Lehman Brothers’ bankrupcy is likely to cost Indian real estate. It may impact the financial major’s existing investments worth $500 million in realty firms, including DLF and Unitech, besides drying up another $500-million worth of potential investment which was expected to flow into Unitech’s Mumbai projects.

The news of Lehman’s collapse brought the BSE realty index down by 7.65% on Monday, while the benchmark Sensex declined 3.35%. Both DLF and Unitech fell 7.5%.

Lehman’s fall signals a deepening of credit crisis for Indian developers, who have lately been battling falling sales, rising cost of construction and tightening credit. It is expected that the US-based firm is likely to go for a fire sale of its assets.

The financial service major was very bullish on India and was among the active investors in Indian real estate. Early this year, it had leased out an office space in Mumbai paying Rs 1 crore per month as rental. This would divert a part of fresh funds seeking to invest in Indian realty.

This is because global fund houses have country-allocations. And as they buyout Lehman’s stake in some of the Indian assets, they will end up diverting some of the fresh funds-in-hand to existing assets rather than investing in new projects.

“Lehman’s departure will impact future cash flows of real estate companies. In a market situation like today’s, it will be all the more difficult for the firms to raise funds,” says Karvy Stock Broking vice-president Ambareesh Baliga.

Lehman invested $200 million in DLF promoter group company DLF Assets last year and bought 50% stake in Unitech’s Mumbai project for $175 million a few months ago. It had also invested $80 million in Bangalore-based SEZ Gandhi City and was likely to hike its share to $300 million.

Lehman’s other investments include a 40% stake in an IT park project of Peninsula Land in Hyderabad for an initial investment of Rs 50 crore. It had also teamed up with Mumbai-based developer HDIL to bid for the redevelopment of Asia’s largest slum Dharavi.

Wherever the developers had received fund, they are safe. But where the funds are yet to come, the developers could get stuck. Some analysts say a distress sale by Lehman will impact the valuation of existing projects.

DLF CFO Ramesh Sanka had earlier told ET that Lehman’s sale of investments in DAL would not impact DAL’s valuation. Unitech MD Sanjay Chandra said that his company had already received funds. So, the company won’t get impacted by Lehman’s bankruptcy.

Some industry executives say that FDI norms of a three-year lock-in period may prevent Lehman from making an immediate sale. But analysts argue that the lock-in period in case of bankruptcy may not hold.

Mumbai housing problem will ease to some extent in the coming year. The city will get its first rental housing project of 35,000 houses at Vasai’s Tiwri village. The project will be developed by Dhanashree Developers and is a part of the Mumbai Metropolitan Region Development Authority’s (MMRDA) ambitious plans for building five lakh rental houses in the next five years. The pilot project spread over 50 acres will have residential units of 160 square feet, which will include a cooking space, bath and water closet. The MMRDA has specified that it would give these houses only to bonafide Maharashtrians who hold a domicile certificate from the state and have a monthly income of more than Rs 5,000 every month. The rents of these houses would range from Rs 800 to Rs 1000.

With growing foreign investments in the country’s real estate market, long-term prospects of the sector look brighter, HDFC Chairman Deepak Parekh said.

“Long-term prospects of commercial real estate market continue to be positive owing to growing opportunities in sectors like healthcare, hospitality, logistics and education,” Parekh told reporters in Mumbai.

There is sufficient interest from foreign investors to take part in the country’s real estate market through private equity and foreign direct investment routes, he said.

In Q1 FY’09, about 20% of FDIs were in the housing and real estate sectors, he said, adding that the IPO market may take some time to recover.

The housing segment has enormous demand if the pricing is correct, Parekh said. “Given the huge housing shortage it is unlikely that there will be any saturation in the market for a long time to come.”

Advising buyers not to sit on the fence, Parekh said: “If you find the right house, go ahead and buy it.”

Interest rates over a 15-year period would inevitably move up and down. “So do not overstretch on a loan and maintain a sufficient buffer,” he said.

The present situation may call for some consolidation within the real estate sector and perhaps the need to create innovative financial instruments that could support financially distressed developers to tide over (the present period), Parekh said.

