Residential property prices to fall 8-10% more in 2009

MUMBAI: Despite popular belief, residential property prices are expected to fall by another 8-10% in 2009 till they stabilise in 2010. Residential property rates declined by 18-20 per cent in March this year, from the highs in the first half of 2008. Despite this drop, homebuyers adopted a 'wait and watch' policy, and this trend is likely to continue through 2009, as per the latest report by CRISIL Research.

Owing to improved affordability, steady economic growth and greater liquidity, the residential segment will witness a speedier recovery compared to the retail and commercial segments. Lease rentals not expected to stabilise till another two years. Mr. Sudhir Nair, Head, CRISIL Research says, “Demand in the commercial and retail segment is likely to remain under stress for the next two years owing to excess supply and weak off take.”

Amongst the 10 cities covered by CRISIL Research, Pune, Bengaluru and Mumbai have witnessed the steepest correction in capital values compared to the highs seen in the first half of 2008. Capital values in NCR had already started stabilising during the first half of 2008 even as the upward trend continued in other cities. Hence, capital values in NCR declined by only 18 per cent, which is relatively low compared to other cities. The report covers more than 400 areas across 88 micro markets in 10 cities--Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai-MMR, NCR and Pune.

It is believed that lower home loan interest rates well as better job security would help to revive demand in the residential segment. Hence, capital values are likely to stabilise in the first half of 2010, and increase during the second half of the year.

Realtors up prices, no clear direction yet

Some developers have started pushing apartment prices somewhat north after an anxious few months in which they jumped to affordable homes in a bit to shore up demand.

Builders are walking a tightrope between sustaining demand and tweaking up profit margins, but analysts say it is too early for prices to tighten.

The country’s second largest realtor Unitech has marginally increased prices of its ongoing residential projects in Gurgaon by up to 2 per cent. “We have increased per square ft prices for our under construction projects in Gurgaon by Rs 50. We will be prudently increasing prices,” Sanjay Chandra, managing director, Unitech said.

Emaar MGF, after having sold out a 300 independent floors at Gurgaon’s Sector 65 with a starting price of Rs. 42 lakh, claims to have sold 90 per cent of 400 more –at a base price of Rs. 44 lakh, indicating a push-up in prices.

Delhi-based Parsvnath Limited has jacked up its luxury apartment price in North Delhi’s ‘La Tropicana’ project by more than 10 per cent from Rs. 9,000 per square foot last September to Rs. 10,000 now. But 40 per cent of the flat bookings are yet unsold.

“We expect prices to go up further,” Pradeep Jain, chairman, Parsvnath Ltd said.

“Market sentiment has definitely improved but if developers are contemplating price hikes, the move will go against them as demand has just begun to rise,” Santosh Kumar, chief executive officer, operations at real estate consultancy Jones Lang La Salle Meghraj told Hindustan Times.

Indian HNIs prefer Realty investment in India than abroad

The Indian HNI (high net worth individual) is being aggressively wooed by foreign developers. With the balance of economic power shifting towards Asia, and with India projected to be the world’s third largest economy by 2050, and a subsequent increase in the number of wealthy individuals , property consultants from across the globe are making a sales pitch, and also getting the HNI segment interested enough to buy.

HNIs are people with net financial assets (liquid assets) of at least $1 million, excluding primary residence and consumables. Data from consultants like Cap-Gemini and Merrill Lynch suggests that India has the youngest HNI population in the Asia-Pacific region, with the club having even 28-year-olds on their rolls.

Strong GDP growth, robust figures in industrial and service sectors, high market capitalization, and steady FII inflows are some factors contributing to the rise in HNI wealth. In 2006, India’s HNI population crossed the 1 lakh figure, which made it the second-fastest growing HNI segment in the world, after Singapore, where the growth was 21%.
If one were to analyze the asset allocation of Indian HNIs, data suggests that while equities make up the greatest portion of India’s HNIs’ portfolio at 31%, 17% of their investibles are in real estate.

“If you were to look at the total pie of investment by Indian HNI, only 2% of the investment from Indian HNIs is going in overseas real estate ,” says Samantha Jerath, a director at Jerath Properties, Delhi-based real estate consultant having a portfolio of many HNIs. He adds, “Barring Dubai and London, I do reckon (Investment taking place in) any other place due to cultural differences, unfamiliarity with local laws, language issues.”

Also accessing and monitoring one’s investment becomes so much more difficult when it is an overseas investment, as there is paperwork involved, making payments from time to time, and with many real estate investment options available back home with even better appreciation profiles, Indians any day prefer their home country.

Vikram Baidyanath, a HNI, says out of all global property destinations, London is most attractive to him. “I’ve spent more than six years in London and it is more of a second home. Besides , it gives a comfort level to be in London and see our products displayed in famous stores. The Asian community has a strong presence and English is understood and spoken by all, so even language is not a barrier.”

Though well travelled, he feels he would not be exactly tempted to invest elsewhere - “To invest in a foreign real estate, either one has to have business interest in a place that makes you travel frequently to that country or be really attached to that place. Also, the appreciation in property is not all that phenomenal to attract anyone to casually invest in any and every global locale.”

Lack of awareness about foreign projects and foreign laws is another deterrent for HNIs from investing in foreign real estate. According to Sandip Sen of Calcutta Skyline who has a good network of HNI clients in the eastern part of the country, “We have found that Indians are not investing a lot in foreign markets, if at all they are investing, it is restricted to UK and the Middle East. Primary constraints in making overseas property investments include unfamiliarity with local laws of that country, fear of being stuck in litigation in another country, plus lack of awareness in general. Also there are regulatory issues.” As per RBI regulations, the maximum limit allowed in investments outside India is $200,000 per year. For any higher investments , RBI needs to be approached.

