Mumbai:- Real estate and retail player, Wadhawan Group is now betting big on food and beverages and lifestyle segments and planning to invest around three thousand five hundred crore rupees in launching new restaurants format and luxury retail expansion plans.
The group has currently entered into a tie-up with Dubai-based Jumeirah Group in order to bring in South East Asian cuisine restaurants for the first time in India, branded as ‘Noodle House’.
According to Srinath Sridharan, vice president & head – strategic alliances, Wadhawan Holdings, “Dish Hospitality Private Ltd, an enterprise of Wadhawan Holdings Private Ltd, promoted by the Wadhawan Group, is planning to set up thirty five Noodle House restaurants in India at an investment of one thousand five hundred crore rupees in the next four years.
Further, Sridharan also informed that Dish Hospitality is planning to foray into the international Markets such as Europe and UAE in order to set up luxury dine-in restaurant called ‘Aurus’. Explains Sridharan, “By setting up luxury restaurants in these Markets, we hope to garner a huge return in investments apart from more customers.” The company has set up a luxury ‘Aurus’ dine-in restaurant in Juhu, Mumbai where a dine-in for two costs over six thousand rupees.
Wadhawan Lifestyle Ltd is planning to set up four US-branded ‘Christian Audigier’ lifestyle apparel and accessories outlets each in Markets such as Delhi , Bangalore, Hyderabad and Chandigarh. Sridharan Says, “We are also looking at setting up two US branded ‘Ed Hardy’ lifestyle apparel stores in India. Each store will have an area size of two thousand two hundred square feet.”
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India to sustain 10% growth for next decades
DUBAI — An Indian hedge fund manager has described his country as being in a charming spot” of economic progress, telling investors in the hospitality and real estate industry that India will be able to carry on an yearly growth of ten percent for many years.
Investment level rose forty percent of the gross domestic product previous year — a jump from twenty five percent five years earlier — while employment is growing at around three percent yearly, said Surjit S Bhalla, chairman and managing director of Oxus Investments Pvt Ltd. He addressed on 3rd may the opening of the fourth Arabian Hotel Investment Conference (AHIC), where he also noted the increasing number of urban women joining the labour force — to eighteen percent in 2005 from fourteen percent in 2000.
“The hype about India is real,” said Bhalla, who manages Dh91.8 million ($25 million) in the Indian equity market through his company in New Delhi. “It is in a charming spot of growth, and this can last another decade or two.”
He told Arab investors at the conference that India lacks infrastructures, but is set to surpass China in terms of GDP growth by 2010. India had an annual growth of 5.6 % between 1980 and 2002, mainly due to its on the rise middle class.
The three-day event devoted its opening session to opportunities in India’s hospitality market, which shares many similarities with that in the Gulf region. Both markets are growing tremendously and calling for environment-friendly buildings and infrastructures. Homi S Aibara, a associate at a leading hospitality consultancy firm in India, Mahajan & Aibara, said that three hundred nine million square feet of commercial space is being planned or under construction all over Indian major cities to augment the existing one hundred seventy three million square feet.
Real Estate MFs and REITS come cheap
Seven years after the proposal was first mooted, the Securities and Exchange Board of India (Sebi) came out with its draft guidelines for real estate mutual funds (MFs). This move has brought much joy and relief to the MF industry. Now, the industry is out to convince domestic investors that the move could not have come at a more opportune time. In these volatile times, real estate acts as a good diversification option due to its low correlation with equity and bonds. Besides, retail investors can now invest in actual real estate projects with amounts as low as a few thousand rupees.
Mr. Vineet K Vohra, MD & CEO, ING Investment Management, said, “Sebi’s move to launch realty MFs will not only foster diversification in the MF industry, but will also promote wider participation in the real estate sector”. Mr Vohra further said that the move will help bring the Indian market place closer to global norms. As for delivering returns, sample this… ING’s Global Real Estate Fund, which invests in shares of international real estate companies, emerged unscathed in the recent stock market turbulence.
The fund not only took the crash in its stride, but also delivered positive returns over the same time period. If you had invested Rs 10,000 separately in the BSE Sensex, BSE Realty index and ING Global Real Estate Fund on January 10, ’08, your investment would be worth Rs 7,900, Rs 5,500 and Rs 10,800, respectively, as on April 22, ’08. Sebi has given approval to two kinds of real estate funds. The first category is of real estate MFs, which will invest in real estate projects and mortgage-backed securities.
These will be closed-ended funds, listed on the exchanges. As their net asset values (NAVs) will be declared daily, investors will have the option to exit any day. So, you can now say goodbye to the old tradition of illiquidity in real estate investments. Real estate investment trusts (REITs, in short) constitute the second category of real estate funds. These products are very popular abroad. The most common version of this class of funds allows an investor to earn fixed income like returns through rents of commercial properties . Most REITs are listed on the exchanges and have tax incentives for investors.
Put simply, REITs work like fixed income instruments (rents as coupons), while realty MFs will seek capital appreciation (like a stock price going up) by investing in properties. For years, real estate was synonymous with lack of transparency in transactions and absence of an index, making it difficult to track prices. Various fund officials like ING’s Mr Vohra hope that the introduction of REITs in India will change all that. They are betting on such products ushering in greater liquidity to this asset class, as well as freeing up developer capital for further investment, changing the dynamics of the sector as well.
