Realty Investors Take Equity Route To Offset Tax Burden

Though the realty sector has been hit by the general economic slowdown, smart property investors, who raked in the moolah when the going was good, made use of the equity markets to reduce the tax they paid on those gains.

According to tax consultants, people whose income is derived from other sources, say a salaried employee, can and have in the past offset derivatives losses against short-term capital gains made in property transactions to reduce tax incidence on the property gains.

Gains from property are deemed short-term if they are held for less than three years. Once a derivatives loss is offset against the gain, the balance short-term capital gain is clubbed with the salary income and taxed at the normal rate.

Tax experts, like Ernst and Young director (financial services) Sameer Gupta, point out that in the context of shares, Central Board of Direct Taxes (CBDT) issued a circular in June 2007 laying down the tests for distinction between shares held as stock in trade vis-a-vis those held as investment.

Some of these tests include the scale and frequency of the transactions, whether owned funds or borrowed funds were utilized for the transactions, the accounting treatment, the motive behind entering into the transactions, etc. They add the tests are indicative and not decisive, and need to be examined on a case-to-case basis, including their applicability to futures transactions.

“It may be argued that a gain or loss arising from an exchange-traded futures transaction (NSE/BSE F and O) is in the nature of a short-term capital gain or loss as a person buying or selling a futures contract is creating a right or interest (in buying/selling a specific number of shares on a net settlement basis) and that when this right/interest is transferred by way of squaring off the transaction, there is a capital gain or a loss,” said E and Y’s Gupta.

Other tax experts buttress this argument by pointing out that a capital asset in the Income-Tax (IT) Act means property of any kind held by an assessee, whether or not connected with his business or profession.

“Under Sec 2 (47) of the I-T Act, a transfer in relation to a capital asset is defined as including the sale, exchange or relinquishment of the asset or extinguishment of any right therein or the compulsory acquisition thereof under any law. The word property used in Sec 2 (14) of the I-T Act is a word of the widest amplitude and the definition has re-emphasized this by the use of words “of any kind”. Thus any right which can be called property will be included in the definition of capital asset,” said senior vice-president (finance) of Tata Sons FN Subedar, drawing attention to a Bombay High Court decision in Tata Services versus Commissioner of Income-Tax case of 1979.

The implication of this is that a derivatives contract entered into by a person, and not held as stock in trade, is a capital asset and that when the futures contract is settled, the accrued gain or loss arising from the settlement of the contract is a capital gain or loss, added Mr Subedar.

Interestingly, while derivatives losses can be genuine, as is likely to be the case over the past nine months which has seen the Sensex declining by 38%, investors can also buy losses in a structured deal with brokers in order to set off the derivatives loss against the short-term capital gain arising on sale of immovable property in the same financial year.

Share brokers say this, though illegal, is not an unknown market practice. They are also quick to point out that structured deals wherein one party buys a loss while the other books a gain is restricted to the ‘unscrupulous’ variety of brokers and is not prevalent among reputed and big institutional and retail brokers.

Explaining the modus operandi of such transactions a broker said this practice was prevalent in the case of Nifty futures. Say, investor A wants to buy a loss and investor B wants to book a profit. The broker punches in a buy and sell order, respectively, on two different terminals using A’s client code for both the transactions (buy and sell).

However, if the valuation of the property changes in six months to Rs 1.2 crore, the investor could sell it and make a cool profit of Rs 20 lakh on an investment of Rs 10 lakh. “This mostly happens when realty market is on a high,” Mr Aggarwal said.

Realtors’ Advance Tax Payment Falls Down

Major real estate players including DLF, Unitech, Parsvnath and Omaxe appear to have taken a sharp hit with the slowdown in the economy as their advance tax payments have fallen sharply. Faced with lower sales and liquidity crunch, DLF hasn’t paid any advance tax in September of this financial year, compared to Rs 37 crore in the year-ago period.

“It’s a general slowdown in the real estate sector which is showing in the advance tax figures,” says Omaxe CMD Rohtas Goel. Omaxe hasn’t paid any tax for September quarter as against Rs 37.5 crore in the year-ago period.

The trouble in the realty sector was evident in the stock market on Monday as the BSE realty index fell 5.26%. DLF scrip touched an all-time intra-day low of 329 despite its previous announcement of share buyback.

Unitech’s advance tax declined by half to Rs 50 crore, while HDIL has paid nothing as against Rs 30 crore last year. Sobha Developers’ tax payment in September fell 60% to Rs 5 crore from Rs 12.5 crore in September 2007. Ansal Properties &Infrastructure paid half the advance tax at Rs 5 crore compared to the year-ago quarter. Parsvnath paid 20% lower tax at Rs 20 crore.

