The Union government’s recently announced stimulus package, coupled with the Reserve Bank of India’s (RBI) move allowing banks to provide special treatment to the real estate sector are likely to change the fortunes of Indian real estate sector, which has been struggling to survive for the past six months. Monday’s interest rate cut on housing loans up to Rs 20 lakh could further improve the sentiment, industry officials said.

“It’s a good beginning. At last, government has recognized housing as a priority sector. They have also realized that the construction and housing sectors are the largest employment generators in the country. But, whatever measures have been announced now, is a great relief to the industry,” Niranjan Hiranandani, chairman, Hiranandani Developers said.

Priority sector status to low-value loans, restructuring of loans taken for commercial property and a reduction in the excise duty on inputs like steel and cement are expected to reduce the cost burden on developers significantly.

Many developers said that changes are very visible now. “Number of enquires are increasing. Strong sales are being registered in some of our new project launched last month,” Sandeep Runwal, director, Runwal group, said.

Till some time ago, companies were in the race to amass huge land banks. They were intent on outdoing each other by bidding for costly land parcels. The financing was done through internal accruals and large-scale bank borrowings. This had sent property prices to new highs.

Things started to change when the stock market crashed and investors were deprived of their surplus cash, which could have been used to buy property. It also caused a decline in demand so such an extent that developers were not registering any bookings. Faced with the same fate, property prices also started falling.

“The government’s policy initiatives come at a time when the industry was reeling under a major liquidity crunch. This would certainly prove to be beneficial for companies that are facing working capital shortage.” Ram Yadav, director finance, Orbit Corporation, said. The credit crunch has put the developers in a fix. New launches were coming down drastically. Completion of projects under construction became difficult.

“There have been no new launches in the recent times but the ongoing projects are running on schedule. Being the largest player in Mumbai, HDIL cannot be insulated from the impact of the slowdown. Since our business model does not require us to amass a huge land bank, we have been able to continue,” said Hari Prakash Pandey, deputy general manager, finance, HDIL. Many companies have retrenched staff from projects due to a delay in launch. Reports hint that some of the north India-based developers like Omaxe, Parsvnath and DLF have cut their workforce.

Home buyers looking for flats on the outer fringes of Mumbai and other cities like Nashik and Pune will benefit the most from the reduction in the interest rates by public sector banks on Monday.

Public sector banks announced that home loans up to Rs 5 lakh would be given at a maximum interest rate of 8.5%, while those between Rs 5 lakh and Rs 20 lakh would be offered at 9.25%.

“The Mumbai market will not be affected by this decision as no flat in the city is below Rs 20 lakh. For larger metros, the limit should have been set at Rs 50 lakh,” said Boman Irani, chairman of the Rustomjee Group, which is setting up middle-income housing projects in Virar and Thane.

According to him, more than 50% loans given out by banks are for homes less than Rs 20 lakh. “This decision is for the entire country. But it would have given a bigger boost if housing projects in the metros had benefited,” he added.

Said Anshuman Magazine, chairman & managing director, CB Richard Ellis, South Asia: “This shows some effort by the government to support the housing market. Although this is expected to have some impact on the market, it won’t be a significant one as the overall confidence level of consumers to invest has to improve.”

However, he added that this reduction won’t have a significant impact on the real estate market. “It would have made a larger impact if the limit had been increased to Rs 40 lakh. Besides, confidence levels are lacking and consumers are waiting for prices to correct. The overall sentiment is down,” he added.

Mumbai-based developer Pujit Agarwal said over the past four years when the market was booming, most developers had stopped catering to the lower income group and were only concentrating on high value products. “The interest cut will lead to a flurry of developers catering to this segment now. Developers are already going back to the drawing board to make smaller flats.”

Chairman of Maharashtra Chamber of Housing Industry (MCHI) Pravin Doshi said EMI were becoming unaffordable because of high interest rates and this decision will help ease the burden. “It will benefit consumers in Dahisar, Mira Road and Virar. But in Mumbai it will not make any difference,” he said.

