ghar4u- Indian Realty News

Developers Reconsider Luxury Housing

2009-08-12T03:47:00.001-07:00

As demand trickles back into the property sector, particularly in the affordable housing space, bringing back buyers and pushing up sales, developers such as QVC Realty, Lodha Group, Unitech Ltd and Ajmera Group are trying various ways to revive their so-called luxury projects in Bangalore, Mumbai and Delhi. So while some are adding cheaper homes alongside villas to boost sales, others are re-launching their high-end offerings in the hope that there will be demand for them. Prakash Gurbaxani, chairman and managing director of QVC Realty doesn’t think so, which explains his company’s decision to launch the smaller houses: “Given the current market dynamics, we recognized the need for a lower ticket size product. Buyers are eager to see prices for homes come down and this time it is end-users, and not speculators, driving the demand.”

The Rs150 crore project is the first development of Bangalore-headquartered QVC Realty Pvt. Ltd, the country’s first venture capital-funded realty firm, backed by IL&FS Investment Managers Ltd. Still, other developers remain hopeful about the prospects of their re-launched offerings. Lodha Aria in Mumbai’s East Parel area, a high-end residential project, was launched by the Lodha Group in March 2008. It was a limited soft launch, primarily for investors and the firm closed a couple of deals. In July, the project was launched again, this time for buyers. The project has 30 three-bedroom apartments, two on each floor, at 2,100 sq. ft each, with prices starting at Rs3 crore. “It’s a good time to launch now after a dry spell last year because buyers’ interest is rising,” said R. Karthik, vice-president marketing, Lodha Group.

The launch, he added, was triggered by rising demand at the company’s other Mumbai project, where an 1,800 sq. ft apartment costs Rs3 crore. “What worked for us was the various sizes of apartments that buyers could pick from.” Analysts second Gurbaxani’s assessment of the market and say demand is yet to return to the “luxury” segment of the real estate market and that there are several reasons why developers are re-launching such projects. “First, luxury projects aren’t selling as much as affordable ones, so many projects have been reclassified from luxury to ‘upper middle class’. Developers are repositioning projects by cutting the size of apartments,” said Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj, a real estate advisory.

And demand has returned to this segment in Mumbai, Puri added. “Developers rationalized prices by reducing size of apartments by 25-45% and by offering price protection to buyers by telling them that if prices came down, they would be given the benefit of the price drop,” Puri said. A Bangalore developer has chosen to go the other way. In a recent auction of nine premium homes for Rs5.5 crore each in the Century Avalon project located at Jakkur in north Bangalore, not a single residence was sold. The builder, Century Real Estate Holdings Pvt. Ltd, has now decided to sell only two to three homes in the project and sell the rest once they are ready. Houses that are ready to move in typically fetch a higher price. The developer is changing part of the master plan to make the houses bigger and is offering customized interiors.

Unitech recently redesigned its luxury project Unitech Grande on Noida Expressway. From penthouses and duplexes, the firm now plans to re-launch the project as an integrated township with high-rise apartments, villas and developed plots. Unitech Grande was planned on 347 acres acquired by Unitech for Rs1,582 crore in May 2006 in what was then the largest land deal. Initially, 12 towers were planned, with 36-45 floors each, including duplexes and penthouses. Waning demand for luxury apartments propelled Unitech to redesign the project. This May, the firm launched residential plots, called The Willows, at the site. Around 200 plots have been sold, a company spokesman said. “There is demand in the market but the pricing and the positioning of the product are important,” said Alexander Moore, managing director, L.J. Hooker India, a real estate agent that conducted the auction.

At the Ajmera Infiniti project in Bangalore’s Electronic City, the developer is now selling cheaper homes in the Rs20-27-lakh category three years after the project’s launch. After initially trying to sell houses for Rs.40-72 lakh, the developer is revising the plan for the remaining part of the project and will now build 250 two-bedroom and 180 three-bedroom flats. “We have seen huge demand in other projects in the same price category. We have got lot of enquiries since we made the change,” said Bandish Ajmera, the Ajmera Group’s managing director.

High Vacancy Levels Pose Problems for Asian Office Space Market

2009-08-12T03:45:00.000-07:00

Floors of office space in key business districts of Delhi and Mumbai are awaiting occupants, although rentals have gone down and business confidence is said to have returned, according to a study that tracks Asian market. “The Bandra Kurla Complex and Kalina districts of Mumbai, for example, saw overall vacancy levels rise to 29.4 per cent, while vacancy levels in Noida in the National Capital Region hovered at around 40 per cent,” real estate consultancy CB Richard Ellis (CBRE) said in its Asia Market View Q2-2009. The report said the election of a new government and falling interest rates improved local business sentiment during the second quarter in India.

However, despite small signs of improvement, cities like Mumbai, Delhi and Bangalore witnessed a slide in office rentals due to an exodus of occupants from the CBDs as corporates moved to alternative locations as a cost cutting measure. “While the second quarter of 2009 observed some improvement in the office-space market with levels of enquiries going up, vacancy levels continued to remain high.” CBRE Chairman and MD (South Asia) Anshuman Magazine said. “The fall in capital values has encouraged more companies to explore and evaluate opportunities for buying rather than leasing the required office space,” he added. He said there is an improved level of activity in the sector but the markets are expected to remain soft in the short to medium term.

“Although the rise in demand for less costly premises bolstered office sub-markets outside the CBD, landlords of buildings in secondary office destinations struggled with the consequences of speculative overbuilding and were forced to increase incentives to recruit tenants,” the report said, adding, that this led to the rise in level of vacancy. CBRE said the overall Asian market has started showing signs of stability in the second quarter of 2009 but companies remain focused on reducing costs and tightening their real estate expenditures. “Most Asian cities either recorded a smaller negative net absorption or a mild increase in office requirements. Overall vacancy for Asian cities rose 60 basic points quarter-on-quarter to 12.5 per cent in the second quarter, but the rate of increase slowed from 120 basic points in the previous quarter,” it said.

Overall, the Asian leasing markets were sluggish during Q2 and office rents remained caught in the down cycle. “Overall office rents in Asia fell 6.7 per cent in the second quarter, decelerating slightly from the 8.1 per cent decline witnessed in the previous quarter as most cities underwent a milder rate of rental reduction,” it said.

Feel good factor coming back into real estate: CREDAI

2009-08-11T21:20:00.000-07:00

BANGALORE: The "feel good factor" is coming back into the real estate sector with enquiries for both commercial and residential space slowly picking up, Karnataka Confederation of Real Estate and Developers' Association (CREDAI) said.

"The feel good is coming back", Raj Menda, President, CREDAI-Karnataka told reporters while announcing a two-day realty Expo from August 15, showcasing 150 properties of 32 leading property developers.

"In the commercial space, where corporates were zeroing in on office space, there has been a demand for 30 lakh square foot office space in Bangalore," he said.

Suresh Hari, Secretary, CREDAI, Karnataka, said: "Since April 2009, people have again started their quest for homes. More people are looking to stretch their hand as far as they can reach right now instead of foreseeing income rise in the future. This has resulted in the resurgence of affordable homes in the bracket of Rs 20 lakh to Rs 50 lakh. Banks have also opened out in reducing home loan rates".

The realty expo would have 2500 houses that would be ready in the next six months and 18,000, which would be completed in one-and-a-half to three year period, indicating that developers were optimistic of sales picking up, Raj said.

There has been a 60 per cent growth in the March 09 quarter over the December 08 quarter, he said.

Need realty regulators in states: Parekh

2009-08-11T21:19:00.000-07:00

MUMBAI: Housing Development Finance Corporation (HDFC) chairman Deepak Parekh has said there is a compelling need to have real estate regulators at state level to deal with issues concerning the housing sector. “There is a compelling need for state-level real estate regulators,” Parekh said in an annual report of the company sent to shareholders.

Discussing various aspects of real estate, he said, "It would be a missed opportunity if the government were not able to lay out an institutional framework for a real estate regulator".

According to Parekh, regulators’ role would be to monitor the affordable housing agenda, promote real estate reforms and ensure transparency especially by mandating that flats be sold only on carpet area and act as a platform to protect buyers from real estate fraud.

Referring to the affordable housing, Parekh observed that affordable housing is not about box-sized , budget homes in far-flung places where there is no connectivity to work places and little surrounding infrastructure. "Affordable housing has to be able to cut across all income segments and has to make economic sense in terms of proximity to work place", he said.

About challenges being faced in rural housing, he sid challenges of rural housing are vastly different from urban housing and key reform like permitting the mortgage of agricultural land for residential purpose was needed. Parekh has also criticised tendency of state housing boards to make profits by selling lands.

He said,"many housing boards have shifted their focus to merely selling land for profit and sitting on cash surpluses. Such profits should be mandatorily ring fenced and deployed only for affordable housing," he said.

Project Delays Mainly Caused by Diversion of Funds by Major Developers

2009-08-09T21:42:00.000-07:00

The prime reason behind project delays in Delhi-NCR has been the diversion of funds by all the major developers. During the boom time, they had over-booked their projects and then failed to deliver their commitments. In fact, the immediate impact of the global slowdown on the Indian residential real estate market was most visible during the second half of 2008. And then, many under construction projects got delayed due to a sudden and rapid contraction in demand. This was accompanied by a significant drop in the residential real estate supply statistics across India as many developers adopted the cautious approach and deferred their plans for any new launches for the rest of 2008.

By early 2009, many developers had adopted the obvious strategy of price correction in existing projects to clear mounting inventories and lure the consumers back into the market. During this period there was another paradigm shift that occurred as many developers understood that the market had converted from an investor driven one to an end user dominant one. Recognising that the end users were seeking homes that were affordable the developers altered their product portfolio and launched affordable housing across India to revive demand by the end of the first quarter of 2009. The Affordable housing concept coupled with reduced home loan rates put the residential real estate market on the path to recovery.

While this interesting phenomenon was emerging across India, PropEquity began a research on 36 cities in India to study the overall impact of this shift and rank the city that holds the highest potential of future growth, provides maximum investment potential and has demonstrated the healthiest absorption values during this dynamic phase of real estate development. Over 10,000 apartment and villa projects of 3000 developers in 36 cities were analysed during the course of the study for the first two quarters of 2009 to rank the top 10 leading real estate destinations in India. DELHI-NCR

Our study has revealed some of the startling facts like the four cities of the National Capital Region (NCR) are amongst the top 10 cities ranked on absorption. Noida has emerged as the leader in NCR. Noida and Faridabad have demonstrated high absorption primarily due to launch of affordable projects. The recent projects of Jaypee (Aman) in Noida and BPTP (Elite Floors) in Faridabad were primarily driving the high absorption values in these cities with developers commanding more than 70 per cent of the market share for the period of Jan 09 to June 09. Only 3 cities namely Gurgaon, Ghaziabad and Faridabad of the NCR appears in the list at low rankings of 5th, 7th and 8th

The gap between the first (Mumbai) and second (Pune) ranked cities is 21 per cent. However this gap doubles (51 per cent) between the cities ranked 2nd (Pune) and 3rd (Noida). Thereafter the rank differences are marginal. Mumbai witnessed the highest absorption of 17,689 units during the period of Jan 09 to Jun 09. Pune which had recorded low absorption levels till Dec 08 witnessed a healthy absorption of 13,899 units during the first half of 2009 and was ranked 2nd in the category. Mumbai and Thane representing Mumbai Metropolitan Region, together lead the total absorption at 22, 049 units, followed closely by NCR at 20,275 units.

The southern region has the second largest share in the unsold supply category that stands at 31 per cent of the total. The eastern region has witnessed lowest absorption levels As compared to the rest of India. Kolkata represents the eastern region and has the lowest unsold supply at 9,672 units and is 10th in the overall ranking.

Peninsula Land to mop up Rs 500 cr through QIP

2009-08-09T21:36:00.000-07:00

Real estate company Peninsula Land is planning to raise a qualified institutional placement (QIP) of Rs 500 crore for acquiring land in Mumbai.

Peninsula Land has already identified five plots in Parel, Lower Parel, Kanjurmarg and Thane, said Rajeev Piramal, the company’s executive vice chairman

“The capital, if raised from QIP, will be used towards acquisition of new properties, as we will complete our current projects of 4 million sq feet in Mumbai within the next 18 months and need to find fresh projects to replace those,” Mr Piramal said.

The company currently has a board approval to raise up to Rs 750 crore and will decide on the final amount to be raised in its annual general meeting that will be held on August 10.

Mr Piramal said demand for commercial projects will take at least six months to revive. “We’re moving away from the commercial model for our projects outside Mumbai for three years now,” he said.

Peninsula Land has decided to convert its plans of developing commercial projects on 30 acres in Hyderabad and 100 acres in Pune to residential.

The company will also develop residential projects on its Nashik and Goa properties. Peninsula Land has plans to launch 7 million sq feet of residential projects over the next three years. The company’s stock closed down 1.15% on Friday at Rs 70.80.

Andhra Pradesh real estate growth continue to rise

2009-08-09T01:36:00.000-07:00

Andhra Pradesh, the “Rice Bowl of India”, is a state in southern India. The state is bordered by Maharashtra, Chhattisgarh and Orissa in the north, the Bay of Bengal in the East, Tamil Nadu to the south and Karnataka to the west. Andhra Pradesh is the 4th largest state in India by area and population. It is the largest and most populous state in Southern India.

Hyderabad: Like many other Indian cities, Hyderabad has witnessed a remarkable growth of the real estate industry. As like other IT cities (Chennai, Pune, Gurgaon, and Mumbai), here also, the city is forced to improve their infrastructure, residential, commercial and mall segments. Better quality of life, Industry friendly government, low crime rate, quick availability of connectivity, shorter commuting distance within the city as compared to other metros has attracted investors and common man alike. With the development of a township with sate -of the-art facilities called HITECH City in Hyderabad, the place has emerged as one of the places for property investments. With more and more IT companies are setting up, the city had bagged a dream project – Fabcity. To create a model city, the state government has taken number of steps. The government has already initiated the project involving an investment of Rs 27,000 crore for development of metro rail, flyovers, roads, and drainage system. Common haunting problems of every metropolitan city are traffic and pollution. To tackle with this problems, the state government is implementing the MRTS, which will have cost around Rs 8760 crore. The rates have not only been increased in and around HITECH city but other areas like Begumpet, Malkajgiri and certain areas in Secunderabad , which shows the over all development of the city. The expansion of the city has not been restricted to western suburbs like HITEC City, Madhapur, and Gachbowli, area the upcoming international airport, Fabcity, Hardware Park and those on Warangal and Vijayawada highways are also turning into hotspots. In Gachowli, around 80 per cent land has been dedicated to international banks, financial institutes, and mutual funds to set up their operations. Gatkesar is another hotspot for middle-class buyers. Prices are still affordable and are likely to shoot up given the road expansion work going on as part of the Prime Minister’s Golden Quadrangular Road Project. The road has been developed till Singapore City. Assured of green space given the reserved forest area between Medipally and Nampally, the stretch is turning out to be preferred destination for employees. But here too, IT industry is a main reason to hike in the rates. A Gartner report predicts that by 2010, Hyderabad and Chennai will replace Bangalore and Mumbai as the favored Indian destinations for IT outsourcing. The study has evaluated and categorized on various factors such as infrastructure, skill availability, skill retention, access, cost of living, political support and quality of life. A recent survey report from Jones Lang LaSalle says six million sq ft of Grade A office has been occupied by IT/ ITES sector alone. The demand has been estimated at 30 million sq ft by the 2010 if the current trend in absorption level is any indication.

