New Delhi-based real estate developer, Parsvnath Developers, plans to develop a mixed-use project, Parsvnath Planet Plaza, in Lucknow. The entire project is expected to incur an approximate cost of Rs 120 crore.
The project will include a mall with hotel complex, food court and shopping zone, informs Deepak Mowar, Vice President – Hotels, Parsvnath Developers. The company will develop a 110 room, four star deluxe property as a part of the mixed use project. The hotel will be developed under the Fortune Park brand and will house two restaurants, which includes a coffee shop and a speciality restaurant. It will provide conferencing facilities, which accommodate approximately 100 persons.
Monthly Archives: May 2008
Realtors are using risk mitigation strategies
In the scenario of high land prices and tight liquidity, builders are increasingly exercising caution and adopting risk mitigation strategies to move ahead.
Where 18 months ago, they were ready to throw money on land parcels, they are now more realistic in acquiring these and seeing what they can build on that piece of land, and the revenue they can generate from it. Developers thus have to think before they buy land.
In case of newly acquired lands and difficulties in executing the project, developers are looking to selling one of their land parcels to fund the other projects. There are also those who may use their land banks as collateral to raise funds for their current needs. Joint ventures have been happening in the past, but they are now increasingly happening in a market that is stretched.
Developers are increasingly getting into joint ventures with landowners, other developers or private equity funds. Here the reward is back-ended and the landowner will get a share of the profits after the project is completed and sold. In this arrangement, the upfront cash amount required to be put in by the builder is reduced and hence to that extent reduces his risk..
Modern India disclosed investment plan
Vijay Kumar Jatia, Chairman and Managing Director of the company told that they have identified land for the for a five-star hotel in Udaipur. They will very soon start acquiring land for the two hundred room hotel, which would developed near a lake.”The hotel project is predicted to cost one thousand crore rupees and the company is also interested in setting up a SEZ in Rajasthan.
The company through its subsidiary, Modern India Property Developers Ltd, is already developing an electronic hardware and software SEZ on around thirty seven acres of industrial land at Khopoli in Maharashtra, strategically located on the national highway 4 with connectivity from two sides.
The nine hundred crore rupees project is scheduled to be finished in three years and is being developed through a Special Purpose Vehicle in which MIL is a major stake holder. Besides developing a hotel and SEZ the company also plans to open a jewellery training institute in Rajasthan.
Real estate expecting twelve billion dollar PE funds
Red Fort Capital is preparing to invest Rs 3,500 crore, mainly on budget hotels, while Starwood is committing Rs 800 crore to Chennai-based Shriram Properties. Deutsche Bank will help Suncity Projects raise Rs 1,500 crore, and the Blackstone Group has said it would invest around $18 million (around Rs 73 crore) in Synergy Property Development Services. Kuldeep Chawla, director, Red Fort Capital, said, “We will focus on developing a chain of budget hotels by associating with local developers. About 400 budget hotels with 60,000 hotel rooms are expected to come up in India. We will look at investing in a diversified portfolio of properties.”
In 2006, Markets regulator Sebi opened up the real estate market to PE investments. The first year was a learning period. “The following year saw a real correction in the market, with large incremental growth rather than dramatic growth, where stock market money went into special purpose vehicle-level investments,” says Arun Natarajan, founder & CEO, Venture Intelligence India, which tracks the PE segment.
Balaji Rao, managing director, Starwood Capital said, “We are strategic partners with Chennai-based Shriram Properties to develop a three hundred acres township in Kolkata ,which requires an investment of five thousand crore rupees. Apart from Starwood Capital, Shriram Properties is also looking at raising funds from Walton Street Capital. Likewise, following its partnership with Synergy, Blackstone Real Estate is eyeing further opportunities here.
