Real estate investment division of JP Morgan Chase is possibly to pick up about 18% stake in Core Hotels Ventures for one hundred crore rupees with the Foreign Investment Promotion Board clearing the proposal.
The suggestion of J P Morgan India Property Mauritius Company II will now go to FM P Chidambaram for final authorization.
Core Hotels Ventures is engaged in providing project management and hotel maintenance services and also building two hotels in Hyderabad.
As par sources, J P Morgan India Property Mauritius Company II has wanted approval to subscribe to 1.42 crore share of Rupees ten each of Core Hotels Ventures at a price of Rupees seventy per share for a overall consideration of around one hundred crore rupees.
Previous year, Core Hotels got FDI from Indus Hotels Reality (Mauritius) Ltd which picked up 12.8 % stake. The company was given around just more than One crore shares.
J P Morgan Chase is engaged in diverse financial service activities, together with asset management, investment banking, private banking and securities services.

Sobha Developers Ltd has announced that the Company enters in Real Estate Project “Sobha Scarlet” in Mysore on August 29, 2008. This will be developed in 14.2 acres of Land.

This project will have 83 villas, out of which 49 villas will be in phase 1 of the project with 3 & 4 Bed Room with Study room. Amenties of the project includes Club house with spa, Tennis court, Swimming pool, Gym, Squash court, Multi purpose hall, Cards & Carrom room, Library and others.

Singapore-based private equity firm, Millennium Spire Ltd-MSL announced investment of $200 million in India’s realty sector in next one year.
MSL Managing Director, Ashish Bhalla reportedly said that the company would invest in real estate projects in the national capital region and Coimbatore in mix use complexes, IT parks, residential and commercial areas.
The company also announced the launch of Spire Edge, an IT Park in Manesar near the national capital. Spire Edge is a 50:50 joint venture between MSL and A N Buildwell and the project is expected completion in next three years. Bhalla said that the company would invest $20 million in Spire Edge project in which, money might be raised from overseas apart from promoters’ investments, said the report.
Bhalla also said that the company foresees an investment of $1 billion investment in the next four years in the real estate sector and would build university-based townships. He further added that the company is in talks with various state governments as it wants to set up projects in public-private-partnership mode including setting up of university based township projects, added the report.

KOLKATA: The state government has granted to a proposal for granting SEZ status to the JSW steel plant project at Salboni with specific pre-conditions, in addition to which it has approved the acquisition of 3500 acres for Aerotropolis project containing a private airport and real estate at Andal.
The Cabinet sub committee on industry agreed to the proposal of granting SEZ status to the steel project on condition that the total area would be used for manufacturing and processing area. The investor would also sell in the domestic market enabling setting up of downstream area.

Millennium Spire Limited, an “Alternative Strategies Fund” under the U.K.-based Millennium Global umbrella, on Thursday announced its foray into the Indian real estate sector unveiling its maiden platform for developments in the Indian market, Spire World, a platform that would drive development of mainstream green projects of Millennium Spire in the country.

The unveiling of ‘Spire World’ also marked the launch of the company’s first “Mainstream Green” project in India, Spire Edge, a sprawling 1.6 million square feet of scalable eco-office complex with an energy saving capacity of up to 30%, costing Rs. 400 crore. It is a 50:50 joint venture between Millennium Spire and A. N. Buildwell, a company with over 25 years of experience in real estate development. The project would be located in the emerging IT hotspot, IMT Manesar along the Delhi-Jaipur highway.

Ashish Bhalla, Managing Director, Millennium Spire said Spire Edge offered a never before commercial advantage bringing better sense and viability to any office project. The uniqueness of the project is the design and infrastructural superiority.

Shriram Properties, the real estate arm of Rs 25,000 crore Shriram Group, would launch two separate subsidiaries to promote projects in retail and hospitality segments, a top official of the company said.

M Murali, managing director of Shriram Properties, said the company would develop 15 shopping malls and 70-80 budget hotels in the next 3-4 years period. Each mall would absorb an investment of Rs 250 crore while Rs 30-40 crore would be pumped in for each budget hotel.

Initially, the company would develop malls covering two million sq ft with a combined investment of Rs 700 crore in the cities like Chennai, Vizag and Kolkata.

He said, “we are looking at strategic partners who can also bring value to promote mall and hospitality projects.”

SS Asokan, executive director of Shriram Properties, said the company is in talks with global players to promote mall and hotel projects. Without disclosing identities, he said the company held talks with retail and hospitality giants in the US, Europe and Japan. The budget hotels would be promoted both in Tier I and Tier II cities.

In addition, Murali said the company also has plans foray into low-cost affordable housing segment in the near future. For the cities like Bangalore, he said the company would launch projects with housing units in the range of Rs 15 lakh per unit. For Tier II cities, budget homes would be in the range of Rs 10 lakh per unit.

He said the real estate market has already witnessd around 20% dip and it would decline by another 5-10% in the next 6-9 months, but it would pick up once election in the US and India were over in the next year. In the long term, he said the Indian real estate market is reliable. The company, which currently owns a land bank of 1,520 acres across the country, is developing projects covering 73 million sq ft.

As India continues its scorching pace of economic growth, many sectors that were not historically favoured by the government are gaining prominence. One such sector is real estate, which has a large employment generation potential and is a significant source of tax revenue. Additionally, this sector has attracted a large amount of foreign investment in recent times. Therefore, the government would do well to address the many complexities and ambiguities—on the indirect tax front—that the sector is facing.