Rentals take a nose dive; corporates moving into furnished office

2009-08-08T22:35:00.000-07:00

Bustling Gurgaon is witnessing a furious rush by many small and even big companies to shift to other new places. Reason? They are getting space in nice buildings at far cheaper rents. As if this were not enough, they are getting fully furnished office space.

According to realty experts, rentals have touched the nadir during the last couple of months. Many IT companies or those who had far bigger spaces than their requirements are moving to compact offices.

Many buildings of DLF, including their Cyber City, and commercial buildings near Golf Course in Gurgaon have seen a crash in rentals, by up to 45-50 %. The space that was not available even for Rs 110 sq feet is now easily available for Rs 50-55 per sq feet, says Rajat Mahajan of Integrated Pan Realty Solutions.

Naturally, in order to cash in upon the situation, many companies are ready to shift to new places, even sacrificing their deposit of lock-in-period .

Devender Gupta of Century 21 India says that despite loosing the money of lock-in-period , many companies are shifting to other places. That clearly proves the point that rentals in Gurgaon are witnessing a big nose dive.

The best thing is that apart from cheaper space, companies are also getting fully furnished offices at almost half the rates compared to what they were paying.

Harish Kumar, an estate manager of a US-based IT firm, says that they too shifted their office as cheap space was available . "I informed the ground reality to my office in America. They were fully convinced with me that in times like this when it is tough for IT firms like us to spend huge money on rentals, we should find ways to save overheads."

He was, however, specifically told by his US-based IT firm to ensure that the new office is fully furnished. Harish did not find it difficulty to find a cheaper as well as furnished office for his company as a large number of companies had shifted to other places.

On the issue of growing demand for fully furnished office space, SVP group CEO, Sunil Jindal, says that as far as their Opulent mall and other commercial places in Ghaziabad are concerned, they give options to their clients.

If they ask for furnished offices, naturally in that case they charge more rent. The other option is that they can sign an agreement for some kind of revenue sharing. Sunil Jindal said that now many companies prefer fully furnished office space, which they can readily occupy and start operations.

Meanwhile, the demand for furnished office space is on the rise in the capital as well as in all the major towns of the country. Companies prefer to start their office in furnished offices rather than starting them in bare commercial place.

Alimuddin Rafi Ahmad of ILD group says it is certainly a new trend in the commercial rental market. Companies in order to save their money and time, settle for furnished office space rather then totally bare or semi-furnished offices.

This trend has really taken epidemic proportions. Now, there are hardly any corporates going in for absolutely bare office. Experts say furnished offices get tenant easily and they always remain under the constant monitoring of realtors. The moment an occupant vacates them, another fills in no time. This is especially true for office with floor areas in the range of 700 sq feet to 2000 sq feet.

S K Menon, one of the senior estate managers a leading tyre company, says companies go for furnished office with partitions, cabins, flooring and modern furniture. They know that they would occupy the office for only three to six years. After that they vacate them. And, since, they have to leave the space after some time, they are extremely reluctant to furnish them in a big way.

Economic slowdown has taught this big lesson to companies cutting across sectors. According to one rough estimate , it costs around Rs 4,000 for one sq feet for furnishing. Alimuddin says they too have changed according to the changing times. Now, for the sake of their clients, they have started providing fully furnished commercial space.

This was hardly a trend in the past. Earlier, tenants used to spend lot of money in furnishing their offices. "The current position is that if your office space is bare, then the chances are it would not get any tenant for a very long time. That will inflict huge losses upon you, a situation nobody likes to face," Alimuddin concludes.

Hiranandani Developer to Collaborate with Maharashtra Govt for Affordable Housing

2009-08-06T21:47:00.000-07:00

Real Estate Developer Hiranandani Constructions is looking to enter the affordable housing segment and may enter into a public private partnership (PPP) with the Maharashtra Government for the same, a top company official said. “We are certainly looking at opportunities in cluster/rental housing. Although we haven’t started talking to MMRDA (for public private partnership) for low-income housing, internally we have started making plans,” Hiranandani Constructions Managing Director Niranjan Hiranandani told reporters on the sidelines of a conference here. The company is also exploring the markets of Bangalore, Nashik, Panvel, Thane and Pune among other cities for the affordable housing project, he added.The State Government is focusing on the rental housing model and aims to have three lakh flats/tenements ready in the next three years through the PPP model, Government of Maharashtra, Additional Chief Secretary and Mumbai Metropolitian Region Development Authority (MMRDA), Metropolitan Commissioner, Ratnakar Gaikwad, said.Hiranandani said he does not foresee real estate prices picking up at least till about a year. “I don’t see prices rising in the next 3-12 months. Housing demand is expanding rapidly but prices right now are stagnant,” he said. Prices may increase steadily after a year as the market takes away ready products, he said. “In five years, there would be a 100 per cent jump in demand over that which existed during peak times before the meltdown,” Hiranandani added.

Recession's positive effects on Indian realty sector

2009-08-06T21:42:00.000-07:00

Arti Khanna, a senior executive with a leading MNC, equates recession with the medicine that people initially complain 'is bitter' , but in the end, come out far healthier and are better off for it. More cautious spending and greater saving by consumers, more prudence by lenders, shift in focus from premium to lower- and mid-end segment of housing by developers, is exactly what our economy needed for its long-term health and recession is having the desired impact. Arti reminisces how they saw bad times during the dot-com bubble in 2001, and yet how the younger generation continues to be over indulgent, leading a hedonistic way of life and not paying heed to saving money. Arti says, "In many ways it brings the much needed discipline to people's way of life, while for corporates across various sectors, there are many positive ripple effects - for instance it allows people to analyse and identify their core competencies. It also helps in rebuilding focus, pruning tangential activities to achieve cost controls, which help in creating more effective systems and processes. And, it forces people to come up with innovative ways of handling problems, something mandatory for survival." Among the three most affected - end users, investors, developers - surely , the end user has benefited the most during this period. The end user has benefited as, finally, the supply chain started addressing the real demand in market - mid-end and affordable housing. Earlier, developers in their greed to garner higher profit margins, focused primarily on premium housing. But now, suddenly, the supply is shifting where the demand is. Even well known developers like Unitech, DLF, Raheja, Jaypee and Omaxe, primarily engaged in raising high-end homes, have begun talking of affordable options. Recession has also been a time to introspect for everybody. "It has been a good learning experience, though not a pleasant one," says Samir Chopra, CMD of RE/MAX India, (RE/MAX is a global network of real estate agents operating in 70 countries). "There have been things to learn, relearn and unlearn for all the three - end users, investors and developers. Consumers have become more vigilant in transactions , and they are more thorough about both the market situation and their own needs. They are beginning to learn how to investigate and research before spending their lifelong savings. Investors have also become more conscious. They are more careful about spending huge sums of money in development and are looking for other avenues for investment in the real estate sector. They have become more delivery oriented, innovative and price conscious in this volatile market . They have learnt from the difficult times, reduced prices, and learnt to make more beneficial offers to consumers ." While at a superficial level investors may seem to be winners with recession giving them an opportunity to pick investments at more realistic prices, recession has also seen them investing less. According to investor Shalabh Bhasin, director of Kshitij Portfolio Services Pvt Ltd, "The recession period has seen me investing less in property market because the previous prices where unduly inflated and even now it can't be said with surety that the prices have bottomed out. Also, most of the investors were already stuck with loads of investment at higher prices, so there was not enough liquidity for further purchases." Citing examples, he says he had invested in Parsvnath Panchkula flats at Rs 3,250/sq ft and Parsvnath Dharuhera flats at Rs 1,800/sq ft, but there is no buyer in these projects and three years on, the builder is yet to start construction. But on the upside, the investor is now carefully assessing a project and is no longer fooled by lucrative promos and advertising of the property. As for developers, on the face of it, they may seem to be the biggest losers with the fund flow nearly stopping and sales drying up. But recession has been a blessing in disguise as it has forced them to innovate to cut costs, improve sales and raise funds. Recession has seen developers changing their product and strategies. According to Mohammad Asif, chief operating officer of High Street Capital, "The shift in strategy is in terms of market focus, product size, pricing and promotion. In residential sector, they have started focusing more on affordable and mass housing. Today's market is customer driven and developers are offering suitable payment plans and other freebies like sharing of stamp duty and housing loan EMI burden to ensure transactions . In commercial segment, the decline in demand from IT/ITeS sector has forced them to look at other business sectors such as logistics, biotechnology , hardware, pharmaceuticals, tourism and education. In the retail segment, instead of fixed rentals, revenue sharing model is becoming a common practice. Developers have also been forced to work out an optimal tenantmix strategy and work on new project design to reduce operating costs. In hospitality sector, the focus now is more on budget hotels and services apartments." Overall, recession has been a time to innovate. In a price sensitive market, the effort has to be to reduce cost, and to achieve this, both the construction cost and land cost have to come down.

FOCAL POINT

Recession helps in rebuilding focus, pruning tangential activities to achieve cost controls, which help in creating more effective systems and processes The end user has benefited as the supply chain started addressing the real demand in market - affordable housing. Well known developers are now catering to this demand

New Delhi Retail Rentals continue to decline

2009-08-04T21:58:00.000-07:00

Country’s capital New Delhi continued to witness a decline in retail rentals of 25 per cent and ranked 69th in rentals among the list of major cities across the world during the first quarter of 2009, according to global real estate consultancy CB Richard Ellis.

Prime retail rentals continued with their downward trajectory worldwide during the period which saw New York maintaining the top slot among cities with high rentals despite a 10 per cent annul decline. New Delhi ranks 69th globally with an average rental of $109 per sq ft each month.

“Demand for retail space has declined in most markets across the world as consumers cut back on spending and unemployment continues to rise in many countries. New Delhi in India saw a 25 per cent decline in a six month period,” CBRE said in its report ‘Global Retail Rents Market View Q1′.

The report said since the end of last year, most major economies barring India and China, have seen significant economic decline. “Rentals in Delhi NCR have corrected further when compared to the beginning of 2008. Retailers feel that rentals have corrected to sustainable levels and are using this period judiciously to take up positions on favourable terms,” CB Richard Ellis Chairman and MD Anshuman Magazine said.

Magazine said rentals are being renegotiated to make retail operations financially viable. “Another trend witnessed during this time is that of developers adopting a renewed stance towards revenue share agreements, as opposed to earlier, when the demand situation was more favourable,” he added.

Among other Asian cities to figure in the list are Hong Kong (ranked number 2 globally), Tokyo (5), Guangzhou (14), Singapore (18), Shanghai (29) and Beijing (35). Globally, New York retained its top slot among the most expensive retail destinations.

“Despite a 10 per cent year-on-year rental decline, New York remains the world’s most expensive retail destination, with rental values totaling USD 1,800 sq ft per annum,” the report said. Buenos Aires (Argentina) saw the largest annual decline in retail rents year-on-year with a drop of 37 per cent, followed by Warsaw (Poland) with a 33 per cent decline and Washington DC with a 26 per cent decline.

Real Estate and Infrastructure PE funds worthwhile

2009-08-04T21:57:00.001-07:00

With risk appetite of high net worth customers increasing, wealth managers are recommending private equity investment of 5-10 per cent of one’s portfolio with special focus on real estate and infrastructure sectors. The ticket size of such investment varies between Rs.10 lakh and Rs.25 lakh, depending on customer’s risk profile.

Managers expect to generate returns of 18-25 per cent CAGR on such investments. HNIs earlier refused to take wealth managers’ call to invest in PE funds. The current market rally supported by better than expected Q1 results and positive global cues has now prompted HNIs to take higher risk and take to PE investments.

“Discerning customers who foresee stability in global economy coming are currently looking at India and China. They expect both the countries to participate in the recovery first. If this is a year of consolidation, there is also a little bit of optimism that results in higher risk appetite,” mentioned Vikas Agnihotri, CEO, Religare Macquarie Private Wealth.

“Supported by improved sentiment on the back of equity market rally, interest in PE is picking up. What work in favour of PE deals are the cheaper valuations available as compared to 2008,” said Shiv Gupta, head of Private Banking, ABN AMRO India.

Wealth managers are identifying real estate and infrastructure PE funds worthwhile for investment in addition to education and healthcare that are considered to be recession proof. They are however recommending such funds only to moderately aggressive investors to very aggressive investors with a lock-in period of 3-7 years. Two major criteria before such recommendations are higher risk appetite and liquidity of a ‘matured’ investor who according to the yardsticks set by wealth advisories has to have total assets of around Rs. 2.5 crore to Rs 5 crore.

Underscoring the demand potential of real estate sector Rajesh Saluja, CEO, ASK Wealth Advisors, said, “counter cyclical opportunities are available in this sector. There is a requirement of 27 billon housing in India and whereas only 3/4 billion are existing. Prices have corrected to reasonable levels. Time is ripe to invest in PE funds in residential housings.”

Price corrections have also helped PE investors to negotiate with the cash strapped developers and the returns are good.

In March, ASK launched a 500 crore real estate fund to supplement its exiting wealth management business. According to industry sources, Religare Macquarie might take exposure in ASK Real Estate Fund. Further, Religare Macquarie itself runs a PE fund on education and healthcare in association with Mileston Capital Advisors.

The wealth management arm of ABN AMRO is currently eying IDFC Infrastructure Fund, sources said. However, ABN’s Gupta refused to comment. Wealth managers from Karvy Private Wealth, wealth management - Axis Bank too are advocating for PE investment in infrastructure and growth focused PE funds.

Hrishikesh Parandekar, CEO, Karvy Private Wealth, said: “We are looking at largely domestic funds on infrastructure sector and growth focused PE funds. We are in touch with investment bankers to track good PE investment opportunities.”

“HNIs who were averse to taking any risk through PE investment, are now willing to listen to our recommendations,” said Sonu Bhasin, President – Retail Financing Services, who also heads wealth management.

Govt should appoint real estate regulator

2009-08-04T21:55:00.000-07:00

Industry body Assocham today said the government should appoint a real estate regulator to help expedite the redressal of consumer grievances. ” There is a need for an efficient and focused regulatory body to overlook functioning of the real estate sector in order to insure the industry development and safeguard of consumer interests in line with international benchmark,” the chamber said.

The real estate regulator would ensure that the consumer grievances against developers, development authorities, real estate agents and financial institutions are addressed without any delay, it said. The chamber further said that opening of an escrow account for real estate players should be made mandatory to ensure transparency in real estate transactions. The real estate industry maintains an escrow account for development of a project, purchase of real estate units and honouring property charges.

” This facility needs to be encouraged by asking project developers to open an escrow account,” It said, adding that such accounts are also maintained for honouring property charges, insurance liabilities and maintenance charges on regular basis.

Hindustan Construction bags Rs.229-crore power project

2009-08-04T21:54:00.000-07:00

Engineering and infrastructure development firm Hindustan Construction Co (HCC) Tuesday said it has been awarded a Rs.228.79-crore contract for a hydel power project in Maharashtra.

The 4x6 MW Gosikhurd Hydel Scheme, is being built on the Wainganga river near Nagpur, the company said in a statement. The contract has been awarded by the Vidharbha Irrigation Development Corp.

HCC will be responsible for all engineering, procurement and construction work as well as supply, installation, testing and commissioning of electromechanical plant and hydro-mechanical components including generating units.

