Investors Searching Different Investment Options

The pursuit of higher returns, as the stock market tanks, has investors searching different other investment options outside the conventional bank deposits. One such avenue that has caught the interest of several investors in recent times, especially in the tier-II towns of the South, is the fixed deposits offered by big jewelry chains.

These jewelry chains, mostly in Tamil Nadu and Kerala, have been catching the attention of depositors from smaller investors at interest rates that are 3-5% over bank fixed deposits.

While dozens of cash-hungry companies, especially real estate, have also been offering competitive rates for deposits, investors are cautious of putting money in many of them, as they lack confidence about the safety of these deposits. But these big jewelers, though unregulated, have been able to draw investors to them because of the higher trust in them.

“People perceive investments in deposits of jewelers as ‘safe’ because there is gold involved. Also, this business is all about ‘trust’. While manufacturing companies have defaulted in the past, you would not hear of any defaults from a jeweler,” said a manager at a Kochi-based jewelry chain, which accepts these deposits. There has been no dearth of demand for such deposits because of the amount of unaccounted money present in the system, partly driven by the real estate boom across the country.

Income Tax Dept To Scan Realty Deals For Evasion

If you bought or sold a house or a plot for more than Rs 30 lakh, then expect a knock from tax hounds. Real estate sector is high on the radar of the income-tax department, which is going to keep a close watch on buyers or sellers of property.

Realty deal whose value is more than eight times the gross income of the buyer could come under the scanner of the I-T department, going by the latest scrutiny norms circulated to officials. So, if your gross income is ten lakh rupees per annum and you have bought a house for more than eighty lakh rupees, you could get a call from the department.

Gross income, for this purpose, shall be total income plus exempted income minus the total tax paid. This norm is being adopted to ensure that there is no evasion and people who enter into such transactions pay taxes honestly.

Cash deposit of ten lakh rupees in your savings account could also bring you on the scrutiny radar. Individual assesses now have to report transactions which get captured in Annual Information Return (AIRs). Sale or purchase of house more than thirty lakh rupees is reported, under AIR, by registrars to the department.

Scrutiny on these counts would be generated though Computer Assisted Scrutiny System (CASS) and not through manual intervention.

According to the criterion that were discussed at the recent annual conference of the chief commissioners and directors general of income-tax, capital gains of more than Rs twenty-five lakh could also attract scrutiny by the department in the current financial year.

Similarly, loss from house property of more than Rs 2.5 lakh would also invite the I-T department’s scanner. The real estate sector, which is known to attract large quantum of black money, continues to draw the attention of tax department.

Real estate agents and builders having a turnover of more than Rs 5 crore could attract scrutiny. Professionals like doctors, architects whose gross receipts exceed forty lakh rupees and those who report profit of less than 30% of the gross receipt, can also face scrutiny.

National Housing Bank To Raise 110 Billion Rupees

India’s National Housing Bank plans to raise one hundred ten billion rupees during the year to March 2009 to meet its loan demand. According to the chairman and managing director S. Sridhar declared that out of this one hundred and ten billion, it will raise thirty billion rupees through zero coupon bonds and another ten billion rupees via retail deposits.

The housing finance regulator also plans to set up a mortgage guarantee firm in four months, in which it will be the single largest stake holder.

Disha Direct Celebrates 5 Successful Year In Real Estate

Disha Direct, the pioneers of the second Home concept productively full five years in real estate industry.
Disha Direct nowadays offer services around the entire field of real estate be it residential properties in cities and towns, second homes away from the city, plots of developed land, commercial properties, expansive acres of land or some rare charismatic homes. With all mod cons with a team of over one hundred seventy professionals, seven brands, ten offices, eight finished projects, twenty eight current projects and three thousand five hundred satisfied customers; Disha Direct is an organization spreading its arms in the realty sector.
On the occasion of its anniversary celebrations, Disha Direct properties remain devoted to its five strong factors – Zero Risk Property, Realistic & Fixed Price, Disha Care – a property management group, Go Green – an attempt to provide projects set in the greenest of places and three thousand five hundred satisfied customers.
In this month-long celebratory event, Disha Direct plans to add to the customer’s convenience by making itself accessible at the distance of a phone call. Customers interested in latest projects can just make a call and be rest assured that a Relationship Manager will visit them with a complete presentation of the project of their interest. Property buyers in this celebratory period can enjoy the exclusive privilege of availing flat five percent concession on any property they choose from a wide collection of properties sponsored by Disha Direct. Apart from these, during the month long celebration property buyers can expect a bag full of surprises and other eye-catching offers.
All in all the anniversary celebrations at Disha Direct come as ‘Happy Hours’ for the property seekers.
Disha Direct is a foremost real estate marketing organization. Having made its foray into real estate marketing five years before specializing in second homes in scenic localities away from the city, the company has established itself as the preferred name in the real estate industry. Currently the company has seven different brands covering different real estate properties.