A senior Unitech executive said realty firms operate through hundreds of subsidiaries and so advance tax figure of the parent company may not reflect the health of the group. However, Karvy Stock Broking vice-president Ambareesh Baliga said: “Given the current market scenario when real estate stocks are getting hammered every day, all listed firms would like to show a better profit in the parent company rather than subsidiary.”

One industry executive blames liquidity crunch as one of the reasons for lower advance tax. “Companies may have better profit but not enough cash to pay tax,” he said. Mr Baliga says companies can’t afford to not pay tax despite showing profits. “At best they can defer booking profit to next quarter if they don’t have enough cash to pay tax.”

Meanwhile, DLF’s buyback announcement doesn’t seem to have helped arrest fall in its share price. A DLF spokesman said, “The impact of buyback announcement was not visible on our share price because we have not started the action yet”.

Overbuilding Promises A Kick In The Gut For Realtors

Nipun Sahni, director and global head of commercial real estate at Merrill Lynch Capital, says the number of information technology parks and special economic zones in the 21-km Old Mahabalipuram Road — popularly known as OMR — in Chennai surpasses demand in the entire IT industry in India.

he said at a Ficci seminar, “It will be difficult for builders to raise finances for their other developments and in subsequent phases, projects will also be postponed”.
OMR, realty analysts say, is symptomatic of the overbuilding that has happened in far too many pockets.
Two other plum areas that are likely to face the same fate, they said, are Lower Parel in Mumbai and Noida in the National Capital Region, both of which are hotspots for A-grade office space. They predict high vacancy rates.
Lower Parel has a ready office space of 4.5 million square feet and will add a minimum 5 million square feet by 2009, taking the total commercial space to 9.5 million square feet.
Of this, DLF, India’s largest realtor, alone will add 3.8 million square feet through office space and a mall.
Indiabulls Real Estate, Peninsula Land and Orbit Corporation are also busy completing their projects in the locality.
To boot, top players such as DLF, Unitech, Emaar-MGF, Akruti City, Puravankara and others have expanded to states they were not present in, and have ended up in close proximity to each other, creating oversupply pockets.
What started as a building boom in 2007 across emerging markets such as Chennai, Hyderabad, Bangalore and Indore is a year later, a very different story thanks to the Reserve Bank of India’s rate hikes, the wealth-depletion effect of falling stock markets and economic headwinds.

Golden Peacock Award To DLF

The largest Indian real estate developer DLF Ltd has received ‘Golden Peacock Award’ for its excellence in corporate governance. The Golden Peacock Global Award for Corporate Governance was instituted by the World Council for Corporate Governance in January 2001 to promote competitiveness among businesses to get better quality of corporate governance.

A DLF spokesperson said, “We are happy to receive the Golden Peacock Award for excellence in corporate governance as it validates DLF’s focus on following policies and processes which serve shareholders and stakeholders of the company in the best possible manner”.

Buy Flat Get BMW Free

Indian real estate sector is going through a big slump. Not only Indian but real estate sectors around the world are facing slump. Property dealers are registering big losses. Biggest example of loss in real estate sector is DLF Group whose share prices have gone down up to 76% on BSE. Because of slump real estate developers are not getting customers for their properties which they have already developed.

So to lure customers they are using various techniques. To attract customers in real estate sector requires great offers from property dealers. And real estate dealers are giving those offers to buyers. Recent case of great real estate offer is in Noida. In Noida, one real estate group is giving free BMW car to customers who buy its luxurious flats in Greater Noida Golf Course Complex. Not only you will get free BMW, you will also get free membership to Golf course and social club along with 2 free car parkings there.

These luxury flats are specially built flats for Indian riches. Flats have been developed keeping in mind CEOs and MDs of big MNCs . The price for these flats ranges from Rs. 3 crore to Rs. 4.50 crore. But there are few requirements to be completed before you get free BMW when you buy flat in Greater Noida. Customer will be asked to pay 40% of the amount to free BMW offer from Noida’s real estate developer. And only those who apply under this scheme will avail this real estate offer. And if you cancel the flat booking after you get free BMW, price of BMW will be taken from your advanced payment and leftover will be given back to you.

So the thing is sure. This is a mean to attract real estate customers at the time when whole real estate sector around the world is going through a big slump.

