Author Archives: skgupta

Real Estate Sector: A look at urban investments in Mumbai.

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India’s growth story has many facets; one of the integral parts of growth – and arguably the most important one – is urbanization. In fast-growing economies, cities are significant investment and employment generators, which in turn carry the growth momentum forward. The sustainability and liveability of any city depends largely on the quality of its infrastructure and real estate stocks. Needless to say, cities also require large sums of money to create urban asset stocks, including buildings and infrastructure.

Over last decade, India’s population grew by 18% while its urban population grew at almost double that rate (at 32%). Currently, about 31.2% of India’s population lives in urban areas. The country’s share of urban population has increased by almost 3.5% over the last decade. What is even more astounding is the increase in the built-up real estate stock in its cities and towns.

Data from the 2001 census shows that about 110 million ‘Census Houses’ exist in the urban areas, which indicates an increase of 39 million over the last 10 years. In other words, real estate stock shows a compounding growth of 4.5 % per annum as against the growth rate of 2.8% in urban population. Obviously, such massive growth needs adequate support from infrastructure.

However, the state of affairs with infrastructure in Indian cities is not very encouraging. Most of the cities still have to deal with issues in terms of roads, public transportation, sanitation, storm water drainage, solid waste management systems, etc. on a regular basis. With the volume of real estate stock increasing inexorably in the cities, there is an acute problem with the basic needs like energy and water in the store for urban India.

The private sector contributes most of the development of real estate stock; however, the responsibility of infrastructure development lies squarely with public sector entities such as ULBs and other utility companies – most of which are Government agencies. The investment pattern in our cities shows a similar trend – the private sector invests in the development of real estate stocks, while the public sector invests largely into infrastructure development.

The quantum of investments in most infrastructure projects is huge, and the agencies responsible for its development are seriously under-financed. They depend either on domestic grants like JNNURM or on intercalation financing involving bilateral and multilateral agencies. In some instances, funds are mobilized from private sources in the form of Public Private Partnership. The private sector generally tends to shy away from investments into city-level infrastructure projects, as most of these projects are considered non-remunerative. They prefer to focus on investing into the development of real estate stock.

Mumbai, India’s financial capital attracts massive investments – largely in the real estate sector. The city being the nation’s epitome of high real estate prices and land scarcity, huge sum of money keep chasing land in the city – while infrastructure augmentation lags behind. Way behind.

Study says that MNCs surpass Indian firms in office space uptake.

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With bearish sentiment affecting corporate expansion plans in the country’s financial capital, there has been a steep decline in the commercial real estate taken up by Indian companies. In contrast, multinational companies (MNCs) have picked up considerable office space here.

The latest report by property advisor DTZ comparing the trends in the first quarter of 2012 to the same period last year shows a noticeable change in the profile of the commercial real estate occupier in Mumbai. Between January and March 2012, Indian corporate firms account for 29 per cent of occupiers of new commercial realty space in the city. This is a sharp fall from the 71 per cent market share of new space that these corporates picked up in the corresponding period in 2011.

In comparison, US- and Europe-based corporates were responsible for taking up 5 and 18 per cent of the space in the first quarter of 2011 respectively. In the same period this year, their market share has gone up by 32 and 23 per cent respectively.

According to Rohit Kumar, DTZ research head, an analysis of quarter-on-quarter and year-on-year office space take-up highlights the fact that relative market share of MNCs based out of USA and Europe has increased significantly while that of their Indian counterparts has dropped. “Be it IT, ITES or Banking, Financial Services and Insurance (BSFI), the MNCs find India relatively cheaper in terms of labour and real estate. On the other hand, despite the positive growth signals from the US and Europe, Indian corporates are more conservative, fearing the return of recession,” said Kumar.

Mumbai offers little hope for home buyers.

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In a recent report, Jones Lang LaSalle said that Mumbai seems to be in a tighter spot with Rs275 billion being sunk in land since FDI (foreign direct investment) was allowed in real estate in 2005; most of which has failed to yield returns. Even many investments done in South Bombay once named as one of the hottest and costliest property location in the world have met the same fate. Read Mumbai has sunk Rs275 billion in lands since 2005, the reason is known to all. Sky high prices have put off customers. In Mumbai, an average flat costs more than Rs10,000 per sq. ft. and even in Navi Mumbai, in less populated areas, there are many projects that have flats priced at over Rs1 crore.

Add to that the confusion created by the new DCR (development control rules). Many builders now have to make fresh plans to accommodate the proposed changes about FSI; and the worst affected are those whose projects are already underway. Many of the launches have been put on hold, and construction has been stalled in many places. And for people who have already invested in these projects, the longer the deadlock lasts, the more they have to pay.

Buy or not to buy? Despite a profusion of analyses and research reports on housing prices and their future direction, home buyers remain as confused as ever. So it is little wonder that 37 lakh of flats remain vacant in Maharashtra, of which 4.79 lakh are in Mumbai. The Census Directorate data says that even Thane district has more than 5 lakh vacant flats.

“Why doesn’t the government or RBI (Reserve Bank of India) understand that the more they squeeze liquidity by raising interest rates, it raises returns on black investments even higher. If our country can bring down black element out of property, rents will fall, property prices will fall,” said a commentator.

