Monthly Archives: September 2009

Indian real estate sector needs regularization

The stock market has SEBI to provide guidelines, define conduct and processes, provide a redressal system for both buyers and sellers and install necessary consistency and standardization. The proposed real estate regulatory body intends to do the same for the Indian property market, which currently presents a rather under-organized picture, Ashutosh Limaye, Associate Director – Strategic Consulting, Jones Lang LaSalle Meghraj said. Further he added, The Indian real estate sector needs regularization, especially in the light of the multitude of local ways of doing business.
He also said, “The body will require builders to provide actual and verifiable figures for area their projects occupy, legal status of the land involved, chargeable built-up spaces, etc. Moreover, it intends to provide a badly-needed redressal system for property buyers. If this authority performs the intended functions efficiently, it can do much to induce confidence in foreign real estate players intending to invest in India and generally eliminate elements that come on the heels of an immature system. Such a body is required to bring about a happy medium between the ways in which real estate business sis done abroad and the way it is done in India. It can give Indian real estate more international credibility and boost investor and actual end user confidence levels.”
Currently, only listed real estate companies are accountable for the ways in which they conduct their business. This is not true for smaller players, and such an agency would make unlisted companies equally accountable. It is definitely possible that a certain number of developers would perceive such regulation as a loss of freedom. In the developer world, there is a huge spectrum of types and scales. At the base of the pyramid are local developers with small scale operations who will need time to get used to the implied processes and systems, which they may not see themselves as equipped for. Such developers would expect to be given a reasonable period to fall in line, which is fair. The regulatory body would be expected to not only provide restrictions and responsibilities, but also to clearly define developers’ rights.
Limaye added, The market needed the wake-up call that the recent slowdown dynamics provided. Developers have now become more introspective and retrospective about certain errors of judgment and ways to do business. While such a body would certainly have been welcome earlier, there is probably no better time than now for it to be put in place. Developers are now in a better position to realize that in the long run, far from being given the short end of the stick, they will benefit equally by increased transparency. One must remember that this regulatory body would ensure the welfare of the industry, which comprises of both developers and buyers.

Indian developers set sights on Sri Lanka

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

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

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

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

Demand for 2-3BHK flats on the rise in Ajmer

The real estate market is slowly picking up in Ajmer. Investors as well as end users have started exploring options. Being a prominent centre of religious tourism, there is no dearth of investors from abroad.
Property consultants have started getting queries from NRIs visiting ajmer. Blue Earth Consultant MD Surendra Rajpurohit said, “Most of them want a 2-3 bedroom flat in the city so that whenever they come to pay homage at the dargah they can live comfortably. In the past few weeks, there has been some positive movement in realty space”.
With time, there has been a paradigm shift in preferences. Earlier there was a demand for independent houses. Now people are asking for apartments and society flats. Mr Rajpurohit says, “People now prefer community living as it offers convenience, safety and common facilities. People, specially retired and nuclear families, are looking for flats”.
But the apartment culture is yet to take off. Not many real estate players are in the ring. Ansal Properties and Infrastructure is among the frontrunner, and is coming up with a hundred acre township Sushant City on NH-8. It will house a commercial mall — Ansal Plaza, a three-screen multiplex, 4 different sizes of 790 residential plots, 1200 independent houses and 225 flats.
Amit Bhardwaj of SM Real Estate said, “Flats are available in the range of Rs 7-15 lakh while an independent house can cost you Rs 7 lakh to Rs 60 lakh, depending on the size and construction”.

Loans set to get costlier

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

Awarded for house design

The award instituted by the Kerala State Nirmithi Kendra for designing a house costing under one lakh rupees has gone to Mr Jonu John Thomas, an architecture student at the National Institute of Technology, Calicut. About 20 designs had come up for consideration at the competition that required participants to prepare innovative blueprints keeping in mind the cost, area, the time needed for construction and energy consumption. Announcing the award, the Minister for Housing, Mr Benoy Viswom, said the winner would take home Rs 50,000.

