Monthly Archives: May 2012

South Indian Real Estate Sector footprint

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What a South Mumbai is to Mumbai or a South Delhi is to Delhi could well be South Indian cities to India! The question is – will the southern region become the downtown of India?

Southern India has for long been the silent crusader, building and strengthening its real estate development as one of the most sought after destinations in the country. With improving transparency and visibility of the real estate markets in the South zone, cities such as Bangalore, Chennai and Hyderabad have attained a place on the global real estate map, a status that was limited just to Mumbai and Delhi in the past.

While South Indian cities constitute nearly 45% of the country’s office space, the stock of 140 million sq ft in these cities is projected to grow at a CAGR of 8% for the period 2012 – 2016, lower than the projected national growth of 11%. This implies that the southern cities, particularly Bangalore and Hyderabad, are relatively rationalised in terms of medium term supply of office space, and the cities have chosen a strategy of pursuing selective quality developments over rapid expansion. While this would keep their share in India’s office stock range bound at 37%-40%, the South Zone’s vacancy rate by end-2012 is expected to be 16%, considerably lower than the pan-India vacancy rate of over 20%.

While demand remains healthy for organised retail spaces, it is polarised towards either successful malls or high streets, which have better footfalls and conversion ratio. As the mall stock in the southern cities sum up to breach the 40 million sq ft mark by end-2016, the vacancy by then is expected to witness a notable decline from the peak levels of 2014 to drop below the national average of 20.5%.

South India’s residential market has been an ardent follower of the ‘affordability’ mantra, with more than 80% of the new launches in the past two years being priced under INR 4,000 per sq ft (USD1 812 per sqm). As a result, the residential markets of South Indian cities have remained resilient in the past few quarters, relative to the significant decline recorded in the sales volume of Mumbai and NCR-Delhi.

The focus of Indian real estate is shifting from Tier I to Tier II cities, and the southern region is also embracing the same, with secondary hubs developing in Kochi, Coimbatore, Vishakhapatnam and Mysore, that are persistently striving for higher milestones.

 

Assotech and Sunapollo to Build Rs 500cr Housing Project in Gurgaon

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Real estate Company Assotech and private equity firm Sun-Apollo Friday announced the development of a housing project in Gurgaon at an investment of about Rs 500 crore over the next three years.

Sun-Apollo Real Estate Advisors has invested Rs 75 crore to pick up nearly 50 percent stake in Assotech’s subsidiary firm which would develop this project. Assotech has infused Rs 76 crore for nearly 51 percent stake in the subsidiary. “We are entering into the Gurgaon market by launching a 12-acre housing project in partnership with Sun-Apollo. This is our first project to receive private equity investment,” Assotech Managing Director Sanjeev Srivastava told reporters.

The project, which is located on Dwarka Expressway, has been launched at a price of about Rs 5,000 per square feet. He said the company has bought the licensed land where it would develop about 580 apartments, 23 villas and 102 flats for economically weaker section. “The total investment in this project ‘Assotech Blith’ would be about Rs 500 crore including the land cost over a period of the next three years,” Srivastava said.

The investment would be met through equity contributions from both the partners, bank loans and advances from customers against sales, he added. Sun-Apollo Principal Alok Aggarwal said: “The two partners are committed to invest more if required for construction activities”. The private equity firm has also invested in real estate projects of Parsvnath Developers and Godrej Properties in north India. “We will do more projects with Assotech in future if there is good opportunity,” Aggarwal said.

Assotech is currently developing many housing and hotel projects in the National Capital Region (NCR), Uttar Pradesh, Odisha, Uttarakhand, Madhya Pradesh and Bihar.

Real Estate Bill Have to Wait More

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The much-awaited regulatory Bill for the real estate sector is still a long way off. The draft Real Estate Regulation Bill will not be tabled during the current session of Parliament, a senior official in the Ministry of Housing and Urban Poverty Alleviation has confirmed.

