Author Archives: skgupta

Real Estate Investment Opportunities in India

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The LiveNRI has announced an upcoming India Property Road Show on May 5th 2012 (Saturday) and May 6th 2012 (Sunday). The timings will be 11am and 7pm (by appointment only). It is an option for investors and home buyers, who are looking for nice property in India. The new solution has been developed to meet the need of the people looking for homes and commercial property in India.

The property will be showcased at the road show, where investors and buyers will be able to see an example and options of property, which will highlight the various options and facilities. It is designed to support an entire investor’s team or just an individual, interested in the property.

About LiveNRI- India Property Service:
LiveNRI represents the top developers in India to offer its clients across the world a wide range of choices within India. The booming real estate market in India affords the opportunity and security of a growing investment.

South Indian Real Estate Sector footprint

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What a South Mumbai is to Mumbai or a South Delhi is to Delhi could well be South Indian cities to India! The question is – will the southern region become the downtown of India?

Southern India has for long been the silent crusader, building and strengthening its real estate development as one of the most sought after destinations in the country. With improving transparency and visibility of the real estate markets in the South zone, cities such as Bangalore, Chennai and Hyderabad have attained a place on the global real estate map, a status that was limited just to Mumbai and Delhi in the past.

While South Indian cities constitute nearly 45% of the country’s office space, the stock of 140 million sq ft in these cities is projected to grow at a CAGR of 8% for the period 2012 – 2016, lower than the projected national growth of 11%. This implies that the southern cities, particularly Bangalore and Hyderabad, are relatively rationalised in terms of medium term supply of office space, and the cities have chosen a strategy of pursuing selective quality developments over rapid expansion. While this would keep their share in India’s office stock range bound at 37%-40%, the South Zone’s vacancy rate by end-2012 is expected to be 16%, considerably lower than the pan-India vacancy rate of over 20%.

While demand remains healthy for organised retail spaces, it is polarised towards either successful malls or high streets, which have better footfalls and conversion ratio. As the mall stock in the southern cities sum up to breach the 40 million sq ft mark by end-2016, the vacancy by then is expected to witness a notable decline from the peak levels of 2014 to drop below the national average of 20.5%.

South India’s residential market has been an ardent follower of the ‘affordability’ mantra, with more than 80% of the new launches in the past two years being priced under INR 4,000 per sq ft (USD1 812 per sqm). As a result, the residential markets of South Indian cities have remained resilient in the past few quarters, relative to the significant decline recorded in the sales volume of Mumbai and NCR-Delhi.

The focus of Indian real estate is shifting from Tier I to Tier II cities, and the southern region is also embracing the same, with secondary hubs developing in Kochi, Coimbatore, Vishakhapatnam and Mysore, that are persistently striving for higher milestones.

 

Assotech and Sunapollo to Build Rs 500cr Housing Project in Gurgaon

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Real estate Company Assotech and private equity firm Sun-Apollo Friday announced the development of a housing project in Gurgaon at an investment of about Rs 500 crore over the next three years.

Sun-Apollo Real Estate Advisors has invested Rs 75 crore to pick up nearly 50 percent stake in Assotech’s subsidiary firm which would develop this project. Assotech has infused Rs 76 crore for nearly 51 percent stake in the subsidiary. “We are entering into the Gurgaon market by launching a 12-acre housing project in partnership with Sun-Apollo. This is our first project to receive private equity investment,” Assotech Managing Director Sanjeev Srivastava told reporters.

The project, which is located on Dwarka Expressway, has been launched at a price of about Rs 5,000 per square feet. He said the company has bought the licensed land where it would develop about 580 apartments, 23 villas and 102 flats for economically weaker section. “The total investment in this project ‘Assotech Blith’ would be about Rs 500 crore including the land cost over a period of the next three years,” Srivastava said.

The investment would be met through equity contributions from both the partners, bank loans and advances from customers against sales, he added. Sun-Apollo Principal Alok Aggarwal said: “The two partners are committed to invest more if required for construction activities”. The private equity firm has also invested in real estate projects of Parsvnath Developers and Godrej Properties in north India. “We will do more projects with Assotech in future if there is good opportunity,” Aggarwal said.

Assotech is currently developing many housing and hotel projects in the National Capital Region (NCR), Uttar Pradesh, Odisha, Uttarakhand, Madhya Pradesh and Bihar.

Real Estate Bill Have to Wait More

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The much-awaited regulatory Bill for the real estate sector is still a long way off. The draft Real Estate Regulation Bill will not be tabled during the current session of Parliament, a senior official in the Ministry of Housing and Urban Poverty Alleviation has confirmed.