The home-buyer, however, is at a loss. The Budget came as a flop, and a recent Crisil report says that prices of steel and cement will go up, which will probably be passed down to the end-user. And then, there is the proposal to hike on leave-license, which is going to make rentals expensive. There are some who expect matters to improve.

Pankaj Kapoor, MD, Liases Foras also had echoed similar thoughts. “The high prices are not fault of only the builders. The hike in stamp duty was uncalled for and it is too revenue-centric and indicates a short term vision.” Read Maharashtra Stamp duty hike: “Neither can you afford to own a home, nor take it on rent”

However, as most experts say, one can buy a home any time. “You never know what will happen next. And honestly, there is little evidence to suggest that customers have waited for better home loan or price options when they have to buy a home—because it is a necessity. So if you want to own a home, there is no bad time,” said an analyst.

If one can’t afford a home, then they should not buy one!

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Journalists are misleading the home buyers, said the savvy second-generation developer, reclining on the deck of his corporate yacht, anchored off the Gateway of India, sounding truly concerned about the fate of middle-class Mumbaikars. With all sincerity, he explained how the prices of land have gone through the roof, how the cost of material has shot up and how even the labour cost has nearly doubled. Of course, he didn’t talk about increasing profit margins. “When all input costs are going up, how can the price of real estate go down? By writing reports that realty rates could go down, you are only delaying their decision. And finally, they will have to pay an even higher price for the delay,” the young turk clad in designer suit said, adding as an afterthought, “Do they have a choice?”

I think they do. The choice of not buying a home at all; the choice of renting it out! What does rising input cost and galloping interest rate mean to someone who opts out of the realty acquisition spree? Like this friend, who owns a 1BHK apartment in Seawoods, New Mumbai, and has for long been planning to move into a bigger home. A 2BHK apartment in the nearby Seawoods Estate costs upward of Rs1.4 crore and even after selling the existing flat, he would have to take a loan of Rs1 crore to move into his dream house — with a monthly instalment of at least Rs1 lakh dangling on top of his head like a sword. The monthly rent for the same apartment is just Rs20, 000 — a saving of Rs80, 000 every month, not to mention the pressure of servicing a gigantic loan. It would be a pity to buy your dream home, and lose your sleep over it.

In these days of fluctuating fortunes and unstable jobs, locking into a lofty home loan may not be the best idea and living on rent may well be a smart move. Leave aside complicated calculations and the conventional wisdom that realty prices only go up, and living on rent makes better economic sense too. Imagine paying a fat instalment for five years, and finding that the price of your flat has remained the same, or even worse, gone down by 30%. Live on rent and not only do you get to keep all that money which would largely make the interest component of your home loan, but you also have the flexibility of moving to a new address, or a new city.
Not that we are new to the concept of living on rent. A good percentage of the population in the west lives on rent, as did a good percentage of Mumbaikars too, till just 25 years ago. Very few people had the resources to buy a house, and one’s own home was a result of a lifetime of hard work. The rest rented it out, and home loan companies did not even exist.
Should every Mumbaikar make the choice of living on rent, the young Turk on the yacht has a lot to worry about  not only about repaying his creditors, but also the fat installment for that anchored yacht!

 

“India is a top focus for Realty Moghul” says Trump Scion.

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Trump’s eponymous real estate group expects to sign multiple deals for Indian residential projects and hotel contracts over the next five years, despite a market riddled by regulatory uncertainty and bureaucratic red tape.

“India, among other emerging markets, is the biggest push for our organisation,” Donald Trump Jr, an executive vice president of The Trump Organization, said on Wednesday.

Trump, whose portfolio includes projects in South Korea and Turkey, in addition to hotels and skyscrapers in the United States, is close to signing a couple of deals with Indian developers, the younger Trump said without providing details.

“Equity investment will depend on individual projects and partnerships but first we would like to form relationships which allow us to understand the processes and spectrum better,” the 34-year-old said on the side-lines of a hotel conference.

The developer entered India last year with a joint venture partnership with Rohan Lifescapes to build a 45-storey luxury residential tower in Mumbai.

However, work on the tower, which will bear the Trump name but involves no equity from the U.S. developer, has been halted for about nine months since authorities said it lacked the necessary permits, a common problem in an industry wrapped in red tape.

Indian developers are often hit by changing regulations. In Mumbai, for example, the scrapping of a rule granting extra floor space in exchange for providing public parking facilities has meant many projects must reapply for clearances.

But Trump, whose father is worth an estimated $2.9 billion, according to Forbes, says the lure of an emerging India outweighs the regulatory headaches.

“The Indian market is starved for a good luxury product and it needs a brand like ours,” he said.

“I like the regulatory changes I am seeing. It may slow things down a bit but will create a level playing field and will help in eliminating the unknown for an outside investor coming in,” he said.

The company plans to focus expansion in the country on luxury residences and hotels, and would look at cities including Mumbai, Delhi, Bangalore and the state of Goa.

Some local players such as privately held Lodha Developers and Godrej Properties are emerging as strong brands in India’s luxury housing space, but the market remains fragmented.

And despite a slew of interest rate hikes that have cooled India’s overall property market and hit luxury developers particularly hard, Trump is bullish.

 

ICICI Bank and Sahara eye Parsvnath’s prime land in Delhi.