Pravin Banavalikar, CEO of Tanaji Malusare City, which is setting up a low-cost housing project in Karjat, said the reduced interest rates have come as a big boost. “We are constructing flats costing between Rs 2 lakh and Rs 7.5 lakh. This comes as a big relief for clients in the lower income group,” he said.

The move to reduce interest rates for home loans up to Rs 20 lakh by public sector banks may induce some buying in the property market and prompt developers to build more low-cost homes. However, according to developers, this may not be enough to provide a major boost to the residential property market immediately. Some property developers say the rate cut will not help their existing projects in metro cities as current prices are way above the loan limit set by banks.

“The rate cuts will revive demand, which had cooled off in the past couple of months,” DLF CFO Ramesh Sanka says. He says some of DLF’s projects in New Gurgaon and Chennai, which offer homes for about Rs 28 lakh, will benefit. Prompted by a huge demand in the Rs 20-25 lakh category and incentives extended by banks, India’s largest listed developer plans to have ‘many’ launches in the coming quarters in this category.

Smaller developers, which have been building budget homes, expect more large developers to join them. “Developers are already reducing the size of apartments and offering fewer facilities to bring down the cost of dwelling units,” says Gaursons joint MD Manoj Gaur, who has sold several budget homes in Ghaziabad.

Many developers and analysts feel the impact of rate cut will be limited. “The rate cut is not going to help us. At present, we are not building houses priced close to Rs 20 lakh. And, who has the money to purchase cheaper land now to start a new project for cheaper homes?” pointed out Omaxe chairman Rohtas Goel.

Rupesh Sankhe, a real estate analyst with brokerage firm Centrum, says: “A home buying decision depends on prices, interest rate and the sentiment. Prices still need to come down by another 15-20% even in Tier II and Tier III cities to increase the affordability.” Home buyers in smaller cities also have a lower income level and, therefore, would buy only when prices come down further, he adds.

Anshuman Magazine, property consultancy firm CB Richard Ellis’ South Asia MD, feels the sentiment is the most important factor at present. “There is a crisis of confidence right now. If people are afraid of losing jobs, they are unlikely to buy homes.”

The average home loan size in India is estimated at Rs 7.5 lakh. So, the rate cuts for loans up to Rs 20 lakh can potentially have tremendous impact. However, developers and experts beg to differ. Property prices have risen by three fol d in most markets and an average home costs upwards of Rs 50 lakh in Delhi or Mumbai and Rs 25-30 lakh in tier II cities. Therefore, the government’s move is aimed at addressing the need of home buyers mainly in smaller cities besides some metropolitan suburbs.

With shrinking industrial production (IIP) numbers for November intensifying fears of a sharper economic slowdown in India, investors are awaiting suitable policy responses. There is an anticipation of second tranche of fiscal sops from the government and additional interest rate cuts by the central bank.

In addition to domestic triggers, investors will keep a close watch on the extent of rate cuts in the US, comments on the interest rate outlook by the Federal Reserve on Tuesday and a likely bailout package for the troubled automobile giants. The Fed is expected to cut the benchmark rates by 50 basis points to 0.5% as part of its attempts to revive consumer spending.

Analysts said the US is unlikely to allow auto giants, including General Motors and Ford, to fail as this will have severe implications on an already-sagging economy. The resurgence of the US is considered to be critical for most emerging markets, including India as it consumes roughly 15% of the world’s exports.

Back home, analysts believe that any measures taken by the government and RBI to protect India from a global recession will assuage nervous investor sentiment only temporarily. There will be no immediate impact on India’s weakening economy.

Realty stocks gathered momentum Monday on media reports that state-run banks will unveil special home loan plans as part of the federal government’s stimulus package.

Under the package to be announced by the Indian Bank Association, housing loans up to Rs 500,000 will be priced at 8.5%, and borrowers in the 5-20 lakh category will have to pay 9.25% interest, it said. The interest rates across all price segments currently exceed 10%.

The special package will also offer a free loan insurance cover, waiver of pre-payment penalty and lower margins, the paper reported.