Historically, the key indirect taxes that applied on the construction and real estate sector were works contract tax (now VAT) and stamp duty. With the expanding service tax net, various construction activities have been brought within the service tax net, notable among them being construction of commercial and residential complexes and renting of immovable property. The latest addition to this list was service tax on works contract, which was introduced in the last budget.

However, the amount of works contract tax payable, under both service tax and VAT, is anything but clear. The Supreme Court, in K Raheja Development Corporation’s case in 2006, held that if a developer enters into a contract for sale of a residential apartment before construction is completed, it would be a works contract.

If the agreement is entered into after the flat or unit is already constructed, this would be an agreement for sale of immovable property and not a works contract. Broadly, this was based on the reasoning that an agreement to sell a flat that is under construction is an agreement to construct a flat for the eventual buyer of the flat. An agreement to construct a building/ apartment is a works contract.

Although this judgment was in the context of the definition of the term ‘works contract’ under the Karnataka Sales Tax Act, the service tax authorities were quick to adopt the ratio and demand service tax on the labour portion of the ‘works contract.’

Sales of flats would anyway attract stamp duty and registration charges, which typically aggregate to 10% of the sale consideration. Before the Raheja case, the consideration passing from the buyer of a flat to the developer did not attract VAT or service tax. The Raheja decision deems this sale agreement to be a works contract if the flat is under construction.

As India continues its scorching pace of economic growth, many sectors that were not historically favoured by the government are gaining prominence. One such sector is real estate, which has a large employment generation potential and is a significant source of tax revenue. Additionally, this sector has attracted a large amount of foreign investment in recent times. Therefore, the government would do well to address the many complexities and ambiguities—on the indirect tax front—that the sector is facing.

Historically, the key indirect taxes that applied on the construction and real estate sector were works contract tax (now VAT) and stamp duty. With the expanding service tax net, various construction activities have been brought within the service tax net, notable among them being construction of commercial and residential complexes and renting of immovable property. The latest addition to this list was service tax on works contract, which was introduced in the last budget.

However, the amount of works contract tax payable, under both service tax and VAT, is anything but clear. The Supreme Court, in K Raheja Development Corporation’s case in 2006, held that if a developer enters into a contract for sale of a residential apartment before construction is completed, it would be a works contract.

If the agreement is entered into after the flat or unit is already constructed, this would be an agreement for sale of immovable property and not a works contract. Broadly, this was based on the reasoning that an agreement to sell a flat that is under construction is an agreement to construct a flat for the eventual buyer of the flat. An agreement to construct a building/ apartment is a works contract.

Although this judgment was in the context of the definition of the term ‘works contract’ under the Karnataka Sales Tax Act, the service tax authorities were quick to adopt the ratio and demand service tax on the labour portion of the ‘works contract.’

Sales of flats would anyway attract stamp duty and registration charges, which typically aggregate to 10% of the sale consideration. Before the Raheja case, the consideration passing from the buyer of a flat to the developer did not attract VAT or service tax. The Raheja decision deems this sale agreement to be a works contract if the flat is under construction.

If the principle in the Raheja case is uniformly applied to all new apartments that are constructed, there could be an additional 8% (4% due to VAT and 4% due to service tax) impact on the difference between the cost of construction and the sale price of the flats! This is a huge burden that would be passed on to the prospective purchasers of flats, sharply increasing the cost of purchase.

To ensure a steady cash flow and reduce financing costs during construction, all flats are sold while they are under construction. Therefore, this burden would fall on every new flat that is constructed. Further, the VAT authorities can demand back taxes for many years, limited only by the period of limitation prescribed under the respective states’ sales tax laws. The magnitude of this potential tax liability is quite staggering.

However, is an agreement for sale of a flat that is under construction really an agreement for construction of a flat? Or is it simply a financing arrangement, whereby the purchaser books a flat while it is under construction by the developer for himself as an entrepreneurial venture rather than on behalf of and under instructions from the buyer.

The gap in consideration between what the developer pays to the contractor (which is admittedly a works contract) and what the purchaser pays to the developer is clearly attributable to the value of land and the profit for the entrepreneurial risk taken by the developer.

If this amount is subject to up to an 8% additional tax, by considering this to be a works contract, it could almost finish off this industry just as it is about to take off! The sector is facing other disputes on taxability of lease rentals and credit available for inputs against service tax liability on lease rentals, but these are trivial as compared to the main issue on works contracts but also need clarification.

It seems that this industry is too important for the government to take a view that such issues should be left to the industry to sort out through recourse to litigation. Therefore, if the government takes a holistic view of the tax burden on this industry, it can enact appropriate measures to make the tax burden moderate, clear and easy to determine.