The eighth Indus India Property Exhibition will be held on 19 and 20 September at Giwana Ball room of the Ramada Plaza in Doha.
The exhibition will display some of the leading names in the Indian real estate sector. Some of the foremost builders and housing finance institutions from India would be taking part in the expo, organizers said.
Several residential and commercial property dealers from all over India will have their stalls at the venue.
The organizers said that the exhibition would bring under one roof reputable builders, diverse properties and the best financing options from the bank so that customers could shop for their dream home with minimum effort and maximum convenience.
NRI investors looking for real estate investments in India would have access to first hand information on an array of upcoming and current real estate projects, they said.
A variety of property alternatives from residential apartments, plots and bungalows to commercial properties would be on display.
The property would also offer the customers a broad choice with the best deals possible, the organizers said.
The real estate industry has several potential as various foreign real estate and finance companies have entered the Indian market. Moreover 100% FDI is permitted in real estate development and the Indian government has played a most important role in supporting the growth of the real estate sector by permitting NRI investment in real estate.
The previous exhibitions organized by Indus Group in Malaysia, Dubai, Muscat and in Kuwait attracted more than ten thousand investors and generated business inquires for more than twenty five billion rupees worth properties and transactions crossing Rs7.5bn during the exhibition days.

In what could lead to one of the biggest land transactions in the country, the Supreme Court will hear on September 16 two companies who have put in bids to acquire the entire land assets of the infamous Golden Forest India (GFIL) which is under liquidation. These two companies are Vavasi Group promoted by National Knowledge Commission chairman Sam Pitroda, and the Delhi-based real estate firm Chadha Group.

“We have received applications from these two companies for the takeover of all the assets of Golden Forests. As long as we manage to raise Rs 2,000 crore, which would benefit GFIL investors, we have no objection,” Justice RN Agarwal (Retd), chairman of the Supreme Court-appointed committee to sell Golden Forests assets told from Chandigarh. GFIL’s land assets are spread across Punjab, Haryana, Uttarakhand, Madhya Pradesh, Orissa and Andhra Pradesh.

“We have forwarded these applications to the Supreme Court, which is expected to take up the matter in its next hearing on September 16,” Mr Agarwal said. The bids are far more than Rs 2,000 crore of current liabilities which includes interest of the defunct company, Mr Agarwal said.

The former judge said that nearly 110 companies, which were floated by GFIL to buy land across the country, will need to be merged with the parent company first so that a bidder can take over the land bank. “This is quite complicated… a lot of legal formalities need to be completed first,” he added.

Analysts said the land bank of around 12,000 acre is approximately valued at Rs 5,000 crore. “We have managed to sell some small portions of GFIL’s land and have received part payment. This will also need to be ratified by the Supreme Court, along with Vavasi and Chadha groups’ applications,” he said.

Golden Forest India made news in the mid-nineties when the company raised funds worth Rs 1,000 crore from over 22 lakh investors across 11 states to invest in plantation schemes. But it soon defaulted on payments to the investors. So, Sebi — which bought all plantation schemes under its purview in 1997 — moved court and initiated proceedings against the company’s promoters led by its chairman R K Syal.

As the case against the company was heard across various courts, the matter was finally transferred to the Supreme Court. Four years ago, the apex court appointed a committee under the chairmanship of retired chief justice RN. Aggarwal, with two members, one each from the Reserve Bank of India and Sebi, for the purpose of taking into custody all the assets of Golden Forest and calling for claims of creditors and scrutinizing them. The court later asked the committee to auction all the assets of the company so that the investors could be repaid.

A banker told that Vavasi is doing a due diligence of GFIL’s assets and talking to various banks to raise funds required for taking over GFIL’s assets. A questionnaire sent to Mr Pitroda went unanswered.

Property developer and fund manager Tishman Speyer plans to raise up to one billion dollar in a private fund in 8-10 months for Indian realty projects, the managing director for its India unit said.

“We still have some money left over from a previous one and we are already talking to investors for our next fund, though we haven’t started road shows yet,” Revathy Ashok told reporters on the sidelines of a capital markets conference.

Tishman has raised three hundred fifty million dollar in a private fund this year and is funding three projects in south India, she said.

High borrowing costs and a stock market slump have forced real estate firms to look at private equity for funding projects.

Private equity investing in India and China held steady in the first half of the year, the Asia Venture Capital Journal said, with India seeing a 3.2% rise to $6.8 billion, and China registering a 3% gain to $5.8 billion.

Real estate prices in India have cooled this year after a 3-year boom as a series of interest rate hikes by the Reserve Bank of India to tame soaring inflation hit consumer demand for new homes and office spaces.

New York-based private equity firm Jina Ventures plans to raise up to two hundred million dollar by end-2008 to invest mainly in manufacturing firms in India, its managing partner said.

“We are talking to investors from Switzerland, the US and Japan and should be able to wrap up the fund by end-2008,” Ron Shah at the capital markets conference.

Jina Ventures had raised fifty million dollar in 2005, which it invested in 12 Indian firms and had exited these investments, Shah said.

He said the opportunities in India remained abundant, but the current market volatility would mean foreign investors may take time to turn up in a big way.

India’s main stock index has fallen about 27% this year after a five-year bull run, hit by uncertainty in world markets and domestic factors such as double-digit inflation and moderating economic growth.