The project has to be completed in 36 months followed by operation and maintenance for 24 months.

'HCC is proud to have built the Gosikhurd Spillway and is currently working on the Godazari branch canal. The Gosikhurd Hydel Scheme further demonstrates our EPC (engineering, procurement and construction) expertise in the hydel power development sector,' said HCC president and chief operating officer Vinayak Deshpande in a statement.

HCC is currently executing nine hydro-electric power projects - four in Jammu and Kashmir, two in Himachal Pradesh and one each in Uttarakhand, Sikkim and West Bengal.

Realtors may not gain from tax benefit extension

2009-08-04T21:52:00.000-07:00

The government’s decision to extend the time limit for claiming tax exemption on profit earned from projects may not give the desired benefits to real estate developers. Instead of giving benefits to ongoing projects, the government chose to extend a tax waiver to ‘affordable’ housing projects that were approved till March 31, 2008.

“A change in any regulation with retrospective effect doesn’t seem to address either the pricing or the supply issue in the real estate sector,” said Kumar Gera, chairman, CREDAI, a builder’s association.

The current provision is unlikely to have any impact on the prices or on the sale of stock. Had it been an exemption for ongoing projects, it would have been an incentive for developers to build more such projects.

Though there is a shortage of 24 million dwelling units in India, there is not enough supply, especially in bigger cities that cater to middle-income segment. “Such an announcement would have no impact on the overall sector,” said E Sudhir Reddy, chairman, IVR Prime, a south-based developer.

Since projects are already under construction, we will check their eligibility status only when tax is due, said R Nagaraju, corporate strategy planning head at Unitech. For developers, project completion is more important than the checking whether it will benefit from any regulatory change.

As per the new regulation, all projects which were approved by March 31, 2008 against the earlier deadline of March 31, 2007, would be eligible for the benefits of Section 80 IB (10). This section provides tax waiver for a project, which is on a minimum one-acre plot of land and the residential unit, and has a maximum built up area of 1,000 sq ft in Mumbai or Delhi and 1,500 sq ft at any other place. Besides these, there are certain other criteria that need to be fulfilled.

“Most builders preferred large units during April 2007 to March 2008, as they were in high demand at that time,” said A Shyamsunder, executive director, marketing agency Disha Direct.

All big builders, such as DLF, Unitech, Sobha, Omaxe and Parsvnath, had launched their luxury projects those days. One of the few listed players that had launched mid-housing projects during that time was Indiabulls Real Estate and DLF.

However, experts say that this relaxation could benefit a few developers, but not the entire industry. “The overall effect of the announced provisions will only be noticeable in smaller cities, where homes costing below Rs 20 lakh are still procurable. In larger cities such as Mumbai, a flat of 1,000-1,500 sq ft can by no yardstick be considered affordable,” said Anuj Puri, chairman, real estate consultancy firm Jones Lang LaSalle Meghraj.

Assocham advocates greater transparency for realty industry

2009-08-04T21:50:00.000-07:00

NEW DELHI: To bring transparency in the realty sector, Associated Chambers of Commerce and Industry of India (Assocham) has suggested that it be made mandatory for real estate developers to open escrow accounts.

Escrow accounts offer a safe avenue to buyers of property since payments for purchase of an apartment or similar real estate are deposited in them and paid to the developer only after the project is complete and the possession handed over. 'It will ensure that loans granted to developers for development of real estate projects are utilised for the purpose for which they are granted,' said Assocham president Sajjan Jindal, commenting on the recommendations that have been handed over to the government. The chamber said such accounts can also be used for payment of property charges, insurance liabilities and maintenance charges on a regular basis. 'Mistrust towards all key stakeholders continues to hamper real estate growth,' Jindal said.

According to him, this mistrust depresses consumer confidence and delays purchase decisions, while also limiting the entry of major international players to bring competition and best global practices to the industry.

'Therefore, there is a need for an efficient and focused regulatory body to oversee functioning of the real estate sector in order to ensure industry development and safeguard consumer interests in line with international benchmark,' he said. In addition, the chamber also suggested that developers and other stakeholders including consumers adhere to the norms laid down for real estate funding and credit by Reserve Bank of India and National Housing Bank. Assocham also requested the authorities to ensure that all development charges are used for the projects for which they are collected.

Commercial realty market on upswing

2009-08-02T21:23:00.000-07:00

MUMBAI: The commercial property market, which had seen one of the biggest falls till May, is slowly reviving as higher government incomes and an improving economy are prompting customers to invest in such asset classes. Developers who had slashed prices of their commercial projects by 40-50% due to slow demand, say there are now more enquiries from retail investors, while institutional buyers have closed some deals.

Many developers, instead of trying to sell off properties are signing rental deals with customers and institutional customers. In one recent deal, global consultant KPMG signed a deal with Lodha Developers for renting out a 130,000 sq ft property at Mahalaxmi in central Mumbai, for a monthly rental of Rs 160 per sq feet.

“This is one of the biggest deals in the commercial property market this year, not just for us but also for the sector,” said Lodha Developers director Abhisheck Lodha. “Though rates have fallen in the past three quarters, there is now a lot of interest from customers.” The company has five commercial projects in Mumbai, in areas such as Parel, Worli and Thane. Recently, Lodha also bid Rs 710 crore for National Textile Corporation’s (NTC) 10.3-acre Finlay Mill land in central Mumbai.

Similarly, in a recent transaction in the commercial property space, investor C Sivasankaran acquired a 66% stake in a commercial property SPV from DLF for Rs 310 crore. Ackruti City is the other investor in the SPV.

Explains Ambar Maheshwari, director investments at DTZ, an international property consultancy firm, “While commercial property rates have been at an all-time low, customers are slowly returning. Many prominent developers are going for lease rent discounting, which not only helps them raise liquidity but also helps them sell the property at a later stage for better valuation.”

Under lease rent discounting, developers borrow from financial institutions on the basis of an agreement between the owner and the tenant. The rent from the tenant is then directly deposited with the lender and not with the owner. Industry observers say several realty players who have commercial projects, have adopted lease rent discounting. Market leaders such as DLF and Unitech are known to favour such a model. Both firms had almost stopped work on their commercial property developments in Mumbai. However, according to people familiar with these companies, work has restarted through lease rent discounting.

Said a Unitech executive: “Commercial properties give better returns, but there is lot of risk as rates are volatile. But our company is now better placed to manage these risks as far as funds are concerned.” Rates on commercial properties are more sensitive to market conditions than those of residential units, as they depend on returns or rentals. So when rentals in India dropped, so did the rates for commercial properties

Like the office-cum-commercial Bandra Kurla Complex in Mumbai, which enjoyed a premium tag for commercial market. Rentals here were around Rs 450-500 per sq feet last year; now for the same property, the rates are at around Rs 250 per sq feet.

Though even as the revival in the commercial property is still beginning, a majority of developers are still cautious. Says Kamal Khetan, chairman, Sunteck Realty: “Capital values of commercial properties are dependent largely on rentals. We believe rents have bottomed out and are already seeing upward movement. A number of investors have started picking up commercial property as it makes good investment sense; it gives a rental return as well as capital appreciation when the markets pick up,” he added.

Real estate looking up, people start buying once again

2009-08-02T21:22:00.001-07:00

The booming real estate market that received a jolt during the slowdown last October-November seems to be recovering. People are slowly purchasing, but only for personal use. Not for investment purposes.

"In the last few months the real estate market has undergone major changes. The slowdown that migrated from the US has got corrected in India now. The prices have got corrected. And whatever pent up demand was there in the market has started getting converted into business," Santosh Rungta, president Confederation of Real Estate Developer's Associations of India (CREDAI), told IANS.

With 4,000 members, CREDAI is the apex body of the organised real estate developers and builders across India, representing pan-India associations of real estate and housing developers. People were virtually not buying during the slowdown as the real estate price was high and insecurity gripped buyers. "The government made an appeal to us that the prices should be brought down and we (CREDAI) made an appeal to our fellow developers that they should try and bring down prices, and they acted accordingly," Rungta said. The pan-India price reduction was to the tune of 15-35 percent depending on various categories and geographies, he said.

"Today flats are being sold, but the pace could be better. Generally things have reversed. In Mumbai also, rightly priced projects have been sold. The major contributor to this is the government policy to generate demand. It brought in stimulus packages, ensured availability of liquidity to the home buyers, interest rates softened," he said.

Another real estate player Indrajit De, chairman of Eden, also said housing loan lending rates cut may attract a few more buyers into the market. "If the lending rate falls further by 50 basis points, the sales figure will climb up," he said, adding, "Certainly the market is looking up now. Sales have also improved. "We are selling around 25-30 units (flats) per month. But it was much higher in the range of 55-60 units per month before the recession actually hit India."

Harshavardhan Neotia, chairman, Ambuja Realty Group, told IANS, "Sales have picked up in the last two-three months. There is more offtake now than what it was six months back. But now the buyers are genuine users and not just investors. These are the people who really need housing. They are lot more quality conscious and they look for the right products." He said there was a drop of 10-15 per cent in the price during the recession period. In the last two-three months the company has sold around 200 flats, he said.

Reacting to the recent announcement by union Finance Minister Pranab Mukherjee on interest subsidy on new home loans and extension of deadline in tax holidays on projects approved by March 2008 if they are completed by March 2012, Rungta said, "One must understand that extending the tax holiday under 80 I B (10) for a mere one year to projects approved by March 2008 will fail to create a significant positive impact on the real estate market. It will only benefit a few micro markets with a handful of projects."

CREDAI has suggested the centre consider extending the dateline to March 2012 for providing tax holidays to projects irrespective of the date of approval. "This will be of greater benefit to the sector and encourage developers to take up new projects and expedite ongoing projects as well." Rungta further said, "Even the proposed interest subsidy of one percent to home loan borrowers for loan taken for houses costing up to Rs.20 lakh is also not justified."

CREDAI has proposed that the centre increase the subsidy to home loan interest rates by another one percent to two percent and extend the scheme for houses costing upto Rs 30 lakh from the currently proposed valuation of Rs 20 lakh.

Office realty shows early signs of revival

2009-08-02T21:20:00.000-07:00

Is there a recovery in sight for sagging office spaces hit by the ripple effects of the US financial meltdown? Market analysts say office spaces have started generating buyer interest from corporates, making developers optimistic about the segment.

But industry experts add a note of caution, saying the supply-demand gap is still huge.

“There is a bit more enquiry for office spaces than a few quarters ago, which is a positive sign. However, the deals are not happening at a good pace and there is at least 18-24 months of oversupply in the market,” Sameer Nayar, managing director and head of real estate finance at the Asia Pacific unit of global financial services firm Credit Suisse told Hindustan Times.

Property consultant Jones Lang LaSalle Meghraj said demand is picking up in cities like Mumbai, Bangalore and Delhi driven, not by traditionally strong IT buyers –which have been hit by the downturn in Western economies – but those from other sectors. “Leasing enquiries have started to show a gradual increase. As the pace of recovery in the global environment improves further, these enquiries are expected to be converted into pre-leases,” DLF mentioned in a presentation made to analysts last week.

“Unlike September-October when demand had hit its bottom, we are receiving enquiries from corporates now,” said Anil Kumar, chief executive officer of Delhi-based Ansal API. Industry estimates suggest rentals declined between 25-40 per cent from their peak values a year ago. Analysts said rentals continued to remain lower than last year whereas developers insist rentals have started moving upwards.

“Lower rentals are a thing of the past, in Connaught Place rentals are anywhere between Rs 150-Rs 300 per square ft whereas a quarter ago it was at Rs 100-Rs 250 per sq ft,” said Pradeep Jain, chairman, Delhi-based Parsvnath Developers.

“Rentals are down significantly from last year and are nowhere close to moving up,” Nayar said.

Inventory clearance sale in real estate

2009-08-02T21:19:00.001-07:00

You thought it happened only for shirts and shoes? The glut in the property market and the reluctance of a large number of property buyers to hit the market has now forced real estate developers to clear their built-up inventories at big discounts — something largely unheard of in India.

Royal Palms Estates, a project spread over 240 acres of land in Mumbai’s Goregaon East has announced what it calls “Inventory Clearance Sale” of its ready possession properties at a flat rate of Rs 3,999 per square foot. Brokers say that compares with the going rates in the Goregaon area of Rs 5,000 to Rs 7,000 per sq ft. Prices had any way corrected by 40 per cent from their peak in 2007, but this is probably the first time that a Mumbai realtor is pushing things down by a further 40 per cent.

Like in basement sales, there is a deadline. The offer ends on August 9. And there are freebies like a club membership. A project of Royal Palms India, Royal Palms Estate is offering both residential and commercial properties in this sale. Also on offer are condominiums for weekend stays and corporate leases, shops, villas and serviced apartments. The cheapest offering is a studio apartment of about 340 sq ft available at Rs 13.59 lakh. A three-bedroom, hall, kitchen flat is available for Rs 49.99 lakh.

“The maximum bargain hunters surface during the slack season and take quick decisions if they find a property worth acquiring either for personal use or for investing,” said Dilawar Nensey, joint managing director at Royal Palms India. He said it also made sense for the company to offer discounts than sit on high-cost debt. Analysts say if the offer clicks, other developers may be forced to drop prices amid talk of a property glut.

In March this year real estate research agency Liases Foras said 8 crore sq ft space of fully constructed or projects under execution remained unsold in the Mumbai while there was a stock of 15 crore square feet in the National Capital Region.

DLF in better health, to develop 16 m sq ft of residential space

2009-08-01T04:28:00.000-07:00

NEW DELHI: DLF, India’s largest property firm, plans to launch 16 million sq ft of residential space in the current fiscal, even as the company continues to have a cautious outlook. DLF has been able to reduce its debt by over Rs 2,000 crore and has received another Rs 2,000 crore from group company DAL in the June quarter, indicating that the company’s cash situation may be fast improving.

“We are being a bit more cautious than the rest of our colleagues...We will launch not just for selling but for adding value and making reasonable profit,” DLF vice-chairman Rajiv Singh told analysts in a post-earnings conference call, adding that he didn’t think the sector was ‘completely out of the woods’. Mr Singh said he saw “reasonable revival in demand” not just for low-cost or mid-income, but also for high-end homes. The company would launch 8 million sq ft each in mid-income and luxury housing segments across cities this fiscal. On the possibility of a price hike, Mr Singh said the current industry conditions didn’t call for a price hike. A price hike could “reinvite the speculative element in the sector,” he said.

DLF on Thursday announced a 79% decline in profit to Rs 396 crore and a 57% fall in sales to Rs 1,650 crore for the June quarter. The company has reduced its net debt in the first quarter from Rs 14,000 crore to Rs 11,686 crore. It plans to bring down its net debt to Rs 6,000 crore by the end of this fiscal. As part of its deleveraging exercise, the company has received Rs 500 crore through the sale of assets and is close to concluding deals that would generate another Rs 3,000 crore in the second and third quarter of this fiscal. In all, the realty firm expects to raise Rs 5,500 crore, which would be used to repay debt and bring down the company’s debt-equity ratio from the current 0.5 to 0.3 by March-end.

