Home buyers appear to be waiting for a ‘crash’ in realty prices. Offers such as, waiver of stamp duty and registration charges, free lifestyle home or modular kitchen and free parking, have failed to boost home sales.

Centrum Broking Pvt Ltd today shared findings from its research report on the Mumbai Real Estate Sector. It expects a 30-35% fall in India’s residential prices from the peak, with the Mumbai Metropolitan Region (MMR) estimated to witness the lowest fall of 20-30% until April 2009. Residential demand in Mumbai is estimated at 66mn.square feet vs 55mn.square feet supply The report says that the decline in real estate prices in Mumbai will bring back affordability and is expected to boost demand. The factors that are likely to result in a lesser price drop in MMR include.

Phoenix Group Global, a promoter of luxury resorts, on Tuesday announced the launch of its own brand of Zuri luxurious hotels and resorts in India. The first five-star hotel will open at Whitefield in Bangalore in January next year, said Priti Chand, media officer of the business group. “We are acquiring land for five other hotels in Ahmedabad, Visakhapatnam, Kochi, Chennai and Nagpur and will be investing around Rs 10.5 billion for these projects,” Chand said.

A two-day real estate conference, Build Up 2008, which started in Bangalore on Tuesday, bore the grim realities of the global financial crisis and its impact on Indian real estate. Neither of the two major speakers — Union urban development minister S Jaipal Reddy and CM B S Yeddyurappa — turned up.

Real estate developer Indiabulls Real Estate soared 27.65% to Rs 136.90, as realty stocks extended gains on hopes cut in lending rates will spur demand for residential properties. The scrip topped gainers in BSE’s ‘A’ group shares.

Uncertainty in the equity market seems to be paving the way for newer investment opportunities. Private equity (PE) players have been quick to recognize these. Of late, their attention seems to have shifted from the most-talked about sectors like real estate and financial services, which were the flavour of the season till some time ago, to sectors like education, healthcare, defence, logistics, warehousing and infrastructure.

According to HDFC chairman Deepak Parekh, lending rates would ease only after deposit rates come down, which will take some time to happen. The statement comes at a time when most people hoped that banks would start lowering their lending rates, following the recent repo cut by the Reserve Bank of India (RBI).

TDI Infrastructure Ltd (TDIL) has announced a scheme for customers who wish to build their homes by offering subsidized construction and assured rentals.

A first of its type scheme, Build and Earn, will enable plot owners of TDI City, Kundli, to build their dream house while enjoying a rebate of about 20-25% on the overall construction cost. Kamal Taneja, managing director, TDIL, said, “Thus, if your plot measures 250 square yards, then you will get a rebate to the tune of Rs 2,50,000 on construction”.

Intended to relieve customers from construction-related worries, the scheme will also offer them rent for a period of 22 months post completion of construction, subject to the customer’s approval. Under the scheme, the company will build the house at an agreed price and handover the premises to the customer.

The company is offering two schemes – ‘Assured rent for 22 months post construction’ and ‘Gross Adjustment in the construction expense’. Various options under both the schemes are offered to customers so as to fit their pockets. The construction time spans between 10 and 12 months in either of the scheme. The plot owner will make the entire payment in four equal installments starting from the day of registration.

Taneja said, “Quality housing at an affordable price has always been our motto. With more and more people signing for this scheme, this will bring life to TDI City, Kundli – the new New Delhi.

Further he added, “We have received an overwhelming response to the scheme. We will immediately start the construction work. We will continue to launch such innovative schemes that will boost confidence of our customers, who have been associated with TDI for long”.

The real estate sector in India has grown 30% to 35% during the last five years, reflecting the rapidly-increasing demand for office, commercial and industrial space, as well as bigger homes now considered within the range of India’s prospering working classes. But the economic juggernaut has been slowing since earlier this year due to double-digit inflation, a severe liquidity crunch as fallout of the U.S. sub-prime crisis, and now, the possibility of economic activity shrinking as part of a global slowdown. The country’s growth estimates of 9% at the beginning of the year have been revised to well below 7%, and the effect is directly visible on the realty sector. “No one’s buying any more,” says Ashwani Shukla of New Delhi-based Triveni Associates, “Two years ago, 25-year-olds earning fat pay packets from [multinational corporations] were buying high-end apartments. Now, there are no takers for flats selling at 20% markdowns. Estate agents are finding it difficult to even meet daily overheads.”