Indian Realty Wakes Up To The US Meltdown

The recent financial debacle in the US has sent shock waves across the globe and is also projected to impact the Indian real estate sector directly or indirectly. Adequate and timely funding would be a major concern for developers. Already, there are indications of investors withdrawing their funding. While big players consider this shake-up as a temporary phase, most global property consultants anticipate correction in property prices. Buyers are adopting a ‘wait and watch’ policy and the cascading impact of the US financial tsunami might be felt on real estate too in terms of movement in projects, property prices and stocks of real estate companies. Let us examine the mixed views on the collapse of major US financial institutions on the Indian realty.

Mahindra Lifespaces Mulls Entering Affordable Housing Segment

Mahindra Group’s real estate arm Mahindra Lifespaces is likely to join the ‘affordable’ housing bandwagon in a year, aiming the middle-income group.

“We are looking at opportunities to enter into the affordable housing sector, but it is still at the discussion stage. It may take one year to concertise the plan,” Mahindra Lifespaces Managing Director and Chief Executive Officer Pawan Malhotra declared.

Affordable housing is making waves in the realty sector due to high cost of property, dearer home loan and its availability, high inflation and the huge gap between demand and supply.

A mapping of the supply trend of housing from private developers done by Ernst and Young shows that 70%-80% of it caters only to the higher-income groups.

In contrast, the Planning Commission expects that the housing shortage in the country to go up to 26.53 million units over the next four years. Of the total housing shortage, economically weaker sections and low-income groups account for about 99% of the shortfall in India.

Thus, anticipating volumes to make up for lower margins, a number of recognized real estate players, like Puravankara and Omaxe Ltd, have already plunged into the new asset class of the real estate sector.

In addition, Matheran Realty, Indu Projects, Shriram Properties, Jain Heights and Structures, Ansal Properties and Shapoorji Pallonji among others are either entered or are in the wings to enter into the creation of affordable housing.

Design Arch To Invest In Greater Noida

Real Estate firm Design Arch said that it will develop a residential project with application of green technology in Greater Noida, which could entail an investment of Rs 150 crore.

Besides, the company plans to develop 10 such e-house projects in the metro cities across the country by 2010-11.
“We have just announced our first e-home concept called Gardenia E-Homes at Greater Noida. It will be followed by another nine such project in various metros over next three years,” Design Arch Managing Director J K Jain said.
He said the company is investing Rs 150 crore for the Greater Noida project and expects a realization of Rs 250 crore once the project is completed by mid 2010.
Jain, however, declined to disclose the investment figures for the other projects planned by the company.
“A green building may cost a little more initially, but saves through lower operative cost over the life of the building. There are many benefits, such as improving occupants’ health, comforts, productivity, reducing pollution and land fill waste,” he added.
He said the company is looking at developing both commercial as well as residential properties with this new concept.
Elaborating on the concept, Jain said structures would be electronic savvy, environment friendly, earthquake resistant besides other amenities.
“The green buildings in our project area will have four components, including energy saving, water saving, better indoor air quality and hygienic conditions and reduction of construction material waste,” he said.
The project would have some other eco-friendly concepts, like integrated rain water harvesting coupled with recycling of water and automatic fire detection sensors, he added.

QVC Realty To Raise Funds For Spreading Out In South

Real estate developer QVC Realty plans to raise Rs 600 crore in 2009 through a mix of equity and debt, primarily to buy large tracts of land in the south, especially closer to the new airports in Bangalore and Hyderabad.

According to a senior official of the IL and FS backed QVC, it plans to use a portion of the funds, Rs 200 crore, for the development of its Rs 2,000 crore township project in Gurgaon. Delhi-based Uppal Group is a partner in this project.

“We will need funds to acquire land in the southern metros. We propose to acquire about 100 acres each in Bangalore and Hyderabad, close to the new airports in these cities, because we believe that both cities will grow in the direction of the airports. We will require funds to develop current projects,” said QVC’s promoter Prakash Gurbaxani.

According to Mr Gurbaxani, IL and FS is likely to invest up to Rs 400 crore in the company giving it the option to raise debt or bring on board a strategic investor into the SPV implementing the Gurgaon township. IL and FS has already invested $100 million into QVC in April, 2007.

QVC Realty, has six projects under various stages of development: integrated township projects in Gurgaon and Pune, apart from stand alone developments in Pune, Bangalore and Chikmagalur in Karnataka totaling about 20 million square feet.

The company has also partnered with Bangalore’s Sobha Developers and New Delhi’s Chintels India for its second township project in Gurgaon.

