Real estate market in India is on the upswing while builders in India are rapidly investing in all the parts of the country. New constructions in this field are into an all-time growth. Indian property developers are buying plots in large number for construction of townships and residential complexes.
A study of the market trends for commercial property in India reveals a similar pattern of the rising rates and a closer look at the prevailing rates is necessary to get the best out of the property. Commercial properties in India are also on the rise with their flourishing constructions. Shopping malls, shops, big Corporate Offices, Movie Halls, Amusement and Recreational parks et al are in for investments by Real Estate Developers in India.
Huge number of properties is on sale in India, luxurious apartments, premium quality flats, independent homes, farm houses, penthouses, row houses – are some of the projects that are selling like hot cakes in residential property sector in India. Property developers in metropolitan cities are expanding their vision and investing in tier II cities like Pune, Surat, Coimbatore, Cochin, and Vadodara.
Property developers in Lucknow, such as Ansals have invested here in a township, Sushant City- Lucknow, which they name as “shaan of Awadh” or Awadh’s pride. Builders in Chandigarh like Axiom Estates are coming up with projects in residential sector. Real estate builders in Ludhiana are investing in residential as well as commercial complexes.
Builders in Hyderabad like Modi Builders are coming up with number of residential projects such as The Gardenia, The Golden Palms, Palm Springs and The Silver Springs. Builders in Cochin for instance, Abad Builders, Trinity Builders & Developers and Gokulam Engineers are establishing themselves in real estate sector and their construction and investments are showing up to be fruitful.
With the kind of growing economy buying, selling, investing and renting properties in India is considered a lucrative option by the people world over. Moreover, an increase in the property rate in the real estate market, even in tier- II or tier – III cities of India, is showing an upswing trend in building and construction. According to real estate agents in India, this is indicative, at least on one level, of a clear interest of people in buying or selling of properties.

Higher rate of returns in real estate investments in India, projects that comply with international standards, greater affordability, apart from emotional reasons like ‘owning a piece of homeland’ were driving the NRI segment growth in the real estate sector in the India.

“Ma, is Chennai like New Jersey”, asks a little toddler in a catchy overseas promotional advertisement campaign launched by a leading real estate brand in India.

The campaign reflects the current market trend among developers to come up with special overseas promotional campaign aimed at targeting the NRI segment that were keen in ensuring that they invested in homes, that were close in design and amenities to those that they lived abroad.

Today with more and more Indians looking at returning home and relocating themselves given better employment opportunities in India, NRIs are now looking at investing in the real estate in the country with a view to make India their future homes.

Those who were making the transition from overseas to India, want to ensure that the transition is smooth, especially for their children, many of whom India would be a new living experience.

A lifestyle match is what these people are looking for when investing in property here.

While some preferred contemporary designs, others were searching for homes that were nostalgic and brought back memories of childhood or times spent in courtyard of a village, where just-rolled out papads lay toasting in the sun, or those ethnic porches where the family sat together enjoying the little ones tumble and roll at play.

Yatra Capital Ltd, the Euronext listed real estate company, has invested $7 million for a 40% stake in Jalan Intercontinental Hotels Pvt Ltd, a company that is building a two hundred room business hotel in Kolkata. The hotel will be supervised by Indian Hotel Ltd under the Taj Gateway brand.
The hotel will be built on a 1.9 acre plot situated at the junction of Rashbehari Connector and EM Bypass in Kolkata. EM Bypass is the main arterial road between old and new Kolkata, connecting Kolkata Airport and eastern parts of the city. The hotel will primarily cater to the requirements of IT/ITES companies located in and around the IT parks and SEZs coming up in the area.
Presently there are close to one thousand five hundred rooms in the premium category in Kolkata.
Occupancy levels have increased at an average rate of 15-18 % over the preceding few years with average annual occupancy levels hovering around 80 %, which is estimated to remain at the same level in the medium term. Almost 60-70 % of guests in the premium category hotels are business travelers.
This will be Yatra Capital’s 14th investment in the country, which includes two other investments in the hospitality sector. Yatra had invested Rs 63.44 crore for a 30 % stake in another firm Platinum Hospitality Services which will develop a hotel in Bangalore at an estimated cost of Rs 402.62 crore. Yatra Capital had also acquired one of the first India-focused property fund Eredene Capital Mauritius for Rs 99.39 crore in 2007.
Ajoy Veer Kapoor, Managing Director, Saffron Asset Advisors Private Ltd, said: “This is Yatra’s third hospitality project and is in line with our commitment to building a strong, diversified portfolio of quality assets. Our investments for Yatra have the potential to deliver across a variety of sectors and locations and we will continue to seek opportunities that will maximize shareholder returns.”

