Monday, August 31, 2009
Realty Estate Developers Showing Interest in Land Acquisition
Following a slew of new launches in the affordable housing segment in the past few months, real estate developers in the country are once again showing interest in land acquisition. They are now also expecting “some price escalations” for residential properties, with easier liquidity and overall positive market environment in the second half of the year. “We believe developers’ appetite for land has increased, given easier financing conditions and availability of prime land parcels (which many developers do not have) at reasonable rates. Increase in both off-takes and unit prices has improved developers’ confidence to purchase new land, in our view,” J P Morgan analyst Saurabh Kumar said in a note to clients.
In recent deals, Indiabulls Real Estate won the four-acre Mantralaya modernisation project in Mumbai with a bid of Rs 1,376 crore. DLF Ltd, the country’s largest realtor, won a 350-acre plot in Gurgaon for about Rs 1,750 crore after two other bidders — Unitech and Bharti — were disqualified on technical grounds. DLF, however, still wants the government to ease policies to ramp up deals. “The overall demand is certainly firming up. All the developers have reduced property prices in the past so I don’t think any price hike can be expected in the near future,” DLF’s group executive director Rajeev Talwar told DNA. However, if demand continues to build up and supply gets restrained, the situation may lead to prices moving northwards. I think the government should ease the policies on giving clearances faster as that creates unnecessary delay in executing the projects,” he said.
Realty analysts and consultants are skeptical about the plan due to developers’ high debt. “That (price revival) is something skeptical to talk about right now. Most developers have raised money through capital markets by either a qualified institutional placement of shares or they are lining up an initial public offering. Companies which are heavy with debt or those who have reduced debt by raising capital should not look at purchasing land outright. However, if they have a fair debt position they can look at it,” Ambar Maheshwari, director-investment advisory at DTZ, told DNA. Omaxe chairman and managing director Rohtas Goel is optimistic of a price hike early next calender. “We have seen projects being launched at rock bottom prices off-late. The same projects are selling at a premium in the re-sale market, so you can expect developers to launch new projects at a higher price, we would also be looking at acquiring some key land plots,” he said.
Nitin Idnani, research analyst with Enam Securities, said, “Developers are still ready to buy land which can be monetised and [as for] those parcels located in tier 2 and tier 3 cities, developers still want to sell them off as it would be difficult to get returns on that land bank.” New Delhi-based developer Anant Raj Industries is also looking to buy distressed land from developers reeling under high debt and has started acquiring land in Maneswar and Bhagwandas. The company has allocated Rs 450 crore for land, on which it plans to build affordable homes. “We are negotiating for many land parcels, which we can get at discounted rates in the current market,” Amit Sarin, director, Anant Raj said.
In recent deals, Indiabulls Real Estate won the four-acre Mantralaya modernisation project in Mumbai with a bid of Rs 1,376 crore. DLF Ltd, the country’s largest realtor, won a 350-acre plot in Gurgaon for about Rs 1,750 crore after two other bidders — Unitech and Bharti — were disqualified on technical grounds. DLF, however, still wants the government to ease policies to ramp up deals. “The overall demand is certainly firming up. All the developers have reduced property prices in the past so I don’t think any price hike can be expected in the near future,” DLF’s group executive director Rajeev Talwar told DNA. However, if demand continues to build up and supply gets restrained, the situation may lead to prices moving northwards. I think the government should ease the policies on giving clearances faster as that creates unnecessary delay in executing the projects,” he said.
Realty analysts and consultants are skeptical about the plan due to developers’ high debt. “That (price revival) is something skeptical to talk about right now. Most developers have raised money through capital markets by either a qualified institutional placement of shares or they are lining up an initial public offering. Companies which are heavy with debt or those who have reduced debt by raising capital should not look at purchasing land outright. However, if they have a fair debt position they can look at it,” Ambar Maheshwari, director-investment advisory at DTZ, told DNA. Omaxe chairman and managing director Rohtas Goel is optimistic of a price hike early next calender. “We have seen projects being launched at rock bottom prices off-late. The same projects are selling at a premium in the re-sale market, so you can expect developers to launch new projects at a higher price, we would also be looking at acquiring some key land plots,” he said.
Nitin Idnani, research analyst with Enam Securities, said, “Developers are still ready to buy land which can be monetised and [as for] those parcels located in tier 2 and tier 3 cities, developers still want to sell them off as it would be difficult to get returns on that land bank.” New Delhi-based developer Anant Raj Industries is also looking to buy distressed land from developers reeling under high debt and has started acquiring land in Maneswar and Bhagwandas. The company has allocated Rs 450 crore for land, on which it plans to build affordable homes. “We are negotiating for many land parcels, which we can get at discounted rates in the current market,” Amit Sarin, director, Anant Raj said.
Kolkata Real Estate Experts Suggest Sellers to Wait for Another six Months
While everybody is speaking about how good an opportunity it is to put in your money in real estate now, investors who intending to sell could do well waiting for about six more months to get some added advantage, say experts. “It depends on at what level they had entered. In another three to six months the market will be stable and input costs are anticipated to rise after that. Since there are no major projects that have been announced, there will be strain on supply. People should wait for at least six months before starting to sell,” said Pradeep Sureka, managing director of Bengal Park Chambers Housing Development Ltd. He added that ideally a twoyear wait would bring in maximum returns.
Debjani Mukherjee Sarkar, general manager — marketing of Bengal NRI and Varun Kathotia, director — marketing of Fort Group agreed. “In the past two months, the trend has shown that the market is picking up. The Bengal NRI, however, believes that people should wait for around six months to get an appreciation of about 10 to 15 per cent,” she said. “Land prices have not changed much and unless one can strike a very good deal, it is better to wait another four months before one sells a property,” Kathotia said. Some said in a couple of years, there would be major rise in property prices. “Those who had invested between 2005 and 2007, early 2008 had been the best time to sell off. At the moment, the market is slightly down and it is the right time to buy rather than sell. By 2011, there will be another 20 to 30 per cent jump in the market and that will be the ideal time to sell,” said Mayank Saksena, associate director of Joneslang Lasalle Meghraj.
“Two years from now, there will be a more than 30 per cent rise in prices,” said Sumeet Dabriwala, managing director of United Credit Belani Group. He added that people should wait for six months to one year because the condition at present was just the beginning of an uptrend. Many divided investors into different categories. “Selling will depend on when the person had taken possession of the property. If he is an old investor, this time is good enough to fetch him a profit and if he has been a recent investor, it will be better for him to wait for some time as the market has stabled and from here, it will only improve. In another year, the market will improve at least 10 per cent,” said Rahul Todi, managing director of Shrachi.
Rajesh Somani of Somani Realtors classified investors according to the amount of money they had spent. “People who had put in their money in properties of over Rs 40 lakh can sell them off as market growth in that segment is very slow but for investors under Rs 30 lakh, it will be advisable to wait for another six months, because the market is showing a positive trend,” he said. “The market has stabilised. People who had bought a correctly priced property will get better returns than bank interest, but those who purchased at exorbitant prices, expecting to make a fortune, will suffer a loss. Sellers who can afford to wait for another six months will get better return. The slowdown has put a check on speculative buying,” said Biswadeep Gupta, general manager of Eden City Group.
Sushil Mohta, managing director of Merlin Group, said two factors crucial to selling were whether the deal was mutually beneficial to both the seller and the buyer and whether it satisfied the consumer’s requirements. As long as these conditions were fulfilled, selling could take place. “Now, when the market sentiment has changed and developers have become more approachable, consumers are finding it easier to visit them and discuss in details their buying or selling decisions. Moreover, in such conditions, developers extend extra cooperation and added incentives to consumers, making deals more lucrative,” he said.
A few experts do not anticipate much of a rise in the near future. “Going by my interest, they should be buying, but realistically speaking, all buying and selling should be held for another three months,” said Kumar Shankar Bagchi, managing director of Bengal Peerless. Asked whether there will be a similar boom in two years, he said, “There will be, but prices will not soar to the level at which they were in the near past, before the financial crash. What happened was a catastrophe, caused by individuals who kept investing endlessly. They have learnt a lesson and I am sure that kind of situation will not rise again in my lifetime.” Harshvardhan Neotia, chairman and managing director of Ambuja Realty said he didn’t see any significant appreciation in the short run. “If one needs the money, one will have to sell anyway, but if one has the retaining capacity, one should wait for another couple of years before any considerable rise in property price,” he said.
“I believe that the decision should be based on the necessity to raise capital. I do not see any sharp increase in the value of real estate in the immediate future. Then again prices of real estate are dependent on location of the property and it is difficult to make a general statement,” said Santosh Rungta, president of the Confederation of Real Estate Developers’ Associations of India (CREDAI).
Debjani Mukherjee Sarkar, general manager — marketing of Bengal NRI and Varun Kathotia, director — marketing of Fort Group agreed. “In the past two months, the trend has shown that the market is picking up. The Bengal NRI, however, believes that people should wait for around six months to get an appreciation of about 10 to 15 per cent,” she said. “Land prices have not changed much and unless one can strike a very good deal, it is better to wait another four months before one sells a property,” Kathotia said. Some said in a couple of years, there would be major rise in property prices. “Those who had invested between 2005 and 2007, early 2008 had been the best time to sell off. At the moment, the market is slightly down and it is the right time to buy rather than sell. By 2011, there will be another 20 to 30 per cent jump in the market and that will be the ideal time to sell,” said Mayank Saksena, associate director of Joneslang Lasalle Meghraj.
“Two years from now, there will be a more than 30 per cent rise in prices,” said Sumeet Dabriwala, managing director of United Credit Belani Group. He added that people should wait for six months to one year because the condition at present was just the beginning of an uptrend. Many divided investors into different categories. “Selling will depend on when the person had taken possession of the property. If he is an old investor, this time is good enough to fetch him a profit and if he has been a recent investor, it will be better for him to wait for some time as the market has stabled and from here, it will only improve. In another year, the market will improve at least 10 per cent,” said Rahul Todi, managing director of Shrachi.
Rajesh Somani of Somani Realtors classified investors according to the amount of money they had spent. “People who had put in their money in properties of over Rs 40 lakh can sell them off as market growth in that segment is very slow but for investors under Rs 30 lakh, it will be advisable to wait for another six months, because the market is showing a positive trend,” he said. “The market has stabilised. People who had bought a correctly priced property will get better returns than bank interest, but those who purchased at exorbitant prices, expecting to make a fortune, will suffer a loss. Sellers who can afford to wait for another six months will get better return. The slowdown has put a check on speculative buying,” said Biswadeep Gupta, general manager of Eden City Group.
Sushil Mohta, managing director of Merlin Group, said two factors crucial to selling were whether the deal was mutually beneficial to both the seller and the buyer and whether it satisfied the consumer’s requirements. As long as these conditions were fulfilled, selling could take place. “Now, when the market sentiment has changed and developers have become more approachable, consumers are finding it easier to visit them and discuss in details their buying or selling decisions. Moreover, in such conditions, developers extend extra cooperation and added incentives to consumers, making deals more lucrative,” he said.
A few experts do not anticipate much of a rise in the near future. “Going by my interest, they should be buying, but realistically speaking, all buying and selling should be held for another three months,” said Kumar Shankar Bagchi, managing director of Bengal Peerless. Asked whether there will be a similar boom in two years, he said, “There will be, but prices will not soar to the level at which they were in the near past, before the financial crash. What happened was a catastrophe, caused by individuals who kept investing endlessly. They have learnt a lesson and I am sure that kind of situation will not rise again in my lifetime.” Harshvardhan Neotia, chairman and managing director of Ambuja Realty said he didn’t see any significant appreciation in the short run. “If one needs the money, one will have to sell anyway, but if one has the retaining capacity, one should wait for another couple of years before any considerable rise in property price,” he said.
“I believe that the decision should be based on the necessity to raise capital. I do not see any sharp increase in the value of real estate in the immediate future. Then again prices of real estate are dependent on location of the property and it is difficult to make a general statement,” said Santosh Rungta, president of the Confederation of Real Estate Developers’ Associations of India (CREDAI).
Real Estate Sector Recovering Worldwide
There are strong new reports that the global real estate market is hitting the bottom and some impressive positive news is coming from real estate markets around the world. In the U.S., the real estate market has yet to hit the bottom, but at least it is very close. There are 2 factors that would determine recovering the real estate market. One is when job losses stop and new jobs are created and secondly when the real estate prices are realistic reflections of what people can afford to buy. The news that the real estate market is recovering based on recent sales doesn’t really reflect real recovery. What is happening is that people are buying houses at bargain prices. The value of sales is up and this is a good sign but still the real estate market would probably start recovering by next spring.
Around the world there is positive news in India where there is a huge demand of the population for real estate that is the main factor for the real estate boom–and also in the Middle East where the population growth in 10-15 years is estimated to triple. The European real estate market mirrors what is happening in the U.S. There are some signs of improvement in Africa and Latin America but not as strong as in Canada, India and China. The Canadian Real Estate Association reported that realtors sold 50,270 units sold via the multiple listing service last month. That’s an 18.2 per cent jump from a year ago. It also marked the first time sales had topped 50,000 in July. Sales of existing single-family homes jumped 55 percent in the 2009 second quarter compared to the 2009 first quarter. Realtors sold 18,141 homes in the second quarter.
In China the strength of the property sector has been another big surprise. Property sales were up 53% in the first six months from a year earlier, according to a survey commissioned by the statistics bureau and published in the China Information News, while nationwide prices averaged across 70 cities climbed year on year in June. This masks the fact that in second and third cities prices have been strengthening much more. Property normally accounts for about 25% of fixed asset investment in China and is a key form of wealth holding for most Chinese. Optimism about housing prices will translate into greater consumer confidence.
Around the world there is positive news in India where there is a huge demand of the population for real estate that is the main factor for the real estate boom–and also in the Middle East where the population growth in 10-15 years is estimated to triple. The European real estate market mirrors what is happening in the U.S. There are some signs of improvement in Africa and Latin America but not as strong as in Canada, India and China. The Canadian Real Estate Association reported that realtors sold 50,270 units sold via the multiple listing service last month. That’s an 18.2 per cent jump from a year ago. It also marked the first time sales had topped 50,000 in July. Sales of existing single-family homes jumped 55 percent in the 2009 second quarter compared to the 2009 first quarter. Realtors sold 18,141 homes in the second quarter.
In China the strength of the property sector has been another big surprise. Property sales were up 53% in the first six months from a year earlier, according to a survey commissioned by the statistics bureau and published in the China Information News, while nationwide prices averaged across 70 cities climbed year on year in June. This masks the fact that in second and third cities prices have been strengthening much more. Property normally accounts for about 25% of fixed asset investment in China and is a key form of wealth holding for most Chinese. Optimism about housing prices will translate into greater consumer confidence.
Things Looking Good for Indian Retail Sector
FDI in retail must be allowed, insists Anshuman Magazine, CMD of CB Richard Ellis South Asia Pvt Ltd. “India’s retail trade is around $ 180 billion, which is almost 10 per cent of the GDP, employing more then 21 million persons. Policies should be more transparent and smooth, in order to attract foreign investors,” he justifies. “Like any other person who invests money, we need to understand that foreign investors will also expect returns. Perhaps the challenge lies in reassuring these investors,” he wonders aloud.
According to Dubai-based real estate consultant, Rajesh Bijlani, the news of retail chain IKEA putting its India entry plans on hold, indicates the prevalent scenario. “There is something in India’s policies and implementation that is keeping such major brands from entering right now, despite the fact that the economic indices are attractive to MNC brands,” he feels. “Many retail brands that have outlets in the UAE have shown interest in setting up operations in India, but little is actually working out in the near future, as compared to the potential. I guess we need to work out red-tapism and other issues that seem to be delaying the entry of these retail players at present,” he adds.