With the current real estate boom and no signs of any fall in demand for homes or offices, this may be the best time for investors to own a share of the lucrative realty sector. Real estate MFs and REITs offer the cheapest and most convenient way to do so. However, let’s hope that smoother legislative framework and a clear taxation policy will be put in place for these products, making them investor-friendly.
Real estate need talent and skills
The demand for talented and skilled individuals to power the growing real estate industry has increased. “The Indian real estate sector is maturing from the short-sprint mindset and is gearing up for the long distance stakes of sustainable real estate development,” says Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj, real estate money management and services firm.
Aniruddha Joshi, executive director, Hirco Group, concurs, “The real estate sector is expanding beyond the basic bricks and mortar. Demand for real estate in growing segments like retail, hospitality, healthcare, biotech, ITES, etc, is driving the sector. In the same way, SEZs (Special Economic Zones), townships, and IT parks have created demand for skills beyond just the conventional fields of architecture, and civil and electrical engineering, to specialised knowledge on infrastructure and urban planning. People with specialisations in environmental aspects are also preferred as developers and consumers become increasingly aware of ‘green’ issues.”
DLF setting up JV Company with Italian major Piquadro
Real estate developer DLF is learnt to be setting up a joint venture company with Italian leather and luggage accessory major Piquadro to hawk its products in India. This is part of the real estate major’s retail strategy to bring in some of the world’s leading premium brands across categories into the country.
At present, DLF is in the process of hiring people to drive the brand Piquadro in its portfolio. DLF spokesperson denied the development, saying the two companies were not in talks for any tie up. DLF has also entered into similar agreements with Italian brands Armani and D&G. Armani holds 51 percent in the joint venture. DLF is also setting up a joint venture with Italian luxury apparel and footwear brand Ferragamo.
The exact stake of the two parties in the proposed DLF-Piquadro JV couldn’t be ascertained. Indian FDI regulation allows 51 percent foreign ownership in a single-brand retail venture. Piquadro may open its first store in the DLF’s planned luxury mall in Delhi. The 20 years old Italian manufacturer and distributor of business bag and luggage have of late been focusing on expanding beyond its shores.
In its December board meeting, the company approved the setting up of a joint venture company in India, which will open new stores. Piquadro also plans to set up two separate companies in China and Abu Dhabi to drive business in those markets. The company already sells in 50 countries, but Italy accounts for almost 80 percent of its sales.
Piquadro, which is listed on the Milan Stock Exchange, reported a consolidated net profit of $6.2 million and turnover of $48.1 million for the nine month period ended December 2007.
At present, DLF is in the process of hiring people to drive the brand Piquadro in its portfolio. DLF spokesperson denied the development, saying the two companies were not in talks for any tie up. DLF has also entered into similar agreements with Italian brands Armani and D&G. Armani holds 51 percent in the joint venture. DLF is also setting up a joint venture with Italian luxury apparel and footwear brand Ferragamo.
The exact stake of the two parties in the proposed DLF-Piquadro JV couldn’t be ascertained. Indian FDI regulation allows 51 percent foreign ownership in a single-brand retail venture. Piquadro may open its first store in the DLF’s planned luxury mall in Delhi. The 20 years old Italian manufacturer and distributor of business bag and luggage have of late been focusing on expanding beyond its shores.
In its December board meeting, the company approved the setting up of a joint venture company in India, which will open new stores. Piquadro also plans to set up two separate companies in China and Abu Dhabi to drive business in those markets. The company already sells in 50 countries, but Italy accounts for almost 80 percent of its sales.
Piquadro, which is listed on the Milan Stock Exchange, reported a consolidated net profit of $6.2 million and turnover of $48.1 million for the nine month period ended December 2007.
SEBI clarification on real estate MFs
MUMBAI: The SEBI on Friday said real estate mutual funds can invest in properties located in million-plus cities and urban agglomerations. Issuing a clarification, SEBI said the cities for investment by real estate mutual funds would include thirty five cities in million-plus urban agglomerates and twenty seven under the million-plus category as per the Census 2001.
DLF assets raises $450 million from Symphony Capital ; Singapore IPO on cards
DLF Assets, the property fund of DLF Ltd, India’s largest real estate developer by market capitalisation, has raised $450 million from Symphony Capital, a London based investment firm. DLF Assets has earlier received two hundred million dollars from a fund sponsored by Lehman Brothers and $400 million from another global investment firm DE Shaw for an SEZ project. The investors got the representation on the board of directors of DLF Assets. DLF Assets Pvt. Ltd. or DAPL is independent of DL. It was set up for bidding along with other companies in potential assets sale by DLF Ltd.
Meanwhile, DLF Assets owes money to DLF, a major chunk of which it planned to pay off via its proposed listing as a real estate investment trust in Singapore. But due to poor market sentiments and a global market slowdown, it had to put off its listing.
It was looking to raise $1 billion through the public issue. DLF Assets has however paid up the bulk of money it owes DLF for the last year but still owns nineteen hundred crore rupees. The fresh infusion of funds from Symphony Capital would enable DLF Assets to partly pay up the money it owes DLF.
