Monthly Archives: September 2008

Realty Investors Take Equity Route To Offset Tax Burden

Though the realty sector has been hit by the general economic slowdown, smart property investors, who raked in the moolah when the going was good, made use of the equity markets to reduce the tax they paid on those gains.

According to tax consultants, people whose income is derived from other sources, say a salaried employee, can and have in the past offset derivatives losses against short-term capital gains made in property transactions to reduce tax incidence on the property gains.

Gains from property are deemed short-term if they are held for less than three years. Once a derivatives loss is offset against the gain, the balance short-term capital gain is clubbed with the salary income and taxed at the normal rate.

Tax experts, like Ernst and Young director (financial services) Sameer Gupta, point out that in the context of shares, Central Board of Direct Taxes (CBDT) issued a circular in June 2007 laying down the tests for distinction between shares held as stock in trade vis-a-vis those held as investment.

Some of these tests include the scale and frequency of the transactions, whether owned funds or borrowed funds were utilized for the transactions, the accounting treatment, the motive behind entering into the transactions, etc. They add the tests are indicative and not decisive, and need to be examined on a case-to-case basis, including their applicability to futures transactions.

“It may be argued that a gain or loss arising from an exchange-traded futures transaction (NSE/BSE F and O) is in the nature of a short-term capital gain or loss as a person buying or selling a futures contract is creating a right or interest (in buying/selling a specific number of shares on a net settlement basis) and that when this right/interest is transferred by way of squaring off the transaction, there is a capital gain or a loss,” said E and Y’s Gupta.

Other tax experts buttress this argument by pointing out that a capital asset in the Income-Tax (IT) Act means property of any kind held by an assessee, whether or not connected with his business or profession.

“Under Sec 2 (47) of the I-T Act, a transfer in relation to a capital asset is defined as including the sale, exchange or relinquishment of the asset or extinguishment of any right therein or the compulsory acquisition thereof under any law. The word property used in Sec 2 (14) of the I-T Act is a word of the widest amplitude and the definition has re-emphasized this by the use of words “of any kind”. Thus any right which can be called property will be included in the definition of capital asset,” said senior vice-president (finance) of Tata Sons FN Subedar, drawing attention to a Bombay High Court decision in Tata Services versus Commissioner of Income-Tax case of 1979.

The implication of this is that a derivatives contract entered into by a person, and not held as stock in trade, is a capital asset and that when the futures contract is settled, the accrued gain or loss arising from the settlement of the contract is a capital gain or loss, added Mr Subedar.

Interestingly, while derivatives losses can be genuine, as is likely to be the case over the past nine months which has seen the Sensex declining by 38%, investors can also buy losses in a structured deal with brokers in order to set off the derivatives loss against the short-term capital gain arising on sale of immovable property in the same financial year.

Share brokers say this, though illegal, is not an unknown market practice. They are also quick to point out that structured deals wherein one party buys a loss while the other books a gain is restricted to the ‘unscrupulous’ variety of brokers and is not prevalent among reputed and big institutional and retail brokers.

Explaining the modus operandi of such transactions a broker said this practice was prevalent in the case of Nifty futures. Say, investor A wants to buy a loss and investor B wants to book a profit. The broker punches in a buy and sell order, respectively, on two different terminals using A’s client code for both the transactions (buy and sell).

Depending on how the index moves, the transaction can be squared off on the same day and the client code changed when the transaction is reversed. For instance, if investor A has bought and the Nifty futures move down, the broker changes the client code for the sell transaction by replacing A’s client code with B’s code. At the end of the transactions the broker is paid a commission by both parties to the deal.

Orbit Corporation MD Pujit Aggarwal says realty investors could make good profits even before construction is complete. For example, an investor gives a down payment of Rs 10 lakh for a property worth Rs 1 crore, construction of which will be complete in two years.

However, if the valuation of the property changes in six months to Rs 1.2 crore, the investor could sell it and make a cool profit of Rs 20 lakh on an investment of Rs 10 lakh. “This mostly happens when realty market is on a high,” Mr Aggarwal said.