FDI is not allowed in multi-brand retail, only in single-branded stores, points out Bappaditya Basu, vice-president (retail), Jones Lang LaSalle Meghraj. “Foreign, single brand stores can open with an Indian partner and hold a maximum of 51 per cent stake, according to FDI norms. In the past, this was not allowed, which meant that only the franchisee route was available and it did not suit many of these brands,” he explains. Among the global retailers seeking to enter the Indian retail arena are Hamleys, Diesel, et al, reveals Basu. “Leading international brands like Burberry, Smallsmith, Kenzo, Bottega Veneta, Canali and Just Cavali were already present on a limited scale and have now changed partners, to open up more stores in India. There are also some international coffee chains eyeing India and scouting for partners,” he adds.
Ashok Kumar, principal and managing director, CresaPartners India mentions how the Emke Group, which operates the biggest hypermarket chain in the Middle East under the LuLu and Al Falah brands, is entering the Indian market by developing the biggest shopping mall in Kochi, in Kerala. “Crocs India Retail Ltd, the lifestyle footwear brand, will launch eight to 10 more EBOs in India. Similarly, Manchester United Food & Beverage Asia, with a mandate to set up casual dining outlets tapping into the popularity of the multi-billion dollar club, has done a recce of select Indian cities in recent months and followed it up by talking to potential investors. Leonidas, a Belgian chocolate producer and seller, has entered the Indian market by establishing its retail operations in India. It claims to be the only chocolate brand having its own exclusive store,” he adds. Similarly, New Delhi-based Grand Slam, one of the market leaders in high end fitness equipment, is planning to set up 30 more franchisee stores in tier-II and tier-III cities, by January 2010, adds Kumar. “Obviously, things are looking up and the Indian scenario seems receptive to FDI in retail,” he adds.
Rajnikant Ajmera, former president of CREDAI explains that the retail segment in India faces a simple challenge: global trends do not fit-in entirely, given that the end customer has a different buying pattern and motivators to loyalty, with regards to a brand or a location. “If you look at Mumbai’s retail story, initial projects faced all sorts of challenges. Some quietly shut down, were taken over or re-did their business plans. Issues pertaining to footfalls, the right size and mix of anchor tenants are still being learnt,” says Ajmera. However, global brands will definitely want to enter the vast Indian market, he adds. Kumar points out that the government has proposed setting up a retail regulatory authority, which will have jurisdiction over the organised retail sector, including single-brand stores and the wholesale cash-and-carry trade.
Amidst talk of a recovery from the global economic recession and the impact on real estate in India, Atul Modak, head of Kohinoor City Project says, “Global financial hiccups are a fact of life. They impact sentiment but will not stop economic growth in India. There is a demand-supply gap when it comes to quality commercial space. Prominent locations have and will always see terrific growth in residential space and this, in turn, will trigger the retail and commercial realty boom in any area,” he says.
According to Dubai-based real estate consultant, Rajesh Bijlani, the news of retail chain IKEA putting its India entry plans on hold, indicates the prevalent scenario. “There is something in India’s policies and implementation that is keeping such major brands from entering right now, despite the fact that the economic indices are attractive to MNC brands,” he feels. “Many retail brands that have outlets in the UAE have shown interest in setting up operations in India, but little is actually working out in the near future, as compared to the potential. I guess we need to work out red-tapism and other issues that seem to be delaying the entry of these retail players at present,” he adds.
FDI is not allowed in multi-brand retail, only in single-branded stores, points out Bappaditya Basu, vice-president (retail), Jones Lang LaSalle Meghraj. “Foreign, single brand stores can open with an Indian partner and hold a maximum of 51 per cent stake, according to FDI norms. In the past, this was not allowed, which meant that only the franchisee route was available and it did not suit many of these brands,” he explains. Among the global retailers seeking to enter the Indian retail arena are Hamleys, Diesel, et al, reveals Basu. “Leading international brands like Burberry, Smallsmith, Kenzo, Bottega Veneta, Canali and Just Cavali were already present on a limited scale and have now changed partners, to open up more stores in India. There are also some international coffee chains eyeing India and scouting for partners,” he adds.
Ashok Kumar, principal and managing director, CresaPartners India mentions how the Emke Group, which operates the biggest hypermarket chain in the Middle East under the LuLu and Al Falah brands, is entering the Indian market by developing the biggest shopping mall in Kochi, in Kerala. “Crocs India Retail Ltd, the lifestyle footwear brand, will launch eight to 10 more EBOs in India. Similarly, Manchester United Food & Beverage Asia, with a mandate to set up casual dining outlets tapping into the popularity of the multi-billion dollar club, has done a recce of select Indian cities in recent months and followed it up by talking to potential investors. Leonidas, a Belgian chocolate producer and seller, has entered the Indian market by establishing its retail operations in India. It claims to be the only chocolate brand having its own exclusive store,” he adds. Similarly, New Delhi-based Grand Slam, one of the market leaders in high end fitness equipment, is planning to set up 30 more franchisee stores in tier-II and tier-III cities, by January 2010, adds Kumar. “Obviously, things are looking up and the Indian scenario seems receptive to FDI in retail,” he adds.
Rajnikant Ajmera, former president of CREDAI explains that the retail segment in India faces a simple challenge: global trends do not fit-in entirely, given that the end customer has a different buying pattern and motivators to loyalty, with regards to a brand or a location. “If you look at Mumbai’s retail story, initial projects faced all sorts of challenges. Some quietly shut down, were taken over or re-did their business plans. Issues pertaining to footfalls, the right size and mix of anchor tenants are still being learnt,” says Ajmera. However, global brands will definitely want to enter the vast Indian market, he adds. Kumar points out that the government has proposed setting up a retail regulatory authority, which will have jurisdiction over the organised retail sector, including single-brand stores and the wholesale cash-and-carry trade.
Amidst talk of a recovery from the global economic recession and the impact on real estate in India, Atul Modak, head of Kohinoor City Project says, “Global financial hiccups are a fact of life. They impact sentiment but will not stop economic growth in India. There is a demand-supply gap when it comes to quality commercial space. Prominent locations have and will always see terrific growth in residential space and this, in turn, will trigger the retail and commercial realty boom in any area,” he says.
Indian REITs Losing Overseas Opportunities
In a scenario where real estate is becoming out of reach for small investors, to invest and reap profits, real estate investment trusts (REITs) are a good way for the investor class to invest in the sector. It also benefits developers, as more funds are pumped into real estate. REITs/REMFs offer an innovative option for investors to buy and trade shares in the real estate sector and collect dividends from capital appreciation and rental incomes, explains Atul Modak, head, Kohinoor City Project.
REITs are generally classified into three broad categories - equity REITs, mortgage REITs and hybrid REITs. “The best benefit of REITs is fast and easy liquidation of investments in the real estate market, unlike the traditional way of disposing real estate,” he explains. However, it is important to have proper regulation and utilisation of these funds and total transparency in the whole process. For REITs to be a success and contribute to the growth of the economy, initial tax sops to the investors and REITs will be helpful, he feels.
REITs in the Indian scenario, are yet to take off, says Ashok Kumar, principal and managing director, CresaPartners India. “Certainly, we are losing out on such opportunities to overseas REITs, as it does not seem to be a priority for the government,” he regrets. The real estate sector in India is still complex and the regulators have to fix a lot of policies and valuation issues, in advance, for REITs to become functional, he adds. “If one considers the union budget 2009-10, there was no mention about FDI in real estate or REITs and REMFs. However, we hope that the FM will announce some relief for the sector, post the budget,” adds Kumar.
Realtor Bharat Mailk points to a paper, ‘Indian REITs: Are We Prepared’, by the ASSOCHAM and CRISIL and says that REITs in India would have the potential to hold at least five per cent share of the total global real estate market, by 2010. The size of this global market would touch US $ 1,400 billion, according to the paper. “According to the paper, by 2010, REITs alone would hold a market size of US $ 70 billion of the total real estate market, as the concept is gaining ground in countries like India and other developing nations,” he says, laying out the statistics. In the Indian context, REITs can help provide an exit route for developers, to revolve funds more efficiently. It will also provide opportunities to retail investors to participate in the real estate sector and provide asset diversification to corporate investors, besides building a vibrant secondary real estate market, adds Malik.
REMFs are the Indian version of the international REITs, adapted to the Indian mutual funds platform, explains Shobhit Agarwal, joint MD (capital markets), Jones Lang LaSalle Meghraj. “In the current context, while everybody is now working on entry and creating assets, the important question of who will buy these assets to provide an exit to the developers / investors needs to be addressed,'’ he points out. The leveraging allowed in the case of Indian REITs is the lowest (at 20 per cent of the value), compared to 35 per cent in the case of Malaysia, Hong Kong, Singapore, and Taiwan and 200 per cent in the case of Korea. This could result in a lower yield and because it is not really leveraged, the risk taken is also more,” he cautions.
Mihir Dhruva, CEO of Siddharth Group is of the opinion that REITs should be more preferred by the ‘low-risk, low-return’ investor segment. “Sentiments, which contributed significantly to the depressed market in FY 08-09 are now reversing,” says Dhruva. “This has been reflected in reports coming from different cities, showing revival of real estate transactions and REITs should have a positive response as a result,” he concludes.
REITs are generally classified into three broad categories - equity REITs, mortgage REITs and hybrid REITs. “The best benefit of REITs is fast and easy liquidation of investments in the real estate market, unlike the traditional way of disposing real estate,” he explains. However, it is important to have proper regulation and utilisation of these funds and total transparency in the whole process. For REITs to be a success and contribute to the growth of the economy, initial tax sops to the investors and REITs will be helpful, he feels.
REITs in the Indian scenario, are yet to take off, says Ashok Kumar, principal and managing director, CresaPartners India. “Certainly, we are losing out on such opportunities to overseas REITs, as it does not seem to be a priority for the government,” he regrets. The real estate sector in India is still complex and the regulators have to fix a lot of policies and valuation issues, in advance, for REITs to become functional, he adds. “If one considers the union budget 2009-10, there was no mention about FDI in real estate or REITs and REMFs. However, we hope that the FM will announce some relief for the sector, post the budget,” adds Kumar.
Realtor Bharat Mailk points to a paper, ‘Indian REITs: Are We Prepared’, by the ASSOCHAM and CRISIL and says that REITs in India would have the potential to hold at least five per cent share of the total global real estate market, by 2010. The size of this global market would touch US $ 1,400 billion, according to the paper. “According to the paper, by 2010, REITs alone would hold a market size of US $ 70 billion of the total real estate market, as the concept is gaining ground in countries like India and other developing nations,” he says, laying out the statistics. In the Indian context, REITs can help provide an exit route for developers, to revolve funds more efficiently. It will also provide opportunities to retail investors to participate in the real estate sector and provide asset diversification to corporate investors, besides building a vibrant secondary real estate market, adds Malik.
REMFs are the Indian version of the international REITs, adapted to the Indian mutual funds platform, explains Shobhit Agarwal, joint MD (capital markets), Jones Lang LaSalle Meghraj. “In the current context, while everybody is now working on entry and creating assets, the important question of who will buy these assets to provide an exit to the developers / investors needs to be addressed,'’ he points out. The leveraging allowed in the case of Indian REITs is the lowest (at 20 per cent of the value), compared to 35 per cent in the case of Malaysia, Hong Kong, Singapore, and Taiwan and 200 per cent in the case of Korea. This could result in a lower yield and because it is not really leveraged, the risk taken is also more,” he cautions.
Mihir Dhruva, CEO of Siddharth Group is of the opinion that REITs should be more preferred by the ‘low-risk, low-return’ investor segment. “Sentiments, which contributed significantly to the depressed market in FY 08-09 are now reversing,” says Dhruva. “This has been reflected in reports coming from different cities, showing revival of real estate transactions and REITs should have a positive response as a result,” he concludes.
Saturday, August 29, 2009
ITDC plans to make Private Hotels, Realtors as Partners
Hotel-cum-tourism PSU, Indian Tourism Development Corporation (ITDC) plans to make private hotel companies and real estate players its franchisee partners. It launched the Ashok Alliance Scheme on Thursday, under which member hotels will be able to use the Ashok brand and benefit from the operational management expertise, marketing inputs and other resources of the ITDC Group. ITDC, in turn, would get 3% of the gross room revenues earned by these hotels.
The company has roped in two developers in Surat and Chandigarh, who will get to use the Ashok brand for properties developed by them. This will take the total number of hotels under the Ashok brand to 18. “We are in talks with a number of other real estate players and hoteliers to bring more hotels under the Ashok Alliance scheme,” ITDC vice-president Kuldip Verma said.
He said ITDC would add 5-6 more hotels at various locations through this alliance — three in West Bengal and one each in Manesar, Coorg and Malaut, Punjab. In the long run, it wants to increase the hotel count to 33 hotels.
In the past three years, ITDC has invested Rs 146 crore in refurbishing Ashok Hotel, Samrat Hotel and Janpath Hotel for the Commonwealth Games in New Delhi. The Organising Committee Commonwealth Games (OCCG) 2010 has declared these three hotels as ‘Games Family Hotels’ which have a total room inventory of 680 rooms. It is revamping its hotels at other destinations too.
ITDC had 34 hotels, of which 18 hotels were sold to private partners under the government’s disinvestment programme. The PSU is now left with 16 hotels, which it now plans to expand through the scheme.
The company has roped in two developers in Surat and Chandigarh, who will get to use the Ashok brand for properties developed by them. This will take the total number of hotels under the Ashok brand to 18. “We are in talks with a number of other real estate players and hoteliers to bring more hotels under the Ashok Alliance scheme,” ITDC vice-president Kuldip Verma said.
He said ITDC would add 5-6 more hotels at various locations through this alliance — three in West Bengal and one each in Manesar, Coorg and Malaut, Punjab. In the long run, it wants to increase the hotel count to 33 hotels.
In the past three years, ITDC has invested Rs 146 crore in refurbishing Ashok Hotel, Samrat Hotel and Janpath Hotel for the Commonwealth Games in New Delhi. The Organising Committee Commonwealth Games (OCCG) 2010 has declared these three hotels as ‘Games Family Hotels’ which have a total room inventory of 680 rooms. It is revamping its hotels at other destinations too.
ITDC had 34 hotels, of which 18 hotels were sold to private partners under the government’s disinvestment programme. The PSU is now left with 16 hotels, which it now plans to expand through the scheme.
India widens foreign VC funds’ investment options
Indian regulators have opened the doors to foreign venture capital funds (FVCFs) beyond the select investment options they were being offered in recent times.
The decision, reflected in some of the communications between the Reserve Bank India and custodian banks of VC funds, could not only make life easier for foreign funds and widen the scope for their risk capital, but also boost foreign direct investment (FDI) in the country.
In the past one year, FVCFs, which were allowed to come in, were specifically told to stick to activities such as infrastructure, bio-technology, nano-technology, biofuel, IT-related activities for hardware and software development and a few other areas outlined by the government in the list of 10 sectors identified for tax benefits to VCs.
Recently, RBI, while giving the green light to some of the FVCFs, has said “if the FVC investor intends to make any private equity investments, then it may have to avail the FDI route”. This means that barring a few sensitive sectors, an FVCF registered in India is free to invest in almost any business in the country. For buying into firms which are outside the 10 sectors, the fund will have to either approach the Foreign Investment Promotion Board for FDIs where the board approval is required, or invest directly in areas where FDI is permitted under the automatic route.