Further, seeing DAPL’s inability to raise funds through an IPO, the parent company DLF has also reversed the sale of fifteen hundred crore rupees worth of office assets to the group company DLF Assets, thereby reporting a reduction of eight hundred crore rupees in the PBT for the quarter ended March ‘07. Had the sale not been reversed Q4 PBT could have been Rs thirty five hundred crore rupees versus the reported Rs 2,704 crore. The reversal of sale is on account of properties not qualifying as IT/ITes SEZs.. DAL will now hold only IT/ITeS properties and this action will benefit DAL.
Meanwhile, DLF Assets owes money to DLF, a major chunk of which it planned to pay off via its proposed listing as a real estate investment trust in Singapore. But due to poor market sentiments and a global market slowdown, it had to put off its listing.
It was looking to raise $1 billion through the public issue. DLF Assets has however paid up the bulk of money it owes DLF for the last year but still owns nineteen hundred crore rupees. The fresh infusion of funds from Symphony Capital would enable DLF Assets to partly pay up the money it owes DLF.
Further, seeing DAPL’s inability to raise funds through an IPO, the parent company DLF has also reversed the sale of fifteen hundred crore rupees worth of office assets to the group company DLF Assets, thereby reporting a reduction of eight hundred crore rupees in the PBT for the quarter ended March ‘07. Had the sale not been reversed Q4 PBT could have been Rs thirty five hundred crore rupees versus the reported Rs 2,704 crore. The reversal of sale is on account of properties not qualifying as IT/ITes SEZs.. DAL will now hold only IT/ITeS properties and this action will benefit DAL.
Chaalo Gujarat : World Gujarati Conference
AHMEDABAD: After pitching ‘Brand Amdavad’ at home, Amdavadi realtors are now cementing plans to hard sell Amdavad realty to non-resident Gujaratis (NRGs) right at their doorway.
For the Gujarat Institute of Housing and Estate Developers (GIHED) has joined hands with the Association of Indian Americans in North America (AIANA) to host their first international property show at the second ‘Chaalo Gujarat: World Gujarati Conference’ to be held at New Jersey in August 2008. The first conference was held in New Jersey in September 2006.
The three-day conference-cum-exposition, in which nearly 50,000 NRGs are expected to participate, will primarily see Ahmedabad-based realtors pitch Amdavad as well as upcoming residential and commercial property projects worth over Rs 20,000 crore to NRGs.
The property fair will also showcase a glitzy Amdavad of tomorrow, replete with jumbo projects like Gujarat International Financial Tec-City, Sabarmati riverfront project, Bus Rapid Transit System, new international airport as well as a 3-D colour laser show and special film.
Land deals at prime locations in Metros losing its shine
The soaring land deals in prime location of metro cities, which had scaled astronomical levels in the past few years, seem to be losing steam. The deals being struck this year are at increasingly lower prices than the ones last year.
Parsvnath Developers has bought 1.18 acre land, jointly owned by Mahajan Industries and Videocon group in Connaught Place for Rs 200 crore. Compared to hotel major Leela group’s acquisition of 3 acres in Chanakyapuri last year for Rs 611 crore, Parsvnath land deal has come at a discount of almost 17 percent at Rs 169 crore per acre.
Parsvnath plans to develop retail and office space, while Leela is building a hotel. Real estate experts say Connaught Place and Chanakyapuri are comparable locations in the capital and should fetch similar rates if transactions happen at the same time.
In addition, the FAR (the ratio of developable space to total land) for both retail/office and hotels are the same at 1.5, according to Delhi’s new master plan.
Mr. Sanjay Verma, Cushman & Wakefield Asia executive managing director, said, “We have come to the end of one property cycle. Speculators have exited the market and we are seeing a softening in the housing market. This will now spread to the commercial market and then finally impact land prices. So with borrowing cost going up, and prices softening, the euphoria towards land acquisition has certainly died down”.
He cautions that there may still be several takers for prime properties such as those in Connaught Place in Delhi and Nariman Point in Mumbai. Mr. Verma said,“The land deals in prime city locations are very few and far between. So the prices, although, reflect the market sentiments, do not give you a trend”.
Parsvnath is planning to develop a luxury mall and office space in Connaught Place. The company plans to invest around Rs 100 crore in the construction of the mall, which is likely to be ready in the next 30 months.
Old Mutual Plans 4 New Realty Funds
After life insurance and property services, the $4.5-billion Old Mutual is planning to significantly increase its investments in the Indian real estate sector and plans to come up with four new funds that will invest One billion billion dollar each or more by 2015.
Colin Young, director, Old Mutual Investment Group Property Investments said “We have aggressive strategy and plan to have four funds of one billion dollar or more for India. We want to be among the leading retail developers in India by 2015 and one of the leading realty asset managers”.
Old Mutual also has plans to float a real estate investment trust (REIT) that will raise money locally and invest in yield-bearing office assets. Consequently, other core funds will buy properties developed by the offshore development funds.
OMIGPI, based in South Africa where it has developed a number of shopping centres, and Mumbai-based real estate firm ICS Realty, have floated their maiden five hundred million dollar property fund that will invest two-third of its corpus retail-centric real estate (in developing and managing shopping centres).
Triangle India Real Estate Fund, which was scheduling to raise five hundred million dollar and close by March 31, 2008, has managed to raise the seed capital of one hundred twenty five million dollar from Old Mutual, thanks to a difficult market.
