Tag Archives: Real Estate

39th Position of India in retailer’s global favorite places

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Although countries like China and Britain are ahead in the race but India has still managed to acquire 39th position in the favorites list of retailers in the world.

In 2008, the CB Richard Ellis (CBRE), a real estate consultancy conducted a survey in which India was ranked as the 44th preference of retailers. It is an appreciable growth of 5 ranks in just 2 year s. This survey was called ‘How Global is the Business of Retail?’

This survey conducted by CBRE is an annual survey which involves around 294 top retailers of the world across 69 countries. Britain acquired 1st position in the list, followed by the UAE, the US, France and China.

The chairman and managing director of CBRE, Anshuman Magazine said that since the last year’s survey, the growth of Indian retail market is commendable. However, the recent global economic crisis has slowed down the activities since it led to delay in completion of retail projects.

DLF Plans to sell non-core assets for Raising Debt.

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Kolkata Properties - Real Estate India - Surekha Sunrise Symphony
DLF, India’s leading real estate developers, plan to raise an amount of Rs. 2700 cr. this financial year by selling non-core assets in order to reduce its debt of over Rs 16,421 cr. by about 33%.

The realty giant plans Rs. 5000 cr. to be cut from its debt. Out of these, Rs. 2700 cr. will be raised from sale of non-core assets and the left over from internal accruals. Last year, DLF could raise only Rs. 1800 cr. from sale of non-core assets while it planned for Rs. 5500 cr.

This fiscal, DLF has to compensate Rs 2,500-2,700 cr. in debt and also an interest of Rs. 1800 cr. Also, officials believe that this Divestment of non-core assets is not just a means to reduce debt but is a strategy to focus more on the core business operations.

Rs. 7,855 cr. was the overall revenue during financial year 2009-10 which is reduced by 25% as compared to Rs. 7,855 cr. in financial year 2008-09. The firm sold an area of 12.55 million sq ft across the world in the last fiscal.

Real Estate Suffers due to Regional Laws

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3D Realty Handshake
In past few years, the realty sector has shown tremendous growth but according to experts, it may still remain a regional play in the country. The underlying reason is that different regions have different laws.

JLLM,Jones Lang LaSalle Meghraj, a property consultant firm’s  Country Head and Managing Director Anuj Puri said that developers experience difficulties in having a pan-Indian presence due to the different procedure and different laws in every state for acquiring land, property taxation and approvals for projects.

Since there is a need of understanding local dynamics for developing realty projects, many developers take property sector as a regional business.

The problem for developers of having a pan-India presence cannot be helped until there is in land acquisition process and regulatory approvals are the belief of many consultants and developers.

Joint Venture Among Tata Housing & Tata Realty

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Joint venture
April 26, 2010

The two companies Tata Realty and Tata Housing belonging to Tata Sons Ltd. are competing with each other which are doing nothing but hindering Tata Sons on a whole.  Therefore, Tata Sons is asking them to avoid this competition.

Tata Housing Development Co. Ltd was established so as to develop and sell primarily residential projects whereas Tata Realty and Infrastructure Ltd was set up to function as a fund and develop infrastructure projects. They both are 100 percent subsidiaries of the group.

Some officials stated that the problem arose two years ago when Tata Realty started looking for real estate projects which directly overlap Tata Housing’s business interests.

This competition is on its peak since both of them now plan residential projects in cities such as Pune and New Delhi.

Now, Tata Realty is been told that it has two options; either develop its ongoing and future residential projects as joint ventures with Tata Housing or not pursue housing projects at all.

Mr. Brotin Banerjee, managing director and chief executive officer of Tata Housing maintained a silence when asked if the two groups had competition amongst them and said that just some overlaps were there and added that the companies shared the same chairman, R.K. Krishnakumar.

What does an affordable house mean?

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We often hear that real estate has a new concept for middle class family, which is so called “Affordable house”. Almost everyone showed a positive attitude for such concept because when it comes about a middle class family, everyone thinks about the cost. But is this concept feasible? Almost all developers are offering 1BHK flat in far-flung are with a name “Affordable house”. According to Mr. Deepak Parekh, chairman of HDFC, “Affordable housing is not about box-sized, budget homes in far-flung places where there is no connectivity to work places and little surrounding infrastructure”.

