Most of the ETFs and Mutual Funds at the different Asset Managers are losing value, as can be noticed from the website of any one of the companies. One of the exceptions is the equity in the rising markets. This sector has matured seemingly and unaltered by the Recession in the US. India is one of the four countries Goldman Sachs pointed out as the leaders in FDI and development along with China, Russia, Brazil (BRIC) in the coming years. Along with China, India too has enjoyed booming exports and growth rates of 8-9% in the last few years, but India`s major economic strength is stated to be internal, or consumption based, rather than a focus on exports solely.
At the heart of the boom in India is its real estate, which unlike Communist China`s, is privately owned. Real Estate prices in India have been growing at a rate of 30-40% for the last few years. Investment banks and Hedge Funds around the world have been investing more and more in the Indian Real estate, driving the prices higher. As per the Associated Chambers of Commerce and Industry of India (Assocham), the Indian realty sector is likely to see high growth rates in 2008. DLF, one of India`s premier Real Estate Development companies recently sold 49 % stake in its seven townships to Merrill Lynch and Brahma Investments to raise Four hundred twenty million dollar. Wachovia Bank picked up a 15% stake in another Indian Real Estate company for fifty nine million dollar. These US banks are the same ones that have lost billions in the US real estate market in the last 1year.
A comparison of the Real Estate prices in New Delhi and Chicago reveals the following figures:
* Condos in New Delhi, India: 2-bedroom, 1000 sq. ft. apartment for $200,000. [$200 per sq ft]
* Condos in Chicago, USA: 2-bedroom, 1000 sq. ft. apartment for $400,000 [$400 per sq ft]
The above has occurred despite the fact that the median income in Chicago is 50 times that in New Delhi.
Clearly, the House price increase in India is an unsustainable bubble. Such land or property bubbles have propped up in Russia, China, Ireland, etc. A bubble is characterized by low income to price ratios (when property rises a lot while income does not), or rent to price ratios(when property rises and rent does not). Such bubbles are financed by low interest rates, bad financing, or too much Foreign Direct Investment. Assuming there is a huge bubble in India, larger than that of the United States, this would have the same effect(if not larger) on the Indian Equity markets as has the US Real Estate on the US stock market. Studies show that a person is 2 times more likely not to spend his money if his house price falls by $1 than if his stock falls by $1. Tell that to Walmart, Carrefour and other Retail Stores that intend to open shop in India this year. As a bubble bursts, banks that lent the money always get into trouble as they recover less than what they lent, the low liquidity of the banks would cause lower business and a stock market crash.
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Posted in Property News
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Tagged Assocham, Brazil, Chicago., China, DLF, goldman sachs, New Delhi, Real Estate, Real Estate prices, Rusia, Townships, US, Wachovia Bank
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The state government has decided to regularize illegal colonies in Ghaziabad on the pattern of Jaipur Development Authority in Rajasthan. The policy would benefit 208 illegal colonies.
The UP administration has invited suggestions on the policy from development authorities across the state through a letter. A copy of Jaipur Development Authority’s policy is also attached.
The development authorities have to post their suggestions within 15 days. The state administration would regularize illegal colonies on priority basis.
Under the new policy, development authorities have been given more power so that regularization work could proceed speedily, said Ghaziabad Development Authority secretary Raj Kumar Sachan. The state’s approval has to be sought in trivial matters too. However, it is not mandatory in the Jaipur authority policy. The regularization tax is also comparatively less.
Development works can be completed after regularization of the colonies. Presently, development works under MLA and MP grant can only be undertaken here.
The Ghaziabad Development Authority will be able to execute its works after regularization is completed.
Is the real estate boom finished? Have prices started to flatten out?
Indian real estate is observing a much-needed cool-off. Without suspicion, realty prices are at their climax and a correction is expected. However, it would be wrong to expect a sudden crash. We guess the downward trend to be gradual and concentrated in definite pockets. We realize several developers have already started witnessing a slowdown in sales. It now depends on the holding capacity of a developer. In fact, instead of reducing the prices outright, some developers are offering freebies like interior decoration, free air-conditioners or other consumer durables. Some of them are also willing to pay the first six equate monthly installments (EMIs) of the mortgage loan.
