Monthly Archives: July 2008

Parsvnath seeks stake sale in projects to control debt

Real estate firm Parsvnath Developers Ltd expects stake dilution in individual projects to help it control its debt and hold margins in a rising interest rate regime, a top official said.
The New Delhi-based developer reported a 16% drop in first quarter net profit at 712.9 million rupees. Net sales were also disappointing, up just 5% from a year ago, to 3.65 billion rupees.
“The bottomline was down because of higher interest costs and input costs,” Chairman Pradeep Jain said.
Parsvnath was mainly hit by a more than five-fold rise in its interest burden to 174 million rupees. The company is currently carrying debt of about 17 billion rupees, compared to 10 billion rupees a year ago, when interest costs were also lower by a third.
India’s central bank this week raised a key lending rate for the second time in two months, to a seven-year high, as part of efforts to cool down the economy and curb double-digit inflation. Banks have reacted by pushing up lending rates to customers to their highest in almost a decade.
Real estate developers in India have been hit by the rising rates as they struggle to cope with a large number of unfinished projects, but are faced with sharply lower demand as high rates bite property buyers dependent on home loans for funds.
“Our average cost of borrowing is 12.85% and has risen about 20 basis points in the last three months,” Jain said, adding that his firm is currently borrowing at rates in the 13.5-14% range.
“We are trying to reduce debt. We are looking at equity dilution in our SEZ (special economic zone) and hotel projects for this,” Jain said, adding the company was in talks with a few partners for due diligence.
Earlier this year, Parsvnath sold 30% in a Mumbai project to two real estate funds for 1.86 billion rupees. Several other large developers have also leaned on private equity deals in the past year, to unlock value in ongoing projects.
Parsvnath shares ended at 111.75 rupees, down 0.9% in a firm Mumbai market that ended 0.5% higher.

MP Government Initiates 12 Investment Proposals

Madhya Pradesh government initiated 12 investment proposals worth Rs 32,000 crore during a two-day Investors Meet here.

The memorandums of understanding signed on the first day of the meet included Rs 1,300 crore cement plant, Rs 1,000 crore real estate unit, Rs 10 crore sponge iron unit and Rs 450 crore bio-energy unit besides several others.

Addressing the function state Chief Minister Shivraj Singh Chouhan said concerted efforts would be made to restore the golden era of Gwalior in the industrial sector.

He announced that Gwalior region would be placed in ‘C’ catogery to accelerate the pace of industrialisation and Udyog Mitra Yojana would be extended for another six years to facilitate the entrepreneurs of the region.

Eminent industrialists V N Dhoot, Raghupati Singhania, Senapati, Sajjan Jindal, Vinod Mittal, Pankan Munjal, H Ikava among others were present on the occasion.

Chouhan said that investors’ meets are not a political move and the government and is very serious about it.

He said that investment Facilitation Bill has already been passed in the state and the SEZ Act 2003 for Indore has been extended to the entire state.

Referring to the power situation he said that the state is better placed in comparison to many other states in respect of power supply.

Power generation capacity has also been increased by 2,950 MW over last four and half years in the state.

Integrated Logistics Park In Haldia By AILPL and Eredene Group

In a joint venture with Apeejay Infra-Logistics Pvt Ltd (AILPL), UK-based Eredene Group, which has a 50 % stake, is set to develop an integrated logistics park in Haldia.

“In this view, the Haldia Development Authority has already earmarked ninety acres of land for them in its industrial zone area and the lease acquirement is in process. This logistics park site is just about 7km from the Port of Haldia and near to its petrochemicals centre. It will be developed to provide distribution warehousing and transport services in addition to ancillary facilities like commercial offices, hotels, retail outlets and light processing workshops,” said Mr Parwez Ahmed Siddiqui, chief executive officer of HDA.

Haldia is situated 90 km downstream from Kolkata at the confluence of the Haldi and Hooghly rivers, and ranks as the 5th largest port in India. It is a major petrochemicals centre with an oil refinery, fertiliser facilities, manufacturing plants and a mixture of light industries.

According to Mr Siddiqui “The West Bengal Industrial Development Corporation (WBIDC) and Tata Steel have formed a JV to build a coking plant for the production of 800,000 tonnes of coke per annum. Such a port-based industrial zone should have a logistics park and I think that this should have been built at least 15-20 years before,” .
Eredene has invested with Apeejay Surrendra Group, the owners of Typhoo Tea and a global Indian business which employs more than forty thousand people in real estate, tea, hospitality, shipping and retail.

Omaxe Sees Financing Costs Up 300 Basis Points

Real-estate firm Omaxe Ltd sees borrowing costs rising by as much as 300 basis points this fiscal year as interest rates in the country rise.
Executive Director Vipin Aggarwal said that the firm will raise 5 billion rupees in the year ending March 2009. A deteriorating sales environment for property companies may also weigh, he added.
Rising financing costs and higher sales costs in the April-June quarter pushed profits at Omaxe down 23 percent, even as sales remained flat.
He said, “We have not faced any problem in raising debt but borrowing costs are going up”. Further he added, “It could be 200-300 basis points more expensive than last year”.