Banks may accept a margin of 10% for a Rs 500,000 loan and 15% for a Rs 20 lakh loan while the borrower will have to make an upfront payment of 10% and 15% respectively of the purchase value.

The package is aimed at boosting growth, and will be available only for new home purchases and not for refinancing existing borrowers, the paper said citing bankers involved in working out the details.

The special package will only be offered by state-run banks as per government directives, the paper said.

At 10:45 am, Unitech climbed 11.66%, Peninsula Land rose 10%, Sobha Developers surged 9.66%, HDIL was up 9.04% and DLF gained 4.7% taking the BSE Realty Index up 6%.

Both IPSL and Sophia Power are subsidiaries of the company. The company further said that it would be allotted equity shares in Sophia on the basis of share exchange ratio as per the approved scheme and in consideration of its existing equity holding in IPSL. Post such allotment, the company would hold 71.43%, FIM would hold 17.86% and LNM India Internet Ventures would hold 10.71% of the equity of Sophia.

Indiabulls Real Estate, engaged in the business of real estate, was separated from Indiabulls Financial Services on Dec. 21, 2006 following the de-merger of the company.

As of now, the moment a loan extended to real estate, capital market or personal loan segment is restructured; the lender has to classify it as a bad loan. At the same time, however, one-time restructuring of loans to any other sector such as steel, textile or cement would not result in the loans being classified as non-performing assets.

In a recent meeting with RBI governor D Subbarao, CEOs of many large banks urged the regulator to relax these restructuring norms. They pointed out that a number of real estate companies have been complaining about the liquidity crunch and have approached lenders to rollover the loan.

However, there is a resistance among banks to give them an additional line of credit or reschedule their loans on the ground that this will add to their pool of NPAs.

Loan restructuring allows banks not to treat the account as an NPA. Banks often indulge in this exercise whenever they sense that the borrower is in stress and the account may turn into an NPA or bad loan.

It enables them to declare a lower NPA ratio — the percentage of sticky loans to total loans — a dead-weight on their books. Also, once an account is deemed as an NPA, the bank has to make some provisions, which affect its bottom-line.

If a real estate company fails to repay loans on a due date, the bank will either accept it as an NPA and restructure the loan or resort to legal action.

Some banks have already come to terms with this and have begun restructuring their real estate loans while a number of banks are looking at ways to reschedule loans to this sector without showing it as NPAs.

Meanwhile, banks have also urged RBI to relax norms on restructuring of loans to manufacturing companies. As of now, when a performing loan to a manufacturing company is restructured for the first time, it can be treated as a standard asset.

However, if the loan to the same company is restructured again, it has to be treated as sub-standard. Banks have urged RBI that given the global turmoil and the slowdown in the economy, banks should be given a second chance to restructure the loan of manufacturing companies while allowing them to classify the same as standard assets.

But, there are fundamental differences, both in the economic situation and the customer segment that constituted “sub-prime” in the US and the segment that needs affordable housing in India.

In US, the housing market was booming and moving only one way — up. With easy and plenty of cheap money available, lenders were increasingly tempted to offer home loans to persons with poor and tarnished credit histories.

They could charge these customers higher interest rates and fees than they would have been able to charge other consumers. Given the rising prices of property, a tidy profit was in store anyway. The idea became popular and large numbers of loans were made to customers who were likely to have problems servicing regular loans even at low rates. While the sun shone, everyone was happy. Then, things changed.

These customers had no way of meeting their repayments and started defaulting on the loans, which led to foreclosures and home sales. As the numbers snowballed, property prices also gave way. Creatively-packaged debt, that was sold as good credit risk, started turning bad. The crisis had begun.

The Indian scenario is not really comparable. True, we’ve had a real estate boom too; but that boom has been limited to the middle and upper income residential and the commercial property market. If we were to use the standard banking benchmark of home loan entitlements being equal to 3.5 times annual salary, this effectively means that over 80% of the Indian population that earns less than Rs 11,000 per month cannot even dream of owning a house, since there has been no supply at all.

