Monthly Archives: April 2012

What Housing when India’s Realty Sector Data is an Opaque House

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The Other day, I was reading a blog entry about housing prices and interest rates on the website of The Economist magazine. The data on which the blog was based included a long (20+ years) history of housing prices in the UK and the US. In the US, for example, the house price index with a base of 100 in 1988 had risen to a peak of about 320 in 2006 and is now down to about 220. In the UK, a similar index started at 100 in 1995, hit about 370 in 2007 but is down only to 320 yet. The post went on to examine why US housing prices have crashed so much more than the UK.
In India, no matter how much you want to, you cannot do any analysis like this because the data does not exist. Despite the centrality of real estate prices in the economy, as well as in the lives of people, these are an almost completely opaque part of the Indian economy. This is all the more galling because with financial savings less developed than the western countries, real estate (along with gold) is a much bigger part of people’s savings.

Whether you are a researcher who needs a couple of decades worth of broad data, or an individual who needs a price map of a particular kind of unit across an area, you are pretty much on your own. This lack of quality information has huge consequences. In any kind of exchange, it skews the advantage towards the larger and more organised side. As an individual, whether you are buying or selling, you’ll start with a scramble for information and will eventually have to make do with whatever is handed to you by people who are on the opposite side.

While the broader picture might eventually become clearer when the National Housing Bank’s Residex index builds up a long enough history, individuals will probably be faced with an information disadvantage unless someone has some ideas about filling this gap.

ASK group plans to fund in Indian Real Estate Projects

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Real estate fund house ASK Property Investment Advisors has said it is planning to fund to invest in Indian real estate projects.

The company has already committed $40 million (Rs 200 crore) out of its second domestic fund. It has formed a subsidiary in Singapore that will be raising this offshore fund. To be launched in July, the ASK Real Estate Special Opportunities Fund plans to invest in projects with a completion cycle of three-four years.

“We are a domestic fund and are constantly looking for opportunities in the domestic markets. Developers are constantly scouting for investments to buy land. We have so far deployed funds in ten investments,” Mr Amit Bhagat, Managing Director and CEO, ASK Property Investment Advisors, said.

The average investments will be to the tune of Rs 75-125 crore. The second fund will invest in mid-sized development projects in key cities such as Delhi-NCR, Mumbai, Pune, Bangalore and Chennai. The ASK Group had raised its first domestic fund of $75 million in 2009. It was also targeted at residential segment. “We have committed 100 per cent of the first fund,” he added. Industry sources note that realty focussed funds pan-India are looking to rise over $5 billion from both domestic and offshore markets.

DLF gains profit much after Goldman Sachs upgrade

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Reuters Market Eye – India’s biggest real estate developer DLF (DLF.NS) rose 3.2 percent to 188.10 rupees after Goldman Sachs upgraded its rating on the stock to “buy” from “neutral” and raised its 12-month target price to 264 rupees from 252 rupees.

Goldman cited a pickup in residential launches, a recovery in commercial property, easing interest rates, and improved outlooks for asset sales as well as for operating/financial leverage as reasons for upgrade.

DLF’s share price is down 0.5 percent for 2012 while the BSE Sensex is up about 11 percent in the same period.

The upgrade has come close on the heels of DLF’s removal from the Sensex, which will come into effect from June 11.

India: ICICI Bank eyes growth after strong Q4

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ICICI Bank, India’s No. 2 lender, posted on Friday a larger-than-expected 31 percent rise in quarterly profit and forecast a higher growth rate for domestic loans and stable asset quality for the coming year.

Loan demand in India is expected to pick up after the central bank last week cut its benchmark lending rate for the first time in three years to help revive sagging economic growth. The Reserve Bank of India has projected loan growth for Indian banks for fiscal year 2013 at 17 percent against 16 percent in the previous year.

ICICI expects its domestic loans to grow 20 percent in the year that began in April from 17 percent last year, driven by demand from companies for working capital, home and car loans, Chief Executive Chanda Kochhar told reporters.

“These numbers may give us comfort to keep what we have (but) we don’t have any particular plans to increase our stakes. We have concerns about the India story in general,” said Olsson Jan-Olov, portfolio manager of Carnegie Emerging Markets at Sweden, which owns ICICI shares.

“We have been a little hesitant towards increasing positions in India due to the overriding political and macro economic situation.” Earlier this week, Standard & Poor’s cut India’s credit rating outlook to negative from stable on hefty fiscal and current account deficits and political paralysis in Asia’s third-largest economy.

The negative outlook jeopardises India’s long-term rating of BBB-, the lowest investment grade rating. Indian banks are actively easing terms on loans for companies, as high interest rates and an economic slowdown has hurt the ability of some to repay loans on time. Power, textile, aviation, construction and real estate are the hardest hit sectors.

