector and the market went dead. Developers came stress with no cash flows from the sale of projects and rentals of commercial office spaces and retail spaces also dipped by as much as 50% and everybody started playing the waiting game and bottom fishing to get back into the market.
The most credible development companies, in the absence of retail buyers, could not find capital to complete under-construction projects. This led to delays and temporary abandoning of projects. Developers were forced to rethink strategies to get back cash flows and improve sales. This led to developers having a “Eureka” moment about affordable housing. Luckily for the markets better sense has now prevailed and several developers are re-pricing projects downwards and repositioning them as affordable housing. The banks have also selectively started lending to developers, albeit in small amounts and with strict performance criteria. The banks have also brought down interest rates and also restructured debts. This has slowly brought buyers to the market.
The worst seems to be over for the mid-market residential real estate asset class, although the same is not yet true for commercial office spaces and retail malls. This segment essentially drives cash flows as well as the major chunk of demand. This segment is also one which gets maximum bookings from actual user market rather than the investor bookings in percentage terms. Therefore, it is the lead segment in driving real estate markets. Unfortunately, it was the most neglected segment during the bull run of 2006 - 2008. Now that most developers have realised that this segment is bringing back buyers who were left out to due to affordability issues during the bull run, cash flows are likely to improve. There have been a few launches of affordably priced projects, which have seen a positive response from actual users. This has led to other developers following suit and taking advantage of the positive sentiment that has emerged towards affordable/mid market residential segment. The market will see a slew of such launches in the next three to 12 months, giving ample choice to actual buyers. Prices will stabilize for a while.
I do not anticipate any further downward movement in properties priced between Rs 15 - 60 lakh (1 - 3 BHK homes) within the metropolitan regions of the top seven to ten cities. Tier III and tier IV cities prices are expected to fall further, however a property corrected 30 - 40% from peak level prices available is an excellent buy. One should take a decision within next three months. This will be a good time to get best possible deal. I feel that residential housing prices have bottomed out and will see a consolidation here onwards . Prices will start firming up and stabilize for a while and by mid next calendar year we should see some signs of price escalation coming back driven by rising volume and demand.
However, before you conclude the deal, do a due diligence on the developer’s track record, talk to the financing bankers about the delivery capabilities of the developer. Only buy from a reputed developer and if possible buy a completed project or one which is nearing completion. Don’t succumb to the pressure from sales staff saying “if you don’t buy now, you don’t get an apartment of your choice”. It is wise to monitor the project site for 3 - 4 weeks from the time you first visit the project and observe the number of labourers, the progress of the project every week, take pictures for 3- 4 weeks of the site to see the progress yourself and be convinced that construction is moving at a good pace. Ideally over 4 weeks, a good developer’s project should go up by 2 levels. Avoid first time and small developers as they have limited capital and resources and may not be able to deliver on time. It is advisable to use a reputed broker to help choose the right project and right developer and get all the relevant information. The 2.00% fees you will pay them is money well spent in getting that dream home.
Ref:http://www.indianrealtynews.com/real-estate-india/analysing-mid-market-residential-segment.html
Mumbai-based developer Hiranandani Group Buys Land worth Rs 800 cr
July 18, 2009
Hiranandani Upscale, a fully-owned company of Mumbai-based developer Hiranandani Group, is learnt to have bought 135 acres in Bangalore, Chennai and Hyderabad for Rs 800 crore. According to a person involved in the transaction, the agreement had been signed last month between Hiranandani Upscale and three individual sellers in these cities. “The three land parcels comprise 80 acres in Bangalore, 35 acres in Chennai and 20 acres in Hyderabad,” said the person. Hiranandani Upscale plans to develop townships in these cities at a later date.
The sale of these land parcels have been on an outright basis and Hiranandani Upscale would make the payment in three tranches. It is believed that the company has paid an initial amount (token money). When queried on the deals, Surendra Hiranandani, managing director, Hiranandani Group and Hiranandani Upscale confirmed to ET the company’s plans to start new projects in South India but refused to share exact details about the deals.
It is learnt that the company would be raising the funds for the deal through private equity investments at a special purpose vehicle (SPV) level. According to the same person involved in the deal, Hiranandani Upscale is in talks with around four private equity players — three foreign and one domestic — for raising equity to develop these projects. Mr Hiranandani said: “We are not in a position to share details but can only confirm that we are talking to some PE players for a partnership at an SPV level.” Hiranandani Upscale is an unlisted company and will focus on projects outside Mumbai with plans to enter the market in North India at a later stage.
The Hiranandani group has plans to develop townships in the three cities on the lines of its Powai project in Mumbai. The projects in the three cities will target the higher income group. It is gathered that the projects will commence in two years and could take another three years for completion. The deal is important since there are not too many large deals taking place in the real estate sector now. In the recent past, deals have largely been taking place in Mumbai. Last month, DLF sold its stake in its Andheri-MIDC land parcel in Mumbai for Rs 200 crore, while in May, DLF had also sold its stake in a property, also in Mumbai. The number of deals have dropped as a result of the economic downturn and a liquidity crunch.
Ref:http://www.indianrealtynews.com/real-estate-india/mumbai-based-developer-hiranandani-group-buys-land-worth-rs-800-cr.html
Hiranandani Upscale, a fully-owned company of Mumbai-based developer Hiranandani Group, is learnt to have bought 135 acres in Bangalore, Chennai and Hyderabad for Rs 800 crore. According to a person involved in the transaction, the agreement had been signed last month between Hiranandani Upscale and three individual sellers in these cities. “The three land parcels comprise 80 acres in Bangalore, 35 acres in Chennai and 20 acres in Hyderabad,” said the person. Hiranandani Upscale plans to develop townships in these cities at a later date.