RCTC Realty Deal With Real Estate Major Emaar MGF

Realty bucks have put a spring in the step of the sagging horse racing scene in Calcutta, with the Royal Calcutta Turf Club (RCTC) hoping the honeymoon lasts.

The deal inked by RCTC with real estate major Emaar MGF for a 300-room five-star deluxe hotel on the club’s 11 Russell Street premises with Park Hyatt as the hospitality partner, has injected fresh life into the racecourse, thanks to the initial funds flow.

“Yes, we could virtually double the stake money for the Monsoon Meeting, which started on July 16. This has in turn doubled the size of the field and we expect leading jockeys and trainers to turn their gaze back on Calcutta,” RCTC steward Kishore Bhimani said.

It is understood that Emaar MGF Land Pvt Ltd handed over a cheque for Rs 72 crore to the turf club last year as part of the joint-venture deal. The monthly profit-sharing bounty has also kicked in, and the turf club has received the first monthly cheque for Rs 61 lakh (after tax deduction at source and service tax) this month.

While the windfall has enabled RCTC to clear its dues (amounting to nearly Rs 18 crore), the turf club is worried over the delay in ground-breaking on Russell Street. Work on the campus, where the realtor is also committed to convert the heritage clubhouse building into a social club, is yet to commence, and the agreement is yet to be registered.

For the moment though, the welcome solvency has started manifesting on the racecourse, with the club completing construction of stables for 600 horses besides syces’ living quarters on the Kidderpore premises.

“The real renovation, however, can begin only after the army renews the lease for the racecourse,” says J.R. Mukherjee, the CEO of the turf club. The club management hopes to complete the entire renovation work by 2011.

“Once the lease is renewed, we plan to start work on the Monsoon Stands, followed by the Grand Stand,” says Boman Parakh, the secretary and chief financial officer of RCTC. While the condemned third enclosure will also be taken up for repair, the club is planning to set up “at least two restaurants and a well-appointed bar” at the racecourse.

IRB Infrastructure Developers Takes Road Building

Driving on the country’s first expressway connecting Mumbai with Pune is always a pleasure, so much so that people have started shuttling between the two cities daily. All this courtesy the swanky road’s meticulous upkeep by a company that was once a family-owned business doing road-building works for local bodies.
At the helm of it all is Virendra Mhaiskar, 37, who has been able to transform the firm into a modern business enterprise—IRB Infrastructure Developers—that looks after the maintenance of one of India’s showcase projects. IRB, a Rs 784-crore company based out of Mumbai, took the public route this year.
Within five years of his joining the business on completion of civil engineering from a lesser-known college in 1990, Mhaiskar led the company to pioneer the now-famous PPP (public private partnership) model in the road sector, making it the first in India. Mhaiskar said, “The condition of the Thane-Bhiwandi bypass was pathetic in 1995. We convinced the authorities and successfully implemented the PPP model on the stretch making the ride smoother”.
The company was to redo the road in return for toll collection rights over it and this modest beginning led the company to register a profit of Rs 114 crore last fiscal.
What makes the present-day IRB different from the rest in its league? Mhaiskar said, “It is the only company that has integrated its businesses offering multiple services under one roof”. Further he said, “We are into road building, its maintenance and also collecting toll, whereas other firms specialize only in one job like being road contractors or mere developers”. As of today, IRB has orders exceeding Rs 6,500 crore with Rs 3,800 crore worth of work to be completed in 10 months’ time. It collects a toll of over Rs 1.2 crore daily on 800 km of roads from 35 different points and holds the toll collection rights over 7% of the ambitious Golden Quadrilateral project in the Bharuch-Mumbai-Pune stretch.
IRB’s operations can broadly be classified into three verticals—toll roads, road construction and the recently added real estate arm (part of the diversification process on which the company is betting big time). Mhaiskar said, “In toll collection, we have to maintain the roads well, and more importantly, add new infrastructure on it like increasing the lanes, which adds to its value”.
After the PPP project in 1995, the other big thrust, which helped the company, was the setting up of the National Highways Authority of India in 2000 due to which the size of projects grew. Mhaiskar further declared, “Earlier, Rs 100 crore projects were unheard of in road building but due to NHAI, we could eye such lucrative deals, which also resulted in capacity expansion”.
Turning the Rs 10-crore firm into a professionally-run enterprise was not easy, says Mhaiskar, who promoted IRB Infrastructure Limited in 1998 to fund the group’s various initiatives. Family members, who were having minority stakes in the company, had to be convinced. He said, “It was an evolving process and I was successful in making them believe that there was value in the company. Their confidence was further strengthened as some private equity players showed interest in us”.
Today, Deutsche Bank, Merrill Lynch and Goldman Sachs, which collectively invested over $60 million in 2007, own 10.24 % stake in the holding company. The next step was to go public and at a time when the IPO market was sluggish.
The issue in February this year was oversubscribed four times over. Mhaiskar claims that IRB has been successful in outbidding formidable competitors like Larsen and Tourbo, Gammon India and Reliance Energy in landing lucrative road projects in Maharashtra and Gujarat: “Our edge is in offering all the necessary services in-house, like putting up the asset, its operation and maintenance and investing in it for expansion”.
He said that Looking beyond India, IRB is considering a foray into toll collection for some important highways in Europe and South East Asia and is in talks for the same with various entities. The company is also betting big on real estate, investing Rs 200 crore in a residential-cum-commercial township spread over 1,400 acres located off the Mumbai-Pune expressway.