ICICI, which is also listed in New York and competes with State Bank of India and HDFC Bank, sees a “very small” and “minimal” pipeline for corporate debt restructurings, Kochhar said.

Commercial Realty Offers Big Opportunities in Mumbai

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The number of high net worth investors (HNIs) and corporates seriously looking to invest in Indian office space has increased manifold in the last few years. Mumbai continues as India’s numerous office space investment destination, with companies from all over the world unerringly zeroing in on the financial capital.

As South Asia’s only true financial hub, Mumbai is among India’s best places to invest in commercial real estate. In times of global economic uncertainty, investors flock to markets that have consistently proved their long-term stability and fundamentals.

In a scenario wherein institutional investors are showing reduced preference for commercial real estate in their portfolios, Mumbai continues to present HNI and corporate investors with myriad growth opportunities in office properties. However, the multitude of options also gives many enthusiastic investors heartburn -where on Mumbai’s vast and complex map are the low-risk/high returns locations?

Today, Mumbai as a city for commercial space investment reveals a high rate of vacancies in many locations. The rental yields in these micro-locations are expected to decrease marginally over the next 12 months.

While this seems to present a depressing scenario on the surface, the fact is that we are now looking at the bottom of the curve. In other words, these markets are expected to bottom out over the next one year and will consequently start to move up again. These locations have significant long-term capital value appreciation potential, and well-informed investors are keeping a close eye on them.

Report: DLF in talks to sell Mumbai land

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DLF, India’s top-listed realtor, is in talks with three Mumbai-based real estate companies — Lodha Developers, Runwal Group and Sheth Creators, to sell a piece of land in central Mumbai, according to a report on Friday.

While DLF is seeking a valuation of 30 billion rupees ($571 million) for the 6.8 hectare property, the potential buyers are negotiating at between 20 billion and 22 billion rupees, the newspaper said, citing an unnamed person.

“Even as all the parties had talks with DLF, the developer is yet to make up its mind, as it is expecting higher valuations,” it quoted the person as saying.

DLF bought the land for 7.02 billion rupees in 2005 from state-owned National Textile Corporation.

Abhisheck Lodha, managing director of Lodha Developers, said the company was not in talks with DLF while an executive at Runwal group also responded in the negative, the paper said.

DLF does not comment on market speculation, the company’s spokesman told.

Hyderabad: 3rd most affordable office location in 2011

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Hyderabad has emerged as the world’s third most affordable office location in 2011 in a list prepared by global realty consultant DTZ, which has also named Chennai and Pune among the top five such positions. According to DTZ’s latest study ‘Global Occupancy Costs – Offices’, Surabaya in Indonesia and Qingdao in China were placed in the top two positions of the chart as the most affordable office locations in the world last year.

“While Tier II cities in India and China dominate the list of top 10 most affordable markets globally, Surabaya in Indonesia remains number one,” DTZ said in the report. The consultant said Hong Kong, London, Geneva, Tokyo and Zurich were the five most expensive office markets in 2011.

DTZ said Surabaya and Qingdao saw average rentals of $ 1,680 and $ 2,380 per workstation a year, respectively in 2011.
Hyderabad, Chennai and Pune followed the top two places with rentals of $ 2,430, $ 2,570 and $ 2,590 a year per workstation respectively, it added.

The study showed that Hong Kong was costliest office place with an annual rental of $ 25,160 per workstation in 2011, followed by London and Geneva at $ 22,590 and $ 18,740, respectively. DTZ, however, said many cities across the world are likely to witness decline in their rentals during this year.

“Under the downside scenario, 2012 offers occupiers a window of opportunity in which to realise cost savings as rents decline… In the top five least affordable cities of Paris, Tokyo, Geneva, London and Hong Kong, office rents fall in 2012 under the euro break-up scenario,” it added. Occupiers in Rome and Milan are likely to benefit from falling occupancy costs over the next five years as sharp decreases in rents are expected in 2012 and 2013, DTZ said.

It further said office rentals in low-cost Indian cities may see double-digit falls in this year.

Property prices in Coimbatore may get hike

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The jump in land, materials and labour costs has pushed property prices up by 25%-30% per cent and slowed the growth of the real estate sector in Coimbatore in the last two years. Property developers in the city believe that if the real estate sector has to grow at pace similar to that of Chennai, which despite the global economic slowdown, registered a steady growth quarter after quarter, as per the residential price index brought out by the National Housing Bank, the government has to develop infrastructure facilities, promote industries and improve water bodies.

“There is not much space left for property developers inside the city. All construction activities are moving towards the suburbs,” said V Subramanian, president, Confederation of Real Estate Developers Association of India (CREDAI), Coimbatore. However, land prices have increased in the outskirts in the past two years. The cost of material and labour is also on the rise. This has seriously affected the middle income group, which is the major segment that invests money to buy property. Property developers have been forced to pass the cost increase burden on the people, which have slowed down the market.

