Tag Archives: India

Dhanlaxmi Bank says will cut costs, not shutting branches.

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Indian private lender Dhanlaxmi Bank said it does not plan to shut down branches or shrink operations, but has initiated steps, including salary cuts, to control costs as it grapples with pressured margins.

“We have no plans to shut down any of our branches. We want to grow,” PG Jayakumar, the bank’s chief executive, told reporters.

The small-sized bank also plans to surrender excess real estate in metros and major cities.

Last week, the Economic Times newspaper reported that the bank plans to shut 30 branches in major cities as part of a revival plan.

The bank swung to a net loss of about 370 million rupees ($7.2 million) in the December quarter as costs soared and revenues shrank.

Consumers and businesses have rushed to park their money in long-term deposits, burdening banks with high costs, while lenders have been struggling to grow their loan books to boost profits.

“Strain on profits in one or two quarters is not going to affect us badly,” Dhanlaxmi said in a statement on Monday.

It plans to focus on loans against gold, small and medium enterprises and retail businesses for growth and expects a net interest margin of 2.5-3 per cent in the current financial year that ends in March.

The bank said it plans to raise 2 billion rupees each of tier 2 and tier 1 capital in the fiscal first and second quarter, respectively.

Shares of the bank, which has a market capitalisation of $126.3 million, ended down nearly 2 per cent in a weak Mumbai market on Monday.

Piramal Realty Acquires Gulita For 452 Cr From HUL.

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Piramal Realty has acquired Gulita – property in south Mumbai from Hindustan Unilever for R452Cr. Piramal Realty is planning to develop high-end luxury apartments on the one-acre land and Ajay Piramal might keep a part of it for his personal use, given the premium location, according to ET.

Gulita is a one-acre property in Worli Seaface, which used to house a training centre and private residences of senior executives of Unilever’s Indian arm.

Gulita was built in 1968 and the land was taken on a perpetual lease from the Brihanmumbai Municipal Corporation–the Mumbai civic authority. The property was put on the block after the company set up a new campus in the suburbs of Andheri and shifted its training facilities there.

Since HUL put the building on block, it has attracted several buyers which included Anil Ambani, Gautam Adani, Oberoi Realty and Sahara.

Last year, Piramal Realty acquired a plot of land in Mumbai from Mafatlal Industries Ltd for about R760Cr. Khushru Jijina – MD of piramal Realty said that the company plans to develop five residential projects in Mumbai at an estimated investment of about R1500Cr. The company will develop about 30 million sq. ft. through land acquisitions funded from its own sources.

Recently in real estate space, Housing Development and Infrastructure Ltd sold 2 acre plot in Mumbai to Adani Enterprises for R900Cr to repay its debt. Ascendas Property Fund Trustee Private Limited, the Trustee-Manager of Ascendas India Trust (a-iTrust) has acquired two operating Buildings in Hitec City 2 Special Economic Zone in Hyderabad, India, from Phoenix Infocity Pvt Ltd for R176.5Cr; while IL&FS Investment Managers bought Logix Group’s four office buildings in Noida for R600Cr.

 

 

JLL: Residential Realty Market is set to appreciate in 6 months.

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Jones Lang LaSalle India, a global research firm in the real estate sector, says that prices of residential units in India in the next six months should witness marginal appreciation. JLL says: “Over 60% of residential launches in the Top 7 cities (mostly in cities other than the NCR and Mumbai) are priced in the range of Rs 2,000-4, 000 per sq. ft., which meets the demand of middle-income buyers.”

At the same time, the RBI has given sufficient indications of probable cuts in key rates during second half of 2012, which will improve affordability for homebuyers and provide lower interest costs for developers. This will help in increasing the demand for residential units in the country. JLL also argues that even in the present bad condition, prevailing absorption rates are at nearly 10-12 %, which translate into an average absorption period of 8-10 quarters for a residential project. “This implies that at average prices, any average residential project should be sold out before construction is completed in around three years from the launch.”

JLL says that new project launches, which were slow in Mumbai and the NCR in the first half of 2011 due to approval and land acquisition issues, have now started to pick up. This should improve cash flows for developers having large land banks during 2012. A number of builders have acquired huge land banks on borrowed fund. As the builders pay huge interest rates, nearly 15-18 % on the borrowed fund, the servicing of debts has put huge strain on their finances. Any improvement in off-take is likely to release them from the financing pressure.

In the present slowdown condition, despite bad financial conditions, builders are not cutting the prices as in most parts of the country; they have priced their projects at nearly cost prices. “With rising input costs, developers do not want to sell below a threshold, which does not justify their minimum replacement returns,” JLL says. “This leaves home buyers with a small window of opportunity – the next six months – when home prices should witness marginal appreciation. After six months, a second wave of high appreciation is predicted.

