Jharkhand’s capital is attracting investors

January 7, 2009 – 2:17 am

Pune Properties - Real Estate India - Vilas Palash Floorplan1 Jharkhand’s capital Ranchi emerges as the single city in eastern India that has an incredible mixture of metropolitan culture along with traditional touch. The city is on the way to meet all the criteria of a metropolitan city. Ranchi is a marvelous place with great strength to put itself on the way of growth. It has already made its entry into the era of real estate, since it became the capital of Jharkhand. Mr. S.N. Singh, president of Jharkhand unit of Confederation of Real Estate Developers Association of India (CREDAI) said that with many industry giants have set up their office, there is development in bothresidential and commercial real estate sector. But, land prices are high but plots are less”. Various industry leaders have already opened their channels in the city. Ranchi also has multiplex and few five-star hotels and motels. Clearly, the average Ranchiites lifestyle has mentioned that it is not far to be enlisted as modern city.

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IBFSL releases 3% equity of Akruti City

January 6, 2009 – 11:50 pm

Indiabulls Financial Services (IBFSL) on Tuesday said that it has released over 3% equity of Mumbai-based developer Akruti City as the real estate firm paid back a major part of its loan amount taken from IBFCL.

Akruti had taken Rs 200 crore from IBFSL by pledging 6% of its equity for working capital requirement.

IBFSL informed the BSE that Akruti City had pledged 5.97% of its equity against the loan and the NBFC has released 3.65% of it. It means, IBFSL is still holding 2.32% of the Akruti City’s equity.

On Tuesday, Akrutiy City’s shares were down by 1.41% to close at Rs 652.05 at the BSE.

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Delhi registers highest vacancy in mall space

January 6, 2009 – 6:17 am

Vacancy Delhi and its neighboring regions witnessed 24% vacancy in its mall space in 2008, the annual retail report issued by international real estate consultant Cushman & Wakefield has indicated. The mall rentals in Delhi also showed a proportionate decline in the range of 12-22%, the report said. Vacancy levels in Pune malls were also high at 15%.
However, the significance of the drop in occupancy levels in Delhi’s NCR region was partially offset by 12% increase in mall capacities during the year. Pune had no consolation as it witnessed 67% decrease in mall supply in 2008 as compared to the previous year.
The report indicates that as much as 11 million square feet of expected mall supply in the year 2008 was deferred to the future, which is a shortfall of 54% from the projections made at the beginning of the year. Of the proposed 74 malls at the beginning of Q1 2008, only about 34 were delivered through the year 2008. At 9.7 million square feet NCR witnessed the largest share of this supply, it noted.
Rajneesh Mahajan, director of retail services at Cushman & Wakefield said, “From the projected supply of 20.8 million square feet space in Q1 2008, we will see a spill over of about 10 million square feet development in 2009/ 2010. Lack of funds leading to construction delays and cautious expansion by retailers has resulted in slow absorption of retail space in malls.”
With an apparent softening of demand, Hyderabad witnessed the least mall space at only 10% of the initial projections, followed by Pune (20%), Chennai (22%), Bangalore (27%) and Kolkata (36%). NCR and Mumbai, however, received a relatively higher share of the projections with 67% and 47%, respectively.
However, owing to the shortfall in mall supply in 2008, the vacancy rates have remained at a national average of 9%.

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Homes @ 20 Lakh

January 6, 2009 – 12:11 am

Real estate companies are now aggressively pitching projects highlighting 2-bedroom apartments available for around Rs 20 lakh, hoping to lure buyers and revive the moribund housing market.

“It is not as if there is a dramatic reduction in prices, but developers want to take advantage of the lower interest rates being offered for home loans up to Rs 20 lakh,” says Sanjeev Shrivastava, MD of Assotech Realty, a Delhi-based firm.

For instance, prices were always in the range of Rs 25-30 lakh at the Crossings Republic in Ghaziabad near Delhi, a case that illustrates Mr Shrivastava’s point. Even when realty prices were wallowing in irrational highs, two-bedroom houses at Crossings Republic were going for under Rs 30 lakh because of the isolated location and poor connectivity.

Gaursons, Paramount, Panchsheel, Skytech Developers and Orange Properties are some of the players which have come out with advertisements for two-bedroom houses priced at the Rs 20-lakh level.

However, for a prospective buyer, the catch lies in the end cost and the location.

The advertisements often conceal additional costs such as external development charges, parking fees, club membership and power back-up charges. So, a house priced at Rs 20.50 lakh may actually cost Rs 26 lakh while an apartment at the second or the third floor may cost Rs 2 lakh more.

Market analysts also point out that some of the projects being advertised are located far away from city limits, or are yet to obtain approval from lenders.

Recently, Bangalore-based real estate marketing firm Orange Properties launched big budget campaigns to attract buyers to its maiden project consisting of 800 apartments, 270 villas and 40 row houses at Devanahalli near Bangalore. It offered a 800-square feet two-bedroom house for Rs 13.5 lakh and a 1,500 square feet villa for Rs 70 lakh.

