Wednesday, September 30, 2009
Tuesday, September 29, 2009
Sunday, September 20, 2009
Thursday, September 17, 2009
Thursday, September 10, 2009
Relief for Developers as Govt Slashes Amenities Charges
In what could be termed a major relief for developers and home buyers, the state government on Wednesday slashed infrastructure and basic amenities charges by 50 to 75 per cent across various categories of buildings. The revised rates will come into effect from September 9, 2009. However, all projects which have been given approval, or for which demand notes have been raised by the regulatory agencies till Tuesday, will not stand to benefit. These projects will have to pay the amenities charges as per the earlier rates. The biggest beneficiaries of the government’s latest decision are people proposing to buy apartments in multi-storeyed buildings in Chennai and Chengalpet region, for whom, the amenities charge has been brought down from Rs 1,000 per sq metre to Rs 250 per sq metre. It works out to a reduction of roughly Rs 75 per sq ft. The revised rates will have to be paid upfront as a one-time payment for obtaining plan approval for buildings.
A government order issued in this regard on Wednesday pointed out that the government had taken into consideration the slump in the construction industry, dip in real estate sales and high rates of interest for housing loans while taking such a decision. The revised infrastructure charges for various categories of buildings are as follows: for multi-storeyed buildings which are commercial, IT, industrial or institutional in nature or that have a combination of such activities, the levy is Rs 500 per sq metre in Chennai and Chengalpet region. In Coimbatore and Tirupur region, the amenities charge for multi-storeyed buildings is Rs 375 per sq metre and in other regions it is Rs 250 per sq metre.
For multi-storeyed residential buildings across the state, a uniform infrastructure charge of Rs 250 per sq metre is applicable. For non-multi-storeyed commercial, IT, group development or special buildings (either ground-plus-three floors or stilt-plus-four floors) amenities charge is Rs 250 per sq metre in Chennai and Chengelpet region, Rs 190 per sq metre in Coimbatore and Tirupur and Rs 125 per sq metre in other regions. For institutional buildings which are not multi-storeyed, the levy is Rs 100 per sq metre in Chennai and Chengalpet region, Rs 75 per sq metre in Coimbatore and Tirupur and Rs 50 per sq metre in other areas. For non-multi-storeyed industrial buildings the amenities charge is Rs 150 per sq metre in Chennai and Chengalpet, Rs 112.5 per sq metre in Coimbatore and Tirupur and Rs 75 per sq metre in other areas.
Confederation of Real Estate Developers’ Association of India Tamil Nadu chapter president Prakash Challa, while welcoming the move, said, “We will directly pass on the benefit to the customers. We thank the government for heeding to our request. But we are disappointed that the government has not given retrospective effect to the GO. It will lead to unnecessary litigation because in our state a planning process takes two years. Buildings which were planned three years ago, when no such infrastructure charge was there, had to pay the levy because by the time their approvals came, the government had introduced the amenities charge. Hence, the benefit being given to new buildings should be extended to all projects which were cleared since April 8, 2008 (when the previous GO was issued).”
A government order issued in this regard on Wednesday pointed out that the government had taken into consideration the slump in the construction industry, dip in real estate sales and high rates of interest for housing loans while taking such a decision. The revised infrastructure charges for various categories of buildings are as follows: for multi-storeyed buildings which are commercial, IT, industrial or institutional in nature or that have a combination of such activities, the levy is Rs 500 per sq metre in Chennai and Chengalpet region. In Coimbatore and Tirupur region, the amenities charge for multi-storeyed buildings is Rs 375 per sq metre and in other regions it is Rs 250 per sq metre.
For multi-storeyed residential buildings across the state, a uniform infrastructure charge of Rs 250 per sq metre is applicable. For non-multi-storeyed commercial, IT, group development or special buildings (either ground-plus-three floors or stilt-plus-four floors) amenities charge is Rs 250 per sq metre in Chennai and Chengelpet region, Rs 190 per sq metre in Coimbatore and Tirupur and Rs 125 per sq metre in other regions. For institutional buildings which are not multi-storeyed, the levy is Rs 100 per sq metre in Chennai and Chengalpet region, Rs 75 per sq metre in Coimbatore and Tirupur and Rs 50 per sq metre in other areas. For non-multi-storeyed industrial buildings the amenities charge is Rs 150 per sq metre in Chennai and Chengalpet, Rs 112.5 per sq metre in Coimbatore and Tirupur and Rs 75 per sq metre in other areas.
Confederation of Real Estate Developers’ Association of India Tamil Nadu chapter president Prakash Challa, while welcoming the move, said, “We will directly pass on the benefit to the customers. We thank the government for heeding to our request. But we are disappointed that the government has not given retrospective effect to the GO. It will lead to unnecessary litigation because in our state a planning process takes two years. Buildings which were planned three years ago, when no such infrastructure charge was there, had to pay the levy because by the time their approvals came, the government had introduced the amenities charge. Hence, the benefit being given to new buildings should be extended to all projects which were cleared since April 8, 2008 (when the previous GO was issued).”
Navi Mumbai- Emerging Commercial Hub
Even India’s leading conglomerates have taken up commercial space here. The state administration has already shifted wholesale commodity markets to Navi Mumbai. So, you have endorsements from different segments that Navi Mumbai’s commercial real estate is much sought after,” he says. Suresh Haware, MD, Haware Builders concurs. “Even at the ‘nano’ end of the commercial real estate spectrum, demand is high,” he says. It is the small offices and shops’ segment that have witnessed the highest demand at Haware Builders’ commercial projects in Navi Mumbai, he reveals.
Today, industrial units in Navi Mumbai are relocating to locations in Raigadh district and commercial is the latest buzzword in Navi Mumbai’s real estate scenario, says Vijay Gajra of the Gajra Group. “Commercial options in Navi Mumbai span a huge price band. Growth of the residential segment in Navi Mumbai, prior to that of the commercial segment, actually works out in favour of the end-user today, as manpower resources are easily available,” he points out. “Commercial real estate in Navi Mumbai comes at competitive prices vis-à-vis other options in the Mumbai metropolitan region (MMR), with the added advantage of being located in a well-planned city,” adds Gajra.