The segment earning between Rs 7,000-Rs 15,000 has never been considered significant for home loan offerings. While the prospects of getting a home loan for the formal sector employee do exist, chances for informal sector employees and the self-employed like drivers, NGO staff, small caterers and others are bleak. This is despite the fact that they have marketable skills, steady jobs/incomes and employer/customer recommendations.

These people have the capability and willingness to make a 20%-25% down payment on houses costing between Rs 4 lakh-5 lakh and are happy and able to take on a 15-year loan obligation, at market rates, in order to realize their dream home. Given that in these small-sized homes, the land cost represents a small percentage of the overall cost, the speculative risk is low, with a very low probability of a drop in these property prices.

Thus, labeling the entire segment as sub-prime would be a misnomer. The higher- and middle-income market has already been tapped and it may now be a good time to take a fresh look at the lower middle class. It could represent a new horizon for growth, diversification and de-risking. Some rough arithmetic suggests that the housing market for the Rs 7,000-Rs 15,000 segment translates into a market size of over Rs 5,00,000 crore!

And then there is the huge multiplier benefit — a strong growth in this market will yield a positive spin-off effect on employment generation (the residential housing sector hires a relatively high percentage of low-skilled daily wage workers as opposed to infrastructure projects) and uptake in consumption of commodities, including cement and steel. Needless to add, lives of millions of Indians and our urban landscapes will be transformed.

The handful of niche players that currently service this customer group, are clearly not enough. The question is will the financial sector rise to the challenge and develop this market quickly enough. The real estate players are already sniffing at the opportunity and a positive signal from banks may be just the trigger they need to take off. And, therefore, ironically, the housing segment which was the cause of all ills in the US may just be the answer to all our problems in India.

RBI may be forced to cut interest rates earlier than planned and more aggressively than previously hoped, as it comes under pressure to navigate an already faltering economy away from the turbulent economic aftershocks of the Mumbai terror attacks.

Last week’s attacks, which killed around 200 people, targeted key symbols of enterprise in a city that is widely viewed as the country’s economic powerhouse and a key barometer of business confidence. The attacks and the choice of targets appear at least partly aimed at puncturing investor confidence at a time when the country’s economy is already reeling under slowdown.

Much like the 9/11 attacks in the US in 2001, hastened the easing of the monetary policy stance — which had been started by the Federal Reserve in response to the bursting of the technology bubble, many in the market are expecting RBI to adopt a similar response to what many are calling India’s version of 9/11. The Fed progressively brought down its key federal funds rate to 1% in the months, following the 9/11 attacks, although no one in India is expecting that aggressive a move.

“With signs of economic slowdown already staring at us, the terrorist attacks are likely to affect investor confidence. To counter the possibility of still slower capital inflows, the market is hopeful about a sooner rate cut from RBI,” said B Prasanna, MD & CEO, ICICI Securities, a primary dealer in government securities.

Terror attacks in Mumbai are hardly new, but it’s the first time that it targeted five-star hotels frequented by top business figures and foreigners visiting the city. Analysts say the likely fall out of the attacks could be foreign investors getting worried about the safety of their employees and establishments, which in turn could impact already shrinking capital flows into the country.

Economic growth this year is expected by most forecasters at less than 7%, down from the 9%-plus of the previous three years, and some analysts expect it to fall further next year. Anticipating this, and helped by a falling inflation rate, the central bank has already switched gears in favour of an easier monetary policy, but analysts say the Mumbai attacks may force it to become more aggressive.

“Declining inflation and increased downside risk to growth hint that another round of easing by the central bank is imminent. However, the Mumbai attacks could prompt RBI to announce a bigger cut than the 50-basis point we had expected prior to the attacks,” said Rajeev Malik, chief economist with Macquarie Securities in a research report.
The market is already betting on this. Overnight interest rate swaps, a derivative product commonly used by traders to express a view on interest rates, are trading at a 5-year low, suggesting rate cuts are imminent.