Design Arch To Invest In Greater Noida

Real Estate firm Design Arch said that it will develop a residential project with application of green technology in Greater Noida, which could entail an investment of Rs 150 crore.
Besides, the company plans to develop 10 such e-house projects in the metro cities across the country by 2010-11.
“We have just announced our first e-home concept called Gardenia E-Homes at Greater Noida. It will be followed by another nine such project in various metros over next three years,” Design Arch Managing Director J K Jain said.
He said the company is investing Rs 150 crore for the Greater Noida project and expects a realization of Rs 250 crore once the project is completed by mid 2010.
Jain, however, declined to disclose the investment figures for the other projects planned by the company.
“A green building may cost a little more initially, but saves through lower operative cost over the life of the building. There are many benefits, such as improving occupants’ health, comforts, productivity, reducing pollution and land fill waste,” he added.
He said the company is looking at developing both commercial as well as residential properties with this new concept.
Elaborating on the concept, Jain said structures would be electronic savvy, environment friendly, earthquake resistant besides other amenities.
“The green buildings in our project area will have four components, including energy saving, water saving, better indoor air quality and hygienic conditions and reduction of construction material waste,” he said.
The project would have some other eco-friendly concepts, like integrated rain water harvesting coupled with recycling of water and automatic fire detection sensors, he added.

QVC Realty To Raise Funds For Spreading Out In South

Real estate developer QVC Realty plans to raise Rs 600 crore in 2009 through a mix of equity and debt, primarily to buy large tracts of land in the south, especially closer to the new airports in Bangalore and Hyderabad.

According to a senior official of the IL and FS backed QVC, it plans to use a portion of the funds, Rs 200 crore, for the development of its Rs 2,000 crore township project in Gurgaon. Delhi-based Uppal Group is a partner in this project.

“We will need funds to acquire land in the southern metros. We propose to acquire about 100 acres each in Bangalore and Hyderabad, close to the new airports in these cities, because we believe that both cities will grow in the direction of the airports. We will require funds to develop current projects,” said QVC’s promoter Prakash Gurbaxani.

According to Mr Gurbaxani, IL and FS is likely to invest up to Rs 400 crore in the company giving it the option to raise debt or bring on board a strategic investor into the SPV implementing the Gurgaon township. IL and FS has already invested $100 million into QVC in April, 2007.

QVC Realty, has six projects under various stages of development: integrated township projects in Gurgaon and Pune, apart from stand alone developments in Pune, Bangalore and Chikmagalur in Karnataka totaling about 20 million square feet.

The company has also partnered with Bangalore’s Sobha Developers and New Delhi’s Chintels India for its second township project in Gurgaon.

The company formally launched its Rs 150 crore Bangalore residential project – QVC Hills. It will construct 100 premium villas, priced upwards of Rs 5,500 per square feet, on a 26-acre plot located in close proximity to the Devanahalli airport.

Plans include developing an additional 50 acres in the coming years, investing additional Rs 250 crore, Mr Gurbaxani said.

Realty Crash Shuts Exit Options For Investors

It has become well nigh impossible for those who invested in real estate last year to exit the scene as the downturn has deepened and the prices being quoted do not even cover the purchase costs and interest expenses.

Moreover, the negative global news flow has set off a panic reaction, inducing investors to close deals at losses.

The 35-year-old Rahul Verma, who works with a Noida-based IT company, exemplifies the experiences of late entrants into the property market. He bought a Rs 50-lakh flat in Greater Noida early last year by arranging for a bank loan to finance 85% of the cost.

His EMIs have continuously gone up since the purchase, thanks to a series of rate hikes by the RBI. The flat purchase was a pure investment decision. Rahul had jumped onto the bandwagon after hearing stories of skyrocketing returns made on property investments.

However, the prices haven’t climbed as expected and the interest outgo has made the property expensive. Rahul is now left with the only option of selling at a loss. And given the global economic gloom, he is willing to take a hit.

“Several investors are stuck simply because there hasn’t been enough price appreciation in the past one year,” says Raheja Developers Chairman Navin Raheja.

Several young investors invested in property at the peak of the property cycle last year. Many purchased two apartments simultaneously, assuming that they would finance one by selling off the other at a premium. They are now caught in a difficult situation as they bought at a higher market rate and are compelled to service two EMIs.

Some investors have started defaulting, according to a senior Parsvnath executive. “There is a significant rise in the number of people who are approaching us to cancel their bookings and return the money,” he says.

Property consultants feel that investors will have to bear huge losses if the markets do not improve during the festive season. Home buyers in the country are staying away due to the high interest rate regime and expectations of a correction following the realty crash worldwide.