The imprisonment, according to the final draft, applies only in the case of non-registration with the real estate regulation authority. Registration is mandatory for projects of a certain area and type. The maximum term of imprisonment is up to three years, and penalty may be extended up to 10 per cent of the project cost. In the earlier draft of the Bill, imprisonment was recommended in case of wilful failure to comply with orders of Appellate Tribunal too. The ministry has also reduced the area size for compulsory registration from 4,000 square feet in the earlier draft to 1,000 square feet now. This would mean registration would be mandatory for the smaller players too.

The Bill has been in the making for several years now, and was slated to be introduced during the Budget session. The housing ministry is now targeting the monsoon session of Parliament. The official said the final draft was ready. The draft bill has gone through some changes related to clauses on imprisonment and compulsory registration.

National Real Estate Development Council (Naredco) hailed this as a good move. “It would also check fly-by-night operators in real estate, which are majorly into smaller projects,” said R. R Singh, Naredco director-general. “However, the load on the authority will increase, as it would get flooded with projects for registration as smaller projects are more in number.” Confederation of Real Estate Developers Association of India (Credai), however, wants no limit on the registration. “No developer should be left out of the ambit of Real Estate Regulation Authority,” according to Credai chairman Lalit Jain.

The objective of the proposed legislation is to establish an authority to regulate, control and promote planned and healthy development and construction, sale, transfer and management of colonies, residential buildings, apartments and other similar properties, besides to host and maintain a website containing all project details.

Mumbai Builders Drop the Plan of Strike

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Mumbai builders have called off their strike scheduled for May 3.

The Maharashtra Chamber of Housing Industry and the Confederation of Real Estate Developers Association of India had called for a one-day token strike protesting the delay in project approvals and against the State Government’s move to establish a housing regulator.

The Builders Association of India too decided to participate in the strike. Addressing media persons here on Wednesday, Mr Paras Gundecha, President, said the Chief Minister, Mr Prithviraj Chavan, met the association on Tuesday and assured the members that all issues concerning builders would be addressed.

Mr Gundecha said MCHI also made a presentation to Mr Chavan on the issue faced by developers and sought a single window clearance for housing projects. The Chief Minister had also made it clear that the government’s priority was to build affordable housing stock, he said.

Delhi: Homes Sells Faster Than Mumbai

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Mumbai may be second to Delhi in unsold homes, but it will take longer to sell them. Real estate developers in the financial capital must wait over three years to clear 1.13 lakh units or 120 million sq ft as high prices deter potential buyers, shows a study released by Liases Foras, a real estate rating and research consultant.

The study covers units in Mumbai Metropolitan Region (MMR) — including Mumbai city, Thane, Kalyan and Navi Mumbai — National Capital Region in Delhi, Pune, Hyderabad, Bangalore and Chennai. NCR, with 232.57 million square feet or 1.60 lakh units of unsold homes — roughly double Mumbai’s —will likely sell homes much faster, in 23 months.

“The NCR market is primarily an investor market and has very little comparison with Mumbai,” says Om Ahuja, chief executive officer (residential services) at Jones Lang LaSalle India. “The real estate market in areas like Gurgaon or Noida attracts a lot of money from neighbouring states like Punjab, UP and Delhi as people invest in residential properties.” Among the six metros, Pune homes will be sold the fastest, taking just 14 months to sell its 43.06 m sq ft at the current pace of buying. A steep rise in interest rates in the last 18 months was seen as the key reason for low sales as buyers try to avoid high home loan instalments.

The Reserve Bank of India cut key rates by 50 basis points last month, forcing lenders to lower their retail lending rates which could push sales.

 

 

Real Estate Industry Courses Lures Youths

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With the boom of real estate industry across the country, it seems the youths are not just concentrating on good communication skills and sound knowledge of geographical area to become a good realtor, but are now looking at courses on real estate industry to get the professional touch. An industry report filed by leading real estate intelligence firm, Jones Lang Lasalle, India, has debated if a career in real estate in the country is apt right now.

Debating whether the Indian real estate industry is the right place to start a career, Sameer Khanna, Head, Human Resources, Jones Lang Lasalle India, noted that compared to developed countries, the Indian real estate sector still lacks sophistication and transparency.

Further Sameer Khanna explained, “However, it is popular for domestic and international investments. This has resulted in the need for better and capable human resources. Though real estate is not nuclear science, there are complexities involved.”

What courses to pick? While the real estate industry is changing fast, a lot of professionalism is coming in, as many major international players; developers are introducing best practices and higher transparency. “People equipped with the know-how, training and professionalism are in high demand, and are paid correspondingly,” experts revealed. Why are city students interested? While many students are choosing the course out of interest, many others enter the trade to see if the industry is challenging. Further, there are the third kind, who has families and forefathers who have been an integral part of the industry and are looking at entering the trade, with a professional course. “I do not know much about this industry but I have enrolled myself for this course because it seems interesting. So far the only role that interests me is one related to analysing the market,” said Shreeti Dey, a student.