Responding to the development, Vikram Shroff of the law firm Nishith Desai Associates said, “The regulator’s intention seems to be to allow FVC entities to invest beyond what is permissible under the Sebi FVC regulations, albeit under the FDI route.” Shroff, who advises several FVCFs, said, “Upon RBI clarifying, offshore venture capital and private equity funds may no longer need to set up separate entities for pursuing FDI in India.”
According to private equity circles, FVCFs have interest in businesses like BPOs, telecom, media and entertainment, among other segments. RBI’s latest stand, however, does not pave the way for FVCF investment in the real estate space — something the central bank forbids.
Fearing a real estate bubble, RBI generally insists on an undertaking from FVCFs that they will not invest in property firms. This, according to private equity circles, is unlikely to change. But on a broader plane, this is a welcome move by RBI and will encourage foreign investments, said Punit Shah, executive director of PricewaterhouseCoopers. “Of course, FVCs enjoy certain regulatory benefits under Sebi and Fema regulations, such as exit and entry pricing and lock-in relaxations. These will not be available for its investments under FDI route, but RBI has certainly made things convenient for the foreign funds.”
Interestingly, the RBI letter is also a rare instance when a local regulator makes a mention of ‘private equity’ — a widely-used generic term for which there is no regulatory definition in India. “It needs to be understood that venture capital and private equity are largely similar activities — only the stage differs. Both provide risk capital. While VCs fund early stage, PEs focus on medium to late stage companies. In several cases, the same fund undertakes both investment activities,” said Shroff.
The decision, reflected in some of the communications between the Reserve Bank India and custodian banks of VC funds, could not only make life easier for foreign funds and widen the scope for their risk capital, but also boost foreign direct investment (FDI) in the country.
In the past one year, FVCFs, which were allowed to come in, were specifically told to stick to activities such as infrastructure, bio-technology, nano-technology, biofuel, IT-related activities for hardware and software development and a few other areas outlined by the government in the list of 10 sectors identified for tax benefits to VCs.
Recently, RBI, while giving the green light to some of the FVCFs, has said “if the FVC investor intends to make any private equity investments, then it may have to avail the FDI route”. This means that barring a few sensitive sectors, an FVCF registered in India is free to invest in almost any business in the country. For buying into firms which are outside the 10 sectors, the fund will have to either approach the Foreign Investment Promotion Board for FDIs where the board approval is required, or invest directly in areas where FDI is permitted under the automatic route.
Responding to the development, Vikram Shroff of the law firm Nishith Desai Associates said, “The regulator’s intention seems to be to allow FVC entities to invest beyond what is permissible under the Sebi FVC regulations, albeit under the FDI route.” Shroff, who advises several FVCFs, said, “Upon RBI clarifying, offshore venture capital and private equity funds may no longer need to set up separate entities for pursuing FDI in India.”
According to private equity circles, FVCFs have interest in businesses like BPOs, telecom, media and entertainment, among other segments. RBI’s latest stand, however, does not pave the way for FVCF investment in the real estate space — something the central bank forbids.
Fearing a real estate bubble, RBI generally insists on an undertaking from FVCFs that they will not invest in property firms. This, according to private equity circles, is unlikely to change. But on a broader plane, this is a welcome move by RBI and will encourage foreign investments, said Punit Shah, executive director of PricewaterhouseCoopers. “Of course, FVCs enjoy certain regulatory benefits under Sebi and Fema regulations, such as exit and entry pricing and lock-in relaxations. These will not be available for its investments under FDI route, but RBI has certainly made things convenient for the foreign funds.”
Interestingly, the RBI letter is also a rare instance when a local regulator makes a mention of ‘private equity’ — a widely-used generic term for which there is no regulatory definition in India. “It needs to be understood that venture capital and private equity are largely similar activities — only the stage differs. Both provide risk capital. While VCs fund early stage, PEs focus on medium to late stage companies. In several cases, the same fund undertakes both investment activities,” said Shroff.
India widens foreign VC funds’ investment options
Indian regulators have opened the doors to foreign venture capital funds (FVCFs) beyond the select investment options they were being offered in recent times.
The decision, reflected in some of the communications between the Reserve Bank India and custodian banks of VC funds, could not only make life easier for foreign funds and widen the scope for their risk capital, but also boost foreign direct investment (FDI) in the country.
In the past one year, FVCFs, which were allowed to come in, were specifically told to stick to activities such as infrastructure, bio-technology, nano-technology, biofuel, IT-related activities for hardware and software development and a few other areas outlined by the government in the list of 10 sectors identified for tax benefits to VCs.
Recently, RBI, while giving the green light to some of the FVCFs, has said “if the FVC investor intends to make any private equity investments, then it may have to avail the FDI route”. This means that barring a few sensitive sectors, an FVCF registered in India is free to invest in almost any business in the country. For buying into firms which are outside the 10 sectors, the fund will have to either approach the Foreign Investment Promotion Board for FDIs where the board approval is required, or invest directly in areas where FDI is permitted under the automatic route.
Responding to the development, Vikram Shroff of the law firm Nishith Desai Associates said, “The regulator’s intention seems to be to allow FVC entities to invest beyond what is permissible under the Sebi FVC regulations, albeit under the FDI route.” Shroff, who advises several FVCFs, said, “Upon RBI clarifying, offshore venture capital and private equity funds may no longer need to set up separate entities for pursuing FDI in India.”
According to private equity circles, FVCFs have interest in businesses like BPOs, telecom, media and entertainment, among other segments. RBI’s latest stand, however, does not pave the way for FVCF investment in the real estate space — something the central bank forbids.
Fearing a real estate bubble, RBI generally insists on an undertaking from FVCFs that they will not invest in property firms. This, according to private equity circles, is unlikely to change. But on a broader plane, this is a welcome move by RBI and will encourage foreign investments, said Punit Shah, executive director of PricewaterhouseCoopers. “Of course, FVCs enjoy certain regulatory benefits under Sebi and Fema regulations, such as exit and entry pricing and lock-in relaxations. These will not be available for its investments under FDI route, but RBI has certainly made things convenient for the foreign funds.”
Interestingly, the RBI letter is also a rare instance when a local regulator makes a mention of ‘private equity’ — a widely-used generic term for which there is no regulatory definition in India. “It needs to be understood that venture capital and private equity are largely similar activities — only the stage differs. Both provide risk capital. While VCs fund early stage, PEs focus on medium to late stage companies. In several cases, the same fund undertakes both investment activities,” said Shroff.
Ref:http://www.indianrealtynews.com/real-estate-india/india-widens-foreign-vc-funds-investment-options.html
The decision, reflected in some of the communications between the Reserve Bank India and custodian banks of VC funds, could not only make life easier for foreign funds and widen the scope for their risk capital, but also boost foreign direct investment (FDI) in the country.
In the past one year, FVCFs, which were allowed to come in, were specifically told to stick to activities such as infrastructure, bio-technology, nano-technology, biofuel, IT-related activities for hardware and software development and a few other areas outlined by the government in the list of 10 sectors identified for tax benefits to VCs.
Recently, RBI, while giving the green light to some of the FVCFs, has said “if the FVC investor intends to make any private equity investments, then it may have to avail the FDI route”. This means that barring a few sensitive sectors, an FVCF registered in India is free to invest in almost any business in the country. For buying into firms which are outside the 10 sectors, the fund will have to either approach the Foreign Investment Promotion Board for FDIs where the board approval is required, or invest directly in areas where FDI is permitted under the automatic route.
Responding to the development, Vikram Shroff of the law firm Nishith Desai Associates said, “The regulator’s intention seems to be to allow FVC entities to invest beyond what is permissible under the Sebi FVC regulations, albeit under the FDI route.” Shroff, who advises several FVCFs, said, “Upon RBI clarifying, offshore venture capital and private equity funds may no longer need to set up separate entities for pursuing FDI in India.”
According to private equity circles, FVCFs have interest in businesses like BPOs, telecom, media and entertainment, among other segments. RBI’s latest stand, however, does not pave the way for FVCF investment in the real estate space — something the central bank forbids.
Fearing a real estate bubble, RBI generally insists on an undertaking from FVCFs that they will not invest in property firms. This, according to private equity circles, is unlikely to change. But on a broader plane, this is a welcome move by RBI and will encourage foreign investments, said Punit Shah, executive director of PricewaterhouseCoopers. “Of course, FVCs enjoy certain regulatory benefits under Sebi and Fema regulations, such as exit and entry pricing and lock-in relaxations. These will not be available for its investments under FDI route, but RBI has certainly made things convenient for the foreign funds.”
Interestingly, the RBI letter is also a rare instance when a local regulator makes a mention of ‘private equity’ — a widely-used generic term for which there is no regulatory definition in India. “It needs to be understood that venture capital and private equity are largely similar activities — only the stage differs. Both provide risk capital. While VCs fund early stage, PEs focus on medium to late stage companies. In several cases, the same fund undertakes both investment activities,” said Shroff.
Ref:http://www.indianrealtynews.com/real-estate-india/india-widens-foreign-vc-funds-investment-options.html
Friday, August 28, 2009
Thursday, August 27, 2009
Bandra-Worli Sea Link Expected to Boost Real Estate Prices by 10-15 per cent in Surrounding Areas
It’s a classic case of infrastructural development boosting real estate prices.The Bandra-Worli Sea Link seems to be doing more than just easing the traffic flow from north and south Mumbai. Experts in the country’s financial capital say that there could be an increase of 10-15 per cent in property rates in surrounding areas. “The Bandra-Worli Sea Link will not only provide relief from the agonising traffic, but will also trigger a major crowd influx, which will affect real estate prices. South Mumbai will have high demand .There are indications of a 10-15 per cent hike in property prices and this may effect connecting areas. Builders who are already selling flats in the area would go for a price correction immediately, says Rajesh Vardhan, managing director, Vardhaman Group, a Mumbai-based real estate development company. In the same breath, he says it is time for a Nariman Point-Worli sea link as well.
Bandra-Worli Sea Link is a Maharashtra state road development corporation project, constructed by HCC, India’s largest engineering contracting company. The road hangs in between cable-stayed bridges on the two ends namely, the Bandra and Worli Cable-stayed bridges of 500 and 150-metre spans, respectively – with the highest towers soaring to a height of 126 metres, equivalent to the height of a 43-storeyed building. The sea link was opened for general public on June 29. Not everyone, however, shares the same optimism. Shreegopal Maheshwari, broker attached to Mumbai-based Maheshwari & Maheshwari, feels that it is too early to see an impact on property prices. “It is just over a month since the link was inaugurated. We may see the real impact in six months.
Worli Sea face has, however, seen a drop of 10 per cent property prices due to increased traffic in the area,” he said. While the office properties in Mumbai generally continued to fall. “Mumbai continued to remain volatile in terms of rental values. Bandra–Kurla Complex (BKC) corrected by another 20 per cent over the previous quarter to settle at Rs 225 per sq ft/month. The location has also witnessed over 40 per cent correction over June, 2008. This has triggered increased interest in the location from corporate occupiers and approximately 1.41 million sq.ft was leased within this location. With the growing demand for this location, the rentals are expected to remain stable in short to medium term,” said a recent report by Cushman & Wakefield.
Ref:http://www.indianrealtynews.com/real-estate-india/mumbai/bandra-worli-sea-link-expected-to-boost-real-estate-prices-by-10-15-per-cent-in-surrounding-areas.html
Bandra-Worli Sea Link is a Maharashtra state road development corporation project, constructed by HCC, India’s largest engineering contracting company. The road hangs in between cable-stayed bridges on the two ends namely, the Bandra and Worli Cable-stayed bridges of 500 and 150-metre spans, respectively – with the highest towers soaring to a height of 126 metres, equivalent to the height of a 43-storeyed building. The sea link was opened for general public on June 29. Not everyone, however, shares the same optimism. Shreegopal Maheshwari, broker attached to Mumbai-based Maheshwari & Maheshwari, feels that it is too early to see an impact on property prices. “It is just over a month since the link was inaugurated. We may see the real impact in six months.
Worli Sea face has, however, seen a drop of 10 per cent property prices due to increased traffic in the area,” he said. While the office properties in Mumbai generally continued to fall. “Mumbai continued to remain volatile in terms of rental values. Bandra–Kurla Complex (BKC) corrected by another 20 per cent over the previous quarter to settle at Rs 225 per sq ft/month. The location has also witnessed over 40 per cent correction over June, 2008. This has triggered increased interest in the location from corporate occupiers and approximately 1.41 million sq.ft was leased within this location. With the growing demand for this location, the rentals are expected to remain stable in short to medium term,” said a recent report by Cushman & Wakefield.
Ref:http://www.indianrealtynews.com/real-estate-india/mumbai/bandra-worli-sea-link-expected-to-boost-real-estate-prices-by-10-15-per-cent-in-surrounding-areas.html
Realty Bosses Took Huge Salary Hike amid Slowdown Blues
India Inc was on a savage cost cutting drive in the latter half of 2008-09. Salary cuts and job losses became the order of the day. However, the big bosses of real estate companies of at least 4 major real estate companies such as Unitech, HDIL, Anant Raj Industries and Ackruti City took home nearly 2-10 times hike in remuneration compared to a year ago. An analysis of the annual reports of these companies shows that the salary hikes were greater in that fiscal when their businesses were caught due to economic slowdown. Wadhawans of Mumbai-centric Housing Housing Development & Infrastructure Limited (HDIL) are a good example.
Between Rakesh Kumar Wadhawan (executive chairman) and Sarang Wadhawan (managing director), HDIL paid them Rs 18 crore in salary and perks in the financial year 2008-09, 10 times more than Rs 1.72 crore a fiscal back in 2007-08. During the same period, consolidated total income of HDIL sank 27% to Rs 1,782 crore and consolidated profits after tax (before minority interests) took a harder 52% knock to Rs 677 crore. The stock price of HDIL fell over 80% to Rs 82 at March 09 end from Rs 500 levels in March 08.
In the case of Unitech - Ramesh Chandra (chairman), Sanjay Chandra and Ajay Chandra (both managing directors) received Rs 5.36 crore as cumulative remuneration in 08-09 nearly 60% more than the Rs 3.44 crore earned in 07-08 . This bountiful hike came at a time even as Unitech’s consolidated total income fell by 23% to Rs 3316 crore and profits after tax plunged 28% to Rs 1,197 crore. 57-year old Anil Sarin, copromoter and managing director of Anant Raj Industries , took home around Rs 1.28 crore in gross remuneration in fiscal 08-09 as against just Rs 37 lakh in 07-08 . Gross remuneration comprises salary, house rent allowance and company’s contribution to provident fund.
This represents more than 200% hike in remuneration - in a year when consolidated total income of Anant Raj dropped by 49% to Rs 322 crore and PAT dived by 53% to Rs 207 crore. The stock also fell from Rs 230 levels in March 2008 to Rs 40 by March 2009. “There are many issues in the real estate space. Corporate governance and the business model being two important ones. We do not like real estate much because we think that it’s very difficult to create value for the shareholders because most of them are capital guzzlers,” Sukumar Rajah, CIO of Franklin Equity (India), said.
Promoters Hemant Shah and Vyomesh Shah of Ackruti City took 40% hike in remuneration as executive chairman and MD respectively in fiscal 08-09. The older and 56-year old Hemant Shah received Rs 1.86 crore (Rs 1.30 crore in 07-08) while 49-year old Vyomesh Shah accepted Rs 1.65 crore (Rs 1.19 crore in 07-08 ). Ackruti’s total consolidated income fell just 4% to Rs 454.78 crore in 08-09 and profits after tax came down 11% to Rs 265 crore in 08-09 .