Old Mutual is bullish on retail and is betting on tier-II and tier-III cities. “About eighty percent of the middle-class consumers live in these cities, where the penetration of organised retail is only fifteen percent. Here, people have the money to spend, but they are highly under-serviced by organized retail,” said Kanthawala.
“In these cities, land is existing at practical prices, and we have the chance to build large compelling centres. We buy huge parcels of land, and rope in big retailers to have their buy-in into the project,” added Kanthawala. The presence of big retailers acts as a hedge against competing centers that may come up.
The second fund from Old Mutual is likely to be a Sharia-compliant fund, which will be focused on offices and residential. Old Mutual will also set up a REIT once the government puts in the guidelines in place in the next one year, which will access local money and buy yield-bearing properties which are ready.
Old Mutual and ICS Realty have also set up Pioneer Property Zone, a property development firm to expand and administer shopping centres. This firm will now work completely for Old Mutual’s funds as its advisor in India.
Emmar’s Three SPVS
Goldman Sachs, Deutsche Bank and another financial investor are thinking to make a shared investment of eight hundred million dollar in three special purpose vehicles being created by real estate major Emaar MGF. Each SPV will have one financial investor.
Delhi-based developer is in advanced talks with private equity players and is likely to close three separate deals within 30 days. No comment came from Emaar MGF on this issue. The deals will be the first big fund flow into the real estate firm since February.
Emaar MGF was enforced to withdraw its seven thousand crore rupees offering, due to poor market response. Poor market response has also enforced DLF, Unitech and Indiabulls to suspend the Singapore listing of their real estate investment trusts. Though the flow of funds into the real estate sector has not stopped, developers are not ready to go in for equity dilution at the parent company level fearing lower valuations. This has encouraged most companies to look for private equity funding at project or SPV level.
Developers are targeting youth
MUMBAI, May 2 – Indian property investors are aiming lower- to mid-end house owners in the booming economy now that sales of luxurious apartments have slowed.
With the number of families earning more than five thousand dollar per annum set to double to around twenty million in the coming two years, demand for small and simple apartments is set to mushroom.
“We haven’t touched the tip of the iceberg,” Niranjan Hiranandani,founder of Mumbai-based Hiranandani Group, said about the potential demand for homes.
“Young people don’t have housing open to them,” Hiranandani told a property conference in Mumbai this week, where talk of mass housing was a hot topic.
The property market has boomed since India eased rules on inward investment in the construction industry in early 2005, partly fuelled by pledges by foreign investors that they will drive up to twenty billion dollar into the country.
But government figures show only about two billion dollar has actually been spent in the preceding three years. Real estate prices have cooled in the last six months.
Developers had piled into the top-end of the housing market where profit margins are highest, for example, building 2,000 sq ft apartments in New Delhi suburbs that sell for $250,000.
But a young couple working in the media or software industry, who together bring in $25,000 a year, would need something half that price.
Developers are targeting the young workforce in a country where double-digit salary hikes are common in sectors such as real estate, information technology and financial services.
With the number of families earning more than five thousand dollar per annum set to double to around twenty million in the coming two years, demand for small and simple apartments is set to mushroom.
“We haven’t touched the tip of the iceberg,” Niranjan Hiranandani,founder of Mumbai-based Hiranandani Group, said about the potential demand for homes.
“Young people don’t have housing open to them,” Hiranandani told a property conference in Mumbai this week, where talk of mass housing was a hot topic.
The property market has boomed since India eased rules on inward investment in the construction industry in early 2005, partly fuelled by pledges by foreign investors that they will drive up to twenty billion dollar into the country.
But government figures show only about two billion dollar has actually been spent in the preceding three years. Real estate prices have cooled in the last six months.
Developers had piled into the top-end of the housing market where profit margins are highest, for example, building 2,000 sq ft apartments in New Delhi suburbs that sell for $250,000.
But a young couple working in the media or software industry, who together bring in $25,000 a year, would need something half that price.
Developers are targeting the young workforce in a country where double-digit salary hikes are common in sectors such as real estate, information technology and financial services.
Parsavnath developers to develop hotel-cum-mall in Lucknow
New Delhi-based real estate developer, Parsvnath Developers, plans to develop a mixed-use project, Parsvnath Planet Plaza, in Lucknow. The entire project is expected to incur an approximate cost of Rs 120 crore.
The project will include a mall with hotel complex, food court and shopping zone, informs Deepak Mowar, Vice President – Hotels, Parsvnath Developers. The company will develop a 110 room, four star deluxe property as a part of the mixed use project. The hotel will be developed under the Fortune Park brand and will house two restaurants, which includes a coffee shop and a speciality restaurant. It will provide conferencing facilities, which accommodate approximately 100 persons.
Realtors are using risk mitigation strategies
In the scenario of high land prices and tight liquidity, builders are increasingly exercising caution and adopting risk mitigation strategies to move ahead.
Where 18 months ago, they were ready to throw money on land parcels, they are now more realistic in acquiring these and seeing what they can build on that piece of land, and the revenue they can generate from it. Developers thus have to think before they buy land.
In case of newly acquired lands and difficulties in executing the project, developers are looking to selling one of their land parcels to fund the other projects. There are also those who may use their land banks as collateral to raise funds for their current needs. Joint ventures have been happening in the past, but they are now increasingly happening in a market that is stretched.