The company formally launched its Rs 150 crore Bangalore residential project – QVC Hills. It will construct 100 premium villas, priced upwards of Rs 5,500 per square feet, on a 26-acre plot located in close proximity to the Devanahalli airport.

Plans include developing an additional 50 acres in the coming years, investing additional Rs 250 crore, Mr Gurbaxani said.

Corporates Float Money To Attain Assets In Property Market

Expecting huge value erosion in the realty space, corporates have started to float new funds to acquire assets in the domestic property market.

Corporates such as the Aditya Birla group, GMR Infrastructure, Akruti City, Bangalore-based Nitesh group and Saffron Advisors have either floated or are in the process of floating funds with corpus ranging between Rs 500 crore and Rs 1,000 crore.
“As far as Indian realty is concerned, for the right projects, funds are still available,” said Saffron Advisors MD Ajoy Kapoor. “Conservative European investors, after conducting extensive due diligence and research, are more comfortable with investing in Indian real estate provided they are able to align with the right partners,” he added.
Munich-based retail aggregator Deutsche Capital Management AG (DCM) has underwritten $20 million for Saffron India Real Estate Fund I (SIREF I), an India-focused real estate fund floated by Saffron Advisors. DCM is raising a specific fund for investing into Indian real estate through Saffron Advisors.
SIREF I is currently raising funds in the US, the UK, Europe, the Middle East and the Asia Pacific. It is a $350- $400 million real estate fund with a maximum limit of $500 million.
Bangalore’s Nitesh group is in the process of floating a Rs 1,000-crore property fund to invest in the group’s real estate arm Nitesh Estates’ upcoming project and to buy assets. “We have initiated talks with many European institutions and HNIs to invest in the fund. The initial response is very positive,” said Nitesh group chairman Nitesh Shetty.
Mumbai-based developer Akruti City is also planning to float a Rs 400-crore fund to acquire more properties as valuations drop across India. “We have got Sebi approval to float a real estate fund,” said MD Vimal Shah. “We have initiated talks with domestic banks to raise the funds,” he added. In the next six months to one year, the property value would fall further which would open opportunities for acquiring cheaper real estate assets, he added.
Tough lending norms, an unfavourable primary market and the US financial worries have started to limit money flow to the domestic property market. The number of real estate deals has reduced and fancy valuations projected by developers witnessed a deep correction, said industry officials.

The Aditya Birla group recently said that it has plans to float a fund for real estate with the corpus likely to be over Rs 500 crore. Industry sources also said that GMR Infrastructure is also planning to float a $1billion infrastructure and real estate fund and that preliminary talk are on with institutions and banks.

Proffesionals Prefer Gurgaon To Live

The expansive skyscrapers and mounting infrastructure has made Gurgaon real estate one of the best places to invest. The commercial properties in Gurgaon have clutched the attention due to bang. The place is housing to diverse world class malls due to availability of ample spaces that is required for corporate industry and its connectivity to Delhi.

Commercial and residential real estate both are on its boom. Nowadays, a number of residential apartments are available that bring class and provide options that have completely changed the definition of Gurgaon real estate. Residential apartments, villas and town ships have made keeping in mind professional who wish to live away from the commotion of city life. On the other hand, commercial centers have made the city a commercial hub.

Akruti Looks For Bus Terminals And Warehouses

Real estate firm Akruti City has identified some alternative growth spots. It has formalised JVs with the Gujarat government and the National Commodity and Derivatives Exchange of India (NCDEX) to redevelop public bus terminals and warehousing facilities, respectively.

While bus terminals will be converted into bus stations-cum-commercial and retail hubs, the company plans to set up 17 warehousing facilities for NCDEX across the country.

“Bus terminals are one of the ideal commercial and retail destinations,” said Akruti City MD Vimal Shah. “Compared to malls and other shopping centres, human mobility at bus terminals is comparatively high. Passengers would be offered more comfort.”

Many state governments and the Indian Railways have zeroed in on bus terminals and railway stations as ideal locations for development as the passenger traffic has been on the upswing.

Some state governments, including Maharashtra, have already started the redevelopment work for BEST terminals while the Railways has identified 22 stations to be converted into station-cum-malls and hotels through public-private participation.

In the first phase, Akruti City will redevelop 5-7 bus terminals in towns such as Baroda, Surat and Mehsana in Gujarat. Akruti, in turn, will get around 2-3 million square feet of area for commercial and retail development.