Dubai has been a popular choice with Indian HNIs and that is corroborated by Dubai-based real estate consultant Mansoor from Spring Rose Real Estate consultants, “A lot of Indian, especially HNIs from South India are investing in retail, while HNIs from Delhi and Mumbai are purchasing apartments from well established brand names in real estate. As a matter of fact, HNIs from India, Pakistan and Bangladesh like to have a foothold in Dubai due to citizenship , tax rebates etc.”

With recession, property prices have depreciated globally. But this has not translated into attractiveness towards overseas properties. On the contrary, according to Dr Devinder Gupta, CEO & CMD of Century 21 India, “Due to the global meltdown and uncertainty in realty sector, many projects have become unviable. Even bankers are not willing to lend. All this has led to Indian HNI being wary of investing overseas.”

There are enough accounts of developers being faced with credit crunch, globally, who have stalled construction work, delaying most of their projects in the pipeline. Developer’s cash flow problems and credit crunch has in turn impacted delivery deadlines of projects.

Samantha Jerath sums it, “Real estate investment is all about perception, trust, and ease of accessing and monitoring projects.

DHFL Venture Capital to raise Rs 250 crores this fiscal

MUMBAI: DHFL Venture Capital, promoted by the leading private sector housing finance company, today said that it would raise Rs 250 crore in the current fiscal domestically to fund real estate projects in Tier-II and Tier-III cities.

"We will raise Rs 250 crore in this fiscal which will be deployed in real estate projects in Tier-II and Tier-III cities," DHFL Vice-Chairman and Managing Director Kapil Wadhawan told PTI.

Wadhawan said that the fund would be raised from financial institutions and High Networth Individuals (HNIs) domestically.

Established in 2005, DHFL Venture Capital had raised Rs 100 crore, its maiden, in 2006 domestically from leading financial institutions and banks. The fund has performed well with over 35 per cent Rate of Return (ROR).

"We will target 30 per cent Internal Rate of Return (IRR) with the upcoming fund too," Wadhwan said, adding that the fund would target both individuals and developers for disbursement.

IRR is a capital budgeting metric used by firms to decide whether they should make investments. It is also called ROR, an indicator of the efficiency or quality of an investment.

Real Estate Leads BSE Sensex Higher

Indian shares snapped a two session losing streak Friday led by infrastructure, real estate and metal companies. The Bombay Stock Exchange’s Sensitive Index, or Sensex, rose 1.8%, or 256.36 points, to close at 14521.89 after trading between 14179.77 and 14559.08 in a volatile session. Friday’s gains were helped by investors accumulating stocks at lower levels following as the 30-stock Sensex fell 4.7% for the week – its first weekly loss after 14 consecutive weeks of gains. “There was a lot of bargain hunting,” said Sunil Pachisia, vice president at Pratibhuti Viniyog Securities. Mr. Pachisia said he expects the markets to remain positive next week as traders are likely to cover short positions ahead of the expiry of the current month’s derivatives contract next Thursday.

“This week a lot of people have taken up short positions,” he said. Risk-wary investors have covered their short positions fearing the market may not fall further, while those with a higher risk appetite are keeping their short positions in the hope of making more money, he said. Dow Jones Technical Analysis tips the Sensex in a 13700-15600 range for next week. On the National Stock Exchange, the 50-stock S&P CNX Nifty index rose 62.20 points, or 1.5%, to 4313.60. The total traded volume on the Bombay Stock Exchange was about INR59.52 billion, compared with Thursday’s INR71.56 billion. Gainers outnumbered decliners 1,345 to 1,293, while 66 stocks were unchanged.

The BSE Capital Goods Index was the biggest gainer among the 13 sectoral indexes, soaring 4.6% to 12259.94, led by index heavyweight engineering and construction firm Larsen & Toubro, which surged 5.7% to INR1,496.10. Reliance Infrastructure jumped 5.1% to INR1,262.25, while Jaiprakash Associates gained 4.7% to INR200.25. Bharat Heavy Electricals ended up 2.8% at INR2,090.50, after India’s Minister Of Heavy Industries Vilasrao Deshmukh said the federal government was considering selling up to a 10% stake in the state-run company. In the real estate sector, DLF, the nation’s largest property developer by sales, recovered from its 3.3% fall Thursday and increased 2.6% to settle at INR330.55.

Metal gainers included Tata Steel, which rose 5.9% to be the biggest gainer on the Sensex, ending at INR411.75. The company Friday raised prices on local hot-rolled and cold-rolled steel products by INR500-INR750 per metric ton. Vedanta group’s Sterlite Industries reversed all of Thursday’s 2.3% loss, ending up 3.0% at INR606.70. Reliance Industries, the nation’s biggest company by market value, rose 0.7% to INR2,039.60, after losing more than 14% in the past four sessions on concerns its future earnings may get hurt after an Indian court ordered it to sell gas to former group company Reliance Natural Resources at nearly half the price recommended by the government. State-run NTPC, down 2.2% at INR198.10, and Tata Power, down 1.1% at INR1,164.35, were among the few Sensex losers.

Indian HNI making realty investment on Home turf

The Indian HNI (high net worth individual) is being aggressively wooed by foreign developers. With the balance of economic power shifting towards Asia, and with India projected to be the world’s third largest economy by 2050, and a subsequent increase in the number of wealthy individuals , property consultants from across the globe are making a sales pitch, and also getting the HNI segment interested enough to buy.

HNIs are people with net financial assets (liquid assets) of at least $1 million, excluding primary residence and consumables. Data from consultants like Cap-Gemini and Merrill Lynch suggests that India has the youngest HNI population in the Asia-Pacific region, with the club having even 28-year-olds on their rolls.

Strong GDP growth, robust figures in industrial and service sectors, high market capitalization , and steady FII inflows are some factors contributing to the rise in HNI wealth. In 2006, India’s HNI population crossed the 1 lakh figure, which made it the second-fastest growing HNI segment in the world, after Singapore, where the growth was 21%.
If one were to analyze the asset allocation of Indian HNIs, data suggests that while equities make up the greatest portion of India’s HNIs’ portfolio at 31%, 17% of their investibles are in real estate.