Blackstone and KKR looks up for Indian Commercial Real Estate

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India’s UB Holdings is in talks with private equity funds Blackstone and Kohlberg Kravis Roberts to sell some of its commercial real estate for 6.5 billion rupees ($123 million), writes Reuters. UB Holdings, controlled by liquor baron Vijay Mallya, is part of the UB Group that owns majority of United Spirits and United Breweries, apart from debt-laden carrier Kingfisher Airlines, which is looking for funds to continue operations, writes Reuters.

Reuters – India’s UB Holdings is in talks with private equity funds Blackstone and Kohlberg Kravis Roberts to sell some of its commercial real estate for 6.5 billion rupees ($123 million), the Times of India newspaper reported on Tuesday citing unnamed banking sources.

 

The UB Tower in Bangalore, which Mallya is looking to sell, is occupied by companies like Apple, Citibank, and Yahoo, the report said. A UB Group spokesman, quoting Mallya, denied the company was in talks to sell the real estate space, the paper reported. Prakash Mirpuri, a UB spokesman, told Reuters there was no plan to sell UB Towers. He, however, could not immediately confirm whether other real estate assets from UB Holdings were up for sale. A Blackstone spokesman declined to comment, while KKR could not be immediately reached by Reuters on Tuesday, which is a local holiday in India. UB Holdings and the private equity players are considering a sale-and-lease-back model, with UB having the right to buy the property back after a specified period, the report said.

Anand Rathi and Knight Frank Eye the Second Realty Fund

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Anand Rathi Financial Services and property consultancy Knight Frank India are planning to launch their second real estate fund by end of this months and looking to raise around Rs 500 crore (~$100 million), sources close to the development told VCCircle. Unlike its peers who are hitting foreign shores to raise new funds, the joint fund rental yield and appreciation portfolio (RYAP) fund will be raised from the domestic market.  Like its predecessor, it will invest in commercial assets in tier I cities which include Mumbai, Pune, Bangalore, National Capital Region (NCR) and Chennai.

The fund would be targeting returns of 10-12 per cent from its investments and expects to stay invested in an asset for four-five years. A senior executive of the joint venture fund house who did not wish to be identified, said, “We are waiting for final Alternate Investment Fund (AIF) guidelines as right now there is no clarity on registration of funds and other norms. Once we have clarity on the same which we are expecting by mid-May we will register and start our fund raising process.”

In April 2, markets regulator Securities and Exchange Board of India (Sebi) had unveiled its final norms to regulate AIF’s in the country. Fund managers expect the detailed guidelines to be issued in the next two weeks.

Knight Frank India and Anand Rathi Financial Services had joined hands two years ago to raise Rs 225 crore rental yield fund. It has invested Rs 135 crore from the existing fund in two projects including Hub town Ltd’s commercial project in Mumbai and Cerebrum IT park development by Pune-based Kumar Urban Development Ltd.

Pune Project got Investment of $13M from Infinite India Real Estate Fund

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JM Financial group promoted Infinite India Investment Management has invested $13 million through its realty fund Infinite India Real Estate Fund in Pune-based developer Kumar Urban Development Ltd’s (KUL) residential project, said sources close to the development.

The source privy to the development said the transaction has been inked recently for an equity stake in a high end residential project which would have developable area of 1million sqft in Pune. The exact size of the stake sale could not be ascertained. Infinite India Investment Management declined to comment on the transaction. When contacted by VCCircle, KUL chairman Lalit Kumar Jain confirmed that the firm has raised capital but did not immediately share name of the investor or the deal amount.

At present KUL have 12 on going residential projects in Pune, five in Mumbai and one in Panchgani, all in Maharashtra. Two years ago KUL was looking to raise Rs 450 crore through an initial public offering (IPO) which didn’t materialise. Half of the amount was to be used to repay high cost debt taken from Standard Chartered and ICICI Bank among others at an average debt cost of 15 per cent. It then came up with the plan to raise private equity funding for its projects and last year managed to rise close to $65 million for some of the projects.

 

Infinite India Investment Management had first launched the realty fund as an equal equity joint venture with SRS Fund and it had plans to invest $400million. JM Financial bought out the JV partner’s stake in April 2010 and since then it has been investing on its own.

Some of its previous deals include $6 million investment in a residential development project of Windshield Developers in Pune besides its agreement with PVR for buying out the multiplex chain’s property located in Phoenix Mills in Lower Parel, Mumbai for Rs 100 crore in May 2011.

 

In London, Tata Housing Development to represent APAC at the International Property Awards

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Tata Housing Development Company (Tata Housing), India’s fastest growing real estate development company, with over 46 million sq ft under various stages of development, has once again triumphed at the most prestigious Asia Pacific Property Awards 2012 (part of the International Property Awards), for the fourth year in a row, bagging five coveted awards under various categories.

Tata Housing is the country’s only residential developer to receive the prestigious five-star award in the Leisure Architecture category for La Montana; highly commended awards in the Show Home category for Prive and Primanti; highly commended award in the Development Marketing category for La Montana; highly commended developer website for www.lamontana.co.in.