Ref:http://www.indianrealtynews.com/real-estate-developers/realty-bosses-took-huge-salary-hike-amid-slowdown-blues.html
Between Rakesh Kumar Wadhawan (executive chairman) and Sarang Wadhawan (managing director), HDIL paid them Rs 18 crore in salary and perks in the financial year 2008-09, 10 times more than Rs 1.72 crore a fiscal back in 2007-08. During the same period, consolidated total income of HDIL sank 27% to Rs 1,782 crore and consolidated profits after tax (before minority interests) took a harder 52% knock to Rs 677 crore. The stock price of HDIL fell over 80% to Rs 82 at March 09 end from Rs 500 levels in March 08.
In the case of Unitech - Ramesh Chandra (chairman), Sanjay Chandra and Ajay Chandra (both managing directors) received Rs 5.36 crore as cumulative remuneration in 08-09 nearly 60% more than the Rs 3.44 crore earned in 07-08 . This bountiful hike came at a time even as Unitech’s consolidated total income fell by 23% to Rs 3316 crore and profits after tax plunged 28% to Rs 1,197 crore. 57-year old Anil Sarin, copromoter and managing director of Anant Raj Industries , took home around Rs 1.28 crore in gross remuneration in fiscal 08-09 as against just Rs 37 lakh in 07-08 . Gross remuneration comprises salary, house rent allowance and company’s contribution to provident fund.
This represents more than 200% hike in remuneration - in a year when consolidated total income of Anant Raj dropped by 49% to Rs 322 crore and PAT dived by 53% to Rs 207 crore. The stock also fell from Rs 230 levels in March 2008 to Rs 40 by March 2009. “There are many issues in the real estate space. Corporate governance and the business model being two important ones. We do not like real estate much because we think that it’s very difficult to create value for the shareholders because most of them are capital guzzlers,” Sukumar Rajah, CIO of Franklin Equity (India), said.
Promoters Hemant Shah and Vyomesh Shah of Ackruti City took 40% hike in remuneration as executive chairman and MD respectively in fiscal 08-09. The older and 56-year old Hemant Shah received Rs 1.86 crore (Rs 1.30 crore in 07-08) while 49-year old Vyomesh Shah accepted Rs 1.65 crore (Rs 1.19 crore in 07-08 ). Ackruti’s total consolidated income fell just 4% to Rs 454.78 crore in 08-09 and profits after tax came down 11% to Rs 265 crore in 08-09 .
Ref:http://www.indianrealtynews.com/real-estate-developers/realty-bosses-took-huge-salary-hike-amid-slowdown-blues.html
Supreme Court Blames Influential People for Illegal Real Estate Construction
The Supreme Court today came down heavily on economically affluent people, bureaucrary and civic body officials for mushrooming illegal real estate construction in the country and ruled file notings by ministers or officials do not have any legal validity. “Economically affluent people and those having support of the political and executive apparatus of the state have constructed buildings, commercial complexes, multiplexes, malls etc. in blatant violation of the municipal and town planning laws, master plans, zonal development plans and even sanctioned building plans”, said a bench of Justices B N Aggarwal and G S Singhvi in a judgement.
“In most of the cases of illegal or unauthorized constructions, the officers of the municipal and other regulatory bodies turn blind eye either due to the influence of higher functionaries of the State or other extraneous reasons, the bench observed.”In most of the cases of illegal or unauthorized constructions, the officers of the municipal and other regulatory bodies turn a blind eye either due to the influence of higher functionaries of the state or other extraneous reasons, it said.
The apex court also said file notings ministers or officials do not have any legal validity. Its ruling came while dismissing an appeal filed by Sathish Khosla, President of Shanti Sports Club of India which claimed to run a cricket academy at a village in Delhi. One of the pleas of the club was that its illegally constructed sports club should not be demolished as the then Minister for Urban Development in 1999 had noted in his file that the construction be regularised.
Ref:http://www.indianrealtynews.com/real-estate-india/supreme-court-blames-influential-people-for-illegal-real-estate-construction.html
“In most of the cases of illegal or unauthorized constructions, the officers of the municipal and other regulatory bodies turn blind eye either due to the influence of higher functionaries of the State or other extraneous reasons, the bench observed.”In most of the cases of illegal or unauthorized constructions, the officers of the municipal and other regulatory bodies turn a blind eye either due to the influence of higher functionaries of the state or other extraneous reasons, it said.
The apex court also said file notings ministers or officials do not have any legal validity. Its ruling came while dismissing an appeal filed by Sathish Khosla, President of Shanti Sports Club of India which claimed to run a cricket academy at a village in Delhi. One of the pleas of the club was that its illegally constructed sports club should not be demolished as the then Minister for Urban Development in 1999 had noted in his file that the construction be regularised.
Ref:http://www.indianrealtynews.com/real-estate-india/supreme-court-blames-influential-people-for-illegal-real-estate-construction.html
Chennai Realtors Using Illegal Guns
The recent shooting of ship captain Ilangovan and his wife Ramani has brought into focus the fact that a number of Chennai-based realtors are procuring guns from Madhya Pradesh, Uttar Pradesh and Bihar, and using them only to threaten others during land deals. The gun that was used on the couple was a country-made pistol and that is probably what saved Vasanthi, their daughter-in-law, when the gunman Rajan turned the pistol on her. Police said country-made guns are not effective and often do not have sufficient range. “Regular guns have a firing range of 50 to 60 yards, but country-made guns have a range of less than 15 to 20 yards. Even, if a person targets the chest, the bullet pierces only the thighs or legs,” sources said. Chennai, or even Tamil Nadu, does not have a hub for manufacturing lethal country-made weapons, but the guns are being brought in from the north.
“In case of the Neelankarai shooting, the accused may have been standing on the extreme right of the room after shooting the couple. He aimed at Vasanthi, who was running away from him, and she was probably out of his range. That is the reason why she did not sustain grievous injuries,” a senior police officer said. “Chennai and Tamil Nadu is not known for manufacturing illegal arms due to the effective policing and intelligence network here, when compared to other states in India. Recently, the illegal manufacture of rocket launchers by Maoists from Andhra Pradesh was busted in Ambattur Industrial Estate,” another senior police officer said.
Due to setting up of many IT companies in Chennai and TN, land value has risen rapidly and real estate is a booming business. “Many youth have entered the real estate business under various banners. The young men procure illegal guns from states where they are easily available and threaten rival gangs,” police said
Ref:http://www.indianrealtynews.com/real-estate-india/chennai-realtors-using-illegal-guns.html
“In case of the Neelankarai shooting, the accused may have been standing on the extreme right of the room after shooting the couple. He aimed at Vasanthi, who was running away from him, and she was probably out of his range. That is the reason why she did not sustain grievous injuries,” a senior police officer said. “Chennai and Tamil Nadu is not known for manufacturing illegal arms due to the effective policing and intelligence network here, when compared to other states in India. Recently, the illegal manufacture of rocket launchers by Maoists from Andhra Pradesh was busted in Ambattur Industrial Estate,” another senior police officer said.
Due to setting up of many IT companies in Chennai and TN, land value has risen rapidly and real estate is a booming business. “Many youth have entered the real estate business under various banners. The young men procure illegal guns from states where they are easily available and threaten rival gangs,” police said
Ref:http://www.indianrealtynews.com/real-estate-india/chennai-realtors-using-illegal-guns.html
Singapore Arm of Realty Major Indiabulls Plans to Raise Rs 676 cr
The Singapore-listed Indiabulls Properties Investment Trust, which is part of realty major Indiabulls Real Estate, is planning to raise up to 200 million Singapore dollars (about Rs 676 crore) through a rights issue. The proceeds would be used to pay debts of the company. Indiabulls Properties Investment Trust (IPIT) in a filing to the Singapore Stock Exchange has said it is looking at a rights issue for the purpose of “raising up to 200 million Singapore dollars of gross proceeds, for the primary purpose of repaying and/or pre-paying part of the borrowings”. Indiabulls Property Management Trustee Pte, the trustee-manager of IPIT, has submitted an additional listing application for the planned rights issue to the Singapore Exchange Securities Trading Ltd.
“Under the rights issue, new units will be offered to all existing unit holders (including Indiabulls Real Estate Limited, which is the sponsor of IPIT) on a renounceable and underwritten basis,” the firm said. According to Monday’s filing, the trustee-manager has not taken any firm decision in relation to the rights issue including the price. “The trustee-manager will make these decisions at a later stage depending on the financial requirements of IPIT and the prevalent market conditions at the material time… There is no assurance that the rights issue will proceed,” it noted. The filing noted that the trustee-manager is always in the process of evaluating various funding sources for IPIT.The Singapore-listed Indiabulls Properties Investment Trust, which is part of realty major Indiabulls Real Estate, is planning to raise up to 200 million Singapore dollars (about Rs 676 crore) through a rights issue.
Indiabulls Properties Investment Trust (IPIT) in a filing to the Singapore Stock Exchange has said it is looking at a rights issue for the purpose of “raising up to 200 million Singapore dollars of gross proceeds, for the primary purpose of repaying and/or pre-paying part of the borrowings”. Indiabulls Property Management Trustee Pte, the trustee-manager of IPIT, has submitted an additional listing application for the planned rights issue to the Singapore Exchange Securities Trading Ltd. “Under the rights issue, new units will be offered to all existing unit holders (including Indiabulls Real Estate Limited, which is the sponsor of IPIT) on a renounceable and underwritten basis,” the firm said.
According to Monday’s filing, the trustee-manager has not taken any firm decision in relation to the rights issue including the price. “The trustee-manager will make these decisions at a later stage depending on the financial requirements of IPIT and the prevalent market conditions at the material time… There is no assurance that the rights issue will proceed,” it noted. The filing noted that the trustee-manager is always in the process of evaluating various funding sources for IPIT.
“Under the rights issue, new units will be offered to all existing unit holders (including Indiabulls Real Estate Limited, which is the sponsor of IPIT) on a renounceable and underwritten basis,” the firm said. According to Monday’s filing, the trustee-manager has not taken any firm decision in relation to the rights issue including the price. “The trustee-manager will make these decisions at a later stage depending on the financial requirements of IPIT and the prevalent market conditions at the material time… There is no assurance that the rights issue will proceed,” it noted. The filing noted that the trustee-manager is always in the process of evaluating various funding sources for IPIT.The Singapore-listed Indiabulls Properties Investment Trust, which is part of realty major Indiabulls Real Estate, is planning to raise up to 200 million Singapore dollars (about Rs 676 crore) through a rights issue.
Indiabulls Properties Investment Trust (IPIT) in a filing to the Singapore Stock Exchange has said it is looking at a rights issue for the purpose of “raising up to 200 million Singapore dollars of gross proceeds, for the primary purpose of repaying and/or pre-paying part of the borrowings”. Indiabulls Property Management Trustee Pte, the trustee-manager of IPIT, has submitted an additional listing application for the planned rights issue to the Singapore Exchange Securities Trading Ltd. “Under the rights issue, new units will be offered to all existing unit holders (including Indiabulls Real Estate Limited, which is the sponsor of IPIT) on a renounceable and underwritten basis,” the firm said.
According to Monday’s filing, the trustee-manager has not taken any firm decision in relation to the rights issue including the price. “The trustee-manager will make these decisions at a later stage depending on the financial requirements of IPIT and the prevalent market conditions at the material time… There is no assurance that the rights issue will proceed,” it noted. The filing noted that the trustee-manager is always in the process of evaluating various funding sources for IPIT.
Indian Hotel Industry Witnesses Growth
According to the world travel and tourism council, the growth in the hospitality industry is pegged at 15% every year, and with 2,00,000 rooms (both luxury and budget) needed in the country, the segment is poised for a stupendous growth. While the high influx of foreign tourists has ensured huge footfalls for the sector over the years, internal tourism too has, off late, begun offering great potential. With travelers taking new interests in the country, players in the hospitality sector have had to offer the best of services, at affordable prices. Also, with the USD 23 billion software services sector pushing the Indian economy skywards, more and more IT professionals are flocking to Indian metro cities, thus signaling a boomtime for the hotel and hospitality segment. Several other factors such as Commonwealth Games in Delhi are fueling the need further.
The Indian hospitality industry is projected to grow at a rate of 8.8% between 2007-16, placing India as the second-fastest growing tourism market in the world. Initiatives like massive investment in hotel infrastructure and open sky policies made by the government are all aimed at propelling growth in the hospitality sector. “Hotel and hospitality industries are among the biggest employment generators in the country. Towards propelling its growth, while the government should confer infrastructure status to the hotel industries, several taxation issues also need to be rationalised. Further permits and licenses required for the hotel operations need to be rationalised by offering a “single window” mechanism,” says Sanjay Gupta, CMD, Neesa Leisure Ltd - the Group which boasts of providing state-of-the-art facilities and services at its hotels.
Be it Cambay Sapphire - the elegant 3 star business hotel at Ahmedabad or The Cambay Grand - the upcoming 5 star hotel in Ahmedabad that takes contemporary luxury to new heights with opulent rooms and suites, exotic spa, virtual golf, and multi cuisine fine dinning, redefining luxury is the perennial mantra in each of Cambay’s hospitality projects. Some of the Group’s forthcoming ventures include The Cambay Spa & Resort at Neemrana, Rajasthan - a proposed five star business hotel boasting of one of the largest conference and convention facilities, another venture of Neesa Leisure Ltd in Dahej (SEZ) to have 100 rooms including apartment and conference facilities and Cambay Sapphire, Jodhpur - a business hotel. Exclusive and innovative initiatives like the Cambay projects certainly focus on ensuring a bright future for the Indian hotel industry.
The government’s decision to substantially upgrade 28 regional airports in smaller towns and privatization & expansion of Delhi and Mumbai airport has improved the business prospects of hotel industry in India. Also, the upgrading of national highways connecting various parts of India has opened new avenues for the development of budget hotels in India. Couple this with the availability of qualified human resources and the hospitality sector has already got great growth prospects! A focus on quality, behaviour-based evaluation, market choice and market response has predominantly shaped the State’s hospitality industry. Increased competition and increase in demand has consolidated the hospitality segment, whilst opening up a plethora of opportunities. Fierce competition has led to innovative ideas by hotel majors, thereby delivering impressive hospitality products and services. This has, in turn, also prompted them to generate new lines of revenue with creative approaches, be it by reducing transaction costs, increasing productivity or promoting traditional Indian values.
A pioneering initiative, herein, is the concept of mixed-use developments, wherein the real estate typically includes an apartment block of a commercial block along with a hotel. Still in its nascent stages in India, the concept offers inspiring potential. Also, the entry of multinationals and Indian hotel chains expanding internationally only reinforces the segment’s untapped business potential. Combining unparalleled growth prospects and unlimited business potential, this industry is certainly on the foyer towards being a key player in the nation’s changing face.
Ref:http://www.indianrealtynews.com/real-estate-india/indian-hotel-industry-witnesses-growth.html
The Indian hospitality industry is projected to grow at a rate of 8.8% between 2007-16, placing India as the second-fastest growing tourism market in the world. Initiatives like massive investment in hotel infrastructure and open sky policies made by the government are all aimed at propelling growth in the hospitality sector. “Hotel and hospitality industries are among the biggest employment generators in the country. Towards propelling its growth, while the government should confer infrastructure status to the hotel industries, several taxation issues also need to be rationalised. Further permits and licenses required for the hotel operations need to be rationalised by offering a “single window” mechanism,” says Sanjay Gupta, CMD, Neesa Leisure Ltd - the Group which boasts of providing state-of-the-art facilities and services at its hotels.
