Monthly Archives: September 2010

Ashiana Housing Ltd brought fame to Indian Realty Market

Forbes magazine for 2010 made a list on ‘Asia’s Best Under A Billion’ in which the only real estate company from India to get through is Delhi-based Ashiana Housing Ltd.

From India, 39 companies were listed out of which Ashiana Housing Ltd which is the only Indian company representing realty sector. Across all over the Asia, only 5 real estate companies represented the real estate sector and Ashiana Housing Ltd is one of them.

In all, 200 companies were listed by the magazine out of which 39 were Indian companies while 71 were China and Hong Kong based.  However, the number of Indian companies has increased from 20 in last year’s list.
This list has been prepared after considering around 13,000 publicly listed Asia-Pacific companies. These are the companies that have revenues under $1 billion. The selection criteria for these 200 companies was

  1. sales growth
  2. earnings growth
  3. shareholders’ return on equity

Navin Fluorine International is a two starrer

Navin Fluorine International has been awarded two stars out of five by CRISIL Equities, the Credit rating agency.

The rating implies that the company`s fundamentals are moderate relative to other listed equity securities in India.

This rating has been given to Navin due to its long-standing presence as one of the four main fluorine players in India. Our grade is moderated by the stagnation in Navin`s main lines of business refrigerants and bulk fluorides. The production of Navin`s flagship refrigerant HCFC 22 is being phased out under the Montreal Protocol due to its ozone-depleting nature.

Also, at the same point of time, sales of low-margin products, i.e. bulk fluorides, are facing tough competition from China.

CRISIL’s criteria for rating Navin 2/5 are the following:

  1. Significant non-operating assets in the form of cash.
  2. Balances with group companies.
  3. Real estate
  4. Investments in group companies through equity, and preference shares.

New Strategy of Company CEOs

In India, it seems like real estate companies are following a different trend for compensating their top management. During 2009, many company CEOs took massive pay hikes, but now they have chosen to either forego their hikes, or at least take modest ones this year, when the sector is doing much better.

Last year, CEOs of few companies like HDIL’s Sarang Wadhawan and Unitech’s Sanjay Chandra came under scathing criticisms from the media. It is hard to believe that in the recession time period of 2008-2009, Chandra got a raise of about 60% whereas Wadhawan got an increment of a whopping 200%.

However, this year the story is quite different. Wadhwan and Chandra both are somewhere at the same salary levels as previous year, thus Unitech’s MD annually earns Rs 1.71 cr. and Rs 6 crore for HDIL’s Wadhawan.

Other than these CEOs, JC Sharma of Sobha Developers took a 25% increase this year, quite modest one. Also, the MD of Puravankara Projects and Godrej Properties, Mr. Ashish Puravankara, scaled up by about 43% annually.

End of realty recession

The Heights Above AT&T Plaza
As the phase of recession is towards its end, an increase in demand of commercial real estate projects, including both office and retail space has been witnessed by firms and retailers.

The executive director for development services at consultants Cushman and Wakefield India, Ravi Ahuja said that in many cities including Mumbai and Delhi-National Capital Region (NCR), the commercial space leased out or sold by the firms is about 9.2 million sq. ft within just a time span of three months, while the space leased and sold during April-June 2009 was just 5.8 million sq. ft.

Last year, the retail space available was 6.3 million sq. ft. However, this year,  some 16.4 million sq. ft of retail space is expected to be available. Consultant Jones Lang LaSalle Inc. has predicted 8.9 million sq. ft will be absorbed this year, compared with 4 million sq. ft in 2009.

Developer such as Assotech Ltd, Wave Inc. Anant Raj Industries Ltd and BPTP India Ltd and have also reported improving property demand.

India Steel selling off its 2 acre plot

3D Realty Handshake
India Steel Works plan to sell its 2 acre plot in Navi Mumbai. Firm has thought of this step in order to unlock value from its real estate. Also, in order to use the proceeds to reduce its debt by half.

The Executive Chairman of India Steel Works’, Mr. Ashwin Gupta informed media that they plan to reduce a debt of Rs 70 cr. through the sale of this land. They are eyeing over Rs 35 cr. from the sale.