Shukla himself has branched out of real estate and started selling insurance six months back, “to pay the bills.” According to various estimates, sales in cities like Mumbai and Chennai are down 30% to 40%. Hoping to induce buyers at Diwali, realtors are advertising cash discounts of 5% to 10% for down payments, and as much as 25% discounts if buyers are willing to wait two to three years before taking possession of the property. “But there is no liquidity with the end user,” says Arvind Nandan, director of consultancy at real-estate consultants Cushman and Wakefield India, “Home-loan rates have hit the roof, and people’s investments have lost value at the stock market. No one has the money to buy.”

Potential home buyers, who have been deferring their purchase decisions, may have to wait till April-May to get a good deal.

The ripples of the ongoing financial crunch, coupled with mounting pressure from various other circles, will peak between January and March. That’s when many developers will be forced to sell the unsold stock at a much cheap price.
Anuj Puri, chairman and country head of Jones Lang Lasalle Meghraj said, “The signals are very much visible. Developers are already offering lots of freebies. I feel, they will hold on to prices till the end of the festive season. If sales are not happening in the current quarter, the Jan-March quarter will see a price crash in some pockets, and in the first quarter of the next fiscal, developers will be forced to sell homes at a much lower rate as their loan repaying capacity will be under challenge”.
He added that in the current market scenario, if developers want to bring some cash flow into their company that will happen only by selling their residential and commercial properties. “All other routes are drying up,” he said.
India’s property market has been among the hardest hit by the global financial turmoil as high interest rates and gloomy economic prospects have driven out buyers and squeezed funds for real estate developers.
Through this year, property prices have already declined more than 10-20%, though in cities like Mumbai and Delhi, prices are still too high for a middle class consumer. Developers like Orbit Corporation have already cut prices by 20% from Rs 26,000 to Rs 21,000 at Parel in Mumbai.
Broking firm Edelweiss Securities in its recent report on real estate said property prices are likely to decline by 10% in the current calendar and another 15% by the end of the current financial year.
“I feel, by the end of the year, developers will feel the real pinch of the current financial crisis. They have to cut prices to keep the wheel rolling. It would happen early next year,” said Pranay Vaikil, chairman of Knight Frank India.
Industry official said, though the rate cut by RBI will improve the confidence level of consumers, it will not reverse the ongoing trend in the market as most buyers will prefer to wait and watch.
“While the repo rate cut signals the reversal of the interest rate cycle, it might be too early to conclude on its impact on the real estate. With liquidity remaining tight for India Inc, home loans rates might see some softening by select players, as the uptake at current rates for residential borrowers is dwindling. Such a move could revive the demand in residential real estate market, that has seen sudden drop in recent times,” DTZ director Ambar Maheshwari said.
According to industry officials, many realty companies were banking on the stock market and foreign investors for new projects. As those sources dry up with the global meltdown, they will be forced to cash out, even if it means selling existing stock at a lower price.

Deloitte Haskins Sells partner Jayesh Kariya said, “Those with a strong financial background would still be able to hold on to the inventory but the ones with leveraged positions will give in to the pressure. The picture would be much clearer by the end of the current year. This period beginning from late December ’08 to March ’09 could provide a good buying opportunity for homebuyers”.

Developers are admitting that there aren’t too many transactions taking place. The festival season between Dusshera and Diwali has traditionally been the time when most families choose to move into their new homes. “Though enquiry levels are increasing, it is not translating to actual deals. Consumers are still hesitant,” said a Mumbai-based developer.

Shares of Indiabulls Real Estate surged over 22% to Rs 131.15 on BSE Tuesday, while Indiabulls Financial Services climbed over 7% to Rs 105.60 after the company assured of not having any non-performing loan in its portfolio.

The financial services company reported a net profit growth of 21.4% to Rs 136 crore for the second quarter ended September and said that it does not plan to expand its loan portfolio from the current Rs 11,000 crore due to adverse market conditions.

The company saw loan repayments of Rs 2,000 crore during July-September and did not face any problems with large-ticket loans, Director Gagan Banga said.

Brokers said market sentiment has improved on positive move taken by the central banks to ease liquidity crisis that boosted the financial and realty stocks. Realty index of BSE was up 7%, while Bankex was up 4% in afternoon trading.