Amid all this, RBI has been predictably silent on further rate cuts. However, that it remains biased in favour of softer rates is clear by some of its recent actions — it cut a key short-term rate and slashed banks’ reserve requirements in early November and recently extended the time period for its various liquidity enhancing measures to June next year.

T reported on Saturday that a group of bankers had in a meeting with RBI asked it to cut its reverse repo rates rather than bring down the cash reserve ratio. This, they feel, will give an indication to the market that interest rates are headed south.

Against much anticipation among the residents and the developers at the time of the launch, Uppal’s Centra Mall in the Industrial Area and DT Mall at IT Park Chandigarh, are still looking for takers. Maximum number of visitors here comprise of cine-goers.

“The recession in the real estate industry is definitely going to impact the future developments of malls in the region. At the same time, we are hopeful that a lot of potential is there in the tricity to generate demand for malls,” said Pradeep Rai, brand manager, Paras Build-Call Pvt Ltd, Gurgaon. The company is constructing one of the largest malls in Punjab with a built-up area of 3.5 lakh square feet — Paras Downtown Square at Zirakpur.

While developers claim most shops have been sold and leased out both in the existing as well as under construction sites, experts are keen to know how this huge inventory of commercial space waiting to be launched in the tricity will generate demand. The malls, where space is usually available with a mix of lease, rent and sale, the rate varies from Rs 16,000 to Rs 25,000 per square feet, depending upon the floor and the location.

EWDPL’s move comes at a time when most of the country’s developers have either deferred or slowed down their projects. DLF and Unitech, two of the country’s largest developers, have recently announced plans to defer or sell some of its projects for want of cash.

As many as 60% of the projects embarked upon by small developers are not likely to be completed as retailers cut back on their expansion plans, stock markets tumble and banks curb lending to real estate projects, experts said.

”This is a time for distress sale of assets by small developers,’’ said Manish Kalani, managing director, EWDPL. ”This provides a great opportunity for us, as our company will be able to raise the funds from private equity.’’

EWDPL recently raised Rs 1,300 crore from a German real estate fund, MPC Synergy, by selling equity in the range of 10% – 49% in 21 projects. In February this year, Phoneix Mills, which is also in the business of retail space development, bought a 42% stake in EWDPL for Rs 1250 crore.

EWDPL plans to open 50 malls by 2012 that will make them the biggest mall developer of the country. By the end of this financial year, the company will open malls in Indore, Nanded, and Raipur.

EWDPL plans to tap the retail potential in the tier-II and tier-III cities as big developers have focused mainly in the metros and other key information technology-linked hubs of the country. The growth in smaller towns was largely untapped.

Talking to Business Standard, Kalani said even at the time of economic downturn the retail sector will grow by 15%, which otherwise would have grown by 20% – 25%.

“We reached small towns even before DLF and Unitech,” added Kalani.

”This downturn will help developers like us who also have expertise in mall management. We were the first ones to introduce the revenue sharing model in the country which has becoming so popular among the retailers today,” said Kalani.

Sweden-based electronic products maker LAVA Electronics is in talks with real estate firms Ansal API, Omaxe and Parsvnath for a possible India entry through a franchisee arrangement.

The LCD television maker, which gets 60% of its revenues from the B2B segment, is planning to sell its products to large hotel chains. The company clocked a turnover of e60 million last year. LAVA executives met officials of real estate companies during the weekend.

LAVA Electronics’ managing director Christian Svantesson said: “We are looking for a suitable franchise partner and aim to enter India by the third quarter of 2009.”

He said his company will have exclusive outlets to cater to consumers directly but five-star hotels would continue to remain its focus area. “We want to position the company as a high-end brand in India,” he added.

The firm has an assembling unit in Southern Sweden. While television cabinets, panels and other hardware are imported from Germany, software programming and product designing is done by the company at its Swedish unit.

The firm intends to replicate similar business models in India. Mr Svantesson said that initially the company would import and sell in India. It will start assembling products in the country after creating a presence among consumers and business houses.

LAVA sold 50,000 LCD televisions world-wide last year and targets to sell 70,000 sets this year. Currently, the firm has operations in countries such as Hong Kong, Australia, Spain, UK, Italy, France and the US.