The Enforcement Directorate(ED), the agency responsible for investigating economic crime in India, has sought information from the Goa government on all companies that bought properties in the state between 2000 and 2007, as it investigates the role of a suspected Russian land mafia.
The agency suspects that some Indian companies that bought large plots in the state could have acted as fronts for Russian owners acquiring land in violation of the Foreign Exchange Management Act, or Fema, said a top enforcement official, who spoke on the condition of anonymity.
The directorate, which has been probing suspicious land transactions, has had little success in tracking such deals.
“Most of these cases are unreported due to the reluctance of state authorities to cooperate with our investigations,” the same official said. “We have asked the Goa government to find out the names of big companies that have bought land for promotion of tourism in Goa.”
Goa chief minister Digambar Kamat declined to comment on the issue in a telephone conversation. He also said a comment through email or fax would take time, citing the state assembly session that’s under way.
Goa, famous for its beaches, tropical biodiversity and a strong Portuguese influence on its culture and architecture, attracts a large number of foreign tourists every year who find it easier to blend in with the diverse local population than in any other Indian state. But parts of Goa have also acquired a reputation as a haven for drug dealers and land mafia.
Last year, CNN-IBN television news channel reported that the Russian land mafia had been throwing out small landholders and farmers, and grabbing prime land in fraudulent deals. Following reports of foreigners buying land in Goa in violation of Fema, the state government handed over details on 21 companies owned by Russian and the Reserve Bank of India, or RBI. nationals to the directorate
According to Ashutosh Limaye, associate director at the property consultant Jones Lang LaSalle Meghraj, increased vigilance over land deals by the police, forest laws and rules relating to coastal regulation zones have stalled land transactions in Goa now.
“The deal makers want to play it safe and are waiting for resolution of the ongoing issues,” he said.”The number of land transactions in Goa has definitely come down as a fallout of the land scam. Many deals, that were at the negotiation stage, have been stalled.”
Still, the “significant decline” in the number of land deals hasn’t led to a sharp fall in prices, which have remained stable, he said.
In May, the directorate issued notices under Fema to the promoters and directors of two companies—True Axis Resorts Pvt. Ltd and Artlibori Resorts Pvt. Ltd, owned by Russian citizens Leonid Beyzer and Valiulin Rashida, respectively, asking them why they should not be penalized. The other directors in True Axis are Pramod B. Walke and Fransico D’Souza, both from Goa.
Beyzer, who still lives in Goa had, in 2005, bought 25,000 sq. m of land, including 19,906 sq. m of prime agricultural land in Morjim, North Goa, for constructing a resort. He was in India on a tourist visa, according to the directorate.
Mint was unable to contact True Axis and Artlibori Resorts because their addresses weren’t readily available.
The directorate also sent notices to directors of another resort firm, Oriental Ambers Pvt. Ltd, only to find later that there was no office at the registered address. It has not been able to trace the local owners of Oriental Ambers either.

Pune: Twelve city-based real estate developers are in the dock with the income tax department for wrongfully claiming a 100% waiver, under 80-I-B10, on low-cost government housing schemes. The I-T department said these developers claimed false tax waivers worth Rs 65 crore, but declined to disclose the identity of the erring builders.

“We will be issuing them notices. We will give them a chance to present their case,” said chief commissioner of IT, Pune M Narasimhappa while speaking to the media.

The chief commissioner expressed concern on transfer of money by non-banking financial consultants through cash cards. “Thousands of crores are being transferred through this route. An assessment is on. There are many cards in the market such as ITZ and Don that are used for such transactions. The department wants to be intimated of such transactions and want it to come in the annual income returns,” said Narasimhappa.

He said that there is a slowdown in the market that is likely to impact tax collections in the Pune region. “Though there has been a 19.7% growth in the overall tax collections in August 2008 over the previous year, the collections have dipped this year because of market slowdown. Last year saw a 38 per cent increase in tax collections; but this year till August 11, it is just 19.7%,” he said.

Collections in 2006-07 that stood at Rs 2767.9 crore had touched Rs 3,312.4 crore in 2007-08. “Collections are likely to be 50% less this year, with a slowdown in the manufacturing and automotive sector in Pune,” he said.

The income tax department has also come out with the concept of a Champion Idea trophy contest for the officers and staff.

The idea is designed to invite, encourage and promote creative and innovative ideas in the fields of increasing the revenue, better services to taxpayers, staff welfare and administration.

DLF Ltd, India’s biggest listed property developer, has sought shareholders consent to raise up to one hundred billion rupees by selling shares to institutional investors.

The New Delhi-based company said in its yearly report for a shareholders meeting on Sept. 30 it estimated to complete the share sale within 1 year of getting shareholder consent.

“This is just an enabling resolution so that we can raise the money when we require,” a DLF spokesman said.

DLF had raised $2.25 billion in its initial share sale previous year. In July, the company said it would spend up to eleven billion rupees to buy back up to 22 million shares following a stock market slide.

The stock has fallen nearly 55% this year, compared with about 29 % drop in the main BSE index.

Insecurity in world equity markets has enforced the company to shelve a planned $1.5 billion initial public offer for its property trust in Singapore.