RBI has cut the repo rate by 100 bps to 8%. This is effective immediately. The Finance Minister, P Chidambaram said that the repo rate cut will help in moderating inflation. This is a positive move which will enthuse both borrowers and investors, Mr. Chidambaram added. The RBI’s move is consistent with the government’s aim of maintaining high growth, he added.

This news may come as a boon for the realty companies as it may help bring down loan rates. This is the first repo cut since 2003.
We feel that a lot of liquidity is already infused in the past ten days. The move may not have an immediate impact on stock prices. Confidence will not come just because of a CRR cut or a repo rate cut. But once global markets recover, this will give a further boost to stock markets.

Property developers in India are offering massive discounts as the markets suffer from the global finance crisis. There are offers everywhere. Posters declare – discount bonanza – and the deeper you delve the better the bargain.
Offers include free covered parking spaces, exemptions from preferential location charges, discounts on the rate per square feet of the property, paid interest and holidays.
Some developers are also offering to pay stamp duty and registration fees which can account for between 4 and 10% of the cost of buying a property. Then there are offers to pay electric bills for a set period.
‘These offers are being used as a marketing tool mostly by developers in Delhi, Mumbai and Chandigarh. The trend is likely to continue till the interest rates come down to a moderate level and capital values cool off,’ said Sandeep Goel, managing director of MSX Developers Pvt Ltd.
It is interest rates that are causing property prices to fall as purchasers can’t afford to buy. The rate has gone up from 7.5% to more than 12% and this has obviously shocked the homebuyers whose budgets have gone haywire. ‘As a result, the buyers are going in for smaller tenements or waiting for interest rates to fall. This festive season, we are offering heavy discounts on down payments,’ said Rakesh Yadav, managing director of Antriksh Housing Constructions.
However developers remain focused and they believe that prices will start rising again. ‘For actual buyers it is the right time (festive season) to buy property because the coming time will be more costly. The industry senses that the long-term forecasts for the sector continue to be good,’ said J B Kramchandani, senior vice president of Parsvnath Developers.
‘Two and three tier cities are also driving the investment and growth phase of the country owing to the huge unexplored potential in these cities. Still, these offers are a good deal in terms of potential price appreciation,’ he added.
However not all developers are making offers. Sanjeev Srivastava, managing director of Assotech Limited, said his company does not believe in offering sops to sell apartments. ‘The kind of quality we have delivered to date and our past record of timely delivery of property has created a strong goodwill in the minds of our prospective buyers,’ he pointed out.
‘Buyers who are booking their properties with us during the current Diwali season, are pretty confident about the Assotech brand and its commitment to provide innovative and cost effective product in due time,’ he added.

MUMBAI: Financiers have started talking tough with Indian property firms in trying to salvage the money they had lent. “Sell-before-it’s-too-late” is a point that some of the big lenders are driving home, while a few overseas funds which had committed equity investments in tranches have gone into arbitration to wriggle out of the promise.

Most builders were prompt with interest payments till September 30. But lenders now fear that many would default in the December quarter or may be even earlier. A large builder has already failed to pay interest to a foreign fund, which had purchased the structured securities at the peak of the property boom.

Banks and institutions have lent over Rs 75,000 crore to Indian builders. This does not include around Rs 25,000 crore worth of bonds and debt papers which mutual funds had bought. While the total value of land and properties held as collateral is more than the outstanding loan, it’s still cold comfort. If builders start defaulting in a big way, the lenders will be left holding huge tracts of land amid crashing property prices.

The lenders said that in some cases, loans coming up for repayment in October and November will not be rolled over — a threat they feel could push some builders to sell properties at a lower price and service the loan interest.

Some of the loans are on a rental discounting model, which means the builder pays the loan interest every month out of the rental income from commercial properties. For construction finance, the loan is cleared in equal quarterly installments, where the amount — like individual home loans — consists of interest and part-principal. A trickier situation is where properties are lying half-built or have been nearly completed, but potential tenants like brokers and finance firms have backed out with the downturn in the market.

But lenders know that they can’t push too hard. “We are targeting to meet the borrowers separately to assess their respective cash flow positions. We have to take a case-by-case approach,” said a banker. What’s worrying them is the huge leverage in the real estate sector, with most builders bringing in relatively little money as their own capital to borrow big-time against land banks.