DLF received Rs 2,000 crore from DAL, a privately-held group company in the April-June quarter, bringing down its receivable from DAL to Rs 2,600 crore. Both DLF and DAL are promoted by Rajiv Singh and family, and the two companies have been mulling over an option for the listed firm to take over the privately-held entity. The proposal of DLF taking over DAL is still under deliberation, Mr Singh said. “DE Shaw is showing some interest in remaining committed...We will be able to resolve this soon,” Mr Singh said on the private equity company’s proposed exit from DAL. DE Shaw, which had invested $400 million in DAL two years ago, had expressed interest to exit DAL sometime ago.

Price correction encourages Gurgaon real estate market

2009-07-30T21:52:00.000-07:00

CBRE Market View, India Office , published for the second quarter, said: "Level of enquiries went up and, more significantly, transaction velocity also increased marginally as compared to Q1 (first quarter) of 2009... However with most of the activity confined to smaller format offices, vacancy levels remain high. Most developers deferred plans for launching any new projects, the focus being on deploying the scarce resources on completing projects in hand."

Interest rate subsidy for mid-segment housing: FM

2009-07-30T21:51:00.000-07:00

Finance minister Pranab Mukherjee said that the interest rate subsidy for mid-segment housing would be routed to customers through commercial banks and housing companies registered with the National Housing Bank (NHB).

In order to further provide stimulus to the housing sector, he informed the buyers and the realty sector, “It will be allowed a tax holiday in respect of profits derived from projects approved between April 1, 2007 and March 31, 2008, if such projects are completed on or before March 31, 2012.”

He elaborated the information and says, ''I expect the developers to pass on the benefit of tax holiday to home buyers by appropriately reducing their prices. I am sure that both the expenditure and tax-foregone initiatives would provide relief to a large segment of prospective home owners and help revive the real estate sector.”

80% apartments and residential towns have western names

2009-07-30T21:50:00.000-07:00

What's in a name, you may ask. Lots, if you believe the nation's property developers and go by the latest trend in the real estate industry as well. Gone are the days when residential properties in India used to have names in Hindi or other Indian languages, such as Ekta Garden, Dhruva Apartment and Tara Apartment. Now more than 80% apartments and residential towns, basically those built by builders, have western names such as Hamilton Heights, C a s a Essenza, Mayfield Garden and Panache Homes, among others.

So, is this just for the sake of name change or is there more than meets the eye? Industry experts believe this shift is apparently more by design than just for the sake of changing names, primarily to reflect western lifestyle and modernity.

Utkarsh Palnitkar, senior professional, real estate practice, Ernst & Young, says, "With the current buyer segment of Indian real estate being a good mix of expatriates, NRIs, and upper middle class who are all globe trotters, such names have a better recall and attach a prestige value to the project. The building quality notwithstanding, such modern names are also more likely to fetch a premium for developers."

Deepak Shah, chief marketing officer at IREO, a leading global investment fund, which has recently entered into real estate development, believes that the choice of brand names across categories mirrors a society's preferences.

For instance, "Many homes and office blocks built in the early years of post-Independent India had a distinct Indian flavour. The first flush of patriotism and nationalism may have had something to do with this. Today, maybe with globalisation, Indian society has come a full circle and people may have begun to reassociate western names with sophistication and premium appeal. This is, thus, more a social and consumer acceptance phenomenon than anything else," he explains.

Brotin Banerjee, CEO and MD of Tata Housing Development Company Ltd, thinks along similar lines. According to him, consumer aspirations and psychographics in India have, over the years, undergone a seminal change. With increased consumerism and other cultural changes, India is also changing - from Hindi to Hinglish, from ethnic wear to fusion dressing, from joint families to nuclear ones, from arranged marriages to arranged 'love' marriages, to name a few.

"In the real estate sector, this is depicted through western-sounding names and to a large extent in the design and architecture of various residential, commercial and retail spaces. Depending on the type of property, the project name is developed. For premium properties, since the design and master planning is primarily done by international architects, project names also need to reflect and compliment the same," he says.

Uniform Valuation Standard for Real Estate to be Effective Soon

2009-07-30T21:49:00.001-07:00

In a few months from now, a uniform real estate valuing method will be put in place across the country. For that, the National Housing Bank (NHB) has prepared a draft of real estate uniform valuing methods. Speaking at a Banking Conclave organised by Federation of Indian Chamber of Commerce and Industries (FICCI) on Wednesday, Sridhar said, “Like uniform accounting standard, we also need a uniform valuation standard for real estate properties. We have already prepared a draft and are now discussing with valuers and bankers. Once, it is finalised, a uniformity will emerge in real estate valuation.”

Sridhar said NHB was scouting for a partner for the proposed Indian Mortgage Guarantee Company, where NHB owns 43 per cent stake. “AIG, which had proposed to take 41 per cent stake in the company, withdrew itself due to financial difficulties in October 2008. We are now searching for an alternative partner,” he added. Asian Development Bank (ADB) and International Finance Corporation (IFC) are the other partners of the company with eight per cent stakes each. Sridhar, chairman and managing director (CMD), said that some stakeholders/partners of Housing Finance Company had expressed interest in it. If they finally leave, Central Bank is willing to pick up their stakes, which would in turn strengthen Central Bank’s exposure in housing finance, he said. Hudco, UTI, NHB are the other partners in Central Bank’s housing finance company.

Homes may get more affordable

2009-07-28T21:45:00.000-07:00

BANGALORE: The government sops announced on Monday for lower cost housing are expected to have a significant impact on the affordability of such homes, and encourage developers to get into the segment.

Ravi Ramu, CFO of Puravankara Projects, whose subsidiary Provident Housing plans some big affordable housing projects, says the interest subsidy of 1% on loans of up to Rs 10 lakh could mean a reduction in the borrower’s EMI by Rs 650 to Rs 750, depending on the tenure of the loan. “And since the EMIs are likely to be about Rs 11,000, this is a significant reduction,’’ he says.

As per the government’s announcement, the value of the house that’s eligible for such subsidy can go up to Rs 20 lakh, but the subsidy will be applicable only on loans up to Rs 10 lakh.

The move to extend by two years the tax exemption available to builders of smaller homes is also likely to persuade builders to reduce the cost of such homes. Sunil Krishnan, president of Confident Group, estimates that it might be possible to bring down the price offered to the buyer by 5%.

The government has extended the provision of section 80IB(10) of the Income Tax Act to projects approved before March 2008 and to be completed before 2012. Earlier, the provision was limited to projects sanctioned before March 2007 and to be completed before March 2010.

The extension exempts builders from paying tax on income from the sale of houses of 1,000 sqft built-up area within 25km of municipal limits of big cities and 1,500 sqft in other areas.

Some say that very few projects were launched during the extended period, so it’s unlikely it will have a major impact.
But Confident, which did launch projects during that period, thinks they’ll now be able to offer more aggressive prices for them. That could help to drive demand and also enable completion of the projects by 2012.

The really big impact of the two measures is seen to be in “sentiment’’. “It sends out the message that the government believes homes up to Rs 20 lakh is a separate category, that it is important to concentrate on it to provide housing to the masses,’’ says Ramu.

A number of developers have been considering getting into this segment. The latest measures might push them into it sooner than later.

Bangalore periphery realty prices slip below guidance value

2009-07-28T21:44:00.000-07:00

BANGALORE: Bangalore’s realty market has thrown up a queer problem with property prices in peripheral areas falling below the guidance value set by the government.

While buyers pick up property at prevailing (lower) market rates, they are having to cough up higher stamp duty for registration. This is because stamp duty is calculated on the guidance value set for each area/property.

“There could be strong case for downward revision of guidance value in peripheral areas,” says K R Niranjan, inspector general of registration and commissioner of stamps in Karnataka. Typically, the government conducts a valuation exercise around October every year and issues fresh guidance values based on property price trends.

If prices continue to be south-bound, the state will have to look at aligning the value to prevailing rates and this could well be the first downward revision in Bangalore. Instead of an annual revision, B S Shankaranarayanan, a legal expert in the realty sector, suggests timely and periodic revision of guidance values based on property price movements.

“This will help the public in cases where there is a price decline and enable the government to mop up more when prices go up,” he adds. And, like a builder in the Yelahanka suburb says, this is as good a time as any to bring about a correction in guidance value.

In a particular instance relating to Devanahalli, which witnessed a steep spurt in prices, given its proximity to the new airport, the value was revised during the year, a state government official says.

Requests seeking downward revision have started trickling in with buyers of the Prestige Shantiniketan project in Whitefield and builder ETA (for The Gardens project on Magadi Road) approaching the department.

The guidance value of Prestige Shantiniketan project is 3,200 per sq feet while it is Rs 4,200 per sq feet for ETA and hence, stamp duty would be calculated on these rates. But, realty sources quote the prevailing basic market rate for ETA at Rs 3,400 per sq feet while prices in Whitefield, where Shantiniketan is located, have suffered a very sharp decline of even up to 30%.

Typically, the guidance value is pegged approximately 20% to 40% below market prices to allow for escalation during the year. In the last three revisions, there has only been an upward revision of the guidance value. In fact, in April 2007, the revision was in the range of 100% to 300%, mirroring the realty boom. But, a builder says, the government hiked the rates when the market had already peaked out, marking the beginning of the downward curve.

Much of that has translated into money in the government’s coffers over the last three years when the state collected as much as Rs 3,630 crore in 2007-08. Now, the chief cash cow department is staring at a huge shortfall in collections in 2009-10 compared to a target of Rs 3,300 crore. In 2009-10, the stamp duty collections plunged to Rs 3,100 crore, necessitating a cut stamp duty from 7.5% to 6% to lift buying sentiment.

But, the new dampener seems to be guidance value, which is estimated based on various parameters such as nature of property (site, corner plot, flat and so on), location and specifications of the building complex. The state government valuation committee, which normally takes three months to carry out the exercise, has representatives from the town planning department, BDA, income-tax, city corporation, public works and irrigation department and Institute of Chartered Valuers.

Price Correction Encourages Gurgaon Real Estate market

2009-07-28T21:42:00.000-07:00

Encouraged by price correction and lowering of interest rates, the real estate market, after a period of relative inactivity lasting the first few months of the year, witnessed improved levels of activity on the part of retail investors in the residential sector, especially in the low to mid-end housing segment, said experts as well as market analysis reports of the second quarter in 2009. CBRE Market View, India Office, published for the second quarter, said: “Level of enquiries went up and, more significantly, transaction velocity also increased marginally as compared to Q1 (first quarter) of 2009… However with most of the activity confined to smaller format offices, vacancy levels remain high. Most developers deferred plans for launching any new projects, the focus being on deploying the scarce resources on completing projects in hand.”

“The downward trend in rental values seen till now has actually been arrested. We expect them to stay put at the present levels over the next quarter. Depending on location, project and sub-market dynamics, the decline over the past 12 months has been anywhere between 25 to 40 per cent. However, values have remained steady over the last quarter,” Pawan Swamy, Managing Director (Western India) Jones Lang LaSalle Meghraj, said.

“In the current context, however, we are now looking at a significant increase in demand, with multinational occupiers beginning to look more favourably at investments” he added. Increased space availability and comparatively reduced cost of occupation in prime Grade A projects in the Central Business District (CBD) has led to a revival of interest in this location, a situation practically non-existent over the past year. As a result, vacancy levels have come down to the range of 7 to 8 per cent. Meanwhile, rentals in the Secondary Business District (SBD) category have come down by approximately 11 per cent over the last quarter, the CBRE report states. “There has been no significant growth in the IT segment — most of the activity we are witnessing is in the corporate sector, predominantly among multinational companies with multiple offices in the same city. Meanwhile, demand in the residential sector has already made a remarkably fast comeback, and capital markets are opening up,” Swamy said.

Meanwhile, Gurgaon witnessed an increase in transactions assisted by attractive leasing packages offered by most developers. “Companies that had postponed their expansion/relocation decisions are now ready to take advantage of the market and the options available for phased take-up…office leasing volume increased by approximately 3 to 4 per cent in the NCR during the second quarter. Increasing levels of corporate confidence should maintain the momentum in the second half of the year,” reads the CBRE report.

Real Estate Downfall Hits NHAI, REC Bonds

2009-07-27T04:20:00.000-07:00

With real estate valuations falling, the rush at the few remaining counters selling capital gains tax-exempt bonds is tapering off. The National Highways Authority of India (NHAI) and Rural Electrification Corporation Limited (REC), the two remaining issuers of such bonds, have mopped Rs 820 crore so far in the current financial year. NHAI has raised Rs 150 crore against the Rs 4,000-crore target for this fiscal, while REC, which opened the issue in April, has raised Rs 670 crore against a target of Rs 2,500 crore.
In 2008-09, NHAI had raised Rs 1,630 crore against a target of Rs 3,000 crore, while in 2007-08 and 2006-07, it had collected Rs 305 crore and Rs 1,500 crore, respectively. “As the real estate (market) is witnessing a slowdown, the response to our bonds is poorer than previous year,” said a senior NHAI official. An REC executive also said the response was not overwhelming. “The response has been poor compared with the previous year, as the real estate market is witnessing a downturn,” said Anil Chopra, CEO and director, Bajaj Capital, an investment advisory firm.Under the income tax law, one can save on payment of capital gains tax if the amount is used for repurchase of property within a 12-month period. Alternatively, capital gains tax can be avoided by investing in bonds issued by NHAI and REC. The bonds are popularly known as 54 EC bonds (after Section 54EC of the Income Tax Act, 1961). Earlier, entities such as the National Housing Bank were also allowed to issue these bonds. But a few years ago, the government reduced the number of isuuers. In addition, it capped the maximum amount that could be invested in these bonds in order to limit the benefit to individuals. Further, the amount of bond issuance was lowered to allow the government to raise revenue during the real estate boom. With real estate valuations falling, the volume of transactions has come down. Analysts estimate the decline to be in the range of 20-30 per cent.

Government weighs 3-yr lock-in on FDI in real estate

2009-07-26T21:38:00.000-07:00

NEW DELHI: The government is weighing the impact of a possible three-year ban on stake sale by foreign investors in real estate projects, a decision that could affect future capital inflows into the sector.

Real estate developers had recently urged the government to reinterpret a provision in the foreign direct investment guidelines, so as to stop overseas investors from withdrawing their funds, beyond the minimum capital of $5 million, before three years of the initial investment.

This, they said, will help them tide over the current liquidity crisis. However, the commerce ministry is concerned that such a measure could be counter-productive. The government wants to keep the foreign investment policy as flexible as possible since the country now needs foreign capital to sustain the growth momentum. For any foreign investor, the exit strategy is as important as the entry strategy. If it is difficult to withdraw capital and redeploy it in another sector, then foreign investors could become reluctant to invest in real estate.

“We examined the proposal, but have not taken any decision and status quo continues. However, we cannot rule out any change in the future,” said an official, who asked not to be named, considering the sensitivity of the subject. The law says that in a cross-border JV in real estate, the foreign partner should bring in a minimum capital of $5 million. The funds would have to be brought in within six months of commencement of business.

It also says the “original investment” cannot be repatriated before a period of three years from the completion of “minimum capitalization.”

This has been interpreted in such a way that funds above the minimum capital requirement could be repatriated within the three-year lock in period. Real estate developers now want to restrict this as the sector got badly hit by the economic slowdown and drying up of sources of foreign capital. Besides, players in this sector have very few alternative sources of funding locally.

House Proud: Elders refuse to buy reverse mortgage

2009-07-25T23:53:00.000-07:00

NEW DELHI: Reverse mortgage, a popular model allowing senior citizens to take money out of their homes, is failing to find an abode in India.