Experts say that in calendar 2007 alone, PE players would have invested five billion dollar in the Indian real estate sector. But there is need for investments of up to $18-20 billion, which are expected in FY09 and FY10, they say. Says Jayesh Kariya, partner, Deloitte Haskins & Sells, “Investments of one thousand four hundred billion dollar are being made by Real Estate Investment Trusts globally. Hence, more global investors will start looking at Indian realty.”
Realty space to gain from real estate MFS
The Indian real estate sector, currently facing strong headwind due to the credit turmoil as well as high inflation, is set to get a breather from the market regulator SEBI’s move to allow Real Estate Mutual Funds, says global consultancy giant KPMG.
Mr. Jai Mayani, KPMG’s Executive Director and real estate head in India, said, “Real Estate Mutual Funds (REMFs) have a useful purpose and a role which until recently was missing in the real estate ecosystem. REMFs should help ease the situation and compensate to some degree the relative absence of public equity and challenging debt markets”.
At present, not much equity funding is available to projects below 50 thousand square metres of built up area or 25 acres and there is hardly any domestic secondary market for stabilised income yielding assets.
Mr. Mayani added, “Besides, with foreign money not permissible in fully built up commercial, residential and retail assets, this is a good vacant space for REMFs”.
REMFs would buy fully built assets and it should help unlock capital for developers. Also, with 15% allocations, which REMFs would have towards under-construction assets, some additional equity should also be available for non-FDI compliant projects.
HCC sets up arms For key businesses
Hindustan Construction Company (HCC), a leading construction house, will transfer its real estate, infrastructure and investment businesses into separate fully-owned subsidiaries in an attempt to provide these high-growth businesses with a distinct focus and identity.
HCC officials said two subsidiaries, HCC Real Estate and HCC Infrastructure, have already been formed and the third, HCC Capital, is in the process. HCC will focus on large-scale construction and engineering projects.
HCC chairman and MD Ajit Gulabchand said that they currently have presence in many infrastructure segments. He added, “We feel the restructuring will help us focus on the untapped segments”. For the past few years, HCC has been witnessing a strong growth in all segments it operates.
Mr. Gulabchand said that the number of projects being executed has increased manifold. However, most of our growth has come from the construction sector and opportunities in the engineering, real estate and other infrastructure segments are yet to be fully explored.
On Wednesday, HCC shares rose 2.7% to Rs 132.50 on BSE. The three companies will have separate CEOs and will bid for projects in their respective areas. They will also raise money and form joint ventures on their own.
HCC Infrastructure will focus on build-own-operate and transfer (BOOT) project opportunities in roads, hydropower, airports and ports. HCC is now the single-largest contractor of the National Highways Authority of India. It constructed more than 490 km of road in 2007/08 over 500 km in 2006/07. Besides, HCC Infrastructure will also bid for large projects in airports and hydro power.
HCC Real Estate will execute projects in real estate. However, HCC’s flagship real estate project, Lavasa near Mumbai, will continue to be a separate entity. A CLSA report released last week said the country’s infrastructure development is set to accelerate, backed by greater private sector participation and improved finances of government and public sector enterprises.
HCC Real Estate would build commercial centres, service apartments and hotels. HCC is currently developing an IT park called ‘247 Park’, a 1.9 million square feet project, and two slum rehabilitation schemes in Mumbai. It has plans to develop townships in Mumbai, Nasik and Nagpur.
HCC is also planning to own and finance select infrastructure projects in the future. HCC would route its investments in infrastructure projects through HCC Capital.
While continuing its operations in the construction space, HCC would mainly focus on building engineering, procurement and construction (EPC) capabilities, besides acquiring, executing EPC projects. It also has plans to enter the winery business and has acquired 400 acres of land in Nasik. For the fiscal ended March 31, HCC’s turnover crossed Rs 3,000 crore while its net profit touched Rs 108 crore.
Emaar SPVs To Get $800 Million PE Funding
According to sources, the Delhi-based real estate developer is at an advanced stage of negotiations with private equity players and is likely to close three separate deals in a month. Emaar MGF spokesperson declined to comment on the development. These deals, once clinched, will be the first major fund flow into the real estate firm since it withdrew its IPO last February.