Vipul Ltd First Quarter Financial Result

Vipul Ltd India’s leading real estate developer, has recorded revenues of Rs 81 crore for the quarter ended 30 June 08 an increase of 5% from seventy seven crore rupees in Q1FY08. EBITDA for the Q1FY09 stood at Rs 15.38 crore, up by 21 percent as compared to Rs 12.74 crore in the corresponding period previous year. Net profit for the year stood at Rs 8.89 crore in Q1 FY09 as compared to Rs 8.00 crore in Q1FY08. The EPS for Q1 FY09 stood at Rs 1.48 compared to Rs 1.39 in the corresponding quarter last year.

The Company had currently announced the launch of Vipul Gardens, a Group Housing project at Dharuhera. The project is strategically located on NH-8 in Dharuhera, a half hour drive from Gurgaon. Vipul World Dharuhera would have a total built up area of approx. One Million Square Feet and will showcase six hundred thirty five apartments with a choice of living between 2 & 3 bedroom apartments.

Vipul Limited has already delivered about 6.5 Million Sq. Ft. and is presently working on an area of about Ten Million Square Feet in Gurgaon, Manesar, Dharuhera, Ludhiana, Bhubaneswar and Nagpur.

Meerut-The Rising Real Estate Destination

Meerut is only 72 kilometers from new delhi. It is an ancient city, which belongs to Uttar Pradesh state. The great history from the city is that Mandodari, wife of Ravana, belongs to this city. Meerut is stand at 28.98 north and 77.7 east, and 219 meters above from sea level. Meerut is the major education center of Uttar Pradesh and students come from all over the country for higher education. CCS University, Meerut Institute of Engineering & Technology, Meerut Institute of Technology, L.L.R.M Medical College, Subharati Medical College and Shobhit University are the famous colleges of Meerut. The real estate market of Meerut as a industries and involves in construction of shopping complexes and apartments. There are various types of industries in Meerut, because the city is near to Delhi and Noida.

If you live overseas than Meerut property dealer may you help in find your dream projects. Meerut property dealers offer you to both types of properties like commercial and residential properties. Real estate in Meerut is riding the crest of increasing demand boosted by large availability of abundant land at throw away prices. MSX Developers, Era Group, Supertech Group, Majestic Properties, DLF are in the Meerut real estate market and increase the competition.

Wipro Managed Ten Year Project From Lodha Group

Wipro Infotech has managed to get a ten year project worth Rs. 1.3 billion from Lodha Group. Wipro will provide IT and business transformation services to Lodha group in India and Middle East. Wipro InfoTech is a leading IT company in India. Lodha group has started a new path to get a premier position in the dynamic real estate market.
Lodha Group is a leading real estate project in Mumbai. It has a land bank of 6000 acres. The group is developing multiple projects in and around Mumbai. It is focusing on the development projects of offices, campuses, SEZ’s and townships and keen to enter in southern and western markets
The deal was announced by Lodha group director, Abhisheck Lodha. He expressed happiness on becoming technology partner with India’s leading IT service provider Company, Wipro info tech. chief executive of Wipro Infotech, Anand Sankaran expressed hope of successful completion of the project. He said that company will deliver its IT related services to make the group, a leading player, in real estate business.
The shares of wipro witnessed a fall of Rs 3.55, or 0.87% as per data shown by BSE.

Slow Down In Lucknow Realty

A number of Lucknow-based small builders are facing crunch due to the rise in inflation and increase in the interest rate by banks.

After the real estate boom the city witnessed, a number of such builders joined the bandwagon. Moreover, they invested heavily in the projects.

However, due to the recent downturn, they are forced to sell of their projects at lower costs. Many of them have shelved their future projects also.

“The current slowdown in the realty sector, coupled with high interest rates and increased cost of construction, has affected the industry immensely. The depreciation has been to the tune of 25-30 %,” Nagendra Pandey of Landmark Constructions told.

The recent hike in the raw material cost has added to the worry of the builders.

“The average cost of construction has increased by almost 30 %. The average cost of construction for the build up area, which used to be Rs 600- 700 per square feet, has gone up to Rs 800- 1,000 per square feet,” added Pandey.

“The city has witnessed a huge property demand in the last 2-3 years, however, for the last 6 months it’s experiencing a downfall,” he said.

“The raw material cost has seen an unexpected increase. Steel prices have gone from Rs 3,000 per quintal to Rs. 5,000 per quintal. Similarly, mortar, which cost Rs 18 per square feet, is now costing Rs 35 per square feet,” Pandey said.

There are around 500 small builders in the city. These include those builders also who build small one-room flats and shops.

“The cost has gone up by approximately 30 %. We cannot cut on the selling price and hence the customers are also shunning away from us. This is a situation of crunch,” said Tirath Housing Director Rahul Agarwal.