“Land costs have increased four-fold in Coimbatore, which is causing major problems for developers,” Subramanian said. Cement, which was costing Rs 190 a bag a year ago, is now available for Rs 300. Steel prices have increased from Rs 38000 per tonne to Rs 60000 per tonne now. Developers are struggling to control their costs and boost sales. Omkar Sankar, director, Sankar Foundation, said there is huge demand for affordable and low-budget houses in Coimbatore. But the jump in prices of affordable houses is now becoming a cause for concern, he noted.

Flats that were sold for Rs 4500 per sq. ft. in Ramnagar area are now being sold for Rs 6500 per sq. ft. Similarly, in areas like Vilankurichi, Thondamuthur, Vadavalli, which are outside the city, costs have moved from Rs 2300 per sq. ft. to Rs 3500 and more. Though the recent lowering of interest rate by banks may bring some respite, developers are still in a wait and watch mode. The situation in Coimbatore is different from Chennai, which is well connected with infrastructure facilities even in far-off areas.

There is a huge demand for housing in Coimbatore and in the next few years there would be at least a demand for 1 lakh housing units, said P Karthikeyan, Chief Executive Officer, Trishul Shelters Private Limited. However this would require good connectivity and infrastructure development in the suburban areas, which is lacking now, he said. Besides the developers have to look at ways to keep costs down by adopting innovative methods and different technologies, he noted.

Affordable Housing Investors finds RBI Rate Cut a Boon

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The recent move by the Reserve Bank of India (RBI) in its annual Credit Policy has given some hope for investors in the affordable housing segment. This is being seen as a positive development for the overall property market. While investors remain cautious and wait for banks to announce the lowering of interest rates, realtors are optimistic of the scenario, however, hoping that inflation remains under check. “While the rate cut of 50 basis points is definitely a ray of hope, it does not dispel the shadows nearly as much as may be initially supposed. It should be borne in mind that the Reserve Bank of India (RBI) has hiked interest rates 13 times between March 2010 and October 2011,” says Om Ahuja, CEO – Residential Services, Jones Lang LaSalle India.

“While this is understandable, given the on-going concerns over inflation and liquidity in the market, the spate of rate hikes has created a compounded problem for the residential real estate sector. The series of hikes in the past have also affected the price that builders put on their properties, since their own costs of borrowing have increased. It is unlikely that property prices will come down because of this rate cut. In fact, it is very likely that there will be an upward bias on property rates because of the anticipated improvement in sentiments of buyers who have so far been sitting on the fence, waiting for some signals of relief,” adds Ahuja. Shrinivas Rao, CEO, Vestian Global Workplace Solutions says the reduction in repo rate will boost economic growth and improve business sentiments which in turn will strengthen buying activity. However, the impact will vary across sectors depending on implementation of the cut by leading banks.

“Leading lenders are likely to cut interest rates on deposits and loans. Home loans are likely to turn cheaper. For instance, a 25 basis point cut could lower home loan EMIs by Rs 16 per Rs 1 lakh. A cut in the repo rate will also reduce the interest on commercial loans which in turn will favour developers to avail cheaper loans, thereby providing traction to real estate activity. Cheaper loan rates are expected to attract more end-users, impacting the residential sales positively,” he says.

With banks offering loans at cheaper rates, developers are likely to prefer the bank loans as against private equity funds. However, an increase in market demand in the short term will drive capital values, thereby benefitting retail investors, adds Rao. According to Ganesh Vasudevan, Vice President and Business Head, IndiaProperty, the cut of 50 basis points by the RBI is a move that will have a positive effect on the real estate segment.

Indian Real Estate Market Among the Most Lucrative Sectors for NRIs

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Indian real estate market is one of the most lucrative sectors for Non-Resident Indians to invest their foreign money. Moreover, this trend will continue for more 4-5 years as the consumption story of Indian real Estate market is not going to get over in near future leading to immense commercial growth prospects that in turn increase the demand for real estate. Although Indian Realty market is facing downfall, it is not correct to say that all cities are experiencing the same situation. It has been observed that some of the cities in India always have good chances of investment and these cities even in worst circumstances would be able to provide good investment returns. One more factor that attracts NRI’s to invest in India is the bigger geographical area. Unfortunately, NRI’s put their money into property prevailing in big cities and metros, but they should be informed appropriately about the outskirts of the big cities and even about the tier-2 cities that offer a great deal of real estate investment in present scenario.
Not only this, but the recent significant depreciation in the value of rupees in respect of dollar/pound/euro has given a profitable chance to the NRI’s to clandestine their foreign earned money into some good  investment plans. However, quite a few times NRI investors face some issues with liaison services in real estate industry, but once these intermediary services will improve more and more foreign investors would be lured to purchase property in India in lieu of high returns.
Foreign investment is also a good sign of growth for Indian Real Estate market as well. In this current state of affairs when the Indian Realty market is experiencing a huge downfall, the foreign investors seem to be the ray of hope. With more and more NRI’s investing in small and even big commercial properties in India, the Real estate market will soon see a huge intensification. It has been observed from past trends that around 70% of foreign investment has been done in residential sector, but according to the Indian developers there are various commercial investment opportunities also existing for the foreign investors who wish to set up a business in India.
However, it has been told by the real estate experts that present time when foreign currency is in appreciation, it is the encouraging time for NRI’s to make some good investment in realty market in India. Office plots, residential spaces and even apartments are easily available for NRI’s.
Indian property developers also have a notion that the downfall of realty market in India is the result of the global meltdown and depreciation of rupee. Their belief is not vague, but they also consider that ambiguities in western economies led to the build-up confidence of NRI’s into Indian market and they are keen on purchasing property here. Their investment is a huge support for Indian Realty market and soon with the rupee appreciation these investments will strengthen the economic situation as well.