L&T Ready For Realty Drive

Engineering and construction, L&T, currently has real estate projects worth $2 billion in hand, said sources familiar with its plans. Most of these projects are in the form of special purpose vehicles, joint ventures and contracts. The SPVs also include a Rs 2,500 crore project in Chandigarh, sources told.

Separately, Larsen & Toubro announced that it has bagged a Rs 1,557 crore order from Andhra Pradesh Power Development Company Limited (APPDCL).

In the morning trade on 30th June (Monday), L&T was trading up by 0.5 % to Rs 2,277 in the early noon deals.

Omaxe To Enter Into Mauritius Real Estate

After success into Dubai, real estate player Omaxe is all set to enter the Mauritian property market with a plan to develop a fifty acre residential project.

The Delhi-based company has identified a project of fifty acres and planning to develop a residential township there. The land for the township is probably to be provided by the government and the company is expecting to receive the ownership of the land within a week. Omaxe would carry out the Mauritian project alone.

The company would develop a residential project about thirteen hundred crore rupees through SPV Golden Crescent RED and General Trading Ltd. Another project worth fifteen hundred crore rupees would be developed through SPV Marine Sands.

Omaxe said in May that it would develop ten lakh affordable housing units with an investment of eighty thousand crore rupees in India over the next half decade. For this purpose, it has set up a new subsidiary named National Affordable Housing and Infrastructure Ltd.

Landmark Ready For Pune-based SEZ Project

Landmark Land Holdings Pvt Ltd, the real estate investment arm of the Dalmia group, has acquired 10 % equity stake in an Integrated Township and Special Economic Zone (SEZ) project at Hinjewadi, Pune, being developed by Kumar Builders.

The proposed SEZ will be established in 124 acres of land, adjacent to the Rajiv Gandhi Software Technology Park at Hinjewadi, a Landmark release on 30th june said. The project is likely to generate revenues in excess of one billion dollar.

However, the company did not specify the size of the deal. Landmark will have an option to increase its stake to 49 % in the future.

Landmark has 20 ongoing projects under development, which have a sales value of five billion dollar.

Autolite India To Enter Real Estate And Retail Segment

Autolite India established in 1970, in the field of Designing, Manufacturing and Market ing of Automotive Lighting products globally. The Company has made surprising growth in business through its innovative products at competitive prices. It is amongst few in the world who have installed Computerized Photometry Testing Equipments, CNC, CAD, CAM design and Tool manufacturing facilities Catia and Pro-E Softwares. Its testing laboratory is recognized by Govt. of India.

The board of directors of company has decided to enter into high profitable real estate & retail segment with regard to the possibilities of diversification in real estate business.

A high level committee has been formed for this purpose to explore the possibilities of real estate business with regard to SEZ, IT Park, commercial complex, residential complex, etc.

Shares of the company gained Rs 0.75, or 1.74%, to trade at Rs 43.75. The total volume of shares traded was 710 at the BSE (11.36 a.m., Monday).

Interest Rate Hike May Hit Realty Sector

With growing inflation and interest rates leading to a slackening in property demand, 1% to 1.5% increase in interest rates could further impact the real estate sector.Jones lang LaSalle Meghraj Chairman and Country Head Anuj Puri said, “The demand is already slackening. The real estate sector can absorb another 100 to 150 basis points rise in interest rates, but anything beyond that will hit the industry hard”.

Further he said that the current trend of drop in demand would continue for about two years as there is no sign of inflation cooling down and high chance of interest rates becoming harder.