Affordable house should be such a housing solution which has economic sense in terms of proximity of work place. This concept also requires public and private sector collaboration.

Office rentals stabilize

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Office rentals, which dropped 40% from their peak in the middle of 2008, stabilized across the country in the September quarter as fresh bookings for office spaces partly reduced inventories, says a report by international property consultant CB Richard Ellis.

There was no change in office rentals in some of the major office locations in the national capital region, Mumbai, Bangalore, Hyderabad and Kolkata, while rentals at some others in Chennai and Pune fell by 5-6% in the quarter ended June 30. In contrast, rentals in Connaught Place in Delhi and Gurgaon in Haryana registered an increase of 5-8% in the last quarter.

“The increase in demand is largely due to improving economic conditions, positive market sentiment and growing corporate confidence. However, it will take some time for the supply-demand gap to get bridged. Thus, both rentals and capital values are expected to remain stagnant or under downward pressure in the medium term,” said Anshuman Magazine, chairman and managing director for South Asia at CB Richard Ellis.

In Mumbai, commercial office space is seeing a slight pick up in demand but rentals continue to be competitive. The September quarter saw close to 95,000 square feet of cumulative lease transactions as compared to 83,000 square feet space being rented in June 2009 quarter, according to the report.

However, as Mumbai continues to be 15th largest office construction site in the world with about 3.5 million square feet of office space coming up in extended business districts (EBD), capital values will remain low. This has resulted in a few unexpected transactions of outright purchase. Recently, Motilal Oswal, a brokerage firm purchased 90,000 sq feet office building for Rs 156 crore. Constructed by K Raheja, the property was purchased at Rs 17,333 per square feet as against the ongoing rate of Rs 19,000-21,000 per square feet.

“Indian corporates firmly believe that current valuation of commercial property is attractive, so they are capitalising on it rather than leasing as is being opted by MNCs,” said Sanjay Dutt, CEO (business), JLLM, an independent property consultant.

Taxes on Nariman Point buildings hiked 10-fold

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Nariman Point is in a state of turmoil. The Brihanmumbai Municipal Corporation has slapped notices on building societies here by increasing their taxes by as much as 5-10 times.

The BMC’s assessment and collection department recently hiked what is commonly known as the rateable value in buildings where offices have been given out on leave and license. The rateable value is fixed on the basis of the rent a particular office space is expected to fetch the owner.

There are close to two dozen buildings in Nariman Point. Some months ago, several societies received notices, informing them that the new rates would be applicable with retrospective effect from April last year.

The fifteen storey Mittal Court is a case in point; the civic administration has hiked its rateable value from Rs 2.86 crore a year to a phenomenal Rs 21.31 crore, 8-fold increase.

Dalamal Tower was slapped with a revised rate that was over 10 times the last one. It will now have to shell out Rs 17 crore instead of Rs 1.59 crore a year.

Interest rates on home loans decline further

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An interest rate war is brewing in the home loans this festive season. Development Credit Bank (DCB) and GIC Housing offering home loans below the psychological 8%. DCB, which recently entered the segment, is offering home loans at 7.95% for loans up to Rs 5 crore at fixed interest rate for the first year and floating rates from year two.

“While affordable housing is the buzzword these days, the market would get a further boost if attractive financing options are available,” says Praveen Kutty, executive vice-president and head, retail banking, DCB.

Central Bank of India and Punjab National Bank have waived off processing fee and documentation charges on certain loans. While one would argue that there isn’t much difference between 7.95% and 8% home loans, bankers say that it is basically a psychological pricing to get more borrowers into their fold.

According to bank observers, borrowers prefer low interest bearing home loan accounts of nationalized banks over private banks. “While there has been demand for home loans in the affordable home loan segment (up to Rs 30 lakh), the activity in the upper bracket (loans above Rs 50 lakh) has mostly revolved around restructuring or takeover of such accounts by another bank,” says VS Reddy, managing director, Lakshmi Vilas Bank.