Additionally, La Montana, a Mediterranean-themed township located at Talegaon, designed by international architect firm F + A, was adjudged as an Asian contender in the Leisure Architecture category, to compete against the highest-scoring contenders from Europe, Africa, the Americas and Arabia, to find the ultimate ‘world’s best’.

Speaking on the achievement Brotin Banerjee, managing director and chief executive officer, Tata Housing, said, “At Tata Housing, it’s our constant endeavour to create benchmark projects based on the consumer’s needs and requirement. We are proud of our continued success at the Asia Pacific Property Awards. This year is special for us as our project La Montana achieved the distinction of winning the five-star rating for Best Leisure Architecture India, and it leads from the Asia Pacific region to be honoured with Best Leisure Architect Residential Asia Pacific. It is indeed a very proud moment for us as this is the only residential project to be nominated from India to represent the Asia Pacific region for the International Property Awards. This will strengthen our commitment to create landmark projects in the country.”

Held in association with Royal Institution of Chartered Surveyors (RICS) Asia, the Asia Pacific Property Awards recognises 40 categories of distinction within the fields of development, interior design, architecture and real estate. Each project was judged by a team of 65 professionals from the property discipline. They are ascertained based on quality of design, construction and presentation of individual properties as well as interior, architecture and marketing.

The Asia Pacific Property Awards are part of the long-established International Property Awards and its winners’ logo is recognised as a symbol of excellence throughout the global industry. Founded 18 years ago, these accolades distinguish excellence in the property industry worldwide, and promote international standards. For the last four years consecutively, Tata Housing has been acknowledged with multiple accolades at this prestigious annual symposium, demonstrating that it is again at the forefront of the real estate industry in Asia.

What Housing when India’s Realty Sector Data is an Opaque House

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The Other day, I was reading a blog entry about housing prices and interest rates on the website of The Economist magazine. The data on which the blog was based included a long (20+ years) history of housing prices in the UK and the US. In the US, for example, the house price index with a base of 100 in 1988 had risen to a peak of about 320 in 2006 and is now down to about 220. In the UK, a similar index started at 100 in 1995, hit about 370 in 2007 but is down only to 320 yet. The post went on to examine why US housing prices have crashed so much more than the UK.
In India, no matter how much you want to, you cannot do any analysis like this because the data does not exist. Despite the centrality of real estate prices in the economy, as well as in the lives of people, these are an almost completely opaque part of the Indian economy. This is all the more galling because with financial savings less developed than the western countries, real estate (along with gold) is a much bigger part of people’s savings.

Whether you are a researcher who needs a couple of decades worth of broad data, or an individual who needs a price map of a particular kind of unit across an area, you are pretty much on your own. This lack of quality information has huge consequences. In any kind of exchange, it skews the advantage towards the larger and more organised side. As an individual, whether you are buying or selling, you’ll start with a scramble for information and will eventually have to make do with whatever is handed to you by people who are on the opposite side.

While the broader picture might eventually become clearer when the National Housing Bank’s Residex index builds up a long enough history, individuals will probably be faced with an information disadvantage unless someone has some ideas about filling this gap.

ASK group plans to fund in Indian Real Estate Projects

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Real estate fund house ASK Property Investment Advisors has said it is planning to fund to invest in Indian real estate projects.

The company has already committed $40 million (Rs 200 crore) out of its second domestic fund. It has formed a subsidiary in Singapore that will be raising this offshore fund. To be launched in July, the ASK Real Estate Special Opportunities Fund plans to invest in projects with a completion cycle of three-four years.

“We are a domestic fund and are constantly looking for opportunities in the domestic markets. Developers are constantly scouting for investments to buy land. We have so far deployed funds in ten investments,” Mr Amit Bhagat, Managing Director and CEO, ASK Property Investment Advisors, said.

The average investments will be to the tune of Rs 75-125 crore. The second fund will invest in mid-sized development projects in key cities such as Delhi-NCR, Mumbai, Pune, Bangalore and Chennai. The ASK Group had raised its first domestic fund of $75 million in 2009. It was also targeted at residential segment. “We have committed 100 per cent of the first fund,” he added. Industry sources note that realty focussed funds pan-India are looking to rise over $5 billion from both domestic and offshore markets.

DLF gains profit much after Goldman Sachs upgrade

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Reuters Market Eye – India’s biggest real estate developer DLF (DLF.NS) rose 3.2 percent to 188.10 rupees after Goldman Sachs upgraded its rating on the stock to “buy” from “neutral” and raised its 12-month target price to 264 rupees from 252 rupees.

Goldman cited a pickup in residential launches, a recovery in commercial property, easing interest rates, and improved outlooks for asset sales as well as for operating/financial leverage as reasons for upgrade.