Mr. Puri, however, said that there was no shortage of demand in Mumbai and Delhi, but in other parts of the country far less number of property transactions are taking place. The slackening in demand, coupled with liquidity crunch, could lead to consolidation in the realty sector as smaller players will find it difficult to survive.

He said, “Smaller players will have to partner with bigger ones or offer stakes to financial partners to complete their projects”.

Further he added that there is no scarcity of demand for office space in the country as overseas companies are now leaning more towards India for outsourcing. As a result, even smaller cities are becoming an attractive destination.

The Loan Against Property Rates & Their Effects

The loan against property rates are fixed by the loan amount, credit ranking of the borrower and the equity of the pledged security. All these three reasons affect the interest rate directly.
The modification of 1991 marked the dawn of Indian financial system. Capped with professionalism, hi-tech IT applications and diversification, Indian financial and loan market has now at its highest altitude. The entry of overseas banks has supported the system to get better its services. Now, competition is at all time high in the Indian housing finance business. With the improved contest, the customer has a number of alternatives to select his housing finance company (HFC) to apply for a loan according to the need.
The loan against property is on the rise in the attractiveness chart as more and more Indians are nowadays taking these loans as the most cost effective solution for their needs. The banks have two prime concerns while providing a loan against home:-
1. Repayment capacity of the borrower credit risk involved in the loan deal.
2. Title of property(If it free from any legal hassles or not).
The borrower to whom the bank is lending should have the capacity to pay the loan amount back in the assigned time period. Repayment capacity is a major concern of the bank while lending funds to anyone. In case of salaried loan applicants, the borrower needs to have a cheque salary which can be verified by the bank. A track record of salary entries in a bank statement reflects consistency and genuineness of the income source of the borrower.

Industry Gambles On Long-term Prospects Of Real Estate

Increasing interest rates and a declining demand may dent the realty market in India. However, the long-term forecasts for the sector continue to be good, senses the industry.
At a seminar on the real estate market in India here on 27th June, most of the realty players confessed that there was a liquidity crunch due to the increase in interest rates. However, this is not going to discourage long-term investors from investing in India, they added.
Termed as “Elephant Investors,” these investors such as pension funds and endowment funds are just waiting in the groups to enter the Indian market, said A. V. Kapoor, managing director of Saffron Asset Advisors Pvt Ltd.
“There are around 21 India-dedicated real estate funds that are raising money in the international market. In the next 9 months, I believe nearly $7 billion will be entering the country through different India-dedicated funds,” Kapoor said.
“While long-term players are look at India, small-term players based in the US & Europe, for example the hedge funds and private equity players, are further interested in their local markets,” said Alex Hayim, director of REIT Property Management India.

RBI Limits Private And Public Sector Banks For NRI Matters

NRI loan interest rate depends a lot on the reason of borrowing. When the reason is to invest in share or commercial immovable property market, the interest rate to be paid is higher than any loan borrowed by the NRI to be invested at an employment generating project.
The RBI has recently prohibited public and private sector banks from lending more than Rs 20 Lakh against the deposits of NRIs. This ban is imposed by the apex bank on doubt that a huge part of such loans is being diverted for speculation in shares and immovable property market. These cautious steps from the apex banking body are aimed at ensuring that bank credit is streamlined towards productive sectors other than the retail sector. It will definitely squeeze the extra investment flow particularly in commercial real estate and capital markets. The hike in standard assets provisioning will lead to a raise in retail lending rates.

Boom Time Over Keki Mistry, Vice Chairman Of Housing Development Finance Corp

According to Keki Mistry, vice chairman of Housing Development Finance Corp An increase in the housing supply, rising borrowing costs and a stock market rout are bringing a five-year property boom in India to a close, according to executives at two mortgage lenders. Property prices across the country could drop as much as 15% in the coming months. Gagan Banga, chief executive of Indiabulls Financial Services Ltd., predicted prices could decline as much as 20%.