Indian Realty Prices May Return

Indian property prices, which had taken off jet appears to be losing altitude after bad debts because of their origin to the real estate reduced the U.S. financial market to its knees.

Market-men see prices cooling and projects are blocked because of lack of funds cheap, but do not expect the market crash.

The collection of funds and American investors from Western Europe, which represent a large portion of money from overseas to India, will be difficult. “Developers should explore new avenues such as the Middle East and Korea,” said the consultant global real estate Jones Lang LaSalle Meghraj country head Anuj Puri.

The first to be affected would be the price of commercial real estate, even if a correction in the residential segment is also planned. Rate has almost doubled during the three years leading to 2007, when interest rates began to harden.

“The feelings of these events as (collapse of Lehman Brothers, Merrill Lynch and others) have an impact on Banking and Financial Services’ real estate requirement of India,” Puri said.

Failed investment banker Lehman and Merrill Lynch, which was supported by the Bank of America, commercial space in India extends over 2.5 lakh square feet – which itself is not enough to bring down prices crashing, but the feeling is.

“This is not a major exhibition to examine 50 million square feet of office space transactions each year in India,” Puri said, adding that there was not much of an impact direct result of both companies down under.

Property prices in a good location would not be affected much, said Amit Sarin, Chief Executive Raj Anand Industries, in which Lehman instead of 1.8% Thursday.

However, the first within areas could feel a pinch, said Sarin, whose company is mainly the construction of the IT space.

The tightening of credit affect investment from private equity players primarily in the United States, experts said.

The current environment is “difficult” for Indian real estate market, Puri said.

Asked about the overall impact on the market, he said there could be a drop in prices due to the negative.

Overall, banks have written over $ 500 billion in bad debts, exactly half the total expected losses by the International Monetary Fund because of losing loans from American banks for people with low credit or infamous “subprime” loans.

The slowdown is also due to high interest rates and the price system, particularly in the housing segment have softened in the last year.

Private equity firm Red Fort Capital Director Chawlla Kuldip said: “Flow of funds from the United States will certainly come, at least in the short term. Fund to both private and public actions of developers are likely to fall”.

The developers, who thought of raising funds through an IPO in the near future, now reluctant to go to the capital market, he added.

Sarin Raj Anand said that companies which have strong accruals would be through internal sailing, but those who depend on debt and private equity feel the pressure.

A director of a large real estate company said the collection of funds by private developers through equity at the end. He noted that developers are already facing difficulties in obtaining Indian debts of banking and financial institutions.

Lehman Brothers has taken 50% in Thursday Unitech project in Mumbai for Rs 740 crore. He also invested $ 200 million in assets DLF Ltd, which is formed by DLF promoters.

US Financial Crisis Affects Real Estate Sector

The crisis in the US financial market will hit the Indian real estate sector hard. The sector was already reeling under tremendous pressure as RBI increased the interest rates to contain inflation, besides restricting the fund flow in it. Consultants said that in the present circumstances the real estate prices will go for a sharp correction in the short to medium term.
The financial crisis in the global market will affect the availability of fund for the domestic realty sector. As RBI has already put restriction on Indian banks to finance real estate companies in the country, they are depended on foreign funds through FDI route for their fund requirements. But, a senior consultant said following the development in US, many of the private equity funds are returning back to their mother countries.
The source said that many of these private equity funds were launched by investment banks. But, now as the fate of these investment banks is uncertain, their capability to raise funds in their country is doubtful. This will put severe constraint on availability of funds in India.
A large player in the sector said that as the availability of funds from banking sector is restricted for the realty sector, they are forced to borrow from the high net worth individuals at high interest rates at around 20%.
At the same time, the crisis in the global market has affected the demand for the real estate space in India. The development in US has affected the global economy, which has forced many of the global majors to either postpone or cut the expansion plan. According to a source in the industry, Google has cut its expansion plan substantially in the NCR region. Earlier, the global major has expressed intention to take lease of 5 lakh square feet of the office space. But now, it is learnt, it has cut its requirement to only 3 lakh square feet.

Lehman Crisis May Pull Down Property Prices

Real estate prices are expected to soften further as the current global financial turmoil would force cash-starved builders to offer hefty discounts. The collapse of financial powerhouses like Lehman Brothers and the consequent liquidity problems will stop the inflow of fresh investments into India’s real estate sector.