The sale of these land parcels have been on an outright basis and Hiranandani Upscale would make the payment in three tranches. It is believed that the company has paid an initial amount (token money). When queried on the deals, Surendra Hiranandani, managing director, Hiranandani Group and Hiranandani Upscale confirmed to ET the company’s plans to start new projects in South India but refused to share exact details about the deals.
It is learnt that the company would be raising the funds for the deal through private equity investments at a special purpose vehicle (SPV) level. According to the same person involved in the deal, Hiranandani Upscale is in talks with around four private equity players — three foreign and one domestic — for raising equity to develop these projects. Mr Hiranandani said: “We are not in a position to share details but can only confirm that we are talking to some PE players for a partnership at an SPV level.” Hiranandani Upscale is an unlisted company and will focus on projects outside Mumbai with plans to enter the market in North India at a later stage.
The Hiranandani group has plans to develop townships in the three cities on the lines of its Powai project in Mumbai. The projects in the three cities will target the higher income group. It is gathered that the projects will commence in two years and could take another three years for completion. The deal is important since there are not too many large deals taking place in the real estate sector now. In the recent past, deals have largely been taking place in Mumbai. Last month, DLF sold its stake in its Andheri-MIDC land parcel in Mumbai for Rs 200 crore, while in May, DLF had also sold its stake in a property, also in Mumbai. The number of deals have dropped as a result of the economic downturn and a liquidity crunch.
Ref:http://www.indianrealtynews.com/real-estate-india/mumbai-based-developer-hiranandani-group-buys-land-worth-rs-800-cr.html
Steady Recovery for Office Real Estate
July 18, 2009
Call it recession or an oversupplied market (in terms of office space), or the general negative sentiment prevailing in the market, office real estate hit an all time low with values nearly bottoming out as compared to its peak around 8-12 months ago, in fact, the commercial real estate values dropped by an average of 25% in all markets and touched 50% in some. The transactions were few and far between as majority of the corporates postponed their business expansion plan and were downsizing, as most were not sure if they would be able to sustain themselves, leave alone embark upon any expansion plans, while those who were earlier looking at expansion/relocation fell in a wait-and-watch mode, in anticipation of further correction.
Giving a sense of the depreciation in commercial real estate values, specifically office space, Arjun Kumar, director of AsiaPac International India says, “Commercial and IT space has witnessed almost 40-50% correction compared to rates 6-8 months ago, across NCR.” He quotes the lease rent in Gurgaon for warm shell as anything between Rs 60-75 /sq ft /month and Noida (on the expressway and Sector 62) as Rs 45-55 /sq ft /month while one can get a steal at Sectors 63, 64 (which are primarily industrial sector but IT/ITeS are allowed to operate ) at Rs 25-30 /sq ft /month for warm shell space , and here additional space is being added almost every day.
Delhi CBD (Connaught Place) also witnessed correction of 40-50%. Says Kumar, “One can have space here between Rs 100-175 /sq ft/month depending on the building (A or B Grade) and maintenance, upkeep of the respective buildings. In South Delhi, Saket and Jasola District Centre in particular, have been witnessing almost 30-45% correction in lease rent as well as capital value. The lease rent being quoted in Jasola is Rs 140-175 /sq ft/month wherein capital value is anything between Rs 11,000-13,000/sq ft for commercial office space.” Apart from the values dropping, there has been a substantial drop in transactions. If at all transactions were happening, they were restricted to the suburbs such as Gurgaon’s Udyog Vihar, as well as builder sectors and Noida — on the expressway, Sector 62, 63, 64.
Says a broker, “The companies which are sure of their business plan and think that market will improve sooner or later are moving forward with their plans, especially, the major Indian corporates, which are catering to the domestic market. These include primarily telecom and software companies.” What is the exact situation in Delhi CBD and secondary micromarkets, Samantha Jerath of Jerath Properties says office transactions have slowed down, undoubtedly. “But it will be wrong to say the values have come down by 50%. This is because even though a rate of Rs 350 /sq ft /month was quoted earlier, no actual transactions were recorded at the value. The highest was Rs 250 and I would say office space values in CP have come down from Rs 175-250 /sq ft /month to Rs 120-150 /sq ft /month. In secondary micromarkets, it has depreciated from Rs 175 /sq ft /month to around Rs 110 /sq ft /month. There has been correction at least to the tune of 20-25% in the entire Delhi NCR region.”
He attributes the fall in office values to a generic overall market dynamics. “The economy is not bullish and so the real estate is witnessing a dent in values. Corporates are downsizing, have tighter budgets and are not enthusiastic about paying high rentals.” But the good news is that revival is on its way in commercial real estate. Says Anurag Bhatnagar, associate director at DTZ, an international property consulting firm, “Commercial real estate was suffering from lack of transactions till Q4 ‘08, but Q1 and Q2 ‘09 have witnessed absorption of a million sq ft each. Rentals across Delhi NCR had already corrected by 10-20% in Q4 ‘08 from peak asking rates in Q2 ‘08. Values corrected further marginally, by 4-5% across all micromarkets from Q1 to Q2 ‘09.”
So far, companies with expansion plans stayed on the sidelines anticipating bottoming out of the market. Citing the reason for lack of transactions, Mathur says lack of absorption/transactions till Q1 ‘09 was due to the general negative sentiment in the market, the cut on global-IT spend for companies and the delayed decision making process. During this period, companies adopted various strategies like renegotiation of contracts along rationalization of their current space layout resulting in higher efficiency. Q1 2009 witnessed a revival in demand with companies closing out deals due to good rates due to broader market being close to bottom. Q2 2009 again maintained the absorption levels of Q1 2009, primarily due to companies getting corrected rates in various micromarkets.
Delhi witnessed the lowest number of transactions in office space in the last one year, while the maximum transaction in office space took place in Gurgaon in Delhi NCR. Gurgaon witnessed majority of the absorption due to availability of Grade A office space in prime areas, available at attractive rates. Early completion of upcoming Metro corridor has also added value to the whole package (against Gurgaon always seen as suffering from lack of public transport).