Currently, Akruti City has 107 million sq ft of developable land bank spread across Mumbai, Panvel, Pune and Baroda. Akruti, in association with TCG Realty, is developing a biotech park on 700 acres at Savli near Vadodara. Shares of Akruti City rose 3.64% to close at Rs 966.15 on the Bombay Stock Exchange.

On Akruti’s JV with NCDEX, Mr Shah said, “Warehousing is one of the new growth areas we have identified. The JV with NCDEX envisages development of 17 warehousing facilities for the commodity exchange at various locations in the country. We will develop and manage these facilities for NCDEX.”

Real Estate Bank India Plans Sixteen Outlets In Orissa

Real Estate Bank India is scheduling to set up three thousand franchisees all over the country with sixteen outlets in Orissa within a year. The first property shop will be opened on September 24 in Bhubaneswar. The other property shops will be located at Rourkela, Cuttack, Jharsuguda, Barbil and Jajpur Road.

This would promote inter and intra state real estate transaction. The company is already experiencing the pleasure of its presence in Karnataka, Kerala, Andhra Pradesh, Pune, West Bengal, Delhi and Tamilnadu. Its main business involves property transactions with a retail format and it is planning to deliver all property transaction related services under single roof. This will be the first property shop in Orissa of its type.

Realty Crash Shuts Exit Options For Investors

It has become well nigh impossible for those who invested in real estate last year to exit the scene as the downturn has deepened and the prices being quoted do not even cover the purchase costs and interest expenses.

Moreover, the negative global news flow has set off a panic reaction, inducing investors to close deals at losses.

The 35-year-old Rahul Verma, who works with a Noida-based IT company, exemplifies the experiences of late entrants into the property market. He bought a Rs 50-lakh flat in Greater Noida early last year by arranging for a bank loan to finance 85% of the cost.

His EMIs have continuously gone up since the purchase, thanks to a series of rate hikes by the RBI. The flat purchase was a pure investment decision. Rahul had jumped onto the bandwagon after hearing stories of skyrocketing returns made on property investments.

However, the prices haven’t climbed as expected and the interest outgo has made the property expensive. Rahul is now left with the only option of selling at a loss. And given the global economic gloom, he is willing to take a hit.

“Several investors are stuck simply because there hasn’t been enough price appreciation in the past one year,” says Raheja Developers Chairman Navin Raheja.

Several young investors invested in property at the peak of the property cycle last year. Many purchased two apartments simultaneously, assuming that they would finance one by selling off the other at a premium. They are now caught in a difficult situation as they bought at a higher market rate and are compelled to service two EMIs.

Some investors have started defaulting, according to a senior Parsvnath executive. “There is a significant rise in the number of people who are approaching us to cancel their bookings and return the money,” he says.

Property consultants feel that investors will have to bear huge losses if the markets do not improve during the festive season. Home buyers in the country are staying away due to the high interest rate regime and expectations of a correction following the realty crash worldwide.

Sarda Group Enters Facility Management

The Rs 2,000-crore Sarda Group has taken over asset and facility management brand Talbot and Company in India at an undisclosed sum foraying into the real estate management segment.

Sarda Group Chairman Ghanshyam Sarda said, “We have acquired Talbot and Company which has roots in UK and this acquisition will help us to get headway in facility management services”.

He said, “We have to streamline Talbot’s services in keeping with current trends of globalization. The solutions we offer shall be tailored to meet specific requirements. Talbot will be providing a complete range of commercial real estate services including leasing, acquisition and facility management”.

At present, Talbot and Co has operates in Kolkata with employing about 50-60 people without any property. The Talbot brand is used in several countries, but managed under separate management.

He said the company would expand manpower to 1,000 and the annual turnover of Rs 300 crore in the next three to four years.

Sarda Group has interests in jute mills, chemical and IT business in USA. The IT company is primarily focused on marine software solutions to major liners.

Government In A Fix Over Lehman Realty Assets

The department of industrial policy and promotion (DIPP) and the Reserve Bank will shortly meet to evaluate the situation arising out of Lehman’s collapse, as the US giant has $500-million investment in Indian real estate projects.

Foreign investment norms for real estate do not allow repatriation of funds within three years of investment. The RBI-DIPP meeting will discuss a mechanism to deal with cases like Lehman, when foreign investors in real estate go bust. One of the key questions is what happens to the failed investor’s assets, which are bound by certain lock-in periods.

Lehman has its real estate assets spread across the country.