Developers are increasingly getting into joint ventures with landowners, other developers or private equity funds. Here the reward is back-ended and the landowner will get a share of the profits after the project is completed and sold. In this arrangement, the upfront cash amount required to be put in by the builder is reduced and hence to that extent reduces his risk..
Modern India disclosed investment plan
Mumbai-based Modern India Ltd has planned two thousand crore rupees investment plans for Rajasthan. Further, it also plans to construct a five-star hotel in Udaipur and a special economic zone (SEZ) in other parts of the state.
Vijay Kumar Jatia, Chairman and Managing Director of the company told that they have identified land for the for a five-star hotel in Udaipur. They will very soon start acquiring land for the two hundred room hotel, which would developed near a lake.”The hotel project is predicted to cost one thousand crore rupees and the company is also interested in setting up a SEZ in Rajasthan.
The company through its subsidiary, Modern India Property Developers Ltd, is already developing an electronic hardware and software SEZ on around thirty seven acres of industrial land at Khopoli in Maharashtra, strategically located on the national highway 4 with connectivity from two sides.
The nine hundred crore rupees project is scheduled to be finished in three years and is being developed through a Special Purpose Vehicle in which MIL is a major stake holder. Besides developing a hotel and SEZ the company also plans to open a jewellery training institute in Rajasthan.
Vijay Kumar Jatia, Chairman and Managing Director of the company told that they have identified land for the for a five-star hotel in Udaipur. They will very soon start acquiring land for the two hundred room hotel, which would developed near a lake.”The hotel project is predicted to cost one thousand crore rupees and the company is also interested in setting up a SEZ in Rajasthan.
The company through its subsidiary, Modern India Property Developers Ltd, is already developing an electronic hardware and software SEZ on around thirty seven acres of industrial land at Khopoli in Maharashtra, strategically located on the national highway 4 with connectivity from two sides.
The nine hundred crore rupees project is scheduled to be finished in three years and is being developed through a Special Purpose Vehicle in which MIL is a major stake holder. Besides developing a hotel and SEZ the company also plans to open a jewellery training institute in Rajasthan.
Real estate expecting twelve billion dollar PE funds
Mumbai, With the Indian real estate market slated to grow 35-40% in value terms over the next two years, private equity (PE) players are lining up significant investments in the segment. Led by Blackstone and the PE arm of Deutsche Bank, a host of players—including Red Fort Capital Advisors, Starwood Capital and Walton Street—are expected to invest close to $12 billion combined in homes, offices, townships, hotels and other projects.
Red Fort Capital is preparing to invest Rs 3,500 crore, mainly on budget hotels, while Starwood is committing Rs 800 crore to Chennai-based Shriram Properties. Deutsche Bank will help Suncity Projects raise Rs 1,500 crore, and the Blackstone Group has said it would invest around $18 million (around Rs 73 crore) in Synergy Property Development Services. Kuldeep Chawla, director, Red Fort Capital, said, “We will focus on developing a chain of budget hotels by associating with local developers. About 400 budget hotels with 60,000 hotel rooms are expected to come up in India. We will look at investing in a diversified portfolio of properties.”
In 2006, Markets regulator Sebi opened up the real estate market to PE investments. The first year was a learning period. “The following year saw a real correction in the market, with large incremental growth rather than dramatic growth, where stock market money went into special purpose vehicle-level investments,” says Arun Natarajan, founder & CEO, Venture Intelligence India, which tracks the PE segment.
Balaji Rao, managing director, Starwood Capital said, “We are strategic partners with Chennai-based Shriram Properties to develop a three hundred acres township in Kolkata ,which requires an investment of five thousand crore rupees. Apart from Starwood Capital, Shriram Properties is also looking at raising funds from Walton Street Capital. Likewise, following its partnership with Synergy, Blackstone Real Estate is eyeing further opportunities here.
Experts say that in calendar 2007 alone, PE players would have invested five billion dollar in the Indian real estate sector. But there is need for investments of up to $18-20 billion, which are expected in FY09 and FY10, they say. Says Jayesh Kariya, partner, Deloitte Haskins & Sells, “Investments of one thousand four hundred billion dollar are being made by Real Estate Investment Trusts globally. Hence, more global investors will start looking at Indian realty.”
Red Fort Capital is preparing to invest Rs 3,500 crore, mainly on budget hotels, while Starwood is committing Rs 800 crore to Chennai-based Shriram Properties. Deutsche Bank will help Suncity Projects raise Rs 1,500 crore, and the Blackstone Group has said it would invest around $18 million (around Rs 73 crore) in Synergy Property Development Services. Kuldeep Chawla, director, Red Fort Capital, said, “We will focus on developing a chain of budget hotels by associating with local developers. About 400 budget hotels with 60,000 hotel rooms are expected to come up in India. We will look at investing in a diversified portfolio of properties.”
In 2006, Markets regulator Sebi opened up the real estate market to PE investments. The first year was a learning period. “The following year saw a real correction in the market, with large incremental growth rather than dramatic growth, where stock market money went into special purpose vehicle-level investments,” says Arun Natarajan, founder & CEO, Venture Intelligence India, which tracks the PE segment.