DLF’s share price is down 0.5 percent for 2012 while the BSE Sensex is up about 11 percent in the same period.

The upgrade has come close on the heels of DLF’s removal from the Sensex, which will come into effect from June 11.

India: ICICI Bank eyes growth after strong Q4

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ICICI Bank, India’s No. 2 lender, posted on Friday a larger-than-expected 31 percent rise in quarterly profit and forecast a higher growth rate for domestic loans and stable asset quality for the coming year.

Loan demand in India is expected to pick up after the central bank last week cut its benchmark lending rate for the first time in three years to help revive sagging economic growth. The Reserve Bank of India has projected loan growth for Indian banks for fiscal year 2013 at 17 percent against 16 percent in the previous year.

ICICI expects its domestic loans to grow 20 percent in the year that began in April from 17 percent last year, driven by demand from companies for working capital, home and car loans, Chief Executive Chanda Kochhar told reporters.

“These numbers may give us comfort to keep what we have (but) we don’t have any particular plans to increase our stakes. We have concerns about the India story in general,” said Olsson Jan-Olov, portfolio manager of Carnegie Emerging Markets at Sweden, which owns ICICI shares.

“We have been a little hesitant towards increasing positions in India due to the overriding political and macro economic situation.” Earlier this week, Standard & Poor’s cut India’s credit rating outlook to negative from stable on hefty fiscal and current account deficits and political paralysis in Asia’s third-largest economy.

The negative outlook jeopardises India’s long-term rating of BBB-, the lowest investment grade rating. Indian banks are actively easing terms on loans for companies, as high interest rates and an economic slowdown has hurt the ability of some to repay loans on time. Power, textile, aviation, construction and real estate are the hardest hit sectors.

ICICI, which is also listed in New York and competes with State Bank of India and HDFC Bank, sees a “very small” and “minimal” pipeline for corporate debt restructurings, Kochhar said.

Commercial Realty Offers Big Opportunities in Mumbai

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The number of high net worth investors (HNIs) and corporates seriously looking to invest in Indian office space has increased manifold in the last few years. Mumbai continues as India’s numerous office space investment destination, with companies from all over the world unerringly zeroing in on the financial capital.

As South Asia’s only true financial hub, Mumbai is among India’s best places to invest in commercial real estate. In times of global economic uncertainty, investors flock to markets that have consistently proved their long-term stability and fundamentals.

In a scenario wherein institutional investors are showing reduced preference for commercial real estate in their portfolios, Mumbai continues to present HNI and corporate investors with myriad growth opportunities in office properties. However, the multitude of options also gives many enthusiastic investors heartburn -where on Mumbai’s vast and complex map are the low-risk/high returns locations?

Today, Mumbai as a city for commercial space investment reveals a high rate of vacancies in many locations. The rental yields in these micro-locations are expected to decrease marginally over the next 12 months.

While this seems to present a depressing scenario on the surface, the fact is that we are now looking at the bottom of the curve. In other words, these markets are expected to bottom out over the next one year and will consequently start to move up again. These locations have significant long-term capital value appreciation potential, and well-informed investors are keeping a close eye on them.

Report: DLF in talks to sell Mumbai land

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DLF, India’s top-listed realtor, is in talks with three Mumbai-based real estate companies — Lodha Developers, Runwal Group and Sheth Creators, to sell a piece of land in central Mumbai, according to a report on Friday.

While DLF is seeking a valuation of 30 billion rupees ($571 million) for the 6.8 hectare property, the potential buyers are negotiating at between 20 billion and 22 billion rupees, the newspaper said, citing an unnamed person.

“Even as all the parties had talks with DLF, the developer is yet to make up its mind, as it is expecting higher valuations,” it quoted the person as saying.

DLF bought the land for 7.02 billion rupees in 2005 from state-owned National Textile Corporation.

Abhisheck Lodha, managing director of Lodha Developers, said the company was not in talks with DLF while an executive at Runwal group also responded in the negative, the paper said.

DLF does not comment on market speculation, the company’s spokesman told.

Hyderabad: 3rd most affordable office location in 2011

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Hyderabad has emerged as the world’s third most affordable office location in 2011 in a list prepared by global realty consultant DTZ, which has also named Chennai and Pune among the top five such positions. According to DTZ’s latest study ‘Global Occupancy Costs – Offices’, Surabaya in Indonesia and Qingdao in China were placed in the top two positions of the chart as the most affordable office locations in the world last year.

“While Tier II cities in India and China dominate the list of top 10 most affordable markets globally, Surabaya in Indonesia remains number one,” DTZ said in the report. The consultant said Hong Kong, London, Geneva, Tokyo and Zurich were the five most expensive office markets in 2011.

DTZ said Surabaya and Qingdao saw average rentals of $ 1,680 and $ 2,380 per workstation a year, respectively in 2011.
Hyderabad, Chennai and Pune followed the top two places with rentals of $ 2,430, $ 2,570 and $ 2,590 a year per workstation respectively, it added.