Be it Cambay Sapphire - the elegant 3 star business hotel at Ahmedabad or The Cambay Grand - the upcoming 5 star hotel in Ahmedabad that takes contemporary luxury to new heights with opulent rooms and suites, exotic spa, virtual golf, and multi cuisine fine dinning, redefining luxury is the perennial mantra in each of Cambay’s hospitality projects. Some of the Group’s forthcoming ventures include The Cambay Spa & Resort at Neemrana, Rajasthan - a proposed five star business hotel boasting of one of the largest conference and convention facilities, another venture of Neesa Leisure Ltd in Dahej (SEZ) to have 100 rooms including apartment and conference facilities and Cambay Sapphire, Jodhpur - a business hotel. Exclusive and innovative initiatives like the Cambay projects certainly focus on ensuring a bright future for the Indian hotel industry.
The government’s decision to substantially upgrade 28 regional airports in smaller towns and privatization & expansion of Delhi and Mumbai airport has improved the business prospects of hotel industry in India. Also, the upgrading of national highways connecting various parts of India has opened new avenues for the development of budget hotels in India. Couple this with the availability of qualified human resources and the hospitality sector has already got great growth prospects! A focus on quality, behaviour-based evaluation, market choice and market response has predominantly shaped the State’s hospitality industry. Increased competition and increase in demand has consolidated the hospitality segment, whilst opening up a plethora of opportunities. Fierce competition has led to innovative ideas by hotel majors, thereby delivering impressive hospitality products and services. This has, in turn, also prompted them to generate new lines of revenue with creative approaches, be it by reducing transaction costs, increasing productivity or promoting traditional Indian values.
A pioneering initiative, herein, is the concept of mixed-use developments, wherein the real estate typically includes an apartment block of a commercial block along with a hotel. Still in its nascent stages in India, the concept offers inspiring potential. Also, the entry of multinationals and Indian hotel chains expanding internationally only reinforces the segment’s untapped business potential. Combining unparalleled growth prospects and unlimited business potential, this industry is certainly on the foyer towards being a key player in the nation’s changing face.
Ref:http://www.indianrealtynews.com/real-estate-india/indian-hotel-industry-witnesses-growth.html
Improvement in Commercial Real Estate Rentals
Mumbai continues to be the second costliest city in Asia Pacific in terms of prime rental rates. With rent of about USD 800 per sq metre per annum, Mumbai is ahead of the likes of Tokyo (USD 750 per sq metre p.a.) and Singapore (USD 625 per sq metre p.a.) as per the latest report of real estate consultancy firm Jones Lang LaSalle. This is despite a 40% drop in rentals from its peak values. Delhi comes fourth in the ranking with USD 725 per sq metre per annum. With GDP growth expected to bounce back in 2010, India and China would outperform the global markets with a 7-10% growth rate. The early signs of recovery are visible in Delhi and Mumbai markets. Having dropped by 24% in March’09 quarter over the preceding quarter, Mumbai’s decline in June’09 was well below 10%. Delhi followed with an 8% decline, which was half of what it was in the quarter before.
The average decline for India in June’09 was 8.3% as against 19% in the quarter prior to that. This showed that the rate of decline in rentals has also slowed down in the June’09 quarter as compared to March’09 quarter. It is believed that rents in these cities have bottomed out. Pune outperformed with just about a 4% decline. This trend is likely to improve by 2011 when the absorption rate would overcome the supply. With 57 million sq feet of office space expected to be operational by the end of 2009, vacancy rate would continue to be high at 27% in 2010 till it comes down to a little above 20% in 2011.
Talking city wise position, Bangalore is expected to relatively outperform other cities with a low vacancy rate as it has received good response for pre leasing properties. Companies form telecom and pharma sector seem to be fast taking advantage of the low rentals and expanding their geographic reach. For example recently Aircel and Telenor Unitech wireless signed more than 50000 sq feet of real estate space. As rents become more affordable, we could see more companies scaling up their expansion plans.
Ref:http://www.indianrealtynews.com/real-estate-india/improvement-in-commercial-real-estate-rentals.html
The average decline for India in June’09 was 8.3% as against 19% in the quarter prior to that. This showed that the rate of decline in rentals has also slowed down in the June’09 quarter as compared to March’09 quarter. It is believed that rents in these cities have bottomed out. Pune outperformed with just about a 4% decline. This trend is likely to improve by 2011 when the absorption rate would overcome the supply. With 57 million sq feet of office space expected to be operational by the end of 2009, vacancy rate would continue to be high at 27% in 2010 till it comes down to a little above 20% in 2011.
Talking city wise position, Bangalore is expected to relatively outperform other cities with a low vacancy rate as it has received good response for pre leasing properties. Companies form telecom and pharma sector seem to be fast taking advantage of the low rentals and expanding their geographic reach. For example recently Aircel and Telenor Unitech wireless signed more than 50000 sq feet of real estate space. As rents become more affordable, we could see more companies scaling up their expansion plans.
Ref:http://www.indianrealtynews.com/real-estate-india/improvement-in-commercial-real-estate-rentals.html
Tuesday, August 25, 2009
Bangalore Based Developer Plans Alliance with Mexican Housing Company
Realty major Puravankara Projects is in talks for an alliance with Homex, a Mexican company that specialises in affordable housing. The idea is to give a boost to its affordable housing subsidiary Provident Housing. Ashish Puravankara, director, Puravankara Projects, said, “We are holding discussions with Homex as they have build a large number of affordable homes. They like our business model and are very keen to tie up.” He did not divulge the nature of the alliance. Homex is vertically integrated home development company focused on affordable-entry level and middle-income housing. It is also the largest home builder in Mexico, based on the number of homes sold, revenues and net income. It has so far delivered around 270,000 homes.
Its affordable entry-level housing ranges between 452 sq ft and 818 sq ft in size and its middle-income apartments are typically 818-1,851 sq ft. Homex has operations in 32 cities located in 20 Mexican states as of December 2008. Homex integrates aluminum moulds into its construction process. With this method, the shell of an entire home can be constructed from concrete poured into as many as 1,000 interconnected pieces of aluminium moulding for an affordable entry-level home. Once the concrete hardens, the moulds are disassembled for use on another home. Each mould can be used as many as 2,000 times. The method also generates less waste, reducing materials cost. Most importantly, the mould system reduces the average time of construction.
Provident Housing has roped in SBI Capital and Housing and Urban Development Corp to raise funds for it affordable venture. The firm is currently at an advanced stage of talks with private equity investors for diluting stake on a project level and hopes to close the deal soon. It has already launched two projects in Bangalore and Chennai and is in the process of launching its second project totalling 6 million sq ft in size in Bangalore with an investment of around Rs 900 crore. The project is expected to have 6,000 apartments. It is currently waiting for sanction to kick start the project. The real estate player will invest Rs 1,900 crore by 2010 on three affordable housing projects in Bangalore and Chennai. The three projects, slated to be ready by 2010-11, will house 15,000 units. The one, two and three bedroom flats will be priced at Rs 10 lakh, Rs 15 lakh and Rs 20 lakh respectively spanning from 750 sq ft to 1,100 sq ft. Provident Housing will also roll out the concept to other cities like Hyderabad, Coimbatore and Mysore in the Phase I. In Phase II it will set up properties in Delhi, Kolkata, Kochi, Jaipur, Pune and Nagpur.
Its affordable entry-level housing ranges between 452 sq ft and 818 sq ft in size and its middle-income apartments are typically 818-1,851 sq ft. Homex has operations in 32 cities located in 20 Mexican states as of December 2008. Homex integrates aluminum moulds into its construction process. With this method, the shell of an entire home can be constructed from concrete poured into as many as 1,000 interconnected pieces of aluminium moulding for an affordable entry-level home. Once the concrete hardens, the moulds are disassembled for use on another home. Each mould can be used as many as 2,000 times. The method also generates less waste, reducing materials cost. Most importantly, the mould system reduces the average time of construction.
Provident Housing has roped in SBI Capital and Housing and Urban Development Corp to raise funds for it affordable venture. The firm is currently at an advanced stage of talks with private equity investors for diluting stake on a project level and hopes to close the deal soon. It has already launched two projects in Bangalore and Chennai and is in the process of launching its second project totalling 6 million sq ft in size in Bangalore with an investment of around Rs 900 crore. The project is expected to have 6,000 apartments. It is currently waiting for sanction to kick start the project. The real estate player will invest Rs 1,900 crore by 2010 on three affordable housing projects in Bangalore and Chennai. The three projects, slated to be ready by 2010-11, will house 15,000 units. The one, two and three bedroom flats will be priced at Rs 10 lakh, Rs 15 lakh and Rs 20 lakh respectively spanning from 750 sq ft to 1,100 sq ft. Provident Housing will also roll out the concept to other cities like Hyderabad, Coimbatore and Mysore in the Phase I. In Phase II it will set up properties in Delhi, Kolkata, Kochi, Jaipur, Pune and Nagpur.
Indiabulls Bags Mantralaya Makeover Project
Indiabulls has bagged the city’s biggest redevelopment project. Gagan Banga, spokesperson for the group, said the Mantralaya venture was the most expensive project in the country. “At Rs 344.12 crore per acre, it is also the most expensive per acre deal in the country and probably Asia. This will allow us to build a world-class structure for the state -an iconic building of 7-star category which will surely change the skyline of Mumbai,'’ he declared.
Some top developers in the city, under condition of anonymity, `alleged’ that the state government had not publicised the tender process adequately. “It is surprising that there were only three short-listed bidders for such a huge contract when many more could have participated,” said one of them. Indiabulls has much to be happy about-the company will get a generous floor space index (FSI) of 4, and could end up getting as much as 44,000 square feet per acre in the free sale component. It plans to construct one high-end residential tower in the area where flats in the nearby NCPA apartment are reportedly being quoted at 80,000 to 85,000 per square foot. PWD minister Chhagan Bhujbal said the proposal was now before a committee headed by chief minister Ashok Chavan for approval.
As part of the redevelopment-which has its share of critics-the main Mantralaya building, as well as the new administrative building opposite it, will be completely torn down, as will the 50 charming row bungalows opposite, which currently house judges and ministers. In place of the bungalows, Indiabulls plans to construct four clusters which will include apartments for judges and ministers as well as a new building for the state headquarters. “We will make sure this is the best building in the country and showcase it as such,'’ said Banga. Of the Rs 1,376 crore offered by Indiabulls, Rs 276 crore is for the corpus for upkeep and maintenance of the new buildings. The project is to be completed in three years’ time.
Some top developers in the city, under condition of anonymity, `alleged’ that the state government had not publicised the tender process adequately. “It is surprising that there were only three short-listed bidders for such a huge contract when many more could have participated,” said one of them. Indiabulls has much to be happy about-the company will get a generous floor space index (FSI) of 4, and could end up getting as much as 44,000 square feet per acre in the free sale component. It plans to construct one high-end residential tower in the area where flats in the nearby NCPA apartment are reportedly being quoted at 80,000 to 85,000 per square foot. PWD minister Chhagan Bhujbal said the proposal was now before a committee headed by chief minister Ashok Chavan for approval.
As part of the redevelopment-which has its share of critics-the main Mantralaya building, as well as the new administrative building opposite it, will be completely torn down, as will the 50 charming row bungalows opposite, which currently house judges and ministers. In place of the bungalows, Indiabulls plans to construct four clusters which will include apartments for judges and ministers as well as a new building for the state headquarters. “We will make sure this is the best building in the country and showcase it as such,'’ said Banga. Of the Rs 1,376 crore offered by Indiabulls, Rs 276 crore is for the corpus for upkeep and maintenance of the new buildings. The project is to be completed in three years’ time.
LIC Plans Housing Venture Capital
Life Insurance Corp of India (LIC) and its associates will hold a majority stake in the real estate venture capital fund to be floated by LIC Housing Finance Ltd, says a top company official. “The majority stake will be with the LIC group. However, the actual percentage and other details as to the joint venture partner are yet to be decided,” LIC Housing director and chief executive R.R. Nair said. The venture capital fund’s initial corpus size is expected to be around Rs.500 crore, though Nair said there will be more clarity on the project Aug 29 when the board meets. The new company’s name will depend on the partner chosen for the venture, he added.
LIC Housing, which funds home purchases, finds floating a venture capital fund a natural extension of its business. “The real estate venture capital is a step towards widening our income basket. Currently, we get interest income from the housing company and fee-based income from the financial services outfit. The venture capital fund will provide income from shares,” Nair said. The real estate fund will invest in companies operating in the field such as developers and construction companies.
LIC is the second largest real estate owner in the country after the Indian Railways. According to officials, foraying into venture capital segment is not connected with the restrictions faced by LIC under the Insurance Regulatory and Development Authority’s (IRDA) investment regulations on investing in unlisted companies.
LIC Housing, which funds home purchases, finds floating a venture capital fund a natural extension of its business. “The real estate venture capital is a step towards widening our income basket. Currently, we get interest income from the housing company and fee-based income from the financial services outfit. The venture capital fund will provide income from shares,” Nair said. The real estate fund will invest in companies operating in the field such as developers and construction companies.
LIC is the second largest real estate owner in the country after the Indian Railways. According to officials, foraying into venture capital segment is not connected with the restrictions faced by LIC under the Insurance Regulatory and Development Authority’s (IRDA) investment regulations on investing in unlisted companies.
Lower Home Loan Rates Push Residential Demand
Demand for residential projects in major cities is picking up on lower home loan rates, property price cuts by developers and job market recovery, a study by Religare Capital Markets Ltd said. Indian real estate saw demand for housing collapse from 2008 amid a global credit crunch and buyers fearing job losses. “Now that property prices have climbed down and the risk of job layoffs has diminished, the service class is likely to participate actively in property absorption, leading to a strong recovery in residential demand,” Suman Memani, associate vice president, Religare Capital Markets, said on Monday, while releasing the report.
Correction of home loan rates from levels of 13 percent in early 2008 to around 8 percent now has also helped spur demand, he said. But prices in the residential segment, that make up about 70 percent of the real estate market in India, may only move up in 2 months, Memani said. “Rising demand for residential projects may spruce up prices only after October.” Religare expects residential prices in the premium and luxury space to rise 10-15 percent as valuations have bottomed out in a few locations with property registrations in cities like Mumbai and Pune rising about 20-22 percent in April-June quarter over January-March quarter, Memani said. Indian real estate developers like Ackruti City Ltd, Anant Raj Industries Ltd, Omaxe, Parsvnath Developers and Sobha Developers, saw a sales slump following the economic downturn. Their margins were also squeezed as many launched cheaper housing to boost unit sales.
Fund raising through the institutional placements route would help realty firms restructure thier balance sheet and many have focussed on execution of projects rather than creating a land bank, which is positive for the industry, Amitabh Chakraborty, president - equity at Religare Capital Markets, said. In April, the country’s second-largest listed developer Unitech sold shares worth $325 million to institutions, while founders of bigger rival DLF raised $780 million by offloading 10 percent. Third-ranked Indiabulls Real Estate sold shares worth $550 million in May and at least 9 more realty firms have got shareholder approval to sell shares worth more than $2 billion, according to Thomson Reuters data.
“This has helped us give positive ratings to real estate projects like Unitech, Puravankara Projects and Anant Raj Industries,” Chakraborty said. However, the commercial sector would see vacancy rates rising as much as 25 percent in 2009/10 with oversupply of about 30 million square feet of space in seven cities and IT companies showing slower employee growth of 2.5 percent, Memani said. Although rental values have started correcting from February 2008, capital values of the commercial properties have not eroded so far, he said. “We expect some correction in the commercial property valuations with deals going through post-October,” Memani said.