However, in some of the micro markets in Mumbai and the NCR, the appreciation in prices was even sharper. In the last two years, in some of the markets like Gurgaon’s Dwarka Expressway, prices have almost doubled.

Overall, the Indian real estate market went through a slowdown in the last one year. But, all the predictions of a hard landing for the residential property market in 2011 and 2012 have failed to come true, so far.

Two Indian Real Estate Deals in Asian Top Ten list.

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Two real estate deals in India — the sale of Leela Kempinski Kovalam and Noida’s deal with Wave Mega City Centre – have been ranked among the top ten in their categories across Asia according to a recently published study by Real Capital. Both deals took place in August 2011.

Real Capital tracks and analyses real estate deals worth over $10 million across apartments, hotels, retail, industrial, office and development projects over the world. The Purchase of Leela Kovalam by Saudi Arabia-based industrialist Ravi Pillai, which was pegged at about Rs 500 crore ranked 10th in Asia-list of largest hotel sellers.

Bangalore and Mumbai have been named among the most active Asian markets in the office space.

Delhi was ranked sixth and Mumbai eighth in the most active Asian apartment markets. Tokyo tops the list followed by Singapore, Hong Kong, Osaka and Beijing. While Chennai comes in at eighth position among active hotel markets, India did not rank in the big league when it comes to retail deals.

Lemon Tree: To open 100 hotels in India by 2020.

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“By 2020 we plan to open 100 hotels in India with an inventory of around 10,000 rooms,” Lemon Tree Hotels Chairman and Managing Director Patu Keswani told reporters on the sidelines of the Hero Mind mine Summit 2012.

Lemon Tree Hotels is planing to open 100 hotels in India by 2020, with a total room capacity of 10,000.

The company also said it has put on hold plans to foray into real estate in partnership with US-based investment firm Warburg Pincus.

This year the company is opening two more hotels, he said without sharing details on the investment that would be required for the expansion.

Keswani, however, said the company plans to raise money from financial institutions or may even go public in the next two-three years. “In the next 2-3 years, we might look at public listing,” Keswani said.

At present, the company’s total room capacity is around 2,000. On the company’s proposed real estate foray, he said: “We have put that housing project in cold storage. It is not the good time to start a project like that.”

In April last year, the company had announced that it will foray into real estate with plans to invest over Rs 1,400 crore to launch housing projects in India in partnership with US-based investment firm Warburg Pincus. “We will wait for the Indian economy to become better and interest rates to come down…I do not see the situation improving in another 2 years,” he added.


Indians on top of the first time property buyers list in Dubai.

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While Dubai remains a hot and one of the favourite destinations of Bollywood. It has definitely fascinated other strata of India as well.
As per the Dubai real estate data, No other national has purchased property to the tune Indians have in 2011.

Indians have topped the list of first-time property buyers in Dubai in 2011, having bought properties worth 2.1 billion dirhams (Rs 292 crore), Dubai Land Department data has revealed.

 

The Indians topped the list of new investors in Dubai properties and conducted 927 transactions worth 2.1 billion dirhams. This represents 16 per cent of the overall value of transactions carried out by new investors,” the department said.

 

While it did not mention the nationality of the second largest investors, the department said the UAE nationals came third, having invested 1.575 billion dirhams (Rs 219 crore).
According to the department the new money flowing into the Dubai property market last year totalled 13.13 billion dirhams (Rs 1,825 crore).

 

Meanwhile, Asian investors formed 68 per cent of the overall number of investors in the sector, with the UAE nationals topping the list with 35 per cent representation of the overall number of Asian landlords, followed by Indians at 20 per cent.

 

If one can’t afford a home, then they should not buy one!

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Journalists are misleading the home buyers, said the savvy second-generation developer, reclining on the deck of his corporate yacht, anchored off the Gateway of India, sounding truly concerned about the fate of middle-class Mumbaikars. With all sincerity, he explained how the prices of land have gone through the roof, how the cost of material has shot up and how even the labour cost has nearly doubled. Of course, he didn’t talk about increasing profit margins. “When all input costs are going up, how can the price of real estate go down? By writing reports that realty rates could go down, you are only delaying their decision. And finally, they will have to pay an even higher price for the delay,” the young turk clad in designer suit said, adding as an afterthought, “Do they have a choice?”