The study showed that Hong Kong was costliest office place with an annual rental of $ 25,160 per workstation in 2011, followed by London and Geneva at $ 22,590 and $ 18,740, respectively. DTZ, however, said many cities across the world are likely to witness decline in their rentals during this year.

“Under the downside scenario, 2012 offers occupiers a window of opportunity in which to realise cost savings as rents decline… In the top five least affordable cities of Paris, Tokyo, Geneva, London and Hong Kong, office rents fall in 2012 under the euro break-up scenario,” it added. Occupiers in Rome and Milan are likely to benefit from falling occupancy costs over the next five years as sharp decreases in rents are expected in 2012 and 2013, DTZ said.

It further said office rentals in low-cost Indian cities may see double-digit falls in this year.

Property prices in Coimbatore may get hike

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The jump in land, materials and labour costs has pushed property prices up by 25%-30% per cent and slowed the growth of the real estate sector in Coimbatore in the last two years. Property developers in the city believe that if the real estate sector has to grow at pace similar to that of Chennai, which despite the global economic slowdown, registered a steady growth quarter after quarter, as per the residential price index brought out by the National Housing Bank, the government has to develop infrastructure facilities, promote industries and improve water bodies.

“There is not much space left for property developers inside the city. All construction activities are moving towards the suburbs,” said V Subramanian, president, Confederation of Real Estate Developers Association of India (CREDAI), Coimbatore. However, land prices have increased in the outskirts in the past two years. The cost of material and labour is also on the rise. This has seriously affected the middle income group, which is the major segment that invests money to buy property. Property developers have been forced to pass the cost increase burden on the people, which have slowed down the market.

“Land costs have increased four-fold in Coimbatore, which is causing major problems for developers,” Subramanian said. Cement, which was costing Rs 190 a bag a year ago, is now available for Rs 300. Steel prices have increased from Rs 38000 per tonne to Rs 60000 per tonne now. Developers are struggling to control their costs and boost sales. Omkar Sankar, director, Sankar Foundation, said there is huge demand for affordable and low-budget houses in Coimbatore. But the jump in prices of affordable houses is now becoming a cause for concern, he noted.

Flats that were sold for Rs 4500 per sq. ft. in Ramnagar area are now being sold for Rs 6500 per sq. ft. Similarly, in areas like Vilankurichi, Thondamuthur, Vadavalli, which are outside the city, costs have moved from Rs 2300 per sq. ft. to Rs 3500 and more. Though the recent lowering of interest rate by banks may bring some respite, developers are still in a wait and watch mode. The situation in Coimbatore is different from Chennai, which is well connected with infrastructure facilities even in far-off areas.

There is a huge demand for housing in Coimbatore and in the next few years there would be at least a demand for 1 lakh housing units, said P Karthikeyan, Chief Executive Officer, Trishul Shelters Private Limited. However this would require good connectivity and infrastructure development in the suburban areas, which is lacking now, he said. Besides the developers have to look at ways to keep costs down by adopting innovative methods and different technologies, he noted.

Affordable Housing Investors finds RBI Rate Cut a Boon

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The recent move by the Reserve Bank of India (RBI) in its annual Credit Policy has given some hope for investors in the affordable housing segment. This is being seen as a positive development for the overall property market. While investors remain cautious and wait for banks to announce the lowering of interest rates, realtors are optimistic of the scenario, however, hoping that inflation remains under check. “While the rate cut of 50 basis points is definitely a ray of hope, it does not dispel the shadows nearly as much as may be initially supposed. It should be borne in mind that the Reserve Bank of India (RBI) has hiked interest rates 13 times between March 2010 and October 2011,” says Om Ahuja, CEO – Residential Services, Jones Lang LaSalle India.

“While this is understandable, given the on-going concerns over inflation and liquidity in the market, the spate of rate hikes has created a compounded problem for the residential real estate sector. The series of hikes in the past have also affected the price that builders put on their properties, since their own costs of borrowing have increased. It is unlikely that property prices will come down because of this rate cut. In fact, it is very likely that there will be an upward bias on property rates because of the anticipated improvement in sentiments of buyers who have so far been sitting on the fence, waiting for some signals of relief,” adds Ahuja. Shrinivas Rao, CEO, Vestian Global Workplace Solutions says the reduction in repo rate will boost economic growth and improve business sentiments which in turn will strengthen buying activity. However, the impact will vary across sectors depending on implementation of the cut by leading banks.

“Leading lenders are likely to cut interest rates on deposits and loans. Home loans are likely to turn cheaper. For instance, a 25 basis point cut could lower home loan EMIs by Rs 16 per Rs 1 lakh. A cut in the repo rate will also reduce the interest on commercial loans which in turn will favour developers to avail cheaper loans, thereby providing traction to real estate activity. Cheaper loan rates are expected to attract more end-users, impacting the residential sales positively,” he says.