It’s now quite evident that real estate companies are in for some difficult times. CRISIL not only foresees a delay in many planned and ongoing projects, it believes several players are over-leveraged and that the combination of sluggish demand and rising costs will lead to a shakeout. In particular, residential complexes, funded largely by customer advances, have been severely hit by the slowdown in bookings, which means it will be a while before the projects are completed. So it’s going to be a long and painful wait for buyers who have paid up. Much of this pain could perhaps have been avoided if the government kept an eye on builders and subjected them to more scrutiny. Indian laws, it would appear, are far too lenient. In China, for instance, developers can pre-sell a residential property only when one-third or two-thirds of the construction is complete, depending on which province they’re in. It’s a far easier world out here where builders are free to pre-sell property even before they’ve started digging. Those who want to own a home of their own, and who doesn’t, often have little choice but to play along. Buyers also have very little idea about how their hard-earned money is being utilized by the developer. In China, we’re told, mortgage payments have to be utilised for a specific project. Maybe that’s the way it should be done here too; builders would then not be able to divert customer advances for other purposes. Because that’s precisely what some of them appear to have been doing. Overly ambitious developers have bid for land banks and are now scrambling for the money to settle the bills. Unless things take a turn for the better, these developers will probably not have the financial wherewithal to start building even if they get possession of the land. And neither will they be penalized for this. In China, a realty firm must develop the land acquired within a certain time frame, failing which the appreciation in the value of the land is taxed. Back home that’s not the case, so there’s really no hurry to start any construction, the land can simply lie vacant. It’s a pity that this can happen in a country where there are so few houses and so many more people waiting for a home of their own.
Chinese developers hold relatively small land banks; brokerage CLSA estimates it would be sufficient for development over a 4-10 year period, depending on growth targets; in India developers are estimated to be holding on to land banks for anywhere between 8 and 15 years. To be fair, approvals in India do take much longer than they do in China because much of the land is agricultural land. But even then, companies appear to be in a hurry to pick up property. Given that there’s a downturn in the offing, they might just end up owing a lot of inventory at a time when prices are coming off. Most Indian property players are already so highly leveraged that few would be able to cash in on falling prices. The difference in the amount of debt that Indian and Chinese players have on their books is striking. The average gearing for listed Chinese developers, CLSA reckons, is 50-60% with only a couple of them at 100%. For companies back home, the average would be closer to 100% with a couple of firms indulging themselves beyond that. What’s more, some of them are not able to recover their money in time; receivables for Parsvanath rose by about 20% sequentially in the March 2008 quarter. The higher cost of money means the debt will continue to pile up.
As it is, it’s not easy to tell what kind of shape the finances of property firms are in. That’s because the percentage-of-completion method followed by companies means that sales and profits and recognized well before the entire project is completed. That just won’t do in China; revenues there flow into the books only after the project has been completed and the property handed over to the buyers. In that sense, investors in property stocks may want to note, Indian firms would seem to be less transparent than their Chinese peers.
That’s possibly because they can get away with it. As CLSA notes, in India property developers are “friends” of policy makers in India. On the contrary in China, while they may enjoy similar good relations with the provincial governments, the central government has been seen to be taking aggressive steps against the sector. Conditions in the real estate space in China today are pretty similar to those in India. Property markets there too have weakened and buyers are biding their time. A big difference, however, is that property prices in China are still considered affordable whereas back home even a modest home remains out of reach. That’s the main reason why there have been so few transactions. It’s time we changed some of the rules, home buyers deserve better.

In the midst of a general slow down in the Indian real estate market, TAIB Bank, a leading private bank based in Bahrain, has picked up a 26% stake in Anant Raj Projects for Rs 216 crore. The deal, one of the first Shari’ah-compliant transactions in the Indian real estate industry, puts the valuation of the subsidiary of New Delhi-based Anant Raj Industries (ARIL) at Rs 831 crore.

TAIB Bank has routed the investment through its real estate investment arm Acacia Real Estate. Anand Raj Projects plans to develop of 6,00,000 square feet of retail space which is expected to be operational by first half of 2009. The proceeds of the transaction will be invested in this project. DTZ India, the Indian subsidiary of DTZ Holdings, and International Property Consultant were the advisors to the transaction.

Confirming the development, ARIL executive director Amar Sarin said, “Though the real estate market is passing through a tough phase, the investors are still keen to invest in bankable projects. Our deal with Acacia reinforces the fact that in real estate and, especially, in retail sector, location still remains the fundamental value generator”.

India’s real estate market is experiencing a slow down. Developers are facing a cash crunch due to the slow down in sales as well as tight liquidity conditions. This has perhaps forced them to look at raising funds from PE investors.

Rajeev Bairathi, associate director, investment advisory, DTZ said, “This deal proves that despite prevailing market condition, investors are ready to pay a premium for participating in projects promoted by reputed developers with established track record, adequate experience and expertise in creating quality product”.