Real estate key for equity markets

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Real estate could be the lynchpin for the equity markets and a failure of a large IPO could start a correction in the market.
Mr Deepak Parekh, Chairman-HDFC Bank, said, “If a large real estate IPO fails, it could have a serious repercussion on the market”.
Mr Parekh stated that many of the recent IPOs have been overpriced and the markets are looking expensive.
Further he added, “Companies raising money need to leave money on the table for investors”.
Indian realtors recently made a trend to raise money through IPOs, with at least five major real estate companies like Emaar MGF Land, Lodha Developers, Sahara Prime City, Ambience Ltd and DB Realty are looking to raise over tweleve thousand five hundred crore rupees.

Tata BlueScope and Arshiya Intl tie-up

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Tata BlueScope Building Solutions, a division of Tata BlueScope Steel Ltd, has tied-up with Arshiya International Ltd to provide Butler Building Systems for Arshiya’s upcoming warehousing projects in India. TBBS has started work, and is currently executing six Butler Buildings at Panvel. Arshiya plans to erect 19 warehouses and chillers units at Panvel and, subsequently, intends to erect 40-50 warehouses at Nagpur and Noida besides the UAE in the next three y ears. Mr H.G. Chandrashekhar, VP-TBBS, said, “Despite the volatile market conditions, infrastructure sector, especially the warehouse segment holds a tremendous growth potential. We are well-poised to successfully meet the evolving demands of the emerging warehouse markets.”

Buyers realize homes still not their cup of tea

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Property prices across the country are 10-25% lower than their peak in early 2008. Bank rates are about 4 percentage points lower. Still, the vast majority of the exploding middle class, which aspires to own a home, is not taking the plunge. Homes are still not affordable. Affordable homes are hardly homes.
The rates may have come down, but even today, the prices quoted by sellers are too high. The developers have reduced the price, but have started charging more for the parking space, which one has to compulsorily buy and that too pay black money for that.

Raheja gets 500 crores’ Delhi slum project

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DDA has awarded Delhi’s first slum redevelopment project, worth Rs 500 crore, to a local builder, Raheja Developers, in a move that may see more such projects in the national capital resulting in better living conditions for urban poor and thousands of crores of businesses for builders.

DDA has awarded 5.22-hectare, or 13-acre, project at Kathputli Colony near Shadipur Depot in west Delhi to Raheja Developers for Rs 6.11 crore, a DDA spokesperson said. Under the scheme, the builder pays only Rs 6.11 crore—the bid amount—for the land, but has to build 2,800 homes, of 30 square metre size each, for existing slum dwellers of Kathputli Colony named after its majority residents of puppeteers and craftsmen.

In the bargain, the builder gets for commercial exploitation 10% of the total space slated for 2800 homes and also close to a hectare for high-end residential development. Therefore, the cost incurred in building 2800 homes for slum-dwellers will be offset by the sale of commercial space and high-end houses in the project, while land would come dirt cheap at Rs 6 crore.

DLF has recently sold 1250 apartments in its Capital Greens project, just 3-4 kilometres from Shadipur Depot at a rate of Rs 5677 a square feet. Raheja Developers will have to create temporary accommodation for the slum dwellers at a piece of land close to the project site that will be given by the DDA in a month or two.

Al Wa’ab City walks ahead luxury Oberoi Hotels and Resorts

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Oberoi Hotels and Resorts has received numerous prestigious awards. The Oberoi brand is synonymous with providing the right blend of luxury, warm service and quiet efficiency to international luxury travelers. It is acknowledged by business and leisure travelers alike as being amongst the finest in the industry.

The Oberoi Hotel, Doha will provide its guests, residents and visitors to Qatar with a distinctive luxury hospitality experience, featuring 225 rooms and suites, 30 serviced apartments in addition to premium outlets for fine dining, leisure and health amenities.

Sheikha Hanadi Nasser Bin Khaled Al Thani- CEO of Al Wa’ab City Management- said, “This MOU is a great example of how Al Wa’ab City is consistently aiming at achieving growth and excellence and remaining true to our mission and commitment to being Qatar’s leading real estate developers. The goals we set at the beginning of our project are being realised across the board and our strategies are continuously enhanced to respond to the changing market environment. Oberoi Hotels & Resorts is perfectly in line with our vision to bring home an unparalleled showcase of the most premium experiences”.