Emaar MGF (40% of which is owned by Dubai-based leading property developer Emaar and 56% by Delhi-based MGF) was forced to withdraw its Rs 7,000-crore share sale, the third-biggest in the history of the country, due to poor market sentiments. Since then, markets have lost steam on global cues, leading to dramatic erosion in the market cap of real estate firms. Real estate biggies such as DLF and Unitech have lost 45% and 50% of their market caps while smaller players such as Parsvnath and Omaxe witnessed a close to two-third erosion of their market caps from their January peak.
The poor market sentiments have also forced DLF, Unitech and Indiabulls to postpone Singapore listing of their real estate investment trust. Though money flow has not stopped in the real estate sector, developers, including the unlisted ones, are hesitant to go for equity dilution at parent company level fearing lower valuation. This has prompted most companies to look at private equity fund at project or SPV level.
Emaar MGF, too, is raising funds at SPV level purely because the current market situation may not have given them the expected valuation. Three SPVs, where the PE money is likely to come, are expected to take up development projects across verticals: housing, retail and office. The exact projects to be undertaken by these SPVs couldn’t be ascertained, but they would be part of the projects already being undertaken by the company.
Some of the mega projects the company has undertaken include a 3,000-acre integrated township in Mohali, a 531-acre integrated township in Hyderabad and a 14-acre residential project in Chennai. The company is also executing the prestigious Commonwealth Games village project, where it is developing a 27.7-acre residential complex with an estimated saleable area of 1.8 million square feet.
The company also plans to develop more 200 hotels over the next 7-9 years. It has two equal joint ventures with Accor for 100 budget hotels and Premier Inn for 80 hotels. The company has also entered into separate management tie-ups with Hyatt, Intercontinental and JW Marriott to run a total of 26 hotels.
Sistema will invest In Hospitality Sector In India
Talking on the sidelines of a conference organized by the Indo-CIS Chamber of Commerce here recently, Mr Chinyaev said, “We are looking to launch an ‘A class’ office and hotel projects in Delhi, Goa, Gurgaon, and in almost all the metros, including Kolkata. If we find proper partners, we will invest $100-200 million in a pilot project by the year-end.” Sistema, however, will not build residential projects in India, he clarified.
The company, which deals with thirty star hotels across the CIS countries, is also looking at building and managing hotels in India.
“We have plans to take part in the tourism business in India through exchange of tourists between the two countries. We can bring our tour agencies to India for this purpose. This will be supported by developing businesses like hotel and resort projects,” Mr Chinyaev said.
Retail real estate to see up to $10 bn investment by FY10
Mumbai, Apr 30 Developers and private equity players are set to put India’s retail space market on full throttle with investments worth around$5 -10 billion in FY09-FY10.
In moves that would lend retail space gigantic proportions, the Runwal Group and Singapore’s GIC will use a joint venture to launch a ‘Our City Centre’ retail mall over 1.1 million sq ft of area in Ghatkopar, Mumbai. In the second phase of their foray, they will develop another ‘Our City Centre’ over 7 million sq ft of area in Hyderabad. Mumbai-based ICS Group is their project advisor.
Equally bullish is Sheth Developers, which is building a shopping centre called ‘Viva City’ over1 million sq ft in Hyderabad and Thane, Mumbai. The company is investing four hundred crore rupees in this new retail development and has not associated with any private equity firms.
The sudden gush of investments has also swept across smaller cities. Media major Dainik Bhaskar Group will develop a 7.5-lakh sq ft retail mall in Bhopal. With construction already under way, the mall is likely to be up and running in December 2009. The mall comprises a basement, ground and six floors with seven anchor shops, 180 retail shops, six-screen multiplex and food courts. JMC projects have been appointed as the civil contractors and Bentel Associates, Mumbai ,are the property advisors.