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Real estate major Parsvnath Developers may soon be able to reduce a significant chunk of its debt, thanks to certain corporate giants showing interest in buying a prime piece of property it owns in the national capital.

The Sahara Group is engaged in discussions with Parsvnath to buy its commercial land near Connaught Place in New Delhi, according to sources. ICICI Bank is also among the contenders for the piece of land, it is learnt.

The 1.18-acre plot at Kasturba Gandhi Marg was bought by Parsvnath in 2008 for about Rs 200 crore, with the aim of constructing a retail-cum-office complex. But the realtor is now looking to sell it to cut mounting debt, currently at Rs 1,300 crore.

Although the Parsvnath management is looking for a price of Rs 700 crore, the interested parties are ready to sign a deal at Rs 600 crore, sources said. Property consultant Jones Lang LaSalle is advising Parsvnath on the deal.

Pradeep Jain, chairman, Parsvnath Developers, did not respond to repeated calls and e-mails. Mails to Sahara spokespersons did not elicit any response.

An ICICI Bank spokesperson said, “ICICI Bank has no plans to acquire this property.”

According to sources, ICICI is exploring the possibility of constructing a corporate house in the locality in partnership with Parsvnath, without acquiring the land.

Earlier, as part of its fundraising exercise, the company had entered into various deals with private equity funds.

In January 2011, Parsvnath signed an agreement with SUN-Apollo India Real Estate Fund LLC for an investment of Rs 100 crore in its premium residential project at Ghaziabad—Parsvnath Exotica. SUN-Apollo had acquired 49.9 per cent stake in the project SPV.

Then, the company sold a minority stake in Delhi-based residential project Parsvnath La Tropicana to JP Morgan for about Rs 150 crore. Through the deal, the previous investor, Red Fort Capital, made an exit. The company had plans to construct an office complex at Connaught Place along with the PE firm.

According to realty experts, demand for land at prime localities has risen as corporate houses look to move their headquarters to such locations.

Anuj Nangpal, director-investment advisory, DTZ India, a real estate consultancy, said, “Organisations are increasingly signaling their arrival or resurgence by moving their presence into the centre of metros. The branding benefit of such ownership of prime real estate far outweighs the costs. Further, employees are also increasingly assessing their jobs and future basis of their office infrastructure and the pride in occupying prime real estate clearly impacts long-term retention.”

Earlier, Business Standard had reported on the discussions being held by textiles major Alok Industries with various large corporate groups to sell its property at Peninsula Business Park in central Mumbai. Alok was looking at a deal in the range of Rs 900-1,000 crore.

‘Simplify Administrative Procedures, Introduce Reforms’-CREDAI

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Simplify administrative procedures, introduce land reforms and changes in banking and taxation systems is the way to increase construction of houses, according to Mr Lalit Jain, National President of Confederation of Real Estate Developers Association of India (CREDAI). The developers have decided to make a representation to the Central Government on the issue of administrative reforms.

The governing council of the industry body will follow up on its representation, and in 45 days decide on further course of action, including going on strike, according to a press release from the confederation. The release said Mr Jain, addressing the annual governing council meeting in Pune, said the changes are needed to encourage the construction business. This will help increase the supply of houses and bring down costs. The Government and the private sector should partner to address the shortage in housing.

The real estate developers have been demanding the changes as they maintain that delays in getting project clearances, high land cost, high rates of taxation and shortage of funds in the real estate sector are driving up the cost of construction. The real estate developers’ organisation has emerged the main representative for the sector, as its membership includes more than 6,000 developers across 20 States and 100 associations in major cities in India.

Mr Pradeep Jain, National Chairman of CREDAI, said the industry body is encouraging self-regulation, by demanding its members to adopt a uniform code of conduct. The members discussed a range of issues that needed to be addressed, including the need for an affordable housing policy, undue delays in approvals, price rise, and standardising procedures across various States.

CREDAI is committed to disclosing the exact cost of a project, once the single-window clearance for approvals is set in place. Each developer will be required to mention the complete cost in each sale. In agreements with buyers, the developers must mention carpet areas in all sale material and agreements; each city unit will establish a consumer redressal forum for dispute resolution. Peer pressure and better understanding between buyer and seller helps resolve issues and save on cost and time for both parties and re-establish goodwill.

Leela Kovalam, Noida, one of the top high-value sellers in Asia.

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The sale of Leela Kempinski Kovalam was among the top 10 hotel deals in Asia during the past one year, shows data from the US-based research firm Real Capital Analytics.

Real Capital, which tracks and analyses real estate deals worth over $10 million across apartments, hotels, retail, industrial, office and development projects over the world, has also named Noida as a top site for sales in the development site category for a deal with the Wave Group for a mega mixed-use project. Mumbai and Bangalore also figure among the active office markets in Asia. In apartments, Delhi and Mumbai are part of the top league in the year ended March 31, 2012.

The Leela Kovalam deal, pegged at about Rs 500 crore, was the 10th in the Asia-list of largest hotel sellers during the one-year period. The Kovalam beach property was sold to Saudi Arabia-based industrialist Ravi Pillai last August.

The other big hotel players in Asia which sold properties at high value include Japan Hotel, LaSalle, Kingdom Holding, Hines and Shui On Group.

Even as Indian entities don’t figure anywhere in the top 10 global list vis-à-vis high value real estate deals in the financial year that just gone by, many of them have made it to the Asian hall of fame.