Sarovar Hotels & Resorts plans to add nearly one lakh rooms by 2012.
It plans to add 33 hotels to the existing 35 in the next four years. “We are a multi-brand hotel management company and given the growth potential in the mid-market hotel segment, our group will continue to focus on it,” said Ajay K. Bakaya, executive director of Sarovar Hotels & Resorts.
Sarovar has five hotel brands in the country — Sarovar Premier and Park Plaza in the five-star category, Sarovar Portico and Park Inn in the three and four-star segments, respectively, and Hometel in the economy segment.
Park Plaza and Park Inn are run under the master franchise of Carlson Hotels.
Sarovar recently opened its budget hotel Hometel in Bangalore, Hyderabad and Mumbai. It plans to open five such hotels in Pune, Chennai, Chandigarh, Chennai and at Baddi. The company aims to open at least 50 Hometels in the next five years.
Among the new properties in the pipeline, Sarovar will open Sarovar Premier and Park Inn in Siliguri.
The chain also plans to come up with hotels in Jaipur, Pune, Port Blair, Ahmedabad, Amritsar, Bhubaneshwar, Raipur and Mohali.
Sources say the group is also venturing into apartment hotels. The first 135-room Park Inn and Suites is scheduled to open in Bangalore in April next year.
Sarovar recorded a turnover of Rs 300 crore in the last fiscal and is expected to post a growth of more than 30 per cent this year. It aims to boost its topline to touch Rs 400 crore this year.

With the saturation of metros and major tier I cities across the country, the focus has now shifted to tier II cities, which has turned to be fruitful for realtors.
Chandigarh has been overwhelmed by the response it got from the realtors who are keen to start their construction activities.
The three operational malls in Chandigarh include Fun Republic, Uppal’s Centra Mall and DLF City Centre.
Other malls that are likely to be operational within next few years are TDI mall and City Emporio Mall. Also Paras Downtown Square mall-cum-multiplex at Zirakpur is likely to be operational year only.
The success of these malls continues to remain a topic of debate for many however people of the city have welcomed such malls as they offer them variety.
They also help in creating employment opportunities for the locals.
According to local realtors one shopping mall creates job opportunities for around 200 people and with more malls opening in Chandigarh, the employment opportunities for local people could be in thousands.
The analysts from global real estate firm Jones Lang La Salle Meghraj maintain that the shopping malls undoubtedly are generating employment opportunities.

Axa Real Estate Investment Managers (Axa REIM) has set up its Asian headquarters in Singapore.

About 18 months after making its strategic move into Asia, Axa REIM has already invested nearly 25% of the $2 billion committed by its clients in the region. The new operations in Singapore are expected to help further build Axa REIM’s presence and leverage in Asia.

Axa REIM, a wholly owned unit of Axa Investment Managers, manages around $63 billion in assets.

“Asia is becoming a strategic destination for the real-estate investors and we want to support our Axa Group and third-party client efforts in diversification and creation of value,” says Pierre Vaquier, CEO at Axa REIM.

Frank Khoo has been named global head of Asia at Axa REIM. Based in Singapore, he will assume his post in mid-September and will report directly to Vaquier. He will also be part of the Axa REIM executive committee.

In this new role, Khoo will coordinate the development of Axa REIM’s investment and asset management activities in the region.

He will manage the development of investment platforms in Japan and India and will set up a local presence in other parts of the region which are important to Axa REIM’s strategy.

He will also contribute to the launch of Asian investment funds to develop Axa REIM’s asset base in Asia.

With over 15 years in the investment industry, Khoo has extensive experience in private equity and real estate and a deep knowledge of all the Asian markets.

Slump in the residential real estate sector in tier-1 cities seems to have spread over to tier-2 and tier-3 cities. Housing demand in small cities got down by 25% during February-July this year because of higher cost of borrowing. Besides rising cost, unavailability of inputs and power shortage also cause excessive delays in project completion.

The study by the Assocham said that realty transaction has gone down by nearly 25% in most of tier-2 and tier-3 cities between February and July of current financial year.

Assocham secretary general D.S. Rawat said that Approx fifteen million people in tier-2 and tier-3 cities were unable to make purchases as higher inflation and interest rate have dampened their enthusiasm and eroded their budget.

The Assocham study is based on feedback from affiliated real estate majors like Parsvnath, Omaxe, DLF, Unitech, and BPTP, which are developing projects in small towns.