She further added, “Since the launch of our project, we made sure to build our momentum by defining and meeting numerous benchmarks. To sign an MOU with a group of Oberoi Hotels and Resorts’ exceptional quality and character is exactly the level of association we expect the Al Wa’ab City project to be aligned with. I’m sure this will be a great partnership, we look forward to welcoming the Oberoi hotel in Al Wa’ab City and the city of Doha”.

Sahara Prime City to use Rs 2860 crore from IPO

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Sahara Prime City, which aims to raise Rs 3,450 crore from an IPO, will utilize Rs 2,668 crore in the next 3 years to part-fund development of about nineteen thousand housing units across the country.

At present, Sahara Prime City is developing nine integrated townships and one residential complex in cities such as Lucknow, Indore, Nagpur, Ahmedabad, Jaipur, Solapur and Cochin. The group’s ambitious Ambey Valley project is not a part of Sahara Prime City.

Sahara Prime City plans to develop 16 more integrated townships and would pump in another Rs 1426.83 crore from the proceeds of the IPO.

The DRHP said it would develop 13.41 million square feet of residential space in the upcoming projects across the country, including Bangalore, Chandigarh, Jabalpur, Jodhpur, Porbandar, Haridwar and Pune.

Happy days are back into realty

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Realty industry is all set to be lift up this Diwali. At least 12 public offerings, a slew of new projects and the return of private equity funds that had turned away proposals due to the global slowdown last year.

‘After weathering the worst funds crisis for one and half year, the realty sector has now started seeing inflow of capital and funds,’ said Anuj Puri, the country head of leading global realty brokerage firm Jones Lang LaSalle-Meghraj.

Mr. Puri further said, ‘Sales are improving and private equity funds are coming back. With market sentiments getting bullish, prospects of fund-raising are even brighter. You can now see how every company is taking the QIP route to raise funds,’.

QIP is a tool to raise capital whereby a listed company issues equity shares, fully or partly convertible debentures or securities, instead of warrants, to institutional buyers.

After losing almost 75% of its stock valuation last year, India’s realty sector has raised about $15 billion (Rs.750 billion/Rs.75,000 crore) through routes like QIP in the past six months.

Among the developers who have started mopping up funds over the past few months are the largest player in the industry, DLF Ltd, with $780 million, Unitech with $325 million and Indiabulls Real Estate with $550 million.

Property cards to regulate realty

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Property cards are the new concept to regulate realty sector in Karnataka. When the Karnataka Land Grabbers Act comes into force, it’ll bring in clearness by cleaning up land records. These had always been messed with, resulting in dubious property transactions and disputes. These cards, to be issued to property owners, will serve as authentic documents.

According to Revenue department registration of sale deeds would be replaced with registration of titles. This will be done by introducing the progressive system of property titles. The newly formed task force for eviction of encroachers on government land is also part of it.

During talks with stakeholders on irregularities in account transfer and building construction, it was felt there is no reliable system of land and property title records in Bangalore Urban. Records of rights are written casually, leading to endless disputes. The present system of registration of documents can be misused easily.

Checklist for NRIs Willing To Invest In Real Estate

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1. Doing a bit of research on the track record of builder can help.

2. For any real estate purchase it is preferable to make visits to the sites before buying them. This exercise is worth it not only because we are committing a large amount of money but also because reversing the decision proves costly as well. If the NRI is not able to make it, he can request a trusted friend or relative to opt for the site visit.

3. Going for a home loan through a bank will ensure that the money is released in stages only. This keeps the money safe during the construction. Also, all the banks at their local branches have their list of shortlisted builders for whose constructions loans are pre-approved. It is better to buy only these constructions, as the banks are quite stringent in their norms for pre-approval and shortlist only those builders who have a proven track record and those project, which comply to all legal norms.