Correction of home loan rates from levels of 13 percent in early 2008 to around 8 percent now has also helped spur demand, he said. But prices in the residential segment, that make up about 70 percent of the real estate market in India, may only move up in 2 months, Memani said. “Rising demand for residential projects may spruce up prices only after October.” Religare expects residential prices in the premium and luxury space to rise 10-15 percent as valuations have bottomed out in a few locations with property registrations in cities like Mumbai and Pune rising about 20-22 percent in April-June quarter over January-March quarter, Memani said. Indian real estate developers like Ackruti City Ltd, Anant Raj Industries Ltd, Omaxe, Parsvnath Developers and Sobha Developers, saw a sales slump following the economic downturn. Their margins were also squeezed as many launched cheaper housing to boost unit sales.
Fund raising through the institutional placements route would help realty firms restructure thier balance sheet and many have focussed on execution of projects rather than creating a land bank, which is positive for the industry, Amitabh Chakraborty, president - equity at Religare Capital Markets, said. In April, the country’s second-largest listed developer Unitech sold shares worth $325 million to institutions, while founders of bigger rival DLF raised $780 million by offloading 10 percent. Third-ranked Indiabulls Real Estate sold shares worth $550 million in May and at least 9 more realty firms have got shareholder approval to sell shares worth more than $2 billion, according to Thomson Reuters data.
“This has helped us give positive ratings to real estate projects like Unitech, Puravankara Projects and Anant Raj Industries,” Chakraborty said. However, the commercial sector would see vacancy rates rising as much as 25 percent in 2009/10 with oversupply of about 30 million square feet of space in seven cities and IT companies showing slower employee growth of 2.5 percent, Memani said. Although rental values have started correcting from February 2008, capital values of the commercial properties have not eroded so far, he said. “We expect some correction in the commercial property valuations with deals going through post-October,” Memani said.
Kolkata Realtors Shocked Over Vedic Village Arson
City realtors are shocked by the arson at Vedic Village in Rajarhat and fear that unless strong action is taken, investor and buyer confidence would be rattled. Terming the incident unfortunate, Confederation of Real Estate Developers Association of India (CREDAI) national president Santosh Rungta said it had raised basic concerns of how effective the administration is in tackling law and order problems.
“It is baffling how a row over a football match could have triggered such chaos, igniting mob violence. It also points to the poor response time of both police and fire brigade. At a Bengal Chamber of Commerce meeting held a couple of months ago, state home secretary Ardhendu Sen had hinted at a Brihottor Kolkata Police (force for greater Kolkata) that would bring adjoining areas like Salt Lake and New Town under its fold. This incident should hasten the formation of such a force because the regimen of Kolkata Police is definitely more superior than the force in the district,” said Rungta, who has a number of projects in the Rajarhat belt.
Other than Action Area I, the other condominium developments in New Town are isolated. Security is a big concern and a deterrent. Sunday’s incident, close to the pockets of development in Action Area II, has further heightened the concerns. “After what happened at Vedic Village, I will not move in till there is more buzz and activity in New Town. No one in their right mind would decide to stay there now,” said Rajiv Dasgupta, owner of an apartment next to the upcoming City Centre in the satellite township. “The fears are real,” realtor Pradip Kumar Chopra said. “It needs to be allayed with decisive action by the administration. If people don’t feel secure to move into peripheral areas, the city’s growth will stop. The incident has made me very apprehensive about future projects in the area. If it recurs, builders will look at other cities. We cannot do business in an environment of fear,” Chopra said.
Space group director Piyush Bhagat, who was a partner in the Vedic Village project during its initial years, said the incident had already sent wrong signals. “If mob fury can happen in Rajarhat, it can happen in the city as well. It has shaken everyone’s confidence. If faith is not restored in a couple of months, it will be disastrous for the sector,” he said. United Credit Belani Group director Sumit Dabriwala, too, termed the incident disastrous but did not think it was symptomatic of a larger malaise. “It is an isolated incident and should be viewed as such. But the response time of police should have been faster. If this is repeated, it’ll become a huge challenge,” he said. Ambuja Realty managing director Harsh Neotia, who was the first to build a major project on the city fringes and has substantial investments in New Town, said police need to get to the bottom of what sparked the trouble.
“This is the first time something of this sort has happened since the agitation in the 1970s. I have developments in Raichak. Sushil Mohta has Ibiza on Diamond Harbour Road. There is Lakeland by Ram Ratan Chowdhury. Something like this has never happened before. I hope this is a one-off incident,” he said. Realtors are worried about mob psychosis moving from streets to a private property. “We’ve had trams and buses burnt at the slightest provocation. The government and administration must come down heavily on such acts. We’ve been silent for too long,” said NK Realtors director Pawan Agarwal. Neotia felt the mob mentality has deep roots in our psyche, given the agitational politics in a state that has been politically active for decades. “These are deeper socio-cultural issues that need societal addressing. There is no quickfix solution,” he said.
But is it also to do with unequal development that widens the gulf between the haves and the have nots rather than bridge it? “Development always begins in pockets and then spreads out. But there is need for corporate social responsibility in the sector. Every development needs to have a human face, whether it be creating an better access road that helps everyone, providing drinking water and sanitation facilities, schools or hospitals,” Rungta said.
“It is baffling how a row over a football match could have triggered such chaos, igniting mob violence. It also points to the poor response time of both police and fire brigade. At a Bengal Chamber of Commerce meeting held a couple of months ago, state home secretary Ardhendu Sen had hinted at a Brihottor Kolkata Police (force for greater Kolkata) that would bring adjoining areas like Salt Lake and New Town under its fold. This incident should hasten the formation of such a force because the regimen of Kolkata Police is definitely more superior than the force in the district,” said Rungta, who has a number of projects in the Rajarhat belt.
Other than Action Area I, the other condominium developments in New Town are isolated. Security is a big concern and a deterrent. Sunday’s incident, close to the pockets of development in Action Area II, has further heightened the concerns. “After what happened at Vedic Village, I will not move in till there is more buzz and activity in New Town. No one in their right mind would decide to stay there now,” said Rajiv Dasgupta, owner of an apartment next to the upcoming City Centre in the satellite township. “The fears are real,” realtor Pradip Kumar Chopra said. “It needs to be allayed with decisive action by the administration. If people don’t feel secure to move into peripheral areas, the city’s growth will stop. The incident has made me very apprehensive about future projects in the area. If it recurs, builders will look at other cities. We cannot do business in an environment of fear,” Chopra said.
Space group director Piyush Bhagat, who was a partner in the Vedic Village project during its initial years, said the incident had already sent wrong signals. “If mob fury can happen in Rajarhat, it can happen in the city as well. It has shaken everyone’s confidence. If faith is not restored in a couple of months, it will be disastrous for the sector,” he said. United Credit Belani Group director Sumit Dabriwala, too, termed the incident disastrous but did not think it was symptomatic of a larger malaise. “It is an isolated incident and should be viewed as such. But the response time of police should have been faster. If this is repeated, it’ll become a huge challenge,” he said. Ambuja Realty managing director Harsh Neotia, who was the first to build a major project on the city fringes and has substantial investments in New Town, said police need to get to the bottom of what sparked the trouble.
“This is the first time something of this sort has happened since the agitation in the 1970s. I have developments in Raichak. Sushil Mohta has Ibiza on Diamond Harbour Road. There is Lakeland by Ram Ratan Chowdhury. Something like this has never happened before. I hope this is a one-off incident,” he said. Realtors are worried about mob psychosis moving from streets to a private property. “We’ve had trams and buses burnt at the slightest provocation. The government and administration must come down heavily on such acts. We’ve been silent for too long,” said NK Realtors director Pawan Agarwal. Neotia felt the mob mentality has deep roots in our psyche, given the agitational politics in a state that has been politically active for decades. “These are deeper socio-cultural issues that need societal addressing. There is no quickfix solution,” he said.
But is it also to do with unequal development that widens the gulf between the haves and the have nots rather than bridge it? “Development always begins in pockets and then spreads out. But there is need for corporate social responsibility in the sector. Every development needs to have a human face, whether it be creating an better access road that helps everyone, providing drinking water and sanitation facilities, schools or hospitals,” Rungta said.
ACC Confident of Real Estate Growth
ACC on Sunday divulged its confidence on market and expecting good results in the current fiscal from the real estate in the major cities “With signs of recovery in the real estate sector, we expect to see considerable improvement by the end of this year with a turn around some time in the middle of next year,” ACC Managing Director Sumit Banerjee told reporters. Hoping healthy figures from the sector, he told that the Ready-mix concrete is the future of cement business.
He said, the developed world is enjoying 80-90% of the cement sales through the Ready-mix concrete route, and India, merely 10-15 per cent. Last year the domestic RMC business segment was ailing due to global meltdown and it was hard to found in the business in Tier-II and Tier-III cities in compare to metros. ACC’’s ready-mic concerete subsidiary, ACC Concrete, posted a net loss of Rs 96.81 crore in 2008 though sales volume grew by 37.4 per cent over 2007 and turnover increased by 40 per cent to Rs 514.53 crore.
He said, the developed world is enjoying 80-90% of the cement sales through the Ready-mix concrete route, and India, merely 10-15 per cent. Last year the domestic RMC business segment was ailing due to global meltdown and it was hard to found in the business in Tier-II and Tier-III cities in compare to metros. ACC’’s ready-mic concerete subsidiary, ACC Concrete, posted a net loss of Rs 96.81 crore in 2008 though sales volume grew by 37.4 per cent over 2007 and turnover increased by 40 per cent to Rs 514.53 crore.
Monday, August 24, 2009
ACC Confident of Real Estate Growth
ACC on Sunday divulged its confidence on market and expecting good results in the current fiscal from the real estate in the major cities “With signs of recovery in the real estate sector, we expect to see considerable improvement by the end of this year with a turn around some time in the middle of next year,” ACC Managing Director Sumit Banerjee told reporters. Hoping healthy figures from the sector, he told that the Ready-mix concrete is the future of cement business.
He said, the developed world is enjoying 80-90% of the cement sales through the Ready-mix concrete route, and India, merely 10-15 per cent. Last year the domestic RMC business segment was ailing due to global meltdown and it was hard to found in the business in Tier-II and Tier-III cities in compare to metros. ACC’’s ready-mic concerete subsidiary, ACC Concrete, posted a net loss of Rs 96.81 crore in 2008 though sales volume grew by 37.4 per cent over 2007 and turnover increased by 40 per cent to Rs 514.53 crore.
He said, the developed world is enjoying 80-90% of the cement sales through the Ready-mix concrete route, and India, merely 10-15 per cent. Last year the domestic RMC business segment was ailing due to global meltdown and it was hard to found in the business in Tier-II and Tier-III cities in compare to metros. ACC’’s ready-mic concerete subsidiary, ACC Concrete, posted a net loss of Rs 96.81 crore in 2008 though sales volume grew by 37.4 per cent over 2007 and turnover increased by 40 per cent to Rs 514.53 crore.
Retail Real Estate Investment not a Lucrative Option Anymore
When the going was good in the real estate sector a few years back, retail was seen as a lucrative avenue to park one’s funds. But given that the current scenario creates scepticism on the return on investment, is retail still seen as a profitable option? Take the case of businessman Manoj Shah who had invested in a mall in 2008. However, the slowdown in the market made this investment yield low returns over the next few months. Shah then decided to exit the retail project and to invest his money elsewhere for better returns. Manish Aggarwal, executive director, investment services, of global real estate consultancy Cushman & Wakefield (C&W) India says it is advisable to stay clear of pre-launch or pre-lease projects at this time. “At present, investment in retail real estate is not the most coveted of investment options owing to reduced retail activity. This is primarily due to falling consumer confidence and unrealistic rentals affecting bottomlines,” he says.
Needless to say, the global financial meltdown and the slowdown in the Indian economy have adversely impacted India’s retail sector. “The resulting drop in yield coupled with low leasing activity and high vacancy rates have all led to individual investors staying away from any new retail real estate investments. Additionally, many first-time mall developers who were earlier planning mall developments on sales model (i.e. selling retail space to investors rather than leasing it directly to brands) have now either postponed or cancelled their projects. This has further limited opportunities,” asserts Mr Aggarwal. Developers have a similar take. The retail segment is not particularly considered ideal right now as people are being cautious, feels Manu Goswami, head, business development and strategic planning, Jaypee Greens. Goswami, however, adds that the smart investor is cherry picking and continues to check for inventory that can bring them attractive capital gains later.
Agrees Rajeev Talwar, group executive director, DLF. He says the retail segment will take off only when the economy starts registering growth. “Builders have been slow in investing money in retail projects…retail spending has also been hit. When the segment starts improving, investments will improve too.” If one does want to invest at this time, choosing the right locations is very important for the investor. When you are considering retail, you can invest either in a mall format development or in a high street standalone store format. Chintan Patel, associate director, real estate practice, Ernst & Young, suggests a few key things to consider.
“It is important to consider factors such as presence of prominent anchor/large tenants, tenant mix, location/frontage of the mall vis-Ã -vis any major road, ease of approach and catchment catered while investing in a mall as they can have a significant impact on the rentals. But if you are looking at the high street format, it is imperative to select a prominent ‘address’ for your store, i.e it should feature in leading shopping corridors of the city.” According to C&W, an investor should evaluate opportunities in established retail destinations such as Linking Road and Colaba in Mumbai, Brigade Road and Commercial Street in Bangalore, Khan Market and South Extension in New Delhi, Banjara Hills and Jubilee Hills in Hyderabad and CG Road in Ahmedabad. But opportunities here too may be limited.
“Most owners have made significant gains through leasing of their retail space over the years and are likely to hold on to their investments till demand picks up. In the event of investors exiting from established mall spaces with assured returns, there is an opportunity to invest in malls such as The Forum in Bangalore, the InOrbit Mall, Malad in Mumbai or the MGF Metropolitan/DLF City Centre in Gurgaon. It might be less risky to invest in malls at good locations with typically low vacancy levels,” adds Aggarwal of C&W. But not all feel that retail is moving slow at this time. Rohit Malhotra, CEO, Realtech, feels individual investors are still looking at retail developments and especially at rented properties as these give them an immediate return on investment.
But he says that one must study the options carefully. “In case the properties are in prime areas it is better for the investor to weigh his options carefully as prices of the property in the medium term will appreciate. The return on investment has to be the main consideration in case he moves his investment to another portfolio.” Similarly, Vijay Jindal, CMD, SVP Group, claims to have received good response for its Opulent Mall in Ghaziabad from investors. “This is the time when you can cut lucrative deals. Many developers are coming up with attractive offers. It is profitable as long as you have a long-term vision in mind. It is not meant for the short-term investor.” Whether you decide to invest in retail real estate right now or not, be sure to understand the appreciation potential that the location has to offer. Decide which retail format you would be more interested in and then make a choice. You may just strike a good deal in these tough times.
Needless to say, the global financial meltdown and the slowdown in the Indian economy have adversely impacted India’s retail sector. “The resulting drop in yield coupled with low leasing activity and high vacancy rates have all led to individual investors staying away from any new retail real estate investments. Additionally, many first-time mall developers who were earlier planning mall developments on sales model (i.e. selling retail space to investors rather than leasing it directly to brands) have now either postponed or cancelled their projects. This has further limited opportunities,” asserts Mr Aggarwal. Developers have a similar take. The retail segment is not particularly considered ideal right now as people are being cautious, feels Manu Goswami, head, business development and strategic planning, Jaypee Greens. Goswami, however, adds that the smart investor is cherry picking and continues to check for inventory that can bring them attractive capital gains later.
Agrees Rajeev Talwar, group executive director, DLF. He says the retail segment will take off only when the economy starts registering growth. “Builders have been slow in investing money in retail projects…retail spending has also been hit. When the segment starts improving, investments will improve too.” If one does want to invest at this time, choosing the right locations is very important for the investor. When you are considering retail, you can invest either in a mall format development or in a high street standalone store format. Chintan Patel, associate director, real estate practice, Ernst & Young, suggests a few key things to consider.