HongKong and Shanghai Hotels in Indian Realty Market

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The Hongkong and Shanghai Hotels Ltd that operates luxury hotels under ‘Peninsula’ brand today said it is in talks with international parties for partnership to enter the Indian market. “We have looked at several properties and held discussions in India to have a presence in the country,” Hongkong and Shanghai Hotels Ltd Director and Chief Operating Officer Peter C Borer told said.

The company is scouting for assets in India to start operations in Delhi and Mumbai. Unlike other international chains, it will look to invest in properties as owners with a majority stake.
Senior company officials have been visiting India for the last four to five years to scout for potential partners, he said but did not disclose the parties with which the company has been having discussions.

When asked why the company has not made progress so far, he said: “We are looking for the right partnership for long term and we want to go slow and steady in the market.”
Borer, however, did not comment on the timeline for opening its first property in India as well as possible investments to be made in the country.

Commenting on the company’s business model, he said: “Our philosophy worldwide is to invest in property and manage rather than only managing it.” The Hong Kong-based hospitality chain currently operates nine hotels in Hong Kong, Tokyo, Beijing, Shanghai, Bangkok, Manila, New York, Chicago and California with an average room of about 200-300 per property. These properties are positioned as business as well as leisure destinations.

The company is currently developing its 10th property in Paris and is likely to be operational by 2013. When asked about room tariff of the chain, Borer said it varies from location to location but ranges between USD 150 to USD 900 per room per night. The average occupancy level across the chain is about up to 75 per cent.

Commenting on the Indian market, The Peninsula Shanghai General Manager Joseph W Y Chong said: “We are still learning about the real estate situation in India. We will not compromise on lower or cheaper substitutes and ideally we will go for a location which is culturally connected and centrally located.”

$20Mn invested in Hallmark Infrastructure by Paracor Capital

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Paracor Capital has invested $20Mn in two residential projects of Chennai-based real estate developer Hallmark Infrastructure. Both these projects are located opposite Mahindra World City on GST Road in New Chennai, and involve a development of 0.8 mn sq ft.

Hallmark Infrastructure was established in 1998 and it became Hallmark Infrastructure Pvt. Ltd in 2005. It is a diversified group based in Chennai with presence in infrastructure projects, IT parks, townships, hospitality and serviced apartments.

Paracor Capital Advisors is the Indian advisor to two Mauritius based investment companies – Paracor India Investments Limited, Mauritius, which focuses on private equity transactions and Madison India Real Estate Fund Limited, Mauritius which focuses on real estate and hospitality investments.

This is Paracor’s fifth Indian real estate investment. Last year, it invested R55Cr for an 8% stake in Marvel Landmarks Pvt. Ltd, a realty firm backed by global asset managers Och-Ziff Capital Management Group. Other real estate investments include Arun Excello Homes, Daman Hospitality and Sabari Inn.

This space has seen 12 investments amounting to $477Mn across 10 deals with disclosed values during the March quarter. The largest PE-realty investment announced during the first quarter of this year was GIC’s $100Mn investment in a Godrej Properties office project in Mumbai’s Bandra Kurla Complex-the only deal over $25Mn reported during the period.

Other deals in the sector include ASK Property Advisors R40Cr investment in Paranjape Schemes’ residential project in Pune and Future Capital’s investment in Rustomjee Group’s project.

Economy and Realty for the Month of April 2012

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Healthy office space absorption in 2011-2012 inspite of slowdown in GDP, However 2012-13 seems bleak.