Global financial giant JP Morgan Chase is investing Rs 130 crore for 33% stake in an SPV of realty firm Alok Infrastructure, a wholly-owned subsidiary of Mumbai-based textile maker and retailer Alok Industries, according to banking sources.

Alok Infrastructure’s SPV, which is receiving the JP Morgan funding, will develop a realty project at a prime location in Mumbai. Alok Infra owns land at several prime locations in Mumbai, some of which it bought in high-profile transactions in the past one year. Alok Infrastructure had been in negotiations with some private equity players to offload equity in the main company.

A falling stock market and a sluggish realty sector of late has, however, brought down the valuation of realty firms forcing Alok Infra, as many other realty companies, to go for investment at the project or SPV level. Alok Infra may be looking at raising more funds through private equity route for its different projects.

The company’s biggest project under execution is the 180-acre textile SEZ at Silvassa in the union territory of Dadra & Nagar Haveli. The SEZ obtained the government’s formal approval last December. Parent Alok Industries plans to occupy one-fifth of the SEZ space for its textile and apparel units. The company is also in talks with other textile makers for space in the SEZ.

Earlier this year, Alok Infrastructure acquired 50% stake in Ashford Infotech, which would develop a million sq ft of space for Rs 400 crore. Ashford Infotech, now equally owned by Alok Infra and Ashford group, had earlier purchased a 6.92-acre plot from CEAT in a Mumbai suburb for Rs 130 crore.

Alok Industries reported a net sales of Rs 2159 crore and net profit of Rs 200 crore for the year 2007-08. Alok exports its range of textile products to as many as 58 countries, which contributes nearly half of the company’s sales. The company has been present across all textile segments, including spinning, weaving, knitting, fabric, garment and home textile.

Lately, the company has moved up the value chain and is increasingly strengthening its presence in retail in India as well the UK. The company retails its products under H&A brand name targeted towards the mass market. The retail division is being hived off as a separate wholly-owned subsidiary by the name Alok Homes and Apparel.

Delhi-based real estate developer and asset management company, Alpha G:Corp, key coalition associate in the pan-India conglomerate. G:Corp, has signed up a joint venture with property-owner in Punjab to conceptualize, design and develop the impressive Alpha One mega project in Amritsar. It will be spread over twenty five acres on G.T. Road. Alpha G:Corp was allotted the mega project status since it submitted the most superior development plan. The initial investment will be two hundred seventy crores rupees in the Ist phase and this is going to be a destination centre encompassing retail, entertainment, luxury hotel and stand-alone boutiques on a total space of 2 million sq. ft. The features in Phase 1 also include a two hundred room luxury boutique hotel under the brand name Ishta from the Ananda group of hotels, which alone will entail an investment of over one hundred crores rupees.

Credit crunch and economic uncertainty have taken their toll on the global property market, with transaction volumes falling by 46% in the first quarter, according to a property report.

Investment throughout Asia and other emerging markets continued to grow, as sales of major commercial properties globally totaled $154 billion (Dh565bn) in first quarter against $283bn of property that changed hands in first quarter of 2007, New York-based Real Capital Analytics said in its latest report.

Property sales figures for April and preliminary results for May show sales in Asia have started to weaken and drop in sales in the United States and Europe have become more severe.

The United Kingdom has led price declines with the United States following behind. Since September, the initial yield on acquisitions of commercial property has increased by more than 25 basis points in the Americas and by almost 40 basis points in Europe.

Cap rates in Asia have continued to fall, reflecting both the growing wave of capital and expected upside for its emerging markets.

Acquisition of land and development rights in Asia has totaled almost $29bn so far this year, making it the most popular target for investors.

Office properties in Europe are a distant second with just under $20bn of transactions, followed by offices in the Americas and Asia with each recording between $15bn and $16bn of transactions through April.

Developable land in Asia posted not only the greatest growth in transaction activity but also the largest gains in pricing in the first quarter. However, all other property types in Asia except apartments recorded gains in both volume and prices. Prices fell lower for all property types in Europe, but several did manage gains in volume. Conversely, no property types posted higher sales volume in the Americas although average prices in the industrial, retail and hotel sectors did increase modestly. Sellers in the United States in particular are opting not to sell at discounted prices, causing volume to plunge while prices for the few transactions that are successfully completed appear rather resilient. However, land prices in the US are falling quickly and have experienced the greatest decline in value so far this year.