The imprisonment, according to the final draft, applies only in the case of non-registration with the real estate regulation authority. Registration is mandatory for projects of a certain area and type. The maximum term of imprisonment is up to three years, and penalty may be extended up to 10 per cent of the project cost. In the earlier draft of the Bill, imprisonment was recommended in case of wilful failure to comply with orders of Appellate Tribunal too. The ministry has also reduced the area size for compulsory registration from 4,000 square feet in the earlier draft to 1,000 square feet now. This would mean registration would be mandatory for the smaller players too.

The Bill has been in the making for several years now, and was slated to be introduced during the Budget session. The housing ministry is now targeting the monsoon session of Parliament. The official said the final draft was ready. The draft bill has gone through some changes related to clauses on imprisonment and compulsory registration.

National Real Estate Development Council (Naredco) hailed this as a good move. “It would also check fly-by-night operators in real estate, which are majorly into smaller projects,” said R. R Singh, Naredco director-general. “However, the load on the authority will increase, as it would get flooded with projects for registration as smaller projects are more in number.” Confederation of Real Estate Developers Association of India (Credai), however, wants no limit on the registration. “No developer should be left out of the ambit of Real Estate Regulation Authority,” according to Credai chairman Lalit Jain.

The objective of the proposed legislation is to establish an authority to regulate, control and promote planned and healthy development and construction, sale, transfer and management of colonies, residential buildings, apartments and other similar properties, besides to host and maintain a website containing all project details.

Mumbai Builders Drop the Plan of Strike

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Mumbai builders have called off their strike scheduled for May 3.

The Maharashtra Chamber of Housing Industry and the Confederation of Real Estate Developers Association of India had called for a one-day token strike protesting the delay in project approvals and against the State Government’s move to establish a housing regulator.

The Builders Association of India too decided to participate in the strike. Addressing media persons here on Wednesday, Mr Paras Gundecha, President, said the Chief Minister, Mr Prithviraj Chavan, met the association on Tuesday and assured the members that all issues concerning builders would be addressed.

Mr Gundecha said MCHI also made a presentation to Mr Chavan on the issue faced by developers and sought a single window clearance for housing projects. The Chief Minister had also made it clear that the government’s priority was to build affordable housing stock, he said.

Delhi: Homes Sells Faster Than Mumbai

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Mumbai may be second to Delhi in unsold homes, but it will take longer to sell them. Real estate developers in the financial capital must wait over three years to clear 1.13 lakh units or 120 million sq ft as high prices deter potential buyers, shows a study released by Liases Foras, a real estate rating and research consultant.

The study covers units in Mumbai Metropolitan Region (MMR) — including Mumbai city, Thane, Kalyan and Navi Mumbai — National Capital Region in Delhi, Pune, Hyderabad, Bangalore and Chennai. NCR, with 232.57 million square feet or 1.60 lakh units of unsold homes — roughly double Mumbai’s —will likely sell homes much faster, in 23 months.

“The NCR market is primarily an investor market and has very little comparison with Mumbai,” says Om Ahuja, chief executive officer (residential services) at Jones Lang LaSalle India. “The real estate market in areas like Gurgaon or Noida attracts a lot of money from neighbouring states like Punjab, UP and Delhi as people invest in residential properties.” Among the six metros, Pune homes will be sold the fastest, taking just 14 months to sell its 43.06 m sq ft at the current pace of buying. A steep rise in interest rates in the last 18 months was seen as the key reason for low sales as buyers try to avoid high home loan instalments.

The Reserve Bank of India cut key rates by 50 basis points last month, forcing lenders to lower their retail lending rates which could push sales.

 

 

Real Estate Industry Courses Lures Youths

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With the boom of real estate industry across the country, it seems the youths are not just concentrating on good communication skills and sound knowledge of geographical area to become a good realtor, but are now looking at courses on real estate industry to get the professional touch. An industry report filed by leading real estate intelligence firm, Jones Lang Lasalle, India, has debated if a career in real estate in the country is apt right now.