Lehman Fall May Deepen Indian Realtors’ Credit Woes

Lehman Brothers’ bankrupcy is likely to cost Indian real estate. It may impact the financial major’s existing investments worth $500 million in realty firms, including DLF and Unitech, besides drying up another $500-million worth of potential investment which was expected to flow into Unitech’s Mumbai projects.

The news of Lehman’s collapse brought the BSE realty index down by 7.65% on Monday, while the benchmark Sensex declined 3.35%. Both DLF and Unitech fell 7.5%.

Lehman’s fall signals a deepening of credit crisis for Indian developers, who have lately been battling falling sales, rising cost of construction and tightening credit. It is expected that the US-based firm is likely to go for a fire sale of its assets.

The financial service major was very bullish on India and was among the active investors in Indian real estate. Early this year, it had leased out an office space in Mumbai paying Rs 1 crore per month as rental. This would divert a part of fresh funds seeking to invest in Indian realty.

This is because global fund houses have country-allocations. And as they buyout Lehman’s stake in some of the Indian assets, they will end up diverting some of the fresh funds-in-hand to existing assets rather than investing in new projects.

“Lehman’s departure will impact future cash flows of real estate companies. In a market situation like today’s, it will be all the more difficult for the firms to raise funds,” says Karvy Stock Broking vice-president Ambareesh Baliga.

Lehman invested $200 million in DLF promoter group company DLF Assets last year and bought 50% stake in Unitech’s Mumbai project for $175 million a few months ago. It had also invested $80 million in Bangalore-based SEZ Gandhi City and was likely to hike its share to $300 million.

Lehman’s other investments include a 40% stake in an IT park project of Peninsula Land in Hyderabad for an initial investment of Rs 50 crore. It had also teamed up with Mumbai-based developer HDIL to bid for the redevelopment of Asia’s largest slum Dharavi.

Wherever the developers had received fund, they are safe. But where the funds are yet to come, the developers could get stuck. Some analysts say a distress sale by Lehman will impact the valuation of existing projects.

DLF CFO Ramesh Sanka had earlier told ET that Lehman’s sale of investments in DAL would not impact DAL’s valuation. Unitech MD Sanjay Chandra said that his company had already received funds. So, the company won’t get impacted by Lehman’s bankruptcy.

Some industry executives say that FDI norms of a three-year lock-in period may prevent Lehman from making an immediate sale. But analysts argue that the lock-in period in case of bankruptcy may not hold.

Mumbai To Get Its First Rental Housing Project

Mumbai housing problem will ease to some extent in the coming year. The city will get its first rental housing project of 35,000 houses at Vasai’s Tiwri village. The project will be developed by Dhanashree Developers and is a part of the Mumbai Metropolitan Region Development Authority’s (MMRDA) ambitious plans for building five lakh rental houses in the next five years. The pilot project spread over 50 acres will have residential units of 160 square feet, which will include a cooking space, bath and water closet. The MMRDA has specified that it would give these houses only to bonafide Maharashtrians who hold a domicile certificate from the state and have a monthly income of more than Rs 5,000 every month. The rents of these houses would range from Rs 800 to Rs 1000.

Long Term Prospects Of Real Estate

With growing foreign investments in the country’s real estate market, long-term prospects of the sector look brighter, HDFC Chairman Deepak Parekh said.

“Long-term prospects of commercial real estate market continue to be positive owing to growing opportunities in sectors like healthcare, hospitality, logistics and education,” Parekh told reporters in Mumbai.

There is sufficient interest from foreign investors to take part in the country’s real estate market through private equity and foreign direct investment routes, he said.

In Q1 FY’09, about 20% of FDIs were in the housing and real estate sectors, he said, adding that the IPO market may take some time to recover.

The housing segment has enormous demand if the pricing is correct, Parekh said. “Given the huge housing shortage it is unlikely that there will be any saturation in the market for a long time to come.”

Advising buyers not to sit on the fence, Parekh said: “If you find the right house, go ahead and buy it.”

Interest rates over a 15-year period would inevitably move up and down. “So do not overstretch on a loan and maintain a sufficient buffer,” he said.

The present situation may call for some consolidation within the real estate sector and perhaps the need to create innovative financial instruments that could support financially distressed developers to tide over (the present period), Parekh said.