Pune property market is one of the most active segments in Western India. Private property developers along with local property builders and civic authorities are pouring in more investments in the city.
Recently, Milestone Capital Advisors announced an investment of Rs300 crore for commercial real estate development in Pune. Milestone is a fund house and focuses on Tier I and II cities. Milestone chose to invest in Pune owing to its sporadic IT sector.
Market reports suggest that commercial property in Pune fetches about 20-25% returns on investment. This makes Pune a favorite destination of investors.
The residential property segment also does well there. These days, Pune builders are focusing on affordable houses. Prominent real estate builders like Kolte-Patil, Gera Properties have announced affordable housing project in the city. The plan is to build one-room set and two-room set accommodation that costs between Rs 10-15 lakh. These builders have outlined that the quality of construction will not be compromised, however these flats/apartments would not have elaborate lifestyle features.

Most real estate builders are now focusing on the bordering areas of Pune. The city centre commands very premium capital and rental values. Hence, most of the users look for affordable accommodation in suburban and bordering areas. And, property builders are trying to cash in on this sentiment on the property seekers. Property in localities like Kothrud, Vanwadi, Oundh are much in demand. These areas were once the extension of villages but are now the hub of property development.

Tech Mahindra announced a capex plan of Rs. 638 crore ($150 million) for next three years, 60% of which will go as investments in physical infrastructure such as buildings and real estate while 40% will be used for enhancing technology.

The company plans to open new centres in Belfast (Ireland), Milton Keynes (UK), Chandigarh and Kolkata.

Builders would face hefty fines if they do not set aside 15% space in their housing projects for the economically weaker sections (EWS). The ministry of housing has asked states to crack down on developers who violate EWS reservation. Repeated failure to implement the policy may also result in government taking back land allocated for such projects.

“It is UPA government’s policy to provide housing to the weaker sections of the society, and non-compliance will result in tough action from the government. Builders cannot go against the National Housing and Habitat Policy, which has made mandatory for them to set aside at least 10% for EWS construction,” a senior housing ministry official said.

According to the policy, at least 15% of land in housing projects or 20% floor area ratio (FAR), whichever is greater, has to be reserved for EWS/ LIG (low income group) housing. The Center has taken seriously to instances in states such as Karnataka, Delhi and UP where builders have flouted EWS norms. Therefore, it has directed states to enforce the reservation strictly.

According to officials, city municipal authorities would not permit developers to advertise their buildings or flats if the building plan does not have accommodation for poor. Apart from EWS allocation, necessary building bye-laws and lay-out clearances by registered architects have to be in place before the builders can advertise their properties.

Apart from pursuing the mandatory EWS housing, the ministry has also asked the finance ministry to direct nationalized banks to lend EWS families funds at lower rates to buy houses. The ministry has said the poor should be charged 5% below the prevalent market rate.

LIC Housing Finance, the mortgage arm of Life Insurance Corporation of India (LIC), is set to foray into the venture capital arena. It intends to start Rs 500 crore real estate funds by the end of this financial year.
LIC Housing Finance is reportedly scouting for a banking partner for raising capital and will soon approach SEBI to set up an asset management company. To invest in listed companies, companies usually register with SEBI.
Based on the response to the real estate fund, the company will decide on whether it will expand its presence in the venture capital space.
There are at least three major banks in the fray for a tie-up and a memorandum of understanding will be signed soon. While LIC Housing Finance would be the promoter of the real estate venture fund, LIC could also be one of the internal contributors of the fund.
LIC Managing Director Thomas Mathew said the insurer has no plans to directly enter the private equity or venture capital businesses.
The fund proposed by LIC Housing Finance will be used to finance real estate development and about fifty-sixty projects are likely to be funded over twelve to eighteen months.
A large number banks and finance companies have recently entered the venture capital space and the existing players are expanding their footprints.

City-based construction firm IVRCL Infrastructure and Projects has plans to sell its high-priced pieces of land, including the twenty five acre information technology special economic zone (SEZ) plot in Noida, and purchase low-cost property in the light of the downside in real estate business in the country.
“With the real estate being what it is now, our first priority is selling high-cost land and filling our land bank with low-cost lands. We will also go for low-cost housing,” Chairman and Managing Director of the four thousand two hundred crore rupees company, E Sudhir Reddy said.
IVRCL currently has one hundred twenty acres in Noida, about one thousand acres in Bangalore, four hundred acres in Pune and two hundred acres in Panvel (Navi Mumbai), besides large extent of land in Hyderabad, Nagpur and Visakhapatnam. The market value of these plots was estimated at over four thousand crore rupees.
On a pre-qualification basis, IVRCL has been allotted one hundred twenty acres in Noida a year-and-a-half- ago. This includes twenty five acres meant for setting up an IT SEZ. While the SEZ land was allotted at a rate of Rs 7.5 crore per acre, the remaining ninety five acres were allotted at about twelve crore rupees per acre. As the rules do not allow sale of SEZ land, IVRCL proposes to raise unfinished structures and dispose off the property.
“The cost of the shell construction will be two thousand rupees per square feet. I will transfer this built-up area to the purchaser at the same cost. However, I will get a premium on the land cost,” Reddy said adding that while the company purchased SEZ land for about seventeen thousand rupees per square meter, the minimum upset price fixed by the government for bidding in that area now stood at about twenty five thousand rupees per square metre.
Though the disposal of the SEZ property essentially means sale of constructed area, land cost will be added in the transaction. In view of the rising interest rates and increasing input costs, the company had also decided to go in for low-cost housing.
“We are currently building nine million square feet of low-cost houses spread over three thousand acres in different cities. The highest price we are charging is two thousand two hundred rupees per square feet,” he said.
According to Reddy, IVRCL is also planning to rope in about ten construction firms for setting up cement plants in different parts of the country for captive consumption. The idea is to put in about twenty five crore rupees each to raise about two hundred fifty crore rupees capital and seek funding from banks and private equity (PE) firms for setting up six cement plants.