How much of this is driven by high interest rates?
Interest rates are cyclic in nature. It is property prices that tend to impact the buying assessment more than interest rates. HDFC has always catered to the middle-class segment. Even today, our all India average loan size is about Rs 12.5 lakh. Moreover, about 95 per cent of our customers are actual end-users, thus we have not seen much change in demand.
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Posted in Property News
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Tagged Air Conditioners, Consumer Durables, High Interest Rates, India, Installments, Interior Decoration, Loan Size, Middle Class, Mortgage Loan, Real Estate, Real Estate Boom
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Ansal Housing & Construction has launched its group housing project, Ansals Tanushree. The project is on the NH 24, Ghaziabad. The project offers 2- and 3-BHK apartments with a built-up area ranging from 1,238-1,700 square feet. These apartments will be housed in three towers. The apartments range between Rs 29 lakh and Rs 40 lakh. Some of Ansal Housing’s earlier projects in Ghaziabad are: Neelpadm Kunj, Garden Enclave, Aavantika, and Chiranjiv Vihar. It has also developed Fortune Arcade in Noida, Golf Links I & II in Greater Noida, and Aashiana in Lucknow.
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Tagged aashiana, Ansal Housing, Apartments, avantika, chiranjiv vihar, fortune Arcade, garden enclave, ghaziabad, Greater Noida, Housing Project, lucknow, neelpadm kunj, noida
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Despite a huge demand for residential flats in Chennai, sales are steadily dipping due to high prices. Middle-class families, who form the bulk of the buyers, have few choices. Going by present market rates, most people in the salaried bracket may not be able to buy a flat anywhere within a 30-km radius of the city centre. Read More »
The sub prime crisis may have struck in the US, but real estate companies around the world are feeling the heat. The meltdown in property firms’ valuations in other economies, including India, China, Japan and the UK, has surpassed that of the US with Indian real estate companies witnessing one of the biggest falls. Some leading Indian real estate firms are trading at about 34% discount to their net asset values, which implies that property firms are being valued at just two-thirds of the assets they hold.
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Tagged China, Citigroup, Global, India, Japan, Market, Project Execution, Property, Rupesh, Sensex, Stock
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Real estate developer Rakindo Developers has unveiled its plan to build a $1.5 billion (Rs 6,000 crore) integrated township at Coimbatore. It is expected to be ready for launch by the last quarter of 2008. Mr Prasad Koneru, MD, Rakindo Developers, told that the flagship project of Rakindo Developers in the texcity will be developed over 1,000 acres with an 18-hole golf course as the centerpiece.
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Tagged coimbatore, Developer, Flagship Project, Golf Course, Hole, Hospital, Infrastructure, Koneru, Real Estate Developer, Residential, Town, Villas
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NEW DELHI: Raising funds is becoming more and more costlier for real estate players, as private equity players try and extract their own pound of flesh given the poor market conditions, says DLF chairman K P Singh.
“The cost of raising funds has gone up from what it was six months ago,” K P Singh told ET, adding that real estate firms faced a tight situation. Several real estate firms, including DLF, Unitech, Indiabulls and Omaxe, have put off their plans to raise funds through capital market due to a global market meltdown.
The listing of DLF Assets (DAL), a firm owned by the promoters of DLF, as a real estate investment trust (REIT) in Singapore has also been postponed. DAL is now raising funds worth Rs 2,000 crore through private placement.
“One would like to go for an IPO to raise funds. But since the market sentiment is not good, one has to opt for private placement,’’ says Mr Singh, adding that Singapore listing will happen ‘once market sentiments improve.” DAL has been in talks with several global funds for the private placement.
“For a good company, raising funds through private placement is not very complex. But it has become expensive as the investor takes his pound of flesh,” he said, indicating that current meltdown has put private equity or other institutional investors at an advantage. In the given situation, Mr Singh said, one could expect more PE deals in real estate, but that would depend on “how desperate people are for funds.”
Mr. Abhinandan Lodha, Director, Lodha Group (Bloomberg), confidently said in mumbai that their aim are to raise $2 billion over the next two years from private equity investors and an initial sale of shares to fund its growth.