According to analysts, the crisis, which comes at a time when the property market is facing a slump, could lead to major price correction in the next one-year. Prices in select markets are already down by more than 20% and you should expect more.

The builders may find the going difficult and offer discounts as the slump is expected to continue for about next two years. Hopes of builders that Diwali would reverse the trend seem unlikely. How much would prices drop? “It’s difficult to put a figure. But demand has come down drastically which is worrisome. It is not even 10% of last year,” said Pranay Vakil, Chairman, Knight Frank India, a global realty consultancy.

Lehman Fall May Deepen Indian Realtors’ Credit Woes

Lehman Brothers’ bankrupcy is likely to cost Indian real estate. It may impact the financial major’s existing investments worth $500 million in realty firms, including DLF and Unitech, besides drying up another $500-million worth of potential investment which was expected to flow into Unitech’s Mumbai projects.

The news of Lehman’s collapse brought the BSE realty index down by 7.65% on Monday, while the benchmark Sensex declined 3.35%. Both DLF and Unitech fell 7.5%.

Lehman’s fall signals a deepening of credit crisis for Indian developers, who have lately been battling falling sales, rising cost of construction and tightening credit. It is expected that the US-based firm is likely to go for a fire sale of its assets.

The financial service major was very bullish on India and was among the active investors in Indian real estate. Early this year, it had leased out an office space in Mumbai paying Rs 1 crore per month as rental. This would divert a part of fresh funds seeking to invest in Indian realty.

This is because global fund houses have country-allocations. And as they buyout Lehman’s stake in some of the Indian assets, they will end up diverting some of the fresh funds-in-hand to existing assets rather than investing in new projects.

“Lehman’s departure will impact future cash flows of real estate companies. In a market situation like today’s, it will be all the more difficult for the firms to raise funds,” says Karvy Stock Broking vice-president Ambareesh Baliga.

Lehman invested $200 million in DLF promoter group company DLF Assets last year and bought 50% stake in Unitech’s Mumbai project for $175 million a few months ago. It had also invested $80 million in Bangalore-based SEZ Gandhi City and was likely to hike its share to $300 million.

Lehman’s other investments include a 40% stake in an IT park project of Peninsula Land in Hyderabad for an initial investment of Rs 50 crore. It had also teamed up with Mumbai-based developer HDIL to bid for the redevelopment of Asia’s largest slum Dharavi.

Wherever the developers had received fund, they are safe. But where the funds are yet to come, the developers could get stuck. Some analysts say a distress sale by Lehman will impact the valuation of existing projects.

DLF CFO Ramesh Sanka had earlier told ET that Lehman’s sale of investments in DAL would not impact DAL’s valuation. Unitech MD Sanjay Chandra said that his company had already received funds. So, the company won’t get impacted by Lehman’s bankruptcy.

Some industry executives say that FDI norms of a three-year lock-in period may prevent Lehman from making an immediate sale. But analysts argue that the lock-in period in case of bankruptcy may not hold.

Home Loan Rates May Increase

Home loan rates may have peaked, according to Deepak Parekh, chairman, HDFC, the largest housing finance company in the country. Interest rates are linked to inflation and there have been signs that inflation is moderating, said Mr Parekh.

“Interest rates are linked to inflation. If inflation is controlled, interest rates can also be contained. In the past two weeks, we have seen from the data coming out that inflation has marginally tapered off. If the trend continues, it would mean that the peak has come already.

I think, with oil and commodity prices tapering off and food prices stagnating, we have peaked already,” said Mr Parekh. However, he added that there were some who believed that there would be one more round of interest-rate hikes.

Delivering the keynote address at the Ficci summit on real estate on Wednesday, Mr Parekh said that slowdown in the real estate market — a long overdue adjustment — was needed, and this, to some extent, has already happened. He pointed out that the real estate industry was still not out of the woods. “I do foresee some more pain in the real estate market in India,” said Mr Parekh.

Mr Parekh also had a suggestion to industry for avoiding situations like the one witnessed in Singur. According to Mr Parekh, the main problem in such cases is that land acquisition is done at fair value, but subsequently when project plans are announced, the value of that land escalates and then the original sellers feel cheated or disgruntled with their compensation.

“It is difficult to find outright solutions, but experience shows that the need of the hour is transparency in such land dealings, clearer land titles and making those losing their land stakeholders in the project.