I think they do. The choice of not buying a home at all; the choice of renting it out! What does rising input cost and galloping interest rate mean to someone who opts out of the realty acquisition spree? Like this friend, who owns a 1BHK apartment in Seawoods, New Mumbai, and has for long been planning to move into a bigger home. A 2BHK apartment in the nearby Seawoods Estate costs upward of Rs1.4 crore and even after selling the existing flat, he would have to take a loan of Rs1 crore to move into his dream house — with a monthly instalment of at least Rs1 lakh dangling on top of his head like a sword. The monthly rent for the same apartment is just Rs20, 000 — a saving of Rs80, 000 every month, not to mention the pressure of servicing a gigantic loan. It would be a pity to buy your dream home, and lose your sleep over it.

In these days of fluctuating fortunes and unstable jobs, locking into a lofty home loan may not be the best idea and living on rent may well be a smart move. Leave aside complicated calculations and the conventional wisdom that realty prices only go up, and living on rent makes better economic sense too. Imagine paying a fat instalment for five years, and finding that the price of your flat has remained the same, or even worse, gone down by 30%. Live on rent and not only do you get to keep all that money which would largely make the interest component of your home loan, but you also have the flexibility of moving to a new address, or a new city.
Not that we are new to the concept of living on rent. A good percentage of the population in the west lives on rent, as did a good percentage of Mumbaikars too, till just 25 years ago. Very few people had the resources to buy a house, and one’s own home was a result of a lifetime of hard work. The rest rented it out, and home loan companies did not even exist.
Should every Mumbaikar make the choice of living on rent, the young Turk on the yacht has a lot to worry about  not only about repaying his creditors, but also the fat installment for that anchored yacht!

 

“India is a top focus for Realty Moghul” says Trump Scion.

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Trump’s eponymous real estate group expects to sign multiple deals for Indian residential projects and hotel contracts over the next five years, despite a market riddled by regulatory uncertainty and bureaucratic red tape.

“India, among other emerging markets, is the biggest push for our organisation,” Donald Trump Jr, an executive vice president of The Trump Organization, said on Wednesday.

Trump, whose portfolio includes projects in South Korea and Turkey, in addition to hotels and skyscrapers in the United States, is close to signing a couple of deals with Indian developers, the younger Trump said without providing details.

“Equity investment will depend on individual projects and partnerships but first we would like to form relationships which allow us to understand the processes and spectrum better,” the 34-year-old said on the side-lines of a hotel conference.

The developer entered India last year with a joint venture partnership with Rohan Lifescapes to build a 45-storey luxury residential tower in Mumbai.

However, work on the tower, which will bear the Trump name but involves no equity from the U.S. developer, has been halted for about nine months since authorities said it lacked the necessary permits, a common problem in an industry wrapped in red tape.

Indian developers are often hit by changing regulations. In Mumbai, for example, the scrapping of a rule granting extra floor space in exchange for providing public parking facilities has meant many projects must reapply for clearances.

But Trump, whose father is worth an estimated $2.9 billion, according to Forbes, says the lure of an emerging India outweighs the regulatory headaches.

“The Indian market is starved for a good luxury product and it needs a brand like ours,” he said.

“I like the regulatory changes I am seeing. It may slow things down a bit but will create a level playing field and will help in eliminating the unknown for an outside investor coming in,” he said.

The company plans to focus expansion in the country on luxury residences and hotels, and would look at cities including Mumbai, Delhi, Bangalore and the state of Goa.

Some local players such as privately held Lodha Developers and Godrej Properties are emerging as strong brands in India’s luxury housing space, but the market remains fragmented.

And despite a slew of interest rate hikes that have cooled India’s overall property market and hit luxury developers particularly hard, Trump is bullish.

 

‘Simplify Administrative Procedures, Introduce Reforms’-CREDAI

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Simplify administrative procedures, introduce land reforms and changes in banking and taxation systems is the way to increase construction of houses, according to Mr Lalit Jain, National President of Confederation of Real Estate Developers Association of India (CREDAI). The developers have decided to make a representation to the Central Government on the issue of administrative reforms.

The governing council of the industry body will follow up on its representation, and in 45 days decide on further course of action, including going on strike, according to a press release from the confederation. The release said Mr Jain, addressing the annual governing council meeting in Pune, said the changes are needed to encourage the construction business. This will help increase the supply of houses and bring down costs. The Government and the private sector should partner to address the shortage in housing.

The real estate developers have been demanding the changes as they maintain that delays in getting project clearances, high land cost, high rates of taxation and shortage of funds in the real estate sector are driving up the cost of construction. The real estate developers’ organisation has emerged the main representative for the sector, as its membership includes more than 6,000 developers across 20 States and 100 associations in major cities in India.