IT/ ITeS SEZs and businesses that have anything to do with rail/road transport and logistics or shipping, are proving to be the next big segment in Navi Mumbai’s commercial spectrum, shares Mayur Shah, honorary secretary, MCHI. Ramneek Bakshi, principal of global property consultants, LJ Hooker, points out that MNCs view India within the parameters of the ‘Brazil, Russia, India, China’ (BRIC) equation. “When they look at India as a business entity, Mumbai takes prime position. When they start looking out for space, Navi Mumbai, which forms the third level of real estate pricing, is attractive for MNCs looking to set up shop in the Mumbai region,” he explains.
At the Norwegian consulate in Mumbai, George Mathew, honorary consul general, concurs, “If you look at real estate pricing trends in the MMR, Navi Mumbai fits the bill on many counts. However, the clincher is the price efficiency and developed infrastructure that Navi Mumbai provides,” he concludes.
Today, industrial units in Navi Mumbai are relocating to locations in Raigadh district and commercial is the latest buzzword in Navi Mumbai’s real estate scenario, says Vijay Gajra of the Gajra Group. “Commercial options in Navi Mumbai span a huge price band. Growth of the residential segment in Navi Mumbai, prior to that of the commercial segment, actually works out in favour of the end-user today, as manpower resources are easily available,” he points out. “Commercial real estate in Navi Mumbai comes at competitive prices vis-à-vis other options in the Mumbai metropolitan region (MMR), with the added advantage of being located in a well-planned city,” adds Gajra.
IT/ ITeS SEZs and businesses that have anything to do with rail/road transport and logistics or shipping, are proving to be the next big segment in Navi Mumbai’s commercial spectrum, shares Mayur Shah, honorary secretary, MCHI. Ramneek Bakshi, principal of global property consultants, LJ Hooker, points out that MNCs view India within the parameters of the ‘Brazil, Russia, India, China’ (BRIC) equation. “When they look at India as a business entity, Mumbai takes prime position. When they start looking out for space, Navi Mumbai, which forms the third level of real estate pricing, is attractive for MNCs looking to set up shop in the Mumbai region,” he explains.
At the Norwegian consulate in Mumbai, George Mathew, honorary consul general, concurs, “If you look at real estate pricing trends in the MMR, Navi Mumbai fits the bill on many counts. However, the clincher is the price efficiency and developed infrastructure that Navi Mumbai provides,” he concludes.
RBI Makes Bank Lending Easier for SEZs
The Reserve Bank of India (RBI) has made it easier for banks to lend to special economic zones (SEZ). Several types of advances to projects in special economic zones have now been excluded from the definition of commercial real estate loans. Reference to SEZs as commercial real estate loans by RBI in a ’06 circular had made it difficult for those involved in these projects to raise funds. Real estate loans are considered risky and categorised as part of exposure to sensitive sectors which also include capital markets and commodities. There are also restriction on foreign investment in real estate.
Speaking to ET, LB Singhal, director general, Export Promotion Council for EoUs and SEZs said: “We had taken up this issue with the ministry of finance and the ministry of commerce. The matter was before the empowered group of ministers headed by finance minister Pranab Mukherjee, which had decided that SEZ should be treated as infrastructure.” He added that now with the central bank clarification, loans to those developing, operating and maintaining SEZs as well as setting up or acquiring units in SEZs will be part of infrastructure lending. “This would enable domestic institutions and banks to make funds available to SEZ sector on the terms and conditions which are applicable for infrastructure lending,” he added.
In the circular issued on Wednesday, RBI has sought to define a commercial real estate loan as one where the funds are used to acquire real estate and the repayment of the loans is out of proceeds of sale or rentals from the property. Bearing this conditions in mind, RBI has sought to differentiate between loans which could be classified as CRE exposures and those which were not. In the context of SEZ, RBI said that there are projects where there are arrangements to insulate the lease rentals from volatility in the real estate prices. This is done by locking into long-term lease agreements that outlive the loan agreement need not be treated as commercial real estate exposures (CREs).
Speaking to ET, LB Singhal, director general, Export Promotion Council for EoUs and SEZs said: “We had taken up this issue with the ministry of finance and the ministry of commerce. The matter was before the empowered group of ministers headed by finance minister Pranab Mukherjee, which had decided that SEZ should be treated as infrastructure.” He added that now with the central bank clarification, loans to those developing, operating and maintaining SEZs as well as setting up or acquiring units in SEZs will be part of infrastructure lending. “This would enable domestic institutions and banks to make funds available to SEZ sector on the terms and conditions which are applicable for infrastructure lending,” he added.
In the circular issued on Wednesday, RBI has sought to define a commercial real estate loan as one where the funds are used to acquire real estate and the repayment of the loans is out of proceeds of sale or rentals from the property. Bearing this conditions in mind, RBI has sought to differentiate between loans which could be classified as CRE exposures and those which were not. In the context of SEZ, RBI said that there are projects where there are arrangements to insulate the lease rentals from volatility in the real estate prices. This is done by locking into long-term lease agreements that outlive the loan agreement need not be treated as commercial real estate exposures (CREs).
Real Estate in the Hospitality Sector
Up until 2007, most hoteliers, investors and developers, were buoyant when it came to the growth prospects in the hospitality industry. They had enough reason to be optimistic, as every factor which would influence the industry, directly or indirectly, was on a growth trajectory. The global economic slowdown and its effect on the Indian economy, however, have doused the fire of excitement of even the most optimistic developers and investors. It has resulted in an extreme crunch for investment in the hospitality sector, coupled with a decrease in the demand for rooms.
One-fourth of the announced plans have fallen completely flat and the rest are hanging on the edge of viability. DLF, Parsvnath and other developers of similar cadre, have scaled down or slowed down their plans of expansion. Parsvnath, which had plans of adding at least 10,000 rooms, has now stopped acquiring land for any further plans, other than the 20 hotels for which they have already done the same. There have been reports that DLF has been in talks with various hotel companies, to sell eight to nine of their land parcels demarcated for hotel projects, to raise funds. Unitech too has sold its Gurgaon hotel project, in order to reduce its huge debt burden.