Senior bank officials that SundayET spoke with have confirmed that the product has failed to find takers during the last two and half years of its existence in India. Till now, less than 500 applicants have availed this loan in India since its inception in 2007, a senior bank official, who did not wish to be identified, said. The reasons for the model not taking off in India are manifold. From an emotional attachment with one’s house to real estate price correction; from an absence of clear guidance against legal complications to inadequate marketing, the plan has been unable to meet the expectations of financial institutions. Reverse mortgage is a plan through which senior citizens can avail loans from either banks or other financial institutions by mortgaging one’s home.

If a senior owns a house and has a mortgage on the house, he might get a reverse mortgage to pay off the existing loan and then have some money left over to take care of his expenses for the rest of his life. The homeowner could get that as a lump sum or a line of credit, and wouldn’t have to pay it back until he moved or died and the house was sold. The banks can sell off the property to realise the loan amount. However, there is a provision that the legal heirs can acquire the property back by paying off the loan to the bank.

Dewan Housing, which is one of the largest housing finance companies, has been able to sell only 4-5 reverse mortgage loans during the last two years. Two large financial institutions, HDFC, which incidentally is one of the largest home loan lenders in the country, and Kotak Mahindra do not have reverse mortgage in their portfolios.

In fact, several other players in the segment are also facing difficulties in selling reverse mortgage products. Says Sujan Sinha, senior V-P and head of retail liabilities, Axis Bank, “The product has not done well. In India, you can count the number of cases of reverse mortgage on your finger tips.”

There are some very basic reasons that have worked against this product which has taken off rather well in international markets. The psyche of Indians does not make them comfortable with the idea of selling their home.

Karnataka Tier 2 and 3 Real Estate Still Suffering slowdown

2009-07-25T23:51:00.000-07:00

Karnataka tier 2 3 realty real estate property UTVi developer housing Despite Bangalore's real estate market showing signs of recovery, properties in tier-2 and tier-3 cities across Karnataka are still down in the dumps. Demand for both residential and commercial real estate in these cities is down by up to 35% as buyers are opting for cheaper options in Bangalore. Mumbai-based developer Sunil Mantri has been eyeing the tier-2 market in Karnataka but he says the recovery in these markets is not likely anytime soon.

Says Sunil Mantri, Chairman, Sunil Mantri Realty: “The tier-1 city is very cheap and property prices are very competitive. Particularly in the IT segment. There would be an impact on tier 2 cities; because if Bangalore can offer Rs 20 rental people would be reluctant to go Mysore which can offer a rental of Rs 15. That is the competition we are facing in Tier 1 vs Tier 2 cities.” According to industry estimates, Mysore’s real estate market has seen demand drop by 25-35%, while Mangalore has seen demand drop by 25-35%. This trend is similar in other Tier-2 cities down south like Kochi and Coimbatore has seen demand dropped by 15-25%.

Analysts say new projects in Tier-2 cities have been put on hold as there is already oversupply in these markets. Karun Varma, MD, JLLM - Bangalore: Correction can be anywhere between 10% and 40% and that’s what we’ve seen in tier 1 cities and that’s also happening in tier 2 cities especially on new projects which have been announced. Analysts say the recovery in the Tier-2 and Tier-3 markets will happen only after the Tier-1 market get back on the growth track. Developers are looking to push sales by cutting down prices in tier one cities and are looking to cash out of smaller markets to reduce risks.

Recovery in Commercial Real Estate

2009-07-24T21:19:00.000-07:00

Commercial real estate transactions, considered a key indicator of economic activity, is showing first signs of stability after a free fall during the early part of this year. According to real estate consultants, the worst phase for the industry seems to be over as lease rentals both in peripheral areas as well as the central business district (CBD) are showing signs of settling down, in addition to deals getting clinched. Transaction data show that Chennai and its adjoining areas witnessed more than 1.95 million square feet of property deals in the first half of 2009. The whole of 2008 witnessed transactions for around 4.90 million square feet.

“We do not want to call it recovery as yet, but at least we can say the downturn has been arrested. In our view, the worst seems over. Property prices are showing signs of holding on, and it may not fall further,” said Rajesh Babu, Chief Consultant, RECS Group a real estate consultancy, which managed the largest deal of RBS in India Land IT Park for 3.50 lakh square feet this year. For instance, around Guindy (in South Chennai), lease transactions were sealed for Rs 45 to 46 a square foot. During the peak of real estate activity, transaction rates were around Rs 55 a square foot. Likewise in the CBD of Chennai, transactions were concluded at around Rs 60 a square foot this year, while the peak rates were around Rs 75 a couple of years ago.

“Absorption till the end of June stood at approximately 1.95 million square feet, similar to H1 2008 and approximately 29% lower than the peak absorption levels achieved in H1 2007. The largest quantum of absorption has taken place in the suburban areas and within the suburban markets, Manapakkam, Ambattur, Perungudi and Taramani saw the highest demand for space due to the robust infrastructure, strong connectivity, proximity to major markets, and rational rentals,” N Hariharan, General Manager, Cushman and Wakefield international real estate consultants said. “We haven’t crossed the woods as yet. But, clearly in the past one month, we have been getting enquiries showing first signs of demand trickling in. We need to wait and watch if the demand sustains and breaches the five million square feet mark this year,” industry sources said.

Even as the industry is trying to project a revival face, clearly there is over-supply in select pockets like Old Mahabalipuram Road (OMR). “On the IT corridor, clearly there are supply overhangs. Roughly four million square feet are vacant and another two million square feet are under development. That pocket of the city remains weak,” sources added.

Lodha hikes bid price for NTC's Finlay to Rs 710 cr

2009-07-24T21:17:00.000-07:00

MUMBAI: Lodha Developers is set to buy a 10.3-acre plot in Central Mumbai for Rs 710 crore in what could be the single-biggest realty deal this year so far, a sign that the downturn in the real estate sector may have
finally bottomed out.

Company’s director Abhisheck Lodha confirmed the offer made to acquire the Finlay Mill property belonging to the National Textile Corporation (NTC), but refused to disclose details of the bid value.

The developer is looking to fund the transaction through an initial public offer (IPO) to raise Rs 3,000 crore by August end, said people familiar with the matter. Mr Lodha refused to confirm this saying the funding mechanism is being worked out.

“We have received an official letter from them and we are satisfied with the bid,” NTC MD K Ramchandran Pillai told ET.

This is the third instance that the Finlay Mill property has been put on the block, and both times the final bidders were unable to meet the reserve price amount or the earnest money.

Lodha’s earlier bid for the 10.3-acre mill land was Rs 657.9 crore when the reserve price was fixed at Rs 708 crore. On Thursday, NTC’s asset review committee did not accept Lodha’s bid on grounds that it was much lower than the reserve price.

Lodha, on Friday, communicated to NTC its decision to increase its offer price for the Finlay property. The other bidder in the fray for the property was Indiabulls Real Estate at Rs 520 crore.

According to sources familiar with the development, the payment for the Finlay Mill acquisition would be made in three tranches over three months. The deal will be inked between Lodha and NTC in the next 10 days.

The first part, which is 25% of the bid amount, will be made in a fortnight from the day the deal is signed.

The second tranche, which will be half the amount, will be made in 45 days starting from the day the first payment is made. The balance will be paid a month after the second tranche is paid. Lodha has already paid an amount of Rs 100 crore as earnest money as part of the bidding process. Lodha Developers’ offer of Rs 710 crore was first reported by ET NOW, this newspaper’s business news channel.

The recent large transaction struck in the real estate sector was that of the Hindoostan Mill land in May this year where serial investor C Sivasankaran acquired a 66% stake from DLF for Rs 310 crore. DLF was a part of the SPV, with Ackruti City being the other.

In 2007, Mumbai Metropolitan Region Development Authority (MMRDA) struck the then biggest deal of Rs 2,790 crore by selling three plots totalling barely six acres in size. This was the biggest deal in 2007.

In 2005, DLF had bought 17.5 acres from NTC in Lower Parel for Rs 702 crore. It is now expected that NTC would put its 16-acre Kohinoor Mill-1 property in central Mumbai on the block with a base price of around Rs 1,200 crore by the end of this month.

Real Estate Customers are now demanding Value for Money

2009-07-24T21:15:00.000-07:00

In the last eight to 10 months, the real estate market has swung from being a builders’ industry to a customers’. “Today, a client is given more value and has a plethora of options,” feels Dharmesh Jain, MD, Nirmal Lifestyle. Just before the slowdown, he explains, the real estate sector was flooded with projects. However, once the slowdown began, customers backed off citing financial security. As a result, a lot of inventory got accumulated and distress sales started.

Till a while back, certain developers were offering ‘free’ cars, along with properties priced above a particular slab. Such tempting offers have now been withdrawn from the market, with the first signs of economic recovery.

Developers have now adapted their strategy, when it comes to offering incentives. For example, Pune-based Rohan Builders have an offer, wherein, they accept a down payment on any of their under-construction properties and offer to pay back the difference, should the market correct further. Another developer has offered to shoulder part of the interest rate on the buyer’s home loan for a year, but, with a three-year lock-in period clause. Such offers are essentially aimed at the fence-sitters.

Today’s buyer is extremely smart, asserts Pawan Datta, CMD of Lakshish. “Now, a customer asks for how much extra space a developer can provide, or how the payment schedule can be worked out, instead of any freebie,” explains Datta.

Value for money is what a customer today is scouting for. The customer is aware of the additional expenses he / she will be incurring. “In the commercial sector, too, things are changing, with clients asking for the ‘amenities’ that they shall get,” reveals Ramprasad Padhi of Pinnacle Realty.

“On the residential front, a few developers would build a one BHK flat of 500-550 sq ft and a two BHK flat of 700-750 sq ft and offer it at a lower rate. This essentially meant that a two BHK flat was being built in the size meant for a one BHK flat. In addition to this, there were charges made for clubs or parking, once the buyer has bought a place,” he says. So, what was supposed to be an ‘amenity’ is ultimately charged for, from the buyer.

Today’s buyer has become conscious of all these dubious tactics.

“The market correction was a necessity, as it was increasingly becoming disorganised. Fortunately, developers realised this and started giving value for money additions,” says Jain. Though the market is picking up, Datta feels that buyers will continue to dominate the market. This time around, the expectation is that healthy competition will take centre stage and the customer will walk away with his hands full.

NTC board to decide on Lodha Finlay bid

2009-07-23T21:36:00.000-07:00

MUMBAI: Lodha Developers’ Rs 657.9-crore bid for the 10.3-acre Finlay Mill property in central Mumbai has not been cleared by the asset review committee of the National Textile Corporation (NTC). The bid was placed on July 16. NTC’s asset review committee was to take a decision on the bid on Thursday, as it was much lower than the reserve price of Rs 708 crore for the property. The committee could not arrive at an unanimous decision, as many members were against awarding the land parcel at a price lower than the reserve one .

Confirming this to ET, NTC MD K Ramchandran Pillai said: “The asset committee had the power to take a decision. Now, the NTC board will decide whether to award the Finlay Mill land to Lodha.” On July 16, the Finlay Mill property received two bids from Lodha and Indiabulls for Rs 657.9 crore and Rs 520 crore, respectively. This was widely seen as a revival of the real estate market.

NTC also had plans to put its 16-acre Kohinoor Mill-1 property on the block, for which the base price could be around Rs 1,200 crore. Located in central Mumbai, this property would have been on the block by the end of this month. “With the asset review committee not taking a decision on the Finlay Mill property, the bidding process for Kohinoor Mill-1 could get delayed,” said the NTC officials.

This is the third time the Finlay Mill property has been put on the block. In the first round of bidding in late 2008, DB Realty had just bid for less than half of the then reserve price of Rs 1,065 crore. The second round, too, received a lukewarm response with the sole bidder representing Chennai-based Christy Textile Products being disqualified after the company failed to deposit Rs 100 crore, as earnest money to qualify for the bidding.

In all NTC has around 25 mills in Mumbai. If NTC accepts Lodha Developers’ bid for Rs 657.9 crore, it would be the largest real estate deal during the year. Prior to this, the Hindoostan Mill’s stake sale deal announced in May between investor C Sivasankaran and DLF was the biggest. Mr Sivasankaran acquired DLF’s 66% stake for Rs 310 crore.

Change may hit FDI in real estate

2009-07-23T04:23:00.000-07:00

The new clarification can have a significant impact on FDI in real estate. The existing FDI was done on the basis of earlier interpretation. In the original investment documents, signed at the peak of the property boom, the builders had agreed to pay back bulk of the money after one or two years. Local builders and global property funds resorted to new financial structures that helped them sidestep FDI restrictions, and, more importantly, bring in money that was essentially debt but could masquerade as equity.

Indian property firms, and the Special Purpose Vehicles (SPVs) floated by them, issued a new security called Compulsory Convertible Debentures (CCDs) to the foreign funds, while the promoters of the firms signed simultaneous agreements in which they agreed to buy back the CCDs after one or two years at a pre-agreed price.

Starved of institutional finance, it was a desperate, expensive and risky mechanism to bring in money. But few cared, as property prices rose and real estate emerged as a new asset class and everybody thought that the boom would last forever. Today, real estate stocks have dropped, property buyers who were pure investors have left the market and deals are few and far between.

Since the chips are down, builders are pushing for a new interpretation of FDI norms. In the past few years, no one objected to the rules.

While a clarification on the lock-in may not go down well among foreign funds, who would be stuck for few more years, the government may give in to a formidable lobby.

Government Targets More Foreign Investment in Real Estate

2009-07-22T21:24:00.000-07:00

The government in India wants to make it easier for foreign property investors and in particular for them to put their money into projects that relate to the hospitality sector and tourism. It is looking at changing the rules to allow overseas investors to be part of smaller real estate projects. At present they are limited to investing in projects that cover a minimum of 25 acres. It is hoped it will encourage foreign investment in property developments in places like Mumbia, Delhi, Bangalore, Chennai and Hyderbad where it is generally not possible to find 25 acres of land for development.

The Department of Industrial Policy & Promotion (DIPP), which sets out the guidelines for direct foreign is keen on attracting more investors. It is proposing to waive minimum capitalisation for development projects which have hospitality and tourism facilities such as hotels, restaurants or entertainment facilities for visitors. The waiver would also be available if 50% of the built-up area in a project is devoted to hotel and tourism businesses, such as food courts, resorts and restaurants and if 20% of the total built-up area is used for hotel rooms.

The property industry welcomed the initiative and said they are long overdue. These steps, when implemented, will provide relief to high-value projects in cities and projects being developed for the tourism sector. The move comes as a relief at a time when the real estate industry is struggling with high levels of debts, strict lending conditions and a general slowdown in business.

Meanwhile there are signs that the hard hit commercial property sector is on the cusp of recovery. Values have fallen by up to 30% as many corporate have downsized and are not enthusiastic about paying high rents. But according to Anurag Bhatnagar, associate director at DTZ, although those with expansion plans are still staying on the sidelines they are making future plans and when they start spending recovery will follow.

Siemens puts on Block 13 Residential Properties in Mumbai

2009-07-22T21:23:00.001-07:00

German power equipment and transmission major Siemens has put 13 of its residential properties in Mumbai on the block. The properties, part of the company’s non-core assets, are spread across a total area of over 15,000 sq ft with an average price of around Rs 30,000 a sq ft. The properties are located in prime areas such as Altamount Road, Nepean Sea Road, Bandra, Dadar and Chembur. Siemens wants to take advantage of stability in realty prices. The company plans to raise around Rs 45 crore, with a minimum selling price of an apartment starting from at least Rs 1 crore with an average price of around Rs 3 crore. A Siemens spokesperson said: “As part of an ongoing strategy, Siemens regularly reviews its assets and (since) these apartments have not been occupied for quite some time, the company is planning to sell them. The properties will be sold through an auction route.”