Noida, the industrial development area next to Delhi, is fifth in the development site sellers’ list in Asia. This was for a deal with industrialist Ponty Chadha-promoted Wave Group for the mixed-use project, Wave Mega City Centre, at an estimated price of $1.4 billion (about Rs 7,140 crore at the current forex rate), according to Doug Murphy, director (analytics) at Real Capital.

In the office space, Bangalore and Mumbai have been named among the most active Asian markets. “There were a number of locations for office sales in Bangalore and Mumbai, the largest being the Embassy Manyata Business Park transaction in Bangalore for about $537 million (Rs 2,738 crore) and Citibank building in Mumbai for about $224 million (Rs 1,142 crore),” Murphy said. Both transactions took place in August 2011.

Delhi and Mumbai are part of the most active Asian apartment markets. While Delhi is ranked sixth, Mumbai is eighth. Tokyo tops the list in high value apartment deals, followed by Singapore, Hong Kong, Osaka, Beijing, Delhi, Fukuoka, Mumbai, Nagoya and Kuala Lumpur.

India is nowhere in the retail top league where deals in Asia are concerned. Among hotels, Chennai is seen as an active market in the eighth position. Singapore leads as the most active hotel market in Asia, followed by Hong Kong, Shanghai, Tokyo, Beijing, Seoul, Osaka, Chennai, Kuala Lumpur and Suzhou.

Buyers back in Real Estate Sector this Navaratra.

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Buyers are back in the realty market this Navaratra, lending credence to this festive season’s reputation as a golden period for business in this sector.

There is flurry of activity in the offices of realty firms as buyers are coming out to seal deals. The mood is likely to remain upbeat till the end of summer vacation of schools.

“I am sure that this positive momentum in the market will continue till summer vacation when even more end users are likely to clinch deals,” Samir Jasuja, the chairman and managing director of Prop Equity, says.

“After Navaratra, summer vacation in schools is regarded a good time for realty, as people wait for the end of term of their children to shift houses or buy one. The summer is a time of transfers and relocation; a time of school admissions and hunting for a house near schools, so that children can have an easy commute,” Jasuja says.

Gaurav Mittal, the managing director of CHD Developers, says: “The mood is really upbeat in the market with people finalizing deals in property. While market warms up during Navaratras even during bad times, this Navaratra is different. The quantum of deals is unexpected, though a welcome development.”

Jasuja says, “Notwithstanding a slew of legal battles, buyers are taking a final call on their new purchases in Noida and Greater Noida.” A report of Prop Equity says that the current financial year has proved to be good for almost all the big cities of the NCR including, Noida, Gurgaon, Ghaziabad, Greater Noida and Faridabad.

Sanjay Khanna, the director of Kailash Nath Developers Pvt Ltd, says: “I hope the worst is over for realty market and transactions take place till the end of summer vacation in schools. This Navaratra is proving to be very auspicious for the realty world. I know that NRIs, too, find the summer months an ideal time to return to their roots in order to buy property. Their search for a property also starts during the summer. This is the time when they visit India in order to meet their relatives and, side by side, also look for nice properties. They do not mind paying slightly more for good properties.”

Realty watchers say that April-June period records a high quantum of property transactions. Realty market picks pace from Navaratras. This is a time when end users finalize their deals and those looking for new homes on rent, also shift. The summer is also a time when the resale market picks up nicely.

Vijay Jindal, the chairman and managing director of SVP group, says: “It is a hectic period from Navaratra and through the summer months. A lot of transactions take place at all levels.” He says that during the summer, buyers give priority to those projects which are close to good schools.

Income Tax Offices will be open on Saturday i.e. 31-3-2012 to facilitate filing of returns.

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The Financial Year 2011-12 closes on 31-3-2012 falling on Saturday. All the Income Tax Offices throughout India shall remain open on this day and the receipts counters shall also work during normal office hours.

This direction is issued for administrative convenience by the Central Board of Direct Taxes in exercise of powers conferred under section 119 of the Income Tax Act, 1961.

Accordingly, Income Tax offices will function from 9.30 am to 6 pm tomorrow to handle year-end rush.

Special arrangements may also be made by way of opening additional receipt counters, wherever required on 30th and 31st March, 2012 to facilitate the taxpayers in filing their returns of income conveniently.

These instructions may be given wide publicity – ORDER [F.NO.225/138/2011/ITA.II], DATED 30-3-2012

No bar on Real Estate Sector from applying for UASL.

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A prosecution witness in the 2G spectrum allocation case on Thursday told a Delhi court that as per the Unified Access Service Licences guidelines, the real estate firms were not barred from applying for the licences.

Company Secretary V Mohan of real estate firm Parsvnath Developers Ltd, which had applied for the UAS licences in 22 circles in August 2007, told Special CBI Judge O P Saini that when the company had applied for the 2G licences, they had gone through the UASL guidelines.

“When the company made application for UAS licence, I had gone through UASL guidelines. When I went through guidelines and the company decided to file application for UAS licences, it was quite clear to me that there was no restriction on a real estate company, applying for a UAS licence,” Mohan said.

Mohan deposed that in August 2007, the firm tried to venture in the telecom business and made applications to the Department of Telecom (DoT) for licences.

Mohan said their application was rejected by the DoT and Parsvnath Developers Ltd did not get any licence.