It is to be noted that the cost of land has also doubled in the city in the last couple of years. Moreover, owing to unprecedented demand for newly-constructed residential properties, property values in Lucknow sub-urban areas have shot up by 20-30 per cent in the last one year.

The cost of land in a locality like Gomti Nagar has gone up to Rs 1,500 per square foot from Rs 600-700 per square foot.

The other favourite spots in the city include Mahanagar, Jankipuram and Aliganj. |The national players like Ansal API, Parsvnath, Omaxe etc, which have significant presence in Lucknow, are also experiencing similar adversity.

“Big players plan their projects taking into account future prices and the cost of production. They have also been affected but not as badly as smaller builders,” said a property dealer.

“The fact is that the business is not going great although the top players are not affected much because they have entirely different category to serve and also have diversified products,” An associate broker for some top real estate players said.

“All products are moving at an average level and nothing drastically has happened as far as our company is concerned. Inflation cannot be ignored and we have to cope with it no matter what,” Ansal API Executive Director (Operations) Ramesh Yadava said.

However, recent inflationary trend has dampened the spirits of both the builders and customers. So much so, that the customers have put on hold their plans for booking of the flats affecting the builders further.

Four Groups Fighting For Hotel Plot In Navi Mumbai

Four hotel chains have submitted bids for a plot to build a five-star hotel in Navi Mumbai, at a time when land prices have dipped in Mumbai and surrounding areas.
Indian Hotels Co. Ltd, which owns the Taj group of hotels, Sun-n-Sand Group of Hotels, Leela Palaces, Hotels and Resorts and Metropolis Hotel have submitted technical bids in the auction for the 11.6-acre land on the Palm Beach Road. The bidders, if their technical bids qualify, will have to submit financial proposals on Friday.
The City and Industrial Development Corp. of Maharashtra Ltd, or Cidco, which is conducting the auction, had set a minimum price of Rs37000 per square meter for the plot, nearly half the price at which two plots were auctioned in 2007 by the same organization in Navi Mumbai.
The slowdown has impacted the few land auctions this year. Last week, Cidco received only one bid in an auction for a plot reserved for an IT park. The land was sold at Rs1 lakh per sq. m, less than the Rs1.5 lakh quoted for a plot in the same area in 2006.
Pranay Vakil, chairman of real estate agency Knight Frank India Pvt. Ltd, said it is “not a good idea” to hold a property auction in a falling market. He added, “We are not encouraging auctions now, because the psychology is not to outbid people but to underbid”.
Vakil Said, “Auctions, as we can see, would inevitably not receive enough bids. Private negotiation for property and land sale is a much better option over auctions now”. Further he pointed out that land prices have dipped by 15-30% in Mumbai and Navi Mumbai this year. The signs of the real estate market heading for a correction in Mumbai started showing when two out of five plots went unsold in the central business district of Bandra-Kurla Complex in an auction in March.
Cidco managing director G.S. Gill said, “We are not private developers or landowners who are waiting for the market to go up. We continue to develop and sell land”.

Indian Real Estate – Ever-Expanding Territories

Real estate market in India is on the upswing while builders in India are rapidly investing in all the parts of the country. New constructions in this field are into an all-time growth. Indian property developers are buying plots in large number for construction of townships and residential complexes.
A study of the market trends for commercial property in India reveals a similar pattern of the rising rates and a closer look at the prevailing rates is necessary to get the best out of the property. Commercial properties in India are also on the rise with their flourishing constructions. Shopping malls, shops, big Corporate Offices, Movie Halls, Amusement and Recreational parks et al are in for investments by Real Estate Developers in India.
Huge number of properties is on sale in India, luxurious apartments, premium quality flats, independent homes, farm houses, penthouses, row houses – are some of the projects that are selling like hot cakes in residential property sector in India. Property developers in metropolitan cities are expanding their vision and investing in tier II cities like Pune, Surat, Coimbatore, Cochin, and Vadodara.
Property developers in Lucknow, such as Ansals have invested here in a township, Sushant City- Lucknow, which they name as “shaan of Awadh” or Awadh’s pride. Builders in Chandigarh like Axiom Estates are coming up with projects in residential sector. Real estate builders in Ludhiana are investing in residential as well as commercial complexes.
Builders in Hyderabad like Modi Builders are coming up with number of residential projects such as The Gardenia, The Golden Palms, Palm Springs and The Silver Springs. Builders in Cochin for instance, Abad Builders, Trinity Builders & Developers and Gokulam Engineers are establishing themselves in real estate sector and their construction and investments are showing up to be fruitful.
With the kind of growing economy buying, selling, investing and renting properties in India is considered a lucrative option by the people world over. Moreover, an increase in the property rate in the real estate market, even in tier- II or tier – III cities of India, is showing an upswing trend in building and construction. According to real estate agents in India, this is indicative, at least on one level, of a clear interest of people in buying or selling of properties.