The developer, which has received investments by JPMorgan Chase & Co. and Deutsche Bank AG in the past two years, said that funds sponsored by mortgage lender Housing Development Finance Corp. agreed to invest $54 million in the projects being developed by the group.
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Mumbai has witnessed the world’s highest (94.4%) increase in rentals of industrial space in 2007 from Rs 18 per square feet per month to Rs 35 per square feet per month ($10.88 per square feet per annum).
With this, the financial capital of the country leaped 11 positions to be 26th most expensive industrial locations in the world. The rise in rentals of industrial space at Ranjangaon in Pune and IMT Manesar in the National Capital Region is fourth and sixth highest in the world. In Ranjangaon, the rentals went up from Rs 12 per square feet per month in December 2006 to Rs 18 per square feet per month in December 2007. Read More »
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Tagged Asia Pacific, Bangalore, Chennai, Dublin, Frankfurt, Imt Manesar, India, Industrial Space, Location, London, Moscow, National Capital Region, Pune, Singapore, Sriperumbudur, Tokyo
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MUMBAI – Real estate firm Parsvnath Developers Ltd has sold thirty percent stake in a Mumbai project to foreign funds for 1.86 billion rupees, the company said in an announcement on Thursday.
Shares in the company hit a high of 217.65 rupees on the news, and were trading 4.57 % higher at 216.30 rupees.
Parsvnath will sell 15 % stake each in the Kurla bus station redevelopment project to Euronext-listed Yatra Capital and Saffron India Real Estate Fund-I, both sponsored by Mauritius-based fund manager Saffron Asset Advisors.
Parsvnath said that Yatra and Saffron have picked up the stake at land-value basis. They will also proportionately fund all future development and construction activities for the project.
Future investment is estimated at two billion rupees and the project is to be completed in two and half years.
The deal will help unlock value of the property and help to begin a strong relationship with well-known foreign direct investment partners, Parsvnath said.
Jones Lang LaSalle Meghraj was the consultant for the deal. Foreign investors have rushed to invest in India’s growing real estate market for the last few years, attracted by simpler investment rules and rising property prices, which have gone up for the fifth straight year.
New Delhi: Global realty brokerage firm Century 21 Real Estate LLC pronounce its foray into the Indian market with plans to open offices from all over the country, where it is eyeing a business of one thousand crore in next five years. The US-based company plans to open one thousand offices through franchisee route.
It would also have its own offices at fifty places in the country to supervise the entire operations. “In the next five years, we plan to have one thousand offices at pan-India level. Century 21 India country head A. Rathore told that he guess one thousand crore income after these sub-franchisees get entirely functional.
The Mukesh Ambani sponsored Reliance Industries Ltd on 14th April said the company would publicize its yearly financial result on April 21.
In an interview to the Bombay Stock Exchange, he said that a meeting of the board of directors of the company would be organized on April 21 to consider and approve the financial results of the company for the year ended and to recommend dividend on equity shares of the company.
Market regulator Securities and Exchange Board of India (SEBI) said on 11th April it would issue rules on Real Estate Mutual Funds in the next fifteen days, allowing retail investor as well to access the realty market, which has viewed a boom in the last few years. “SEBI is ready with rules on real estate MFs that could be issued any day.T C Nair told the outer time limit to issue guidelines is fifteen days.
In Delhi for two small shops of 600 square feet each, shopkeepers now pay something between Rs 1.5 and Rs 2 lakh per month. As par the tenants, there has been an increase of 10-15 percent in the property rates where Metro line is ready, and the landlords say property pries will rise further.
Resident of MG Road Delhi are not sure about rate of property price. They think that this is a temporary sop in an election year (Delhi Assembly elections are due later this year). After the election same sealing drive will be started again and all the rise in property price will be lost due sealing. No one will like to buy the property in that area in which after every certain period a sealing drive starts and demolish all the construction.
Some shopkeepers still prefer to pay the increased rents and shifts from MG Road. “I have invested lakhs in furnishing this showroom and if I have to remove all this, my investment would go waste,” said Deepankar Chaudhary, who runs a shop selling carpets in MG Road.