NEW DELHI: Office space absorption in the country has gone down by 41.11% cumulatively in the three quarters ended September this year, as a fallout of the global economic slowdown.
The total office space take up between January and September this year stood at 5.3 million square feet as against 9 million square feet in the corresponding period last year, according to global commercial real estate services firm CB Richard Ellis (CBRE).
“The global economic slowdown has started to show early signs of impact on the offices market. The third quarter of 2008 has seen some decline in the office space take up across the country. Going forward, this is expected to keep office rentals under check,” CB Richard Ellis Chairman and Managing Director (South Asia) Mr Anshuman Magazine said.
In its quarterly ‘India Office Market View’ report, CBRE covered seven cities and found that the cities showed a marked slowdown in demand and office space leasing that had moderated in the first two quarters of the year.

Real estate entrepreneur Vijay Raheja has lined up a raft of projects in Mumbai and Bangalore for the next six months to a year—braving a slump in the property market after splitting the family business with his brother in July—and started with a development targeted at the rich.

His company, V Raheja Design Construction launched its first project post the split on Dussehra—the Verena luxury villas spread over five acres in east Bangalore’s Whitefield neighborhood where each unit has been priced at Rs 6 crore.
“There are 40 villas, and all will be sold by invitation. Other residential and commercial projects will be launched gradually,” said a senior official at the company who manages the Bangalore operations, but did not want to be identified.
Raheja is working on projects including an IT park, Gigaplex, a residential project, Buena Vista, and a commercial property, Raheja Chambers, in the city.
In Mumbai, an information technology park is under construction.
Raheja and his younger brother, Deepak, split the 56-year-old B Raheja Builders between themselves and founded their own companies, ‘Mint’ reported on 7 July. The properties and projects of B Raheja Builders were divided between the brothers, with V Raheja Design taking over the construction of the new JW Marriott hotel at UB City in Bangalore.
“A Rs6 crore villa is overpriced where builders are unable to sell Rs3 crore houses in the same area,” Naresh Dandapat, regional director (south) at property consultancy Knight Frank India, said of the Verena villa project. But the official defended the pricing, saying, “They are exclusive and contemporary, and have been priced accordingly.”

It’s an initiative that could lead to a facelift for Malabar Hill, Mumbai’s toniest address, as well as Nariman Point and other areas in South Mumbai. The city collector has proposed to free government-owned land, which is currently locked in lease agreements, by selling it at market rates.

Real estate firm TDI Infrastructure plans to invest Rs300 crore in developing two township projects over the next 4-5 years.

An entire township of nearly four thousand new homes is being built in Southern India, dubbed a “mega project” for the country’s building boom.

With the domestic bourses taking cues from global markets, the realty stocks on Wednesday dipped 3.70% as bearish sentiments gripped the market.

Leading real estate players are optimistic about the RBI’s move to cut CRR and believe that this will help the flow of funds in the realty sector, enabling faster execution of projects. The CRR cut can also influence the boost of the realty market, provided there is a decrease in interest loans.

Choice Hotels is deciding to invest fifteen hundred crore rupees over coming two years to double the number of its hotels from the present twenty-five to fifty across India. The company has already started construction of twenty-one more hotels and has tied up with various construction companies. Choice hotels has done dealing with Amrapali group, Mittal group, Asterix group and Sabri group. Planning for hotels in New Delhi, Amritsar, Hyderabad, Pune, Chandigarh, Manesar, Gurgaon, Goa, Bangalore, Chennai, Ludhiana, Noida and Bathinda is going on. Choice hotels has contracted Amrapali group for 3 hotels, Mittal group for 2, Asterix group for 2 and Sabri group for 4 hotels.

The significance of the financial crisis that has hit the US economy can be measured from the fact that the cost of the rescue of these financial giants to the Federal Reserve and Treasury Department has been estimated at close to a trillion dollars.

With the global credit crisis leading to the worst slowdown in the Indian real estate market in recent times, agents and developers are hoping the festive season surrounding Diwali, the Hindu festival of lights, will drive away the gloom. Coming at the end of October, Diwali will prove a crucial period for developers as many Indians consider it to be the start of the Hindu business year and an auspicious time to start new ventures, buy property and expensive consumer goods.

In a move that may indirectly bring private companies under the scrutiny of Comptroller and Auditor General (CAG), the statutory body has decided to bring five new sectors including public-private partnerships (PPP) into its ambit. The other four sectors are environment and climate change, e-governance, social audit and regulatory bodies.