Wealthy Indians are increasingly looking at land as a preferred investment avenue as volatile markets limit their options of asset classes.
About 48% of the high net worth individuals (HNIs), both in India and abroad, with investable assets ranging from 500,000 pounds to 30 million pounds (Rs 4 crore – Rs 240 crore), is looking to increase allocation to realty in the next 12 months, according to a report released by Barclays in association with the Economist Intelligence Unit.
Satya Narayan Bansal, chief executive, Barclays Wealth India, says, “This may be an indication of the confidence among investors who are looking at the current downtrend in the realty markets as an opportunity to make gains.”
Experts say these investments may go into real estate funds, stocks of companies that deal in property, as well as directly in land.
It’s not just in India that HNIs are buying. Allocation in property abroad is catching on in a big way. The UK and UAE are emerging as favourite destinations, which offer assured rentals and greater transparency.
Nipun Mehta, co-founder & CEO, Unitis Tower Wealth Advisors, says, “The trend of HNIs investing in land is more prominent in northern India than in the southern parts.
Initially, the buying was mostly in Tier I, where the property prices were perceived to be cheaper. Now it is spreading to Tier II cities also.” Property is being mostly bought in non-urban areas due to great potential for appreciation.

Indiabulls Real Estate today said it will raise 500 million dollars (about Rs 2,231 crore) through issue of shares to Qualified Institutional Buyers.
The company would issue equity shares or fully convertible debentures, partly convertible debentures or optionally convertible bonds, among others to raise 500 million dollars, it said in a filing to the Bombay Stock Exchange.

The proposal was approved by the shareholders in a meeting.

Shares of the company closed at Rs 278.65, down by 3.7% on the BSE.

Chairman Deepak Parekh said that the property funds of Housing Development Finance Corp (HDFC) and its asset management unit have more than $1 billion of available funding and will look to buy distressed real estate projects.

The funds are yet to buy any projects, but he said there could be opportunities within six months if the current downturn in the realty sector continued.

Parekh said, “I would like to see both my funds, the international and the domestic fund, play a much greater role in takeovers and buyouts of real estate projects which are facing difficulty”.

He said that India’s top mortgage lender, in which Citigroup holds a stake of about 12%, has an $800 million property fund that was raised overseas, and only a third of it is committed.

Parekh said that its asset management unit raised almost Rs 4,000 crore ($900 million) under its real estate portfolio management services business last financial year and has invested only Rs 300 crore.

Parekh said, “I expect that some of the developers who have bought land at exorbitant prices will not have the wherewithal to complete the development”. Further he said, “We will function like an asset reconstruction fund”.

After five years of boom, real estate firms are battling tepid sales and a cash crunch, with buyers scared away by rising interest rates and some signs of softening in property prices.

He said that a lot of developers flush with funds from the realty boom picked up land without setting aside enough for building the property, as they tended to fund developments out of customer bookings. But now the cycle had been broken.

Parekh said, “For the last 30 years we have been dealing with these builders in good times as well as bad times. We have had times when interest rates were 18% to 18.5%. We still survived and we still supported developers”.

“It is not the end of the world if prices come down 20% or 25%”.

Parsvnath Developers Limited (PDL), India’s leading Real Estate Company with pan India presence having diversified portfolio has announced the launch of Parsvnath Premier a Group Housing project in Parsvnath City, Indore.
The Group Housing project spread over an area of 6.3 acres is strategically located in Indore adjoining NH-3 and AB Bye Pass, Mangliya. The realization from the project is approximately Rs 60 crore and is scheduled to be complete by the end of 2011.
Mr. Sanjeev Jain, Managing Director, Parsvnath Developers Limited said, “At Parsvnath it has been our constant endeavor to explore opportunities to completely develop the fastest growing cosmopolitan city of India by furnishing it with residential and commercial projects so that it stands at par with the metro towns. In order to do so in the commercial capital of Madhya Pradesh where we marked our presence by launching Parsvnath City, an integrated township with IT/ ITES SEZ we are further launching Parsvnath Premier”.
Parsvnath Premier having 4.11 lac square feet of saleable area offers 300 units. The project comprising of ground plus five floors would be equipped with two and three bedroom flats. The project to be built with rich construction specifications offers a gamut of leisure activities.
Parsvnath also entered into an agreement with Madhya Pradesh government for expeditious and unhindered development of its 76-acre SEZ at Indore which will create direct and indirect employment opportunities for approximately 40,000 people and is developing 100 acre Integrated Township in Ujjain.