Housing Development and Infrastructure Ltd (HDIL), India’s third largest developer by market value, plans to raise Rs1,000 crore within a year to buy land and relocate 80,000 slum families for the Mumbai airport modernization project. The project will entail the country’s single largest rehabilitation exercise, even bigger than the Dharavi project, which will relocate 55,000 families.
With a land bank of 2,500 acres (valued at Rs21,000 crore in 2007), HDIL, which started off as a finance firm, is now one of the largest landowners in Mumbai, with residential and commercial projects in Pune, Kochi and Hyderabad.
The company’s forte, though, is slum redevelopment. After getting the state government’s approval this May, HDIL became the rehabilitation agency for the airport project in which 20,000 slum families will be shifted in the first go.
HDIL has bought a 53-acre plot in suburban Kurla, where the earlier Premier Automobiles Ltd factory was located, for Rs1,900 crore. The remaining 60,000 families would be moved in two phases, 30,000 families in each.
“We have some land reserve for the resettlement but, we will raise Rs1,000 crore through debt to buy more land in the vicinity of the airport to relocate the remaining people. We will buy land which is within 1Km from the airport,” said Sarang Wadhawan, managing director of HDIL.
HDIL, which has completed about 28 million sq. ft of construction, follows a business structure in which it acquires large tracts of land, develops the infrastructure and sells it to other developers. Out of the 276 acres of encroached land in the airport project, HDIL’s share is 106 acres.
“We are looking at a hospitality venture along with commercial space there. We will also develop and sell a portion of this land,” said Wadhawan. The remaining 170 acres will have to be handed over to the Mumbai International Airport Pvt. Ltd for commercial development, a joint venture between the GVK-SA consortium, which is developing the airport, and the Airports Authority of India. HDIL said it expects to earn Rs15,000-18,000 crore of revenue from the rehab programme.
HDIL is also planning to further expand its new businesses oil and gas, and media. It plans to set up a 150MW power plant on the Fiat land in Kurla which will have 40 residential towers to house the slum dwellers. HDIL is already building a coal-fired power plant on its 2,300 acre, multi-product SEZ in a Mumbai suburb, and a port there.
“The objective of expanding our power business is to facilitate our core business which is real estate. We are also looking at more acquisitions in the power sector,” said Wadhawan. The firm has bid for several oil blocks under India’s new exploration and licensing policy that will speed up oil exploration in the country.
HDIL’s most recent expansion plan is in the media and broadcasting space where it has picked up a stake in Sri Adhikari Brothers Media and Techocraft Media, that runs the Marathi channel Mi Marathi and news channel, Live India. Under HDIL Entertainment, a subsidiary of HDIL, it also plans to launch three multiplexes in suburban Kandivali, Goregaon and Bhandup in the next one year.
Akshaya Kumar, chief executive officer of Parklane Property Advisors, a Mumbai-based property consultancy firm, says that real estate developers stepping into new businesses is a fairly recent phenomenon. “Historically, only DLF had cement and power businesses which it later exited. Now, in a tight real estate market, many developers are attempting at new sectors with good potential by hiring expertise and using their network.”

The largest real estate company by market share DLF Ltd is planning to raise Rs 10,000 crore over the next one year. The shareholders will pass an enabling resolution to this effect in the next annual general meeting which will be held on September 30.

According to a DLF spokesperson, “This is a normal procedure to raise money. We need the shareholders approval to raise money. This process authorizes us to raise money upto Rs 10,000 crore.”

The real estate company may not raise the absolute amount. It may raise funds for a smaller amount. The resolution is valid for one year, until the next AGM takes place.

With a size of Rs 84,909 crore DLF is the largest real estate company in India. In July this year DLF said it would buy back up to 2.2 crore shares at a maximum price of six hundred rupees per equity share. It has allocated one thousand one hundred crore rupees for the purpose, and would be financing the same through internal resources.

The company is planning to buy the shares through open market purchases through the stock exchange route. The buy back of shares will help increase the earning per share (EPS). This will also lead to a reduction in the price earning (PE) ratio. A lower PE always pushes up the stocks. High stock prices always work to a company’s advantage when it wants to raise funds.

The buyback proposal follows a sharp dip in the company’s market value over the recent past, which saw its share price plunging to below the issue price of five hundred twenty five rupees, at which the company had sold shares to public about a year ago.

At one point of time, the shares were trading at over double the public offer, but it has dropped to less than half of the life-time high of One thousand two hundred twenty five, scaled on 15th January this year.

If DLF buys back the entire 2.2 crore shares as planned, the holding of its promoters, KP Singh and family, would rise to about 89.5% from 88.2%.

DLF is developing various projects in Gurgaon, Chennai, Indore, Rajarhat and Kochi.

Investing in the Indian real estate sector continues to grow, however the pace may be slowing just a little. Foreign developers as well as private equity funds remain bullish, long-term, on India’s property market.

Not only is investment flowing into the metro cities, but attractive real-estate deals are also being negotiated and signed in ’second-tier’ cities such as Indore, Jaipur and Cochin.

From a foreign investor’s perspective, the recent correction in real estate prices in some parts of India is good news in that it could result in land being available at attractive values.

But although Indian property may make an attractive investment for foreign investors, it is important that they address some of the regulatory issues prior to making an investment.

According to India’s current foreign direct investment (FDI) policy, 100% FDI is allowed under the automatic route – that is, without requiring government approval – for the construction and development projects that include housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional-level infrastructure and townships.

But this is subject to certain conditions:

• Minimum area for development under each project should be:

i) 10ha in the case of services housing plots; or

ii) 50,000 square meter in the case of construction development projects.

iii) In case the project is a combination of the two, any one of the two conditions would have to be met.

• Minimum capitalisation of 10 million US dollars for wholly owned subsidiaries and 5 million US dollars for joint ventures with Indian parties.
• The funds have to be brought in within six months of commencement of business of the company.
• The original investment is subject to a lock-in period of three years from the completion of minimum capitalisation.
• At least 50% of the project must be developed within a period of five years from the date of obtaining all statutory clearances.
• Investors would not be permitted to sell undeveloped plots.