“If you were to look at the total pie of investment by Indian HNI, only 2% of the investment from Indian HNIs is going in overseas real estate ,” says Samantha Jerath, a director at Jerath Properties, Delhi-based real estate consultant having a portfolio of many HNIs. He adds, “Barring Dubai and London, I do reckon (investment taking place in) any other place due to cultural differences, unfamiliarity with local laws, language issues.”

Also accessing and monitoring one’s investment becomes so much more difficult when it is an overseas investment, as there is paperwork involved, making payments from time to time, and with many real estate investment options available back home with even better appreciation profiles, Indians any day prefer their home country.

Vikram Baidyanath, a HNI, says out of all global property destinations, London is most attractive to him. “I’ve spent more than six years in London and it is more of a second home. Besides , it gives a comfort level to be in London and see our products displayed in famous stores. The Asian community has a strong presence and English is understood and spoken by all, so even language is not a barrier.”

Though well travelled, he feels he would not be exactly tempted to invest elsewhere - “To invest in a foreign real estate, either one has to have business interest in a place that makes you travel frequently to that country or be really attached to that place. Also, the appreciation in property is not all that phenomenal to attract anyone to casually invest in any and every global locale.”

Lack of awareness about foreign projects and foreign laws is another deterrent for HNIs from investing in foreign real estate. According to Sandip Sen of Calcutta Skyline who has a good network of HNI clients in the eastern part of the country, “We have found that Indians are not investing a lot in foreign markets, if at all they are investing, it is restricted to UK and the Middle East. Primary constraints in making overseas property investments include unfamiliarity with local laws of that country, fear of being stuck in litigation in another country, plus lack of awareness in general. Also there are regulatory issues.” As per RBI regulations, the maximum limit allowed in investments outside India is $200,000 per year. For any higher investments , RBI needs to be approached.

Dubai has been a popular choice with Indian HNIs and that is corroborated by Dubai-based real estate consultant Mansoor from Spring Rose Real Estate consultants, “A lot of Indian, especially HNIs from South India are investing in retail, while HNIs from Delhi and Mumbai are purchasing apartments from well established brand names in real estate. As a matter of fact, HNIs from India, Pakistan and Bangladesh like to have a foothold in Dubai due to citizenship , tax rebates etc.”
With recession, property prices have depreciated globally. But this has not translated into attractiveness towards overseas properties. On the contrary, according to Dr Devinder Gupta, CEO & CMD of Century 21 India, “Due to the global meltdown and uncertainty in realty sector, many projects have become unviable. Even bankers are not willing to lend. All this has led to Indian HNI being wary of investing overseas.”

There are enough accounts of developers being faced with credit crunch, globally, who have stalled construction work, delaying most of their projects in the pipeline. Developer’s cash flow problems and credit crunch has in turn impacted delivery deadlines of projects.
Samantha Jerath sums it, “Real estate investment is all about perception, trust, and ease of accessing and monitoring projects.

Confusion in Carpet Area Sale

Confusion prevailed over real estate transactions on carpet area figures in the sale agreement. Government of Maharashtra had recently amended various Acts and procedures to have real estate sale to be on the basis of carpet area.
After many complaints of cheating on the super built up area concept, Maharashtra government had announced in its Housing Policy in November 2006 to curb such practices.
The rules and provisions are also applicable on resale of flats ad properties. Previously, documents registered with authorities were having provisions to mention carpet area, accordingly, stamps duty was charged on carpet area in meters basis.
After the notification to the amendments to Maharashtra Ownership Flat Act and other rules, it is now mandatory to have carpet area in meters mention in the sale agreement. The amenities and other utilities may be charged in a separate agreement or bifurcation of sale proceeds into carpet areas and other add on must be mentioned in the sale agreement.
Sellers and builders are still confused with the process since FSI are calculated in built up for certain measurement for BMC and over all FSI calculation if townships are developed. MHADA and CIDCO besides other government agencies still follow built up and super built up area in its ads and public documents. Hence the confusion still persist as to what area to be mention in the sale agreement.

Fire Capital to invest $500 mn in India realty

Improved sentiment in the real estate sector has resurrected the investor confidence. Fire Capital, a global private equity fund that invests in real estate projects, has decided to invest close to $500 million (Rs 2,500 crore) over the next five years. “If we get good land deals we will invest at the rate of $100 million in a year over the next five years,” said Om Choudhry, CEO, Fire Capital Fund Pvt Ltd. “We are targeting an internal rate of return (IRR) of between 25 and 30 per cent on our investments.”

The private equity player that on Sunday launched its project in Nagpur has prepared a roadmap for its investments in the sector going forward.

The company would be investing into projects in the tier II cities unlike many other private equity investments in the real estate sector that go into buying stakes into the real estate companies.The company plans to launch projects in cities like-- Bhubaneshwar, Ahmedabad, Ludhiana, Amritsar and Trichy among others.

Even though the property prices corrected between 30 per cent and 35 per cent over the past 18 months the rise may not be immediate and swift, “I do not see a rise in the property prices over the next six months,” said Choudhry.

While the budget is round the corner and the industry is looking set for next leg of growth there are several relaxations that the industry is looking for itself from the government. “We want infrastructure status for the real estate sector and want tax breaks for specific projects that focus on affordable housing of a significant magnitude,” said Choudhry.

GMR Plans 250-acre aerospace park in Hyderabad

GMR Hyderabad International Airport Ltd (GHIAL) is planning to set up an aerospace park in Hyderabad, which would be spread over 250 acres, even though the aviation sector is going through turbulent times. The park, to be completed in 5-6 years, is coming up in the vicinity of the GHIAL’s new airport in Shamsabad, Hyderabad, where the company already has more than 5,400 acres and is expected to employ 8,000-10,000 people. “The park would be set up in the next 5-6 years. It will be spread over 250 acres,” a senior official of the company told PTI. He, however, declined to share the investment plans of the project. The land for the project has been designated as Special Economic Zone and will enjoy tax and other financial incentives.