During his cross-examination, he said their firm was complying with net worth criteria and paid up equity capital criteria when it applied for the UASL on August 24, 2007.

He said the firm knew about August 2007 recommendations of the Telecom Regulatory Authority of India (TRAI) and in view of this, they knew that the entry fee for grant of pan-India UAS licence was Rs 1,658 crores.

“The company was in the know of TRAI recommendations of August 2007. The company knew that the entry fee for grant of a pan-India UAS licence was Rs 1,658 crore, in view of TRAI recommendations. When the company made the application on August 24, 2007, it never knew that DoT was going to announce a cut-off date,” Mohan said.

Mohan, whose deposition concluded today, said the main ground communicated to Parsvnath Developers Ltd by the DoT for rejecting its application for the UASL was that the telecom business was not in the object clause of the firm at the time of making the application.

He said the rejection of the application by the DoT was challenged by the firm before the Delhi High Court. Besides Mohan, the court also recorded the testimony of prosecution witness Raj Kumar Kapoor, a retired Director of Bycell Communications (P) Ltd, which had also applied for UAS licences in 2007.

Kapoor, whose recording of testimony concluded today, said he was called by the DoT officials for licences on January 10, 2008 but at Sanchar Bhawan, he was given a letter to the effect that their application for UASL was not considered.

Chennai leads Indian Realty Sector.

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In a recent report, property broking and real estate consulting firm Jones Lang LaSalle said the Indian property market is poised to attract about US$3 billion, almost double last year’s US$1.6 billion, from overseas buyers this year.

The Indian property market will see more investment from overseas this year as it still remains an attractive investment destination globally.

Of this, one-third would be from home buyers and the balance from investors. This is despite the fact that property prices in India are at an all-time high.

According to a recent National Housing Bank (NHB) survey, property prices in big Indian cities have increased by as much as 43 per cent to 166 per cent in the last four years.

NHB, wholly owned by the Reserve Bank of India, lends to home-mortgage companies. It also regulates and refinances social housing programmes. In its report, the bank said Chennai had seen the highest rise in prices at 166 per cent. Bhopal was second with a hike of 117 per cent and Mumbai was ranked third with an increase of 87 per cent.

What then brings overseas investment to Indian property, when prices are skyrocketing? The answer is simple: Despite the global turmoil because of the financial crisis, the Indian economy has remained robust, largely due to domestic-driven demand.

According to Jones Lang LaSalle, India’s strong economic growth, rapid urbanisation, growing middle-class population, demographic advantage and increased thrust on infrastructure has worked in its favour. Buying property is especially popular among Indians living abroad, who all seem to want a piece of the homeland. That is why Indian property shows are burgeoning around the globe.

Dubai-based Sumansa Exhibitions has been holding Indian property shows across five countries. And every year the number of developers taking part in the shows and the attendees has grown rapidly.

Sumansa Exhibitions’ chief executive officer Sunil Jaiswal says: “We have held shows in the UK, South Africa, Hong Kong, Dubai and Singapore. They have been very well received by both exhibitors and visitors alike.”

This year Sumansa will hold the Indian Property Show in Singapore on April 14 and 15. It will be held at the Suntec Exhibition Centre’s hall 401 and nearly 40 developers from across India will be part of the show.

More than 200 properties will be showcased during the two-day exhibition. Sumansa expects the number of footfalls at the event to be much larger than the 4,000 that turned up at its last year’s event.

Preferred Bidder for 42 Marriott Hotels in UK is an Indian investor.

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Indian property investor Blue Mountain Real Estate Advisors has been selected as the preferred bidder for 42 Marriott hotels throughout Britain after it offered almost 750 million pounds, a media report has said.

The holding company for the portfolio of hotels collapsed under the weight of about 900 million pounds of debt, most of it held by Royal Bank of Scotland (RBS).

Blue Mountain Real Estate Advisors, a part of the Mumbai-based India Blue Mountain group, is understood to have been granted a period of exclusivity by RBS to put together funding for a deal, The Times said in a report.

The proposed sale to Blue Mountain comes as a surprise as, according to the report, the front-runners in the latter stages of the auction had been RB Capital and Sahara, the Indian group that bought the Grosvenor House on Park Lane just over a year ago for 470 million pounds.

IOREC: Property Market In Mauritius a Profitable Investment.

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The sluggish global economy has not left the property sector unscathed, but the high-end estate market on the Indian Ocean island of Mauritius is showing remarkable resilience.

Murray Adair, CEO of the Indian Ocean Real Estate Company (IOREC) who is developing several luxury resorts in Mauritius in partnership with Flacq United Estates Limited (FUEL), says while there had been a slow-down in the property market, sales transactions in upmarket resorts on the island remain buoyant.

Adair says this is particularly true for resorts developed under the Mauritian Government’s Integrated Resort Schemes (IRS) which aims to encourage foreign direct investment. He pointed out that more foreign ownership approved units were sold in 2011 than in the whole of 2009 and 2010 combined. Under the IRS, foreigners are allowed permanent residence in Mauritius when they invest $500 000 or more in these designated resorts and they keep this status for as long as they own the property.

“We find that the IRS is definitely encouraging investment on the island. For example, over 50% of the properties at Azuri, a luxury beachfront village to be built on the coast about 25 km from Port Louis on the north east coast, have been sold off-plan since it was launched in September 2011,” says Adair.