Ref:http://www.indianrealtynews.com/real-estate-india/steady-recovery-for-office-real-estate.html
Call it recession or an oversupplied market (in terms of office space), or the general negative sentiment prevailing in the market, office real estate hit an all time low with values nearly bottoming out as compared to its peak around 8-12 months ago, in fact, the commercial real estate values dropped by an average of 25% in all markets and touched 50% in some. The transactions were few and far between as majority of the corporates postponed their business expansion plan and were downsizing, as most were not sure if they would be able to sustain themselves, leave alone embark upon any expansion plans, while those who were earlier looking at expansion/relocation fell in a wait-and-watch mode, in anticipation of further correction.
Giving a sense of the depreciation in commercial real estate values, specifically office space, Arjun Kumar, director of AsiaPac International India says, “Commercial and IT space has witnessed almost 40-50% correction compared to rates 6-8 months ago, across NCR.” He quotes the lease rent in Gurgaon for warm shell as anything between Rs 60-75 /sq ft /month and Noida (on the expressway and Sector 62) as Rs 45-55 /sq ft /month while one can get a steal at Sectors 63, 64 (which are primarily industrial sector but IT/ITeS are allowed to operate ) at Rs 25-30 /sq ft /month for warm shell space , and here additional space is being added almost every day.
Delhi CBD (Connaught Place) also witnessed correction of 40-50%. Says Kumar, “One can have space here between Rs 100-175 /sq ft/month depending on the building (A or B Grade) and maintenance, upkeep of the respective buildings. In South Delhi, Saket and Jasola District Centre in particular, have been witnessing almost 30-45% correction in lease rent as well as capital value. The lease rent being quoted in Jasola is Rs 140-175 /sq ft/month wherein capital value is anything between Rs 11,000-13,000/sq ft for commercial office space.” Apart from the values dropping, there has been a substantial drop in transactions. If at all transactions were happening, they were restricted to the suburbs such as Gurgaon’s Udyog Vihar, as well as builder sectors and Noida — on the expressway, Sector 62, 63, 64.
Says a broker, “The companies which are sure of their business plan and think that market will improve sooner or later are moving forward with their plans, especially, the major Indian corporates, which are catering to the domestic market. These include primarily telecom and software companies.” What is the exact situation in Delhi CBD and secondary micromarkets, Samantha Jerath of Jerath Properties says office transactions have slowed down, undoubtedly. “But it will be wrong to say the values have come down by 50%. This is because even though a rate of Rs 350 /sq ft /month was quoted earlier, no actual transactions were recorded at the value. The highest was Rs 250 and I would say office space values in CP have come down from Rs 175-250 /sq ft /month to Rs 120-150 /sq ft /month. In secondary micromarkets, it has depreciated from Rs 175 /sq ft /month to around Rs 110 /sq ft /month. There has been correction at least to the tune of 20-25% in the entire Delhi NCR region.”
He attributes the fall in office values to a generic overall market dynamics. “The economy is not bullish and so the real estate is witnessing a dent in values. Corporates are downsizing, have tighter budgets and are not enthusiastic about paying high rentals.” But the good news is that revival is on its way in commercial real estate. Says Anurag Bhatnagar, associate director at DTZ, an international property consulting firm, “Commercial real estate was suffering from lack of transactions till Q4 ‘08, but Q1 and Q2 ‘09 have witnessed absorption of a million sq ft each. Rentals across Delhi NCR had already corrected by 10-20% in Q4 ‘08 from peak asking rates in Q2 ‘08. Values corrected further marginally, by 4-5% across all micromarkets from Q1 to Q2 ‘09.”
So far, companies with expansion plans stayed on the sidelines anticipating bottoming out of the market. Citing the reason for lack of transactions, Mathur says lack of absorption/transactions till Q1 ‘09 was due to the general negative sentiment in the market, the cut on global-IT spend for companies and the delayed decision making process. During this period, companies adopted various strategies like renegotiation of contracts along rationalization of their current space layout resulting in higher efficiency. Q1 2009 witnessed a revival in demand with companies closing out deals due to good rates due to broader market being close to bottom. Q2 2009 again maintained the absorption levels of Q1 2009, primarily due to companies getting corrected rates in various micromarkets.
Delhi witnessed the lowest number of transactions in office space in the last one year, while the maximum transaction in office space took place in Gurgaon in Delhi NCR. Gurgaon witnessed majority of the absorption due to availability of Grade A office space in prime areas, available at attractive rates. Early completion of upcoming Metro corridor has also added value to the whole package (against Gurgaon always seen as suffering from lack of public transport).
Ref:http://www.indianrealtynews.com/real-estate-india/steady-recovery-for-office-real-estate.html
Better Infrastructure Required to Boost Pune Real estate- ASSOCHAM Pune Head
July 18, 2009
There are often comparisons made between the infrastructure of Mumbai and Pune. The popular consensus seems to be that both cities are equally challenged as far as supportive infrastructure is concerned. This is inappropriate for two reasons – one, Mumbai’s growth pattern has been very different from Pune’s. The city has evolved into the country’s financial capital, and the pressures on it are enormous and overwhelming, considering the fact that a significant part of it is an island that cannot grow horizontally to accommodate the growing real estate demands.
Pune, on the other hand, has an advantage by virtue of the fact that it has been able to add to its borders by means of surrounding villages. This has served to decreased pressure on the central city and encourages an outward growth pattern. The challenges on Pune’s infrastructure – particularly its road network - have more to do with the speed of this growth. While there are various proposals for roads and road widening, these have to be translated into real time to be effective. The pockets of infrastructural under-development are the result of both developers and the government concentrating on existing growth areas and sidelining those with high future potential. It is a known fact that no area can grow in terms of residential, commercial and retail real estate unless the necessary infrastructure is first put in place. This is quite a common phenomenon that is the result of the principle of fastest returns almost instinctually followed by both developers and the government. Bangalore, for instance, was initially not well planned for radial expansion. The approach in this city was simple – where information technology projects went, residential projects followed. IT and ITeS, as business lines, are not dependent on a city’s CBD areas and can workably exist in areas where property prices are low. Once such a project is established, residential, commercial and retail establishments follow. Since this kind of growth in no way follows a master plan, the result is haphazard pockets of growth. This naturally leads to the neglect of areas that have not been so favoured. The syndrome is also evident in the case of other industries such as manufacturing.