The park will offer services like aircraft maintenance and repair, manufacturing of components and sub-systems, and research and development for civil as well as military aircraft. It will also provide training for aviation industry personnel. Besides, it will offer warehousing services and support ancillary industries like tyre manufacturers. The park is expected to generate employment for 8,000-10,000 people. In February, as a first step, GHIAL had announced the setting up of a Rs 400 crore maintenance, repair overhaul (MRO) facility in association with Malaysia Airlines at the aerospace park. GHIAL is a joint venture firm in which GMR Infrastructure holds 63 per cent, the Airports Authority of India and Government of Andhra Pradesh hold 13 per cent each and Malaysia Airports Holding Berhard has the remaining 11 per cent.

Blackstone Makes First Indian Real Estate Acquisition

Blackstone Group LP’s property unit has made its first purchase in the Indian Real Estate market by paying $18 million for a minority stake in Synergy Property Development Services.

Blackstone’s property unit is buying the stake in the Bangalore-based property management and construction company, the newspaper reported. Blackstone was one of the most active private equity firms in India last year, concluding five deals valued at about $800 million.

Synergy has more than 500 staff and has operations in Dubai and Kuala Lumpur, the FT said. Synergy manages about 100 million square feet of real estate, the newspaper said. The acquisition will give Blackstone a platform to make other investments in India’s property market.

No Fresh Supply of Mall Space for South India between January and March

The three major cities in south India — Chennai, Hyderabad and Bangalore —did not witness fresh supply of mall space between January and March this year, according to Cushman & Wakefield. However, these cities would see supply of 4.35 million sft by the year end, the real estate services firm said in its report recently. “Retail real estate across India continued to reel under the current economic pressure while retailers continued to show their apathy towards expansion plans.”

Though Bangalore no new supply, some sporadic leasing activities in the existing malls kept rentals across established locations like Mysore Road and Vittal Mallya Road stable. Rental values in upcoming malls, however, recorded some correction. Bangalore is likely to see about 2 million sft of mall supply in 2009, of which approximately 0.3 million sft is expected in the Whitefield micro market during the second quarter of 2009.

Chennai did not witness any new mall supply during the first quarter of 2009 and rentals dropped by eight per cent at central Chennai while western and southern regions remained stable. Hyderabad some of the highest mall rental corrections ranging from 25 per cent to 29 per cent due to restrained demand from retailers. Main street rentals also saw corrections between 5 per cent and 20 per cent largely due to renegotiations and restrictive demand.

Resale home market fails to attract buyers

MUMBAI: The increase in the demand for housing in the past one month appears to be restricted to new projects. According to industry trackers,resale properties do not have too many takers, at least not in the large cities. In the case of new projects, developers have been offering attractive discounts, while prices in the resale segment have remained high.

Typically, resale properties come with a larger unaccountable component (also referred to as “black”). This, as a proportion of the total price, was earlier between 25% and 30%, while it is now as much as 40%. For instance, in Goregaon, a suburb in western Mumbai, the property price of a one bedroom apartment that is six years old, was around Rs 40 lakh with the seller demanding Rs 16 lakh in black compared with not more than Rs 12 lakh late last year.

Sellers have held on to the price in cities such as Delhi, Mumbai and Bangalore. These tier-I cities saw prices rise sharply in the midst of the boom. Praful Joshi, a Mumbai-based real estate agent, said: “With the sellers of older property not reducing the rates, the number of transactions have reduced substantially.”

Agreed Sunil Bajaj, another city-based property consultant, “The asking rate for old property market is not in line with the prevailing market rate. In Kandivali (a suburb in western Mumbai), the price of an apartment on the first floor on a per square foot basis was as expensive as the one on the penthouse in the same building.” He added that the flat has remained unsold.

Potential buyers have not been finding the going easy. Amit Desai, a Mumbai-based professional employed in a large business group, is one such person. “For a salaried employee, the rates for older property is out of reach since sellers ask for at least 30% of the price in black. This means you get a loan only on the white component (the price after deducting the black component).”

Industry observers said new property has witnessed a price drop of 30-50% in the past six months that is the result of developers facing a liquidity crunch and falling demand. Some buyers have chosen not to go ahead with the purchase, as they feared the property might not be completed. This has led developers to offer schemes like getting the buyer to make a partial payment initially and pay the rest at the time of possession.

Affordable housing a cloak to cut debt?

Does, affordable housing, the new buzzword in the real estate sector, conceal a smart back-end trick from developers who have launched budget homes, some costing less than Rs 10 lakh?

Industry analysts watching the game say the proceeds earned through the bookings are being used to pay back debtors as well as lending surplus cash flow at 20 per cent interest in the market.

“Affording housing schemes have brought lot of cash into hands of developers. Many are servicing their debt through this earning,” said Samir Jasuja, managing director, PropEquity.

“They (developers) have got flexibility to utilize the cash for 12 to 18 months even if they make no profit in selling the flats. It is a win-win situation for both developers and buyers,” said Jasuja whose firm tracks 2,500 developers in 35 cities and provides market information to private equity investors.

Some experts say affordable housing is a good way for developers to make up for the excesses of buying land at high prices.

Most developers take 10 per cent (price of flat) at the time of booking, 15 per cent within 45 days, 10 per cent on excavation, 10 per cent on the first slab and 5 per cent towards cost of construction. But actual constrution starts much later.

“The developers have gone where the demand is. At least there is momentum. The high volume of business would keep them going though with lower margins,” said Gautam Mehra, executive director (real estate practice), PriceWaterhouseCoopers.

High Net worth Investors still Risk Averse

A report by the Economist Intelligence Unit and released by Barclays Wealth on Monday suggests that high net worth investors (HNIs) across the world are not yet ready to take on more risk after all the talk of “green shoots” of recovery . The report which surveyed 2,100 HNIs from across key markets, found that while nine out of 10 HNIs globally do believe that the current markets offer buying opportunities, the majority of them were reluctant to act on this view.