Real Estate Boom In Bhiwadi

Touted as a entrance to Rajasthan, Bhiwadi, falling in Alwar district and bordering Haryana is a key industrial growth centre in the NCR with over 2500 operational industries. Bhiwadi enjoys huge location advantage with IGI Airport, New Delhi, just fifty five kilo meter away and Gurgaon forty kilo meter away. Being close to Delhi and well connected by NH-8, Bhiwadi is attracting industrialists not only from the capital but also from Punjab and other parts of India.
Manesar, lying between Gurgoan and Bhiwadi, is another key industrial town with IT parks and proposed SEZ. As the prices in Gurgaon are already high, service class people are left with no choice but to go to Dharuhera, Manesar or Bhiwadi. Several private firms such as Ashiana, Parsvnath, Omaxe, Piyush group etc are developing integrated townships and group housing projects along the Alwar-Bhiwadi Road, the nearest and most reasonable destination.Today the real estate developers are quite upbeat about the brand Bhiwadi. Says Vijay Mohan, Marketing Manager of Ashiana Group, “In 1992 when we launched our group housing scheme, we had to sell Bhiwadi first and then our product but today, from the marketing point of view, it is much easier for us to sell because Bhiwadi is gaining fame and we are established as a brand in this locality. In 1992, people who had purchased flats from us for Rs 800/sq.ft. are today reselling them for Rs 2600/sq.ft. The three BHK villas that sold for fifteen lakhs rupees in 2003 today the same villas cost around sixty to seventy lakhs rupees.”
Explaining the reason for sudden real estate development in Bhiwadi,CEO of Infocus India, says, “Government’s plan to develop Mumbai-Delhi industrial corridor (Bhiwadi will fall under phase I) and the entry of several new multi-national companies in and around Bhiwadi have acted as catalysts.” He added, “In 2005, with the development of Gurgaon, Bhiwadi started gaining visibility. But the land, which used to cost twenty lakhs rupees per acre then, has jumped to one crore rupees per acre in 2007. In a year or two, it is sure to double.”

JP Morgan Chase Buys 33% In Alok Infra’s SPV

Global financial giant JP Morgan Chase is investing Rs 130 crore for 33% stake in an SPV of realty firm Alok Infrastructure, a wholly-owned subsidiary of Mumbai-based textile maker and retailer Alok Industries, according to banking sources.

Alok Infrastructure’s SPV, which is receiving the JP Morgan funding, will develop a realty project at a prime location in Mumbai. Alok Infra owns land at several prime locations in Mumbai, some of which it bought in high-profile transactions in the past one year. Alok Infrastructure had been in negotiations with some private equity players to offload equity in the main company.

A falling stock market and a sluggish realty sector of late has, however, brought down the valuation of realty firms forcing Alok Infra, as many other realty companies, to go for investment at the project or SPV level. Alok Infra may be looking at raising more funds through private equity route for its different projects.

The company’s biggest project under execution is the 180-acre textile SEZ at Silvassa in the union territory of Dadra & Nagar Haveli. The SEZ obtained the government’s formal approval last December. Parent Alok Industries plans to occupy one-fifth of the SEZ space for its textile and apparel units. The company is also in talks with other textile makers for space in the SEZ.

Earlier this year, Alok Infrastructure acquired 50% stake in Ashford Infotech, which would develop a million sq ft of space for Rs 400 crore. Ashford Infotech, now equally owned by Alok Infra and Ashford group, had earlier purchased a 6.92-acre plot from CEAT in a Mumbai suburb for Rs 130 crore.

Alok Industries reported a net sales of Rs 2159 crore and net profit of Rs 200 crore for the year 2007-08. Alok exports its range of textile products to as many as 58 countries, which contributes nearly half of the company’s sales. The company has been present across all textile segments, including spinning, weaving, knitting, fabric, garment and home textile.

Lately, the company has moved up the value chain and is increasingly strengthening its presence in retail in India as well the UK. The company retails its products under H&A brand name targeted towards the mass market. The retail division is being hived off as a separate wholly-owned subsidiary by the name Alok Homes and Apparel.

Tier2 and Tier3 Cities Are Ready For IT

It always comes to hear that time is now ripe to go to Tier2 and Tier3 cities for IT and ITES companies. Being part of a big city or Tier1 city and being an SME, we keep wondering too whether should we go or not and if yes is the time ripe and if so, can SEMs go first or it is the business of the large corporations such as a Infosys, or a Wipro or a TCS to setup the operations and the ecosystem first and then the SMEs to follow?

Shimoga is a small town around 300 k.m north of Bangalore and it is considered as Tier3 city (Mysore and Mangalore probably fits under Tier2 tag). There are many such towns and cities in different cities which are considered as potential Tier2 and tier3 destinations for IT/ITES. Infact Shimoga happens to be the home district of the current CM and there is lot of hope and aspirations of the local community for attracting many IT/ITES companies over there and infact there is already an ITES company operating for last couple of years.