Currently, the top seven cities of India that is Mumbai, National Capital Region, Bangalore, Pune, Chennai, Hyderabad and Kolkata together occupy 389 mn sq.ft of Grade-A office space. During 2010-11, a total of 38 mn sq.ft of new space was constructed in the top seven cities and it was 37 mn sq. ft during 2011-12. Office space absorption in India during 2011-12 was merely 2% lower than 2010-11 despite GDP growth slowing down from 8.4% to 6.9% during the same period. This is in sharp contrast to the popular belief that 2011-12 was a dull year for office market in terms of absorption. Healthy absorption rate ensured a drop in vacancy level to 21% by the end of Q4 2011-12 from 27% in Q4 2009-10.

Share of Banking & IT sector falls in absorption while manufacturing sector has witnessed an increasing trend over the last two years and contributed 19% in total absorption during 2011-12, higher from 13% in 2010-11. GDP growth of service segment is estimated to grow at 8.8% during 2012-13, much higher than industry segment growth of 6%. Absorption of space during 2012-13 is expected to be considerably lower than the previous two years and this will make it all the more challenging for developers to maintain existing levels of rent.

However, the latest move by Reserve Bank of India (RBI) of reducing the repo and reverse repo rate by 50 basis points (bps) each could provide the much needed impetus to the economy and help in reviewing the demand scenario for office space in the coming quarters.

Bengal Urban Land Policy: Seeks 30% Reservation for Low-Cost Housing

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The promise of Ma, Mati, and Manush governance by Mamata Banerjee may fall short of the second M-word, meaning land — at least for real estate developers in the state’s capital city. For, the West Bengal government has now decided to bring in an amendment to the Urban Land (Ceiling and Regulation) Act (ULCA), 1976, an eyesore of developers for quite some time. The proposed alteration will stipulate the developers to reserve 30 per cent apartments in big housing projects for the low-income group (LIG). Industrialists have been seeking a total repeal of the Act, introduced in 1976 to prevent hoarding or excessive holding of land in urban centres.

According to the Act, the ceiling limit on vacant land in a category ‘A’ city like Kolkata is 7.5 cottah or about 500 square meters. The demand for repealing the ULCA was raised for the first time by Godrej Properties chairman Adi Godrej, at an industry meet within the first month of Banerjee taking over the chief minister’s office.

Much to the disappointment of the developers, urban development minister Firhad Hakim has now totally ruled out the possibility of repealing the Act. “We are not going to abolish the Land Ceiling Act,” he said. “Instead, we will give permission to developers for purchase of land beyond ceiling, provided they reserve 30 per cent housing for low-income housing segment.”

As for the Trinamool dispensation, it has also decided to do away with the concept of public-private partnership (PPP) — an idea pioneered by the earlier Left Front government under Buddhadeb Bhattacharjee. Instead, “the government will allocate land to the highest bidder and for the rest of the big projects the state will build on its own,” according to Hakim. Notably, in spite of the Land Ceiling Act, the earlier government had windfall gains by allotting land in prime areas of city.

For example, three prominent government agencies involved in land deals in and around Kolkata — the Kolkata Metropolitan Development Authority (KMDA), Kolkata Municipal Corporation and West Bengal Housing Board— signed deals worth more than Rs 18,000 crore, for over 5,250 acres of land during the period in little over two years. In fact, KMDA was credited with signing deals, worth more thanRs 800 crore with real estate developers on a single day. “The process of land allotment slowed substantially over the last two years. First, it was due to elections,” said a city-based real estate developer. “Second, it was due to lack of vision and policy of the new government.”

2012 is a Tougher Year for Fund Raising

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Due to global issues, liquidity is becoming a problem. Though the phase is temporarily, the concern cannot be ruled out. Indian real estate sector is banking on the fact that change will take place and market will come out of the situation. The fact of the matter is that next 12 months and in fact 2012, does not look too bright for the sector.

The global debt worries have led to more and more uncertainty. In the last few months, the sector has been plagued by a potential liquidity squeeze. The situation is very unsettling and the fear is that we might end up looking at the year 2008 situation. It is certain that banks will get into selective lending with more strict verifications. In 2012, we are expecting that interest rates might get stabilized but disbursal of home loans will come down.

As RBI has been steadily increasing interest rates, debt for developers is becoming expensive. Also many banks are right now not keen to lend to real estate projects. Due to global uncertainty even private equity is cautious of investing in India. In fact, companies have started looking at alternative routes of fund raising. And many a deals are being done as structured debt deals hiding behind the facade of an equity structure.

In structured debt deals, the companies—investor and investee—sign two agreements. In the publicly announced agreement the investor—a PE or a VC fund—buys an equity stake in the company; and in the second contract they have buyback clause, which allows investee company to buy back its shares from the PE/VC fund at a price that will give the fund a return of about 20% per annum over the duration of the investment.

All signs currently suggest that 2012 would not be an easy year. As debt becomes more expensive and PE funds find it difficult to deploy cash due to global economic conditions, we would see higher number of structured deals taking place in 2012. Though these structured deals are being done, they have their share of problems. The problem is when the side-contracts are not honoured.