Balaji Rao, managing director, Starwood Capital said, “We are strategic partners with Chennai-based Shriram Properties to develop a three hundred acres township in Kolkata ,which requires an investment of five thousand crore rupees. Apart from Starwood Capital, Shriram Properties is also looking at raising funds from Walton Street Capital. Likewise, following its partnership with Synergy, Blackstone Real Estate is eyeing further opportunities here.
Experts say that in calendar 2007 alone, PE players would have invested five billion dollar in the Indian real estate sector. But there is need for investments of up to $18-20 billion, which are expected in FY09 and FY10, they say. Says Jayesh Kariya, partner, Deloitte Haskins & Sells, “Investments of one thousand four hundred billion dollar are being made by Real Estate Investment Trusts globally. Hence, more global investors will start looking at Indian realty.”
Realty space to gain from real estate MFS
The Indian real estate sector, currently facing strong headwind due to the credit turmoil as well as high inflation, is set to get a breather from the market regulator SEBI’s move to allow Real Estate Mutual Funds, says global consultancy giant KPMG.
Mr. Jai Mayani, KPMG’s Executive Director and real estate head in India, said, “Real Estate Mutual Funds (REMFs) have a useful purpose and a role which until recently was missing in the real estate ecosystem. REMFs should help ease the situation and compensate to some degree the relative absence of public equity and challenging debt markets”.
At present, not much equity funding is available to projects below 50 thousand square metres of built up area or 25 acres and there is hardly any domestic secondary market for stabilised income yielding assets.
Mr. Mayani added, “Besides, with foreign money not permissible in fully built up commercial, residential and retail assets, this is a good vacant space for REMFs”.
REMFs would buy fully built assets and it should help unlock capital for developers. Also, with 15% allocations, which REMFs would have towards under-construction assets, some additional equity should also be available for non-FDI compliant projects.
HCC sets up arms For key businesses
Hindustan Construction Company (HCC), a leading construction house, will transfer its real estate, infrastructure and investment businesses into separate fully-owned subsidiaries in an attempt to provide these high-growth businesses with a distinct focus and identity.
HCC officials said two subsidiaries, HCC Real Estate and HCC Infrastructure, have already been formed and the third, HCC Capital, is in the process. HCC will focus on large-scale construction and engineering projects.
HCC chairman and MD Ajit Gulabchand said that they currently have presence in many infrastructure segments. He added, “We feel the restructuring will help us focus on the untapped segments”. For the past few years, HCC has been witnessing a strong growth in all segments it operates.
Mr. Gulabchand said that the number of projects being executed has increased manifold. However, most of our growth has come from the construction sector and opportunities in the engineering, real estate and other infrastructure segments are yet to be fully explored.
On Wednesday, HCC shares rose 2.7% to Rs 132.50 on BSE. The three companies will have separate CEOs and will bid for projects in their respective areas. They will also raise money and form joint ventures on their own.
HCC Infrastructure will focus on build-own-operate and transfer (BOOT) project opportunities in roads, hydropower, airports and ports. HCC is now the single-largest contractor of the National Highways Authority of India. It constructed more than 490 km of road in 2007/08 over 500 km in 2006/07. Besides, HCC Infrastructure will also bid for large projects in airports and hydro power.
HCC Real Estate will execute projects in real estate. However, HCC’s flagship real estate project, Lavasa near Mumbai, will continue to be a separate entity. A CLSA report released last week said the country’s infrastructure development is set to accelerate, backed by greater private sector participation and improved finances of government and public sector enterprises.
HCC Real Estate would build commercial centres, service apartments and hotels. HCC is currently developing an IT park called ‘247 Park’, a 1.9 million square feet project, and two slum rehabilitation schemes in Mumbai. It has plans to develop townships in Mumbai, Nasik and Nagpur.
HCC is also planning to own and finance select infrastructure projects in the future. HCC would route its investments in infrastructure projects through HCC Capital.
While continuing its operations in the construction space, HCC would mainly focus on building engineering, procurement and construction (EPC) capabilities, besides acquiring, executing EPC projects. It also has plans to enter the winery business and has acquired 400 acres of land in Nasik. For the fiscal ended March 31, HCC’s turnover crossed Rs 3,000 crore while its net profit touched Rs 108 crore.
Emaar SPVs To Get $800 Million PE Funding
Goldman Sachs, Deutsche Bank and one more financial investor are likely to make a combined investment of $800 million in three special purpose vehicles (SPVs) which are being created by real estate group Emaar MGF. Each SPV will have one financial investor who will hold a minority stake.
According to sources, the Delhi-based real estate developer is at an advanced stage of negotiations with private equity players and is likely to close three separate deals in a month. Emaar MGF spokesperson declined to comment on the development. These deals, once clinched, will be the first major fund flow into the real estate firm since it withdrew its IPO last February.
Emaar MGF (40% of which is owned by Dubai-based leading property developer Emaar and 56% by Delhi-based MGF) was forced to withdraw its Rs 7,000-crore share sale, the third-biggest in the history of the country, due to poor market sentiments. Since then, markets have lost steam on global cues, leading to dramatic erosion in the market cap of real estate firms. Real estate biggies such as DLF and Unitech have lost 45% and 50% of their market caps while smaller players such as Parsvnath and Omaxe witnessed a close to two-third erosion of their market caps from their January peak.