Rating agencies and foreign investors do not see any impact on the prospects of the economy because of terror attacks in the financial capital. The meltdown in the global financial markets is still a larger concern.

Past experience has shown that markets have reacted only temporarily to such extraordinary events. Although some reports do not make a reference to the terrorist strikes, the event is likely to have been factored since the report includes India’s Q2 GDP numbers, which were released on Friday.

The Orissa episode of the Credai has decided to reduce prices of their forthcoming housing projects by 5-10% in the coming 2 months in the wake of fall in raw material prices.

The strategy comes close on the heels of a call given by Credai to more than three thousand of its members in the country earlier this month to reduce prices to revitalize the falling consumer demand.

The price reduction in the forthcoming housing projects by the thirty-seven developers of Credai, Orissa will be effective from January 2009 after full development plan of the city, prepared by the IIT, Kharagpur is expected to come into force.

Following the price reduction, the residential real estate projects in the city will be available in the range of Rs 2,200-Rs 2,400 per square feet as against the existing rates of around Rs. 2,500 per square feet.

According to the CDP of Bhubaneswar, prepared by IIT, Kharagpur, about 30 lakh people need to be accommodated in the city in coming twenty years, as against the city’s present population of about thirteen lakh. To accommodate thirty lakh people in the city, an area of 9,286 acres has been earmarked for residential purposes in the new CDP.

Addressing the media, Mohammed Moquim, president of Credai, Orissa said “Credai Orissa has decided to reduce prices of all the upcoming housing projects by 5-10% to bring more affordability to the end customers in the wake of slide in raw material prices and falling prices of land.”

Further hw added that land prices are predicted to drop further by about 20 to 25% in the coming months and in such a scenario, Credai, Orissa will announce an additional cut in prices for the real estate projects by about 15-20%.

John Abraham, who is the goodwill ambassador of Habitat of Humanity, received the money at a glittering ceremony here yesterday. The contribution, made by leading property developer ETA Star, is for Homes for the Homeless initiative and will be used to build homes for the needy.

Mr. Rick Hathaway, area vice president of Habitat for Humanity International, Asia-Pacific, was present on the occasion.

Union urban development minister Jaipal Reddy said that the government will soon make available slum lands in New Delhi for re-development. The government will follow the Mumbai model where land is auctioned to the real estate developers for building flats. Certain number of flats will be reserved for the slum dwellers at a minimal price. The developers can sell other flats to customers at the market rate.

“We are in the advance stage of finalizing the auction process in consultation with the Delhi development Authority (DDA). We would be ready with the guidelines soon,” the minister said.

The minister informed that the government is also taking suitable steps to increase housing supply for people in middle income group in the Capital. “We have asked DDA to construct large number of flats for middle class population living in Delhi. With land cost hitting the roof and the financial slowdown squeezing the paying capacity of people, the government would take all possible steps to release and develop large chunks of land into affordable residential apartments,” the minister said.

Mr Reddy also said that the urban development ministry is giving final touches to the long pending bill on real estate regulator. “It would be a model bill that would be mandatory for Delhi and a model for other states to incorporate in their state legislature,” he said.

Mr Reddy further said that while the government is trying to pep the dying sentiments in the realty sector, the regular infrastructure needs would also be given a very high priority. He informed that the Planning Commission is considering ministry’s proposal to inject more funds into the existing corpus of Rs 50,000 crore. “We have asked for an additional funding Rs 20,000 to take up additional projects under the flagship programmed of Jawaharlal Nehru National Urban renewal Mission,” he said.

The terrorist attacks on Mumbai are likely to further pull down the sagging property prices in the city, especially in South Mumbai. South Mumbai, the most expensive property market is expected to face a dip in value across all segments, including rentals, in the next half year.

“It’s is too early to say anything now. However, the attack would definitely be a dampener to the sentiment, at least in the initial few months. The attack may also create a ripple effect on the property prices in the suburban market,” Pranay Vakil, chairman of Knight Frank India said.