Realty Industry Feels Rate Cut as Benefit for All

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The interest rate sensitive realty industry Tuesday welcomed the Reserve Bank of India’s (RBI) decision to cut key lending rates by 50 basis points, and felt the move will boost builders’ and home loan customers’ sentiments alike.

“For the real estate in particular, this is indeed a welcome step by RBI. While the sector was already reeling under the pressures of high interest rates, this will allow banks to lower down the interest rates significantly. Both buyers and developers shall get benefitted from this,” said Pradeep Jain, chairman, Confederation of Real Estate Developers’ Association of India (CREDAI).

Home loan buyers are currently paying a higher rate of interest in the range of 11.50-13 percent on floating basis. Customers, who had earlier opted for dual rate scheme and now just exhausted their fixed tenure rate, are paying the same rate of interest.

Other industry players like Unitech and real estate consultancy firm Cushman & Wakefield also welcomed the move, which they said would boost business confidence.

“This development will have a positive impact across the economy and particularly in the real-estate industry. Not only will the cost of borrowing rationalize, this reduction will also provide an impetus to growth and enhance business-confidence,” said Ajay Chandra, managing director, Unitech.

Cushman & Wakefield India said that the banks are expected to pass on the reduction in interest rates to consumers, which will provide a positive boost to market sentiments especially in the residential sales markets.

“We expect to witness some pickup in the volume of sales transactions. For the whole of last year, end buyers had to defer their purchase decisions as they were facing the double-edged sword of rising interest rates and stubborn price levels,” said Anurag Mathur, managing director, Cushman & Wakefield.

The RBI’s announcement also buoyed the BSE Realty index which grew by 32.50 points at 1,813.97 points around 2:50 p.m. Stocks of realty industry players also surged with DLF’s scrip growing by 3.75 points or 1.88 percent at 203.25 points.

Indian Realty Sector growing very Fast

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The real estate industry is expected to reach US $180 billion by 2020, said analysts and industry experts at a seminar organised in the city.

As part of the Management Development programme, the students of the Acharya Bangalore B School attended a three-day seminar on Real Estate Management that started on Thursday.

Realtors and analysts from the field also attended the seminar to provide the students with future prospects and various professional options.

Presenting a paper on ‘Internet and Real Estate’, Business Head of 99Acres.com, Vineet Singh said, “As per reports by real estate intelligence firms, India is ranked as the fifth most attractive destination for future real estate investments in a list topped by China. The Indian real estate industry is expected to reach US $180 billion by 2020. This is a good platform to involve both academia and industry to facilitate dual growth and understanding. We get to know what the emerging new talent holds and they learn about the industry perspective.”

Industry experts from Brigade Group, Sobha Developers and other leading real estate organisations attended the event to train the students. “I’ve always had an interest in this industry as my family deals with real estate. But at this seminar I could ask a few basic questions and get industry relevant answers,” said Niharika Singh, a student.

Realtors expect rise in property demand post RBI’s rate cut

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Realty firms on Tuesday hailed the RBI’s decision to cut short-term lending rate saying the move would reduce the cost of funds to home buyers as well as developers and boost property demand.

“Reserve Bank’s decision to cut the repo rate by 50 basis points and abolish pre-payment penalties is a good move for home buyers,” Confederation of Real Estate Developers Association of India (CREDAI) Chairman Pradeep Jain said. In its annual credit policy, RBI has asked banks not to levy foreclosure charges or pre-payment penalties on home loans extended on a floating interest rate.

The country’s largest realty firm DLF also welcomed the decision, saying it would significantly improve the cash flows of developers. “It is positive news although very-very delayed. This will benefit home buyers besides the industry. It will improve cash flows tremendously,” DLF Group Executive Director Rajeev Talwar said.

Jain too said that liquidity for developers would improve and cost of funds would be cheaper. On demand, Credai Chairman said the move would definitely boost housing demand. However, property consultant DTZ India CEO Anshul Jain felt more measures need to be taken to have a positive impact on housing demand.

“It is a step in right direction although lot more measures need to be taken before we see any effect of the rate cut on the real estate sector,” said Jain of DTZ. The housing demand, which is very subdued currently, would only rise if the interest rates on home loans come down to below 10 percent, he added.

Realty projects, roads focus to help build-up for Unity Infraprojects

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Healthy order book, strong balance sheet and the potential to unlock value from real estate projects make Unity Infraprojects a decent investment idea on a medium-term basis. Mumbai-based Unity Infraprojects is a small-sized construction firm operating in buildings, water and roads segments. The company is also developing real estate on its land parcels in Nagpur, Bangalore, Pune, Kolkata and Goa. The total saleable area from these projects is nearly nine million square feet.

Unity Infraprojects stands to gain by unlocking the value in its real estate projects. It was not able to monetise any of its real estate projects due to delays in execution by over a year. However, it is now in an advanced stage of securing approvals for launching its Bangalore residential project. Unity has a total saleable area of nearly 3 million square feet in this project, which it intends to launch in another three months.