The million dollar question, now, is how to bail oneself out of stranded projects. Divesting a part of the stake in the project to gain capital may be one of the options. However, this may not be very easy in today’s market. The project maybe valued at a much lower price than what is expected and may leave the seller with a raw deal. One could also think of repositioning the project. Instead of increasing the investment requirement for a project by planning a high-end luxury hotel, one could look at serviced apartments and budget hotels, at the moment, to get through the times of credit crunch.
Another option would be to reduce the scale of the project. Phasing the project out in stages, where part of the hotel could be operational in a relatively lesser time and with lesser investment than earlier planned, would help ease the credit and liquidity crunch. There are quite a few operators who take a stake in the project as well. Accor is a good example of such an operator who has significant expansion plans in India. Tying up with the right investing operators would, however, not be as easy as these operators would choose only the best of the options available and they would have their own plans in place already. Going back to the lender may be an option worth visiting, to see if they could restructure the existing loan. One could also go for refinancing or extending the loan.
If the borrower has a good record, they could also look at finding a new lender as well, probably an HNI who would be willing to invest. However, if the only option left is to exit the project, the timing would need to be well thought out. If one waits too long for a good price, the price might just go lower. The government has been very liberal, when it comes to FDI regulations in the hotel and tourism industry. According to the government of India - Ministry of Commerce and Industry press note 2 (2000 series), 100 per cent FDI is permissible in the hotel and tourism sector on the automatic route, subject to the automatic approval clauses.
The additional restrictions, applicable to some sectors of real estate, such as area of development being at least 50,000 sq metres; 50 per cent of the project to be completed before five years; no repatriation of funds before three years from date of minimum capitalisation released in 2005; are not applicable to the hotel and tourism industry. Once the credit crunch situation gets better, the inherent demand in the industry that one senses should help attract funds easily, as compared to some of the other sectors. Some say the worst is over and India will be getting back on its feet soon. However, the key is not just to wait and watch, but to try and be one step ahead. Be ahead and decide on when to stop waiting. Only the best will survive and everyone is waiting to see who these companies really are.
One-fourth of the announced plans have fallen completely flat and the rest are hanging on the edge of viability. DLF, Parsvnath and other developers of similar cadre, have scaled down or slowed down their plans of expansion. Parsvnath, which had plans of adding at least 10,000 rooms, has now stopped acquiring land for any further plans, other than the 20 hotels for which they have already done the same. There have been reports that DLF has been in talks with various hotel companies, to sell eight to nine of their land parcels demarcated for hotel projects, to raise funds. Unitech too has sold its Gurgaon hotel project, in order to reduce its huge debt burden.
The million dollar question, now, is how to bail oneself out of stranded projects. Divesting a part of the stake in the project to gain capital may be one of the options. However, this may not be very easy in today’s market. The project maybe valued at a much lower price than what is expected and may leave the seller with a raw deal. One could also think of repositioning the project. Instead of increasing the investment requirement for a project by planning a high-end luxury hotel, one could look at serviced apartments and budget hotels, at the moment, to get through the times of credit crunch.
Another option would be to reduce the scale of the project. Phasing the project out in stages, where part of the hotel could be operational in a relatively lesser time and with lesser investment than earlier planned, would help ease the credit and liquidity crunch. There are quite a few operators who take a stake in the project as well. Accor is a good example of such an operator who has significant expansion plans in India. Tying up with the right investing operators would, however, not be as easy as these operators would choose only the best of the options available and they would have their own plans in place already. Going back to the lender may be an option worth visiting, to see if they could restructure the existing loan. One could also go for refinancing or extending the loan.
If the borrower has a good record, they could also look at finding a new lender as well, probably an HNI who would be willing to invest. However, if the only option left is to exit the project, the timing would need to be well thought out. If one waits too long for a good price, the price might just go lower. The government has been very liberal, when it comes to FDI regulations in the hotel and tourism industry. According to the government of India - Ministry of Commerce and Industry press note 2 (2000 series), 100 per cent FDI is permissible in the hotel and tourism sector on the automatic route, subject to the automatic approval clauses.
The additional restrictions, applicable to some sectors of real estate, such as area of development being at least 50,000 sq metres; 50 per cent of the project to be completed before five years; no repatriation of funds before three years from date of minimum capitalisation released in 2005; are not applicable to the hotel and tourism industry. Once the credit crunch situation gets better, the inherent demand in the industry that one senses should help attract funds easily, as compared to some of the other sectors. Some say the worst is over and India will be getting back on its feet soon. However, the key is not just to wait and watch, but to try and be one step ahead. Be ahead and decide on when to stop waiting. Only the best will survive and everyone is waiting to see who these companies really are.
Oman to Invest in Mangalore Based Township Project
A sovereign fund of the Sultanate of Oman is investing roughly Rs 620 crore, or $125 million, in Mangalore-based realty developer Mohtisham’s 300-acre integrated township, sources privy to the development said. The deal is probably the largest fund action in Indian tier-II real estate. Oman Investment Fund, through a Cypress-incorporated entity, is picking up 50% stake in Mohtisham Estates, a joint venture developing a 18-19 million sq ft project on the Mangalore-Bangalore highway.
When contacted, SM Arshad, Mohtisham, confirmed the investment. “We can confirm that Oman Sovereign fund has taken a stake in the project,” he said. He, however, refrained from divulging financial details of the transaction. Mohtisham is a nearly two-decade-old realty player with established ties in the Arabian Gulf. It is believed that the transaction was a direct one and did not go through a market process. Several Middle-East sovereign funds have been scouting for opportunities in India’s real estate and infrastructure sector as they have a liking for investments backed by physical assets and those are broadly in line with Shariah principles. Sovereign funds of Abu Dhabi, Saudi Arabia, Oman and Qatar are active in the country at the moment.
Oman fund’s investment would flow into the project in a phased manner and could even top $125 million, sources added. For a while now, sectoral experts have been predicting the emergence of big real estate play in India’s tier-II, or even tier-III, centres. And this deal could be one of the early precursors to a developing story. Sources said work on the project would start early next year and is likely to be completed over eight years. The first phase of the project is expected to hit the market in three years. The township will have residential units, a mall, schools, hotel and a special economic zone.