The survey was done between March and May 2009. Investors in India were among the more risk-averse, with about 69 per cent of the respondents sticking to the view that despite opportunities, the risk of price falls was still too high for them to consider taking the plunge into the market. Though an increase in risk appetite is the reason most often cited for the ongoing rally in emerging market stocks, Barclays found that the majority of investors did not want to peg up allocation to riskier assets over the next 12 months. They instead preferred status quo on their portfolio.

“This widespread sense of caution and risk aversion highlights the extent to which wealthy investors have been chastened by the events of recent months and suggests that it may be some time before confidence returns to the market,” observes the report. Only 16 per cent of the wealthy in India, for instance, said they were willing to take higher risk in their portfolio over the next year. Besides preferring status quo, investors also showed a marked preference for straight-forward investments that they knew, such as cash, real-estate, government bonds and stocks of their own country.

The findings show that globally, real-estate was the asset class where the maximum number of respondents (25 per cent) wanted to increase exposure, followed by government bonds (22 per cent) and commodities (21 per cent). In India, 18 per cent of respondents wanted to increase allocation to real-estate next year, compared to 17 per cent who wanted to increase allocation to stocks or cash. Concluding, the report likens the current situation to a mirror image of irrational exuberance. Just as market gains make people more optimistic about the future, a meltdown like the one we saw last year may make them too pessimistic. “Just as during a boom, investors can mistakenly extrapolate a trend of rising prices, so in a downturn they can expect a continuation of falling prices — only to delay re-entering the market and find that they have missed the turn in the cycle,” it observes.

Indian Developer Plans Mega Home Project

A housing project with 2,000 properties up for grabs is to become the third mega-project to be built by an up-and-coming Indian developer. Indu Projects Limited announced Indu City in Bachupally, Hyderabad, would also be designed and built by American Real Estate giants Belt Collins. It follows similar huge housing schemes called Indu Fortune Fields, in Kukatpalli, and Indu Aranya, built at Nagole.

The company also revealed the development would be a fusion between real estate and natural terrain, providing a balance between “nature and high quality living”. Indu projects said: “The proposed gated community is planned for 1,715 apartment units ranging from 750 sq ft to 3,150 sq ft, and a range of 318 villas ranging from 325 sq yards to 600 sq yards.” In line with a current drive towards more affordable housing in India, the developer also said units would be available to suit all real estate budgets.

On-site benefits will include a Swimming pool, club house, and creche, with an international school also on a five acre plot of land. Funding will be part-provided by Red Fort Capital, a private international Real Estate fund which has already put over US$ 1 billion into several schemes across the country. Housing and Commercial Real Estate in Hyderabad has become more popular as the city's business sector continues to grow, with many IT and technology firms setting up home in the local area.

India Property Expo in Dubai Seals Rs. 65.33 cr Deal

The 12th India Realty Expo 2009 held in Dubai saw 106 flats worth Rs 65.33 crore being booked, a senior real estate industry official said. “106 flats worth Rs 65.33 crore were booked (during the expo),” Maharashtra Chamber of Housing Industry (MCHI), CEO, Zubin Mehta, said in a press release issued here. “Around 86 flats worth Rs 80.18 crore are in the pipeline when the NRIs come down to India in July-August on their annual vacation,” Mehta added. MCHI is a leading body of real estate builders and developers. The expo evoked an encouraging response with 2,700 NRIs visiting the exhibition in three days during June 4-6, the release said.

“The softening of real estate prices home loan interest in India were the key reasons that attracted a large number of NRIs during the expo,” Mehta said. Fifteen leading developers and builders showcased their properties at the realty expo. Home finance institutions which participated in the expo included HDFC, DHFL and Bank of Baroda, the release said. “Majority of the walk-ins was Mumbai-specific and this reflected into an opportunity for the developers to close a few deals during the expo itself,” MCHI’s Co-ordinator and Co-Chairman, International Exhibitions, J S Augustine, said. That the expo took place in Dubai when the first signs of an economic revival globally were being witnessed also made a positive impact, he said.

The exhibition, which was inaugurated by Consul (Commerce) to the Consulate General of India, Dubai, Partha Roy, aimed to provide a one-stop solution to all the needs of NRIs intending to purchase a property in India, the release said. MCHI’s President, Pravin Doshi, describing the response as “encouraging”, said that “this encouraging response denotes the demand and popularity of housing in India by NRIs in the Middle-East.” The 15 developers who participated in the expo were Ajmera Builders, Mayfair Group, Akar Creations, Better Homes, Everest Developers, Hiranandani Constructions, Marathon Group, Nahar Group, Nirmal Lifestyle, Nyati Group, Our Town, Pathy Housing, Pranjee Group, Rustomjee and Total Environment.

Realistic Prices boost Flat Bookings, Show Revival Hopes

Early signs of deal-making in apartments during the first quarter of 2009 show a possible revival of demand in the real estate sector, say some analysts.

A study conducted by real estate research firm PropEquity in Mumbai, Bangalore, Chennai, Hyderabad and Gurgaon says absorption has been high among the residential new launches in the first quarter of 2009 in Mumbai, Chennai and Gurgaon, where developers had offered discounts and reduced flat sizes to lure buyers.

But absorption is less in Bangalore and Hyderabad where developers launched few projects on account of oversupply. “Mumbai has seen a rise in the absorption share of new launches. This encouraging trend is indicative that the markets are poised for a recovery if proactive measures are adopted by the real estate community,” said Samir Jasuja, CEO, PropEquity.

In mid-April, DLF opened bookings for its Moti Nagar project in Delhi at Rs 4,500 to Rs 5,500 per square foot against the earlier market price of around Rs 7,000. The 1,400 bookings were sold out in 24 hours, a DLF spokesperson said.
In Mumbai, real estate developer HDIL has received bookings for over 800 flats at its newly launched projects in Kurla and Versova where it had offered substantial discounts.