Though the investment policy seems straightforward, investors still need to address some key issues and comply with other regulatory requirements.

For example, when it comes to funding, India’s exchange control regulations permit external commercial borrowings (ECBs) – that is, commercial loans in the form of bank loans, buyers’ credits, suppliers’ credits, and loans from shareholders.

There are several restrictions on the end use of ECB funds. One of these is that the proceeds of ECBs cannot be used for the purpose of acquiring real estate in India. Accordingly, ECBs cannot be used for real estate development in India.

Preference shares are also considered as ECBs and, likewise, cannot be used to invest in a real estate project in India.

The only exception is the use of compulsory convertible preference shares or fully and mandatorily convertible debentures, which would be treated as part of equity and would be considered as FDI.

Therefore, apart from pure equity funding, only compulsory convertible preference shares and fully and mandatorily convertible debentures can be used. This would tend to minimise the options available for funding a project in India because all funds would have to be in the form of equity or instruments which can be converted into equity.

As per the FDI regulations, a foreign investor’s original investment ‘cannot be repatriated before a period of three years from completion of minimum capitalisation’.

Emerging markets property developer Plaza Centers NV said it has signed a joint venture contract with Israel-based Elbit Imaging for developing three projects in India.
The three projects are in the three Indian cities Bangalore, Chennai and Kochi and would have a combined development budget of about 3.4 billion dollars, Plaza said in a regulatory filing to the London Stock Exchange.
As stated by the contract, Plaza would acquire a 47% stake in Elbit India Real Estate Holding Ltd, which already owns around 50-80% stake in the three projects along with local Indian partners.
Three projects, which are in the stages of planning and design, are likely to start in 2009.
“Through this joint venture, Elbit and Plaza are set to take advantage of India’s flourishing economy and thereby mark a new era of growth for Plaza,” company CEO Ran Shtarkman said.
He also added that there is a huge demand in India for high-end residential accommodation, five and four star hotels and western style retail complexes.
“We look forward to meeting some of this demand with the delivery of these large projects, and we will continue to look for parallel opportunities in the future,” Ran Shtarkman said.
The joint venture’s voting rights would be split 50:50 between Elbit and Plaza. Further, Plaza would pay a small amount to the joint venture for a stake.
According to the filing, the JV would also look for development opportunities for large scale mixed use projects in India, predominantly led by either residential or office schemes.
“In addition, Plaza will continue to develop, manage and look for new opportunities for shopping centers based projects in India independently of the JV,” it added.

After delivering more than 11,000 residential flats and a number of commercial establishments in Pune, Goel Ganga group is on a major expansion mode.
The group is all set to deliver 10,000 flats within next three years in prominent cities like Bangalore and Mumbai along with Pune at an estimated investment of Rs 5,000 crore.
The group has also entered hospitality sector with three hotels coming up in Pune and Bangalore.
Goel Ganga Managing Director Atul Goel, while addressing a press conference on Friday said, “Over next three years, we will deliver 5 million square foot of residential and commercial space in Bangalore, Mumbai, Nagpur and Pune together. We have recently completed 25 years in real estate sector and now, we have major expansion plans in hospitality business as well.”
The group has announced three residential projects in Pune namely Ganga Bhagyoday, Greater Ganga Panama and Ganga Skies, which all will deliver more than 600 flats each along with commercial complexes and a 6-screen cinema multiplex.
The group’s ambitious project in Bangalore will deliver 40 super luxurious villas worth Rs 5 crore each.
“We are setting up Eastern Randezvous hotel in Pune while The Lemon Tree hotel is already operational in Bangalore. Construction of a 10 lakh square foot shopping mall in Nagpur too is going on,” he added.
Goel stated that the group plans to invest Rs 5,000 crore over next three to four years in its various projects.

Three large realty firms have placed bids to build and operate stretches of national highways that have come up for auction this year as part of expanding their portfolio to offset a slump in their core business. Unitech Ltd, DLF Ltd and Omaxe Ltd are among several infrastructure companies bidding for the right to build and operate national highway stretches that are currently being offered by the National Highways Authority of India, or NHAI, the regulator for inter-state highways.
The projects they are bidding for are part of the national highway development programme, or NHDP, which aims to upgrade more than 33,000km of highways, according to an NHAI official, who didn’t wish to be named.
The real estate sector in India has seen a slowdown in recent times as it has become expensive for developers to borrow money, with Reserve Bank of India raising the repurchase rate overnight lending rates to banks to a seven-year high of 9% last month.
In the past three years, property prices in some markets such as Gurgaon in Haryana and Noida in Uttar Pradesh adjoining the national capital have jumped by 100-200%, deterring home-buyers from investing in properties. As a result, realty firms are finding it tough to sell residential properties that typically contribute 50-70% to their revenues. DLF, Unitech and Omaxe have a large chunk of their residential and commercial projects in these places.
The Union government estimates that India needs at least Rs20 trillion in infrastructure investments in five years, at least a third of which it expects to come from private firms.
While DLF, the country’s biggest realty firm by market capitalization, announced an infrastructure development partnership with Gayatri Projects Ltd earlier this year, Omaxe partners with Hyderabad-based GVK Industries Ltd and Nagarjuna Construction Co. Ltd on a project-to-project basis.
Unitech, which has built highways on a turnkey basis (building roads for a fee), is now bidding for projects that allow the concessionaire who wins the bid to operate and derive revenues from the highways for a specified period. Its revenue from the construction business was Rs213.01 crore for the year to March.
A concession agreement, which governs national highways, doesn’t allow developers to commercially exploit land along the highways they operate, although such land is considered prime property.
Some analysts say, for real estate companies, bidding for national highway projects could be a way of building their portfolio so they would be able to bid for state highways or the so-called ring roads around cities, many of which have land development components.
“You don’t need a land development component. If you know how to execute your project well, then you can make money upfront, rather than wait for toll revenues,” said Amrit Pandurangi, who heads the infrastructure practice for consulting firm PricewaterhouseCoopers.
Calling investing in infrastructure the latest fad, Subhash Bedi, director at Red Fort Capital Advisors Pvt. Ltd, an India-focused real estate fund, said infrastructure investments made sense for real estate companies because of a “synergy of skill sets, construction skills and project management skills.”
“What real estate companies are beginning to understand is that land is not a store of value. In the case of a lot of real estate companies, they are asset-rich and not cash flow-rich… In infrastructure projects, you get a steady cash flow,” said Ashish Kalra, managing director of Trikona Capital Plc., which manages over Rs4,300 crore in infrastructure and real estate assets in the country.
“We have project management expertise and have done highway construction contracts in the past,” said Unitech’s executive vice-president M.K. Aggarwal. “When totally unrelated industrial groups are bidding, why can’t we?”