It always comes to hear that time is now ripe to go to Tier2 and Tier3 cities for IT and ITES companies. Being part of a big city or Tier1 city and being an SME, we keep wondering too whether should we go or not and if yes is the time ripe and if so, can SEMs go first or it is the business of the large corporations such as a Infosys, or a Wipro or a TCS to setup the operations and the ecosystem first and then the SMEs to follow?

Shimoga is a small town around 300 k.m north of Bangalore and it is considered as Tier3 city (Mysore and Mangalore probably fits under Tier2 tag). There are many such towns and cities in different cities which are considered as potential Tier2 and tier3 destinations for IT/ITES. Infact Shimoga happens to be the home district of the current CM and there is lot of hope and aspirations of the local community for attracting many IT/ITES companies over there and infact there is already an ITES company operating for last couple of years.

There are lot of advantages – you are away from the hustle and bustle of big cities and being part of a quiet relatively unpolluted environment, lower living costs, no traffic jams for sure, better quality of family life etc but the biggest advantage will be the land/realty price and especially more attractive if government can provide (thru SEZ etc) very subsidized land. But then again lot of cons go with that – lack of availability of talent, even if local talent exists will be tougher to pull them from the lure of big cities, fewer schools to support the ecosystem, additional expenses (which is not an issue for BIG IT companies) of setting up of every infrastructure item that is required, the quality of life off-office hours, the schools, the shopping malls, the night life what most of the IT and the ITES crowd expect – all these will be missing, and more than finding talent, retaining the talent will be a bigger issue expect for those who are from that town and love to stay and work there. Then again the expenses of running a firm in big cities is becoming extremely tough and challenging with rising inflation, fuel costs, real estate costs, attrition rates, traffic chaos, ever reducing of the quality time spent with the family, and in general dissatisfaction towards the ever busy polluted city life. The issue has become a chicken-egg issue with waiting to see which one will happen first – the IT companies moving to Tier2/Tier3 or is it the ecosystem first and then IT companies more there. Still better big companies opening it up first on a big scale so that they can or have the potential to make others to create the needed ecosystem to start with them but the early advantage will be lost for SMEs and as the land/rental prices would have increased, stealing the lone big advantage one could have got.

Many companies are finding it very difficult to hire talent and still tougher to hold onto them. Today’s talent is in spite of all the deficiencies and cons, still sticking onto metro life style with shopping and entertainment in the weekend which is clearly lacking in the tier2/tier3 cities. A NASSCOM- Kearney assessment of 50 leading locations for IT-BPO sector has pointed out that a lack of recreational facilities was a handicap for the tier-II and III cities. But the study on `location road map for IT-BPO growth’, had predicted that the share of sectoral employment in the top seven locations will decline to around 60-75% over the next decade and that will subsequently result in the rise of tier II and tier III cities’. SM Doshi, partner A T Kearney India, said, “But that cannot be achieved by only installing physical infrastructure like power lines and mass-transport system in tier II and tier III cities. Efforts should also be made to create an ecosystem that comprises social infrastructure with the trappings of metropolitan life”.

The industry experts believe that the first mover advantage does no way help IT companies attract skilled employees to these locations. When an ITES employee was asked by his company to get ready for a stint in a Tier3 location he decided to hunt for a new job. There are currently over two million employment provided by India’s IT-BPO sector, and over 90 percent of which is captured by the seven leading cities of Bangalore, Mumbai, NCR, Hyderabad, Pune, Chennai and Kolkata. Less that 10% is relegated to tier2 and tier3 cities and a very low ratio indeed.
So do SMEs make the bold move and couple it with Government incentives and move also to Tier2 and Tier3 cities and to get that early mover advantage or wait until the Big ones move or there is a critical mass built and then move.

Summer is over but the temperature is still rising, particularly at the Philippine Real Estate Festival as it presents 24 gorgeous young women vying for the title of Miss Real Estate Philippines on July 25 at the SMX Mall of Asia.