There are lot of advantages – you are away from the hustle and bustle of big cities and being part of a quiet relatively unpolluted environment, lower living costs, no traffic jams for sure, better quality of family life etc but the biggest advantage will be the land/realty price and especially more attractive if government can provide (thru SEZ etc) very subsidized land. But then again lot of cons go with that – lack of availability of talent, even if local talent exists will be tougher to pull them from the lure of big cities, fewer schools to support the ecosystem, additional expenses (which is not an issue for BIG IT companies) of setting up of every infrastructure item that is required, the quality of life off-office hours, the schools, the shopping malls, the night life what most of the IT and the ITES crowd expect – all these will be missing, and more than finding talent, retaining the talent will be a bigger issue expect for those who are from that town and love to stay and work there. Then again the expenses of running a firm in big cities is becoming extremely tough and challenging with rising inflation, fuel costs, real estate costs, attrition rates, traffic chaos, ever reducing of the quality time spent with the family, and in general dissatisfaction towards the ever busy polluted city life. The issue has become a chicken-egg issue with waiting to see which one will happen first – the IT companies moving to Tier2/Tier3 or is it the ecosystem first and then IT companies more there. Still better big companies opening it up first on a big scale so that they can or have the potential to make others to create the needed ecosystem to start with them but the early advantage will be lost for SMEs and as the land/rental prices would have increased, stealing the lone big advantage one could have got.

Many companies are finding it very difficult to hire talent and still tougher to hold onto them. Today’s talent is in spite of all the deficiencies and cons, still sticking onto metro life style with shopping and entertainment in the weekend which is clearly lacking in the tier2/tier3 cities. A NASSCOM- Kearney assessment of 50 leading locations for IT-BPO sector has pointed out that a lack of recreational facilities was a handicap for the tier-II and III cities. But the study on `location road map for IT-BPO growth’, had predicted that the share of sectoral employment in the top seven locations will decline to around 60-75% over the next decade and that will subsequently result in the rise of tier II and tier III cities’. SM Doshi, partner A T Kearney India, said, “But that cannot be achieved by only installing physical infrastructure like power lines and mass-transport system in tier II and tier III cities. Efforts should also be made to create an ecosystem that comprises social infrastructure with the trappings of metropolitan life”.

The industry experts believe that the first mover advantage does no way help IT companies attract skilled employees to these locations. When an ITES employee was asked by his company to get ready for a stint in a Tier3 location he decided to hunt for a new job. There are currently over two million employment provided by India’s IT-BPO sector, and over 90 percent of which is captured by the seven leading cities of Bangalore, Mumbai, NCR, Hyderabad, Pune, Chennai and Kolkata. Less that 10% is relegated to tier2 and tier3 cities and a very low ratio indeed.
So do SMEs make the bold move and couple it with Government incentives and move also to Tier2 and Tier3 cities and to get that early mover advantage or wait until the Big ones move or there is a critical mass built and then move.

IVRCL Infra To Sell Costly Land

City-based construction firm IVRCL Infrastructure and Projects has plans to sell its high-priced pieces of land, including the twenty five acre information technology special economic zone (SEZ) plot in Noida, and purchase low-cost property in the light of the downside in real estate business in the country. Read More »

LIC Housing To Enter Venture Funding

LIC Housing Finance, the mortgage arm of Life Insurance Corporation of India (LIC), is set to foray into the venture capital arena. It intends to start Rs 500 crore real estate fund by the end of this financial year.
LIC Housing Finance is reportedly scouting for a banking partner for raising capital and will soon approach SEBI to set up an asset management company. To invest in listed companies, companies usually register with SEBI.
Based on the response to the real estate fund, the company will decide on whether it will expand its presence in the venture capital space.
There are at least three major banks in the fray for a tie-up and a memorandum of understanding will be signed soon. While LIC Housing Finance would be the promoter of the real estate venture fund, LIC could also be one of the internal contributors of the fund.
LIC Managing Director Thomas Mathew said the insurer has no plans to directly enter the private equity or venture capital businesses.
The fund proposed by LIC Housing Finance will be used to finance real estate development and about fifty-sixty projects are likely to be funded over twelve to eighteen months.
A large number banks and finance companies have recently entered the venture capital space and the existing players are expanding their footprints.

Domestic Hospitality Under Transformation

The domestic hospitality industry is undergoing rapid transformation, with several hotel groups investing in new properties across India and the globe. Additionally, real estate players are entering the industry through management contracts with established hotel chains.

This expansion in the hospitality business is taking place on account of the massive growth that India is likely to witness in the coming years. Currently, India’s travel and tourism industry is estimated at 6.1% of the gross domestic product (GDP) — below the world average of 9.9%.

The capacity for star-rated rooms in India is far shorter than its demand, and cities are now evolving from a single-business district to multiple-business districts, as growth spreads and cities get bigger. Moreover, new growth centres are emerging in previously untouched markets such as Orissa, Chhattisgarh, Jharkhand, Pune and West Bengal, among others. This has greatly expanded the market for star-rated hotel accommodation in the country.

The hospitality industry is divided into four segments: luxury, leisure, business and budget hotels. Major hotel chains like Indian Hotels Company (IHCL), Hotel Leela and ITC Hotels are aiming for a presence in most of these segments.

For instance, the market leader, IHCL, is following an integrated approach to offer rooms at all price points and in almost all million-plus cities in the country. This is being complemented by setting up hotels at strategic locations across the globe. The company plans to double its room inventory to over 20,000 in 3-5 years. This includes around 3,000 rooms under the ‘Ginger’ brand, which is IHCL’s budget chain of hotels.