Anand Jain-controlled Jai Corporation, an infrastructure company, has raised commitments worth five thousand six hundred eighty six crore rupees through its venture capital management company’s two funds.
Urban Infrastructure Venture Capital, the company’s venture capital company, is the Indian Advisor to UIREF, a Mauritius-based offshore fund that invests in Indian real estate.
Urban Infrastructure Real Estate Fund, the offshore fund that was launched in May previous year, has raised commitments of around two thousand four hundred crore rupees till now. With an additional commitment of one thousand sixty five crore rupees in May, the second fund the Urban Infrastructure Opportunities Fund has raised its corpus fund to three thousand two hundred eighty six crore rupees, the company said in its yearly report lately.
Both funds invest in special purpose vehicles that are floated for real estate projects in India. Jai Corp plans to grow the SPVs into large real estate development companies by providing funding for various projects. The investment focus, according to the report, is on developing big integrated townships and multi-use developments.
The opportunities fund, which was launched in May 2006, raised two thousand two hundred twenty one crore rupees worth commitments at the beginning itself. After two years, it raised further commitments of one thousand sixty five crore rupees and 20% of it has been drawn down for seven years.
Anand Jain has been closely associated with Reliance Industries for a long time. He attended the Hill Grange High School in Mumbai, where Mukesh Ambani was his classmate. Jain is presently in charge of RIL’s SEZ foray. The fund’s target is in line with the plans of its core investor, Reliance Industries, said sources.
Jai Corp is a stakeholder in entities developing two SEZs – Mumbai SEZ and Navi Mumbai SEZ and the Rewas Port in Maharashtra.
It is planning mega play in power generation, transmission and distribution, water supply, gas distribution, engineering, procurement and construction and IT and telecom. The company makes cold-rolled coils, galvanized coils and corrugated sheets at its Nanded unit in Maharashtra.

South Mumbai, the most expensive property market in the country, may change for ever. A Supreme Court order has paved the way for redevelopment of the entire city, the impact of which would be primarily felt in South Mumbai, dotted with old, crumbling mansions.

While the decision would free vertical growth in a city that’s clamouring for space, it would put an enormous strain on Mumbai’s already creaky infrastructure.

On Thursday, the apex court upheld the Maharashtra government’s development control rule 33(7) (or, DCR) that allowed builders to avail of three to seven times the Floor Space Index (FSI) while re-developing old, cess buildings in the city. The FSI fixes the extent to which an open space can be developed.

The SC order brings to an end a protracted legal battle over one of the most contentious issues in Mumbai.

Close to 19,642 old, cess buildings in South Mumbai will be available for redevelopment — a possibility that could be a windfall for many builders. It’s unclear whether the extra supply in the coming days would have any significant impact on property prices. Even though property markets in several cities have crashed, the extent of correction has been rather insignificant in Mumbai.

According to the amended rules, developers can get up to 2.5 or even higher FSI for re-development of chawls constructed before 1940. For chawls constructed after 1940, developers will get, as an incentive, 50% additional FSI of the utilised area for rehabilitating existing tenants.

The builder community believes that the SC decision may throw open large housing stock in the market and eventually soften property prices. “This was one of the biggest hurdle in Mumbai’s development. Now, with SC settling the issue once and for all, the city will have as much as 200 acres of land open for re-development in the next 10 years. It’s a very significant development,” said Orbit Corporation director (finance) Ram Yadav.

“Not only builders; even the residents of Mumbai’s crowded suburbs like Thakurdwar, Zaveri Bazaar, Chira Bazaar and Grant Road wanted these rules to be made effective. With the apex court upholding them, it will bring in considerable relief to lakhs of residents of old, dilapidated buildings,” said Vardhman Group managing director Rajesh Vardhan. The goup is active in the housing re-development space.

The present turn of events owes its origin to the state amendment of DCR 33(7) four years ago, which left redevelopment at the discretion of builders. While the need for redevelopment was widely felt, many objected to the way the state government went about changing the rules.

Several city-based activists feared that it would lead to indiscriminate development in the island city. Former Mumbai municipal commissioner JB D’Souza, along with Cyrus J Guzder and Shirish Patel, challenged the state’s decision in a public interest litigation before the Bombay High Court.

The petitioners said the amended rules can allow builders to undertake redevelopment of even strong and comparatively new buildings. “This is bound to put a massive strain on infrastructure like transport, water supply and sewerage,” they had argued, while pleading with the Bombay High Court for quashing the order that amended the DCR 33 (7).

The petitioners had sought the HC directive to set up a panel of experts for certifying redevelopment of only dilapidated and structurally-unsound structures.

The then Chief Justice of the Bombay High Court, Dalvir Bhandari, and Justice DY Chandrachud had not only upheld the petitioners’ contention but ordered an interim stay on all redevelopment projects falling under DCR. The high court also had ordered the formation of a structural committee comprising three engineers to review “weak” buildings and decide whether these need redevelopment. Thursday’s Supreme Court verdict will once again upturn all this.

KOLKATA: Land prices have skyrocketed on Kona Expressway and stretches of National Highway-2 and National Highway-6. Call it the Singur ripple effect or impact of other projects like the DLF township project in Dankuni and logistic hub on Kona Expressway, land prices have risen at least six fold in the past four years.