House buyers, though in small numbers, have started returning to he market after developers slashed property prices between 25 to 40 per cent for new bookings, say industry watchers. But a majority of them are said to be still waiting for a further correction in prices. "How much of these (reported new bookings) are actual sales? There is certainly some momentum in the market, but unless these bookings turn into housing loans, nobody knows whether those who have booked are actual end users," said Pankaj Kapoor, CEO, Liase Foras, a real estate research firm. "The market is heading for revival much before we expected. Every developer who has offered discounts in new projects has reported good sales, " said Niranjan Hiranandani, Managing Director, Hiranandani Constructions.

Buy house, don't rent - message from the housing sector

The economic slowdown has hit home sales and sent prices plummeting. The flip side: home rents have shot up.

Rents went up by around 30 per cent in major cities including Delhi and the national capital region (NCR) last year, as more and more consumers, hit by the slowdown, preferred living in rented houses to investing huge sums to buy properties, industry officials said.

"The slowdown has fuelled the rental market. On an average, the residential rental has gone up 30 per cent in the last one year in Delhi and NCR. In many areas, it went up even 50 per cent," Rajesh Goenka, chairman of Axiom Estates, the London-headquartered provider of property services in India, told IANS.

Added Pradeep Khanna, chairman of Khanna Properties, a west Delhi-based brokerage firm: "The rental for a normal two-bedroom set in Delhi and NCR was about Rs.7,000 per month one year back. However, today it is very difficult to get a decent two-room set on the same rent even in remote localities."

According to industry officials, the high cost of properties and slackening supply of houses have fuelled rentals in Delhi.

"People need a house to live in, and not everyone can buy one. With prices still beyond the reach of a large section of the middle class, staying in rented accommodation is the only option left," Goenka said.

"Even the potential buyers are on a wait-and-watch mode now."

Priyanka Prasad, a jewellery designer, echoed similar views, saying she had to shift home from north Delhi to west Delhi because of high rents.

"I was paying Rs7,500 for a two-room set in the Kamla Nagar area in north Delhi. However, this year the landlord asked for Rs 12,500. This was out of my budget, so I shifted to Dwarka, where I got a similar house for Rs 8,500," Prasad said.

The trend in the housing rental sector is just opposite to the commercial and official rental markets, where prices fell 30 per cent last year, according to reports by global real estate consultant Cushman and Wakefield.

Sameer Nayar, managing director and Asia Pacific head of the real estate unit of Credit Suisse, said supply was more than the actual demand in the office rental sector.

"Office rentals are going down because the supply is more than the actual demand. However, in the residential property sector, the demand is much higher. Naturally, the rent will go up," Nayar said.

Big Realtors infuse cash to ride Downturn

Things have started to look up real estate developers who for the last few months were reeling under the double whammy of poor buyer demand and low availability of funds.

In a month’s time, three major developers including DLF, Unitech and Indiabulls Real Estate have raised money through the financial market indicating the beginning of a revival of investor confidence. They are using the money to restructure business, cut debt and expand projects.

“Availability of credit, for both developers and buyers, and an improvement in demand are essential for a complete recovery,” Anshuman Magazine, managing director, South Asia, at real estate consulting firm CB Richard Ellis.

Indiabullls this week announced an institutional placement of shares to raise Rs. 2,656 crore.“Indiabulls is a debt-free company and we will use the funds to fund our real estate and power business,” Gagan Banga, director, Indiabulls told Hindustan Times.

Last month, Unitech raised Rs. 1,621 crore through a qualified institutional placement (QIP) which led to the promoters’ stake falling to 51 per cent. They now plan to inject Rs 1,000 crore through convertible warrants to take it to 61 per cent, informed sources said.

Last week, DLF’s promoters diluted 10 per cent stakes to aid promoter-controlled leasing affiliate DLF Assets Limited (DAL). “We are pleased to follow through our commitments with this game changing transaction " Rajiv Singh, vice chairman, DLF had said.

Housing Sector back in business

Spurred by price corrections, new launches, lowering of interest rates, increase in sales inquiries and, more importantly, the newfound mantra of ‘affordable housing’, the real estate industry has started showing signs of recovery.

Industry body Assocham has gone to the extent of saying that the real estate recovery is possible in the coming three months. A recent Assocham Business Barometer (ABB) survey has found that anticipating strong policy measures for the real estate in the forthcoming Budget, embattled realty majors see positive signs of recovery taking place within the next three months as affordable housing projects rev up demand and improved cash flows address their liquidity concerns.

As per the survey, a whopping 92% of the respondent developers considered affordable housing as the most dominating segment to shore up the demand in real estate sector. And the policy actions supplementing the robust demand in the housing sector are likely to hold the key for a speedy recovery phase in the sector.

Although the findings of this survey may seem to be too optimistic, particularly in view of the prolonged slowdown in the industry, but taking the current positive signs in the property market into account, both industry majors as well as experts feel the real estate recovery is not a distant dream. And they have ample reasons to believe this.

Firstly, after a gap of more than a year, some real ‘actions’ are being witnessed in the realty market, including the high-profile launches of some major projects coupled with increased sales inquiries. Along with that, some realty majors are also said to have recorded an overwhelming response for their upcoming projects.

For instance, the Jaypee group claims to have booked all the 3300 apartments of Jaypee Greens Aman, its new residential project in Noida, within 24 hours of their launch, while Capital Greens, DLF’s first residential project in Delhi, is claimed to have showed bookings of 1,400 flats on the first day itself. Such instances only prove that buyers and strategic investors are once again warming up to the sector, though in a restricted manner.

Secondly, the Indian economy recorded a better-than-expected growth rate of 6.7% in 2008-09. “The GDP growth rate, clocked in tumultuous times of global financial crisis, lends credibility to the presence of real domestic demand and consumption continuing to fuel the economy, though albeit at a reduced growth rate,” says Neeraj Bansal, associate director - advisory services, KPMG.