Offering them equity in the project will give them long-term economic benefits, rather than leaving them with the fear of being displaced and then subsequently becoming the grist for someone else’s battle,” said Mr Parekh.

The doyen of the country’s housing finance industry was also critical of the move to extend higher floor-space index (FSI) for redevelopment projects in South Mumbai. Last week, the Supreme Court allowed the Maharashtra government to demolish pre-1940 buildings and replace them with new towers.

The state government has been allowed to grant builders increased development rights as an incentive for redevelopment. According to Mr Parekh, higher FSI will result in building within five feet of one another. “Where is the open space? Where is the water? and how will the sewage system work?” said Mr Parekh.

He pointed out that some of the old structures had hundreds of dwelling units. And for rehousing, there was not enough space for redevelopment after everyone is rehoused.

Parsvnath Bagged One More Project In Mumbai

Parsvnath Developers Ltd has declared that the they have won another project from Mumbai to develop a plot of land at Mahim Bus Station for commercial and residential utilization along with remodeling of existing bus station.

The project would give the Company a developable area of forty thousand square feet with a realizable value of approximately seventy crore rupees. This project is in addition to a project grabbed from BEST, Mumbai for re-development into a modern bus terminus at Kurla with modern amenities and a commercial shopping complex in Mumbai.

The Mahim project would be on lease to the Company for a period of sixty years and would be executed within two years from the date of commencement of work.

TDI Unveils TDI City In Mohali

TDI Infrastructure Limited (TDIIL), a premier real estate group has launched TDI City Mohali, Phase – II in the presence of S Sukhbir Singh Badal, Hon’ble MP & President, Shiromani Akali Dal. TDI City is a self sufficient integrated township, which will offer plots of various sizes along with beautifully designed villas and luxury apartments. Spread over an area of 150 acres, the township would be embellished with state-of-the-art malls, a multiplex and best in class facilities such as a healthcare centers, primary and secondary schools, round the clock security, recreation centers, commercial offices and a hotel.

Located at Sector 110 and 111, Main Landran-Banur Road, Mohali TDI City Phase II is a well planned & an ultra modern dream township. It is equipped with world class facilities and features and also has wide and well lit metal roads, inter flowing green space and beautiful landscaping.

Speaking at the launch, Ravinder Taneja, Vice Chairman, TDIIL said, “Mohali‘s population is around the 200,000 mark and the region is a growing destination for an increasing number of outsourcing IT companies which look to capitalize on the rich investment opportunities the city offers. Global tech giants like Dell, Quark, Philips have set up base in Mohali and many more IT companies planning to follow the suit.

With lucrative and steadily increasing job opportunities many people are migrating from different parts of the country to Mohali. With the success of TDI City Mohali, Phase I, we realized the need to develop housing and recreational facilities for such people whose number is increasing everyday in Mohali. Thus TDI City Mohali, Phase-II will prove to be a great place to live in’.

‘Quality housing at an affordable price’ has always been the motto of the TDI Group. In keeping in with the company belief, while conceptualizing & developing TDI City it was ensured that its residents get the best facilities and high quality services at an affordable price. The city will comprise of residential accommodations starting at a a price range of Rs.11,000/square feet to Rs 13,000/square feet and commercial area costing Rs 60-70 lac/102 square yards.

A sizeable commercial project of 10 acres is also part of the plans for TDI City Mohali. With the approach road going through the process of expansion and a frontage area of about 8 acres, not to mention it being conveniently located on the Main Landran-Banur Road near the well known Chandigarh Engineering College, TDI City Mohali Phase II has the potential to become a landmark for the city of Mohali as well as set a benchmark for excellence.

Long Term Prospects Of Real Estate

With growing foreign investments in the country’s real estate market, long-term prospects of the sector look brighter, HDFC Chairman Deepak Parekh said.

“Long-term prospects of commercial real estate market continue to be positive owing to growing opportunities in sectors like healthcare, hospitality, logistics and education,” Parekh told reporters in Mumbai.

There is sufficient interest from foreign investors to take part in the country’s real estate market through private equity and foreign direct investment routes, he said.

In Q1 FY’09, about 20% of FDIs were in the housing and real estate sectors, he said, adding that the IPO market may take some time to recover.

The housing segment has enormous demand if the pricing is correct, Parekh said. “Given the huge housing shortage it is unlikely that there will be any saturation in the market for a long time to come.”