Many brokers had even purchased land in the area hoping for the price to shoot up further. An acre of land which cost Rs 24 lakh even five years ago, fetches around Rs 2 crore today.

Property prices have shot up even further on Kona Expressway that serves as a gateway to Singur from Kolkata. Even in 2001, the price per acre there stood at Rs 12 lakh per acre.

“With projects like the Tata Motors small car plant in Singur, the DLF township in Dankuni, Kolkata West International City and the logistic hub on Kona Expressway coming up, it is obvious that property prices would soar. But the delay in these projects and the Singur stalemate are a matter of concern for many,” said Ram Ratan Chowdhury, managing director of Panchadeep Constructions Ltd (PCL). He has been a pioneer in bringing mega projects to Howrah.

If poor infrastructure and lack of development held back real estate prices on the western front of the Hooghly even a few years ago, the upcoming projects are changing the industrial landscape in the Howrah-Hooghly belt, thus pushing up property prices.

Less commuting time, excellent connectivity and ventures by big houses like the Tatas, DLF and the Salim-Ciputra group have made realtors make a beeline for land in the area. The Singur plant is just around 10 kilometre from the point where the Kona Expressway meets NH-6 and NH-2.

Real estate developers and brokers, who have invested in the stretch, are keeping their fingers crossed. For, they feel that the growth of price in real estate will be at a much slower pace if the Tata project shifts from Singur to an alternative location.

“The price of real estate does not change overnight, though there will be an impact on the price of land in that belt in case the Tatas leave. We hope that the Singur stalemate will be solved in a week or so at the most. If the Tatas stay, the price of land is bound to shoot up. Even if they leave, real estate prices will still go up but at a slower pace and rate,” said real estate developer Sumit Dabriwala, managing director of Riverbank Holdings Private Ltd.

Affected by slowdown and reported corrections in prices, the country’s real estate industry predict growth in the long term despite costly home loans and lack of funding for realty projects.

According to a most recent study by Ernst & Young and FICCI on the country’s real estate scenario, about 62% of the respondent developers expected the industry to grow in the long term despite a correction in prices by about 10-15% in the previous year.

Giving highlights of the report, ‘Realty Pulse’ to be released on September 10, Ernst & Young Partner and Leader Ganesh Raj said, “There has been a slowdown in demand and some correction also happened by about 15-20%. But this is momentary; the market will surely bounce back.”

Healthcare infrastructure, logistics and warehousing and affordable housing would hold significant growth potential in the Indian real estate sector, he added.

“The temporal slowdown in the market will be followed by sustained activity as a result of innovative formats, new geographies and flexible pricing and delivery mechanisms. Given the growth in residential housing, organised retail and hospitality industries, the sector is likely to see increased investment activity,” Raj said.

The report pointed out that respondents believe genuine end-users had ‘taken over’ from the investors and account for about 80-90% of sales in their current projects.

“Respondents expressed mixed reactions with regards to land valuations. Most of them seem to be reaching a consensus that land values are likely to see stability over the short to mid-term and may not witness any appreciation over the next 12 months,” it said.

NEW DELHI: The suspension of work at the Tata Motors’ Nano plant in Singur was unfortunate, but it would not deter foreign investors to India on a long-term basis, Bajaj Auto chairman Rahul Bajaj said.

“It’s a very unfortunate thing that has happened in Singur, but I don’t think that there will be any long-term effect on India’s position as an investment destination,” Bajaj told reporters here on the sidelines of the annual convention of the Society of Indian Automobile Manufacturers.

“I definitely want Tata Nano to come out from Singur and I hope it will come out in October itself,” he added.

Bajaj said West Bengal chief minister Buddhadeb Bhattacharya had worked “very hard” in the last four years to secure investments in his state, and a Tata pullout could prove to be a setback for West Bengal.

To a question that he had vested interest in the issue as Bajaj Auto had plans to launch a rival small car, Bajaj retorted: “Those who say this have selfish interest or are plain stupid. Those who say this are thieves, interested parties or plain stupid.”
“I have always advocated that nobody’s land should be taken without giving a fair price and against their will. I have been saying this for the last four years to the government,” he said.

“Bajaj Motors itself was set up on acquired land. I am nobody to comment against it, but all I am saying that development has to take place but at the same time, people need food security.”

The government had acquired 997.11 acres of farmland in Singur, about 40 kilometres from Kolkata, and given it to Tata Motors to set up the Nano small car plant.

However, from the very onset, the project has faced resistance from various political parties over the issue of acquisition of the land.

From Aug 24, the state’s principal opposition party Trinamool Congress has laid siege to the area surrounding the factory, demanding the return of 400 acres.