Mr Pradeep Jain, National Chairman of CREDAI, said the industry body is encouraging self-regulation, by demanding its members to adopt a uniform code of conduct. The members discussed a range of issues that needed to be addressed, including the need for an affordable housing policy, undue delays in approvals, price rise, and standardising procedures across various States.

CREDAI is committed to disclosing the exact cost of a project, once the single-window clearance for approvals is set in place. Each developer will be required to mention the complete cost in each sale. In agreements with buyers, the developers must mention carpet areas in all sale material and agreements; each city unit will establish a consumer redressal forum for dispute resolution. Peer pressure and better understanding between buyer and seller helps resolve issues and save on cost and time for both parties and re-establish goodwill.

Leela Kovalam, Noida, one of the top high-value sellers in Asia.

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The sale of Leela Kempinski Kovalam was among the top 10 hotel deals in Asia during the past one year, shows data from the US-based research firm Real Capital Analytics.

Real Capital, which tracks and analyses real estate deals worth over $10 million across apartments, hotels, retail, industrial, office and development projects over the world, has also named Noida as a top site for sales in the development site category for a deal with the Wave Group for a mega mixed-use project. Mumbai and Bangalore also figure among the active office markets in Asia. In apartments, Delhi and Mumbai are part of the top league in the year ended March 31, 2012.

The Leela Kovalam deal, pegged at about Rs 500 crore, was the 10th in the Asia-list of largest hotel sellers during the one-year period. The Kovalam beach property was sold to Saudi Arabia-based industrialist Ravi Pillai last August.

The other big hotel players in Asia which sold properties at high value include Japan Hotel, LaSalle, Kingdom Holding, Hines and Shui On Group.

Even as Indian entities don’t figure anywhere in the top 10 global list vis-à-vis high value real estate deals in the financial year that just gone by, many of them have made it to the Asian hall of fame.

Noida, the industrial development area next to Delhi, is fifth in the development site sellers’ list in Asia. This was for a deal with industrialist Ponty Chadha-promoted Wave Group for the mixed-use project, Wave Mega City Centre, at an estimated price of $1.4 billion (about Rs 7,140 crore at the current forex rate), according to Doug Murphy, director (analytics) at Real Capital.

In the office space, Bangalore and Mumbai have been named among the most active Asian markets. “There were a number of locations for office sales in Bangalore and Mumbai, the largest being the Embassy Manyata Business Park transaction in Bangalore for about $537 million (Rs 2,738 crore) and Citibank building in Mumbai for about $224 million (Rs 1,142 crore),” Murphy said. Both transactions took place in August 2011.

Delhi and Mumbai are part of the most active Asian apartment markets. While Delhi is ranked sixth, Mumbai is eighth. Tokyo tops the list in high value apartment deals, followed by Singapore, Hong Kong, Osaka, Beijing, Delhi, Fukuoka, Mumbai, Nagoya and Kuala Lumpur.

India is nowhere in the retail top league where deals in Asia are concerned. Among hotels, Chennai is seen as an active market in the eighth position. Singapore leads as the most active hotel market in Asia, followed by Hong Kong, Shanghai, Tokyo, Beijing, Seoul, Osaka, Chennai, Kuala Lumpur and Suzhou.

Buyers back in Real Estate Sector this Navaratra.

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Buyers are back in the realty market this Navaratra, lending credence to this festive season’s reputation as a golden period for business in this sector.

There is flurry of activity in the offices of realty firms as buyers are coming out to seal deals. The mood is likely to remain upbeat till the end of summer vacation of schools.

“I am sure that this positive momentum in the market will continue till summer vacation when even more end users are likely to clinch deals,” Samir Jasuja, the chairman and managing director of Prop Equity, says.

“After Navaratra, summer vacation in schools is regarded a good time for realty, as people wait for the end of term of their children to shift houses or buy one. The summer is a time of transfers and relocation; a time of school admissions and hunting for a house near schools, so that children can have an easy commute,” Jasuja says.

Gaurav Mittal, the managing director of CHD Developers, says: “The mood is really upbeat in the market with people finalizing deals in property. While market warms up during Navaratras even during bad times, this Navaratra is different. The quantum of deals is unexpected, though a welcome development.”

Jasuja says, “Notwithstanding a slew of legal battles, buyers are taking a final call on their new purchases in Noida and Greater Noida.” A report of Prop Equity says that the current financial year has proved to be good for almost all the big cities of the NCR including, Noida, Gurgaon, Ghaziabad, Greater Noida and Faridabad.