Advising buyers not to sit on the fence, Parekh said: “If you find the right house, go ahead and buy it.”

Interest rates over a 15-year period would inevitably move up and down. “So do not overstretch on a loan and maintain a sufficient buffer,” he said.

The present situation may call for some consolidation within the real estate sector and perhaps the need to create innovative financial instruments that could support financially distressed developers to tide over (the present period), Parekh said.

Golden Forest Land Set To Change Hands

In what could lead to one of the biggest land transactions in the country, the Supreme Court will hear on September 16 two companies who have put in bids to acquire the entire land assets of the infamous Golden Forest India (GFIL) which is under liquidation. These two companies are Vavasi Group promoted by National Knowledge Commission chairman Sam Pitroda, and the Delhi-based real estate firm Chadha Group.

“We have received applications from these two companies for the takeover of all the assets of Golden Forests. As long as we manage to raise Rs 2,000 crore, which would benefit GFIL investors, we have no objection,” Justice RN Agarwal (Retd), chairman of the Supreme Court-appointed committee to sell Golden Forests assets told from Chandigarh. GFIL’s land assets are spread across Punjab, Haryana, Uttarakhand, Madhya Pradesh, Orissa and Andhra Pradesh.

“We have forwarded these applications to the Supreme Court, which is expected to take up the matter in its next hearing on September 16,” Mr Agarwal said. The bids are far more than Rs 2,000 crore of current liabilities which includes interest of the defunct company, Mr Agarwal said.

The former judge said that nearly 110 companies, which were floated by GFIL to buy land across the country, will need to be merged with the parent company first so that a bidder can take over the land bank. “This is quite complicated… a lot of legal formalities need to be completed first,” he added.

Analysts said the land bank of around 12,000 acre is approximately valued at Rs 5,000 crore. “We have managed to sell some small portions of GFIL’s land and have received part payment. This will also need to be ratified by the Supreme Court, along with Vavasi and Chadha groups’ applications,” he said.

Golden Forest India made news in the mid-nineties when the company raised funds worth Rs 1,000 crore from over 22 lakh investors across 11 states to invest in plantation schemes. But it soon defaulted on payments to the investors. So, Sebi — which bought all plantation schemes under its purview in 1997 — moved court and initiated proceedings against the company’s promoters led by its chairman R K Syal.

As the case against the company was heard across various courts, the matter was finally transferred to the Supreme Court. Four years ago, the apex court appointed a committee under the chairmanship of retired chief justice RN. Aggarwal, with two members, one each from the Reserve Bank of India and Sebi, for the purpose of taking into custody all the assets of Golden Forest and calling for claims of creditors and scrutinizing them. The court later asked the committee to auction all the assets of the company so that the investors could be repaid.

A banker told that Vavasi is doing a due diligence of GFIL’s assets and talking to various banks to raise funds required for taking over GFIL’s assets. A questionnaire sent to Mr Pitroda went unanswered.

Eighth Indus India Property Exhibition Will Be Held In Doha

The eighth Indus India Property Exhibition will be held on 19 and 20 September at Giwana Ball room of the Ramada Plaza in Doha.
The exhibition will display some of the leading names in the Indian real estate sector. Some of the foremost builders and housing finance institutions from India would be taking part in the expo, organizers said.
Several residential and commercial property dealers from all over India will have their stalls at the venue.
The organizers said that the exhibition would bring under one roof reputable builders, diverse properties and the best financing options from the bank so that customers could shop for their dream home with minimum effort and maximum convenience.
NRI investors looking for real estate investments in India would have access to first hand information on an array of upcoming and current real estate projects, they said.
A variety of property alternatives from residential apartments, plots and bungalows to commercial properties would be on display.
The property would also offer the customers a broad choice with the best deals possible, the organizers said.
The real estate industry has several potential as various foreign real estate and finance companies have entered the Indian market. Moreover 100% FDI is permitted in real estate development and the Indian government has played a most important role in supporting the growth of the real estate sector by permitting NRI investment in real estate.
The previous exhibitions organized by Indus Group in Malaysia, Dubai, Muscat and in Kuwait attracted more than ten thousand investors and generated business inquires for more than twenty five billion rupees worth properties and transactions crossing Rs7.5bn during the exhibition days.

