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Realty PE Deal Volume in Q1 rises but Big Deals are missing.

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Private equity deals are alive and kicking in Indian real estate space even though headline numbers do not reflect the same due to the absence of big ticket investments. The total number of PE deals during the first quarter of CY 2012 has hit a three-year high, according to VCCEdge, the financial research platform of VCCircle.

There were 12 deals worth $279 million in Q1, compared to 9 deals worth $432 million in Q1 CY2011 and 4 deals worth $97 million in the same period in 2010, according to VCCEdge. This is much lower than the peak of 22 deals cumulating to $1.2 billion in the first quarter of 2008, after which stock markets went into a tailspin due to global financial meltdown.

Although the overall value of PE investments has shrunk and investors remain cautious about the sector, it does not necessarily reflect a poor investment scenario in the realty space, according to analysts.

Shobhit Agarwal, joint managing director (capital markets) at property consultant Jones Lang LaSalle India, says, “Most of the funding that is happening now is for last-mile project completion where most of the money has already been spent by the developers and they don’t need large-size funding.” In fact, the projects are 60-70 per cent complete and developers are looking for some more equity to finish them off, he adds.

Last year, the average deal for PE investments was skewed up in the first quarter due to two $100 million-plus investments, including one by Ascendas. This pushed up the average deal size to around $50 million, as against the average size of $20-25 million in Q1 of the previous two years.

But there is another reason for lower quantum of investments by PE firms in the realty sector. According to V Hari Krishna, director of Kotak Realty Fund, “Most of the funds are reaching their shelf life and new fundraising is not happening in the same pace as it happened in the earlier round. Therefore, a lot of funds have either exhausted their capital or are on the verge of it and investments are slowing down.”

Even though the average ticket size of PE investments has shrunk, real estate remains one of the top sectors drawing PE firms. During Q1, real estate accounted for almost 10 per cent of the total PE deal volume and around 15 per cent of total value of PE investments, as per VCCEdge.

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.

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.

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.

Builders say that Pranab Mukherjee has ignored ground realty in the Union Budget 2012-13.

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With predicting an escalation in property prices, top players in the realty sector said they had been ignored by the finance minister.

Chief of the Confederation of Real Estate Developers’ Association of India (CREDAI), Lalit Kumar Jain, said the announcement on external commercial borrowings (ECB) for affordable housing was a minor respite but still meaningless. Jain, who is also chairman and managing director of Kumar Urban Development Ltd, added, “We contribute 6.5% to the GDP and expected a big boost from the budget for affordable housing through special schemes, an interest subvention of 5-7 % for LIG (low income group) and EWS (economically weaker section) housing and promotion of rental housing through tax exemption.”

Jain also pointed out that the interest subsidy on home loans was too low. The Budget has extended the scheme of interest subvention of 1% on housing loan up to Rs 15 lakh where the cost of the house does not exceed Rs 25 lakh for another year.

In addition, Gaurav Gupta, director, Omkar Realtors & Developers, lamented that the realty sector had got nothing to boost market and customer sentiments. “There are no indications of this sector being granted the status of an industry, which it much deserves. On the contrary, the increase in service tax will push up realty prices as the additional cost will be passed on to the buyers.”

Tata Housing MD and CEO Brotin Banerjee added, “Initiatives to make affordable housing available to a larger section of the society have only been met partially.”

There were some who welcomed the proposals. Sachin Sandhir, MD, RICS South Asia felt it “exceeded expectations” given the pressures on the fiscal situation.

Budget 2012: A ray of Hope for the Real estate sector.

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The real estate industry is very optimistic about the coming budget 2012 as the budget may bring a sheer relief  for the affordable housing buyers.

Real estate industry generates countless jobs across its various verticals and also the sector is a major driver for economic growth so it is  hoping to get an industry status.

To improve the significance of the housing sector sufficient steps were not taken in the Budget 2011-12 which in return gave very less to the developers and customers.

Shailesh Sanghvi, Director, Sanghvi Group of Companies said that,”We expect revision in tax for affordable housing projects in order to address the acute housing shortage in the country.”

The priority must be given to the banks who  in return offer concessional costs to the common man and also affordable housing should be considered important .

The interest subvention of 1% on home loans could be raised from Rs 20 lakh to 30 lakh.

In addition Ajmera also said that “The budget should look forward to extending the existing benefit of Section 80 IB(10) of the IT Act for developing affordable housing as the country is still in a huge shortage of tenement.”

Government must take steps which in return would be beneficial to both developers and also buyers. Real Estate sector is hoping the best from the Budget 2012.

As per the developers, Pranab Mukherjee, must present such a Budget that should bring happiness,joy and comfort to every sector.

 

 

Beary’s Group Bags Prestigious Prize

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A Bangalore based residential project has won the runner up award by the International Real Estate Federation (FIABCI). ‘Bearys Lakeside Habitat’, a twin tower residential project was awarded the prestigious award on May 27 at Bali, Indonesia.

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Photo by [ecpark]The ceremony was held in the presence of the President and the First lady of the Republic of Indonesia along with many other renowned developers and dignitaries especially flown in from around the world.

The project promoted by the Bearys Group, ‘Lakeside Habitat’ that welcomes you to the city as you drive into it from the airport is the only Indian project to win this award this year. This is not the first time that Lakeside Habitat has won an award; it has been recognized on many previous occasions also.

There were fifty-four projects chosen from across 11 countries to compete for the coveted Prix d’ Excellence award 2010.

The award was received by the Director of Beary’s Group, Mr. Siddique Beary.

Indian Real Estate has once again a reason to rejoice.