Thirdly, sensing a near-term economic recovery and, resultantly, expecting the realty sector to outperform other sectors in the months to come, fund managers are reposing their faith in real estate. This explains why in the month of April, mutual fund houses increased their exposure in the realty sector to Rs 308.16 crore as against Rs 98.76 crore in March, translating into a whopping 212.03% rise in the exposure.

Fourthly, there is a renewed faith of overseas investors also, stemming from the series of steps taken by developers to improve their financial position.” Unitech has, for instance, cut debt by Rs 2,000 crore while DLF has repaid Rs 1,700 crore of loans in the past year. And similar is the case with lots of other large and mediumsized developers,” says Bansal.

Fifthly, home loan disbursements by the country’s top lenders, which signal the actual demand for homes, is also improving. HDFC saw its fourth quarter disbursals going up by 17.5% at Rs 12,400 crore, while LIC Housing saw an increase of 42% and 22% in March and in Q4, respectively. Moreover, a general softening of interest rates has also helped developers cut their borrowing costs by as much as 300 basis points.

Real Estate prices are likely to see some correction

Sarita Mantri, Managing Director, Mantri Realty talks about the organization’s future plans, latest trend and multi-city presence including small cities by developing the high-standard residential and commercial projects all over India.

Mantri Realty has been in the real estate sector since 1986 and recently the group has been confirmed with various Foreign Director Investment (FDIs) close to the tune of US$ 200 million in various projects spread across India.

No Service Tax on Property

It is a big victory for Promoters and Builders Association of Pune and Lakhs of property purchasers in the country. On 23rd August, Service Tax Authority in its circular No.96/7/2007-ST dated 23/8/07 clarified that there will be no Service Tax applicable on builders or developers.

In its para 079.01/.23.08.07 The circular said “in a case where the builder, promoter, developer or any such person builds a residential complex, having more than 12 residential units, by engaging a contractor for construction of the said residential complex, the contractor in his capacity as a taxable service provider (to the builder / promoter / developer / any such person) shall be liable to pay service tax on the gross amount charged for the construction services under ‘construction of complex’ service [section 65(105)(zzzh)].”

The circular further said that “ If no other person is engaged for construction work and the builder / promoter / developer / any such person undertakes construction work on his own without engaging the services of any other person, then in such cases,-

(i) Service provider and service recipient relationship does not exist,

(ii) Services provided are in the nature of self-supply of services. Hence, in the absence of service provider and service recipient relationship and the services provided are in the nature of self-supply of services, the question of providing taxable service to any person by any other person does not arise.

It was objected by the builder's association PBAP of Pune to the Ministry of Finance and other authorities that it is a double taxation and flat purchasers are paying 10 to 12 % more on sale price. After a long fight , the association must be complimented for this great victory. Leaders like Kumar Gera, Lalit Kumar Jain, Atul Goel and others have given the industry its due.

Discounts pay, Home Buyers back in market

New Delhi: Home sales have picked up in select Indian markets over the past couple of months, but analysts warn that prices may not have bottomed out yet as developers are sitting on a huge inventory.

Markets such as Delhi National Capital Region (NCR), including Delhi and surrounding areas such as Gurgaon, Faridabad, Noida and Ghaziabad, have seen a rebound in home demand, with several builders launching projects at a discount to market rates.

They call it disruptive pricing. And it has worked. In one day, DLF, India’s largest real estate company, sold almost double the number of flats in Delhi than all builders together in Mumbai in the March quarter. Check out the numbers. DLF sold 1,356 apartments in Delhi on April 7, when it launched a residential project in West Delhi by offering flats at up to 32% less than market rates.

Unitech, another builder with a nationwide presence, said it sold 3,000 apartments in two months in Gurgaon, Mumbai and Chennai. Jaypee Group said it sold 5,000 apartments in Noida in three months, while BPTP claimed to have sold 4,700 flats in Faridabad in one month. Compare that with 740 flats sold in the whole of Mumbai in the first three months of 2009 and 4,491 apartments sold in the national capital region in the same period, as quoted by a recent UBS report.

“There is a definite a rise in interest among home buyers and an attractive pricing has led to bookings,” Anshul Jain, CEO of international property consultancy firm DTZ India, said. It was the cement-to-hotels conglomerate Jaypee Group that started the affordable house bandwagon in the capital region, by targeting frills and reducing apartment sizes. “We offered houses at prices 25-30% lower than the market rate and that brought buyers to us,” said Jaiprakash Associate director Rita Dixit, who oversees the group’s real estate business.

The pick-up in demand is unlikely to firm up prices soon. “It’s the end user’s market. It will be a long while before speculators get in and jack up prices,” said Unitech MD Sanjay Chandra. UBS analysts, in fact, see further erosion in prices. “The industry will still see further price cuts, as higher absorption is required to clean the system of current inventory,” its analysts Suhas Harinarayan and Pankaj Sharma wrote in a sector report. The March quarter sales accounted for just 10% of the inventory in Mumbai and Delhi, it said. At that rate, it will take another 10 quarters to flush out the inventory even if there’s no fresh supply.

Real Drop in Real Estate Rates

By Sanjay Chaturvedi

Mumbai real estate rates are falling to 2005 level. Docuemnts registered and deals offered in classifieds are real witness of this. Interaction with many builders in the city has revealed that sale has droped to almost fifty percent as compared to December 2007 till March 2008. Though the rates for new projcts have not come down, sale drop will lead to further fall of real estate rates in the city.

Many new projects have started to offer indirect discounts to the actual occupants. Companies and corporate too are waiting for further drop to accommodate their maharajas.