Real estate trackers are split on whether Mangalore is ready to absorb a massive development of this scale. But optimists believe investors in the project are possibly ahead of the revival curve in a city touted as an energy and education hub in the boom years. “The potential remains undiminished. ONGC has led the pack with significant investment initiatives. The city, given its proximity to Manipal, is already an education hub. It has large overseas linkages especially with the Middle-East and is an expanding port city,” explained one sectoral observer. The only downside is probably the communal clashes that rocked the city in recent years, and the emergence of an ultra conservative fringe that hurt the city’s cosmopolitan image.
When contacted, SM Arshad, Mohtisham, confirmed the investment. “We can confirm that Oman Sovereign fund has taken a stake in the project,” he said. He, however, refrained from divulging financial details of the transaction. Mohtisham is a nearly two-decade-old realty player with established ties in the Arabian Gulf. It is believed that the transaction was a direct one and did not go through a market process. Several Middle-East sovereign funds have been scouting for opportunities in India’s real estate and infrastructure sector as they have a liking for investments backed by physical assets and those are broadly in line with Shariah principles. Sovereign funds of Abu Dhabi, Saudi Arabia, Oman and Qatar are active in the country at the moment.
Oman fund’s investment would flow into the project in a phased manner and could even top $125 million, sources added. For a while now, sectoral experts have been predicting the emergence of big real estate play in India’s tier-II, or even tier-III, centres. And this deal could be one of the early precursors to a developing story. Sources said work on the project would start early next year and is likely to be completed over eight years. The first phase of the project is expected to hit the market in three years. The township will have residential units, a mall, schools, hotel and a special economic zone.
Real estate trackers are split on whether Mangalore is ready to absorb a massive development of this scale. But optimists believe investors in the project are possibly ahead of the revival curve in a city touted as an energy and education hub in the boom years. “The potential remains undiminished. ONGC has led the pack with significant investment initiatives. The city, given its proximity to Manipal, is already an education hub. It has large overseas linkages especially with the Middle-East and is an expanding port city,” explained one sectoral observer. The only downside is probably the communal clashes that rocked the city in recent years, and the emergence of an ultra conservative fringe that hurt the city’s cosmopolitan image.
Tuesday, September 8, 2009
Indiabulls launches High-End Residential Project in South Mumbai
Close on the heels of launching Indiabulls Sky, its high-end residences project in South Mumbai, Indiabulls Real Estate Ltd has now announced the launch of a mini-township, Indiabulls Greens, just 5 kilometers from Panvel station. Spread across a serene 25 acres in close proximity to the Mumbai-Pune highway, the project offers a good alternative for buyers from Kharghar and Belapur looking to upgrade to a bigger home and a better lifestyle.
Greens offers a slew of amenities that include: a clubhouse with a gym, a swimming pool, sports facilities including a cricket pitch, a school, hospital, convenient shopping facilities, dry & utility balconies, 24-hour power backup, ample parking space and a dedicated bus service to and from the train and bus station.
The facilities on offer here also include a service management system on-call, which ensures that the residents will find domestic help and other ancillary assistance without any effort. The landscaping of the project has been designed to ensure maximum greenery from landscaped walkways and eco gardens to dense perimeter woodlands. The inaugural rate for the project starts at Rs2,200 psf for the first 50 apartments.
Greens offers a slew of amenities that include: a clubhouse with a gym, a swimming pool, sports facilities including a cricket pitch, a school, hospital, convenient shopping facilities, dry & utility balconies, 24-hour power backup, ample parking space and a dedicated bus service to and from the train and bus station.
The facilities on offer here also include a service management system on-call, which ensures that the residents will find domestic help and other ancillary assistance without any effort. The landscaping of the project has been designed to ensure maximum greenery from landscaped walkways and eco gardens to dense perimeter woodlands. The inaugural rate for the project starts at Rs2,200 psf for the first 50 apartments.
Investors Scripting Real Estate Recovery
“These are investors who are taking an opportunistic view of the situation where prices have corrected considerably in many locations ,” says Sanjay Dutt, CEO business at Jones Lang LaSalle Meghraj (JLLM). He estimates that a good 40% of the stock sold in the last few months would have gone to investors. In Delhi-NCR , this figure might be higher at 50%. “Investors are back in good numbers and before the curve goes up, they want to buy. Some who have bought are already hoping to book profits during this Diwali ,” he adds. This could be a precursor to further improvement in investor sentiments, since investors would take this as a sign to look towards a sustainable run in the future.
Investors took flight from the residential real estate market when the market crashed last year and many have been shy of venturing back. The last few months though have seen a number of affordable launches at price points, which have stimulated the market . Most developers have launched mid-income housing in the Rs 20-40 lakh range, which has created a movement. While the short-term investor is there, interestingly, a good number of the investors are medium to long-term investors. “These investors are flocking to real estate because of the lack of other investment opportunities in the market at the moment,” says Ajit Krishnan , partner, real estate practice at audit firm Ernst and Young who feels the trigger for these investors was the drop in price points in the residential segment in the last eight months.
These investors are not purely speculative and are investing in real estate as a shelter against inflation , he says. Other investment opportunities today do not yield the same results. Developers on their part are insisting that a majority of the buyers in their projects are end-users . As there is no set way to differentiate investors from end-users , Unitech looks at consumer behaviour to judge one from the other. “Investors usually are not too bothered about specification details , do not go for site visits too often . We have not seen such behaviour at our projects. It appears that a large majority are end-users ,” says R Nagaraju, general manager of corporate planning at Unitech. Wherever prices have been brought down to attract customers , there have been investors but Aditi Vijayakar, executive director , residential services at Cushman & Wakefield says these investors are mostly long term. “These investors are using this decline in the market to buy another property which they can decide on selling after the project is delivered ,” she adds.
Alongside investors are endusers who are mainly interested in completed homes. “The question is of consumption. We are definitely seeing movement in completed properties which are being picked up end-users ,” explains Krishnan. Prices in the residential market in NCR-Delhi and Mumbai have started to climb up in the last months or so and Vijayakar warns that it is a little too early to raise prices. “In the medium term, it will not be sustainable for developers,” she says. There is a concern that the few end-users who have started to show interest might be deterred from making purchases if the prices of homes keeps rising.