Provident Housing and Infrastructure Ltd, the wholly owned subsidiary of Bangalore-based real estate company Puravankara Projects Ltd, is in talks with four overseas private equity funds to raise about seven hundred fifty crore rupees to acquire land for its affordable housing projects, a source close to the development said.
“Total project cost is eight thousand crore rupees. Of this, seven hundred fifty crore rupees will be raised through private equity funding at the project level. While one is an Asia-based fund, the remaining three are from the US,” he said.
Provident Housing and Infrastructure announced that it will invest a total of eight thousand crore rupees in seven affordable housing projects spread across Bangalore, Chennai, Hyderabad, Coimbatore and Mysore in the first phase.
The company plans to raise the remaining seven thousand two hundred fifty crore rupees through a mix of internal accruals, debt and customer advances. He also said that the company could dilute between 30-40% stake in each of the affordable housing projects. In the second phase, the company plans to take its low-cost housing projects to Delhi, Kolkata, Kochi, Jaipur, Pune and Nagpur.
Increasingly, real estate developers are foraying into the affordable housing segment in a bid to offset the slowdown in sales of mid-income and high-end apartments.
“In the last 6-12 months, there have been negligible sales in the high-end residential segment. Developers are eyeing the low-income segment as it is also a volumes game,” an analyst at a domestic brokerage said. In May, Delhi-based Omaxe had pronnounced investment of Rs eight thousand crore rupees to build around ten lakh low-cost houses over the next ten years. presently, Puravankara Projects has a land bank of over one hundred twenty five million square feet.
Nearly 65% of the company’s land bank is in Bangalore. It is developing twenty million sq ft of residential and commercial projects.
In a July report, Citigroup Global Markets had downgraded its rating on the Puravankara stock to “hold” from “buy” and cut the price target to Rs 212 per share from Rs 358.

The explosion in commodities and retailing will result in Indian warehousing sector increasing at the rate of 35% to 40% yearly to become fifty-five billion dollar industry within three years.

By that time the country would have about forty-five million square feet warehousing space and more than a hundred logistics parks.

As said by the report by real estate consultancy Cushman and Wakefield, Warehousing activities account for about 20% of the total Indian logistics industry and offer incredible growth potential. The turnover of warehousing was twenty billion in previous financial year. Report says, “From a mere combination of transportation and storage services, logistics is fast emerging as a strategic function that involves end-to-end solutions that improve efficiencies”. It is further stated in the report that real estate sector is also set to witness rapid growth following the setting up of warehouses in different parts of the country.

Realty firm Raheja Developers said it would invest about four thousan five hundred crore rupees to develop an engineering SEZ in Gurgaon over the next three to five years.
This project, which is expected to create job opportunities for around fifty thousand people (including both direct and indirect) is said to have a potential to generate yearly exports of one thousand crore rupees.
According to Navin M Raheja Raheja Developers Chairman “This is the first notified engineering Special Economic Zone (SEZ) in the northern India. The project cost to develop this two hundred fifty five acre SEZ is about four thousand five hundred crore rupees,”.
The investment would be funded through a mix of debt, equity and internal accruals, he said. “We are also looking at the strategic investors,” Mr Raheja added.
Informing on the land acquisition process Raheja informed that out of the total two hundred fifty five acre, about sixty per cent has been purchased while in the rest of the forty per cent the company has entered into partnership with landowners.
“We are going with the willing partnership of the farmers by paying them competitive prices for their lands. Incase the farmers are still reluctant to sell their lands, we have an option where the landowner can give his land on lease and in return can expect an income of around Rs 2-5 lakh per month, which is much higher with respect to what a farmer would normally earn on an equal stretch of land,” Raheja said.
When asked to comment on the amount of pressure, the growing number of SEZs will put on the limited agricultural land, Mr Raheja asserted that it is not SEZs, but low productivity of agricultural produce, that is an obstacle in the country’s pursuit of producing sufficient food grains.
Raheja, explaining on their SEZ project, said, the first phase of the project that involves the notified two hundred fifty five acre would be completed over the next 3-5 years. The company plans to expand the size of SEZ project and is in talks with landowners.