Sanjay Khanna, the director of Kailash Nath Developers Pvt Ltd, says: “I hope the worst is over for realty market and transactions take place till the end of summer vacation in schools. This Navaratra is proving to be very auspicious for the realty world. I know that NRIs, too, find the summer months an ideal time to return to their roots in order to buy property. Their search for a property also starts during the summer. This is the time when they visit India in order to meet their relatives and, side by side, also look for nice properties. They do not mind paying slightly more for good properties.”

Realty watchers say that April-June period records a high quantum of property transactions. Realty market picks pace from Navaratras. This is a time when end users finalize their deals and those looking for new homes on rent, also shift. The summer is also a time when the resale market picks up nicely.

Vijay Jindal, the chairman and managing director of SVP group, says: “It is a hectic period from Navaratra and through the summer months. A lot of transactions take place at all levels.” He says that during the summer, buyers give priority to those projects which are close to good schools.

Income Tax Offices will be open on Saturday i.e. 31-3-2012 to facilitate filing of returns.

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The Financial Year 2011-12 closes on 31-3-2012 falling on Saturday. All the Income Tax Offices throughout India shall remain open on this day and the receipts counters shall also work during normal office hours.

This direction is issued for administrative convenience by the Central Board of Direct Taxes in exercise of powers conferred under section 119 of the Income Tax Act, 1961.

Accordingly, Income Tax offices will function from 9.30 am to 6 pm tomorrow to handle year-end rush.

Special arrangements may also be made by way of opening additional receipt counters, wherever required on 30th and 31st March, 2012 to facilitate the taxpayers in filing their returns of income conveniently.

These instructions may be given wide publicity – ORDER [F.NO.225/138/2011/ITA.II], DATED 30-3-2012

Chennai leads Indian Realty Sector.

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In a recent report, property broking and real estate consulting firm Jones Lang LaSalle said the Indian property market is poised to attract about US$3 billion, almost double last year’s US$1.6 billion, from overseas buyers this year.

The Indian property market will see more investment from overseas this year as it still remains an attractive investment destination globally.

Of this, one-third would be from home buyers and the balance from investors. This is despite the fact that property prices in India are at an all-time high.

According to a recent National Housing Bank (NHB) survey, property prices in big Indian cities have increased by as much as 43 per cent to 166 per cent in the last four years.

NHB, wholly owned by the Reserve Bank of India, lends to home-mortgage companies. It also regulates and refinances social housing programmes. In its report, the bank said Chennai had seen the highest rise in prices at 166 per cent. Bhopal was second with a hike of 117 per cent and Mumbai was ranked third with an increase of 87 per cent.

What then brings overseas investment to Indian property, when prices are skyrocketing? The answer is simple: Despite the global turmoil because of the financial crisis, the Indian economy has remained robust, largely due to domestic-driven demand.

According to Jones Lang LaSalle, India’s strong economic growth, rapid urbanisation, growing middle-class population, demographic advantage and increased thrust on infrastructure has worked in its favour. Buying property is especially popular among Indians living abroad, who all seem to want a piece of the homeland. That is why Indian property shows are burgeoning around the globe.

Dubai-based Sumansa Exhibitions has been holding Indian property shows across five countries. And every year the number of developers taking part in the shows and the attendees has grown rapidly.

Sumansa Exhibitions’ chief executive officer Sunil Jaiswal says: “We have held shows in the UK, South Africa, Hong Kong, Dubai and Singapore. They have been very well received by both exhibitors and visitors alike.”

This year Sumansa will hold the Indian Property Show in Singapore on April 14 and 15. It will be held at the Suntec Exhibition Centre’s hall 401 and nearly 40 developers from across India will be part of the show.

More than 200 properties will be showcased during the two-day exhibition. Sumansa expects the number of footfalls at the event to be much larger than the 4,000 that turned up at its last year’s event.

IOREC: Property Market In Mauritius a Profitable Investment.

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The sluggish global economy has not left the property sector unscathed, but the high-end estate market on the Indian Ocean island of Mauritius is showing remarkable resilience.

Murray Adair, CEO of the Indian Ocean Real Estate Company (IOREC) who is developing several luxury resorts in Mauritius in partnership with Flacq United Estates Limited (FUEL), says while there had been a slow-down in the property market, sales transactions in upmarket resorts on the island remain buoyant.

Adair says this is particularly true for resorts developed under the Mauritian Government’s Integrated Resort Schemes (IRS) which aims to encourage foreign direct investment. He pointed out that more foreign ownership approved units were sold in 2011 than in the whole of 2009 and 2010 combined. Under the IRS, foreigners are allowed permanent residence in Mauritius when they invest $500 000 or more in these designated resorts and they keep this status for as long as they own the property.