Investors took flight from the residential real estate market when the market crashed last year and many have been shy of venturing back. The last few months though have seen a number of affordable launches at price points, which have stimulated the market . Most developers have launched mid-income housing in the Rs 20-40 lakh range, which has created a movement. While the short-term investor is there, interestingly, a good number of the investors are medium to long-term investors. “These investors are flocking to real estate because of the lack of other investment opportunities in the market at the moment,” says Ajit Krishnan , partner, real estate practice at audit firm Ernst and Young who feels the trigger for these investors was the drop in price points in the residential segment in the last eight months.
These investors are not purely speculative and are investing in real estate as a shelter against inflation , he says. Other investment opportunities today do not yield the same results. Developers on their part are insisting that a majority of the buyers in their projects are end-users . As there is no set way to differentiate investors from end-users , Unitech looks at consumer behaviour to judge one from the other. “Investors usually are not too bothered about specification details , do not go for site visits too often . We have not seen such behaviour at our projects. It appears that a large majority are end-users ,” says R Nagaraju, general manager of corporate planning at Unitech. Wherever prices have been brought down to attract customers , there have been investors but Aditi Vijayakar, executive director , residential services at Cushman & Wakefield says these investors are mostly long term. “These investors are using this decline in the market to buy another property which they can decide on selling after the project is delivered ,” she adds.
Alongside investors are endusers who are mainly interested in completed homes. “The question is of consumption. We are definitely seeing movement in completed properties which are being picked up end-users ,” explains Krishnan. Prices in the residential market in NCR-Delhi and Mumbai have started to climb up in the last months or so and Vijayakar warns that it is a little too early to raise prices. “In the medium term, it will not be sustainable for developers,” she says. There is a concern that the few end-users who have started to show interest might be deterred from making purchases if the prices of homes keeps rising.
Developers not to Pay Fine for Late Delivery if Specific Date is not mentioned on Contract
Real estate developers cannot be fined for late delivery of possession of a flat to an allottee if no specific date of its delivery is mentioned in the contract, the apex consumer body has held. The National Consumer Commission further held that the acceptance of the belated delivery of the flat in 1993 without protest renders it impossible for the consumer fora to award compensation to the buyer in this case.
The Commission passed the order on a plea of the allottee, Ashok Khanna, seeking compensation from the Ghaziabad Development Authority (GDA) for the late delivery of the flat and extra sum charged by it. “Where time is not the essence of the contract then the buyer, instead of rescinding the contract on the ground of non-performance, accepts the belated performance in terms of the delayed contract and then the question of any breach of agreement does not arise,” the Commission headed by Jstice Ashok Bhan said.
The Commission passed the order on a plea of the allottee, Ashok Khanna, seeking compensation from the Ghaziabad Development Authority (GDA) for the late delivery of the flat and extra sum charged by it. “Where time is not the essence of the contract then the buyer, instead of rescinding the contract on the ground of non-performance, accepts the belated performance in terms of the delayed contract and then the question of any breach of agreement does not arise,” the Commission headed by Jstice Ashok Bhan said.
Monday, September 7, 2009
Saturday, September 5, 2009
Parsvnath Developers will Sell Shares to Overcome Debt
The New Delhi-based developer aims to sell shares to institutional investors by the end of October, and the stake in a housing project this month to a private equity fund” Parsvnath Developers Ltd plans to sell as much as $100 million (Rs489 crore) of shares and stake in a real estate project as it seeks to trim its debt to one-third by March, chairman Pradeep Jain said in an interview. “The New Delhi-based developer aims to sell shares to institutional investors by the end of October, and the stake in a housing project this month to a private equity fund,”Jain said. In June, the firm got Rs90 crore from private equity firm Red Fort Capital for a stake in a New Delhi housing project.
Indian developers including Unitech Ltd and Indiabulls Real Estate Ltd have raised more than $2.6 billion since April as the Bombay Stock Exchange (BSE) Realty Index more than tripled from a 9 March low. Investors are speculating a decline in borrowing costs and property prices will revive housing demand in a nation with an estimated shortage of 24.7 million homes. “The quarter for the sector has been good, but the sustainability will have to be checked,” said Nitin Idnani, an analyst with Enam Securities Pvt. Ltd in Mumbai. “Any increase in prices may dampen demand.”
Shares of the developer rose 2.73% to Rs120 on Thursday in BSE trading. The stock has more than doubled this year, after plunging 90% in 2008. “The worst for the real estate sector is behind us,” Jain said. There’s a renewed interest by overseas investors, depending on the quality of the projects. Parsvnath, which expects to get about Rs5,000 crore from sale of homes over 24-30 months, aims to trim its debt to Rs500 crore by March, Jain said.
Indian developers including Unitech Ltd and Indiabulls Real Estate Ltd have raised more than $2.6 billion since April as the Bombay Stock Exchange (BSE) Realty Index more than tripled from a 9 March low. Investors are speculating a decline in borrowing costs and property prices will revive housing demand in a nation with an estimated shortage of 24.7 million homes. “The quarter for the sector has been good, but the sustainability will have to be checked,” said Nitin Idnani, an analyst with Enam Securities Pvt. Ltd in Mumbai. “Any increase in prices may dampen demand.”
Shares of the developer rose 2.73% to Rs120 on Thursday in BSE trading. The stock has more than doubled this year, after plunging 90% in 2008. “The worst for the real estate sector is behind us,” Jain said. There’s a renewed interest by overseas investors, depending on the quality of the projects. Parsvnath, which expects to get about Rs5,000 crore from sale of homes over 24-30 months, aims to trim its debt to Rs500 crore by March, Jain said.
Gujarat Real Estate Developers to Visit Japan and Korea
Even as Gujarat chief minister Narendra Modi hopes to see the state, alongwith Japan and Singapore dominate the Asian economy, a delegation of 95 real estate developers from Gujarat will be visiting Japan and Korea to study and imbibe technological know-how of infrastructure in these Asian economies. The delegation, comprising members of Confederation of Real Estate Developers Assocation of India (CREDAI) Gujarat chapter, will be accompanied by members of Japan External Trade Organisation (JETRO) and Korean Chamber of Commerce and Industries.