Meanwhile, ITC Hotels is using a mix of owned investment and franchisee model to take a shot at market leadership. The company offers a choice of over 90 hotels across 77 destinations in India under four different brands — ITC Hotels, Welcome Group, Fortune and Welcome Heritage. It also has four properties under the Sheraton franchise, which adds up to an inventory of 6,000-plus rooms, with half of the room inventory being at the premium end.

Hotel Leela has already started constructing hotels in Udaipur, Chennai and Delhi, while it continues to expand its existing properties at Bangalore and Kovalam. East India Hotels (EIH) plans to set up one new hotel each at Mumbai , Gurgaon, Bangalore, Hyderabad and Khajuraho. Besides, it is expanding its flight kitchen services in Kolkata and Mauritius, and plans to refurbish its existing properties.

PEs, FIIs Ready To Buy Equity Stake

Real estate funds, PE players and foreign institutional investors are exploring options to buy equity stakes in listed realty companies, as valuations of these companies have fallen by over 65% during the past three months.

The move has also come as a blessing in disguise for these realty companies who have been finding it difficult to source funds after the RBI tightened lending norms to property developers following a global liquidity meltdown. Sources said that funds floated by majors such as HDFC, ICICI, Kotak and Anand Jain’s Urban Infrastructure Opportunities Fund as well as foreign funds are in talks with listed real estate developers to pick up minority stakes.

Although domestic real estate funds have raised over $2 billion during the past year, a major chunk of these funds is yet be invested. So, most real estate companies are keen to close such deals with the funds.

Mumbai-based Lok Housing chairman Lalit C Gandhi said, “There are 4-5 such proposals that we are working on. No deal has been finalized yet”. The company is in the process of raising around Rs 1,800 crore from the market. Interestingly, foreign institutional investment in various companies has also been on the rise since March.

Companies such as Orbit, IVR Prime, Kolte Patil and Peninsula Land have seen an increase in FII holdings, with IVR Prime and Orbit recording the highest such increase in institutional holding by over 1%.

Private equity interest in real estate companies has also revived as the slowdown in the economy has beaten down valuations, which were once quoting triple digit price earnings multiples when the market was at 21,000. Private equity players are now shifting focus from special purpose vehicle (SPV) investments in individual projects to entity-level investments. The fact that most of these real estate stocks have high promoter holding could leave scope for some equity participation by these private equity players.

Promoter holding in various companies has been going up sharply. Puravankara Projects and Akruti City have 89.96% promoter holding. If DLF was to go ahead with its entire buyback, it could have one of the highest promoters holding of 89.3%. DTZ director investment Amber Mahasweri said, “We are working on a few of such proposals. Though promoters are asking for a premium, many funds are keen to invest in the entity level”. DTZ is an international property consultant.

Many developers have also admitted that the investment bankers are also approaching them with proposals. “In the last two months, we have received as much as 12 proposals from PE players to pick equity stake. We are yet to come to any decision,” said Orbit Corporation head finance and strategy Ram Yadav. Realty stocks have fallen 65% from their 52-week high market capitalization. Companies like Parsvnath and Omaxe have already fallen by about 79% and 77%, respectively.

A Township coming up In Siliguri

Although the debate for the renovation of a tea estate into a real estate project, Uttorayon township, a project of Luxmi Group, in partnership with Siliguri Jalpaiguri Development Authority (SJDC) and West Bengal Industrial Development Corporation (WBIDC), and managed by the Ambuja Group, at Chandmoni in Siliguri, has completed two phases of development, and is scheduled to be complete by 2011. Read More »

Prediction About Realty Trend

For now, the next few quarters could be the acid test for the sector. The stock prices of many real estate companies are under duress. DLF’s offer for a share buyback comes at a time when the stock price has been adversely hit. While one could argue that the overall sentiment is on a low, the fall in these stocks has hit the investor really hard.

At such high price levels for property, the buyer is taking his time which does not augur well for the developers. It is precisely for this reason that the uncertainty has stepped in.

HDFC’s Karnad admits that there are some pockets in India where prices need to correct further. “However, today, the real estate sector is going through a stage of over-pessimism,” she argues.

The story of the aspiring Indian middle class is hard to ignore and that could be urge to own a home could still make sure there is a healthy level of demand. Overall, the impact of a global slowdown on India is slowly being felt. It may affect Indian realty sector in coming time. However, NRIs affections towards Indian properties will not likely to be vanish in near future.

No Price Reduce-Parsvnath Developers

Parsvnath Developers Ltd has no plans to reduce prices of its properties, a top official of the real estate company said on 16th July 2008.
“There is no question of reducing prices at all. Prices have to go up,” Pradeep Jain, chairman and managing director said.
He also said rising input costs would be passed on to the consumers.

Survival Instinct Of Indian Real Estate

While the Indian real estate industry is growing by leaps and bounds where foreign investment and growth is concerned, the tremendous potential of something as important as fire safety, has not yet been understood yet. Optimists feel that this is changing slowly but surely. M C Muthanna, Chief Operating Officer, Firepro Systems, said, “India is a reasonably domestic consumption driven market. Gradually as awareness is setting in, people are realizing that fire safety actually touches all segments. Builders are moving beyond statutory needs, so also the consumers, who want more safety features”. In any case, the need to protect family and property will never change. So whether the properties concerned, is worth Rs 5,000 or Rs 50,000, there will always be the need and urge to protect it.Differences in global and Indian practices come to the fore easily. In general, the Indian real estate industry is on par with the developed world, in providing some basic systems. The key difference is the amount of spending. Sophisticated systems like addressable fire detection systems and automatic gas suppression systems are being used in the protection of offices in commercial buildings. But in residential apartments, the spending for installing the life safety equipment is still very low and the equipment used is still basic in design.