The poor market sentiments have also forced DLF, Unitech and Indiabulls to postpone Singapore listing of their real estate investment trust. Though money flow has not stopped in the real estate sector, developers, including the unlisted ones, are hesitant to go for equity dilution at parent company level fearing lower valuation. This has prompted most companies to look at private equity fund at project or SPV level.
Emaar MGF, too, is raising funds at SPV level purely because the current market situation may not have given them the expected valuation. Three SPVs, where the PE money is likely to come, are expected to take up development projects across verticals: housing, retail and office. The exact projects to be undertaken by these SPVs couldn’t be ascertained, but they would be part of the projects already being undertaken by the company.
Some of the mega projects the company has undertaken include a 3,000-acre integrated township in Mohali, a 531-acre integrated township in Hyderabad and a 14-acre residential project in Chennai. The company is also executing the prestigious Commonwealth Games village project, where it is developing a 27.7-acre residential complex with an estimated saleable area of 1.8 million square feet.
The company also plans to develop more 200 hotels over the next 7-9 years. It has two equal joint ventures with Accor for 100 budget hotels and Premier Inn for 80 hotels. The company has also entered into separate management tie-ups with Hyatt, Intercontinental and JW Marriott to run a total of 26 hotels.
According to sources, the Delhi-based real estate developer is at an advanced stage of negotiations with private equity players and is likely to close three separate deals in a month. Emaar MGF spokesperson declined to comment on the development. These deals, once clinched, will be the first major fund flow into the real estate firm since it withdrew its IPO last February.
Emaar MGF (40% of which is owned by Dubai-based leading property developer Emaar and 56% by Delhi-based MGF) was forced to withdraw its Rs 7,000-crore share sale, the third-biggest in the history of the country, due to poor market sentiments. Since then, markets have lost steam on global cues, leading to dramatic erosion in the market cap of real estate firms. Real estate biggies such as DLF and Unitech have lost 45% and 50% of their market caps while smaller players such as Parsvnath and Omaxe witnessed a close to two-third erosion of their market caps from their January peak.
The poor market sentiments have also forced DLF, Unitech and Indiabulls to postpone Singapore listing of their real estate investment trust. Though money flow has not stopped in the real estate sector, developers, including the unlisted ones, are hesitant to go for equity dilution at parent company level fearing lower valuation. This has prompted most companies to look at private equity fund at project or SPV level.
Emaar MGF, too, is raising funds at SPV level purely because the current market situation may not have given them the expected valuation. Three SPVs, where the PE money is likely to come, are expected to take up development projects across verticals: housing, retail and office. The exact projects to be undertaken by these SPVs couldn’t be ascertained, but they would be part of the projects already being undertaken by the company.
Some of the mega projects the company has undertaken include a 3,000-acre integrated township in Mohali, a 531-acre integrated township in Hyderabad and a 14-acre residential project in Chennai. The company is also executing the prestigious Commonwealth Games village project, where it is developing a 27.7-acre residential complex with an estimated saleable area of 1.8 million square feet.
The company also plans to develop more 200 hotels over the next 7-9 years. It has two equal joint ventures with Accor for 100 budget hotels and Premier Inn for 80 hotels. The company has also entered into separate management tie-ups with Hyatt, Intercontinental and JW Marriott to run a total of 26 hotels.
Sistema will invest In Hospitality Sector In India
Kolkata, April 30:- Mr Alexander A. Chinyaev, the chief representative in India of Sistema said that after venturing into the Indian telecom business, Russian conglomerate Sistema is now planning to tap the real estate and hospitality industries in India. The London Stock Exchange-listed public sector company is looking at investing an estimated eight hundred crore rupees to construct office and commercial projects in the country by year end.
Talking on the sidelines of a conference organized by the Indo-CIS Chamber of Commerce here recently, Mr Chinyaev said, “We are looking to launch an ‘A class’ office and hotel projects in Delhi, Goa, Gurgaon, and in almost all the metros, including Kolkata. If we find proper partners, we will invest $100-200 million in a pilot project by the year-end.” Sistema, however, will not build residential projects in India, he clarified.
The company, which deals with thirty star hotels across the CIS countries, is also looking at building and managing hotels in India.
“We have plans to take part in the tourism business in India through exchange of tourists between the two countries. We can bring our tour agencies to India for this purpose. This will be supported by developing businesses like hotel and resort projects,” Mr Chinyaev said.
Talking on the sidelines of a conference organized by the Indo-CIS Chamber of Commerce here recently, Mr Chinyaev said, “We are looking to launch an ‘A class’ office and hotel projects in Delhi, Goa, Gurgaon, and in almost all the metros, including Kolkata. If we find proper partners, we will invest $100-200 million in a pilot project by the year-end.” Sistema, however, will not build residential projects in India, he clarified.
The company, which deals with thirty star hotels across the CIS countries, is also looking at building and managing hotels in India.
“We have plans to take part in the tourism business in India through exchange of tourists between the two countries. We can bring our tour agencies to India for this purpose. This will be supported by developing businesses like hotel and resort projects,” Mr Chinyaev said.