Adair says while the International Monetary Fund in January cut its 2012 growth forecast for Mauritius from 4.1% to 3.8%, the country remains a sought-after tourist and investment destination. He says the tourism sector contributes 15% to the GDP of Mauritius and remains the biggest foreign exchange earner for the island.

“The Government’s initiatives to further diversify the economy and encourage investments from the Far East, including China, Russia and India will further enhance the long-term growth potential of the island,” concludes Adair.

Brigade Group opens Orion mall in Bangalore.

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Real estate developer Brigade Group has opened its flagship retail venture Orion mall in Brigade Gateway Enclave, Bangalore. Spread over 8.2 lakh sq. ft., the mall houses a mix of global and national brands.

Orion mall is developed and managed by Brigade Group and located in the Brigade Gateway Enclave that also includes the World Trade Centre, Sheraton Bangalore hotel, 1,200+ residences, Columbia Asia Hospital, The Brigade School, and Galaxy Club. The mall overlooks a two-acre manmade lake and has open-air children’s play area and amphitheatre.

Foley Designs and DSP Design are the interior designers, while HOK from New York has developed the main design of the mall. The mall has LED lighting solutions, automatic sensor controlled car parking, over 225 closed-circuit security cameras apart from 42 lifts and escalators.

Speaking on the occasion, Jaishankar, CMD, Brigade Group, said: “Orion mall will undoubtedly be the most sought-after destination amongst discerning shoppers and for brands of repute as well. With the launch of Orion, it truly transforms the Brigade Gateway Enclave into an exclusive integrated lifestyle enclave and marks the Brigade Group’s foray into the highly competitive retail segment.”

The mall has three entrances from Dr. Raj Kumar Road – Rajajinagar, Yeshwantpur (next to Metro Cash & Carry), and Railway Parallel Road – Malleswaram.
Orion has a hypermarket (Star Bazaar). Its food court (Sauce Pan) spreads over 55,000 sq. ft. Housing brands like Mc Donald’s, Subway, Sbarro, Rajdhani, Kailash Parbat, Empire, Empire Fresh Fruit Juice Centre, Indian Tadka, Mad about China, Mad over Donuts, Tiger bay, and Up south. The mall also houses a Reliance Digital store for electronics need.
For entertainment, Orion will house the largest PVR multiplex of the country – with 11 screens and over 2,800 seats. BluO, a 27-lane bowling centre will also open its first centre in the city. The lounge will offer entertainment options like Karaoke bar. The mall will also house Time Zone, an 8,000 sq. ft. gaming centre.

Brigade Group has completed over 100 projects, developing over 20 million sq. ft. of area since 1986.

20% Reservation for EWS will take time, Says Real Estate Industry.

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The real estate industry is at loggerheads with the state government after a directive by the Urban Development Department to private developers that they reserve 20 per cent of plots and tenements for the economically weaker sections (EWS). The move is being opposed not only by individual developers but also by the Confederation of Real Estate Developers Association of India (CREDAI) who is tagging the proposed policy as unworkable and not contemplated in totality. CREDAI has filed an objection with the Town Planning Department (TPD) arguing that Rajeev Awaas Iona gave thought to all aspects of such housing creation.

“The department is at present hearing people with stake in real-estate industry and have filed objections. The hearing report will be submitted to the government for approval,” said Avinash Patil, deputy director, TPD. The government notice, issued in January, specifies that out of development on plots measuring 2,000 square metre and above, the developers should reserve 20 per cent of the area for the EWS category in the plot size of 30 to 50 square meters. In case the developer is building apartments on the same area, it has been directed that minimum of a 20 per cent of built-up area be reserved in the apartment size of 27.88 to 45 square meters.

The real estate industry feels that implementation of such a policy should only happen after adequate thoughts as the notice can affect the industry adversely. “The notice lacks clarity. In the present form the move will hit us badly,” said Hemant Naiknavare, vice-president, CREDAI, Pune Metro.

Gudi Padwa and its Impact on Indian Realty Sector.

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Gudi Padwa, a festival which earmarks new beginnings and new hopes to everybody’s life. Hence many builders announce their new projects at this point of time taking into consideration the sentiments of the local market. The festival is widely celebrated in the state of Maharashtra. As for common people in India, a home is a priced possession and they do not sell and buy residential properties often. They wait for an auspicious date to such transactions.

Keeping this in mind, realtors at Pune has organized Sakal Pune Property Show named as Sakal Gudi Padwa Grihotsav 2012. Across the just concluded quarter, residential prices in the outskirts of Mumbai have seen a positive slide. With the Union Budget 2012 giving due consideration to the loans of affordable housing projects coupled with the positive feeling related to the festival, buyers and sellers expect to strike a great deal during this year’s Gudi Padwa.

The buyers mainly constitute the New Urban Family Sector. Moreover, during this festive season, realtors juxtapose the properties with attractive discounts and freebies. But with these factors only, nobody can lure customers today. They are more oriented towards the location of the property, the pricing and the quality of construction.

The recent years were not so good for real estate sector. The ever rising inflation rates and interest rates kept the buyers at the bay. But the recent decision of the RBI to cut CRR rates gives little bit of hope to the sector.