“It is important to consider factors such as presence of prominent anchor/large tenants, tenant mix, location/frontage of the mall vis-Ã -vis any major road, ease of approach and catchment catered while investing in a mall as they can have a significant impact on the rentals. But if you are looking at the high street format, it is imperative to select a prominent ‘address’ for your store, i.e it should feature in leading shopping corridors of the city.” According to C&W, an investor should evaluate opportunities in established retail destinations such as Linking Road and Colaba in Mumbai, Brigade Road and Commercial Street in Bangalore, Khan Market and South Extension in New Delhi, Banjara Hills and Jubilee Hills in Hyderabad and CG Road in Ahmedabad. But opportunities here too may be limited.
“Most owners have made significant gains through leasing of their retail space over the years and are likely to hold on to their investments till demand picks up. In the event of investors exiting from established mall spaces with assured returns, there is an opportunity to invest in malls such as The Forum in Bangalore, the InOrbit Mall, Malad in Mumbai or the MGF Metropolitan/DLF City Centre in Gurgaon. It might be less risky to invest in malls at good locations with typically low vacancy levels,” adds Aggarwal of C&W. But not all feel that retail is moving slow at this time. Rohit Malhotra, CEO, Realtech, feels individual investors are still looking at retail developments and especially at rented properties as these give them an immediate return on investment.
But he says that one must study the options carefully. “In case the properties are in prime areas it is better for the investor to weigh his options carefully as prices of the property in the medium term will appreciate. The return on investment has to be the main consideration in case he moves his investment to another portfolio.” Similarly, Vijay Jindal, CMD, SVP Group, claims to have received good response for its Opulent Mall in Ghaziabad from investors. “This is the time when you can cut lucrative deals. Many developers are coming up with attractive offers. It is profitable as long as you have a long-term vision in mind. It is not meant for the short-term investor.” Whether you decide to invest in retail real estate right now or not, be sure to understand the appreciation potential that the location has to offer. Decide which retail format you would be more interested in and then make a choice. You may just strike a good deal in these tough times.
Saturday, August 22, 2009
Friday, August 21, 2009
DLF Bags India Largest Land Deal Worth Rs 1750cr
DLF has bagged the country’s largest land deal so far for Rs 1,750 crore, barely two days after it emerged as the sole bidder for the 350.7 acres of prime real estate in Gurgaon. This is also seen as a sign of revival of real estate in the country. The land was originally tendered in January 2009, but not much interest was shown by the developers so the authority decided to shelve the process. It was put for re-bid later this year and received three bids.
Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) MD, Rajeev Arora said that they have sent the letter of acceptance to the developer. The industrial authority had disqualified two other bidders — Unitech and Bharti Realty — on technical grounds, though their financial bids were better than that of DLF. Officials said that DLF had bid Rs 12,000 per sq metre against the reserve price of Rs 11,978 per sq metre. The land is located at Wazirabad village on Gurgaon-Faridabad road and involves acquisition of agricultural land and getting clearance for commercial, residential and leisure purposes, including an 18-hole golf course.
As per the terms and conditions, the developer has to deposit 10% of the bid amount within 30 days of issue of letter conveying acceptance of bid over and above the earnest money deposit. The regular Letter of Allotment containing detailed terms and conditions of allotment will be issued on receipt of 10% of bid amount.
Ref:http://www.indianrealtynews.com/real-estate-india/dlf-bags-india-largest-land-deal-worth-rs-1750cr.html
RE/MAX India Expand its Area of Operation in 7 More Regions
RE/MAX India, the master regional franchisee of RE/MAX International in India, has expanded its areas of operations in 7 more regions. The company has appointed regional owners for seven new regions which include Bangalore, North & South Gujarat, Rest of Tamil Nadu, Delhi NCR, Chandigarh and Pune. Mr. Samir Chopra, head of RE/MAX operations in India, will retain the Delhi/NCR region in order to maintain first hand experience with the trade. With this development, RE/MAX India is nine regions strong in India within a short span of 4 months into operations.
RE/MAX recently forayed in India with the mission of organizing the Real Estate brokerage industry. The company is rapidly expanding its presence and is planning to establish its operations throughout the country within the next few years. Expressing his delight on this development, Mr. Samir Chopra, CMD RE/MAX India said - “I’m extremely happy and excited about the way things are shaping up. We have found like minded people, who share our values and our vision.”
“RE/MAX India with its network of brokers, authentic information and world class standards of operations will certainly infuse transparency in this sector. The organization of the highly fragmented Real Estate sector will not only solve the woes of the consumers but would also generate many entrepreneurial opportunities in the industry,” Mr. Chopra added.
Gurgaon Rapidly Develops as One of the Most Modern Cities of India
Gurgaon has emerged as one of the most modern cities of India, with state-ofthe-art commercial buildings, posh residential condominiums and large malls. It has emerged as the first choice for a large number of multinational companies opening their offices in the country. The township has benefited hugely from its proximity to India’s capital and power centre at Delhi. In the last ten years, Gurgaon has had a number of MNCs opening their offices here. This has led to a rapid growth in real estate in the city, and today, it has emerged as a major residential, commercial and retail hub. Favorable government policies, good connectivity with Delhi, and its upcoming infrastructure has enabled Gurgaon to position itself as an industrial & IT/ITeS hub. A number of IT/ITeS companies, auto and auto ancillaries and garment export industries are operating out of this place.
The city’s proximity to the domestic and international airports, quality of real estate developments coupled with proactive government policies have helped it to grow faster than any other competing suburbs of Delhi, says Samir Jasuja of PropEquity, a real estate research firm. The commissioning of NH-8 (Delhi-Gurgaon Expressway) has further fuelled developments in Gurgaon. The Metro link, currently under construction, will further strengthen Gurgaon’s position in the NCR by providing muchneeded quality public transport connectivity. The city has also benefited from the government’s enhanced focus on a comprehensive infrastructure development plan for the 2010 Commonwealth Games in the NCR. However, Gurgaon has still a long way to go in terms of social and physical infrastructure as it faces severe power shortages and traffic bottlenecks.
Jasuja says the city is all set to witness a fresh residential supply of 97.60 million sq ft during 2009-2011, 80% of which has already been sold. However, the slowdown in economy for the last one year has affected its rate of absorption. The slowdown in absorption or sale of residential units has led to a significant price drop, in the range of 30% to 45%, for projects getting completed in 2010-2011, and 20% to 30% for projects nearing completion in 2009, Jasuja says. The completed projects are also witnessing a price drop of 10% to 15%. On the other hand, drop in prices have led to an increase in real estate activities as residential sales have picked up due to this significant price correction since the first quarter of 2009. It has also lured developers to launches residential projects in the affordable price bracket.
The slowdown has also affected commercial office market, which witnessed a drop in demand with corporates deferring expansion plans owing to changed business environment. Commercial office market witnessed corrections in terms of capital values and lease rentals. According to a report of PropEquity, the city saw a supply of 7.3 million sq ft in 2008, of which only 63% was absorbed. The gap between demand and supply is expected to widen in the current year as a lot of projects that were scheduled to be operational by 2008, have been delayed and are now likely to get completed in 2009, resulting in an increased supply at 20.9 million sq ft of commercial space in 2009.
The retail market has been affected due to a decrease in consumer spending, as a result of the ongoing slowdown. The earlier expansion plans of retailers are likely to be revised. In fact, retailers are using the slowdown as an opportunity to renegotiate existing leases at lower rentals. With high vacancy levels, developers are evaluating revenue sharing models to attract retailers. But, with the correction in prices, construction activities are picking up. The new Gurgaon-Manesar Master Plan, in fact, is fuelling a boom in developments. It has brought in fresh areas under development and given a lease of life to the city.
The city, says Jasuja, is expected to grow along the southern peripheral area where Sohna Road and Golf Course Road extension are the major growth corridors. With the local civic body - Haryana Urban Development Authority (HUDA) introducing the Gurgaon- Manesar Master Plan 2021, the availability of land for development and avenues for new growth corridors has opened up. Sector 8, 11, 12, 12A and Palam Vihar comprise the old section of Gurgaon. Sector 4, 5, 14, 15, 29, 56 and 57 are amongst the most developed HUDA sectors in Gurgaon. Areas like DLF Phase I-V, Sushant Lok I-III and Golf Course road are the prime residential areas commanding the highest real estate prices. Concentration of new development is mainly in the new sectors, Jasuja points out. Dharuhera, Sohna Road, Pataudi Road, DLF Phase V are the emerging growth corridors.
Total city-level supply by 2011, a report by PropEquity says, is 107.56 million sq ft, including a completed stock of 9.95 million sqft spread across 111 projects, comprising apartments and villas. As per the new master plan, 14,930 hectare of land has been allotted for residential use with an addition of 58 new sectors. 27 per cent of the proposed residential land is under the process of licensing
Ref:http://www.indianrealtynews.com/real-estate-india/gurgaon-rapidly-develops-as-one-of-the-most-modern-cities-of-india.html
Factors Contributing to Price Correction in Real Estate
Recession, while being the primary cause for correction in property prices, is not necessarily the only reason. Scratch deeper, and you will find other factors responsible for correction in values such as increase in land supply/finished products, revision in specifications of buildings by developers, and increase in floor area ratio (FAR). A noteworthy point is while all new projects are being launched at realistic (corrected) prices, many of the existing projects have also corrected their pricing. A broker cites some examples of projects in Gurgaon and Noida, “In Gurgaon, various projects under DLF, Unitech, and Vatika, which were available in and around Sector Road and Sohna Road, near NH-8, in the range of Rs 4,000-8,000 per sq ft almost 7-8 months ago, are now available in the range of Rs 3,500 to Rs 4,500 per sq ft on basic selling price.” In Noida, the broker adds that projects on the expressway under Jaypee, Omaxe, Unitech, and Eldeco, were available in the range of Rs 5,000 to Rs 7,000 per sq ft, 7-8 months ago. But new projects of Jaypee, 3C, Unitech, Amrapali are available in the range of Rs 2,500 to Rs 3,500 per sq ft on basic selling price within the same vicinity.
There has been a significant price correction and this is apparent in the average values prevailing in the NCR. While in upcoming projects at Gurgaon the basic selling price ranges between Rs 2,000 and Rs 3,200 per sq ft, depending on the location/sector, in Faridabad, it is between Rs 1,500 and Rs 3,000 per sq ft, while in Noida, the range is between Rs 2,500 and Rs 3,200 per sq ft. Developers attribute fall in realty values to something else. They feel price matrix is only determined by demand-supply equation. With global financial crisis and unabated rise in Indian inflation index, the cost of buying a house went up. Home loan interest rates also became much higher than the rates many could afford. All these resulted in waning of demand for property. According to Rajeev Rai, vice-president of Corporate Assotech Ltd, “To counter decreasing demand and to gain confidence of all stakeholders of Indian real estate, developers association like NAREDCO and CREDAI decided to bring down prices of various properties by reducing overheads and marketing costs. In some cases, ticket size of the property was reduced with reduction in size of apartment to make it more affordable for the masses.”
One view is also that in bringing down prices, developers are compromising on certain specifications. According to Arjun Kumar, director of AsiaPac International India, “One can see that there has been a compromise on specifications, especially in furnishing and finishing part of the house such as wooden flooring, modular kitchen, wardrobes, fittings in bathroom, etc. Having said this, it would be wrong to say developers have started compromising on the basic structures of buildings.” Another view is that prices have come down due to increase in FAR, especially in Noida, and increase in land supply in Gurgaon and Faridabad. Says Kumar Arjun, “Gurgaon and Faridabad fall under Haryana and there has been increase in land supply because of the revision in master plan. In the new master plan, many more residential sectors have been added and licences for new projects have been approved. All this has added to the supply in market. This has of course given enough room for developers to be competitive in tight economic situation. Noida and Ghaziabad, which are in Uttar Pradesh, are witnessing an increase in supply primarily because more land have been auctioned and given to developers for group housing. The FAR applicable has also been revised from 1.75 to 2.75 and restriction on going vertical has virtually been relaxed. This has definitely led to price competitiveness.”
But Rajeev Rai of Assotech argues that any addition in FAR always comes with additional charges, which has to be paid to the development authority. “In case of ongoing projects, the foundation work and ground coverage norms do not provide much scope for full utilization of additional FAR. So it doesn’t have much bearing on the price level.” However, the fact is, higher FAR is what makes affordable housing possible - for instance, Falcon constructed houses on NH-8 by providing greater number of apartments at reduced sizes and by incorporating cost effective technology. According to Bhim Yadav, CEO, Falcon Realty Services Pvt Ltd, “A higher FAR not only brings in more supply to the market, it is vital for creating room for more affordable housing and control the steep rise in prices. This will ultimately benefit the common man.”
Ref:http://www.indianrealtynews.com/real-estate-india/factors-contributing-to-price-correction-in-real-estate.html
SBI to Open 1000 New Branches Hire 11000 People
State Bank of India (SBI), which is opening 1,000 branches a year and is continuing to expand its operations, plans to hire 11,000 people in the current fiscal. According to SBI Chairman O P Bhatt, the country’s largest lender had witnessed a “lot of growth” in every business segment. The contribution of the overseas operations to the bank’s balance sheet had increased to over 12 per cent from about 8 per cent when he took charge as the chairman. SBI’s credit offtake picked up from the end of July and the bank was expecting to achieve its targeted year-on-year growth rate of 25 per cent in the current year, Bhatt told mediapersons on Thursday on the sidelines of the Global Organisational Development Summit 2009 being held here at the Indian School of Business. He, however, said the existing drought situation could have some impact on credit offtake. But it was too early to give an estimate in this regard.
Bhatt ruled out any similarity between what was happening in India and what has led to the subprime crisis in the US, even though all major banks were aggressively pushing the home loan segment at present. The products and the institutions in India and the US were different. Home loans were given in the US based on the asset value while they were given in India based on the person’s income and his ability to repay. “Except for reducing the interest rate, we have not relaxed any conditions (for giving home loans),” he pointed out. Bhatt said that there was a traction in the home loan segment following reduction in the interest rates. “SBI is now the largest home loan provider. We have surpassed ICICI and HDFC,” he said adding real estate prices had also declined by 15 to 20 per cent in metros.
He said SBI was awaiting further communication from the Reserve Bank of India and the Union government regarding the merger of State Bank of Indore with it. A decision on the merger of other associate banks would be taken only after this. Stating that current and savings accounts (CASA) contributed 38 per cent to the SBI revenues, he said that bank’s CASA registered a growth rate of 23 per cent as against the industry average of 19 per cent.
Ref:http://www.indianrealtynews.com/real-estate-india/sbi-to-open-1000-new-branches-hire-11000-people.html
36 Shops Auctioned for a Whopping Rs 48.76 crore in Manesar
In what could be an early indication of a recovery in the sluggish real estate market, 36 shops in Manesar were auctioned for Rs 48.76 crore against the reserve price of Rs 19.07 crore. The Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) sold the shops at a rate ranging from Rs 1.38lakh per sq metre to Rs1.6 lakh per sq metre against the base price of Rs 58,000/sq metre late Tuesday. The going price has stumped senior HSIIDC officials, who had reduced the reserve price fearing a lukewarm response. “We had slashed the reserve price by 25% since there was apprehension that there could be poor response from bidders. But 189 parties participated in the bidding for 40 shops with basements and this is a positive sign for the realty sector,'’ said an HSIIDC official.