Eighth Indus India Property Exhibition Will Be Held In Doha

The eighth Indus India Property Exhibition will be held on 19 and 20 September at Giwana Ball room of the Ramada Plaza in Doha.
The exhibition will display some of the leading names in the Indian real estate sector. Some of the foremost builders and housing finance institutions from India would be taking part in the expo, organizers said.
Several residential and commercial property dealers from all over India will have their stalls at the venue.
The organizers said that the exhibition would bring under one roof reputable builders, diverse properties and the best financing options from the bank so that customers could shop for their dream home with minimum effort and maximum convenience.
NRI investors looking for real estate investments in India would have access to first hand information on an array of upcoming and current real estate projects, they said.
A variety of property alternatives from residential apartments, plots and bungalows to commercial properties would be on display.
The property would also offer the customers a broad choice with the best deals possible, the organizers said.
The real estate industry has several potential as various foreign real estate and finance companies have entered the Indian market. Moreover 100% FDI is permitted in real estate development and the Indian government has played a most important role in supporting the growth of the real estate sector by permitting NRI investment in real estate.
The previous exhibitions organized by Indus Group in Malaysia, Dubai, Muscat and in Kuwait attracted more than ten thousand investors and generated business inquires for more than twenty five billion rupees worth properties and transactions crossing Rs7.5bn during the exhibition days.

Golden Forest Land Set To Change Hands

In what could lead to one of the biggest land transactions in the country, the Supreme Court will hear on September 16 two companies who have put in bids to acquire the entire land assets of the infamous Golden Forest India (GFIL) which is under liquidation. These two companies are Vavasi Group promoted by National Knowledge Commission chairman Sam Pitroda, and the Delhi-based real estate firm Chadha Group.

“We have received applications from these two companies for the takeover of all the assets of Golden Forests. As long as we manage to raise Rs 2,000 crore, which would benefit GFIL investors, we have no objection,” Justice RN Agarwal (Retd), chairman of the Supreme Court-appointed committee to sell Golden Forests assets told from Chandigarh. GFIL’s land assets are spread across Punjab, Haryana, Uttarakhand, Madhya Pradesh, Orissa and Andhra Pradesh.

“We have forwarded these applications to the Supreme Court, which is expected to take up the matter in its next hearing on September 16,” Mr Agarwal said. The bids are far more than Rs 2,000 crore of current liabilities which includes interest of the defunct company, Mr Agarwal said.

The former judge said that nearly 110 companies, which were floated by GFIL to buy land across the country, will need to be merged with the parent company first so that a bidder can take over the land bank. “This is quite complicated… a lot of legal formalities need to be completed first,” he added.

Analysts said the land bank of around 12,000 acre is approximately valued at Rs 5,000 crore. “We have managed to sell some small portions of GFIL’s land and have received part payment. This will also need to be ratified by the Supreme Court, along with Vavasi and Chadha groups’ applications,” he said.

Golden Forest India made news in the mid-nineties when the company raised funds worth Rs 1,000 crore from over 22 lakh investors across 11 states to invest in plantation schemes. But it soon defaulted on payments to the investors. So, Sebi — which bought all plantation schemes under its purview in 1997 — moved court and initiated proceedings against the company’s promoters led by its chairman R K Syal.

As the case against the company was heard across various courts, the matter was finally transferred to the Supreme Court. Four years ago, the apex court appointed a committee under the chairmanship of retired chief justice RN. Aggarwal, with two members, one each from the Reserve Bank of India and Sebi, for the purpose of taking into custody all the assets of Golden Forest and calling for claims of creditors and scrutinizing them. The court later asked the committee to auction all the assets of the company so that the investors could be repaid.

A banker told that Vavasi is doing a due diligence of GFIL’s assets and talking to various banks to raise funds required for taking over GFIL’s assets. A questionnaire sent to Mr Pitroda went unanswered.

Tishman Speyer Plans To Raise 1 Billion Dollar

Property developer and fund manager Tishman Speyer plans to raise up to one billion dollar in a private fund in 8-10 months for Indian realty projects, the managing director for its India unit said.

“We still have some money left over from a previous one and we are already talking to investors for our next fund, though we haven’t started road shows yet,” Revathy Ashok told reporters on the sidelines of a capital markets conference.

Tishman has raised three hundred fifty million dollar in a private fund this year and is funding three projects in south India, she said.

High borrowing costs and a stock market slump have forced real estate firms to look at private equity for funding projects.

Private equity investing in India and China held steady in the first half of the year, the Asia Venture Capital Journal said, with India seeing a 3.2% rise to $6.8 billion, and China registering a 3% gain to $5.8 billion.

Real estate prices in India have cooled this year after a 3-year boom as a series of interest rate hikes by the Reserve Bank of India to tame soaring inflation hit consumer demand for new homes and office spaces.