At Nariman Point, though NCPA and other deals were reported highest, but under cutting in the rates and lowest rates were never reported. The last deal for office premises was registered with Rs.18,245/- per sq.ft. For a office space last month. For residential apartment at Cuff Parade was finished with Rs. 22,343/- per sq.ft. The rates for these location were quoted a Rs.26,000/- and Rs.45,000/- respectively.

At Powai, the rates opned by builders at Rs.7,300/- per sq.ft. plus floor rise, whereas the actual dealing at some of the MHADA flats were for Rs.4,300/- per sq.ft. And in a posh development the rates were agreed on Rs.6,000/- per sq.ft.

At Mulund, rates have come down heavily with a slash of Rs.1000/-to Rs.1800/- per sq.ft. At Mira Road, the rates have touched almost Rs.4,000/- is now offering properties at Rs.2,200/- per sq.ft. Commercial and shops do not have any price but any thing which buyer can offer for.

At Santacruz, Khar and Bandra west the rates have touched Rs.25,000/- per sq.ft. is now avalable for Rs.14,000/- to Rs.18,000/- per sq.ft. Many builders have broke the deals with societies on redevelopment since offers made previously are not viable.

At Kandivali and Malad, the rates are worst hit. Builders have recently opened rate at Rs.10,000/- have fallen down to Rs.6,500/- and less.

Investors are selling the stock in Mumbai, Delhi and Chennai and going in for emerging cities where the boom have just started. Mutual Funds and Venture Funds are now coining ideas of sell off stocks and equity in the venture ad wants to liquidate their investment for want to squiring off loss in the stock markets. Brokers are busy in resale and investment sale. Each of them has hundreds of proposals with no buyers in the market. Due to economic conditions, seasonal depression and liquidity crunch besides home loan interest rate hike, the process of declining in real estate rates all over the country is most likely till December 2008.

Stock Brokers turn to Realty as well

After mutual funds and insurance firms, it is now stock brokers who have begun selling flats and commercial spaces to prospective clients. Things are beginning to look up for brokers who had diversified into real estate distribution after broking and third party distribution revenues dried up for them, towards the second half of 2008, reports Shailesh Menon from Mumbai.

Seeing opportunities to make money, several broking firms are in the process of setting up real estate advisory business to cater to their affluent clients. While Sebi does not allow brokers to advise on or sell real estate assets, most broking firms have formed separate companies to take up realty advisory business. A few entities (also having broking operations among other businesses relating to finance) who have begun operating in this segment are Unicon Financial Intermediaries (through Unicon Real Estate), Artha Money, SMC Capital, ICICI Housing Finance (cross-selling through ICICI Direct) and HDFC (cross-selling through HDFC Securities).

If market watchers are to be believed, Religare Enterprises, which recently launched its home finance business, is considering a foray into real estate advisory business; Birla Sunlife Asset Management has begun offering real estate advisory services for offshore clients. According to sources, the AMC has also launched an offshore real estate fund hoping to collect around Rs 2,500 crore from overseas investors — mostly from Gulf countries and Latin America.

The turnaround in market,s coupled with a fall in real estate prices and a dip in interest rates, have done good for brokers who double up as real estate distributors. While the initial months (the trend to start real estate advisory business started in the second half of 2008) were tough, things are beginning to look up for stock brokers who are now selling more spaces to prospective customers.

According to sources, brokers charge anywhere between 2% and 5% as commission (depending on credibility and premium attached to the builder) for specific real estate deals. If the builder is well-accredited and easily saleable, brokerage charges would be in and around 2-2.5%. Projects of second-grade builders and real estate developers with not-so-clean records are advised (and sold) at higher commissions.

“Diversifying into in property markets is an automatic extension to our core businesses — stock broking and wealth management,” said Vikas Mallan, head-distribution, Unicon Financial Intermediaries. “We’re distributors for almost all prominent North-based builders. Unicon has separate 60-member team that advises clients on the real estate deals. As of now, we’re only on first sale side, where we sell budget and premium residential spaces to our clients,” Mr Mallan added.

While Unicon has entered into distribution tie-ups with DLF, BPTP, Meriton Group and Jaypee Associates, Artha Money advises clients on projects constructed by Alliance Projects, DLF, Emmar MGF, Tata Housing and Raheja.

Indian Real Estate back on the radar of NRIs and PIOs

With the India Realty Expo 2009 opening in Dubai on Thursday, Indian real estate is back on the radar of NRIs and PIOs, says Zubin Mehta, CEO, MCHI. The reverse is also true, says Sandeep Joshi, CEO of EventPro International. Global property investments are making a comeback, searching for Indian HNIs, who would be willing to buy property abroad.

With slick presentations and smart brochures, backed up by an even better sales pitch, projects in Mauritius, Australia, Thailand , UK and even the USA, are being offered to the Indian HNI willing to buy property abroad, says Joshi.

"With media reports talking of sales picking up in the residential segment, in the past five months, the global property market feels that the Indian HNI has money to invest and their aim is to get a piece of this. The only question is whether the sales pitch would be interesting enough," says Joshi.

At the Gulf Real Estate Conference in Bahrain last year, Manju Yagnik, vice-chairperson of Nahar Group, who pitched investments in Indian real estate, to GCC-based developers, had a co-speaker in her session, who pitched Australia and Thailand real estate options.

"When a Bahraini delegate asked him about returns on investments in these locations, he was candid enough to admit that they were merely projected returns and that no one could guarantee that these would actually happen, within the time-frame suggested in the presentation. The same issue comes up, when Indian HNIs are wooed by global property consultants," she says.

The post-election political stability and continuation of existing pro-reform economic policies, has been a positive for global property sellers, says realtor Bharat Malik. "The global market scenario is bad. India is seen as being economically better off, plus there is the realisation that Indian HNIs have money to invest. So, logically , you would have global projects pitching for Indian investments," he says.

In line with this, Abdul Majeed Ismail Al Fahim, chairman, Pearl Dubai FZ LLC, which is developing the 'Dubai Pearl' , in the UAE, maintains that India would be 'an integral part of our growth strategy'.