Housing Demand Fall In Small Towns

Slump in the residential real estate sector in tier-1 cities seems to have spread over to tier-2 and tier-3 cities. Housing demand in small cities got down by 25% during February-July this year because of higher cost of borrowing. Besides rising cost, unavailability of inputs and power shortage also cause excessive delays in project completion.

The study by the Assocham said that realty transaction has gone down by nearly 25% in most of tier-2 and tier-3 cities between February and July of current financial year.

Assocham secretary general D.S. Rawat said that Approx fifteen million people in tier-2 and tier-3 cities were unable to make purchases as higher inflation and interest rate have dampened their enthusiasm and eroded their budget.

The Assocham study is based on feedback from affiliated real estate majors like Parsvnath, Omaxe, DLF, Unitech, and BPTP, which are developing projects in small towns.

FIIs Reduced Investment In Real Estate

BSE reports shows that Foreign institutional investors (FIIs) have reduced their investment in real estate companies, mainly Parsvnath Developers and Unitech by 0.8 and 2 % correspondingly, year-on-year.

According to shareholding data available on BSE, the domestic financial institutions and banks have amplified their inevstment in Unitech Ltd by more than 1.5%, while Foreign institutional investors (FIIs) have reduced their stake.

In the case of Parsvnath, there were marginal changes in the institutional shareholding (mutual funds/UTI and financial institutions and banks) within the non-promoter category, even as the ‘individual’ holding get higher by just less than a percentage point.

In the case of Unitech, the stake held by various mutual funds and UTI stood at 0.51% on June 30, 2008 a bit higher than 0.25% in 2007.

Jai Corporation To Raise Rs 5,686 Crore Through Venture Capital

Anand Jain-controlled Jai Corporation, an infrastructure company, has raised commitments worth five thousand six hundred eighty six crore rupeees through its venture capital management company’s two funds.
Urban Infrastructure Venture Capital, the company’s venture capital company, is the Indian Advisor to UIREF, a Mauritius-based offshore fund that invests in Indian real estate.
Urban Infrastructure Real Estate Fund, the offshore fund that was launched in May previous year, has raised commitments of around two thousand four hundred crore rupees till now. With an additional commitment of one thousand sixty five crore rupees in May, the second fund the Urban Infrastructure Opportunities Fund has raised its corpus fund to three thousand two hundred eighty six crore rupees, the company said in its yearly report lately.
Both funds invest in special purpose vehicles that are floated for real estate projects in India. Jai Corp plans to grow the SPVs into large real estate development companies by providing funding for various projects. The investment focus, according to the report, is on developing big integrated townships and multi-use developments.
The opportunities fund, which was launched in May 2006, raised two thousand two hundred twenty one crore rupees worth commitments at the beginning itself. After two years, it raised further commitments of one thousand sixty five crore rupees and 20% of it has been drawn down for seven years.
Anand Jain has been closely associated with Reliance Industries for a long time. He attended the Hill Grange High School in Mumbai, where Mukesh Ambani was his classmate. Jain is presently in charge of RIL’s SEZ foray. The fund’s target is in line with the plans of its core investor, Reliance Industries, said sources.
Jai Corp is a stakeholder in entities developing two SEZs – Mumbai SEZ and Navi Mumbai SEZ and the Rewas Port in Maharashtra.
It is planning mega play in power generation, transmission and distribution, water supply, gas distribution, engineering, procurement and construction and IT and telecom. The company makes cold-rolled coils, galvanised coils and corrugated sheets at its Nanded unit in Maharashtra.

Parsvnath Launches Parsvnath Premier In Indore

Parsvnath Developers Limited (PDL), India’s leading Real Estate Company with pan India presence having diversified portfolio has announced the launch of Parsvnath Premier a Group Housing project in Parsvnath City, Indore.
The Group Housing project spread over an area of 6.3 acres is strategically located in Indore adjoining NH-3 and AB Bye Pass, Mangliya. The realization from the project is approximately Rs 60 crore and is scheduled to be complete by the end of 2011.
Mr. Sanjeev Jain, Managing Director, Parsvnath Developers Limited said, “At Parsvnath it has been our constant endeavor to explore opportunities to completely develop the fastest growing cosmopolitan city of India by furnishing it with residential and commercial projects so that it stands at par with the metro towns. In order to do so in the commercial capital of Madhya Pradesh where we marked our presence by launching Parsvnath City, an integrated township with IT/ ITES SEZ we are further launching Parsvnath Premier”.
Parsvnath Premier having 4.11 lac square feet of saleable area offers 300 units. The project comprising of ground plus five floors would be equipped with two and three bedroom flats. The project to be built with rich construction specifications offers a gamut of leisure activities.
Parsvnath also entered into an agreement with Madhya Pradesh government for expeditious and unhindered development of its 76-acre SEZ at Indore which will create direct and indirect employment opportunities for approximately 40,000 people and is developing 100 acre Integrated Township in Ujjain.