Many property consultants had already assumed that South Mumbai property prices would further appreciate, though marginally, in the second half of the year due to demand-supply mismatch. With the government taking measures to attract more foreign business in recent years, there has been consistent interest in establishing and expanding operations in India, thus leading to an obvious pressure on real estate, especially in South Mumbai.

Price is usually a function of demand and supply. The excess demand for properties had been pushing up the prices in this part of the city till recently. “The attacks would spread negative sentiments in the property market. New property deals will be very negligible in the next few months,” said a senior official with Birla SunLife’s real estate division.

“This draws a clear picture of the future of real estate investments and available opportunities.” He said his company’s presence at the show meant it could “take a detailed look” at everything related to the Indian market. Cityscape India 2008, to be held at the Bombay Exhibition Center from December 8 to 10, is expected to attract more than three lacs property professionals and international investors.

The company, which currently has a debt of Rs 8,200 crore, is also planning to rope in private equity funds for residential projects by March 2009. In addition, it will transfer Rs 1,200 crore of debt to its telecom joint venture.
Talking to Business Standard, Unitech Chairman Ramesh Chandra said the company would raise around Rs 1,500 crore from sale of hotels and commercial space. Besides, it will transfer Rs 1,200 crore of debt to its telecom joint venture and will also realise Rs 300 crore as debt repayment from the joint venture. Unitech had lent Rs 820 crore to the joint venture and given a guarantee for another Rs 1,200 crore.
“By January, Unitech will raise Rs 2,500 crore through these routes,” said Chandra. The company has also decided to sell its plots to schools and hospitals. The company has around 27 plots, mostly of five acres each, and another 15 plots earmarked for hospitals.
Unitech is aiming to divest three of its hotels projects that are nearing completion. Depending upon the success of negotiations, these projects may be divested by 2009. It is already at an advanced stage of discussion to sell Courtyard by Marriot, the 199-room budget hotel in Gurgaon, and expects to close the transaction before January.

According to the assessment of Assocham, over 20 million people in about 25 tier-II and tier-III cities, who want to purchase dwelling units, but had to back out on account of rising borrowing costs.

This, in turn, has compelled most real estate developers to defer projects, Assocham said, adding that the rising cost of raw materials like brick, cement and steel has worsened the situation for them.

In tier-II and tier-III cities, property purchases had registered a growth of over 25% between April and September last year.

Higher interest rates have also upset payment plans of borrowers, it said.

The chamber’s assessment is based on feedback from real estate members operating in cities such as Chandigarh, Meerut, Pune, Bhopal, Indore and a slew of smaller urban centres across the country.

Developers giving the feedback include Parsvnath, Omaxe, DLF and Unitech.

Citi has received US government guarantees of $306 billion, a cover that will help it sell the sticky assets and irrecoverable mortgages on its books, and a $20-billion cash infusion from the US Treasury, which is over and above the $25 billion it had received earlier.

Citigroup’s CEO Vikram S Pandit gets to keep his job, at least for now. However, the US government will get $27 billion of preferred stock, paying 8% dividend.

After the stock crashed last week, there were speculations that Mr Pandit will have to quit and Citigroup may be sold in parts. The biggest banking rescue deal was quickly cobbled together over the weekend before markets could further punish the scrip and paralyze the financial system. When trading resumed on Monday, the Dow was in the green. The European markets also cheered the state support for Citigroup and were up between 2% and 5%, amid expectations that president-elect Barack Obama will push for an unprecedented government role in reviving growth and stabilizing the financial system.

But many emerging markets, where Citi has a sizeable exposure, were more guarded in their response. Key Asian markets were down between 0.25% and 3%, while back home, Indian equities rebounded from their day’s lows on news of the Citi bailout package, but ended the day on a subdued note.

The distant shakeout in Citi is also creating ripples in India. Among the senior officials to quit in the past few days is Brian Brown, head of equities at Citigroup Global Markets India. Citi Financial, the group’s non-banking finance arm in India which has seen high delinquencies, will receive $200 million infusion by March.