With the city’s real estate market being dominated by smaller and unheard of players whose actions could fright away prospective buyers, the bigger players are joining hands to give a professional touch to the realty business. “We need to bring in additional people who are properly trained agents. This can be achieved by having a proper course to train real estate agents,” Puravankara Projects Limited (PPL) director Ashish Puravankara said during an interaction with the media here on Thursday.

The move, in a way, would decrease poaching in the sector. “At present, the industry is being steered by those who have been backed b almost40 years experience in the field. The real estate companies mainly pick employees from other companies in the absence of formal training schools. It is high time we have formal training for those entering the industry.” Puravankara said.

The PPL will pressure the Confederation of Real Estate Developers Association of India (CREDAI) to roll out such training programmes, besides interacting with international experts on real estate.

PPL lately invited research specialist from Real Estate Institute of New York University to study the possibilities of identifying Bangalore as a key competitive city in the global economy.

Pointing to the happenings in Bangalore’s realty market, Puravankara said: “The demand for housing has not gone down in the current times in the backdrop of the global slowdown, but people have delayed their buying plans. With professionals around, these buyers could be converted.”

Agreeing with him, Pamela Hannigan, a research expert and member of Real Estate Institute of New York University, said “Students can lift up the capacity to navigate virgin territory through formal training and that will change the dynamics of the real-estate sector.”

Thiruvananthapuram: The Kerala Pradesh Congress Committee (KPCC) alleges that the current controversy over Special Economic Zones (SEZs) in the State has its roots in the schism in the ruling Communist Party of India (Marxist), with one section showing undue haste in getting them cleared to help certain real estate companies.
The KPCC executive committee, which met here on Sunday, discussed the SEZ controversy among other issues and decided to come out with a statement reiterating the party’s policy perspective on the topic. KPCC president Ramesh Chennithala explained the party’s stand on the issue at a press conference after the meeting.
The committee felt that the controversy in the CPI (M) and the Left Democratic Front (LDF) it led was uncalled for. The LDF government had already cleared SEZs in several places in the State focusing on sectors such as Information Technology and neither the Communist Party of India nor Chief Minister V.S. Achuthanandan had found fault with the policy when it was mooted.
In a note circulated at the meeting, Mr. Chennithala, laying out the party’s policy, said a majority of the 21 applications before the government seeking SEZ status were from real estate groups and builders whose main objective was to construct apartments and allied facilities.
Listing out the names of the companies, Mr. Chennithala said in his note that the Industries Department had forwarded the applications of some of these companies to the Chief Minister’s office without proper spadework and by exempting them from the mandatory government clearance. And the proposals were sent for Central clearance without a discussion in the Cabinet. Most of the companies had exaggerated their investments in the SEZ and many involved farmlands, the note said.
Later at a press meet, Mr. Chennithala said the Chief Minister had now opposed the SEZs not because of ideological differences but because his party’s State committee had sought to corner him politically.The KPCC president said the Congress stance had been clarified by party president Sonia Gandhi at the Nainital All India Congress Committee session.

Investors who want to take advantage of growth in the domestic real estate sector can draw strength from DLF’s impeccable delivery record and scale of operations.

A prominent player in the National Capital Region (NCR), DLF is the largest listed realty company in India. Besides being present in homes, offices and shopping mall segments, it has added hotels, infrastructure and special economic zones (SEZs) divisions to its portfolio.

With land reserves of over 16,000 acres spread across 32 cities, the company has delivered 224 million square feet of completed development since 1949. While residential projects contribute around 65% to its revenue, retail and commercial projects account for the remaining 35%.

After dominating the luxury housing market, the company has now shifted its focus to mid-income housing projects. DLF plans to shift the focus of its product portfolio from residential to commercial and retail projects. Around 46% of future development is expected to take place in metros (Chennai, Bangalore and Kolkata) and another 33% in super metros (Delhi and Mumbai). This will help in maintaining its premium pricing policy.

DLF has shown phenomenal growth in sales, as well as profit. With the real estate industry growing at 30%, DLF has been one of the star performers in this sector. Its sales have witnessed a compound annual growth rate (CAGR) of more than 95% over the past three years, while its net profit has seen an over threefold growth during the same period. However, it needs to be noted that sales growth is largely on account of increasing receivables.

The company has a strong asset portfolio with accruing leasing income. Tax sops in IT SEZs make them most lucrative for builders. DLF is expected to benefit significantly, as it has more than 20 million square feet under IT-SEZ construction. Also, the company will not be able to maintain its premium price when more projects come on stream in the NCR, its core region of operation.

Foreign players find it worthwhile to buy small stakes in individual projects of large developers in India, rather than buying out companies. DLF has managed to secure Rs 1,675 crore of private equity (PE) in seven of its group housing/township projects. Around 49% of its stake was diluted in favour of Merrill Lynch and Brahma Investments in the beginning of this year.

This came at a time when the real estate industry was going through a bad phase. Though small developers are still finding it difficult to finance their projects, DLF seems insulated from this risk by its sheer size in the industry. The company also plans to list its real estate investment trust (REIT) in financial year 2009 and raise funds to finance DLF Assets (DAL)’s purchases.