“We will be leaving with Japanese and Korean delegation to visit these two countries to undertake a technical study of their infrastructure and try to bring those technology to Gujarat. Both Japan and Korea have exhibited some technology in building their infrastructure and developers in Gujarat intend to imbibe them to come up with some technologically advanced properties that are cost efficient as well,” said Jaxay Shah, president, CREDAI Gujarat delegation. The real estate developers delegation will leave for these countries from September 29, 2009 and return in mid October 2009, Shah added.
In Gujarat, JETRO has been in talks with the state government for investment on the Delhi-Mumbai Industrial Corridor (DMIC) - India’s mega infrastructure project in association with Japan. From Palanpur in Banaskantha to Valsad down south, the DMIC will traverse 38 per cent of its 1,483-km route through Gujarat. Moreover, the upcoming Dholera special investment region (SIR) will see a mini-Japan with several projects from the country. Apart from Dholera SIR and Dahej PCPIR, the Japanese have shown interest in developing Aliabet, a wasteland in the Gulf of Khambhat. During the Vibrant Gujarat Global Investors’ Summit (VGGIS) 2009, Japan had also been the partner country with the state government.
“We will be leaving with Japanese and Korean delegation to visit these two countries to undertake a technical study of their infrastructure and try to bring those technology to Gujarat. Both Japan and Korea have exhibited some technology in building their infrastructure and developers in Gujarat intend to imbibe them to come up with some technologically advanced properties that are cost efficient as well,” said Jaxay Shah, president, CREDAI Gujarat delegation. The real estate developers delegation will leave for these countries from September 29, 2009 and return in mid October 2009, Shah added.
In Gujarat, JETRO has been in talks with the state government for investment on the Delhi-Mumbai Industrial Corridor (DMIC) - India’s mega infrastructure project in association with Japan. From Palanpur in Banaskantha to Valsad down south, the DMIC will traverse 38 per cent of its 1,483-km route through Gujarat. Moreover, the upcoming Dholera special investment region (SIR) will see a mini-Japan with several projects from the country. Apart from Dholera SIR and Dahej PCPIR, the Japanese have shown interest in developing Aliabet, a wasteland in the Gulf of Khambhat. During the Vibrant Gujarat Global Investors’ Summit (VGGIS) 2009, Japan had also been the partner country with the state government.
Developers Target Industrial Areas of Tier 2 & 3 Cities
The demand fundamentals of India are now focused around cities that have sufficient economic activity, be it industrial, service sector-driven or incentive-driven programs by the State Government. In Gujarat, which has seen considerable industrial progress, cities of Ahmedabad, Surat and Vadodara come readily to mind.Baddi in Himachal Pradesh and Pantnagar and Rudrapur in Uttaranchal attracted a lot of residential developers, thanks to government policies. In the South, Coimbatore, Vizag and Kochi emerged, either thanks to a large investor segment or as the outcome of sufficient economic activity. Towards the West, Pune, Nasik and Nagpur are noteworthy in this context.
In all cases, developers positioned their development close to industrial hubs, targeting a totally different price segment. While this was a worthy ambition , it was poorly conceived as a plan since many of them did not factor in State Government-level regulatory challenges such as local municipal laws.
Real Estate Major IREO appoints Crayons News
Global real estate giant IREO has appointed Crayons Advertising as its media AOR following a multi-agency media pitch. The company is expected to spend up to Rs 50 crore in the next two months. The teaser campaign kicks off today in OOH and print. The TV campaign will break a little later. The OOH hoardings will be put up in Delhi, the NCR and Punjab, while the print campaign will break in newspapers and business magazines. This is the first time that IREO has appointed a creative and media agency. The creative duties are being handled by McCann Erickson.
IREO will pump $500 million in various infrastructure projects in India. The group has already invested $1.5 billion in India and is one of the largest investors in the country’s real estate sector. IREO has a portfolio of 13 projects located in prime locations around the country, and plans to pump in $500 million in various infrastructure projects over a period of seven years.
IREO will pump $500 million in various infrastructure projects in India. The group has already invested $1.5 billion in India and is one of the largest investors in the country’s real estate sector. IREO has a portfolio of 13 projects located in prime locations around the country, and plans to pump in $500 million in various infrastructure projects over a period of seven years.
Wednesday, September 2, 2009
Changes in Indian Real Estate Affairs
Real estate in India has always been the playing field for entrepreneurs. This industry has witnessed unprecedented highs and frightening lows over the years. One is often left dyspnoeic with the continuous shifts in this sector. Due to rise in demand in the IT/ITeS sector and significant increase in FDI, the commercial and retail real estate markets experienced tremendous growth in the first quarter of 2008. Land deals accrued around Rs 23,000 crore with additional deals worth Rs 10,000-crore in the pipeline. The highest recorded land deal was Mumbai’s Bandra-Kurla Complex. However, it has not been an easy journey for all in the property market. Last year, the global property collapse exacerbated by the credit bubble burst resulted in reduced finance and business activity. Equity markets also remained lacklustre and raising money through IPOs proved to be difficult. Both real estate giants, Unitech and DLF, delayed the plans to raise money through REIT issues after witnessing unfavourable initial response.
Consequently, lack of funds forced developers into high interest loans. High credit amounts proved to be detrimental for property companies. Most companies borrowed a large portion of their land-development outlays up front and relied on advance sales to repay these loans. However, poor sales led to delays and massive cost overruns. According to industry estimates, around Rs 8,000 crore worth of projects had faced considerable delay by June 2008. The collapse of Lehman Brothers, in September 2008, was perhaps the most significant event that spiflicated an already floundering property market in India. It triggered a shockwave that rippled through the liquidity centric commercial and retail real estate markets leaving a trail of defaults, delays, and losses. Even though property prices have corrected by 22-42% in major cities over the last few months, 10-15% downside is further expected. Commercial real estate demand has languished as corporate firms deferred expansion plans to deal with the credit situation.