To identity another factor that has compromised Pune’s holistic growth in terms of real estate viability - the first master plan for the city designated a much more progressive ‘roadmap’ for the city’s road network, while the second one is decidedly sotto voce on these. Also, key roads leading to new growth areas are not being put in place with the speed necessary to ensure that these new areas have the requisite connectivity. The roads leading to Kharadi – a major real estate growth nexus – have not been put in place due to an inappropriately slow speed of development initiative. Similarly, the Eastern bypass has been at the proposal stage for many years. In these and various other instances, the result is compromised potential.
In comparison, the Pimpri Chinchwad Municipal Corporation (PCMC) has been proactive in terms of a proper road network. This explains why there have been such spurts in growth and corresponding real estate values in this region. Considering how much the authorities have already achieved, it is distressing that certain pockets in the region still show signs of infrastructure deficit. The Pharande Group, which has made significant land bank investments in Phase II, across Sectors 4 and 6, had already launched residential projects in Pradhikaran’s Phase I. However, because of the lack of proper roads, only the Pharande Group and a handful of smaller developers have taken the risk of venturing into this area to open it up for the times to come. The potential of this key area apparently lacks from recognition of its inherent future value. A closer look at its promise for the PCMC real estate market would very likely cause a more fast-paced development of its road network. There are earlier precedents in Pune, wherein languishing areas were given fast-paced infrastructure upgrades because of an upcoming market catalyst.
When the recent Youth Commonwealth Games loomed closer, the enhancement of Baner Road and Pashan Road were put on the fast track. In the same manner, it is not unreasonable to anticipate that the PCNDTA will take cognizance of the fact that Pradhikaran’s Phase II is extremely important by virtue of the fact that strategically juxtaposed New Rajguru Nagar has now been identified as the location of Pune’s new airport. This being the case, putting down adequate roads in this area will set the stage for immense future growth of this strategically placed locality .
Ref:http://www.indianrealtynews.com/real-estate-india/better-infrastructure-required-to-boost-pune-real-estate-assocham-pune-head.html
There are often comparisons made between the infrastructure of Mumbai and Pune. The popular consensus seems to be that both cities are equally challenged as far as supportive infrastructure is concerned. This is inappropriate for two reasons – one, Mumbai’s growth pattern has been very different from Pune’s. The city has evolved into the country’s financial capital, and the pressures on it are enormous and overwhelming, considering the fact that a significant part of it is an island that cannot grow horizontally to accommodate the growing real estate demands.
Pune, on the other hand, has an advantage by virtue of the fact that it has been able to add to its borders by means of surrounding villages. This has served to decreased pressure on the central city and encourages an outward growth pattern. The challenges on Pune’s infrastructure – particularly its road network - have more to do with the speed of this growth. While there are various proposals for roads and road widening, these have to be translated into real time to be effective. The pockets of infrastructural under-development are the result of both developers and the government concentrating on existing growth areas and sidelining those with high future potential. It is a known fact that no area can grow in terms of residential, commercial and retail real estate unless the necessary infrastructure is first put in place. This is quite a common phenomenon that is the result of the principle of fastest returns almost instinctually followed by both developers and the government. Bangalore, for instance, was initially not well planned for radial expansion. The approach in this city was simple – where information technology projects went, residential projects followed. IT and ITeS, as business lines, are not dependent on a city’s CBD areas and can workably exist in areas where property prices are low. Once such a project is established, residential, commercial and retail establishments follow. Since this kind of growth in no way follows a master plan, the result is haphazard pockets of growth. This naturally leads to the neglect of areas that have not been so favoured. The syndrome is also evident in the case of other industries such as manufacturing.
To identity another factor that has compromised Pune’s holistic growth in terms of real estate viability - the first master plan for the city designated a much more progressive ‘roadmap’ for the city’s road network, while the second one is decidedly sotto voce on these. Also, key roads leading to new growth areas are not being put in place with the speed necessary to ensure that these new areas have the requisite connectivity. The roads leading to Kharadi – a major real estate growth nexus – have not been put in place due to an inappropriately slow speed of development initiative. Similarly, the Eastern bypass has been at the proposal stage for many years. In these and various other instances, the result is compromised potential.
In comparison, the Pimpri Chinchwad Municipal Corporation (PCMC) has been proactive in terms of a proper road network. This explains why there have been such spurts in growth and corresponding real estate values in this region. Considering how much the authorities have already achieved, it is distressing that certain pockets in the region still show signs of infrastructure deficit. The Pharande Group, which has made significant land bank investments in Phase II, across Sectors 4 and 6, had already launched residential projects in Pradhikaran’s Phase I. However, because of the lack of proper roads, only the Pharande Group and a handful of smaller developers have taken the risk of venturing into this area to open it up for the times to come. The potential of this key area apparently lacks from recognition of its inherent future value. A closer look at its promise for the PCMC real estate market would very likely cause a more fast-paced development of its road network. There are earlier precedents in Pune, wherein languishing areas were given fast-paced infrastructure upgrades because of an upcoming market catalyst.
When the recent Youth Commonwealth Games loomed closer, the enhancement of Baner Road and Pashan Road were put on the fast track. In the same manner, it is not unreasonable to anticipate that the PCNDTA will take cognizance of the fact that Pradhikaran’s Phase II is extremely important by virtue of the fact that strategically juxtaposed New Rajguru Nagar has now been identified as the location of Pune’s new airport. This being the case, putting down adequate roads in this area will set the stage for immense future growth of this strategically placed locality .