Options in fire protection and suppression, in residential as well commercial property, are varied but useful to the core. In commercial property, hydrant and hose reels are used for the entire building premises, while addressable fire alarm systems are used extensively for office space, along with sprinkler systems. For data centre rooms/ control rooms which are manned by people, clean agent gas suppression systems are used. Water cannot be used for fire protection at such premises. So inert gases are used to avoid data loss or damage.

Fire protection and suppression systems in commercial spaces can be installed in retail malls, airports, cinema theatres and multiplexes, auditoriums, convention centres, convenience stores, storage warehouses, hotels and restaurants — thus, preventing loss of life and property to a great extent.

Violation Of FEMA In Goa

After being scanned for Foreign Exchange Management Act (FEMA) violation, many foreigners intend to sell their properties in Goa and return back, but have to stay back as Goa authorities have banned any related transactions.
Few of the foreigners who have invested in Goa getting jittery after the show-cause notice from the directorate of enforcement and investigations into the deal intends to do away with the property.
But the state government has with-held any further transaction in their properties forcing them to sit with the fingers crossed.
This month itself, the notary services and state registrar department have received two applications by foreigners – UK and Russian each – who want to sale their properties. The applications contend that their property is legally purchased and hence should be allowed to be sold.
“We have forwarded their applications to the debt management unit who will have to take further stand on the issue,” a state registrar official stated.
Goa woke up to the grim reality of around 480 properties being purchased by the foreigners and the number swelling every passing month.
The authorities prima facie had found that the properties were purchased in violation of FEMA and scoring on the loopholes in Goa’s property registration system.
The state government-constituted Anupam Kishore committee had identified 480 such cases, of which 298 cases were referred to directorate of enforcement as prima facie FEMA violations were noticed in them.
The directorate of enforcement has begun investigating into all sale deeds including those executed by forming an Indian company with foreigners as its directors.
“After the issue has cropped up, we are not even allowed to move an inch. Our investment is blocked here,” a Russian national, whose property in Siolim, is in question, reacted.
The Russian, who refused to be identified, said that he had purchased an ancestral house in the name of the Indian company but the local authorities refuse him even to repair it.
“I am stuck here with my money. I can’t even sell off the property as sale deeds cannot be executed,” he said.
Few of the UK nationals, who invested in Goa, after reading the advertisement back in their country which lured them with good offers, feel cheated.
A south Goa-based foreign couple, who too do not want to be named, has written letter to the registration department seeking to sell their property after the probe began.
“How can they be allowed to sale the properties? Their old sale deed is being questioned that means the property may not have been legally transferred. So how can we allow them to sell it to next party,” Swapnil Naik, additional collector, who is also a member of Anupam Kishore committee, reacted.
He said that those properties which are not being questioned and are legally purchased can be sold out with proper permission.
The directorate of enforcement which is probing into the transactions has already asked the state government not to allow further transactions in case of seven properties – all in north Goa.
“The DE has specially instructed that there will be no further sale deed or transfer of the property,” Naik said.
The registration department, which was criticized for allowing innumerable properties being purchased without proper checks, feels that the state government should appoint an authority which will go into all the details of the application, when foreigners apply for buying the property.
“We can’t check his visa details. If we sit with it, we will be registering only one deed a day and then we will be accused of being slow and corrupt,” an official commented.
The law mentions that for a foreigner to buy property in Goa, he needs to be staying here for 182 days and should have business, vocational or employment visa. The reserve bank of India’s nod is also mandatory.

Indo-Rama Plans To Set Up 200 Retail Stores

Indo Rama Retail Holdings Pvt. Ltd, the retail venture of the promoters of Indo Rama Synthetics (India) Ltd will be setting up 200 stores across the country over the next three years.
Announcing the launch of the company’s store in Chennai, Mr Ashok Srivastava, chief operating officer, Indo-Rama Retail Holdings said, “Any company spends close to Rs 400 per employee on stationery and other office materials. With IT, education, financial, media sectors booming we are confident there will be a huge demand for our products.”
The company will be setting up close to 50 stores in tier-2 and tier-3 cities by the end of 2008. He pointed out, “Our investments per store would vary depending on the real estate value. We will be investing around Rs 15 lakh to Rs 40 lakh per store”. We are targeting cities such as Madurai, Coimbatore, Trichy and Salem in Tamilnadu. Further he said that the company is also eyeing entering SEZ’s in these cities. To a query on funding, he said that the funding would be through internal accruals.
The market for office products in India is estimated to be around $10 billion growing at 15% year on year. Office1 Superstore is targeting to capture 5% of market share in the organized sector.
The company clocked revenues worth Rs 5 crore last year and is confident of achieving Rs 1 crore business from each store that they set up.