Negative absorption rate aggravated by falling rentals led to decreasing margins. Companies like DLF, with 40% of its portfolio in the commercial and retail space, reported 29% y-o-y decline in 2009 revenues while its net profit plummeted by 43%. Similarly, the top line was also distorted for companies like Ansal (-26%), Parsvanath (-60%), etc. Timely and synchronised measures taken by central banks and governments around the world restored balance and prevented a total collapse of the financial system. Thus, markets saw a mild recovery. According to Rajeev Rai, vice-president of Corporate Assotech Ltd, “To counter decreasing demand and to gain confidence of all stakeholders of Indian real estate, associations like NAREDCO and CREDAI decided to bring down prices of various properties by reducing overheads and marketing costs.
In some cases, ticket size of the property was reduced with reduction in size of apartment to make it more affordable for the masses.” As per a report by Grant Thornton, the total number of PE deals announced during the first half of 2009 stood at 93 with a total announced value of $2.89 billion with the highest proportion invested in real estate and infrastructure management worth $1.61 billion. Bhim Yadav, CEO, Falcon Realty Services Pvt Ltd, reckons, “A higher FAR not only brings in more supply to the market, it is also vital for creating room for more affordable housing and control the steep rise in prices, ultimately benefiting the common man.” The Mumbai real estate saw a sharp price correction. Average peak rentals fell 40–60%. While there was a slight mismatch with excess supply, (supply of over 30mn sq ft over 2008–10E vs expected demand of 22mn sq ft), the demand in Mumbai has been healthy.
UnlikeMumbai, commercial and retail space in NCR is expected to languish due to weaker absorption rate. As per Centrum, the average vacancy rate in malls across India was about 9% in Q408 and NCR had the highest vacancy rate of around 25%. According a study by Knight Frank India, average rentals in Gurgaon was down from Rs 120/sq ft to the Rs 51/sq ft while rents in Noida dropped from Rs 90/sq ft to Rs 44/sq ft. In conclusion, as market conditions stabilise, the financial markets will slowly pick up resulting in an improved liquidity scenario, stable government, and affordable prices. This may well serve to bring back the shine to this lacklustre sector.
Consequently, lack of funds forced developers into high interest loans. High credit amounts proved to be detrimental for property companies. Most companies borrowed a large portion of their land-development outlays up front and relied on advance sales to repay these loans. However, poor sales led to delays and massive cost overruns. According to industry estimates, around Rs 8,000 crore worth of projects had faced considerable delay by June 2008. The collapse of Lehman Brothers, in September 2008, was perhaps the most significant event that spiflicated an already floundering property market in India. It triggered a shockwave that rippled through the liquidity centric commercial and retail real estate markets leaving a trail of defaults, delays, and losses. Even though property prices have corrected by 22-42% in major cities over the last few months, 10-15% downside is further expected. Commercial real estate demand has languished as corporate firms deferred expansion plans to deal with the credit situation.
Negative absorption rate aggravated by falling rentals led to decreasing margins. Companies like DLF, with 40% of its portfolio in the commercial and retail space, reported 29% y-o-y decline in 2009 revenues while its net profit plummeted by 43%. Similarly, the top line was also distorted for companies like Ansal (-26%), Parsvanath (-60%), etc. Timely and synchronised measures taken by central banks and governments around the world restored balance and prevented a total collapse of the financial system. Thus, markets saw a mild recovery. According to Rajeev Rai, vice-president of Corporate Assotech Ltd, “To counter decreasing demand and to gain confidence of all stakeholders of Indian real estate, associations like NAREDCO and CREDAI decided to bring down prices of various properties by reducing overheads and marketing costs.
In some cases, ticket size of the property was reduced with reduction in size of apartment to make it more affordable for the masses.” As per a report by Grant Thornton, the total number of PE deals announced during the first half of 2009 stood at 93 with a total announced value of $2.89 billion with the highest proportion invested in real estate and infrastructure management worth $1.61 billion. Bhim Yadav, CEO, Falcon Realty Services Pvt Ltd, reckons, “A higher FAR not only brings in more supply to the market, it is also vital for creating room for more affordable housing and control the steep rise in prices, ultimately benefiting the common man.” The Mumbai real estate saw a sharp price correction. Average peak rentals fell 40–60%. While there was a slight mismatch with excess supply, (supply of over 30mn sq ft over 2008–10E vs expected demand of 22mn sq ft), the demand in Mumbai has been healthy.
UnlikeMumbai, commercial and retail space in NCR is expected to languish due to weaker absorption rate. As per Centrum, the average vacancy rate in malls across India was about 9% in Q408 and NCR had the highest vacancy rate of around 25%. According a study by Knight Frank India, average rentals in Gurgaon was down from Rs 120/sq ft to the Rs 51/sq ft while rents in Noida dropped from Rs 90/sq ft to Rs 44/sq ft. In conclusion, as market conditions stabilise, the financial markets will slowly pick up resulting in an improved liquidity scenario, stable government, and affordable prices. This may well serve to bring back the shine to this lacklustre sector.
SEZs Regaining Prominence
Global trends suggest that barely 10 per cent of special economic zones (SEZs) that are planned actually fructify, says Mayur Shah, MD of SEZ Marathon Group. At Nexzone, his upcoming IT and ITeS SEZ site in the periphery of Navi Mumbai, Shah says that the global trend is reflected in India too. “Ninety per cent of the Indian SEZs that were to be announced have been dropped and the remaining 10 per cent will succeed,” he says. “Times will be positive, from now on,” he predicts. “All indications are that the markets in Europe and North America will be back to business, between April and September of next year,” he says. That will bring back smiles on the faces of Indian IT and ITeS companies and also BPO and KPO companies, but it will also create new challenges for them. IT and ITeS SEZs can prove to be among the best solutions for these challenges, feels Shah. World class infrastructure will be the key to the success of not just IT and ITeS SEZs, but also of manufacturing and industrial SEZs, says Shah. The tenants for these will be a mix of mid-sized Indian companies that will be looking to go global, as well as some of the large players in the respective domains, explains Shah.