The trend in the real estate industry has changed from amassing land banks to exhibiting delivery capability. DLF has entered into several strategic tie-ups with international companies. The list includes Lang O’Rourke for construction, WSP for design and engineering, Feedback Ventures for project management, and Dubai-based Nakheel for SEZ development.

A key catalyst for the company will be DAL’s ability to consistently raise funds to buy commercial assets from DLF. With the shift in the company’s focus to commercial and office segments, this can also be made available for listing through a REIT, once DLF gets regulatory approval.

The company currently has large projects under execution. Timely delivery of these projects will be a key concern. Moreover, on the financials’ side, the company has a high level of receivables that may impact its cash flows, which are stretched as of now. Also, delay in raising funds for DAL can impact DLF’s topline in future.

Kolkata: Although bullish about the investment opportunities in the state, Mahindra and Mahindra Limited does not have any immediate plan to invest here through its regular brands. Any investment here will rather be in the real estate and IT sectors, Mr Anand Mahindra, vice-chairman and managing director of Mahindra and Mahindra Limited said.
He was speaking on the sidelines of a programme organised by the Ladies Study Group at a city hotel.
“Investment in IT and real estate through our group companies like Mahindra Life Space and Mahindra World City will probably be our flagship ventures in the state,” he said.
While Mahindra Life Space deals mainly with developing residential areas, Mahindra World City Developers Limited focuses on setting up SEZs.

Office rental prices are unlikely to see any major fall across the country’s three major business hubs National Capital Region, Mumbai and Bangalore even as the commercial realty markets in these areas are expected to witness a significant surge in supply, a leading real estate consultancy firm said.
While Bangalore is expected to witness further rise in the average office rentals, those in Delhi and adjoining areas like Gurgaon and Noida as well as Mumbai are expected to remain mostly flat in the short to medium term, CBRE said in its latest office market review for Asia-Pacific region.
Only certain small pockets in National Capital Region (NCR) and Bangalore could see a correction in prices in the near future, while any downward correction is very unlikely across Mumbai region, it said.
“The National Capital Region (Gurgaon and Noida) is expected to witness flattening trend in rentals over the short to medium-term,” CBRE said.
“However, some micro-markets with forthcoming supply is likely to experience a marginal value correction in the next six months,” it said, adding there would be significant additional supply in Gurgaon, Noida and Jasola in South Delhi.
CBRE noted that in preparation for hosting the Commonwealth Games in 2010, rigorous efforts have been made to improve infrastructure all across the NCR.
For Mumbai it said, that with over one million square feet of corporate office supply currently available and another nine million square feet ordinary office space expected to come online in the next two quarters, rental values are likely to remain stagnant.
MPC Energy Buys Equity In Phoenix Mills SPVs
MPC Energy, a JV between Germany-based MPC Capital and Switzerland-based Synergy Asset Management, has invested Rs 1,300 Crore in the purchase of equity in special purpose vehicles floated by Phoenix Mills, a real estate developer. 70% of the investment is expected to be used for fifteen projects that are in development stages, while the remaining 30% will be used for six additional projects that are in the pipeline.
The purchased equity stakes that range from 10% to 49% in value will be picked up 21 projects promoted by Phoenix Mills and its subsidiaries, Entertainment World Developers and Big Apple. Each project is foreign direct investment (FDI) compliant and a separate corporate identity (SPV). The developments will be located in tier I and II cities like Mumbai, Chennai, Bengaluru, Jabalpur, Udaipur, Raipur, Chandigarh, Pune and Indore.

HCC Real Estate Ltd (HCCREL), the real estate arm of construction major Hindustan Construction Company (HCC), is in the process of entering into large size land deals. The plots, aggregating 1,550 acres in various parts of India, will be used to develop townships.
HCCREL is planning to invest a thousand crore rupees in the initial phase of the project this financial year. Funds will be raised through HCCREL’s forthcoming IPO, Rajgopal Nogja, its president, said.
According to Nogja, “We are acquiring thousand acres of land in Nashik apart from 300 acres in Thane in Mumbai and about 250 acres in Pune. Plans are on the anvil to enter into land deals in markets such as Panvel, Kolhapur and Nagpur as well.”
Apart from this, HCC Real Estate is also planning an eighty acre slum rehabilitation scheme in Vikhroli East in Mumbai.
The company is currently engaged in constructing two million square feet IT park in Vikhroli. Nogja said, “The IT park will be a world class construction with gold rated LEED certification for green buildings. It will be ready for occupation in 2009. We hope to achieve very good valuation once the project is completed.” He informed that Future Group’s Pantaloon and Orange have already leased almost 30% of the park christened `247 Park’.
Meanwhile, Oxford University has agreed to set up executive education facilities in Lavasa, the hill station being developed by HCCREL in Lonavla, Maharashtra. In addition, Girls Day School Trust of UK and Christ College, Bangalore will also set up their campus in the hill town; MoUs have been signed to this effect. While most of the infrastructure is ready for phase I of Lavasa, the construction of villas and apartments is in full swing. HCCREL has registered pre-sales of Rs 494 crore in the 2007-’08 financial year for the Lavasa project, against a target of Rs 99 crore.
HCC Real Estate is looking at setting a second Lavasa hill station project in Gujarat, on the lines of the one at Lonavala, said Nogja.