Debating whether the Indian real estate industry is the right place to start a career, Sameer Khanna, Head, Human Resources, Jones Lang Lasalle India, noted that compared to developed countries, the Indian real estate sector still lacks sophistication and transparency.

Further Sameer Khanna explained, “However, it is popular for domestic and international investments. This has resulted in the need for better and capable human resources. Though real estate is not nuclear science, there are complexities involved.”

What courses to pick? While the real estate industry is changing fast, a lot of professionalism is coming in, as many major international players; developers are introducing best practices and higher transparency. “People equipped with the know-how, training and professionalism are in high demand, and are paid correspondingly,” experts revealed. Why are city students interested? While many students are choosing the course out of interest, many others enter the trade to see if the industry is challenging. Further, there are the third kind, who has families and forefathers who have been an integral part of the industry and are looking at entering the trade, with a professional course. “I do not know much about this industry but I have enrolled myself for this course because it seems interesting. So far the only role that interests me is one related to analysing the market,” said Shreeti Dey, a student.

Blackstone and KKR looks up for Indian Commercial Real Estate

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India’s UB Holdings is in talks with private equity funds Blackstone and Kohlberg Kravis Roberts to sell some of its commercial real estate for 6.5 billion rupees ($123 million), writes Reuters. UB Holdings, controlled by liquor baron Vijay Mallya, is part of the UB Group that owns majority of United Spirits and United Breweries, apart from debt-laden carrier Kingfisher Airlines, which is looking for funds to continue operations, writes Reuters.

Reuters – India’s UB Holdings is in talks with private equity funds Blackstone and Kohlberg Kravis Roberts to sell some of its commercial real estate for 6.5 billion rupees ($123 million), the Times of India newspaper reported on Tuesday citing unnamed banking sources.

 

The UB Tower in Bangalore, which Mallya is looking to sell, is occupied by companies like Apple, Citibank, and Yahoo, the report said. A UB Group spokesman, quoting Mallya, denied the company was in talks to sell the real estate space, the paper reported. Prakash Mirpuri, a UB spokesman, told Reuters there was no plan to sell UB Towers. He, however, could not immediately confirm whether other real estate assets from UB Holdings were up for sale. A Blackstone spokesman declined to comment, while KKR could not be immediately reached by Reuters on Tuesday, which is a local holiday in India. UB Holdings and the private equity players are considering a sale-and-lease-back model, with UB having the right to buy the property back after a specified period, the report said.

Anand Rathi and Knight Frank Eye the Second Realty Fund

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Anand Rathi Financial Services and property consultancy Knight Frank India are planning to launch their second real estate fund by end of this months and looking to raise around Rs 500 crore (~$100 million), sources close to the development told VCCircle. Unlike its peers who are hitting foreign shores to raise new funds, the joint fund rental yield and appreciation portfolio (RYAP) fund will be raised from the domestic market.  Like its predecessor, it will invest in commercial assets in tier I cities which include Mumbai, Pune, Bangalore, National Capital Region (NCR) and Chennai.

The fund would be targeting returns of 10-12 per cent from its investments and expects to stay invested in an asset for four-five years. A senior executive of the joint venture fund house who did not wish to be identified, said, “We are waiting for final Alternate Investment Fund (AIF) guidelines as right now there is no clarity on registration of funds and other norms. Once we have clarity on the same which we are expecting by mid-May we will register and start our fund raising process.”

In April 2, markets regulator Securities and Exchange Board of India (Sebi) had unveiled its final norms to regulate AIF’s in the country. Fund managers expect the detailed guidelines to be issued in the next two weeks.

Knight Frank India and Anand Rathi Financial Services had joined hands two years ago to raise Rs 225 crore rental yield fund. It has invested Rs 135 crore from the existing fund in two projects including Hub town Ltd’s commercial project in Mumbai and Cerebrum IT park development by Pune-based Kumar Urban Development Ltd.