With banks offering loans at cheaper rates, developers are likely to prefer the bank loans as against private equity funds. However, an increase in market demand in the short term will drive capital values, thereby benefitting retail investors, adds Rao. According to Ganesh Vasudevan, Vice President and Business Head, IndiaProperty, the cut of 50 basis points by the RBI is a move that will have a positive effect on the real estate segment.

Indian Real Estate Market Among the Most Lucrative Sectors for NRIs

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Indian real estate market is one of the most lucrative sectors for Non-Resident Indians to invest their foreign money. Moreover, this trend will continue for more 4-5 years as the consumption story of Indian real Estate market is not going to get over in near future leading to immense commercial growth prospects that in turn increase the demand for real estate. Although Indian Realty market is facing downfall, it is not correct to say that all cities are experiencing the same situation. It has been observed that some of the cities in India always have good chances of investment and these cities even in worst circumstances would be able to provide good investment returns. One more factor that attracts NRI’s to invest in India is the bigger geographical area. Unfortunately, NRI’s put their money into property prevailing in big cities and metros, but they should be informed appropriately about the outskirts of the big cities and even about the tier-2 cities that offer a great deal of real estate investment in present scenario.
Not only this, but the recent significant depreciation in the value of rupees in respect of dollar/pound/euro has given a profitable chance to the NRI’s to clandestine their foreign earned money into some good  investment plans. However, quite a few times NRI investors face some issues with liaison services in real estate industry, but once these intermediary services will improve more and more foreign investors would be lured to purchase property in India in lieu of high returns.
Foreign investment is also a good sign of growth for Indian Real Estate market as well. In this current state of affairs when the Indian Realty market is experiencing a huge downfall, the foreign investors seem to be the ray of hope. With more and more NRI’s investing in small and even big commercial properties in India, the Real estate market will soon see a huge intensification. It has been observed from past trends that around 70% of foreign investment has been done in residential sector, but according to the Indian developers there are various commercial investment opportunities also existing for the foreign investors who wish to set up a business in India.
However, it has been told by the real estate experts that present time when foreign currency is in appreciation, it is the encouraging time for NRI’s to make some good investment in realty market in India. Office plots, residential spaces and even apartments are easily available for NRI’s.
Indian property developers also have a notion that the downfall of realty market in India is the result of the global meltdown and depreciation of rupee. Their belief is not vague, but they also consider that ambiguities in western economies led to the build-up confidence of NRI’s into Indian market and they are keen on purchasing property here. Their investment is a huge support for Indian Realty market and soon with the rupee appreciation these investments will strengthen the economic situation as well.

HongKong and Shanghai Hotels in Indian Realty Market

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The Hongkong and Shanghai Hotels Ltd that operates luxury hotels under ‘Peninsula’ brand today said it is in talks with international parties for partnership to enter the Indian market. “We have looked at several properties and held discussions in India to have a presence in the country,” Hongkong and Shanghai Hotels Ltd Director and Chief Operating Officer Peter C Borer told said.

The company is scouting for assets in India to start operations in Delhi and Mumbai. Unlike other international chains, it will look to invest in properties as owners with a majority stake.
Senior company officials have been visiting India for the last four to five years to scout for potential partners, he said but did not disclose the parties with which the company has been having discussions.

When asked why the company has not made progress so far, he said: “We are looking for the right partnership for long term and we want to go slow and steady in the market.”
Borer, however, did not comment on the timeline for opening its first property in India as well as possible investments to be made in the country.

Commenting on the company’s business model, he said: “Our philosophy worldwide is to invest in property and manage rather than only managing it.” The Hong Kong-based hospitality chain currently operates nine hotels in Hong Kong, Tokyo, Beijing, Shanghai, Bangkok, Manila, New York, Chicago and California with an average room of about 200-300 per property. These properties are positioned as business as well as leisure destinations.

The company is currently developing its 10th property in Paris and is likely to be operational by 2013. When asked about room tariff of the chain, Borer said it varies from location to location but ranges between USD 150 to USD 900 per room per night. The average occupancy level across the chain is about up to 75 per cent.

Commenting on the Indian market, The Peninsula Shanghai General Manager Joseph W Y Chong said: “We are still learning about the real estate situation in India. We will not compromise on lower or cheaper substitutes and ideally we will go for a location which is culturally connected and centrally located.”

$20Mn invested in Hallmark Infrastructure by Paracor Capital

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Paracor Capital has invested $20Mn in two residential projects of Chennai-based real estate developer Hallmark Infrastructure. Both these projects are located opposite Mahindra World City on GST Road in New Chennai, and involve a development of 0.8 mn sq ft.

Hallmark Infrastructure was established in 1998 and it became Hallmark Infrastructure Pvt. Ltd in 2005. It is a diversified group based in Chennai with presence in infrastructure projects, IT parks, townships, hospitality and serviced apartments.