Any marketing strategy in terms of SEZs should be directed at new domestic and international companies, gearing up to enter the Indian market and hoping to expand operations after deployment, points out Abhishek Kiran Gupta, head (research), Jones Lang LaSalle Meghraj. Commercial real estate specialist, Mohanjeet Sehgal, sees value-additions when it comes to SEZs, over the next couple of years. “Policy flip-flops and land acquisition issues have created a negative impression, especially when STPI was granted a year’s extension in the last budget,” he says. “However, when the STPI concessions cease, ultimately those who have space in IT and ITeS SEZs will be clear winners,” he insists. In Navi Mumbai and its periphery, he sees great potential for BPO and KPO companies at SEZs. “Marketing activities for SEZs were rather slow, till recently. Now, companies are comparing different aspects of leasing space in SEZs in Navi Mumbai vis-à-vis Mumbai’s central suburbs. It is decision making time, now,” he says.
Rajesh Gadgil has just made a presentation to a large company that is looking out for SEZ space in Thane. “SEZs totally change the outlook of potential lease tenants,” he says. It is not just the large players that are considering its positives, says Gadgil, who adds that smaller sized IT spaces will also get good demand from start-ups and small entrepreneurs. According to Ashok Kumar, principal and managing director, CresaPartners India, the target audience for SEZs and the issue of striking the right balance between portfolio and tenant mix, needs to kept in mind. While SEZs are needed to accelerate GDP growth and attract foreign investment, the ‘indecision’ on land acquisition and other policies has resulted in numerous SEZs not being able to take off, he points out.
SEZs are not a suitable or tempting platform for existing STPI-based companies seeking to consolidate, cautions JLLM’s Abhishek Kiran Gupta. “In addressing the target audience of large, new companies, the marketing strategy should highlight the fact that new companies can avail of the full tax benefits that SEZs provide and that these benefits will continue to be applicable as they expand operations,” he suggests. India is known for its entrepreneurial spirit and the IT, ITeS and BPO/ KPO sector are no different, shares Dilawar Nensey, joint MD, Royal Palms. “Lease rental is an important factor that impacts the small-sized start-up entrepreneur,” points out Nensey and innovative schemes may just help the IT/ ITeS/ BPO/ KPO entrepreneur get the right sized start-up for his project. Nensey echoes Shah’s thoughts that the sector is bound to flourish and that a unit in a SEZ makes long term business sense. “India will always remain an IT/ ITeS superpower and SEZs will be the key to ensuring that we remain competitive in global markets,” he concludes.
Any marketing strategy in terms of SEZs should be directed at new domestic and international companies, gearing up to enter the Indian market and hoping to expand operations after deployment, points out Abhishek Kiran Gupta, head (research), Jones Lang LaSalle Meghraj. Commercial real estate specialist, Mohanjeet Sehgal, sees value-additions when it comes to SEZs, over the next couple of years. “Policy flip-flops and land acquisition issues have created a negative impression, especially when STPI was granted a year’s extension in the last budget,” he says. “However, when the STPI concessions cease, ultimately those who have space in IT and ITeS SEZs will be clear winners,” he insists. In Navi Mumbai and its periphery, he sees great potential for BPO and KPO companies at SEZs. “Marketing activities for SEZs were rather slow, till recently. Now, companies are comparing different aspects of leasing space in SEZs in Navi Mumbai vis-à-vis Mumbai’s central suburbs. It is decision making time, now,” he says.
Rajesh Gadgil has just made a presentation to a large company that is looking out for SEZ space in Thane. “SEZs totally change the outlook of potential lease tenants,” he says. It is not just the large players that are considering its positives, says Gadgil, who adds that smaller sized IT spaces will also get good demand from start-ups and small entrepreneurs. According to Ashok Kumar, principal and managing director, CresaPartners India, the target audience for SEZs and the issue of striking the right balance between portfolio and tenant mix, needs to kept in mind. While SEZs are needed to accelerate GDP growth and attract foreign investment, the ‘indecision’ on land acquisition and other policies has resulted in numerous SEZs not being able to take off, he points out.
SEZs are not a suitable or tempting platform for existing STPI-based companies seeking to consolidate, cautions JLLM’s Abhishek Kiran Gupta. “In addressing the target audience of large, new companies, the marketing strategy should highlight the fact that new companies can avail of the full tax benefits that SEZs provide and that these benefits will continue to be applicable as they expand operations,” he suggests. India is known for its entrepreneurial spirit and the IT, ITeS and BPO/ KPO sector are no different, shares Dilawar Nensey, joint MD, Royal Palms. “Lease rental is an important factor that impacts the small-sized start-up entrepreneur,” points out Nensey and innovative schemes may just help the IT/ ITeS/ BPO/ KPO entrepreneur get the right sized start-up for his project. Nensey echoes Shah’s thoughts that the sector is bound to flourish and that a unit in a SEZ makes long term business sense. “India will always remain an IT/ ITeS superpower and SEZs will be the key to ensuring that we remain competitive in global markets,” he concludes.
UBI Offers Lower Home Loan Rates
Union Bank of India (UBI), today said that it has reduced interest rates on its housing and auto loans as a part of a festival offer. The public sector lender would now offer home loans at 8.50 per cent for the first three years and at floating rate linked to its benchmark prime lending rate from the fourth year onwards for loans up to Rs 50 lakh, a press release issued here said.
For loans above Rs 50 lakh, UBI now offers a concession of 0.25-1 per cent over floating rates for the first three years depending the tenor of the loan. Interest rates for car loans have also been reduced by 0.75-1 per cent, depending on the tenor, the release said. For a tenor of upto three-years, the new rate will be 10 per cent and for a period between 3-5-years, the reduced rate will be 10.50 per cent, the release said. The festive offer will be effective from September 1 to October 31.
For loans above Rs 50 lakh, UBI now offers a concession of 0.25-1 per cent over floating rates for the first three years depending the tenor of the loan. Interest rates for car loans have also been reduced by 0.75-1 per cent, depending on the tenor, the release said. For a tenor of upto three-years, the new rate will be 10 per cent and for a period between 3-5-years, the reduced rate will be 10.50 per cent, the release said. The festive offer will be effective from September 1 to October 31.
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