The company has appointed Jones Lang LaSalle Meghraj (JLLM) as the property consultant for the deal. The company is also believed to be planning to put more such properties on the block soon. These residential properties would be put on block only after selling the current lot of 13 apartments. Anuj Puri, chairman, JLLM, said: “These are premium properties. Besides Siemens, there are many others also exploring the option of selling their non-core assets.” Earlier, Hindustan Uniliver had also sold some of its residential properties.

Even banks such as Standard Chartered and HSBC are planning to put their non-core assets on the block. The selling of assets is not the result of a distress sale, but to unlock the valuation of the existing assets that are lying under utilised. “Companies may either sell the property or rent them out since that is also an effective option,” said an industry tracker. The recent stability in the property market has been a significant reason for companies to sell some of their real estate assets.

Mumbai most preferred for investing in properties: Survey

2009-07-22T21:20:00.000-07:00

CHENNAI: The country's financial capital Mumbai ranked as the most preferred destination for investing in properties, while Chennai has displaced Bangalore in the South, a survey conducted by an online portal said here on Tuesday.

The survey, "Trend in residential space across top cities in the current scenario" ranked Mumbai as the most preferred destination to invest in property while in south, Chennai was the first place for property investments, Bangalore.

Cities like Patna, Nashik, Tiruchirapalli and Madurai have also become favourite destinations for property investments, the survey said.

It said 60 per cent of respondents felt interest rates for home loan come down further in the coming months, while 40 per cent evinced interests on properties with an area between 500 to 1,000 square feet.

Over 3,000 people from the metros and other cities, including Pune, Thane, Coimbatore, Ahmedabad and Vadodara participated in the survey.

"Market sentiments are reviving and people are willing to invest. Based on our survey, more than 60 per cent of customers are looking at buying residential properties in the next six months. They also are expecting a lowering of interest rates on home loans", Consim Info Founder and CEO Murugavel Janakiraman said.

Realty April-June net seen slumping as sales dip

2009-07-22T21:17:00.000-07:00

MUMBAI: Mid-cap real estate developers are expected to show a slump in sales by half to as much as 90 percent in the June quarter, as home buyers stay clear of purchases, according to a poll of brokerages

Margins are also seen squeezed as many launch cheaper housing to boost unit purchases, but the firms are expected to show a fall in their bottom line by at least 60 percent, or plunge to losses during the quarter over a year-ago, according to the poll.

"Mid-income is boosting demand. There is a huge gap in supply-demand." Shailesh Kanani, analyst at Angel Broking said.

"Margins (are) likely to come under pressure due to change in product mix," Macquarie Research said. "Sales expected to drop significantly year-on-year due to a slowdown in the physical property market."

Besides launching lower-cost housing, builders have tried to reschedule loan repayments and raise funds through share placements with institutional buyers in the first half of 2009.

"Profit after tax (is) set to improve sequentially, and in the quarters ahead, owing to balance sheet deleveraging," Religare Hichens Harrison said in a report.

"Going ahead, we expect a build-up of momentum in launches in the affordable housing segment," a report by Edelweiss Securities.

"General confidence in the economy and affordability will be the key demand determinants over the next one year," according to the Edelweiss report. Commercial demand, which helps builders' expand, should revive by FY11, Angel's Kanani said.

FDI lock-in norm change may cheer local realty cos

2009-07-19T21:48:00.000-07:00

MUMBAI: Hectic lobbying is under way to bring about a small change in the way one interprets a rule on foreign investment in property — a change that could backfire on overseas investors rescue several Indian realtors.

It will not require a Cabinet decision or a new press note issuance by the government. All it will call for is a simple clarification — one that could make or break many players in the local property market that has attracted close to $20 billion in the past five years.

According to the foreign direct investment (FDI) regulations, a foreign investor has to bring in a minimum $5 million to participate in a joint venture (JV) with an Indian developer while the rest of the money be brought in at a later point, may be in tranches. Interestingly, the March 2005 press note 2, which spells out FDI rules, says: “Original investment cannot be repatriated before a period of three years from completion of minimum capitalisation.”

Till now, the interpretation has been that the three-year lock-in applies only to the ‘original’ or ‘minimum’ investment of $5 million and not to the entire money that the foreign investor puts in. For instance, if a foreign fund invests $100 million, the interpretation has been that it can recover and repatriate up to $95 million before three years while the balance $5 million can be repatriated only after three years. But not any more, something the government will soon specify.

Mumbai-based developer Hiranandani Group Buys Land worth Rs 800 cr

2009-07-18T01:56:00.001-07:00

Hiranandani Upscale, a fully-owned company of Mumbai-based developer Hiranandani Group, is learnt to have bought 135 acres in Bangalore, Chennai and Hyderabad for Rs 800 crore. According to a person involved in the transaction, the agreement had been signed last month between Hiranandani Upscale and three individual sellers in these cities. “The three land parcels comprise 80 acres in Bangalore, 35 acres in Chennai and 20 acres in Hyderabad,” said the person. Hiranandani Upscale plans to develop townships in these cities at a later date.

The sale of these land parcels have been on an outright basis and Hiranandani Upscale would make the payment in three tranches. It is believed that the company has paid an initial amount (token money). When queried on the deals, Surendra Hiranandani, managing director, Hiranandani Group and Hiranandani Upscale confirmed to ET the company’s plans to start new projects in South India but refused to share exact details about the deals.

It is learnt that the company would be raising the funds for the deal through private equity investments at a special purpose vehicle (SPV) level. According to the same person involved in the deal, Hiranandani Upscale is in talks with around four private equity players — three foreign and one domestic — for raising equity to develop these projects. Mr Hiranandani said: “We are not in a position to share details but can only confirm that we are talking to some PE players for a partnership at an SPV level.” Hiranandani Upscale is an unlisted company and will focus on projects outside Mumbai with plans to enter the market in North India at a later stage.

The Hiranandani group has plans to develop townships in the three cities on the lines of its Powai project in Mumbai. The projects in the three cities will target the higher income group. It is gathered that the projects will commence in two years and could take another three years for completion. The deal is important since there are not too many large deals taking place in the real estate sector now. In the recent past, deals have largely been taking place in Mumbai. Last month, DLF sold its stake in its Andheri-MIDC land parcel in Mumbai for Rs 200 crore, while in May, DLF had also sold its stake in a property, also in Mumbai. The number of deals have dropped as a result of the economic downturn and a liquidity crunch.

Analyzing Mid Market Residential Segment

2009-07-18T01:54:00.001-07:00

Is this is a good time to buy? How much are prices likely to drop? Should I wait or buy now? Unfortunately, the answer is not a simple “yes” or “no”. One needs to consider factors such as economic growth outlook, interest rates, job security, demand, credit supply etc, understand the overall dynamics of the real estate sector. Rough estimates show that out of the total 100% real estate market the residential segment weightage is approximately 75% whereas 20% is commercial office spaces and balance 5% comprises retail, hospitality. The mid market residential segment (residential properties between Rs 15 - 50 lakh) represents nearly 85% of total mortgage disbursements in India. Therefore, the mid market residential segment represents nearly 64% of the market. Almost 55% of mortgage finance disbursement for residential properties happens within the top seven cities and the balance 45% is shared by the whole country.

There was a dearth of two to three bedroom properties within this range of Rs 15 - 50 lakh within the greater metropolitan areas of major cities. Easy supply of money from equity capital sources created an artificial demand of land for the development of large township projects and SEZs. Everybody started announcing huge and multiple projects but ignored the calculation, execution and delivery capability perspective involved. Most developers started projects 10 - 20 times the total square footage of what they had delivered in the last 20 - 30 years. The various sources of institutional capital lapped up the story. However critical considerations like the nature and kind of organisation structure, management bandwidth, labour, capital equipment, machinery, project time were ignored.

The pricing of residential projects went up by 400 - 500% in most cities between 2006 - 2008. Interest rates also went up from an all time low of 7.00%, 20-year fixed mortgage to as high as 13.75% floating rate in 2008. This put a lot of strain on affordability. The stock market crash and job insecurity that followed the Lehman Brothers fiasco, drove away investors and actual buyers. The credit tightening from domestic banks and marked to market losses started reflecting on credit supply to the sector and the market went dead. Developers came stress with no cash flows from the sale of projects and rentals of commercial office spaces and retail spaces also dipped by as much as 50% and everybody started playing the waiting game and bottom fishing to get back into the market.

However, before you conclude the deal, do a due diligence on the developer’s track record, talk to the financing bankers about the delivery capabilities of the developer. Only buy from a reputed developer and if possible buy a completed project or one which is nearing completion. Don’t succumb to the pressure from sales staff saying “if you don’t buy now, you don’t get an apartment of your choice”. It is wise to monitor the project site for 3 - 4 weeks from the time you first visit the project and observe the number of laborers, the progress of the project every week, take pictures for 3- 4 weeks of the site to see the progress yourself and be convinced that construction is moving at a good pace. Ideally over 4 weeks, a good developer’s project should go up by 2 levels. Avoid first time and small developers as they have limited capital and resources and may not be able to deliver on time. It is advisable to use a reputed broker to help choose the right project and right developer and get all the relevant information. The 2.00% fees you will pay them is money well spent in getting that dream home.

DLF drops mall proposal, opts for residential project

2009-07-18T01:51:00.000-07:00

CHENNAI: Gurgaon-BASED realty major DLF has dropped its plan to develop a mall on up market Commander-in-Chief Road in Chennai as the ongoing economic slowdown has affected consumer spending.

The company has now sought permission to develop the land as a premium residential project, scotching market rumors that it was trying to sell the land it bought four years ago.

“We have completed the design process. We are awaiting approvals to announce the launch of our residential project during October-November this year,” DLF Southern Homes director KK Raman told ET on Friday.

In 2005, DLF Commercial Developers acquired the 4.41-acre property from German major Mico Bosch for about Rs 138 crore and had intended to develop it as a retail-cum-office complex. Later, it revised the plans and applied for a multi-storey building status, hoping to develop the property as a mall.

Now, for the second time, the company is revamping its plans. It has approached the Chennai Metropolitan Development Authority to permit its reclassification so that the land can be developed as a residential project.

Incidentally, the latest move to get a residential classification took place soon after it got the approval for setting up the mall. At that time, a senior DLF official said, “We have to be nimble and flexible in business and work out contingency plans. All plans are possible.” Mumbai-based architect Hafeez Contractor has completed the design for the residential project. The space available would range from 1,350 sq ft to 2,700 sq ft.

Typically, a premium residential project in this up market area would fetch Rs 10,000 to Rs 11,000 per sq ft. Lease rental pegged at Rs 100 per sq ft. The construction cost of a mall, exclusive of the land cost, works out to Rs 2,000 per sq ft, according to an industry expert.

Asked about the status of its 3,493-apartment Garden City project on Old Mahabalipuram Road, Mr Raman said DLF is waiting for the market to firm up before it decides to launch the third and final phase, which would release 1,493 apartments.

Of the 2,100 apartments launched in two phases — 1000 and 1100 units — 1,580 apartments have been sold. This is inclusive of the net cancellations which saw the exit of 400 buyers from the project. Thereafter, DLF had to revise its prices. Work has began at the site and apartments to be delivered on schedule in the first quarter of the 2011-12 financial year.

DLF had expressed its intent to pass on a timely payment rebate of Rs 200 per sq ft. It had slashed its prices from Rs 2,500 to Rs 2,600 per sq ft against Rs 2,800 to Rs 3,200 per sq ft for its existing customers. For new customers, the basic price was fixed at Rs 2,750 per sq ft. Mr Raman claimed that every month the company is selling 75 to 80 units.

DDA has launched 43 schemes in 42 years

2009-07-17T21:22:00.000-07:00

Delhi Development Authority (DDA) has launched 43 schemes in the last 42 years to provide affordable housing to various segments of society, the government said today.

The housing agency is also planning to provide 66,476 dwellings in various parts of the city between 2009-10 and 2014-15, Minister of State for Urban Development Saugata Roy informed the Lok Sabha during question hour.

"DDA has launched 43 housing schemes since 1967-68 to provide affordable housing to various segments of society. It has been allotting built-up flats in different categories with reservation for SC/ST, war widows and ex-servicemen," he said.

He said DDA has also allotted land to cooperative group housing societies and also for resettlement of slum dwellers.

To another question, he said the DDA has informed that housing projects in various categories are being planned and a total of 66,476 flats will be constructed between 2009-10 and 2014-15.

What is a Serviced Apartment?

2009-07-17T21:20:00.000-07:00

A serviced apartment is a type of furnished, self-contained apartment designed for short-term stays, which provides amenities for daily use.

This is a new concept in India but the western countries have already welcomed it. Five Star Hotels brought this style to clients who would stay for a long period. They realized in the beginning clients loved the luxurious service but after a month they longed for their home. Thus a serviced apartment would offer most of the aspects of your home. Making you feel at ease, as though you were at home.

Many corporates who travel to other states or countries find it difficult to adjust to the new culture and setting. For sometime the hotel service is welcome but later you long to dwell your own style.

Reason why service apartments were brought into being. You cook and eat and live the style you want. You are even provided with a maid/manservant who will get you groceries or any other requirement. Making it just the way it would be at home.

Now-a-days Indian immigrants coming to India to settle opt for this type of apartments. As they hunt for a new house they accommodate themselves in comfort in a service apartment. So they do not have to compromise on their lifestyle or go through the hassles of shifting in a rented home with zilch amenities then shifting out.

The service apartment is made to look and feel exactly like a home. Every room is furnished with a television & music set, microwave and other electronic goods. Moreover some hotels also provide you with magazine and shoe racks. Cleaning is done everyday. However a senior hotel manager mostly accompanies the cleaning staff so that they are never alone in the room.

The tariff charge depends on how long is the stay. It is less expensive if the person has a prolonged stay. It can be bargained if the stay is for a month or even more for a year. A service apartment generally provides you with an AC furnished flat, equipped kitchen, TV, fridge, washing machine, landline, internet, power back-up, fire safety & security and some even provide you with a locker. However before booking the apartment always make sure what is inclusive and what is exclusive. For instance who will pay the electricity, maintenance. Hence make sure what are you paying for.

Low-cost housing drive may dent margins of realty firms

2009-07-16T22:24:00.000-07:00

The June quarter financial results of real estate companies will mirror the changes that the sector went through during the quarter. The sector, which has been languishing for some time, appears to have found its feet with its focus on affordable housing. This has led to higher sales for many companies. But on the flip side, the move has impacted the margins negatively for many. The reason being that the mid-segment housing is a high volume-low margin business.

The June quarter results, hence, may be a tad better on a quarter-on-quarter (q-o-q) basis, but much lower than those reported in the corresponding quarter of the previous year. The average of the estimates of ET Intelligence Group and eight brokerage houses shows that the overall industry sales are expected to decline 30% on a year-on-year (y-o-y) basis. On a q-o-q basis, industry sales would grow at an average of 30%.