“We find that the IRS is definitely encouraging investment on the island. For example, over 50% of the properties at Azuri, a luxury beachfront village to be built on the coast about 25 km from Port Louis on the north east coast, have been sold off-plan since it was launched in September 2011,” says Adair.

Adair says while the International Monetary Fund in January cut its 2012 growth forecast for Mauritius from 4.1% to 3.8%, the country remains a sought-after tourist and investment destination. He says the tourism sector contributes 15% to the GDP of Mauritius and remains the biggest foreign exchange earner for the island.

“The Government’s initiatives to further diversify the economy and encourage investments from the Far East, including China, Russia and India will further enhance the long-term growth potential of the island,” concludes Adair.

India loses $210 billion in Coal Scandal.

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The Indian Parliament erupted in hoots and jeers Thursday after a draft report by government auditors estimated that the national treasury lost $210 billion by selling coal fields to private excavation companies in sweetheart deals.

According to the report, leaked to the Times of India newspaper, the primary beneficiaries were about 100 private and state companies that were handed contracts for 155 coal fields between 2004 and 2009 without going through a competitive bidding process. The report said that $210 billion — five times India’s annual defence budget — was a conservative estimate given that it relied on prices for low-grade rather than medium-grade coal.

The report represents the latest in a string of corruption scandals to hit the ruling Congress Party — others have involved the telecommunications, real estate and sports industries — that has left India’s leadership weak and bereft of policy initiatives. Opposition leaders called the latest revelation the “mother of all scams,” accusing the government of looting the country.

But auditors with the comptroller/auditor general’s office countered that the leaked draft is misleading, adding in a letter to the prime minister’s office that the figures publicized were the product of discussions held at a “very preliminary stage.

“We are examining the news report and I have called for records,” Coal Minister Sriprakash Jaiswal told journalists, adding that he wasn’t in office at the time of the suspect deals. “After that I will reply.”

The government said it has not received the report yet from comptroller/auditor general’s office.

India, the world’s third-largest coal producer after China and the United States, has seen a series of mining scandals. In August, the top elected official in south western Karnataka state resigned after being implicated in a mining scandal that a watchdog said involved $400 million. Three months later, a report claimed that almost 50% of the iron ore exported from western Goa state was illegally mined.

India is hungry for energy to fuel its fast-growing economy, and coal accounts for 70% of the mix, a percentage expected to grow, given limitations on the further development of power from nuclear reactors and renewable sources. Environmentalists, however, say increased production is ecologically unsustainable.

The John Marshall Law School will present “Real Estate Investing in India: Opportunities and Challenges” at an event.

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The Centre for Real Estate Law at The John Marshall Law School in Chicago will present the lecture “Real Estate Investing in India: Opportunities and Challenges” on April 4, 2012.

Risks and benefits that come with purchasing real estate in India is the topic of an April 4, 2012, lecture at The John Marshall Law School in Chicago. Guests Shahrookh Cambata, Scott Eisenberg and Marc J. Strauss will speak at the event.

The free program, from 8:30 to 11 a.m., looks at the interest in real estate in India. Investments have grown as the expanding real estate markets in the U.S. and Western Europe have caused investors to consider developing markets for better opportunities. Speakers for “Real Estate Investing in India: Opportunities and Challenges” will discuss the risks and benefits of investing in India. Real Estate sales there have thrived since 2005 because the Indian government strengthened its protection of foreign ownership.

 

The lecture will feature three experts: Shahrookh Cambata, managing member and CEO of Greaves Travel; Scott Eisenberg, attorney and real estate entrepreneur for Lakeshore Investment Development; and Marc J. Strauss, general counsel for First Rockford Group.

 

Registrations are requested and are being accepted at http://www.events.jmls.edu/re-india. Attorneys can earn two hours of CLE for this program.

Realty Sector has no resurgence.

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The latest Economic Survey reveals that the share of the housing sector to the overall GDP is likely to rise by one per cent to 6 per cent on increased investment. Currently, about 5 per cent of India’s GDP is contributed by the housing sector. With institutional credit for housing investment growing at a compounded annual growth rate of about 18-20 per cent per annum in the next three-five years, the housing sector’s contribution to GDP is likely to increase to 6 per cent.

As every rupee that is invested in housing and construction, Rs 0.78 gets added to the GDP. Investment in housing and real estate activities can be considered a barometer of growth of the entire economy. Unfortunately, the 2012-13 Budget does not recognise this. Although the finance minister’s speech concludes by reiterating the fact that there is a need to create an “enabling atmosphere” and that India is on the brink of “resurgence”, he has done precious little to make that happen.