Paracor Capital Advisors is the Indian advisor to two Mauritius based investment companies – Paracor India Investments Limited, Mauritius, which focuses on private equity transactions and Madison India Real Estate Fund Limited, Mauritius which focuses on real estate and hospitality investments.

This is Paracor’s fifth Indian real estate investment. Last year, it invested R55Cr for an 8% stake in Marvel Landmarks Pvt. Ltd, a realty firm backed by global asset managers Och-Ziff Capital Management Group. Other real estate investments include Arun Excello Homes, Daman Hospitality and Sabari Inn.

This space has seen 12 investments amounting to $477Mn across 10 deals with disclosed values during the March quarter. The largest PE-realty investment announced during the first quarter of this year was GIC’s $100Mn investment in a Godrej Properties office project in Mumbai’s Bandra Kurla Complex-the only deal over $25Mn reported during the period.

Other deals in the sector include ASK Property Advisors R40Cr investment in Paranjape Schemes’ residential project in Pune and Future Capital’s investment in Rustomjee Group’s project.

Economy and Realty for the Month of April 2012

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Healthy office space absorption in 2011-2012 inspite of slowdown in GDP, However 2012-13 seems bleak.

Currently, the top seven cities of India that is Mumbai, National Capital Region, Bangalore, Pune, Chennai, Hyderabad and Kolkata together occupy 389 mn sq.ft of Grade-A office space. During 2010-11, a total of 38 mn sq.ft of new space was constructed in the top seven cities and it was 37 mn sq. ft during 2011-12. Office space absorption in India during 2011-12 was merely 2% lower than 2010-11 despite GDP growth slowing down from 8.4% to 6.9% during the same period. This is in sharp contrast to the popular belief that 2011-12 was a dull year for office market in terms of absorption. Healthy absorption rate ensured a drop in vacancy level to 21% by the end of Q4 2011-12 from 27% in Q4 2009-10.

Share of Banking & IT sector falls in absorption while manufacturing sector has witnessed an increasing trend over the last two years and contributed 19% in total absorption during 2011-12, higher from 13% in 2010-11. GDP growth of service segment is estimated to grow at 8.8% during 2012-13, much higher than industry segment growth of 6%. Absorption of space during 2012-13 is expected to be considerably lower than the previous two years and this will make it all the more challenging for developers to maintain existing levels of rent.

However, the latest move by Reserve Bank of India (RBI) of reducing the repo and reverse repo rate by 50 basis points (bps) each could provide the much needed impetus to the economy and help in reviewing the demand scenario for office space in the coming quarters.

Bengal Urban Land Policy: Seeks 30% Reservation for Low-Cost Housing

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The promise of Ma, Mati, and Manush governance by Mamata Banerjee may fall short of the second M-word, meaning land — at least for real estate developers in the state’s capital city. For, the West Bengal government has now decided to bring in an amendment to the Urban Land (Ceiling and Regulation) Act (ULCA), 1976, an eyesore of developers for quite some time. The proposed alteration will stipulate the developers to reserve 30 per cent apartments in big housing projects for the low-income group (LIG). Industrialists have been seeking a total repeal of the Act, introduced in 1976 to prevent hoarding or excessive holding of land in urban centres.

According to the Act, the ceiling limit on vacant land in a category ‘A’ city like Kolkata is 7.5 cottah or about 500 square meters. The demand for repealing the ULCA was raised for the first time by Godrej Properties chairman Adi Godrej, at an industry meet within the first month of Banerjee taking over the chief minister’s office.

Much to the disappointment of the developers, urban development minister Firhad Hakim has now totally ruled out the possibility of repealing the Act. “We are not going to abolish the Land Ceiling Act,” he said. “Instead, we will give permission to developers for purchase of land beyond ceiling, provided they reserve 30 per cent housing for low-income housing segment.”

As for the Trinamool dispensation, it has also decided to do away with the concept of public-private partnership (PPP) — an idea pioneered by the earlier Left Front government under Buddhadeb Bhattacharjee. Instead, “the government will allocate land to the highest bidder and for the rest of the big projects the state will build on its own,” according to Hakim. Notably, in spite of the Land Ceiling Act, the earlier government had windfall gains by allotting land in prime areas of city.

For example, three prominent government agencies involved in land deals in and around Kolkata — the Kolkata Metropolitan Development Authority (KMDA), Kolkata Municipal Corporation and West Bengal Housing Board— signed deals worth more than Rs 18,000 crore, for over 5,250 acres of land during the period in little over two years. In fact, KMDA was credited with signing deals, worth more thanRs 800 crore with real estate developers on a single day. “The process of land allotment slowed substantially over the last two years. First, it was due to elections,” said a city-based real estate developer. “Second, it was due to lack of vision and policy of the new government.”