The second annual beauty pageant intensely screened over 200 young women before coming up with the list of official candidates who will represent the country’s top real estate builders and developers.

In the process, these young women will immerse in all areas of the real estate industry. They have been busy with a crash course on the state of real estate, and with seminar-workshops that educate them on why real estate industry is a vital in Philippine economy.

During the press presentation of these real estate beauties at the Lancaster Suites in Mandaluyong City, the media had a closer look at each of the candidates as they strutted their stuff and flaunted their curves in skimpy yellow bikinis.

“Believe me, Miss Real Estate Philippines is more than just a beauty pageant. It’s beauty pageant for a cause. The winner will be the ambassadress of real estate industry in the Philippines. She will help and spearhead the outreach projects that will provide homes to the most disadvantage social sector,” PREF chairman Rosemarie Basa said.
Filipino-Australian Rose Cel Aguilar, last year’s winner, will relinquish her crown to the winner who will receive valuable prizes that include cash and a house and lot. She will also represent the country in the first-ever Miss Real Estate Asia pageant that will be held in November.

Miss Real Estate Philippines is just one of the components that anchors the 2008 Philippine Real Estate Festival. The rest of the activities will officially open on July 26.

This three-day spectacular event will commence with an exhibit that will bring together 150 of the country’s biggest and most trusted real estate development companies and projects, finance institutions, suppliers, contractors, and professionals.
Fiesta Pinoy, which serves as the official closing of the festival, will combine indoor games, contest, raffles, disco dancing, mini-parade, and a musical concert for the amusement and entertainment of exhibitors, patrons, and guests.

Donald Trump Jr., whose father built a multi-billion dollar fortune in real estate, plans to set up a fund of as much as $1 billion to buy property in India, betting on the nation’s economic growth.
New York-based Trump Organization Inc. also plans a residential and hotel project in Mumbai with a local partner to tap the growing wealth of middle- and higher-income Indians. The city is India’s biggest trading center for stocks, bonds, commodities, diamonds and gold, and home to some of the country’s largest companies including Reliance Industries Ltd. and State Bank of India.
Trump said, “Our entry has to be in Mumbai and that’s where everything is going on right now in terms of the high-end real estate”. Further he said, “That’s the place where one is going to achieve the highest prices per square foot. It sets the tone for all of the other future developments”.
India’s $912 billion economy grew an average 8.8% since 2004 and is forecast to expand as much as 8.5% in the year to March 31, according to the central bank.

Bullish about the Indian infrastructure sector, United Engineers Malaysia (UEM) Builders, the entirely owned subsidiary of Khazanah National Berhad, an investment division of the Malaysia government has showed keen awareness to invest in infrastructure projects for example expressways, real estate and bring in their expertise in waste management. UEM has already made investments of over three hundred crore rupees since its presence in India for the preceding eighteen years.
UEM has completed over seven hundred kilo meter of roads with an investment of over two thousand three hundred crore rupees in UP, Karnataka, Kerala, Bihar, West Bengal, Gujarat, Andhra Pradesh, Tamil Nadu and Maharashtra.
“The Indian market is very important for UEM as we see a enormous potential in this market. India is a key driver for UEM’s overall growth and we have always been devoted towards this market. The company is devoted to supporting India in building an sophisticated infrastructure, suited to its growing business and social requirements. India is one of the top three global markets for the group,” Tan See Yin, senior director, UEM International (East Asia) said.
PLUS Expressways Berhad, a subsidiary of UEM group, is aggressively participating in pre-qualification bids for NHDP-III and V. As Asia’s largest toll concessionaire, the company is keen to share its experience and expertise, and to play a significant part in India’s road infrastructure development, Yin said, who was in India to get a sense of the improvement of the company’s several initiatives said.
“The group has so far spent in more than three hundred crore rupees to build up its team and resources in India. India is a focus country for our international expansion and we are devoted to contributing in India ‘s infrastructure needs,” Yin said.
UEM presently has over ten branches and site offices in India, including presence in key cities such as Delhi, Mumbai, Bangalore, Chennai and Chandigarh.

The domestic hospitality industry is undergoing rapid transformation, with several hotel groups investing in new properties across India and the globe. Additionally, real estate players are entering the industry through management contracts with established hotel chains.

This expansion in the hospitality business is taking place on account of the massive growth that India is likely to witness in the coming years. Currently, India’s travel and tourism industry is estimated at 6.1% of the gross domestic product (GDP) — below the world average of 9.9%.

The capacity for star-rated rooms in India is far shorter than its demand, and cities are now evolving from a single-business district to multiple-business districts, as growth spreads and cities get bigger. Moreover, new growth centres are emerging in previously untouched markets such as Orissa, Chhattisgarh, Jharkhand, Pune and West Bengal, among others. This has greatly expanded the market for star-rated hotel accommodation in the country.