He added while the 16 booths measuring 48 sq metre each were auctioned at Rs 1,38,800 per sq metre registering an increase of 139% against the base price, 20 shop-cum-offices (SCOs) were sold at a higher price. Though their reserve price was also Rs 58,000/sq metre, bidders quoted highest price of Rs 1.6 lakh per sq metre, a jump of 177%. The industrial corporation had floated the tenders for the shops as part of the integrated model township of Manesar, which is a house to many corporates. HSSIDC sources said that the residential complex off the NH-8 has huge potential to emerge as a hot spot in next few years. The residential sector has 554 plots and the industrial corporation has allotted plots to approximately 50 group housing societies.
Real estate analysts maintain that the increased industrial development in the area has prompted property developers to consider residential development in the region. In fact, most of the major property developers have already acquired land along Gurgaon-Jaipur expressway and development has already started. Some of the developers have added a new tag to Manesar calling it as `New Gurgaon’. Anticipating the hectic growth and expansion of Gurgaon and to meet the future needs, Manesar was included in the umbrella Master Plan 2021 for the region. The Manesar project is being developed with all the required facilities like shops, offices and hotels. HSIIDC has earmarked Sector 2 for commercial developments and is developing 12 commercial zones in the township.
Ref:http://www.indianrealtynews.com/real-estate-india/36-shops-auctioned-for-a-whopping-rs-4876-crore-in-manesar.html
He added while the 16 booths measuring 48 sq metre each were auctioned at Rs 1,38,800 per sq metre registering an increase of 139% against the base price, 20 shop-cum-offices (SCOs) were sold at a higher price. Though their reserve price was also Rs 58,000/sq metre, bidders quoted highest price of Rs 1.6 lakh per sq metre, a jump of 177%. The industrial corporation had floated the tenders for the shops as part of the integrated model township of Manesar, which is a house to many corporates. HSSIDC sources said that the residential complex off the NH-8 has huge potential to emerge as a hot spot in next few years. The residential sector has 554 plots and the industrial corporation has allotted plots to approximately 50 group housing societies.
Real estate analysts maintain that the increased industrial development in the area has prompted property developers to consider residential development in the region. In fact, most of the major property developers have already acquired land along Gurgaon-Jaipur expressway and development has already started. Some of the developers have added a new tag to Manesar calling it as `New Gurgaon’. Anticipating the hectic growth and expansion of Gurgaon and to meet the future needs, Manesar was included in the umbrella Master Plan 2021 for the region. The Manesar project is being developed with all the required facilities like shops, offices and hotels. HSIIDC has earmarked Sector 2 for commercial developments and is developing 12 commercial zones in the township.
Ref:http://www.indianrealtynews.com/real-estate-india/36-shops-auctioned-for-a-whopping-rs-4876-crore-in-manesar.html
NRIs Focusing on Indian Investment
A stint or two abroad is a common thing for most professionals these days. No wonder, financial advisors have to deal with many Indians with non-resident tag these days. According to them, most non-residents are keen to keep their Indian ties intact and invest in various avenues like mutual funds (MFs), fixed deposits, real estate and so on. “Most of these people look to return to India finally. That is one of the reasons why they are keen to invest here,’’ says Suresh Sadagopan, chief Financial planner, Ladder7 Financial advisories.
Besides emotional reasons it also makes perfect sense as India is one of world’s fastest growing economies and they can hope to pocket superior returns here. “The chances of getting double digit returns abroad is limited. In India, you can always hope to get 8-10% returns,’’ says a wealth manager with a bank. “For example, Indian stock market has given even 100% returns till a few years ago, something one can never dream of in a developed country. Even fixed income investments will offer you around 8-10%, whereas getting even 3-4% from such instruments is considered great abroad,’’ he said.
But what are the investment avenues the NRI lot flocks to? Many a financial consultant maintains that property is a big attraction for them. “Most of the queries I get are related to property,’’ says an investment consultant who doesn’t want to be named. “Some people want to buy a home because they want to return to India eventually. Others look at property as pure investment. In fact, NRIs were a major force behind the real estate boom that went bust recently,’’ he adds. Sadagopan says some NRIs are also keen on MFs as they are permitted to invest in the entire universe of schemes. “It is not true that everyone wants to invest only in property. Some are also keen to invest in mutual fund schemes, as they know there is a possibility of superior returns,’’ he says. “Also, there are no restrictions on where they can invest. OIC and PIO enjoy all privileges like ordinary Indians. They can invest anywhere they like,’’ he adds.
However, financial advisors caution NRIs that they have to be careful while listing the details at the time of investment. They should clearly mention their status, complete with relevant documents and details. Suresh Sadagopan offers an example of investing in MFs: “They should clearly mention in the application form that they are NRIs. They should also provide their overseas address.’’ He also adds that in the case of fixed deposits, they should know the difference between various deposits like NRE account and NRO account. This is crucial because you can repatriate the income under NRO, while you can’t do the same in NRE account. The issue of relevant papers and documents is something that creeps up regularly in conversations with financial experts. They all insist that having relevant documents is a key factor. “Some investments may require the investor’s status card abroad. If they are going for insurance cover, the company may ask for details like work permit in some cases. It can vary from company to company,’’ says Sadagopan.
Ref:http://www.indianrealtynews.com/real-estate-india/nris-focusing-on-indian-investment.html
Besides emotional reasons it also makes perfect sense as India is one of world’s fastest growing economies and they can hope to pocket superior returns here. “The chances of getting double digit returns abroad is limited. In India, you can always hope to get 8-10% returns,’’ says a wealth manager with a bank. “For example, Indian stock market has given even 100% returns till a few years ago, something one can never dream of in a developed country. Even fixed income investments will offer you around 8-10%, whereas getting even 3-4% from such instruments is considered great abroad,’’ he said.
But what are the investment avenues the NRI lot flocks to? Many a financial consultant maintains that property is a big attraction for them. “Most of the queries I get are related to property,’’ says an investment consultant who doesn’t want to be named. “Some people want to buy a home because they want to return to India eventually. Others look at property as pure investment. In fact, NRIs were a major force behind the real estate boom that went bust recently,’’ he adds. Sadagopan says some NRIs are also keen on MFs as they are permitted to invest in the entire universe of schemes. “It is not true that everyone wants to invest only in property. Some are also keen to invest in mutual fund schemes, as they know there is a possibility of superior returns,’’ he says. “Also, there are no restrictions on where they can invest. OIC and PIO enjoy all privileges like ordinary Indians. They can invest anywhere they like,’’ he adds.
However, financial advisors caution NRIs that they have to be careful while listing the details at the time of investment. They should clearly mention their status, complete with relevant documents and details. Suresh Sadagopan offers an example of investing in MFs: “They should clearly mention in the application form that they are NRIs. They should also provide their overseas address.’’ He also adds that in the case of fixed deposits, they should know the difference between various deposits like NRE account and NRO account. This is crucial because you can repatriate the income under NRO, while you can’t do the same in NRE account. The issue of relevant papers and documents is something that creeps up regularly in conversations with financial experts. They all insist that having relevant documents is a key factor. “Some investments may require the investor’s status card abroad. If they are going for insurance cover, the company may ask for details like work permit in some cases. It can vary from company to company,’’ says Sadagopan.
Ref:http://www.indianrealtynews.com/real-estate-india/nris-focusing-on-indian-investment.html
Sahara Group Plans to Take its Realty Arm Public through $1 Billion IPO
Lucknow-based Sahara Group is planning to take its realty arm public and raise up to $1 billion, which, if successful, would make the company the second valuable player in the segment after DLF. A person with direct knowledge of the development told ET that investment bankers JM Financial, Kotak Mahindra Capital Company and Enam will advise the initial public offering (IPO) of Sahara Prime City (SPCL) along with legal firms Amarchand Mangaldas Shardul Shroff & Co, Hirani & Co, Luthra & Luthra and Milbank of UK. The IPO is expected to hit the market by the end of this year, the person said on condition of anonymity.
Another person — close to one of the three investment banks — said the group wants to offload 10% of its stake in the wholly-owned company, valuing itself at $10 billion (Rs 49,000 crore) behind DLF, which has a market cap of Rs 63,000 crore as on August 19, 2009. Currently, the second valuable firm in the Indian realty firmament is Unitech with a market cap of Rs 17,000 crore. The draft red herring prospectus for the offering will be submitted in a week, the person said A Sahara Group spokesman declined to comment for this story, which was broken earlier in the day by ET NOW, this newspaper’s business news channel. According to a real estate expert, the proposed IPO indicates that the group is refurbishing its real estate business after the Reserve Bank of India (RBI) asked it to pull out of its mainstay parabanking activities over a period of time. RBI has asked Sahara India Financial Corporation not to accept any new deposit which matures beyond June 30, 2011.
It has also been asked to stop accepting instalments of existing deposit accounts with effect from that date. The Sahara group had announced its intention to launch a real estate IPO two years ago. SPCL owns a plethora of firms, including Sahara City Home, Sahara Star Hotel in Mumbai, Sahara Super Speciality Tertiary Care Hospital in Lucknow and Sahara Grace. It has acquired land of 8,500 acres for its township projects. It plans to set up 217 townships, spreading over 100 acres each, in various parts of the country. Of this, the first phase is expected to set up 102 townships, while the remaining in the second phase. The first phase is expected to be over in the next five to seven years while it will kick-off the second phase from 2015.
Sahara’s plans aligns with the larger trend in the realty industry, which is crawling out of a market slump. A clutch of real estate companies are in the process of launching IPOs this year in order to cash in on the slow reversal of fortunes in the sector. Emaar MGF, Lodha Developers, Nitesh Estates and Oberoi Constructions are some of the firms waiting this year to launch IPOs. Of this, Lodha Developers’ is expected to be pegged at over Rs 2,000 crore which is value the company at around Rs 20,000 crore.
Ref:http://www.indianrealtynews.com/real-estate-india/sahara-group-plans-to-take-its-realty-arm-public-through-1-billion-ipo.html
Another person — close to one of the three investment banks — said the group wants to offload 10% of its stake in the wholly-owned company, valuing itself at $10 billion (Rs 49,000 crore) behind DLF, which has a market cap of Rs 63,000 crore as on August 19, 2009. Currently, the second valuable firm in the Indian realty firmament is Unitech with a market cap of Rs 17,000 crore. The draft red herring prospectus for the offering will be submitted in a week, the person said A Sahara Group spokesman declined to comment for this story, which was broken earlier in the day by ET NOW, this newspaper’s business news channel. According to a real estate expert, the proposed IPO indicates that the group is refurbishing its real estate business after the Reserve Bank of India (RBI) asked it to pull out of its mainstay parabanking activities over a period of time. RBI has asked Sahara India Financial Corporation not to accept any new deposit which matures beyond June 30, 2011.
It has also been asked to stop accepting instalments of existing deposit accounts with effect from that date. The Sahara group had announced its intention to launch a real estate IPO two years ago. SPCL owns a plethora of firms, including Sahara City Home, Sahara Star Hotel in Mumbai, Sahara Super Speciality Tertiary Care Hospital in Lucknow and Sahara Grace. It has acquired land of 8,500 acres for its township projects. It plans to set up 217 townships, spreading over 100 acres each, in various parts of the country. Of this, the first phase is expected to set up 102 townships, while the remaining in the second phase. The first phase is expected to be over in the next five to seven years while it will kick-off the second phase from 2015.
Sahara’s plans aligns with the larger trend in the realty industry, which is crawling out of a market slump. A clutch of real estate companies are in the process of launching IPOs this year in order to cash in on the slow reversal of fortunes in the sector. Emaar MGF, Lodha Developers, Nitesh Estates and Oberoi Constructions are some of the firms waiting this year to launch IPOs. Of this, Lodha Developers’ is expected to be pegged at over Rs 2,000 crore which is value the company at around Rs 20,000 crore.
Ref:http://www.indianrealtynews.com/real-estate-india/sahara-group-plans-to-take-its-realty-arm-public-through-1-billion-ipo.html
Thursday, August 20, 2009
DLF Set to Finalise India’s Largest Land Deal
Real estate major DLF is set to bag India’s largest land deal. Haryana government sources said DLF has emerged as the sole bidder to qualify for 350.7 acres of prime land in Gurgaon close to South Delhi for development of a recreation and leisure project which will include an 18-hole golf course. Haryana Industrial and Infrastructure Development Corporation (HSIIDC) disqualified the two other bidders on technical grounds. HSIIDC had fixed the minimum reserve price as Rs 1,700 crore for the land at Wazirabad village on Gurgaon-Faridabad road which includes part of Sectors 42, 53 and 54 as well as agricultural land for the project comprising commercial, residential, sports and golf course activities. A senior HSIIDC official said DLF’s bid was approximately Rs 1,750 crore.
If the deal goes through, it would be the largest single land deal in the country so far. Though BPTP had bagged a 95-acre plot in Noida last year for a whopping Rs 5,000 crore, the deal had to be called off after the realtor failed to make the complete payment. DLF had purchased a 38-acre plot in west Delhi from DCM Shriram Group for Rs 1,680 crore. “We did not open the financial bids of two others as they failed to meet the technical criteria. The sub-committee set up to take the final view on the bidding will submit its report to the government and then the decision would be taken,'’ the official added.
Bharti and Unitech were the two other bidders, officials said. “One of the lead partners in case of Bharti Realty could not meet the financial conditions. In case of Unitech, it did not have the experience of managing an 18-hole golf course for 10 years. Though it has developed one at Manesar, it still does not have the occupation certificate,'’ a HSIIDC official said. However, sources maintained that Unitech had quoted Rs 1950 crore and Bharti Realty Rs 2,500 crore for the project. Though the agency had floated tenders in January, it received only one bid from DLF. It then decided to retender the project with modifications.
In order to make the project viable, HSIIDC increased the FAR by 20%. This additional construction rights could be used by the developer to increase FAR in any of its projects in Gurgaon-Manesar plan. The new revised bid document also incorporated that the government would get environmental and defence clearances for the project. Earlier, these clearances were the responsibility of the developer. The authority also relaxed the payment plan. “These new incorporations are going to benefit DLF in a major way since it has several projects going on in the region,'’ said a market analyst.
Ref:http://www.indianrealtynews.com/real-estate-india/dlf-set-to-finalise-indias-largest-land-deal.html
If the deal goes through, it would be the largest single land deal in the country so far. Though BPTP had bagged a 95-acre plot in Noida last year for a whopping Rs 5,000 crore, the deal had to be called off after the realtor failed to make the complete payment. DLF had purchased a 38-acre plot in west Delhi from DCM Shriram Group for Rs 1,680 crore. “We did not open the financial bids of two others as they failed to meet the technical criteria. The sub-committee set up to take the final view on the bidding will submit its report to the government and then the decision would be taken,'’ the official added.
Bharti and Unitech were the two other bidders, officials said. “One of the lead partners in case of Bharti Realty could not meet the financial conditions. In case of Unitech, it did not have the experience of managing an 18-hole golf course for 10 years. Though it has developed one at Manesar, it still does not have the occupation certificate,'’ a HSIIDC official said. However, sources maintained that Unitech had quoted Rs 1950 crore and Bharti Realty Rs 2,500 crore for the project. Though the agency had floated tenders in January, it received only one bid from DLF. It then decided to retender the project with modifications.
In order to make the project viable, HSIIDC increased the FAR by 20%. This additional construction rights could be used by the developer to increase FAR in any of its projects in Gurgaon-Manesar plan. The new revised bid document also incorporated that the government would get environmental and defence clearances for the project. Earlier, these clearances were the responsibility of the developer. The authority also relaxed the payment plan. “These new incorporations are going to benefit DLF in a major way since it has several projects going on in the region,'’ said a market analyst.
Ref:http://www.indianrealtynews.com/real-estate-india/dlf-set-to-finalise-indias-largest-land-deal.html
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