Mumbai expects highest residential space demand

Mumbai is expected to see the highest demand for residential space of approximately 16.40 lakh units due to the large scale urbanization. The mid-scale and affordable housing in suburban and peripheral areas will be the focus of this demand. However, the demand for office space would be approximately 23.7 million square feet, which is lower than that in Bangalore, Chennai and NCR.

The demand for hospitality in Mumbai is expected to be strong at over 98,500 room-nights, by virtue of the fact that the city is regarded as the financial capital of India and therefore the volume of both domestic and foreign business travelers is expected to grow steadily. Demand for retail is expected to be 6.19 million square feet.
On the other hand, Pune is expected to see the highest compounded annual growth in retail demand at 51% due to the current favorable demographics. The total expected demand for retail in Pune is approximately 1.76 million square feet. Office demand in Pune is expected to be 21.7 million square feet.

Bangalore emerges as a clear preference for sectors like office and retail, while it comes a close third in the residential and hospitality segments . Bangalore is expected to see the highest demand for office space in 2009-2013 of approximately 34 million square feet.

Real estate sector to witness a prolonged & robust demand

Real estate sector in the country will witness a prolonged and robust demand. According to a report by global realty consultation firm Cushman & Wakefield, the pan-India residential demand for 2009-2013 could be around 7.5 million units and that for office space at 196 million square feet.

The Cushman & Wakefield India Real Estate Investment report 2009 Survival to Revival Indian realty sector on the path to recovery estimates demand for retail space at around 43 million sq ft while the hospitality sector is expected to see a demand of approximately 6,90,000 room-nights in the same period.

According to Anurag Mathur, MD of C&W, India, “Though the highgrowth trajectory of the previous years saw a setback during the global economic slowdown, the inherent strong economic fundamentals, low exposure to debt and state intervention, would help the sector gradually return to the path of recovery and witness robust demand for real estate across sectors”.

2BHK is in trend

The maximum demand currently is for 2BHK residential apartments and finally supply is following demand. Such has been the response that there are developers who claim as much as 55% of their inventories comprise two bedroom units.

According to Atma Sharan, GM-Marketing, Ashiana Housing Ltd, “About 55-60% inventory would be 2BHK. This definitely is the fastest moving segment, particularly among first home buyers.

The 2BHK end user is attracted by the price tag, affordability factor, and lower EMIs. Developers who were primarily focusing on plush housing earlier are including smaller units in a big way in their projects. They are coming up with new initiatives in this line which is expected to attract the young service class people in a big way. So, be it DLF, Unitech or Jaypee, they all have at least 30% inventories as two bedroom units in their projects and plan to increase the percentage with time.

Retail investors turn careful on IPOs

Though the 10 IPOs in the fiscal have mopped up close to Rs 10,000 crore, the attitude of retail investors to the offerings has been one of extreme caution.

While participation by institutional and high net worth investors has been positive, retail interest has waned, said merchant bankers.

The 10 IPOs that hit the market this fiscal have seen their retail portion getting subscribed less than four times on an average.

The IPOs may be getting subscribed multiple times. But the fact that several investment recommendations stated that the IPOs were overvalued put retail investors off.

Mr Adeel, a retail investor, said: “A small-time retail investor will look at investment recommendations and most of the IPOs are said to be overvalued. This will keep us away from those IPOs.”