April 11, 2008 – 12:19 pm
There is an increasing figure of B-School graduates choosing to make a successful career in the Real Estate industry that is slowly but surely becoming more organized. There is a slow but sure development in the real estate market.
The fast growth of the real estate business has led to enormous employment chances for skilled professionals, and as a result, more and more graduates from foremost educational institutions are taking to this industry.
According to employment agencies and recruitment executives, the real estate sector is moving towards becoming more organised, and superior real estate companies are spotlighting on becoming more skilled and transparent. Student aspirants looking at a career in real estate are appointed across different horizontals in leading real estate/urban infrastructure firms. They could range from analytics, planning and acquisitions — to project management and marketing.
According to V K Menon, Director, Career Advancement Services, ISB, In the preceding year 2007, of the 418 students who have graduated out of ISB, 45 students have opted for a career in real estate, which is more than 10 percent of the batch size! This is possible because a no. of MNC are also showing interest in Real Estate.
April 11, 2008 – 12:18 pm
Real estate and textile firm Modern India Ltd said it is in talks with private equity players to dilute the founders’ stake and sell stake in its special economic zone unit.
Mr. V K Jatia, Chairman and Managing Director, Modern India Ltd, said, “We are in talks with 2-3 players, and we will finalize in the next one to one and a half months”.
There could be two different transactions, one for Modern India Ltd and another for the SEZ, he said, adding both transactions may happen simultaneously. Read More »
ACI Real Estate, an associate of German investment company Alternative Capital Invest GmbH, on 9th April entered the Indian real estate market through its franchisee, Hyderabad based Global Properties.
This marks the initial phase of ACI’s Indian franchisee network, which is being launched to serve the firm’s real estate portfolio in the UAE, at present valued at more than Dh10 billion.
The company has pronounced that in the upcoming months it will continue to seek prime franchisee operators to represent it across key Indian cities. Its portfolio includes residential, commercial, leisure and retail developments in prime locations in Dubai, Abu Dhabi, Ajman and other emerging cities across the UAE.
Talking on the potential of the franchisee set up, Sanjay Chimnani, joint managing director of ACI Real Estate, said: “The agreement with Global Properties marks our first coalition in India to serve the quickly rising investor market. In selecting our local franchisee, we found Global Properties who share our mission of doing business with clearness, purpose and truthfulness. We believe the ACI franchisee network in India will set a suitable gateway that links the astute Indian investor with ACI’s vast UAE property portfolio.”
ACI Real Estate’s projects in Dubai include premium branded properties such as the Sports Trilogy project comprising the Michael Schumacher, Boris Becker and Niki Lauda towers. Its developments also include the Dh6bn Marine Legends with the Ferretti Group.
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Posted in Property News
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Tagged ACI, Boris Becker, Ferretti Group, German Investment, Global Properties, Indian Cities, Investment Company, Investor Market, Michael Schumacher, Project, Property Portfolio, Real Estate, Retail Developments, Sanjay
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Russian conglomerate Sistema, on Tuesday declared that it plans to invest $100-200 million in developing hotels, offices and residential complexes in major cities of India. The revelation came after the company’s decision to invest $5 billion in the country’s telecom sector earlier in the year.
Sistema has confirmed an coalition with India Shyam Group, which has divested 51 percent stake in its telecom venture in favor of Sistema. The Sistema-Shyam joint venture will be developing a 22-acre property in Gurgaon, on the periphery of Delhi. The venture is Sistema’s first undertaking in the construction and real estate market outside Russia and Ukraine.
Real estate industry is passing through the transition phase. This phase will decide the future of real estate. Every day something new is coming to us. Sometimes we get to know new real estate trends and sometimes new way to make the property popular. The recent new trend is that now the real estate will use the names of celebrities along with the name of their property. In foreign countries this trend is going on. It might not be surprising if you get to know about new property as SRK plaza or Rani Mukherjee villa.
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Apparel retailer Provogue India Ltd said on Tuesday it has sold 27 percent stake in a unit of real estate arm Prozone Enterprises Pvt Ltd for 4.57 billion rupees.
The stake has been acquired by Triangle India Real Estate Fund, promoted by Old Mutual Investment and ICS Realty.
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