It may also be understood that only the residential market has seen a recovery, while the commercial and retail segments are still under stress. Among all the listed companies, Orbit and Indiabulls Real Estate (IBREL) are expected to show a marginal improvement in sales. With a huge fall in property prices in the luxury segment, Orbit has shown a 5% increase in sales. With a 70% yoy decline in revenue, Parsvnath is expected to see the highest fall. DLF and Unitech may follow with a 60% and 54% decline, respectively. As a move to generate cash for business activities, both these companies have exited from unviable projects and also sold non-core assets. This would help in completing under-construction projects. Even some large SEZ projects have been shelved.

A lot of companies have launched new residential projects in the affordable housing segment. Though construction costs would be low, EBIDTA margins would fall by an average of 5-10% due to a sharper decrease in prices. However, companies such as Unitech, DLF, HDIL and Sobha, which have raised funds, have improved their balance sheet positions and thus lowered their overall finance cost. Average EBIDTA margin for the June quarter would be 39% against 43% for the March quarter. Peninsula Land is expected to show a positive margin, as the number of projects was very limited, hence leverage was also low.

Despite all the gloom, realty sector is seen to show some improvement in margins. The overall profit after tax (PAT) margins for the June quarter will be at 26%. Though real estate sector is one of the major contributors to the over all profit growth for India Inc, yet it is low as compared to the past PAT margins of 35-40%.

However, since alternate sources of funds have become available, builders have managed to improve their cash position. Loans have been restructured and thus interest liability has been reduced. Developers, such as Mahindra Lifespaces, IBREL and Peninsula Land, are expected to report PAT margins upward of 30%.

Commercial realty picks up steam

2009-07-16T22:22:00.000-07:00

MUMBAI: After months of stagnation in the commercial real estate market in Mumbai, there is finally some revival. First off the block was the 10.3-acre Finlay Mill property for which there have been bids from Lodha Developers and Indiabulls Real Estate. On July 31, NTC will put the 16-acre Kohinoor Mill-1 property also on the block, for which the base price will be Rs 1,200 crore. Both these properties are located in central Mumbai.

In the case of Finlay Mill property, the last day for the submission of bids was Thursday. Lodha Developers and Indiabulls Real Estate have put in their bids. The base price for this property, which has a buildable area of 4.20 lakh square feet, is Rs 708 crore with Lodha’s bid at Rs 657.9 crore and Indiabulls’ at Rs 520 crore. The property was put on block twice earlier, and according to senior officials at NTC, the sale will go through this time around. When contacted, NTC Mill CMD K Ramchandran Pillai said: “The asset sale committee would review the bids on July 22, after which a decision will be taken.”

It is now learnt that property consultant Jones Lang LaSalle Meghraj has been mandated for the sale of the Kohinoor Mill-1 land. A senior NTC official told ET: “The bidding process will commence in less than two weeks.” This is the first time that this land is being put on the block. The Kohinoor Mill-1 property is different from that of Kohinoor Mill-3, which was bought by Manohar Joshi and Raj Thackeray for Rs 421 crore in 2005.

In all, NTC has the go-ahead to put 25 mills in Mumbai on the block. The last deal struck was for a land parcel in Parel in central Mumbai for Rs 702 crore. Last month, the Hindoostan Mill land in the same area, which was owned by the Thackersey family and later sold to a special purpose vehicle (SPV) company of Ackruti City and DLF, was put on the block, ET had reported on May 14 that C Sivasankaran, the NRI maverick investor, had acquired DLF’s stake of 66% for Rs 310 crore.

The revival in the commercial real estate segment has been a welcome development and has been viewed positively by those tracking the industry.

“Though the Finlay property has received bids below the base price, the price on a per acre basis indicates a recovery,” said a property consultant.

ICICI Venture to Launch 1,000Cr Real Estate Fund

2009-07-16T22:20:00.000-07:00

ICICI Venture is launching a Rs 1,000Cr real estate fund, which will focus on commitments from domestic investors. Amidst a series of departures of senior officials, India’s leading private equity firm ICICI Venture Funds Management Co. Ltd is in the process of launching a relatively smaller Rs 1,000 crore real estate fund, according to two sources close to the development. The plan for the scaled down real estate fund comes at a time when the firm is facing hurdles in raising commitments from investors for some of the fund initiatives it announced earlier which included a $1-1.5 billion real estate fund.

The firm, which manages more than $2 billion currently, had been in the news with its long time MD and Chief Executive Renuka Ramnath quitting in April. Ramnath was replaced by banker Vishakha Mulye, who was till then an Executive Director of ICICI Lombard General Insurance Company. The change at the top deck of ICICI Venture has reportedly raised concerns among many investors – mainly foreign – and that is considered one of the reasons for the firm’s plans to launch a smaller fund.The fund plans to mobilise 90% of the target corpus from domestic investors, both institutional and high-networth individuals (HNIs), sources told VCCircle. Most PE firm have been raising capital abroad, while ICICI Venture is turning to domestic investors so that it can use ICICI Bank’s distribution muscle to reach out to the local investors.

This fund will also be an initiative from scratch by the new leadership. Sources said that a successful launch of the real estate fund will help infuse confidence in foreign investors after which it can go in for a larger general private equity fund, probably with a target corpus of $1 billion, sources added. The fund is about to be launched and will hit the roads in coming weeks.

Let us kill Mumbai with highest property tax in the World

2009-07-16T22:16:00.000-07:00

The present system of arriving the Municipal taxes is on the basis of Rateable value, is based on standard Rent. The Rents were frozen and as per the section 154 of B.M.C. Act, as interpreted by the Hon’ble Supreme Court, the rent means the Standard Rent or the Rent at which the Property was first let out and that should be the basis for fixation of the Rateable value. As rents were frozen the Rateable value is law and hence the standing committee of Mumbai Municipal Corporation has increased the taxation from 11.5% of the Rateable value in 1945 (Prior to Bombay Rent Act, 1947 coming in force onwards) to 112.5% of Rateable value for Commercial premises with metered water connection and at the rate of 320.5% of rateable value for Commercial Premises, which have non metered water connection.

In Mumbai, the Municipal Taxes are the highest in the world. Residential Municipal tax is @ 87.5% of Rateable value with water meter, and @185% of Rateable value with properties without water meter. Commercial Municipal Tax is @ 112.5% of Rateable value with water meter, and @ 320.5% of Rateable value for properties without water meter. In addition, there is repair Cess for old buildings ranging from 87% to 1160% of Rateable value.

These tax rates are applicable on standard rent basis. However, recently in view of Sec.3(1) (b) of Maharashtra Rent Control Act, 1999, Properties let out to banks, Multinational, Consultants, Public Sector undertakings are excluded from the purview of Maharashtra Rent Control Act and without the Sanction of the Standing Committee of BMC, the Assessment Department is levying these highest rates of tax on contractual rent (and not deemed standard rent ) received by landlords. The taxes are several times more than actual rent fetched by landlords.

According to the submission in a report to standing Committee on 4^th December 2002, stating at present out of 2,51,212 properties, 1,82,279 properties data is stored in the computer and present Municipal taxes collected is Rs. 745.22 crores. The proposed tax @0.3% tax on capital value basis would be Rs. 2.50 to Rs. 4.50 per month for residential properties and @ Rs.10 to 18 per sq. ft. per month for commercial properties in South Mumbai. Between Rs. 1.25 to Rs. 2.50 per sq. ft. per month for residential properties, Rs. 5 to Rs. 10 per sq.ft. per month for commercial properties in suburbs, Rs. 0.65 to Rs. 1.25 per sq. ft. p.m. for residential properties and Rs. 2.50 to Rs. 5 per sq. ft. p. m. for commercial properties for extended suburbs.

If the rates applied to the properties identified by BMC, it crossed Rs. 5000 crores revenue to BMC. The report of Tata Institute of Social Sciences for arriving at Municipal Taxes on the basis of capital value as suggested to charge Municipal Tax at the rate of 0.1875% and then increase gradually, and on 5^th year charge @ 0.3%. But BMC has straight away on the first year proposed to the standing committee to change Municipal Tax at the rate of 0.3% against the recommendation. Even from 0.1875% to 0.3% the increase in 5 years would be 1.6 times.

A flat of 950 sq. ft. will attract Rs. 5000/- p. m. for property tax and maintenance in suburbs. It will be more in South Mumbai specially towers with swimming pools. In all Rs. 60,000/- and above per annum will be recurring cost of new flat in suburbs and much more in South Mumbai.

The tax structure will certainly effect the decisions of property purchases and lane to own and let out will be closed forever. Since taxes will be more than fair market rents.

Budget housing to leave little room for profit margins

2009-07-15T21:35:00.000-07:00

The real estate sector, which has been languishing for some time, appears to have found its feet with focus on affordable housing and this may reflect in the June quarter results of the companies. The move has led to higher sales for many companies, but on the flip side, it has also impacted the margins negatively. The reason being that the mid-segment housing is a high volume, low margin business.

The June quarter results, therefore, may be a tad better on a quarter-on-quarter basis. But much lower than those reported in the corresponding period of the previous year. The average of estimates of ET Intelligence Group and eight brokerage shows that the overall industry sales are expected to decline 30% on a year-onyear (YoY) basis. On a quarter-on-quarter (QoQ) basis, industry sales would grow at an average 30%.

It may also be understood that only the residential market has seen a recovery, while the commercial and retail segments are still under stress.

Among all the listed companies, Orbit and Indiabulls Real Estate (IBREL) are expected to show a marginal improvement in sales. With a huge fall in property prices in the luxury segment, Orbit has shown 5% increase in sales. With a 70% YoY decline in revenue, Parsvnath is expected to see the highest fall. DLF and Unitech may follow with 60% and 54% decline, respectively. As a move to generate cash for business activities, both these companies have exited from unviable projects and also sold noncore assets. This would help in completing under-construction projects. Even some large SEZ projects have been shelved.

Many companies have launched new residential projects in affordable housing segment. Though construction costs would be low, EBIDTA margins would decline by 5-10 % average due to sharper decrease in prices. However, companies like Unitech, DLF, HDIL, and Sobha that have raised funds have improved their balance sheet positions and thus lowered their overall finance. Average EBIDTA margin for June’ 09 would be 39% as against 43% for March’ 09. Peninsula Land is expected to show positive margin, as the number of projects was very limited, hence leverage was also low.

Despite all the gloom, realty sector is seen to show some improvement in margins. The overall PAT margins for the June quarter will be at 26%. Though real estate sector is one of the major contributors to the over all profit growth for India Inc, yet it is low as compared to the past PAT margins of 35-40 %. However as alternate sources of funds have become available, builders have managed to improve their cash position. Loans have been restructured and thus interest liability has been reduced. Developers like Mahindra Lifespaces, IBREL and Peninsula Land are expected to report PAT margins upward of 30%.

Foreclosure Properties – Good Real Estate Deals

2009-07-15T03:07:00.000-07:00

Foreword

In this fickle fiscal period, foreclosed property sales have emerged as a smart investment option as well as an intelligent real estate bargain. At present, when the interest rates are stumpy and the stock market is volatile – it is an ideal time for buying foreclosure homes for personal dwelling, leasing or re-selling.

Explanation

Foreclosure is an official procedure by which an owner’s right to a property is terminated legally, generally owing to the proprietor’s inability to pay the loan amount in arrears to finance or mortgage company. Under such circumstances, once the legal paperwork is over for such houses, these are termed as foreclosure homes. Furthermore, such properties are taken over by the finance or mortgage company; which then put up the property for sale at a public auction in an attempt to recover the unpaid mortgage amount.

Acquisition Approach

Buy foreclosure home is an investment strategy that necessitates a certain level of intelligence and assiduousness. One must do cautious study into a local property market, financially viability and demographic tendencies. First and foremost, one should locate foreclosed properties by browsing through the website as well as by checking classified newspaper ads. Secondly, one must seek advice from reliable real estate agents and personal lawyer regarding the legal stipulations for the particular property one is interested in. It is important to check the foreclosed property to confirm about its state and thus determine its market value. Finally, one should contact the trustee of the public auction and make inquiries about the minimum bid that will be allowed. From the trustee, one must also find about the foreclosure proceedings. Lastly based on these above findings one should tender a bid on the foreclosed property at the foreclosure auction.

Conclusion

The foreclosed homes are available at discounted price and consequently, fairly within affordable means in contrast to other real estate assets. A recent market survey by a leading real estate firm has revealed that most of the foreclosed homes are offered at a price, which is at an average five to ten percent less than the prevalent market price.

Realty sector unhappy with Budget

2009-07-15T03:05:00.000-07:00

New Delhi: The real estate industry, which is reeling under the credit crunch and slump in demand, expressed its unhappiness for not announcing any specific incentives in the Budget, but said the overall thrust on infrastructure development would benefit the sector.

The country's second-largest realty firm, Unitech, Managing Director Sanjay Chandra said the overall push to infrastructure sector was a positive development, but expressed dissatisfaction that the Budget did not provided any incentive to boost affordable housing.

"The increased spending on infrastructure and highways will stimulate economic growth...but I wish the Finance Minister would have announced some incentive for the affordable housing sector," Chandra added.

Navin Raheja, MD, Raheja Developers said, “The FM has totally ignored current business and social scenario. Globally, there was a hope that the positive signs of Indian economy will turn into realty after budget and Government will take the corrective and practical approach for improving the overall economy. The budget has failed to shore up the housing requirement for general public”.

Global real estate consultant Jones Lang LaSalle Meghraj Chairman and Country Head Anuj Puri said: "The Budget did not mention FDI into the real estate sector or REITs and REMFs. We are also disappointed about the lack of affirmative action on increasing tax exemptions on housing loans, principal repayment and interest".

There was lack of measures in terms of end-user facilitation, boosting of buyer sentiments and groth of mass housing, he added.

Banks suggest no increase in real estate price

2009-07-15T03:02:00.000-07:00

Banks in India are suggesting property developers to stop increasing real estate prices as it could stop the market recovery. Developers have been taking advantage of rise in sale but its side effect could put off the buyers.

S. Sridhar, Chairman and Managing Director of the Central Bank of India described the move as short sighted and that the developers are naïve if they think that by increasing prices, they would stimulate demand. Further he said, “It is difficult to generalise but as a whole there is some more scope for downward adjustment in prices, or in certain places it should plateau. That will stimulate the demand”. He added, “If the real estate players revise the prices upwards, it will stall the recovery process. Demand for housing loans has picked up among the banks but the situation is still fragile”.

Real Estate Shows Signs of Stability after a Long Freefall

2009-07-14T23:30:00.000-07:00

Commercial Real Estate transactions, considered a key indicator of economic activity, is showing first signs of stability after a free fall during the early part of this year. According to real estate consultants, the worst phase for the industry seems to be over as lease rentals both in peripheral areas as well as the central business district (CBD) are showing signs of settling down, in addition to deals getting clinched.

Transaction data show that Chennai and its adjoining areas witnessed more than 1.95 million square feet of property deals in the first half of 2009. The whole of 2008 witnessed transactions for around 4.90 million square feet. “We do not want to call it recovery as yet, but at least we can say the downturn has been arrested. In our view, the worst seems over. Property prices are showing signs of holding on, and it may not fall further,” said Rajesh Babu, Chief Consultant, RECS Group a real estate consultancy, which managed the largest deal of RBS in India Land IT Park for 3.50 lakh square feet this year.