The hospitality industry is divided into four segments: luxury, leisure, business and budget hotels. Major hotel chains like Indian Hotels Company (IHCL), Hotel Leela and ITC Hotels are aiming for a presence in most of these segments.

For instance, the market leader, IHCL, is following an integrated approach to offer rooms at all price points and in almost all million-plus cities in the country. This is being complemented by setting up hotels at strategic locations across the globe. The company plans to double its room inventory to over 20,000 in 3-5 years. This includes around 3,000 rooms under the ‘Ginger’ brand, which is IHCL’s budget chain of hotels.

Meanwhile, ITC Hotels is using a mix of owned investment and franchisee model to take a shot at market leadership. The company offers a choice of over 90 hotels across 77 destinations in India under four different brands — ITC Hotels, Welcome Group, Fortune and Welcome Heritage. It also has four properties under the Sheraton franchise, which adds up to an inventory of 6,000-plus rooms, with half of the room inventory being at the premium end.

Hotel Leela has already started constructing hotels in Udaipur, Chennai and Delhi, while it continues to expand its existing properties at Bangalore and Kovalam. East India Hotels (EIH) plans to set up one new hotel each at Mumbai, Gurgaon, Bangalore, Hyderabad and Khajuraho. Besides, it is expanding its flight kitchen services in Kolkata and Mauritius, and plans to refurbish its existing properties.

At a time when the real estate sector is hard-pressed for funds, the real estate mutual funds (REMFs) are yet to take off, in spite of being granted permission 3 months ago. This is due to unclear rules about their tax treatment.
REMFs, which were touted as key instrument enabling retail investors to take part in the booming realty sector, have been delayed partly because the Securities & Exchange Board of India (Sebi) and the finance ministry are still trying to sort out the tax ability of such scheme.
The Central Board of Direct Taxes (CBDT) has decided to provide it the same tax status as the equity oriented mutual funds, as was requested by the Sebi. This means that the REMFs will be freed from dividend distribution tax and investors spared from paying long-term capital gains while selling their shares.
Yet, as said by the Income Tax Act 1961, equity oriented mutual funds are those which have at least sixty five percent direct investment in securities of the listed companies.
Interestingly, in Sebi’s rules, REMFs must invest a at least of thirty five percent of their funds straight into real estate assets and the rest into mortgage-backed securities, debt and equity instruments floated by the realty companies, thereby making it hard for them to be eligible as equity oriented mutual funds.
“As per the REMF structure laid out by Sebi, these funds would more often than not be akin to debt funds,” an expert said. Unlike equity-linked funds, debt-funds magnetize both capital gains tax and dividend distribution tax. This creates problems as investors are indirectly being denied the tax incentives given to equity oriented funds, the officials said.
“For a clearer understanding and in order to take in REMFs, the finance ministry will have to change the description of equity oriented mutual funds in the IT Act,” A. Krishnan tax partner (real estate), Ernst & Young said.

Faced with a slowdown and increased competition, real estate players are trying to re-invent themselves by focusing on ‘personalized selling’.
Refusing to be lost in the clutter of ‘look-alike offerings’ in the real-estate market, a section of leading developers engaged in constructing properties in Bangalore, Mumbai, Hyderabad, Goa and Chennai is trying to carve out a niche by personally attending to the needs of each and every customer who strolls in to inquire about their projects.
Bangalore-based TSI Ventures director (sales and marketing) Jackbastian K Nazareth said, “The euphoria of inquiries witnessed since the past couple of years has now died down. But there are still quite a few genuine buyers. Now, in order to counter the strong competition and to stand apart from a string of look-alike offerings in the real-estate market one needs to make necessary marketing innovations and concentrate on personalized selling”.
While launching its much-talked about ‘Wave Rock’ project in Hyderabad, TSI has rolled out special cookies imported from New York and had distributed it among those who stepped-in for inquiries. Mr Nazareth said, “In India, buying a home is an emotional process and such personal treatment of probable customers helps in creating a lasting impression in their minds”. Further he added, “We will be launching similar schemes when we launch new township projects in Hyderabad and Chennai in the near future”.
Priti Chand, director (PR & Communications) of the group, which is building 200 villas at Madgaon and high-end apartments about 12 kms from Panjim, said, “Though we know that all inquiries will not materialize, we still design the product as per the requirements and choices so that we get tailor-made villas. We are marketing these projects as second-homes and we are therefore trying to get the homes tailor-made”. Further she added, “We live in a busy world and the time-starved customers expect personalized services such as carpeting, furniture and similar home decor jobs from us”. The Group, while recently launching its hotel projects in Goa, had organized fireworks display, fashion shows and had gifted wine bottles to visitors who graced the occasion. Ms Chand remarked, “We will be organizing similar displays when we launch our properties in Goa”.
Similarly, the Lodha Group which is currently in the process of selling a high-end villa project (each unit costing between Rs 3-3.5 crore) at Lonavala has also taken the ‘personalized’ route.
Lodha Group senior vice-president (marketing) R Karthik said, “We are providing first-hand experience of the villas to our guests. The customer while visiting our project gets an actual feel of the villa he or she is planning to buy”.
Further he said, “The company picks the guests willing to visit project site along with their family in a luxury vehicle. Right from being ushered in; the guest gets treated to the five-star experience which he/she will receive once the final product is ready. For instance, there are maids and butlers on call”. Further he added that the company has incorporated a ‘personal flavour’ while marketing and selling their products.