After this it will focus on monetising its real estate in other cities. The current order book of the company in its construction business stands at Rs 4,700 crore, which are 2.75 times its FY11 revenues. These orders are to be executed over the next three years. The company has been increasing its exposure to the roads segment in the last few years. Although the roads segment is highly competitive, Unity’s backward integration in terms of owns machinery has allowed the company to garner better operating margins than its peers.

In the nine months ending December 2011, the company has maintained an operating margin of 15.5%. Another factor that augurs well for the company is its strong balance sheet. As of September 2011, the company had a debt-equity ratio of 1.1, which is one of the best among its peers. Unity Infraprojects’ stock is trading at a P/E of 3.9 while similar-sized rivals like Pratibha Industries and Supreme Infrastructure India are trading at a P/E of 5.9 and 5.2, respectively. Considering its growth potential and the relative discount to its peers, the stock looks attractive at this level.


Sahara, ICICI, Bhushan Steel in race to buy Parsvnath’s Connaught Place land.

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Sahara Group, ICICI Bank, Bhushan Steel, Bharti Realty, Red Fort Capital and Shri Lal Mahal are understood to be in the race among others to acquire Parsvnath Developers’ 1.18 acre of prime commercial land near Connaught Place in the National Capital.

In January, Parsvnath had announced plans to monetise the KG Marg land, which it had bought for Rs 200 crore in 2008. Parsvnath, which is eyeing about Rs 700 crore from sale of this land, got the building plan approved from local authority last week and potential buyer can start construction on the land immediately after the deal, sources said.

“The first round of bidding and due diligence have been already completed. The process will be expedited now as the company was waiting for the building plans approvals before it starts negotiation with potential buyer,” a source, who is involved in the process, said. Sahara Group, ICICI Bank, Bhushan Steel, Bharti Realty, private equity firm Red Fort Capital, rice company Shri Lal Mahal and one leading realty firm from NCR have shown interest in buying this land, sources said, adding that Parsvnath had got bids up to about Rs 700 crore in the first round of bidding.

When contacted, Parsvnath Developers Chairman Pradeep Jain said: “The process for sale of this land is on. We cannot comment any further.” Property consultant Jones Lang LaSalle India is helping Parsvnath in this deal. The built-up area allowed on this prime land is about 1.5 lakh sq ft with 300 car parking. Realty consultant said that prime office buildings near CP are currently commanding a monthly rental of 350-400 per sq ft.

Although Jain did not give any timeline for completion of this transaction, sources said that the deal could be closed in this quarter. Parsvnath has a net debt of about Rs 1,200 crore and plans to reduce it to about Rs 500 crore by utilising the proceeds from sale of this prime property. The company has two housing projects and several shopping malls at metro stations in the National Capital. It is setting up an office building near Gole Market here with an investment of Rs 300 crore.

That apart, Parsvnath had bought in 2010 a 38 acre of land near Sarai Rohilla from the Railways for Rs 1,651 crore, making it the second biggest land deal in Delhi. The company, in partnership with Red Fort Capital, plans to provide luxury housing and commercial space in this project. Parsvnath, which has a land bank of about 200 million sq ft across the country, had received private equity funding from Sun Apollo and JP Morgan in some other projects in NCR.

 

 

Economy and Realty for the Month of March 2012.

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The report highlights the revised service tax and its impact on the consumers, the deduction in TDS and the current scenario of the External Commercial Borrowing (ECB) apart from its emphasis on the Chennai Realty Market.

Following are the key takeaways of the report:

– Chennai leads the market in terms of number of units under construction accounting for 68% of the total number of units coming up in the city, followed by the western region with 27%.

– Chennai is slated to witness the infusion of around 67500 residential units in the forthcoming three years.

– During 2011, the highest price rise was observed in the central areas of the city, to the tune of around10-18%.

– According to a United Nations study, Chennai has a deficit of around 60000 housing units. About 6000 of them are in the high income group segment, 12000 in the middle income group and 18000 in the low income group.

In March,India Inc. invested $2.7 bn overseas.

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Overseas investments by Indian companies stood at USD 2.77 billion in March, up 37.6 percent over the previous month, with Binani Industries, Mercator Lines, HCL Technologies, Varun Shipping, Hexaware Technologies, and Tata Steel emerging as major investors.

As many as 489 overseas investment transactions were carried out by various companies in March, as per the Reserve Bank data released Wednesday. Binani Industries invested a total of USD 323.34 million in its two wholly-owned subsidiaries based in Luxembourg and the US that are involved in financial, real estate and manufacturing services.

Mercator Lines, which is into agriculture and mining, through its joint venture-Mercator Offshore PTE- invested USD 150.15 million in Singapore during the month, it said. ABG Shipyard, through its wholly-owned subsidiary invested USD 80 million in Singapore.