The offer came with added inducements — assured rental of Rs 5,000 for two-bedroom apartments for two years, and a free Mercedes car worth Rs 28 lakh for villa buyers.

“The offer was initially open for four days, but we extended it for another four days given the overwhelming response from across the country,” says Orange Group senior vice-president Pericho Prabhu, who claims to have sold at least 200 apartments in eight days flat.

However, the project doesn’t fall in areas covered under the Bangalore draft master plan 2015. That means it is at least 48 kms away from the city centre with no guarantee of a public transport system.

There are certain other cases where home buyers are not getting their loans sanctioned, as the projects are yet to be approved by mortgage lenders. Recently, a well-known builder in Gurgaon sold off several apartments in his project after a similar heavy budget advertising, but buyers are now in a fix, as banks are not sanctioning loans for the project.

Another project by Falcon Realty, which promises to give a one-room-kitchen flat for Rs 5.5 lakh and a one-bedroom apartment for Rs 9.9 lakh in Alwar, is also yet to obtain the approval from lenders.

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Home owner may add extra floors

January 5, 2009 – 4:27 am

The ministry of housing is considering a proposal that may allow home owners to add extra floor beyond prevailing norms on their existing properties by paying a fee to the local body. The money will be used for providing affordable housing to the economically weaker section. The proposal is based on the recommendations of the high-powered task force on affordable housing chaired by HDFC chairman Deepak Parekh.

“We are actively considering to allow expansion of the floor area ratio. FAR would be different for different cities depending on the demand,” a senior official in the ministry of housing ministry, who did not wish to be identified, said. FAR is specified by local bodies such as Municipal Corporation to restrict height of buildings in the area to protect environment and avoid undue pressure on civic amenities. The report recommends FAR relaxation only after ensuring its impact on the local habitation. “Given the environmental concerns, sustainable methodologies need to be developed,” it said.

According to the findings of the report, alleviating the urban housing shortage could raise the rate of GDP growth by at least 1-1.5%. The government has estimated that the total housing shortage during the entire 11th Five Year Plan (2007-12) would be around 26.53 million units.

The government is also considering the committee’s recommendation for resettlement of squatters and slum dwellers before public land is vacated. It had suggested that resettlement colonies could be built on PPP model. “The government may accept other recommendations of the Parekh Committee after assessing their impact,” the official said. The committee’s recommendation to establish a real estate regulator is under examination of the housing ministry. The creation of a regulatory agency will require enactment of the Real Estate Management and Regulation bill.

The bill is still lying with the urban development ministry. There is a view within the ministry to set up an arbitration body or ombudsman at the state level till the time a regulatory body is established.

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Slow real estate sector may come to fast-track again

January 3, 2009 – 3:09 am

Reserve Bank of India’s (RBI) latest round of interest rate cuts together with the government’s fiscal stimulus package may prod some home buyers to return to the moribund housing market, but industry officials say the steps may not be enough to revive the market.

Some developers say the moves do little to specifically address the realty sector’s main source of troubles credit flow to developers.

The central bank on Friday reduced repo and reverse repo rate by one percentage point and banks’ cash reserve ratio (CRR) by 50 basis points, which is likely to enhance liquidity in the system and make lending to home buyers and developers easy and less expensive.

“Rate cuts will definitely have positive impact on demand for homes. RBI’s actions in the past have eased liquidity in the system, but credit flow to developers still remains an issue,” says Gera Developers chairman Kumar Gera, who is also the chief of real estate industry body Credai.

Developers were expecting that the government would raise the limit on homes loans classified as priority sector lending for banks to Rs 30 lakh from Rs 20 lakh now; and raise exemption limit for tax benefits on interest paid on home loans to Rs 3 lakh from Rs 1.5 lakh now.

The real estate sector has been in the grips of a sharp slowdown since the beginning of last year, with sales having fallen drastically in the last quarter. Lower sales hit developers’ cash-flows, while unavailability of bank credit and funds from private equity squeezed them further, forcing most of them to delay projects and lay off employees. The realty sector is a big employer and a key source of demand in a variety of other sectors, and the government has been keen to lift this industry to spearhead a wider economic recovery.

The RBI has repeatedly cut CRR and key rates in the past two months, but banks have not been very forthcoming in lending to developers because of the high risk perception of the sector. This is because several house-builders find difficult to service debt and pay for the land already acquired amid slowing sales.

The government’s move to allow builders to raise foreign loans or external commercial borrowings (ECB) to develop townships is also being seen as a significant move, although again having a limited impact.

“The government move will not flood Indian real estate with funds, but in today’s time, every step counts. This is a signal to the developers to locate money wherever it is sitting,” says DLF group executive director Rajeev Talwar. DLF, India’s biggest property company, is developing a handful of townships across the country and may potentially benefit from the government’s move.