PDL looking torward tier-II cities

Ugly church
Parsvnath Developers Limited is looking toward tier-II cities and following the strategy, PDL announced Parsvnath City at Saharanpur.  It will offer plotted development, independent Floors and expandable villas at affordable prices.  Spread over more than hundred acres, Parsvnath City, Saharanpur is strategically located on Delhi road. First of its kind project will offer independent floors in affordable range starting from Rs 9.50 lakh. The project will comprise of plots in various sizes of 201, 300, 402 and 502 square yards. The independent floors will have the options of 2 bedroom, 3 bedroom and 3 bedroom with study room units and option of expandable villas are also available.
Parsvnath City will have fully fledged infrastructure wide well lit metaled roads and solid waste management.  The township will also have Group Housing, School, Community Center and Mall. The realization from the project will be about three hundred fifty crore rupees spread over 2 years. The development of the township is planned to be completed in 2 years.

All apartments sold within 2 hours

DLF has launched the 2nd phase of its residential project in the heart of national capital, has sold all the apartments within 2 hours. The company sold all the flats, offered at prices of up to Rs 1.86 crore, though it has increased the selling price of its units by up to 26% compared to 1st phase.
TC Goyal, MD- DLF said, “Even with increased price, we have received tremendous response for our product. We initially planned to launch six hundred fifty units in 2nd phase, but due to huge demand we planned to offer more”.
The company has launched 2nd phase of the project at Rs 6,750 (2-BHK), Rs 7,500 (3-BHK) and Rs 8,000 (4-BHK) per square feet.
However, the effective rate would come down to Rs 5677, Rs 6363 and Rs 6820 per square feet respectively as DLF would offer a discount of five hundred rupees per square feet for timely payment and 8.5% rebate on down payments.

Weaving character into homes

Bringing character to a home is the latest mantra, at least in the luxury format.
Designer Mr Sabyasachi Mukherjee will work on six of the two hundred limited edition homes Samira Habitats is developing at Alibagh. These would cost upwards of one crore rupees each.
The designer will work closely with the project architect to ensure structural compliance of the masonry, while filling in with his craft and elements.
The purpose is to lend individuality and embed creativity that the designer exhibits in his apparel on the ground.
Further he said, “When I decided to extend my love for visual aesthetics, form and color to interiors, I chose Samira Habitats because of their offerings of finely crafted homes close to nature. Their eye for opulence and detail is a vision I passionately share”.

Mumbai high street rentals see biggest crash

As the global slowdown pushed consumers to stay at home, retailers halted expansion plans and checked out of expensive high-street locations. Rental rates at high street locations across the world crashed, with the biggest crashes in Mumbai.
Among the exceptions were Bangalore’s two iconic retail hubs, Brigade Road and Commercial Street, and Kolkata’s Camac Street.
Mumbai’s leading highstreet locations—Colaba Causeway, Linking Road and Kemps Corner—also reported the largest declines in rentals across the world on a year-on-year basis—63.5%, 63%, and 60% respectively.
As per the annual global survey, Main Streets Across The World 2009, by global real estate consultants Cushman and Wakefield, over three-fourth’s of the world’s most prestigious shopping streets saw rentals crashing anywhere between 17% and 63.5%. Around 18%, however, recorded a growth.

Real estate firm sees festival sales

Photo by paul goyette
Property firms are launching housing projects and raising pitch for ongoing ones in the hope of making decent sales going into the festive season. The mood among builders may be buoyant, but very few believe price hike is possible as demand is still hesitant and new supplies are hitting the market.

The festive season, which usually begins late September with the Hindu festival of Navratra and continues up to Christmas, often sees higher sales of property, cars and other durables.

Lodha developers is planning to launch two new projects, comprising apartments priced over Rs 1 crore, in Mumbai’s suburbs of Andheri and Thane. So far, the slow return of housing demand was scripted by lower-priced homes. But Lodha’s offerings indicate the builder is confident of getting buyers for high-priced segment as well.

Dax Properties setting up golf township

Dax Properties is setting up a 18-hole golf course-centric luxury retreat and township at Shadnagar near here which will entail investment of five hundred crore rupees.
The golf course will be spread over 130 acres on a 300-acre site earmarked for the Golf Retreat project, according to Mr Masood, MD of the Bangalore-based Dax Properties, part of Countryside Realtors.
Further he said, “We believe India has potential to serve golf lovers offering golf tourism in a majestic lush green environment where one could also buy luxury villas being developed on the property”.