However real estate experts suggest that the sentiments related to a festival only cannot trigger the sector. But it is decisive in getting the real estate market on the right track after a gloom. Moreover, traditionally Gudi Padwa means birth of bhoomi and bhoomi is everybody’s shelter. We can hope and look forward for bright days for real estate sector ahead with this auspicious festival.

Lalit Kumar Jain: Bihar is better than Maharashtra for builders.

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When it comes to ease of approval and a good bureaucratic set up for real estate, Bihar seems to be better opportunity than Maharashtra, according to Lalit Kumar Jain, real estate tycoon and president of Confederation of Real Estate Developer’s Association of India (CREDAI). Jain was speaking to DNA against the backdrop of the first ever all India CREDAI meeting to be held in Pune from Wednesday.

“In Bihar, the bureaucratic setup to get necessary sanction allows us to complete our projects on time. Thanks to the organised system there, the end buyer also pays less for real estate compared to Maharashtra,’’ he said.

The two-day conference, will discuss amongst other things, the various challenges faced by the industry in terms of approvals, government’s decision to reserve 20%flats for economically weaker section of society and other issues.

While commenting about various problems facing the industry, Jain saidthe apparent delay in the process of getting sanctions for the projects was a major concern. “In case, the sanctions are delayed, the cost of the project escalates which results in a burden on the customer,’’ he said.

The decision of the state government to compulsorily reserve 20% of the flats for economically weaker sections of society according to Jain would be have a negative effect on the industry. “To compromise on this, the builder will pass on the cost to other buyers who will feel the pinch,’’ he said.

Real Estate Sector in Bangalore may see 25 per cent growth.

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The real estate sector in Bangalore has grown to a large extent in the past one year. In the year ahead, the city’s realty is expected to grow by 25 per cent, estimates the Karnataka Chapter of the Consortium of Real Estate Developers’ Associations of India (CREDAI).

“We are expecting the realty to grow by 25 per cent in the coming year. Last year too we have witnessed a similar growth,” said Sushil Mantri, president, CREDAI Karnataka.

As per studies conducted last year, the city is likely to absorb about 7.1 million sq. ft. of office space against a supply of 7 million sq. ft. While demand for office and commercial sales in the city saw a rise, residential sales remained slow.

Experts said that the city witnessed a great strength in high street leasing and rent, and capital value has increased nominally in a few sub-markets. Also, there was a rise in rental value as demand by retailers remained strong.

With commercial office space developers offering favourable options, predictions for 2012 are that several IT companies in the city will look at pre-leasing office space.

However, analysts opine that office space supply will outweigh demand.

“FDI in multibrand real estate is expected to catalyse a lot of demand from international retailers. International luxury brands will restrict their growth plans to Mumbai, Delhi and Bangalore,” states a projected report by Jones Lang LaSalle India, Realty Intelligence firm.

The report states that the mid-end and affordable housing segments will record healthy appreciation in capital value in short term from a low base.

 

Real Estate Sector Brokers bail out Developers with Buyback Deals.

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The prices are not moving up in metros for more than a year now and the buyers including investors are staying away from making a purchase decision, so brokers are in a fix currently.

An Industry watcher said that the Real Estate Developers are facing a cash crunch in the NCR and Mumbai Metropolitan Region and are approaching brokers to underwrite their properties to save the day and maintain prices of properties in a bid.

“So as the new real estate projects that are launched, brokers underwrite a bulk of apartments and the developer can show it as sales,” said Sachin Sandhir, managing director, Royal Institutions of Chartered Surveyors.

Kaustuv Roy, executive director, Cushman & Wakefield, said “For the whole system to work two things are very important, first there should be buyers in the market and second the prices should continue to increase at a faster rate.”

 

‘Integrated Township of the Year Award’ received by the DLF Garden City Lucknow.

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Garden city is DLF’s first residential project, in the city of Nawabs – Lucknow. With almost 40 per cent of the area as open spaces and plot sizes starting from 250 sq. yards and above, the township conforms to very high standards of low density population norms. The facilities at Garden city match the international living standards and give the people of Lucknow their first real taste of an exquisite lifestyle. It boasts of meticulous town planning, eco-friendly infrastructure, wide open roads, its own smart sewage disposal plant, underground cabling and massive green belts running across the township.

Garden city has bagged the “Integrated Township of the Year – North India” award at the Realty plus Excellence Awards 2012, instituted by real estate monthly magazine Realty Plus. Cheered by a galaxy of realty stars, luminaries and other stakeholders present from all over the country at a glittering award ceremony held in national capital at The Metropolitan Hotel, Bangla Sahib road, Garden city, Lucknow was chosen for setting new benchmarks for excellence in the Indian Real Estate industry in 2012′, their immaculate town planning and their outstanding contributions and efforts towards bringing about massive and positive changes in the real estate skyline of this region.

This is the fourth award in the last two years conferred upon DLF India:

* Marketer of the Year For Hyde Park Estate at DLF New Chandigarh – Estate World Awards in Association with KPMG & Bloomberg-2011

* Developer of the year – North India – Estate World Awards in association with KPMG & Bloomberg-2011

* Integrated Township of the Year For DLF Valley, Panchkula – Realty Plus Excellence Awards-2010,

Receiving the award, Ananta Singh Raghuvanshi, director sales and marketing at DLF India Ltd said, “It is extremely encouraging to enter new markets and recreate the success and magic of the past. As a group we are extremely excited and committed to our developments in Lucknow, New Chandigarh, Hyderabad, Chennai, Bengaluru, etc. For each market, we are trying our best to think globally and act locally.”