Switching To Tier II And Tier III Cities A Good Option For Real Estate

Union Finance Minister P Chidambaram has said the double digit inflation will continue for some more weeks.
The Central Government as well as the Reserve Bank of India is not going to hesitate in taking more steps to control towering prices, if the need arises with the markets also reacting adversely to the two major concerns – high inflation and oil price hike.
But one asset, which seems to be inflation-proof, is real estate, which is now starting to show signs of softening, particularly with banks raising interest rates and loans getting more difficult.
With possibility of home loans becoming dearer, this is still a excellent time to buy property. Property experts even say switching to Tier II and Tier III cities is a good option.
With the RBI raising repo rates to 8.5 %, one can expect a decline in property prices. Experts predict a further slide in prices of 5-10 % over the next quarter.
“If the sentiment remains the same, the mortgage rates go up; they would impact the demand as well as prices. There will be further drop seen in both.” Anshuman Magazine, Chairman & MD, CB Richard Ellis, says.
So a drop in demand could force property developers to bring down to prices to help increase demand. Many builders, especially in Mumbai, are now offering discounts to attract buyers.
“If you have a good location, some money, and a good developer, then you must buy now and not wait,” BP Dhaka, COO, Parsvnath Developers, says.
Residential property prices have gone down by 15-20 % in the past few months across the country. For consumers, this may be a good time to buy a property but yes, bearing that loan may become tougher
So, an informed decision may help you clinch a good real estate deal that is facing a price correction in several parts of the country.
Also, the options to move to Tier II and Tier III cities can also be considered. According to experts property prices will go down in these cities even more as compared to the metros.

Contract Between Sunil Mantri And HTML

Hindustan Times Media Limited has purchased 0.65% stake in real estate foremost Sunil Mantri Realty for twenty crore rupees, which will be used by the latter to finance new projects.
Taking about the contract, Sunil Mantri Realty’s chief financial officer Mr. R. Arora said that this collaboration will enable the organization to achieve further planned goals of future. Sunil Mantri Realty has residential and commercial developments in Mumbai, Hyderabad, Pune, Bangalore, Solapur, Nagpur and Gwalior.

The company had recently signed a memorandum of understanding with MSC Cyberport Sdn Bhd Malaysia to work together in the development, construction, marketing and funding of Bandar MSC Cyberport, which is a 6534000 square feet project.

Thirty Billion FDI Likely In Real Estate In Next Decade

According to estimate made by ASSOCHAM, the FDI component in the domestic real estate market is expected to be thirty billion US dollar as against its total amount of one hundred two billion US dollars in next decade as the real estate sector escalation will raise up by more than 30%.
Additionally, ASSOCHAM report stated that, the domestic real estate market is expected to be of fifteen billion US dollars in which the FDI contribution is estimated around six billion US dollars. The bank credit to this sector in 2006-07 has been estimated around three lakhs crore rupees, which will multiple substantially in the future years considering the growth that the sector has been registering.
Mr S. Jindal president of ASSOCHAM said that presently the foreign developers can take on construction actions on a minimum space of fifty thousand square feet in consequence of which Indian real estate sector could achieve FDI’s component around six billion US dollars.
Mr. Jindal further said, “The upper limit of fifty thousand square feet would be lifted by the government as it is under continuous pressure for increased FDI’s which as per ASSOCHAM estimate will increase to two lakh square feet in subsequent decade in a gradual manner and result for much higher foreign capital absorptions”.

Impact Of Interest Rate On Real Estate And Housing Loan

Indian real estate firms expect a hit on margins for the next few quarters as the central bank’s move to raise interest rates this week will push up costs and keep potential buyers away from the market.
Developers, already facing a demand slowdown, have refused to lower the price line as they seek to make up profits despite high land costs and curbs on funding. However, higher interest rates in the economy could push them to choose survival over pride.
The Reserve Bank of India late on 24th June raised its key lending rate and cash reserve requirement by 50 basis points each to curb price pressures. Inflation jumped to its highest in more than 13 years in mid-June to 11.42 percent.
As a result, lending rates of banks are seen close to 13 percent, levels last seen nearly a decade ago, while interest rates on home loans could go up by 50-100 basis points, putting off a large segment of middle-class buyers.
Real estate prices had already started slackening, this move will lead to more slowdown,” said Ramesh Jogani, managing director at India REIT Fund Advisors, which has invested in several projects. “We see a 15-20 % fall in prices.”
Analysts say the slackening of demand is raising concern over future realizations, which is reflected in the performance of real estate stocks, with most close to their lowest level in a year and 40-60 % off their peaks.
“In the near term, we think affordability will be a bigger driver and a 20% correction in property prices will be needed by the year end to revive volumes,” UBS Investment said in a research note.