Ref:http://www.indianrealtynews.com/real-estate-india/better-infrastructure-required-to-boost-pune-real-estate-assocham-pune-head.html
Friday, July 17, 2009
Mumbai Commercial Real Estate shows Some Signs of Recovery
July 17, 2009
After months of stagnation in the commercial real estate market in Mumbai, there is finally some revival. First off the block was the 10.3-acre Finlay Mill property for which there have been bids from Lodha Developers and Indiabulls Real Estate. On July 31, NTC will put the 16-acre Kohinoor Mill-1 property also on the block, for which the base price will be Rs 1,200 crore. Both these properties are located in central Mumbai. In the case of Finlay Mill property, the last day for the submission of bids was Thursday. Lodha Developers and Indiabulls Real Estate have put in their bids. The base price for this property, which has a buildable area of 4.20 lakh square feet, is Rs 708 crore with Lodha’s bid at Rs 657.9 crore and Indiabulls’ at Rs 520 crore. The property was put on block twice earlier, and according to senior officials at NTC, the sale will go through this time around. When contacted, NTC Mill CMD K Ramchandran Pillai said: “The asset sale committee would review the bids on July 22, after which a decision will be taken.”
It is now learnt that property consultant Jones Lang LaSalle Meghraj has been mandated for the sale of the Kohinoor Mill-1 land. A senior NTC official told ET: “The bidding process will commence in less than two weeks.” This is the first time that this land is being put on the block. The Kohinoor Mill-1 property is different from that of Kohinoor Mill-3, which was bought by Manohar Joshi and Raj Thackeray for Rs 421 crore in 2005. In all, NTC has the go-ahead to put 25 mills in Mumbai on the block. The last deal struck was for a land parcel in Parel in central Mumbai for Rs 702 crore. Last month, the Hindoostan Mill land in the same area, which was owned by the Thackersey family and later sold to a special purpose vehicle (SPV) company of Ackruti City and DLF, was put on the block, ET had reported on May 14 that C Sivasankaran, the NRI maverick investor, had acquired DLF’s stake of 66% for Rs 310 crore.
The revival in the commercial real estate segment has been a welcome development and has been viewed positively by those tracking the industry. “Though the Finlay property has received bids below the base price, the price on a per acre basis indicates a recovery,” said a property consultant.
Ref:http://www.indianrealtynews.com/real-estate-india/mumbai/mumbai-commercial-real-estate-shows-some-signs-of-recovery.html
After months of stagnation in the commercial real estate market in Mumbai, there is finally some revival. First off the block was the 10.3-acre Finlay Mill property for which there have been bids from Lodha Developers and Indiabulls Real Estate. On July 31, NTC will put the 16-acre Kohinoor Mill-1 property also on the block, for which the base price will be Rs 1,200 crore. Both these properties are located in central Mumbai. In the case of Finlay Mill property, the last day for the submission of bids was Thursday. Lodha Developers and Indiabulls Real Estate have put in their bids. The base price for this property, which has a buildable area of 4.20 lakh square feet, is Rs 708 crore with Lodha’s bid at Rs 657.9 crore and Indiabulls’ at Rs 520 crore. The property was put on block twice earlier, and according to senior officials at NTC, the sale will go through this time around. When contacted, NTC Mill CMD K Ramchandran Pillai said: “The asset sale committee would review the bids on July 22, after which a decision will be taken.”
It is now learnt that property consultant Jones Lang LaSalle Meghraj has been mandated for the sale of the Kohinoor Mill-1 land. A senior NTC official told ET: “The bidding process will commence in less than two weeks.” This is the first time that this land is being put on the block. The Kohinoor Mill-1 property is different from that of Kohinoor Mill-3, which was bought by Manohar Joshi and Raj Thackeray for Rs 421 crore in 2005. In all, NTC has the go-ahead to put 25 mills in Mumbai on the block. The last deal struck was for a land parcel in Parel in central Mumbai for Rs 702 crore. Last month, the Hindoostan Mill land in the same area, which was owned by the Thackersey family and later sold to a special purpose vehicle (SPV) company of Ackruti City and DLF, was put on the block, ET had reported on May 14 that C Sivasankaran, the NRI maverick investor, had acquired DLF’s stake of 66% for Rs 310 crore.
The revival in the commercial real estate segment has been a welcome development and has been viewed positively by those tracking the industry. “Though the Finlay property has received bids below the base price, the price on a per acre basis indicates a recovery,” said a property consultant.
Ref:http://www.indianrealtynews.com/real-estate-india/mumbai/mumbai-commercial-real-estate-shows-some-signs-of-recovery.html
Housing Sector to Come up with 8,000 flats in NCR
July 17, 2009
In a move expected to give a big push to the housing sector in Gurgaon and Faridabad, the Haryana Housing Board is in the process of inviting expressions of interest for building 8,000 flats in these cities and some other places in the national capital region areas. This is in addition to the 38,000 housing units, majority of them in NCR, planned in the next two years. Under the latest project, the state will enter into an agreement with real estate developers to provide affordable housing to middle and lower middle class under the public private partnership mode.
“Since we do not have land in Faridabad and Gurgaon, we will be joining hands with private colonizers whose projects have been stuck due to the (economic) slowdown. We’ll prefer those who have the licence, and then those who have enough land,'’ said S P Gupta, chief administrator of the housing board. The announcement follows chief minister Bhupinder Singh Hooda’s assurance to developers that steps will be taken to counter the slump in the real estate market. It will also fulfil his commitment of providing cheap housing to locals, especially those in NCR cities of Gurgaon and Faridabad. Among the other areas selected for the project are Bawal (in Rewari district close to Gurgaon), Badhi (Sonepat) and Karnal.