4. Post the construction, the management of the asset is one of the major issues faced by NRIs. There is no easy solution for this. There are some society associations which support the owners of the buildings with services like maintenance and rent collection. There are again the “friendly neighborhood real estate agents” who may some times double up as the maintenance manager too. Many times though the “friendly” turn into “greedy” after some time. There are a few professional real estate management firms in most metros, which are now expanding into the Tier-II cities too.

5. Some of the other checks for any real estate purchase are:

i. Whether the construction rate quoted is for Built-up area or Carpet area? Construction is generally quoted for built-up area and rental is quoted only for the carpet area. There can be a difference of 15 % to 20% between the two based on the type of construction. Today in apartments there is the concept of super built-up area which apart from the built-up area includes stair case, common passages, fire escape passage, etc. The super built-up area can be bloated by as much as 50% of the carpet area.

ii. Robert Allen, the Real Estate Mogul suggests the 100 – 20 – 10 – 1 rule for any real estate purchase. The idea is to check out 100 properties in person; shortlist 20 of them for a deeper scrutiny; enter into negotiation with sellers for 10 of the properties and finally buy the ONE that is best suited.

iii. Technically there should be a check for all the statutory approvals – town planning, water supply and sewage disposal, safety approval from the local fire department, etc. It is always better to ask for the encumbrance certificate and the title deed from the builder to get a legal opinion from a lawyer.

6. Don’t hesitate to ask. This is probably the most important point. Many times, for avoiding being thought of as less intelligent, we question less. For any investing and particularly for real estate the more the questions asked the better the investment. The genuineness of the promoter can be gauged by the patience, the promptness and depth of the answers. Answers like, “Don’t worry about that, we will manage”, without going into the specifics are danger signs.

7. Take time. Do not restrain yourself by limiting the time for checking the properties and decision making to the time that you are present in India. A 2-4 week holiday cannot be hoped to be converted into a real estate investment period. Start the process before you come here. In case you cannot decide before you leave, it is OK. A Power of Attorney to a parent or a relative can be used to decide on the actual purchase even after you leave the shores of India.

Property deals to be scanned by FIU

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Financial Intelligence Unit wants to cross check every real estate deal. It has asked the states to submit monthly data on registration of properties. FIU is a central agency responsible for receiving, processing and analyzing information relating to suspect financial transactions.

Often the real estate deals in the country involve unaccounted cash transactions. This may result into illegal fund transaction.

At present, all property registrars have to send data to income tax authorities on property transactions above thirty lakh rupees as part of the Annual Information Return. The FIU demands data for all property transactions.

The complete data is required for the agency also for co-coordinating efforts of international intelligence in checking money laundering and related crimes. If timely data are available, any intelligence generated by it could be acted upon promptly.

Real estate is always an asset

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Improvement in the overall economic sentiment coupled with liquidity due to a recent upswing in the equity markets has renewed consumer faith in real estate.
Developer Vijay Wadhwa advises parents to go for real estate investment for their child’s future. He further said, “Real estate is the best long-term investment. It remains in your child’s name, and the appreciation in value over the years makes it a safe and secure option. Or even while planning for your old age, real estate is always an asset”.

Looking at the current market scenario, Wadhwa points out that market sentiments are improving, and real estate is among the biggest beneficiaries. He said, “After witnessing slow movement over the past few months, Mumbai is seeing an increase in demand in the residential sector. Additionally, increasing focus on affordable housing for low and middle income groups has resulted in the launch of several low cost projects, most of which are concentrated in the peripheries of Mumbai. This has also opened up new investment options for those who did not have bigger investment units or major amounts that could be invested”.

Further he says, “Softening of home loan interest rates and correction in capital values by some developers has resulted in the anticipation of increased demand during the festive season,” says Narpat Mehta, director, Kanakia Group. “We are expecting an increase in demand from both end users as well as investors”.

Omaxe may raise prices

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Real estate developer Omaxe Ltd may raise prices this financial year and plans to launch four new projects over the next two months on rising demand, its chairman said.
Mr. Rohtas Goel said, “Demand might be robust. I will increase prices very soon, in single digits within this year”.
The firm will invest fifteen billion rupees on the new projects, Goel said, adding he expects revenues of 23 billion rupees from the projects over 30 months.
India’s property market is recovering from a bottom hit earlier this year, and analysts say much of the demand will be from middle-income and affordable housing.