HCL Technologies, India’s fourth largest software exporter, invested USD 60 million in Bermuda through its wholly owned subsidiary for providing financial, insurance and real estate solutions.
Likewise, Varun Shipping which is into transport, storage and communication business invested USD 60 million via its JV in Cyprus.

Hexaware Technologies invested USD 38.7 million through its wholly-owned subsidiary in Germany to provide financial, insurance, real estate solutions, it said. Tata Steel invested USD 35.5 million in Singapore through its wholly-owned unit, it said.

Unitech comes up with Gardens Galleria in Noida.

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Unitech, one of the India’s leading integrated developers of large-scale real estate projects, has launched Gardens Galleria in Noida. It is part of Unitech’s existing 147 acres entertainment-cum-retail destination in Noida.
Gardens Galleria, designed by US-based firm Callihon, is spread over 8.36 acres, is strategically positioned adjacent to sector -18, Noida and Film City. It is minutes away from ITO, East Delhi, South Delhi, and Noida Expressway. The project is in the midst of established residential areas, offices, colleges and other commercial towers.

The destination already comprises of an international standard themed amusement park Worlds of Wonder and The Great India Place, a shopping mall. The mall, a combination of entertainment, retail and hospitality, in Noida will comprise of hyper market, departmental stores, international shops, spa, gymnasium, banks, ATMs, food and fun joints. The project comprises 230 retail outlets and there is also parking facility for 8,500 cars. Unitech has already got over 10 lakh patrons a month in its three operational malls the Metro Walk in New Delhi, Great India Place in Noida and Gurgaon Central.

Commenting on the launch, Munish Baldev, head-retail of Unitech said, “We are happy to launch Gardens Galleria in Noida. Unitech has already developed 1.3 million sq ft of mall area in New Delhi, Noida and Gurgaon since 2006, and is developing another 4 million sq ft of retail space in cities such as Kochi, Gurgaon, Bangalore, Lucknow, Mohali, Bhopal, Bhub­aneswar, and Dehradun. We have always been bullish about the retail development space and have been developing the shopping malls as per our business plan. We have been getting strong traction from retailers for leasing of the mall-space under development.”

Genesis Luxury, Genesis Lifest­yle, French Connection, Nautica, Louis Philippe, Van Heusen, Calvin Klein are among some of the major brands who have their stores in Galleria. The company is also developing another 4 million sq ft of retail space in cities such as Kochi, Bhopal, Bhubaneswar, Bangalore, Dehradun, Mohali, Lucknow, and Gurgaon in the next 4-5 years.

Surat: Real Estate experiences 100% growth in 2 yrs.

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Realty glitters in the diamond city. Real estate sector has witnessed a 100 per cent growth in the past two years, aided by a number of factors like vertical development, business opportunities and influx of people from other places.

Om Ahuja, CEO-residential services, Jones Lang LaSalle (JLL) India, said, “In cities like Surat, the growth is directly related to increased income of people. High income has also spawned more nuclear families.”

Chairman CREDAI, Surat, Tarun Rawal said, “On-going development of mass transport infrastructure and planned town planning schemes in the city has given confidence to people to go to faraway places to live. Hence, small sector projects – 1,500 sq ft houses – have gained a foothold in the city.”

Surat was the only city where people used to buy and sell properties without documents, but now awareness is growing. “Now small units have started to come up in huge numbers,” said Harshil Daliwala of SNS Builders.

The city is estimated to be spread over in an area of 326 sq km. It could further expand by another 200 sq km. “There is a plan to convert Surat-Navsari into twin cities which will together have a population of 1.15 crore people,” Surat Municipal Corporation’s director of planning Jivan Patel said.

Indian Real Estate is Growing Big.

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The real estate industry is expected to reach US $180 billion by 2020, said analysts and industry experts at a seminar organised in the city. As part of the Management Development programme, the students of the Acharya Bangalore B School attended a three-day seminar on Real Estate Management that started on Thursday.

Realtors and analysts from the field also attended the seminar to provide the students with future prospects and various professional options.

Presenting a paper on ‘Internet and Real Estate’, Business Head of 99Acres.com, Vineet Singh said, “As per reports by real estate intelligence firms, India is ranked as the fifth most attractive destination for future real estate investments in a list topped by China. The Indian real estate industry is expected to reach US $180 billion by 2020. This is a good platform to involve both academia and industry to facilitate dual growth and understanding. We get to know what the emerging new talent holds and they learn about the industry perspective.”

Industry experts from Brigade Group, Sobha Developers and other leading real estate organisations attended the event to train the students. “I’ve always had an interest in this industry as my family deals with real estate. But at this seminar I could ask a few basic questions and get industry relevant answers,” said Niharika Singh, a student.