Officials claim that around 828 units would come up at Badhi, a township to the north of Delhi. While the board is still working on the number of flats to be offered in Gurgaon and Faridabad, it plans to build 400 units for the lower middle class in Bawal. The housing board will share 50% cost of the project and forego profits. “We’ll also have some guidelines as far as profits of joint venture groups are concerned,'’ Gupta added. Earlier, the state had announced that as many as 38,000 houses would be built for all sections of society by 2011. Though the exact number of houses to be constructed close to Delhi hasn’t been worked out, it’s believed that most of these units will be in NCR where the demand is the highest.
Ref:http://www.indianrealtynews.com/real-estate-india/housing-sector-to-come-up-with-8000-flats-in-ncr.html
In a move expected to give a big push to the housing sector in Gurgaon and Faridabad, the Haryana Housing Board is in the process of inviting expressions of interest for building 8,000 flats in these cities and some other places in the national capital region areas. This is in addition to the 38,000 housing units, majority of them in NCR, planned in the next two years. Under the latest project, the state will enter into an agreement with real estate developers to provide affordable housing to middle and lower middle class under the public private partnership mode.
“Since we do not have land in Faridabad and Gurgaon, we will be joining hands with private colonizers whose projects have been stuck due to the (economic) slowdown. We’ll prefer those who have the licence, and then those who have enough land,'’ said S P Gupta, chief administrator of the housing board. The announcement follows chief minister Bhupinder Singh Hooda’s assurance to developers that steps will be taken to counter the slump in the real estate market. It will also fulfil his commitment of providing cheap housing to locals, especially those in NCR cities of Gurgaon and Faridabad. Among the other areas selected for the project are Bawal (in Rewari district close to Gurgaon), Badhi (Sonepat) and Karnal.
Officials claim that around 828 units would come up at Badhi, a township to the north of Delhi. While the board is still working on the number of flats to be offered in Gurgaon and Faridabad, it plans to build 400 units for the lower middle class in Bawal. The housing board will share 50% cost of the project and forego profits. “We’ll also have some guidelines as far as profits of joint venture groups are concerned,'’ Gupta added. Earlier, the state had announced that as many as 38,000 houses would be built for all sections of society by 2011. Though the exact number of houses to be constructed close to Delhi hasn’t been worked out, it’s believed that most of these units will be in NCR where the demand is the highest.
Ref:http://www.indianrealtynews.com/real-estate-india/housing-sector-to-come-up-with-8000-flats-in-ncr.html
Improvement in Realty Expected Post June Quarter
July 17, 2009
Large realty firms are likely to report lower revenues and net profits in the three months to June from a year ago because of lower demand, lower prices and huge debts. Analysts, however, expect that when the companies report results for the June quarter, there might be some improvement from the preceding three months, signalling that demand might have returned slowly and financial restructuring has helped. The average of five of these shows that DLF is expected to post a net profit of Rs566.16 crore on revenue of Rs1,356.02 crore in the three months to June.
The average of five of these shows that DLF is expected to post a net profit of Rs566.16 crore on revenue of Rs1,356.02 crore in the three months to June. An economic revival and strong demand for budget housing are driving the upturn, Kunal Lakhan, an analyst with Kisan Ratilal Choksey Shares and Securities Pvt. Ltd (KR Choksey) wrote in a recent report. Transaction volumes in housing have picked up as developers launched projects at prices 25-40% lower than market value, he wrote. The response to recent mid-income housing launches, too, has been positive, resulting in developers launching a record 35 million sq. ft of projects in the last few months, wrote analysts Siddharth Botra and Mansi Trivedi from Motilal Oswal Financial Services Ltd in a report this week.
Of this, firms including DLF Ltd, Unitech Ltd, Indiabulls Real Estate Ltd, Puravankara Projects Ltd and Housing Development and Infrastructure Ltd (HDIL) have sold 16 million sq. ft of residential area since March, which is 44% of the launched floor space. Demand for office space in the June quarter is also seeing a revival, recording a growth of nearly 65% over the preceding quarter, a report by real estate consultant Cushman and Wakefield Inc. earlier this week noted, with hotspots being Bangalore and Mumbai. The average of five of these shows that DLF is expected to post a net profit of Rs566.16 crore on revenue of Rs1,356.02 crore in the three months to June. Although that represents a 64.74% fall in revenue and a 69.62% fall in net profit for India’s biggest realty firm by market value on a quarterly or sequential basis, the developer will see a marginal 0.37% increase in revenue and a huge 255.96% increase in net profit. Median estimates peg the year-on-year contraction at 69.89% for sales and 78.84% for net profit.
“We expect fall in revenues (from a year ago) owing to absence of DAL revenues,” Rupesh Sanke, an analyst with Centrum wrote in a report. Still, volume offtake in affordable housing projects at Bangalore, Gurgaon and Chennai is expected to help revenue numbers, he wrote. DAL, short for DLF Assets Ltd, a company owned by the promoters of DLF that used to buy the realty firm’s completed assets, used to account for up to 40% of the listed realtor’s revenues until December. DLF expects to report results on 31 July, a spokesman said, but this has not been finalized. Indiabulls is expected to see a ninefold jump in earnings to Rs61.7 crore In the quarter gone by, Unitech may see a 42.45% decline in revenue to Rs606.72 crore and a 57.18% decline in net profit to Rs201.1 crore from a year ago. Median estimates put the fall at 71.63% and 46.13%, respectively. On a sequential basis, average sales and earnings could have risen by 57.18% and 28.10%, respectively.
Asset sales at Unitech—which sold its main office building in south Delhi for Rs500 crore and a hotel in Gurgaon for Rs200 crore—in the June quarter “may result in reported numbers being higher than our expectations”, Centrum’s Sanke wrote. In the last few months, realty firms have restructured debt and infused fresh equity. Unitech, for instance, raised $900 million (Rs4,383 crore) through two sales of shares in the June quarter. The average debt-equity ratio of key real estate companies has declined significantly from 1:1 to 0.4:1, Motilal Oswal analysts wrote.