For instance, around Guindy (in South Chennai), lease transactions were sealed for Rs 45 to 46 a square foot. During the peak of real estate activity, transaction rates were around Rs 55 a square foot. Likewise in the CBD of Chennai, transactions were concluded at around Rs 60 a square foot this year, while the peak rates were around Rs 75 a couple of years ago. “Absorption till the end of June stood at approximately 1.95 million square feet, similar to H1 2008 and approximately 29% lower than the peak absorption levels achieved in H1 2007. The largest quantum of absorption has taken place in the suburban areas and within the suburban markets, Manapakkam, Ambattur, Perungudi and Taramani saw the highest demand for space due to the robust infrastructure, strong connectivity, proximity to major markets, and rational rentals,” N Hariharan, General Manager, Cushman and Wakefield international real estate consultants said.

“We haven’t crossed the woods as yet. But, clearly in the past one month, we have been getting enquiries showing first signs of demand trickling in. We need to wait and watch if the demand sustains and breaches the five million square feet mark this year,” industry sources said. Even as the industry is trying to project a revival face, clearly there is over-supply in select pockets like Old Mahabalipuram Road (OMR). “On the IT corridor, clearly there are supply overhangs. Roughly four million square feet are vacant and another two million square feet are under development. That pocket of the city remains weak,” sources added.

Sale Volumes up in Real Estate

2009-07-14T23:28:00.000-07:00

By Dr. Sanjay Chaturvedi:

A grand successful property exhibition organised by MCHI and CREDAI in Dubai in the first week of June gave a sigh of relief to the struggling real estate market. When asked, Keystone group alone sold twenty five flats in the exhibition and many hot deals to be closed soon. Nahar group, who have recently launched four towers at Nahar Amrit Shakti near Powai returned with handsome sale. Likewise all the participants are happy that they could sale their stocks in various projects, especially in Mumbai and its extended suburbs in the exhibition. A NRI trend in buying spree was reported in the last issue of Accommodation Times is proven in the event.

A large number of visitors have shown positive interest from the Gulf, which gave a breathing space to fund starved real estate sector.

Mr. Zubin Mehta, CEO, MCHI, just before the exhibition in Mumbai said that this time we are sure to materialize the sale effectively since the time and venue is good beside the fact that NRI are waiting for us.

At home, sale zooms to average 900 flats sold per month in all the circles of Registration office since October 2008 till date. The average sale recorded in 2006-2007 was 800 documents registered. The discounting factor and much needed amenities with soft approach of builders was that all needed for such revival. The rates are still down by 40% since 2007 level. Developing zones like Mira Road, Thane and Navi Mumbai gave extra discount to budget home hunters.

In Pune, sale volumes are high. The biggest volume recorded in Sinhagad Road and likely to add further. Other areas on the outskirt of the city too getting great demand but with a request for further discount the prices of 10 to 20%.

In Delhi and NCR, new constructions have started in full swing after new set of institutional finance now available to the developers. The sale recorded in all the zones is up by 35% since last October.

In Bangalore, the sale volume with discounted prices is up by 20% since January. The month of May seems to be the lucky month for all the under construction projects. Corporate are on buying spree in the region.

The Real Estate Boom will be an explosion of property rates

2009-07-14T23:24:00.000-07:00

The recession has taken a big bite of the developers and the much awaited boom period will be when sq. ft. prices will inflate. This is the right time to buy for potential home seekers.

By Ubaid Parkar:

A 2 BHK flat is an aspiration but as has been seen for the past few months, the so-called “affordable” housing segment have been content to offer a 1 BHK inventory or even a nightmarish 1 Room Kitchen. With budget housing the new buzzword ringing on the doorways of developers justifying market research to provide homes to low income population, the 2BHK option for the middle class masses is still a distance away.

Tata Housing Development Company Ltd. announced a township in Boisar spread across 63 acres which is meant for the industrial population there. Housing Development & Infrastructure Ltd (HDIL) very recently announced its joint venture with Mumbai Metropolitan Region Development Authority (MMRDA) for developing over 500 acres of land under a rental housing scheme at Virar. Nirman Group announced “Nano City” for 250 flats at Neral near Karjat at the start of the year. And the much discussed Maharashtra Housing & Area Development Authority’s (MHADA) 3863 flats which generated over 4 lakh applicants was the signature for the decree of low cost housing.

It is a bandwagon effect. With the elections concluded and the stock market buoyant, developers still feel that the revival has a distance to travel. An optimistic outlook towards the revival has been placed in the post-Diwali period. Unfortunately low cost housing translates into constricted spaces and sprawls of 1000 sq. ft. will not head the crown of the real estate outlook. It is said that the Real Estate sector is waiting for the boom period. For whom? If the prices are tumbling, although not by much as developers cuddle up to their rates like an infant with a teddy, is it not beneficial for the consumer to be king and negotiate without having the feeling of being held hostage?

Pratik Ajinkya, a team manager, purchased a flat in February 2008 in Kandivali (E) which belonged to an investor. The terms: Rs 5500 per sq. ft. plus Stamp Duty and Registration Fees to be compensated for. The only negotiation was a revised rate of Rs. 5400 per sq. ft. “The building which I stay in has 100 per cent occupancy currently and there was not much of an opportunity for a negotiation back then.”. He added, “The rates in my area have frozen now for last year or so and have shown no signs of dropping.”

Ishika Bhasutkar who is employed in the services sector booked a flat in Mira Road in February this year. She said, “The initial deal was at a total cost of Rs. 12.75 lakhs. After a little running around a broker offered it at Rs. 12.60 lakhs and then after a bit more helter-skelter the flat was eventually settled at Rs. 12.45 lakhs by the developer themselves. Their negotiations were very casual and were not giving any serious consideration.”

Furthermore, there has been a drop in the interest rates for housing loans and has been much widely reported, a reiteration is in store. Financial institutions are wooing in people to try and attract potential home buyers. So much so that it resulted in a war of words between SBI and HDFC. ICICI has recently reduced its home loans by 0.5 per cent. The manufacturing sector has taken a big hit and Steel and Cement prices have tumbled, two of the most widely used components utilized in the construction of a home, ensuring the cost of production for developers does not rise. It has been hard for developers but this has been due to their speculative transactions and their luxurious flats having no real takers. Optimism has been dug up from inquiries alone.

It is the ideal time for buyers to be in the driving seat and corner rates to their appropriation. Because once the “boom” begins it will back to square one as property rates will skyrocket and so will the egos and hostilities of developers.

Government may relax FDI norms for realty

2009-07-14T23:22:00.000-07:00

The government department responsible for the promotion of industry is proposing easier rules to allow overseas investors to be part of smaller real estate projects and lower capitalization norms for those which involve facilities related to hospitality or tourism.

The department of industrial policy & promotion (DIPP), which handles the FDI policy, in a note drafted for the Cabinet Committee on Economic Affairs (CCEA), has said that FDI should be allowed to flow into realty projects even if the area covered is only 10 acres.

As of now, FDI is allowed in realty projects only if the minimum area covered is 25 acres (or 10 hectares).
The move will help realty projects in metros like Mumbai, Delhi, Bangalore, Chennai and Hyderabad to attract FDI.
Realty players feel that it is not possible to find 25 acres of land in these cities to make their projects comply with Press Note 2 of 2005, which defines guidelines for permitting FDI in this sector.

The industry is keen on business in the metros, as it attracts high-profile customers, but wants FDI to be allowed since the cost of land in these cities is high, making them expensive.

The DIPP has also proposed that the minimum capitalization norms specified in Press Note 2 can be waived in the case of projects, which involve hospitality and tourism facilities, such as hotels, restaurants or entertainment facilities meant for tourists.

Press Note 5 specifies that minimum capitalization should be $5 million for permitting FDI in realty projects, which involve an Indian partner. In case the project is implemented by a fully-owned subsidiary of an overseas firm, the minimum capitalization specified is $10 million.

The waiver would be available in case 50% of the built-up area in a project is devoted to hotel and tourism businesses, such as food courts, resorts, restaurants.

If 20% of the total built-up area is used for hotel rooms, the waiver will be available. Veterans in the real estate business, who do not want to be identified, said the liberalization moves were welcome changes that they have been waiting for.

These steps, when implemented, will provide relief to high-value projects in metros and projects being developed for the tourism sector.

The move comes as a relief at a time when realty players are struggling to managed debt and lull in business, they added.

However, the realty industry is upset that its demand for waiving off the three-year lock-in for FDI in real estate has not been accepted. Many fund houses keep off realty projects due to the three-year lock-in period, industry veterans feel.

DLF to sell more land, wind power business to raise funds

2009-07-14T23:20:00.000-07:00

NEW DELHI: Debt-ridden realty player DLF said today it will sell more land and wind power business this fiscal to raise Rs 1,900 crore and lowered the sales figure for flats.

With a total debt of over Rs 14,000 crore to start the year 2009-10, DLF had been doing everything conceivable, including sale of promoters' equity in the company as also different projects.

Within twenty days of claiming that it had sold 4,000 flats during three months ending June, DLF's Group Executive Director Rajiv Talwar told reporters the actual sales figure was just 2,500. "I must have given wrong figures at that time," he said when reminded about the figures given by him on June 26.

Rival Unitech on the other hand has been able to bring down its debt to below Rs 5,000 crore and today it is believed to have some cash surplus.

Both DLF and Unitech shares appreciated by 11.44 per cent and 8.62 per cent to close the day at Rs 330.10 and Rs 70.60 a share respectively.

As part of its management of debt, DLF sold Rs 1,000 crore worth of land during April-June period and is planning to garner Rs 900 crore to part-repay the debt by exiting its wind power business.

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

2009-06-25T02:09:00.000-07:00

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

2009-06-25T02:08:00.000-07:00

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

2009-06-21T23:20:00.000-07:00

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

2009-06-21T23:18:00.000-07:00

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

2009-06-20T02:49:00.000-07:00

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

2009-06-20T02:46:00.000-07:00

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

2009-06-20T02:43:00.000-07:00

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

2009-06-17T23:21:00.001-07:00

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

2009-06-17T23:19:00.000-07:00

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

2009-06-17T23:18:00.001-07:00

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

2009-06-17T23:16:00.000-07:00

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

2009-06-17T23:11:00.000-07:00

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?

2009-06-17T23:08:00.000-07:00

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

2009-06-17T22:55:00.000-07:00

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

2009-06-14T22:48:00.000-07:00

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

2009-06-14T22:45:00.000-07:00

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

2009-06-14T02:48:00.000-07:00

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

2009-06-14T02:46:00.000-07:00

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

2009-06-14T02:44:00.000-07:00

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

2009-06-14T02:38:00.000-07:00

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

2009-06-14T02:36:00.000-07:00

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

2009-06-14T02:35:00.000-07:00

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

2009-06-13T23:44:00.000-07:00

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

2009-06-13T23:34:00.000-07:00

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

2009-06-13T23:26:00.000-07:00

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

2009-06-13T23:22:00.000-07:00

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'.

Do Not wait for Prices to fall further-Developers to Buyers

2009-05-01T05:30:00.000-07:00

At a time when real estate prices seem to be in free-fall, many potential home-buyers are sitting on the fence in the hope that prices will drop still further. Real estate developers are now warning that if they wait too long, there could be dire consequences for a number of support industries, millions of unskilled labourers and the wider economy itself. Since March 2008, when the first impact of the U.S. sub-prime crisis and the global economic slowdown began to make itself felt in the Indian housing market, prices and offtake have both fallen by at least 35 per cent, according to Prakash Challa, president of the state branch of the Confederation of Real Estate Developers’ Association of India (CREDAI).

He warned that the confused consumer could push the market too far. “When they hear that prices have fallen over 30 per cent, that interest rates are likely to fall further, they think they are better off waiting,” he said. However, developers are already operating with minimal margins and would be forced to delay or pull out of projects if the market falls further, he said. With employees in the IT industry having formed 65 to 70 per cent of the consumers during the growth phase of the last three years, the housing market has been badly hit by the tech slowdown. “They don’t know if they will get their increments or if they will even hold on to their jobs. So there is a crisis of confidence about borrowing even if the interest rates do fall further… It is all causing a fear psychosis.”

Mr. Challa also blamed the Union Finance Ministry and the Reserve Bank of India for adding to the real estate sector’s problems. In issuing guidelines designed to reduce the exposure of banks to the real estate sector, they have made it difficult for the industry to access funding at reasonable costs, he said. Data showed that the total public sector bank exposure to the sector over the last two years, including the huge chunk of housing loans to the end consumer, loans to housing finance institutions and the National Housing Board, amounted to around Rs. 2 lakh crore. If the exposure to developers alone was taken, the figure would not amount to more than 4 to 6 per cent of total lendable funds, he said. In contrast, in the U.S. and Europe, banks have 40 to 60 per cent exposure to the real estate sector, he said.

In such a situation, “why are they talking about the need to curtail the industry? This is very myopic thinking by the RBI and the Finance Ministry,” said Mr. Challa. He emphasised that apart from the developers themselves, 200 other downstream industries would suffer. Job losses would also be huge, as the construction industry is the largest employer of unskilled labour after the agricultural sector. In Chennai and its suburbs alone, Mr. Challa estimates that well over 2.5 lakh workers have already lost their jobs since March 2008. Most of these are migrant workers who have been forced to return to their hometowns. “When Jet Airways lays off 1,900 workers, there is so much hype. But when 10,000 unskilled workers go off the radar, everyone is silent,” he said.

Supporting the housing sector at this stage could be vital to an economic recovery, said Mr. Challa, rueing the fact that support for the residential real estate industry was not part of the government’s stimulus package. CREDAI has proposed that the state government release some of its land holdings in the city for public-private partnership projects with a consortium of developers to develop low and middle-income housing. “TNHB [Tamil Nadu Housing Board] alone is sitting on 300 acres of land… They have more than 100 acres within the city,” he said. A minimum of 10,000 units could be built in the city, ranging between 300 and 1,000 sq. ft in size. Along with basic construction costs of Rs. 1,200 per sq.ft, Mr. Challa proposed that the government could fix its own prices to sell or rent the housing.

2009-05-01T04:52:00.000-07:00

NEW DELHI: The slowdown is going to continue for the Indian realty sector and it may take 24 months to see revival, say industry experts.

"The Indian realty sector will take about 24 months to see any revival," according to Sameer Nayar, managing director and head of real estate (Asia Pacific) of Credit Suisse, a leading financial services company.

"There is a sort of standoff in the market where both the seller and buyer are not happy with the price. So no transaction is taking place. This may continue for two more years," Nayar said.

Maintaining that developers need to make a "realistic assessment" of the market before launching a project, he said: "What we need is not five star hotels or costly condominiums but middle market flats and low budget hotels."

There is still lot of demand in middle segment housing in the Rs.20 lakh-Rs.50 lakh bracket "where developers should focus", Nayar added.

According to him, there is a also huge disconnect between supply and demand in the office space.

"For example, in Noida the supply of office space is more than the actual demand. I feel it will take two years to occupy the spaces supplied if the economic growth comes back to normal," he said.

But as per his assessment, what will decide the survival of developers is the delivery of projects on time.

"Unless the existing project is delivered on time, no further approval should be given for any fresh projects," Nayar said.

He lamented the fact that there was no real focus on the realty sector while everyone talked of the IT sector, which constituted less than one million jobs in India.

"Construction and real estate sector provide maximum employment in India after the agriculture sector. But still, there is no real, comprehensive policy framework in this sector," Nayar added.