Developers Gamble On Eco-Friendly Buildings To Flatter Buyers

Top developers are now betting on green buildings. Green building ,so to say use less energy, water and natural resources, creates less waste and is healthier for the people living inside compared to a standard building – to flatter large number of leaseholder. Even though green buildings involve an incremental cost of 7-10% over traditional buildings, developers see it as an opportunity for differentiation in a growing market.

The trigger is a growing environment consciousness among topnotch tenants, particularly the multinationals. In the request for proposals (RFPs) that are coming in, many MNCs are starting to ask the question about the green quotient. Jones Lang Lasalle-Meghraj chairman and country head Anuj Puri said, “It may not be mandatory today but going forward, many MNCs will make it mandatory”. Developers such as K Raheja and RMZ have decided to go all green.

RMZ’s 1.9 million square feet mall, RMZ Galleria, in Bangalore is currently under construction and will be a green development. So will be K Raheja’s Mindspace projects at Mumbai and Hyderabad, both of which are currently under development. According to CII-Indian Green Building Council (IGBC), 147 million square feet of green space has been registered in India to date across a total of 239 projects. At the moment, K Raheja is planning and developing around 14.5 million square feet of green space across the country. K Raheja associate vice-president Shabbir Kanchwala said, “We are looking at the long-term and want to be the first ones to go green in a big way”.

The Lodha Group, though, is getting into it only partially. Lodha Group senior vice-president Bharat Dhuppar said, “Only our commercial buildings will be green”. Lodha has about twelve buildings in the pipeline and most of them will be commissioned between 2009 and 2010.

In their projects, K Raheja expects the cost to be around 7-8% higher. The savings, though, will be considerable. Kanchwala declared, “We are looking at 30-40% power saving and about 20% water saving”. Further he added, “Also in construction, we try and use a lot of recycled materials — aluminum and glass — as well as mix fly ash with the concrete that is used”. The use of glass too is being reduced. Selvarasu said, “We keep the use of glass to the minimum, to about 35% in commercial and about 20% in retail”.

In a world where energy costs are going up by the day and investments in energy are peaking, a green building which saves precious energy and comes at the same rental for the occupier is a decent marketing tool for developers. Kanchwala said, “Many of our customers are Fortune 500 companies who understand and prefer green buildings”. Selvarasu said, “The future is in sustainability”.

Irish Life To Invest In Commercial Property In Asia and Europe

Investors in this country are known to have an appetite for exotic investments.

Irish Life is tapping into this by giving investors an opportunity to invest in commercial property in Asia and Europe through two new funds from Irish Life — Eurasia Property Fund and Eurasia Property Plus Fund.

Irish Life is partnering with Hendersons Global Investors-one of the biggest property investors in the world — which currently manages property assets worth more than $23bn.

The Eurasia Property Fund will initially invest up to 75pc in commercial property with the rest invested in European property shares and cash. One quarter will be invested in European property in 13 different countries.

There is also the Eurasia Property Plus which gives exposure to properties in Japan and Hong Kong,other parts of China and India. The minimum investment is €20,000.

This is high-risk stuff and independent advice would be worth taking.

Hilton Hotels Corp Plans To Add 300 Hotels In Asia

Hilton Hotels Corp plans to put in three hundred hotels to the existing forty seven in Asia over the subsequent decade, as the firm looks for to catch up with its competitors and cash in on the boom in business and leisure travel in India and China, a media report on 25th June said.
According to The Wall Street Journal Hilton, with nine brands ranging from the opulent Waldorf -Astoria Collection to the thriftier Hampton Inn, expect to administer the majority of these new hotels and leave the investment and ownership of them to others.
“The Asia region is one of our absolute top main concerns for our business and development. The plan is to put about three hundred new hotels in the region. We’d like to do better than that, but that’s our goal,” the report said quoting Hilton’s Chief Executive and President Chris Nassetta.
He also anticipated the value of these planned hotels to be in “the tens of billions of dollars.”
Hilton Hotels is a foremost worldwide hospitality company with more than three thousand hotels in seventy four countries and territories.
The newspaper quoting Nassetta said Hilton is concentrating initially on India, where it has a joint venture with local property firm DLF Ltd. that aims to open seventy five hotels within the subsequent five years.
“Starting in India’s big cities, where population density limits the availability of appropriate land for international -standard hotels, Hilton plans to set up its Hilton Hotels, Homewood Suites by Hilton and Hilton Garden Inn brands,” it noted.