HDIL is likely to post an average net profit of Rs147.36 crore on revenues of Rs356.23 crore in the April-June months—a fall of 37.50% and 53.66%, respectively, from a year ago, show three analyst estimates. Indiabulls Real Estate, India’s third largest listed developer, could stand out in its June results. It is expected to see a ninefold jump in earnings to Rs61.7 crore, according to the average of five brokerage reports. This performance comes on the back of brisk sales in Gurgaon and Chennai, H. Nemkumar, an India Infoline analyst, noted in his report.
Ref:http://www.indianrealtynews.com/real-estate-india/improvement-in-realty-expected-post-june-quarter.html
Large realty firms are likely to report lower revenues and net profits in the three months to June from a year ago because of lower demand, lower prices and huge debts. Analysts, however, expect that when the companies report results for the June quarter, there might be some improvement from the preceding three months, signalling that demand might have returned slowly and financial restructuring has helped. The average of five of these shows that DLF is expected to post a net profit of Rs566.16 crore on revenue of Rs1,356.02 crore in the three months to June.
The average of five of these shows that DLF is expected to post a net profit of Rs566.16 crore on revenue of Rs1,356.02 crore in the three months to June. An economic revival and strong demand for budget housing are driving the upturn, Kunal Lakhan, an analyst with Kisan Ratilal Choksey Shares and Securities Pvt. Ltd (KR Choksey) wrote in a recent report. Transaction volumes in housing have picked up as developers launched projects at prices 25-40% lower than market value, he wrote. The response to recent mid-income housing launches, too, has been positive, resulting in developers launching a record 35 million sq. ft of projects in the last few months, wrote analysts Siddharth Botra and Mansi Trivedi from Motilal Oswal Financial Services Ltd in a report this week.
Of this, firms including DLF Ltd, Unitech Ltd, Indiabulls Real Estate Ltd, Puravankara Projects Ltd and Housing Development and Infrastructure Ltd (HDIL) have sold 16 million sq. ft of residential area since March, which is 44% of the launched floor space. Demand for office space in the June quarter is also seeing a revival, recording a growth of nearly 65% over the preceding quarter, a report by real estate consultant Cushman and Wakefield Inc. earlier this week noted, with hotspots being Bangalore and Mumbai. The average of five of these shows that DLF is expected to post a net profit of Rs566.16 crore on revenue of Rs1,356.02 crore in the three months to June. Although that represents a 64.74% fall in revenue and a 69.62% fall in net profit for India’s biggest realty firm by market value on a quarterly or sequential basis, the developer will see a marginal 0.37% increase in revenue and a huge 255.96% increase in net profit. Median estimates peg the year-on-year contraction at 69.89% for sales and 78.84% for net profit.
“We expect fall in revenues (from a year ago) owing to absence of DAL revenues,” Rupesh Sanke, an analyst with Centrum wrote in a report. Still, volume offtake in affordable housing projects at Bangalore, Gurgaon and Chennai is expected to help revenue numbers, he wrote. DAL, short for DLF Assets Ltd, a company owned by the promoters of DLF that used to buy the realty firm’s completed assets, used to account for up to 40% of the listed realtor’s revenues until December. DLF expects to report results on 31 July, a spokesman said, but this has not been finalized. Indiabulls is expected to see a ninefold jump in earnings to Rs61.7 crore In the quarter gone by, Unitech may see a 42.45% decline in revenue to Rs606.72 crore and a 57.18% decline in net profit to Rs201.1 crore from a year ago. Median estimates put the fall at 71.63% and 46.13%, respectively. On a sequential basis, average sales and earnings could have risen by 57.18% and 28.10%, respectively.
Asset sales at Unitech—which sold its main office building in south Delhi for Rs500 crore and a hotel in Gurgaon for Rs200 crore—in the June quarter “may result in reported numbers being higher than our expectations”, Centrum’s Sanke wrote. In the last few months, realty firms have restructured debt and infused fresh equity. Unitech, for instance, raised $900 million (Rs4,383 crore) through two sales of shares in the June quarter. The average debt-equity ratio of key real estate companies has declined significantly from 1:1 to 0.4:1, Motilal Oswal analysts wrote.
HDIL is likely to post an average net profit of Rs147.36 crore on revenues of Rs356.23 crore in the April-June months—a fall of 37.50% and 53.66%, respectively, from a year ago, show three analyst estimates. Indiabulls Real Estate, India’s third largest listed developer, could stand out in its June results. It is expected to see a ninefold jump in earnings to Rs61.7 crore, according to the average of five brokerage reports. This performance comes on the back of brisk sales in Gurgaon and Chennai, H. Nemkumar, an India Infoline analyst, noted in his report.
Ref:http://www.indianrealtynews.com/real-estate-india/improvement-in-realty-expected-post-june-quarter.html
ICICI Venture to Launch 1,000Cr Real Estate Fund
ICICI Venture is launching a Rs 1,000Cr real estate fund, which will focus on commitments from domestic investors. Amidst a series of departures of senior officials, India’s leading private equity firm ICICI Venture Funds Management Co. Ltd is in the process of launching a relatively smaller Rs 1,000 crore real estate fund, according to two sources close to the development. The plan for the scaled down real estate fund comes at a time when the firm is facing hurdles in raising commitments from investors for some of the fund initiatives it announced earlier which included a $1-1.5 billion real estate fund.
The firm, which manages more than $2 billion currently, had been in the news with its long time MD and Chief Executive Renuka Ramnath quitting in April. Ramnath was replaced by banker Vishakha Mulye, who was till then an Executive Director of ICICI Lombard General Insurance Company. The change at the top deck of ICICI Venture has reportedly raised concerns among many investors – mainly foreign – and that is considered one of the reasons for the firm’s plans to launch a smaller fund.The fund plans to mobilise 90% of the target corpus from domestic investors, both institutional and high-networth individuals (HNIs), sources told VCCircle. Most PE firm have been raising capital abroad, while ICICI Venture is turning to domestic investors so that it can use ICICI Bank’s distribution muscle to reach out to the local investors.