India’s GDP has not been growing as it was sometime earlier was the topic of the finance minister before presenting the Budget. His five-point objective does not really lay any emphasis on the housing and real estate industry. While he has tried to restrict central subsidies to fewer than 2 per cent of GDP to improve the quality of public spending, he has failed to provide for measures which will give impetus to the industry at large, housing and real estate in particular.

The finance minister has permitted external commercial borrowings (ECBs) for low cost affordable housing projects. One wonders if this would do any good, since players in this industry are not used to taking the ECB route for affordable housing projects. This provision therefore does not make sense.

Extending the scheme of interest subvention of 1 per cent on housing loans up to Rs 15 lakh (on houses costing up to Rs 25 lakh) for another year also does not make sense, unless and until the limit of Rs 25 lakh is increased.

Realtors ask for Better home loans and tax cuts.

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Realtors from Chennai are expecting the Union government to enhance the income tax exemption for up to Rs 3 lakh paid as interest on housing loans in a year from the existing Rs 1.5 lakh which will help to boost the real estate market.

Siva Krishnan, head of residential services (Chennai), Jones Lang LaSalle India, said that  “The market, which was struggling last financial year, has picked up and we expect the government to enhance the income tax exemption limit.”

The Confederation of Real Estate Developers’ Associations of India have expressed that the realty sector and housing policy should be modified in order to address a huge demand of 26 million homes. “Inordinate delay in the sanction of approvals have hit hard. Provision of single-window clearance for real estate development projects is the need of the hour,” said CREDAI president T Chitty Babu.

In addition he also said that “Some of the measures like creation of Special Residential Zones can help. Affordable housing sector should continue to grow based on the incentive given for borrowings from banks for homes.”

Also the 36-month holding period should be reduced to 12 months.

Realty Funds gets Cold Shoulder from HNIs

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Realty has historically been a favourite of HNIs, who have invested even in tough times.

But the dismal performance of most players, not-so-attractive returns on offer and an opportunity to tap the market directly are keeping HNIs away from the real estate funds, which are trawling the money market for investors.

Now, Real estate funds are finding it difficult to raise fresh funds as their mainstay investors, the high net worth individuals (HNIs), are turning their back on them.

Sutapa Banerjee, senior vice-president and head (private banking, India), ABN Amro Bank said that, “The interest in real estate has not dried up. Property continues to be a significant part of an HNI’s portfolio.” In addition, there seems to be some discomfort with funds investing in realty.

During the first major fundraising in 2006-07, funds were highly optimistic on the sector. But after the crash in 2008-09, exit with decent returns became a major issue for them.

An HNI advisor, Jayant Pai said, “Investors generally have a recent bias and the recent happening isn’t very good. The existing funds have promised good returns, but they are still on paper; these exits have not come through. A good amount of funds have extended their exit time period, this affects the internal rate of return.”

After Noida Lucknow to have the Realty Focus.

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Real estate gurus in the Noida region are worried a lot on Tuesday. Mega projects such as construction of the Formula 1 motor racing track were possible due to considerable political backing during the Bahujan Samaj Party (BSP) regime. However, farmers, caught in the recent land acquisition row in the same area are rejoicing after the UP election result.

As Noida and Greater Noida, next to Delhi, had gained in prominence under Mayawati as the UP chief minister, Lucknow would get the same treatment now, experts said after the results to the five state elections were announced.

So, now Lucknow may well become the new real estate capital of Uttar Pradesh under the Samajwadi Party’s rule in the state, as a result of clear shift from Noida at present.

Sanjay Sharma of Qubrex, referred to industrialist Subrata Roy’s close associations with the SP. “They (Sahara) would gain. Sahara has Sahara City Homes in Lucknow and various places in Uttar Pradesh. He also said that “They have acquired a lot of land in UP”.

As a result, even the small developers in Lucknow will benefit from this shifted focus.

NRIs want to buy home in India

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NRIs are investing into residential real estate specifically in large Indian cities to build a back-up base in the country as many of them intend to set up businesses in these cities in the future. I think there is  not a single non-resident Indian (NRI) who is not keen to buy real estate in India. Having a own home in this country is one of the means available to them to stay connected to their motherland. As they make their fortunes abroad, such investments in their country help them to maintain their relationships back home.

What I found most interesting was that they had not even considered eventually relocating to India when they bought property here as they have simply done it for investment.

NRIs are investing into residential real estate specifically in large Indian cities to build a back-up base in the country. This particularly applies to NRIs with professional/entrepreneurial ambitions who intend to set up businesses in these cities in the future.