Real Estate Industry Predict Growth

Affected by slowdown and reported corrections in prices, the country’s real estate industry predict growth in the long term despite costly home loans and lack of funding for realty projects.

According to a most recent study by Ernst & Young and FICCI on the country’s real estate scenario, about 62% of the respondent developers expected the industry to grow in the long term despite a correction in prices by about 10-15% in the previous year.

Giving highlights of the report, ‘Realty Pulse’ to be released on September 10, Ernst & Young Partner and Leader Ganesh Raj said, “There has been a slowdown in demand and some correction also happened by about 15-20%. But this is momentary, the market will surely bounce back.”

Healthcare infrastructure, logistics and warehousing and affordable housing would hold significant growth potential in the Indian real estate sector, he added.

“The temporal slowdown in the market will be followed by sustained activity as a result of innovative formats, new geographies and flexible pricing and delivery mechanisms. Given the growth in residential housing, organised retail and hospitality industries, the sector is likely to see increased investment activity,” Raj said.

The report pointed out that respondents believe genuine end-users had ‘taken over’ from the investors and account for about 80-90% of sales in their current projects.

“Respondents expressed mixed reactions with regards to land valuations. Most of them seem to be reaching a consensus that land values are likely to see stability over the short to mid-term and may not witness any appreciation over the next 12 months,” it said.

Millennium Spire Enters Into Indian Realty Sector

Millennium Spire Limited, an ‘Alternative Strategies Fund’ under the UK-based Millennium Global Umbrella, has entered the Indian realty sector unveiling its maiden platform for developments in the Indian market, Spire World. It is a platform that would drive development of mainstream green projects of Millennium Spire in the country. This has also marked the launch of the company’s first ‘Mainstream Green’ project in India, Spire Edge, a sprawling 1.6 million square feet of scalable eco-office complex with an energy saving capacity of up to 30%, costing four hundred crore rupees. The project is a joint venture between Millennium Spire and A.N. Buildwell, a company with over 25 years of experience in real estate development. The project would be located in the emerging IT hotspot, IMT Manesar along the Delhi-Jaipur highway.

Mid-range Properties Rental In Banglore

Bangalore’s residential rentals in central locations for mid-range properties for second quarter of 2008 have recorded peak values. Mid-range developments are properties quoting rentals between Rs 100,000- 120,000 monthly. Read More »

Saffron Asset To Launch Three New Funds

Saffron Asset Advisors, a private equity player, is planning to launch three new funds in hospitality, logistics and infrastructure early on 2010. Ajoy Veer Kapoor, founder and managing director, Saffron Asset Advisors told FE, “We are planning a five hundred million dollar infrastructure fund, and will introduce two hundred million dollar hospitality and logistics funds. We will source funds through foreign direct investments (FDIs).” Read More »

REBI Is Planning To set Up 3,000 Franchisees Across The Country

Real Estate Bank India (REBI), is planning to set up three thousand franchisees across the country, with about forty eight outlets in West Bengal in the next few years.
Across the eastern region, REBI would open two hundred stores, said Hemant Sikaria, regional head of REBI, on the occasion of launch of two-day expo, Franchise Expo 2008-09.
This would be a podium for entrepreneurs and business houses to explore business opportunities in real estate.
REBI was present in places like Bangalore, Bhubaneshwar, Chennai, Coimbatore, Delhi, Hyderabad, Jabalpur, Jaipur, Lucknow, Ludhiana, Mysore, Surat, Trichy, Truvandrum and Varanasi.
“India’s realty segment is the only industry with a track record of 30-35% growth per year in terms of investment. With the realty sector booming in east, we are confident that to be able to provide solutions to all real estate requirements of the people here,” Sikaria said.
REBI provides a single window service for brokerage services, financial services, database services and relocation services.
REBI claimed it had tie-ups with organizations like KPMG and TCS to leverage on their business process validation and technology platform.