Best time for a deal in real estate

It is the best time to look around for a value buy in real estate. With lower price points in locations which were not within your wallet’s reach, buyers are scouting for good ‘value’ bargains at this time.
And with developers going big on affordable home launches, the timing may just be one of the best for buyers seeking a steal deal.
Anshuman Magazine, CMD of global real estate consultancy CBRE says that value buying is happening mostly in suburban locations as that is where the current supply is.

Best Western opens property

Best Western India, the Indian affiliate of the international Best Western brand, opened its 13th operational property.
Branded as ‘Best Western Classic Avenue’, the 60-room, four-star luxury property is the second in Kerala after Kochi.
Best Western, among the world’s largest chain providing marketing, reservations and operational support to over four thousand independently owned and operated member-hotels in more than 80 countries.
According to Mr Sudhir Sinha, President and COO, Best Western India, occupancy rates have looked up by 20 – 25% to 65 %-plus since the lows registered during the recession period from September last.
Mr K. P. Sahadevan, Managing Director, Best Western Classic Avenue, said that an additional seventy rooms would be added to the property over the next three to four years to raise it to five-star category.

Realtors must tell buyers about bank claim

Home buyers will now know if the land on which their building stands is free of outside claims after a recent RBI circular mandating builders mortgaging the land to raise money to disclose it in all advertisements and brochures.

RBI has asked lenders to ensure that all publicity material relating to the sale of real estate make a mention of the bank’s lien on the property so that home buyers are not kept in the dark.

RBI aims to prevent prospective buyers from being lulled into the belief that the flats they own are on ‘free-hold’ land through this move.

In Mumbai flatowner gets rights over his house through membership of a cooperative housing society. The land is not owned by the society unless it is transferred through a conveyance.

Various Industrial Projects Look Out for Orissa Govt NOD

The Naveen Patnaik Government’s failure to help companies take possession of land has delayed implementation of 14 mega industrial projects.
Top representatives from Posco-India, Tata Steel, ArcelorMittal India Ltd, Jindal Steel & Power Ltd, SSL Energy Ltd, Uttam Galva Steels Ltd, Essar Steel Orissa Ltd, Bhusan Power & Steel Ltd, Aditya Aluminium Ltd, Welspun Power & Steel Ltd, Vedanta Aluminium Ltd, Jindal India Thermal Power Ltd and Bhushan Steel Ltd attended the meeting.
The 14 projects had proposed investments of Rs 2 lakh crore but have invested Rs 21,031.71 crore only. Though 45,607 acres were required for the projects, the State Government had allotted them 14,131.90 acres till date.
Most companies have not been able to take possession of land for their respective projects primarily due to opposition from people living in the area who face displacement. The other issues were availability of water, supply of power, and rehabilitation and resettlement.
The Minister asked senior Government officials to resolve the problems facing the industries and also advised the companies to expedite land acquisition.

El Forge to sell Chennai property

The Chennai-based El Forge Ltd is selling its land at Thuraipakkam for ten crore rupees as part of its restructuring plan. The company, which made a loss of Rs 18 crore last year on a turnover of Rs 87 crore, will make a substantial profit on the transaction.
Company officials do not want to disclose the profit figure, pending conclusion of the transaction. The transaction is likely to be concluded in October and as such, the profits will be reflected in the accounts of the third-quarter.
The plant and machinery at Thuraipakkam have been moved to Appur, where a new facility has come up at an investment of hundred crore rupees.
Mr K. V. Ramachandran, Vice-Chairman and Managing Director, said that the company is also shifting machinery from its leased facility in Gumidipoondi to Appur. It also has plant in Hosur. Across these plants, the company has an installed capacity is 21,600 tones a year.