New York-based private equity firm Jina Ventures plans to raise up to two hundred million dollar by end-2008 to invest mainly in manufacturing firms in India, its managing partner said.

“We are talking to investors from Switzerland, the US and Japan and should be able to wrap up the fund by end-2008,” Ron Shah at the capital markets conference.

Jina Ventures had raised fifty million dollar in 2005, which it invested in 12 Indian firms and had exited these investments, Shah said.

He said the opportunities in India remained abundant, but the current market volatility would mean foreign investors may take time to turn up in a big way.

India’s main stock index has fallen about 27% this year after a five-year bull run, hit by uncertainty in world markets and domestic factors such as double-digit inflation and moderating economic growth.

Sarovar Hotels And Resorts Plans To Add 33 Hotels

Sarovar Hotels & Resorts plans to add nearly one lakh rooms by 2012.
It plans to add 33 hotels to the existing 35 in the next four years. “We are a multi-brand hotel management company and given the growth potential in the mid-market hotel segment, our group will continue to focus on it,” said Ajay K. Bakaya, executive director of Sarovar Hotels & Resorts.
Sarovar has five hotel brands in the country — Sarovar Premier and Park Plaza in the five-star category, Sarovar Portico and Park Inn in the three and four-star segments, respectively, and Hometel in the economy segment.
Park Plaza and Park Inn are run under the master franchise of Carlson Hotels.
Sarovar recently opened its budget hotel Hometel in Bangalore, Hyderabad and Mumbai. It plans to open five such hotels in Pune, Chennai, Chandigarh, Chennai and at Baddi. The company aims to open at least 50 Hometels in the next five years.
Among the new properties in the pipeline, Sarovar will open Sarovar Premier and Park Inn in Siliguri.
The chain also plans to come up with hotels in Jaipur, Pune, Port Blair, Ahmedabad, Amritsar, Bhubaneshwar, Raipur and Mohali.
Sources say the group is also venturing into apartment hotels. The first 135-room Park Inn and Suites is scheduled to open in Bangalore in April next year.
Sarovar recorded a turnover of Rs 300 crore in the last fiscal and is expected to post a growth of more than 30 per cent this year. It aims to boost its topline to touch Rs 400 crore this year.

Chandigarh Attracting Realtors

With the saturation of metros and major tier I cities across the country, the focus has now shifted to tier II cities, which has turned to be fruitful for realtors.
Chandigarh has been overwhelmed by the response it got from the realtors who are keen to start their construction activities.
The three operational malls in Chandigarh include Fun Republic, Uppal’s Centra Mall and DLF City Centre.
Other malls that are likely to be operational within next few years are TDI mall and City Emporio Mall. Also Paras Downtown Square mall-cum-multiplex at Zirakpur is likely to be operational year only.
The success of these malls continues to remain a topic of debate for many however people of the city have welcomed such malls as they offer them variety.
They also help in creating employment opportunities for the locals.
According to local realtors one shopping mall creates job opportunities for around 200 people and with more malls opening in Chandigarh, the employment opportunities for local people could be in thousands.
The analysts from global real estate firm Jones Lang La Salle Meghraj maintain that the shopping malls undoubtedly are generating employment opportunities.

Axa REIM Sets Up Asian Headquarters

Axa Real Estate Investment Managers (Axa REIM) has set up its Asian headquarters in Singapore.

About 18 months after making its strategic move into Asia, Axa REIM has already invested nearly 25% of the $2 billion committed by its clients in the region. The new operations in Singapore are expected to help further build Axa REIM’s presence and leverage in Asia.

Axa REIM, a wholly owned unit of Axa Investment Managers, manages around $63 billion in assets.

“Asia is becoming a strategic destination for the real-estate investors and we want to support our Axa Group and third-party client efforts in diversification and creation of value,” says Pierre Vaquier, CEO at Axa REIM.

Frank Khoo has been named global head of Asia at Axa REIM. Based in Singapore, he will assume his post in mid-September and will report directly to Vaquier. He will also be part of the Axa REIM executive committee.

In this new role, Khoo will coordinate the development of Axa REIM’s investment and asset management activities in the region.

He will manage the development of investment platforms in Japan and India and will set up a local presence in other parts of the region which are important to Axa REIM’s strategy.

He will also contribute to the launch of Asian investment funds to develop Axa REIM’s asset base in Asia.

With over 15 years in the investment industry, Khoo has extensive experience in private equity and real estate and a deep knowledge of all the Asian markets.