As during 2008-2009 global financial crises (GFC), India has presented itself as an example of financial stability. This GFC has caused NRIs to seriously think about buying homes in India.

As per the limits regarding how many commercial or residential properties they can own in India, there is no restriction to the NRIs. But when a NRI wants to sell and take the money back, he can do so with the sale proceeds of only two units. NRIs can invest into real estate by transferring funds to India through normal banking channels, or by invest through funds in a Non-resident external (NRE)/ Foreign currency non resident (FCNR)/ Non- resident ordinary rupee (NRO) accounts maintained in India. But payment via travellers’ cheque or foreign currency notes is not permitted.

Home loan can be availed from Indian institution approved by the National Housing Bank (NHB), and loan repayment can be done either through inward remittances, debit to a NRE/FCNR/NRO account, through the rental income which is earned in India. NRIs can also apply for home loans from the employer in India, provided specific terms and conditions listed by RBI are met.

NRIs are allowed to mortgage their residential property in India with an Indian financial institution without any approval from RBI. They can also mortgage it with a foreign financial institution with prior approval from RBI.Also they can rent out their residential property without the approval of the RBI in India and the rent received can be credited to NRO/NRE account.

US Ratings Downgrade, Will Interest Rates Come Down.

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How will the US rating downgrading from AAA to AA+ impact the real estate sector? Will it have a long-term or an immediate impact? What’s going to be hit, residential or commercial real estate sector?

The good news is that the interest rates might come down in residential segment whereas commercial real estate sector will be hit and the reduction will take place in office space. This is the first time something like this had happened and it is difficult to predict the consequences. It has created uncertainty in the global market and extreme instability across asset classes.

There could be some positives for emerging markets such as India, with the cut of prices of oil and other commodities, inflation too can be controlled adding to it interest rate should come down. Overall, impact on real estate in India could be positive.

The money that pours in will be further used to further for residential development as we already have reasonable capacity for commercial development that still needs to be absorbed. However, in the long run, the commercial property sector take-up maybe an issue, from the demand side from IT/ITeS sector which are closely linked with the USA.

Farmers should be Given Right to Sell 100% of their Land – BJP

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The BJP has said that the draft Land Acquisition and Resettlement and Rehabilitation Bill 2011, which is now in public domain, is good but cannot be accepted in its existing format.

Sangh Priya Gautam, the former Union minister said, farmer should be given the right to sell 100% of their land. In Greater Noida, the Formula 1 racetrack required only 1000 acres of land but 2500 acres were acquired and allotted to a private builder by the government.

Land should be taken on lease from farmers. The ownership should remain with farmers, said a BJP leader. Another major aspect of the centre’s draft is that the urgency clause can be imposed only at the time of natural calamity or can be imposed in case of national security.

SC’s Decision About Noida Extension Land Deals Broke Buyers’ Dreams

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The Investors and the buyers are in panic after the decision of Supreme Court came up, of upheld the Allahabad High Court judgement. They are under huge shock as the judgment had rejected the possession of over 156 hectors of land for developing a township in Greater Noida or can say Noida Extension. Supreme Court’s judgment jointly comprising of Justice  G.S. Singhvi and Justice A.K. Ganguly has given a set back to Mayawati’s government and the builders.

About 6,000  buyers have been affected by the judgment of the reverse of the projects and the developers will take steps to compensate the buyers by shifting them to other projects or by refunding them the money. However, buyers are in a complete state of panic as developers are very sure of themselves as they say their projects are safe. For instance, Mr. Pandey booked a house in November 2010, in Mahagun Mywoods project. The developers are sure their project is very much safe but the buyer wants his money back but the developer says if they cancel the booking, 10% of the booking amount will be levied as cancelation penalty. This would be approximately INR 2 Lakhs. Other buyers too have similar opinions.

Sebi’s Refund Order Diverted

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The Sahara Group had challenged Supreme Court against market regulator Sebi’s order asking it to return funds collected from investors through a scheme along with 15 pc interest. The matter to be listed for hearing on 04 July 2011, the first day after the vacations. Sahara India has critiqued market regulator’s move to make its order public when the matter is undecided before the Supreme Court. Sebi on 23 June 2011, had directed two Sahara group companies — Sahara India Real Estate Corp and Sahara Housing Investment to refund the money made from investors.

The Sahara group firm want directions to Sebi to remove the order from its website and restrain the market regulator and its officials from publicizing the order which it has challenged. The Sahara’s counsel argued that the company wants Sebi to obliterate the parts of the order directing it to return money with interest to the investors as it has created a panic among the investors.