Pune Project got Investment of $13M from Infinite India Real Estate Fund

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JM Financial group promoted Infinite India Investment Management has invested $13 million through its realty fund Infinite India Real Estate Fund in Pune-based developer Kumar Urban Development Ltd’s (KUL) residential project, said sources close to the development.

The source privy to the development said the transaction has been inked recently for an equity stake in a high end residential project which would have developable area of 1million sqft in Pune. The exact size of the stake sale could not be ascertained. Infinite India Investment Management declined to comment on the transaction. When contacted by VCCircle, KUL chairman Lalit Kumar Jain confirmed that the firm has raised capital but did not immediately share name of the investor or the deal amount.

At present KUL have 12 on going residential projects in Pune, five in Mumbai and one in Panchgani, all in Maharashtra. Two years ago KUL was looking to raise Rs 450 crore through an initial public offering (IPO) which didn’t materialise. Half of the amount was to be used to repay high cost debt taken from Standard Chartered and ICICI Bank among others at an average debt cost of 15 per cent. It then came up with the plan to raise private equity funding for its projects and last year managed to rise close to $65 million for some of the projects.

 

Infinite India Investment Management had first launched the realty fund as an equal equity joint venture with SRS Fund and it had plans to invest $400million. JM Financial bought out the JV partner’s stake in April 2010 and since then it has been investing on its own.

Some of its previous deals include $6 million investment in a residential development project of Windshield Developers in Pune besides its agreement with PVR for buying out the multiplex chain’s property located in Phoenix Mills in Lower Parel, Mumbai for Rs 100 crore in May 2011.

 

In London, Tata Housing Development to represent APAC at the International Property Awards

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Tata Housing Development Company (Tata Housing), India’s fastest growing real estate development company, with over 46 million sq ft under various stages of development, has once again triumphed at the most prestigious Asia Pacific Property Awards 2012 (part of the International Property Awards), for the fourth year in a row, bagging five coveted awards under various categories.

Tata Housing is the country’s only residential developer to receive the prestigious five-star award in the Leisure Architecture category for La Montana; highly commended awards in the Show Home category for Prive and Primanti; highly commended award in the Development Marketing category for La Montana; highly commended developer website for www.lamontana.co.in.

Additionally, La Montana, a Mediterranean-themed township located at Talegaon, designed by international architect firm F + A, was adjudged as an Asian contender in the Leisure Architecture category, to compete against the highest-scoring contenders from Europe, Africa, the Americas and Arabia, to find the ultimate ‘world’s best’.

Speaking on the achievement Brotin Banerjee, managing director and chief executive officer, Tata Housing, said, “At Tata Housing, it’s our constant endeavour to create benchmark projects based on the consumer’s needs and requirement. We are proud of our continued success at the Asia Pacific Property Awards. This year is special for us as our project La Montana achieved the distinction of winning the five-star rating for Best Leisure Architecture India, and it leads from the Asia Pacific region to be honoured with Best Leisure Architect Residential Asia Pacific. It is indeed a very proud moment for us as this is the only residential project to be nominated from India to represent the Asia Pacific region for the International Property Awards. This will strengthen our commitment to create landmark projects in the country.”

Held in association with Royal Institution of Chartered Surveyors (RICS) Asia, the Asia Pacific Property Awards recognises 40 categories of distinction within the fields of development, interior design, architecture and real estate. Each project was judged by a team of 65 professionals from the property discipline. They are ascertained based on quality of design, construction and presentation of individual properties as well as interior, architecture and marketing.

The Asia Pacific Property Awards are part of the long-established International Property Awards and its winners’ logo is recognised as a symbol of excellence throughout the global industry. Founded 18 years ago, these accolades distinguish excellence in the property industry worldwide, and promote international standards. For the last four years consecutively, Tata Housing has been acknowledged with multiple accolades at this prestigious annual symposium, demonstrating that it is again at the forefront of the real estate industry in Asia.