This fund will also be an initiative from scratch by the new leadership. Sources said that a successful launch of the real estate fund will help infuse confidence in foreign investors after which it can go in for a larger general private equity fund, probably with a target corpus of $1 billion, sources added. The fund is about to be launched and will hit the roads in coming weeks.
Ref:http://www.indianrealtynews.com/real-estate-india/icici-venture-to-launch-1000cr-real-estate-fund.html
The firm, which manages more than $2 billion currently, had been in the news with its long time MD and Chief Executive Renuka Ramnath quitting in April. Ramnath was replaced by banker Vishakha Mulye, who was till then an Executive Director of ICICI Lombard General Insurance Company. The change at the top deck of ICICI Venture has reportedly raised concerns among many investors – mainly foreign – and that is considered one of the reasons for the firm’s plans to launch a smaller fund.The fund plans to mobilise 90% of the target corpus from domestic investors, both institutional and high-networth individuals (HNIs), sources told VCCircle. Most PE firm have been raising capital abroad, while ICICI Venture is turning to domestic investors so that it can use ICICI Bank’s distribution muscle to reach out to the local investors.
This fund will also be an initiative from scratch by the new leadership. Sources said that a successful launch of the real estate fund will help infuse confidence in foreign investors after which it can go in for a larger general private equity fund, probably with a target corpus of $1 billion, sources added. The fund is about to be launched and will hit the roads in coming weeks.
Ref:http://www.indianrealtynews.com/real-estate-india/icici-venture-to-launch-1000cr-real-estate-fund.html
Affordable Housing Lowering Profit Margin
The real estate sector, which has been languishing for some time, appears to have found its feet with focus on affordable housing and this may reflect in the June quarter results of the companies. The move has led to higher sales for many companies, but on the flip side, it has also impacted the margins negatively. The reason being that the mid-segment housing is a high volume, low margin business. The June quarter results, therefore, may be a tad better on a quarter-on-quarter basis. But much lower than those reported in the corresponding period of the previous year. The average of estimates of ET Intelligence Group and eight brokerage houses shows that the overall industry sales are expected to decline 30% on a year-onyear (YoY) basis. On a quarter-on-quarter (QoQ) basis, industry sales would grow at an average 30%.
It may also be understood that only the residential market has seen a recovery, while the commercial and retail segments are still under stress. Among all the listed companies, Orbit and Indiabulls Real Estate (IBREL) are expected to show a marginal improvement in sales. With a huge fall in property prices in the luxury segment, Orbit has shown 5% increase in sales. With a 70% YoY decline in revenue, Parsvnath is expected to see the highest fall. DLF and Unitech may follow with 60% and 54% decline, respectively. As a move to generate cash for business activities, both these companies have exited from unviable projects and also sold noncore assets. This would help in completing under-construction projects. Even some large SEZ projects have been shelved.
Many companies have launched new residential projects in affordable housing segment. Though construction costs would be low, EBIDTA margins would decline by 5-10 % average due to sharper decrease in prices. However, companies like Unitech, DLF, HDIL, and Sobha that have raised funds have improved their balance sheet positions and thus lowered their overall finance cost. Average EBIDTA margin for June’ 09 would be 39% as against 43% for March’ 09. Peninsula Land is expected to show positive margin, as the number of projects was very limited, hence leverage was also low.
Despite all the gloom, realty sector is seen to show some improvement in margins. The overall PAT margins for the June quarter will be at 26%. Though real estate sector is one of the major contributors to the over all profit growth for India Inc, yet it is low as compared to the past PAT margins of 35-40 %. However as alternate sources of funds have become available, builders have managed to improve their cash position. Loans have been restructured and thus interest liability has been reduced. Developers like Mahindra Lifespaces, IBREL and Peninsula Land are expected to report PAT margins upward of 30%.
Ref:http://www.indianrealtynews.com/real-estate-india/affordable-housing-lowering-profit-margin.html
It may also be understood that only the residential market has seen a recovery, while the commercial and retail segments are still under stress. Among all the listed companies, Orbit and Indiabulls Real Estate (IBREL) are expected to show a marginal improvement in sales. With a huge fall in property prices in the luxury segment, Orbit has shown 5% increase in sales. With a 70% YoY decline in revenue, Parsvnath is expected to see the highest fall. DLF and Unitech may follow with 60% and 54% decline, respectively. As a move to generate cash for business activities, both these companies have exited from unviable projects and also sold noncore assets. This would help in completing under-construction projects. Even some large SEZ projects have been shelved.
Many companies have launched new residential projects in affordable housing segment. Though construction costs would be low, EBIDTA margins would decline by 5-10 % average due to sharper decrease in prices. However, companies like Unitech, DLF, HDIL, and Sobha that have raised funds have improved their balance sheet positions and thus lowered their overall finance cost. Average EBIDTA margin for June’ 09 would be 39% as against 43% for March’ 09. Peninsula Land is expected to show positive margin, as the number of projects was very limited, hence leverage was also low.
Despite all the gloom, realty sector is seen to show some improvement in margins. The overall PAT margins for the June quarter will be at 26%. Though real estate sector is one of the major contributors to the over all profit growth for India Inc, yet it is low as compared to the past PAT margins of 35-40 %. However as alternate sources of funds have become available, builders have managed to improve their cash position. Loans have been restructured and thus interest liability has been reduced. Developers like Mahindra Lifespaces, IBREL and Peninsula Land are expected to report PAT margins upward of 30%.
Ref:http://www.indianrealtynews.com/real-estate-india/affordable-housing-lowering-profit-margin.html
Subscribe to:
Posts (Atom)