Realty: Difficult To Buy And Rent

Realty prices might be showing signs of easing, yet its tough to buy a house. Prices are still high and loans are getting expensive. Renting a property is also getting dearer.

According to analysts and developers residential rentals are hardening, registering a 10% growth. The demand for rented residential space is high as India has very low residential rental yields hovering around 3-6%

At the same time home loan interest rates are around 11% to 13%. While new property sales are slowing down, rentals are showing an upwards trend.

Many prospective home buyers are deferring purchase, expecting a dip in prices, and looking for renting accommodation in the short run.
“People are nervous about spending the capital they have in times of uncertainty. Therefore renting remains the only option. Though India is also unique as lot of people prefer to park money in residential projects and lock up apartments, which reduces the supply of apartments for rent, putting an upward pressure,” says global real estate advisory DTZ director Abhilash Lal.

Ansal Housing and Construction Director Kushagr Ansal points out, “Real estate yields in India are very low, pegged at 4-6%. This makes renting a lucrative option.”

Though new supply is being added to the pool of residential properties, it hasn’t really helped in stabilizing rents. Parsvnath Developers COO Dr B P Dhaka said, “New supply is not coming in the preferred centrally located residential areas. Also maintenance and construction costs have gone up in the last one year. All this has contributed to higher rentals.”

Omaxe executive director Vipin Agarwal points out, “Since residential rentals and lease are long term arrangements, there has not been a significant increase in rentals in last 6-8 months (for people already living in rented properties).’’

Proposal For Farmers In Mysore

Mysore city authorities have a proposal for farmers who own land in and around the city: Part with your plot for nothing and get 18% of it back after it is developed and potentially more valuable.
The Mysore Urban Development Authority (Muda) thinks it’s offering a good deal to farmers as it competes with private developers for land to build public housing in a city where property prices have doubled in 18 months. Whether the offer will find takers is in some doubt.
A. Rudrappa, joint director (planning) at Muda said, “The objective is to give back farmers 18% of their own land, after it is developed, so that they get to retain the asset”. Further he said, “It will also prevent them from being cheated by builders who often don’t pay them the entire amount.”
Muda has 1.5 lakh applications pending for public housing in Mysore, the largest city in Karnataka after Bangalore, the state capital and India’s Information Technology hub. The agency’s inability to pay market price for farmland has driven landowners to private developers and sent property valuations soaring.

The 18% land-back offer is based on the average cost estimation of developed and undeveloped land that showed farmers would benefit even if they get back less than one-fifth of their original holding, according to officials at the urban development department in Bangalore.

Developed land would include access to amenities such as electricity, water and sewerage, enhancing its potential for commercial development.

Sudarshan Rao, a Mysore property consultant who has brokered land deals said, “For many farmers, land is a liability and they want to sell it off quickly to repay debt or start some new business. They wouldn’t wait for a period of two-three years till the land gets developed and he gets partial ownership of it”.

According to farmers, land demand is huge. Farmers are not sure what kind of development will happen and what would they earn after selling their land.
Developers have bought up large parcels of agricultural land in areas such as Nanjungud Road, T Narsipur Road, Hunsur Road and HD Kote Road in and around the city, in the belief that Mysore was the next real estate market.

In the last one year, top developers such as Unitech Ltd, Emaar MGF Land Ltd, Sobha Developers Ltd, Nitesh Estates and Total Environment System have acquired land in and around Mysore. But while developers rushed in and property prices soared, little development has taken place. Most projects are yet to break ground in the city that is still waiting for its first shopping mall.

Developers say that they are waiting for an opportune time to launch their projects. said Nitesh Mani, chief executive officer of Nitesh Estates, which plans to develop an IT park in Mysore, “Though many developers have bought land, no one is jumping into development right away”. Further he said, “It is important to choose the right kind of project in Mysore.”