As a result, Tata Motors suspended work at the Nano factory for an indefinite period and signalled its readiness to pull out of the state.

Developer Nirmal Lifestyle Ltd has tied up with the American Tennis Association to use the US Open brand for amenities at its projects in India.
“We are building sports infrastructure as part of our lifestyle city projects and are doing a series of global tie-ups,” Chairman Dharmesh Jain said.
Under the 10-year arrangement, the Mumbai-based Nirmal will launch U.S. Open-branded tennis academy, club-houses, fitness centres and villas at its township projects under development.
Earlier this year, Nirmal had publicizde plans to set up five integrated townships at a cost of five billion dollar. It will set up another fifteen townships in the second phase.
Nirmal is presently developing a three million square feet shopping mall in Mumbai and a 1,080-room hotel project, jointly with France’s Accor.

MUMBAI: India’s hottest property market, Mumbai, could see some shakeup in the commercial realty space. In a significant development, the Mahrashtra government has decided to allow all upcoming IT parks and IT specific buildings in the city to utilise 80% of the total constructed area for financial services, besides IT and IT enabled services. At present only 30% of the total constructed area can be given to financial services.
In a notification issued last week, the state government said in order to develop Mumbai as an international financial hub and to generate additional employment, it has been decided that all such building which are eligible for additional FSI of 100%, can now utilise 80% of the total constructed area for financial services, apart from IT and ITES.
The government also considered the increasing demand of investors in the financial services sector before changing the IT-financial services ratio, the notification said.
The government’s move is expected to increase supply of commercial space in Mumbai and correct property rentals. It may be noted that a lack of supply has pushed Mumbai’s commercial property prices to $400 per sq ft, a rate close to the ones prevailing in London and New York.
Currently, more than 100 IT specific building are coming up in Mumbai and its suburbs. Besides, three to four IT SEZs have also been proposed in Mumbai. The state government has also extended the new amendment in the policy to other areas of financial services such as corporate finance, asset and fund management, broking, NBFC, research advisory tax and audit, business and management consultancy, transactions services, treasury operations risk management and credit services.
According to international property consultant DTZ’s latest report, with over 15 million sq ft office space expected to be completed in 2008, the demand from banking and financial services and ITES and other sectors could play a major role in determining the future growth of the commercial property market in Mumbai.
“This change in regulation is extremely positive, and will accelerate the expected commercial space market correction. Previously, only domestic companies could take advantage, now, we will see many MNCs also safely occupying this type of buildings,” said Pawan Swamy, MD (Markets) Jones Lang Lasalle Meghraj said. IT-specific buildings in Mumbai, for instance, have seen a significant upgrade in inquiries as result of this changed regulation.
Previously, there was a lack of enthusiasm about the potential of IT-specific buildings, since non-IT occupiers would not qualify for them. This impacted developers overall interest in launching such projects. However, there seems to be some confusion about the new proposal. Announced in 2003, the state’s IT policy is understood to be undergoing a major review after five years.
“The state government is currently working on new initiatives to be included in the said policy. The policy in its new avatar will come into force from January 2009,” a top official from the concerned ministry told. Under the circumstances, it’s unclear when the proposed decision about the use of developed space would come into force. The policy promises many tax sops, including 100% exemption on stamp duty, for the IT industry.

With Gujarat’s realty market showing signs of a slowdown, the Gujarat Institute of Housing and Estate Developers (GIHED) has its fingers crossed that the just concluded 3-day property show at World Gujarati Conference (WGC) will help keep the market afloat by raking in NRI business of around Rs 1,000 crore by March 2009.
The 50-odd Gujarat-based realtors , who displayed nearly 150 projects , are hoping that after having a peek at properties on offer , NRGs winging their way during winter break will buy into Gujarat realty .
While high-end apartments and bungalows were sought after and realtors claimed to have booked 15-20 units, GIHED vice-president Suresh Patel said the basic objective was not just to sell realty but promote Gujarat an investment destination . “Properties are not bought on impulse. It’s just a way to connect with NRGs , who usually get friends and relatives to check out property before they fly down ,” explained Ahmedabad-based Sangath group ‘s Nephal Shah, who claims to have distributed nearly 5,000 brochures .
Added Ahmedabad-based Parshwanath Realty Pvt Ltd director Rushabh N Patel, “There are many NRGs who haven ‘t been to Gujarat in years and are not aware of the rapid development .”
And despite a huge crash in property prices due to the sub-prime crisis and the fact that visitors found property prices at the show ‘inflated’, many showed keenness in buying property in Gujarat thanks to prospects of higher appreciation.
“I am sure prices are negotiable,” said conference participant Sanat Desai hopefully , even as Princeton (NJ) based architect Ramesh Patel was excited about the ‘phenomenal’ appreciation . “If I buy a house worth $ 1 million here, I will get twice the returns in 10 years, while in Gujarat I can expect it to appreciate 10 times,” he said. “Investment is the basic objective. We have a house here and don’t plan to move to India permanently even later,” said businessman Dhiraj Shah.