Real Estate Looking Forward

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The reactions to real estate market are mixed. The looking up of this market in the US economy has raised some hopes in the Indian markets too. Various real estate companies have expressed that the market is looking up, and is likely to improve in the coming days, but some companies are skeptical and want to see actual results flowing in before commenting.
There has been some increased activity on the real estate market front in the recent weeks and this has raised some hopes. The media also reported that the prices of houses would not drop down further indicating that there is stability in the market.
The following weeks would be crucial and they could decide which way the market would go in the coming weeks.

Indian developers set sights on Sri Lanka

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Sri Lanka is taking small steps to revitalize its shabby forty billion dollar economy. Delegates from the Sri Lanka board of investment met officers from real estate giants for investments and have liberal rules governing businesses.

It aims to spend twenty million dollar in encouraging the nation for global tourists.

Ravi Puravankara, MD-Puravankara group, said, “With the civil war over, we are seeing a huge demand for housing”. The group is planning to launch a villa project in Colombo. Further he added, “We have already initiated the land acquisition process”.

The Sri Lankan government is aiming an FDI of two billion dollars by next year. According to government statistics, Sri Lanka received $889 million in FDI during last year and four hundred million dollars, so far, this year. The Board of Investment refused to comment on how much it expects the Indian real estate developers to invest.

Loans set to get costlier

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The Reserve Bank of India may step up its efforts to pre-empt another bubble in the local property market by increasing the cost of funds for the commercial real estate sector by up to 200 basis points.
According to an RBI official, “We are looking at a hike in the risk weight to the commercial real estate segment to 125% as a measure to ward off another bubble in the real estate segment and to ensure high credit quality”.
These days interest rates on most of the loans are between 7.5% and 12.5%, depending on the credit rating of the borrowing company. The current move will make loans to this segment costlier by 75-200 basis points.
Bank finance for land development is classified as CRE if the source of repayment would be lease rentals. The segment has started showing signs of revival after an earlier-than-expected recovery of the country’s economy from a demand slump.
The measure could affect the financial health of some of the largest real estate firms of the country, which were forced to sell land banks and projects to meet their cash requirements. A similar move by the RBI in 2007 had resulted in a crash in property prices. Though the central bank was criticised for the measure, the global financial crisis in 2008 proved that it was a step in the right direction.
Till mid-November last year, the risk weight to loans secured by commercial real estate was 150%, which was brought down to 100% by the banking regulator to facilitate credit flow to the sector that was reeling under a demand slump.
High exposure of some banks in the segment may have prompted RBI to consider such a measure, said the chairman of a government-run bank. “A major chunk of the non-food credit off-take in the recent months went to the real estate segment,” he said, requesting anonymity. However, an increase in risk weight by 25% points will have only limited impact, he added.

Residential property prices rise

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The upward movement has begun. Not only have the sales picked up, but the prices of residential property too have increased 5-15 % in the last couple of months. With a long festive season ahead, realty experts believe property markets could see heightened activity, provided developers desist from increasing prices of residential space any further.

Aditi Vijayakar, the executive director (Residential Services, India) of Cushman and Wakefield, said, “The festive season (September-December) has historically been a buying period, with a large chunk of overall sales being converted during this auspicious time. Some developers see as much as 30-40 % of the yearly sales taking place during the festive season”. Further she pointed out, “Residential prices have increased by 5-15 % from the bottom it made in the first half of the year. If the developers continue to raise the prices then the renewed demand and interest that is being witnessed will start to abate”.

She added, “The previous year has been a taxing one for the real estate industry and the initial signs of recovery are evident in the market, and as most of the sales happen during the festive periods, developers have to be cautious not to hike prices in projects and new launches as this will drive out the end users and prolong the revival in the residential space”.

According to the expert, almost all cities are registering a rise in sale as transactions had frozen up during the start of the year. But now as the economy has stabilized and is back on the growth trajectory, there is a revived interest in buying homes by end users and this increase in confidence, better economy, favorable borrowing conditions and rationalized capital values amongst others which is promoting rising sales across India.