Real Estate tops the PE chart in Feb.

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The second month of 2012 saw $922.7 million of private equity (PE) investments in Indian companies across 51 deals, 58% higher than the investments of $583.8 million across 24 deals in the same month last year.

However, the average deal size declined to $23.1 million from $38.9 million last year, as February 2012 was marked by a high number of smaller value deals.

During the month, the real estate sector topped the investment chart, accounting for 36.6% of the total investments, while the banking, financial services and insurance (BFSI) sector occupied the second slot with 23.6% share.

Mint, in association with Four-S Services, presents a snapshot of the PE landscape in India for February.

Stamp duty hike report in Maharashtra for the Real Estate Sector.

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Shares of real estate companies with significant exposure in Mumbai slumped in a weak market today after media reports surfaced that the Maharashtra government proposes to hike stamp duty for properties.

Shares of realty players like India Bulls, Oberoi and HDIL today slumped as much as 6 per cent after reports that the state government is planning to hike stamp duty by as much as 160 times.

India bulls Real Estate slumped 4.53 per cent to a low of Rs 65.25, Oberoi Realty tanked 2.32 per cent over its previous close to Rs 250 and Housing Development and Infrastructure Ltd was down by 6.64 per cent to Rs 89.15 on the BSE.

If the hike comes into effect, it will increase prices of both residential and commercial leave-and-licence properties, by a huge margin, market analysts said, adding that it will affect the already-sluggish Mumbai real estate demand.

“This news is going to be negative and stock prices of realty companies who have exposure in Mumbai took a hit. The cost of property in Mumbai will move up it will worsen the situation as there are already very few takers at the present interest rate regime,” Ashika Stock Brokers Research Head Paras Bothra said.

Moreover, weakness in the broader market also battered these stocks to some extent, market analysts said. The 30- share benchmark index Sensex was trading at 17,113.62, down 248.12 points at 1321 hours.

According to media reports, Maharashtra government proposed to hike stamp duty on leave-licence to 0.1 per cent on market value or 1 per cent of the average annual rent or deposit paid, whichever is higher, for residential properties.

For commercial properties, the duty for lease agreements over 60 months is 0.4 per cent.

This is a whopping hike from the previous fixed amount of Rs 25,000 for residential and Rs 50,000 for commercial properties for 60 months.

Banks prefer Private Developers for lending.

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As per the latest data available from the Reserve Bank of India, the outstanding for commercial real estate is Rs 1187.1 billion as of January 2012, a growth of 12.2 per cent over the year-ago period. Although this rate is lower than the growth figure of 19.9 per cent in the same period the previous year, the double-digit growth stands in sharp contrast to the claims from public-listed realty firms who say bank lending has shrunk considerably.

Central to the theme of continued lending to real estate development are the low-lying, unlisted property developers of the country – a crop of realtors who have always been on the side-lines of the big Indian realty story but who are slowly yet surely climbing up the ladder for a larger share of bank loans.

According to a research report by IDFC’s Institutional Securities team last December, bank and NBFC loans to developers have increased 15 per cent to Rs 1.8 trillion for the 12 months ended September 11 in spite of higher interest rates and the RBI’s efforts to curb lending to the sector. Of this, loans to unlisted developers accounted for more than 72 per cent of the total.

One reason for such a shift could be the hard targets that listed realty firms chase due to the pressure of being listed, with compulsory quarterly disclosures. Add to it the size of the firm and pressure points will become clearer. A listed firm usually places bigger bets with larger projects and when the market faces turbulence, project execution becomes a problem. This reverberates with pending projects and drying up of bank credit.

Even as most unlisted private developers are small realtors, there are some large private groups in different regions of the country. Given the huge set of private developers, even private equity developers have been betting on projects sponsored by such realtors.

Real Estate Sector still waiting for the long pending Industry Status.

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The announcement with respect to external commercial borrowing now being permitted opens up a huge opportunity for developers want to cater to the bottom of the pyramid with housing units targetted at the lower income classes even though the overall expectations haven’t been met.

This move will ensure better capital availability for developers of low-cost housing which will result in timely project execution, which will boost volumes and since low margins are typical of this sector, only higher volume growth will make it attractive to developers.

The Union Budget 2012-13 throws up a mixed bag for the real estate sector. The government’s initiative to make affordable housing available to a larger section of the society has only been met partially. Initiatives such as external commercial borrowing (ECBs) for the affordable and low-cost housing segment will help the sector to tap long-term funds and help ease the liquidity in the sector.

Extension of the 1 per cent  interest subvention scheme for affordable housing will help the buyers to avail a loan limit of Rs 25 lakh. Also the measures to increase funding for highways and other infrastructure will help put more territories on the real estate map.

The Union budget has no real measure for the real estate sector as most of the industry expectations have not been met. The most important demand across all real estate companies is that of an industry status being assigned to the sector has been still pending.

Even though all the expectations have not been delivered. The most important demand of increase in the limit on tax deduction available on home loans interest from current Rs 1.5 lakhs remains unanswered.