Bangalore’s residential rentals in central locations for mid-range properties for second quarter of 2008 have recorded peak values. Mid-range developments are properties quoting rentals between Rs 100,000- 120,000 monthly.
The values have gone up by 8-10% in two quarters and the main reason credited for this sharp movement is lack of fresh projects launched by leading developers.
Rentals of mid-range properties (Rs 20,000-40,000) located in eastern and south and south-eastern parts of the city have fallen by 11% and 4% correspondingly.
The excess supply of all grades of developments, appearance of newer residential locations and unexpected shift in interest towards north Bangalore have impacted the eastern and southern markets to a huge extent, said Cushman Wakefield-India’s Q2 Bangalore-residential report. Also Whitefield, Sarjapur Road, Outer Ring Road and Bannerghatta Road have an abundance of existing and future residential developments of a range of grades, leading to excess supply.
“However, the mounting rate of inflation and the existing cash crunch has led to stabilization in rentals across most areas, barring a few projects in both high-end and mid-range sectors since the first quarter,” the report added.
The coming quarter is not likely to witness any big changes in either capital or rental values in Bangalore’s residential sector. The current economic condition and the unstable stock market situation have changed the outlook for investment preferences in this sector.
Capital values are expected to continue stagnant across all areas in the future months, but are probable to weaken in Whitefield, Sarjapur Road, Outer Ring Road and Bannerghatta Road.

Real estate firms will enter into joint development for construction projects by selling land parcels to other builders, given the drop in sales of apartments and inflationary trends.

Pankaj Jaju, head-real estate practice, Enam Securities told FE, “Metros and Tier II towns having a huge pipeline of projects have witnessed a 60% drop in sales of apartments in the last six months.” Selling land parcels to other builders for joint development will enable land owners to invest in buying more land bank and increasing the supply of properties, he opined.

Rohit Gera, executive director, Gera Developers aired similar views. “The real estate market in Pune has witnessed a 60% drop in sales. If inflationary trends continue till December 2008, land value will undergo a price correction of about 30% by March – April 2008,” he said.

However, this will not impact consumers as developers will not charge a premium from them. Instead, as Gera revealed, “Large, medium and small developers have already started offering land to us for joint development. We are, in fact, waiting for price discounts at which we can borrow land from them for constructing their projects.”

Industry experts believe that real estate prices in Navi Mumbai and Bandra Kurla Complex (BKC) are expected to shoot up further by about 10-15% within the next six months if developers are not able to complete their projects on time.

The scene is not too different in Bangalore and Chennai, where the real estate market has started witnessing a rise in labour costs, mainly due to a crunch in the availability of labour, sources in Puravankara Projects told.

Raw material input costs for construction constitute 40% of total project cost. Since input costs are expected to rise further, the real estate market will witness a further dip in sales of apartments across the country.

The Rs 1,000-crore textiles-to-real estate major, Bombay Dyeing, will develop eight lakh square feet of property on its surplus land in Mumbai. The company will construct a high-rise building for commercial and residential use.

”We will commence construction of a high-rise tower in two months. The entire project will be sold off in the next 24 months,” chairman Nusli Wadia told shareholders at the company’s AGM.

Although it would be difficult to fix a value for the upcoming project, real estate market sources said that the company could earn a few thousand crores. However, the value will depend on the state of the real estate market, which has shown signs of weakness of late.

“It’s anyone’s guess where the market is headed for in the next two years,” said a real estate analyst on condition of anonymity. Bombay Dyeing had started selling its Spring Mills project at Dadar in 2006 at an introductory price of Rs 10,200 per square feet, which zoomed to Rs 25,000 per square feet in January 2008.

The company is redeveloping its Spring Mills property in Central Mumbai into a residential tower, 84% of which has been sold. The work at Dadar and Worli is also under way, with two commercial and IT/ITeS towers expected to be ready by 2009-10. “This is 45% ready,” Mr Wadia said. “Instead of our earlier plans to lease out part of the property, we are now looking selling,” he added.

Bombay Dyeing, which suffered a Rs 48-crore loss for the quarter ended June 2008, is likely to take a hit in the second quarter too. “We expect a further loss due to production of polyester stable fibre, which started in October 2008. The second quarter is also expected to be the same (loss-incurring). We see positive results in the third quarter,” Mr Wadia said.

The company’s stock closed at Rs 564.6, up 4.91% in a buoyant BSE. The company, which recently entered Dubai, plans to invest in other overseas textiles retail market.