Unlock urban land values

Georgia Dome Event Space Light Sentinels
Building infrastructure requires huge investments and one of the effective ways of addressing this insurmountable obstacle is to unlock urban land values for infrastructure finance.
This is what experts contended at a day-long deliberation, jointly organized by the Ministry of Urban Development, Infrastructure Development Finance Corporation, India Urban Space Foundation and National Institute of Urban Affairs in collaboration with Wolfensohn Centre for Development at Brookings.
Participants from different countries highlighted the unresolved paradox in that for most large infrastructure projects — those related to transportation and communications — infrastructure investments push the value of urban land more than the cost of the project.
If land-value gains so accrued exceed project costs, why has it been so difficult to ramp up infrastructure financing? Hence, the policy question to find a proper way out to capture part of the gain in land-values for urban infrastructure finance through land-based financing.

Piramals’ Indiareit plans realty fund

Indiareit Fund Advisors is setting up its second real estate fund with a corpus of five hundred crore rupees and expects to raise the money from investors by the end of this year.

The group had earlier floated Indiareit Fund, a $450-million real estate fund in 2006 and the proposed new Rs 500-core fund is over and above this. The Piramal Group has a presence in sectors, such as healthcare, diagnostics, glass manufacturing and real estate.

Said Ramesh Jogani, managing director and CEO, Indiareit Fund Advisors: “The Piramal Group is setting up a new domestic real estate fund and we are in the process of raising an overall corpus of around Rs 500 crore for it. This fund will invest in projects in Mumbai, New Delhi and Alibaug, a tourist town near Mumbai, and will be restricted to the residential segment. The new fund, apart from having a real estate focus, may also invest jointly with the existing fund.”

Unitech presents Unihomes

Unitech Developers are now concentrating on Kolkata. They present new stylish affordable residential apartment Unihomes at Kona Expressway Kolkata with lots of modern amenities. Unihomes offers one and two bedroom apartments that are suitable for contemporary urban living. A desirable and contemporary place within the reach of your pocket. Apartments Price is starting at eighteen lakh rupees and above.

Shriram Properties and Career Launcher tie up

Shriram Properties and Career Launcher have tied up to open a chain of 25 Indus World Schools in townships developed by Shriram Properties.
According to Career Launcher, a leading education service provider present in 200 locations in India, West Asia and the US, initially, Indus World Schools would come up by 2010 in Shriram Properties townships being developed in Bangalore, Chennai, Kolkata and Visakhapatnam.
Over the next three years, 25 such schools will come up in the southern and eastern parts of the country.
As per the agreement signed by the two partners, Shriram Properties will provide the infrastructure and Career Launcher will bring in its education expertise.
Indus World Schools are operating in Hyderabad, Indore, Mandi, Bhiwani, Raipur, Ahmednagar, Amritsar, Gurgaon and Noida.

Omaxe to develop Hi-Tech Township in Lucknow

Omaxe Ltd. is going to develop a Hi-tech township spread over about 2700 acres in Lucknow the city of nawabs. Garv Buildtech Private Ltd, a subsidiary of Omaxe, has entered into a MoU to develop the said Hi-tech Township in Lucknow.

The Hi-Tech Township which is expected to yield estimated revenue of over Rs 2800 crores will be executed over a period of 5-7years and is slated to cater to the growing demand of quality living space in the city. The township is strategically located on the proposed Lucknow Ring Road in close proximity to Lucknow Airport and only half an hour drive from Hazratganj, center of Lucknow city.

Speaking on the announcement, Mr. Rohtas Goel, CMD, Omaxe Ltd said, “The hitech township is an attempt to recreate an entirely new living experience in the city of Nawabs. There is already substantial pressure on the existing infrastructure and this township will attempt to ease the demand by providing state of the art facilities in close quarters. This hi-tech township will indeed reinforce the commitment to develop and deliver a world class product to the new aspiring class of local residents and the migrants from other cities.”