The Indian real estate market is set to witness the entry of investors like Gaziz Globe and Big Shopping Group from Israel, Mirax from Russia and a few others from Eastern and Western Europe. Together, these investors are likely to invest around Rs 10,000 crore in Indian property that is FDI compliant, in the coming months, through the PE route.
The move is expected to bring relief to developers who are increasingly finding it difficult to mobilize funds from banks. Jones Lang LaSalle Meghraj (JLLM) is currently working on these transactions. It is understood that a number of funds from Israel have bought large tracts of land in Goa and are scouting for more land and property elsewhere.
According to Anuj Puri, chairman & country head, JLLM, “Currently, there are liquidity issues in Indian real estate market. Hence, funds from Israel and Russia will bring relief to Indian developers. Since PE players are investing in Indian properties that are FDI compliant, the funds will be invested in the ongoing construction of properties over 50,000 sq m in size. They cannot invest in ready property.”
While Gaziz Globe is investing in various retail projects, Big Shopping Group is investing in new retail projects in Pune and Mumbai.
Meanwhile, Mirax, Russia, is evaluating the feasibility of investing in developments in Mumbai. Kardan Group, Israel, is also investing in an SEZ in Pune.

With real estate stocks being hit adversely by the market slowdown, the phenomenon is expected to have a spiraling effect on hospitality development in India. Most real estate majors with a series of hospitality developments in their portfolio are affected by this trend. This may lead to a stall or delay in the completion of projects as well as a revision of the project expenditure. Over the past few months, real estate stocks have seen a major downfall, with an average of 60 to 65% drop in the share prices during 2007-08.

Prem Subramaniam, Head, Infrastructure Development Finance Company (IDFC) said, “There is not only a slowdown in the market, but also an alteration in project costs with the configuration of interest rates”.

While financial market analysts expect the decline in real estate stocks to continue in coming months, they also speculate that hotel projects will be stalled due to lack of liquidity and equity funding in the markets. On the contrary, hospitality consultants feel that projects that are already secured with funds will not be affected.

Parsvnath Developers Ltd has no plans to reduce prices of its properties, a top official of the real estate company said on 16th July 2008.
“There is no question of reducing prices at all. Prices have to go up,” Pradeep Jain, chairman and managing director said.
He also said rising input costs would be passed on to the consumers.

For now, the next few quarters could be the acid test for the sector. The stock prices of many real estate companies are under duress. DLF’s offer for a share buyback comes at a time when the stock price has been adversely hit. While one could argue that the overall sentiment is on a low, the fall in these stocks has hit the investor really hard.

At such high price levels for property, the buyer is taking his time which does not augur well for the developers. It is precisely for this reason that the uncertainty has stepped in.

HDFC’s Karnad admits that there are some pockets in India where prices need to correct further. “However, today, the real estate sector is going through a stage of over-pessimism,” she argues.

The story of the aspiring Indian middle class is hard to ignore and that could be urge to own a home could still make sure there is a healthy level of demand. Overall, the impact of a global slowdown on India is slowly being felt. It may affect Indian realty sector in coming time. However, NRIs affections towards Indian properties will not likely to be vanish in near future.

Arrival of boom in real estate has seen mergence of many realtors and builders. Among the front runners, one is Amarapali group. Over a span of 12 years, the group has build scores of residential building, commercial complexes and corporate houses. It is now foraying encouragingly into the extremely challenging space of SEZs. This remarkable success of Amarapali group owes to number of factors namely man, machine and mantra.
Amarapali group is head by its chairman MD Mr. Anil Kr. Sharma, who is great visionary in his own right. After creating a vast repertoire of top class residential projects, malls, SEZs and IT parks, the group the set to take a giant leap by foraying into the high growth hospitality business in the country. In the first phase, the group is going to launch its international class 4-5 Stars hospitality projects in the cities of Virindavan, Bareilly, Jaipur, Udaipur, Indore and Greater NOIDA.