Retail real estate to see up to $10 bn investment by FY10
Mumbai, Apr 30 Developers and private equity players are set to put India’s retail space market on full throttle with investments worth around$5 -10 billion in FY09-FY10.
In moves that would lend retail space gigantic proportions, the Runwal Group and Singapore’s GIC will use a joint venture to launch a ‘Our City Centre’ retail mall over 1.1 million sq ft of area in Ghatkopar, Mumbai. In the second phase of their foray, they will develop another ‘Our City Centre’ over 7 million sq ft of area in Hyderabad. Mumbai-based ICS Group is their project advisor.
Equally bullish is Sheth Developers, which is building a shopping centre called ‘Viva City’ over1 million sq ft in Hyderabad and Thane, Mumbai. The company is investing four hundred crore rupees in this new retail development and has not associated with any private equity firms.
The sudden gush of investments has also swept across smaller cities. Media major Dainik Bhaskar Group will develop a 7.5-lakh sq ft retail mall in Bhopal. With construction already under way, the mall is likely to be up and running in December 2009. The mall comprises a basement, ground and six floors with seven anchor shops, 180 retail shops, six-screen multiplex and food courts. JMC projects have been appointed as the civil contractors and Bentel Associates, Mumbai ,are the property advisors.
HOT PROPERTY
Is it the exact price for the property? Perhaps this is the question that keeps on creeping in people’s mind ever since they make up their mind to buy or sell a property. So it is important to spot the right price for making a successful real estate deal. There are certain things which every one should keep in mind to arrive at the decent levels of property-valuation and deal are:
1. Excellent roads in the border of and within the society add value to the property.
2. Value depends on the profile of the locality where the property is located.
3. Connectivity with transport equally important for buyer’s point of view. In fact, property in surrounding area to these facilities makes sound investment proposition.
4. People avoids locality that are nearer to riot prone area or communally polarized.
5. Not to mention, green atmosphere, civic facilities like safe drinking water, continuous power supply and proper drainage system are the first choice of the buyer.
Babcock forms India team,eyes $2 billion assets
Australia investment bank manager Babcock & Brown hopes to invest in $2 billion of Indian property and infrastructure assets within three years and has poached nine investment bankers from ABN AMRO for the task.
Mr. Jaginder Singh Pasricha, executive director for business development in India, told Reuters the infrastructure specialists he pinched from the Dutch bank had started their fund on Monday.
Pasricha has spent the last year formulating a strategy for spending up to 40% of a $1 billion Asia infrastructure fund. This week he put together a new team in one fell swoop.
He said,”We know we’re the new boys on the block”.
The new Babcock & Brown team will approach Indian companies building roads, ports, airports and power plants.
Further he said,”We’d look to partner companies with some existing expertise with infrastructure”.
He added, “It could be a contractor with a few projects who needs a bit of hand holding and, if possible, a bit of capital”.
Investors have been increasingly drawn to Indian infrastructure as the government estimates about $500 billion will be needed to build new roads, airports and power plants by 2012 to keep pace with a fast-growing economy.
Warburg pincus invests $75 million in Jaipur’s unique affordable homes
‘Affordable homes business’ is going to be the next big trend in Indian real estate sector. Global private equity firm Warburg Pincus will invest $75 million in Unique Affordable Homes Pvt Ltd, part of the Jaipur-based Mannat Group company. The company will build affordable housing projects in North and Western India. In its first pure play real estate deal in india, Warburg Pincus will provide an initial equity line of up to $ 75 million to the venture. The deal was facilitated by Asipac. AZB & Partners provided legal advice to Warburg Pincus, while Chir Amrit Law Chambers assisted Unique Builders on the transaction.
Unique Builders, since its founding in 2003, has completed nine real estate projects – four residential and five commercial projects – mostly in Rajasthan. The company has a large land bank in Jaipur and its surrounding areas, and it plans to launch more projects in the residential, corporate/commercial and township sectors.
Unique Builders is now venturing into affordable homes with modern amenities on a large scale. The first of such projects under this joint venture with Warburg is MyHaveli @ Mannat-1, a 3,510-condo multi-family high-rise community project on Ajmer Road, which was launched in November 2007. The venture intends to invest approximately $150 million in this seed project. The company also has similar projects on the drawing board at two other locations in Jaipur, as well as in a number of other cities across Rajasthan, according to a release.
The firm’s past and current investments in India include Bharti Airtel (formerly Bharti Tele-Ventures), Ambuja Cement, Alliance Tires, Dainik Bhaskar, Gangavaram Port, Housing Development Finance Corporation (HDFC), Havells India, Kotak Mahindra, Max India, Moser Baer, Nicholas Piramal, Punj Lloyd, Lemon Tree Hotels and WNS Global Services.
JP Infrastructure Pvt Ltd Is Ready To Issue Public Offer
Ahmedabad-based realty player JP Infrastructure Pvt Ltd (JPIPL) is in initial phase of talks with a foremost PE fund to raise around two hundred crore. The company is also planning to come out with an initial public offer and had selected Cushman & Wakefield in December preceding year for valuation of its assets.
According to a source the realtor is seeks to divest about ten per cent. The company will have 6 months to one year time to come out with an IPO while making way for the PE firm to exit. In the meantime, it is planning a big township project in Ahmedabad, retail malls in Vadodara and Surat, corporate park in Lower Parel in Mumbai.