Praveen Kumar, associate director at property consultancy Jones Land LaSalle Meghraj said, “Selling the land to private developers at market value would be a better option for landowners because they don’t know what kind of development and infrastructure that would come up on that land once they get it back”.

Rate Hike To Delay Realty Projects

Real estate developers see further slump in demand and price correction due to RBI’s move to raise interest rate. Caught between slow demand and rising cost of capital and construction, developers are deferring launch of new projects. Some even fear that ongoing projects may get delayed.

Indiabulls’ group spokesperson Gagan Banga said, “Interest rate hike has dampened the sentiment in the real estate market, which will result in further slowdown. We see 5-15% price correction in the real estate sector in the next few months depending on the project and its location”.

Real estate market has been under pressure for the past six months with sales declining by up to 70% in several markets and prices declining by up to 20% in overheated pockets like Gurgaon, Greater Noida, Ghaziabad and Kundli in the national capital region and some Mumbai suburbs.
Cushman & Wakefield South Asia MD Sanjay Verma said, “There is no alternative to credit. Land transactions have dried up due to developers’ inability to bring funds. The fund-raising plans of developers have also changed and some have limited their expansion plans”.
Some developers, especially smaller ones, also fear that their project might get stuck due to unavailability of funds. The bank credit had already dried up for small developers and they now fear rising interest rate will further increase their borrowing cost from NBFCs or private moneylenders. With homeloan rates, likely to go up, the advance money received from customers too will dry up forcing them to slow the pace of project execution.

Unitech general manager (corporate planning & strategy) R Nagraju, however, feels that high borrowing cost will have only a marginal impact on company’s margins. He pointed out that a bigger concern is slackening demand.

Mr. Nagraju said, “We can’t do anything about high interest rates, but we need to stimulate demand by adapting our products suited to the current market needs. This could mean cutting down on frills and making houses more affordable to the end user”.

Unitech plans to launch houses at Rs 40 lakh in Gurgaon and at even lower price points in smaller cities, which it thinks will find large number of buyers. Similarly, Ansal Properties and Infrastructure (API) is tweaking its plans to suit the changing demand scenario.

API CEO Anil Kumar said, “We plan to launch plotted development projects soon, which still have a good demand. Besides, we would focus on execution of projects rather than launching more housing projects”.

Hi-tech City Project In Kochi

Kochi will soon get international status with the upcoming of hi-tech city project worth five thousand crore rupees. The Bangalore-based Shobha Developers have signed up a MoU with the state government for setting up this hi-tech city. Sobha Hi-Tech City will be an incorporated city with focal point on research and development, knowledge dissemination, information technology and pure and applied sciences. The city is situated close to the NH 47 bypass close to Maradu in Kochi. It will have seven million square feet of knowledge park, commercial space to provide business-friendly environment, hospitality and leisure projects, entertainment and amusement facilities, a marina and residential complexes. The project will be completed in 8yre and would produce seventy five thousand straight jobs.

ICICI, DLF Lead Lenders, Real Estate Lower After Rate Increase

ICICI fell 2.4% to 686 rupees, its lowest in almost two years. DLF declined 3.8% to the lowest since it began trading in July. The Bombay Stock Exchange’s Bankex Index lost 3.3%, and the real estate index shed 4%.
The Reserve Bank of India unexpectedly lifted interest rates the second time in two weeks and told lenders to keep more cash in reserve after the surge in crude-oil prices pushed inflation to a 13-year high. The central bank also signaled it will keep raising borrowing costs.
Sampath Kumar, an analyst at Goldman Sachs Group Inc., stated, “Banks could raise lending and deposit rates by 75 to 100 basis points in response to the policy announcement. Increase in lending rates would likely adversely affect market expectations on loan growth, net interest margins and asset quality”.
The Reserve Bank increased the repurchase rate by 0.5 percentage point to 8.5%, the biggest move since 2000, and adjusted the cash-reserve ratio by a similar margin to 8.75%.
Before yesterday’s move, the central bank had raised the repurchase rate eight times in the past two and half years and increased the cash reserve ratio seven times since December 2006 to slow money supply and cool inflation.
The central bank’s monetary tightening had already led to a 43% slump in the Bombay Stock Exchange’s bank index this year, and a 60% plunge in the real estate index, outpacing the 30% drop in the nation’s equity benchmark Sensitive Index.