Residential projects outside proposed townships are unlikely to benefit from government’s latest stimulus package, officials say.

The government also announced that it will work with state governments to make land available for low and middle-income segments, although industry officials say this move is unlikely to have any impact in the short-term.

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Reddy seeks more aid for real estate

January 2, 2009 – 7:37 am

With an aim of reversing the slowdown, Urban Development Minister Jaipal Reddy has sought an additional package for the real estate sector.

In a letter to the Prime Minister, Reddy has stated that “more needs to be done to reverse the slowdown facing the sector”.

Suggesting a slew of measures, Reddy has submitted a note containing suggestions of industry.

“Some of these suggestions with appropriate modifications could be favorably looked into,” he said in the letter to the PM.

The real estate sector plays a dominant role in the country’s economic growth and employment generation.

Unfortunately due to the ripple effect of the global meltdown, the sector is facing severe liquidity crunch. Transactions have come down by almost 80% and the sector which was driving the entire economy has virtually come to a halt.

As a result, most of the developers are facing liquidity crunch on account of financing their long term assets with short term loans.

Seeking rationalization of home loan interest rates, the real estate industry has suggested 6.5% interest for a loan up to Rs five lakh and 7.5% on loan above Rs five lakh and up to Rs 30 lakh.

It has also sought the income tax limit exemption on rental income from house to be increased from 30% to 50% among others to revive the sector.

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Hiranandani group to resume Hirco

January 2, 2009 – 12:36 am

Leading shareholders of Hirco, the AIM-listed real estate fund of the Hiranandani group, are likely to support the group’s move to restructure Hirco, by merging two real estate subsidiaries with it.
According to a person close to the Hiranandani group, “The proposal to restructure has originated from shareholders. About 90% of them are supporting the proposal,” he said, declining to be quoted. “A board meeting is scheduled sometime later this month to take the final call on the plan,” he added.
The move has however run up against stiff opposition from another section of shareholders who are reportedly planning to jointly oppose such a move as they feel, it would give the Hiranandani group, control over Hirco.
Extraordinary general meeting on January 16, in Mumbai, for shareholders to vote on the restructuring proposal. Hirco will begin roadshows for investors early next week.
Niranjan Hiranandani, chairman of the Hiranandani group, didn’t comment as it is the silent period - the period ahead of the company’s results when senior officials don’t make forward looking statements.
Reports in the British media on Wednesday had suggested that certain shareholders were opposing the restructuring plan, which they say, would dilute shareholding interests and effectively cede control to the Hiranandanis.
According to the reports, a section of investors led by Laxey Partners, an activist shareholder with over 10% shareholding in Hirco, have termed the restructuring plan as “shocking and ill-conceived.”
In a letter, Laxey wrote to other shareholders urging them to join it in voting against the plan, which involves injecting a loss-making development vehicle ownded by the Hiranandani family, into Hirco, and handing the family an equity stake of up to 50.6% in Hirco.
As part of the proposal, shareholders will lose their preferential claim on £350.8 million of shares that pay an annual dividend of 12%.
On December 18, the Hirco board had proposed the merger, through which, Hirco would acquire two special purpose vehicles owned by the Hiranandanis. These two companies are carrying out township developments at Panvel, near Mumbai and in Chennai.
There are currently many foreign funds that own large stakes in Hirco, including UK’s Standard Life (13.11%), HSBC Holdings (10.13%), Laxey Partners (10.05%), Halbis Capital (7.84%), Fortress Investment (4.57%) and Lazard AM (4.57%).
The Hiranandani group which is unlisted in India, holds less than 20% of the invested entity. The merger proposal, once implemented would take the Hiranandani group holding to over 50%.
Hirco, which listed on the AIM in 2006, had raised more than £380 million for investing in residential properties in India.

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Real estate stocks do well

December 30, 2008 – 3:49 am

Shares of real estate companies were up, but gave back a portion of early gains, as investors booked profits in choppy trades. Analysts said the spurts of strength in realty stocks in recent days can be attributed to hopes of further cuts in interest rates.

“Most of the strength in selective stocks is due to hopes of interest rates going down. Since last few days, we have witnessed a series of rate cuts by banks due to pressure from the government. At this point of time, concern about lending to real estate sector is still weighing on majority of institutional investors,” says a real estate analyst.

At 12:30 PM, BSE Realty was at 2,237.35 points, up 1.4% from the previous close, but off the day’s high of 2,291.21.HDIL, Indiabulls, Unitech and Parsvanath, which were up over 2%, were leading the pack of realty gainers.

Investors are hoping that the cut in interest rates would spur demand for property, but analysts said that is not enough. It is believed that realty players should cut prices significantly to revive demand from prospective clients, which will also ease the burden of these companies.

Expectations of a sustained strength in property prices had led to builders buying lands at exorbitant prices through borrowed money. But, with sales drying up following the sharp rise in interest rates, these highly-leveraged companies are under great deal of pressure.

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