He added that once the firm achieves its agenda of becoming a debt-free, the motive behind selling off the Navi Mumbai land, they will raise working capital and drive up turnover. The firm expects to make profit in the financial year 2012.

The firm wants to complete this sale deal as soon as possible.

Economists expect rate hike announcement by RBI later This Month

Since the home buying continues at its full pace even after an impending rate hike by Reserve Bank of India due to which there have been a continuous rise in property prices, the realty industry now is completely free from tensions, i.e,  has shrugged off all its worries. Due to the still high food prices, many economists expect a fifth round of policy rate hikes towards the end of this month. Most probably, RBI will unveil its first-ever mid-quarter policy review on September 16.
However, the developers are still cool and confident for the residential sales even after a possibility of rate hikes by RBI are almost next week. The chairman of CREDAI, Confederation of Real Estate Developers’ Associations of India, Mr. Kumar Gera say that since the buyers fear of price rise in future, therefore they will not stop investing right now. These days an investor does not see the price if he can afford it, he added. Therefore, this price hike won’t make much difference to the market.

Workshop organized by CREDAI

Kolkata Properties - Real Estate India - Surekha Sunrise Symphony
A workshop by arranged by CREDAI, The Confederation of Real Estate Developers’ Association of India on September 7 at Ocean Pearl, Mangalore.

The district in-charge minister Krishna J Palemar inaugurated the workshop and said that people have already disobeyed law in the past and have undertaken illegal construction due to which city lacks in proper parking areas. Also, this has made the possibility of widening roads impossible.

He added that no new Transferable Development Right (TDR) will be accepted now. The situation is that even if the officials shatter some walls, sufficient parking space would not be available. Thus, separate land should be allotted for parking with addition 30 feet for road widening. The left out land can then be provided to building owners as per the new Comprehensive Development Plan (CDP).

V Ponnuraj, the deputy commissioner gave a presentation on Introduction and analysis of various options of TDR and DR. Dharmaraj, an architect and MCC consultant then came up with the process and Terms and conditions.

The revised Direct Tax Code (DTC) got approval

On June 15, the revised Direct Tax Code (DTC) was released which has got approval now. This new DTC will be implemented from 2011. The aim of this revision is to simplify the existing income tax laws. There are some changes proposed in the code for the real estate sector too which go as follows:
Taxation policy for Rental Income Originally, according to DTC, the gross rent was to be calculated at a presumptive rate of 6% of either the market value, or acquisition or the cost of construction, whichever is higher. But the revised DTC has proposed that actual rent received or receivable for the financial year should be the basis of calculation.
Home Loan Interest Policy:Originally, it had been proposed to do away with the tax deduction on the interest paid on home loans. But, as per the revised DTC, tax deduction on the interest paid on home loans up to Rs 1.5 lakhs for purchase or construction will continue.  This revision is quite encouraging for the buyers to buy residential properties.
Also, the property which has not yet been let out will be kept out of tax calculations. Thus, there will be no deduction against tax or interest.

Scope of small real estate investors

In present scenario, scope of small real estate investors in India is low as compared to the institutional investors. Although they can own many property, but bank would not fund more than two loans.

However, this restriction doesn’t imply that they cannot invest beyond that from their personal accruements. They always have the option to go for investing in rent-generating assets, which can bring decent returns, if not good, if they have been bought wisely.

Even after all these limitations for small investors, property investment is an all time investment since it belongs to some of the belongings which always tend to retain their intrinsic value.

Last week’s biggest realty deals in NCR

16b Rental Cottage (E)
A high-end flat was leased for a rental value of Rs 1.2 lakh per month. This apartment is built in the peripheral location of Gurgaon on an area of 4,200 sq ft.  The apartment has been taken on lease by a big corporate for their senior executive.  The average rental value for these flats has been consistent throughout the last quarter and falls in the range of Rs 1 to 1.75 lakh.

Since Gurgaon has now become one of the key commercial office hubs in the NCR, it has acquired a remarkable demand for rental residences. With the growth of Gurgaon, metro connectivity which is soon going to hit Gurgaon seems like cherry on the cake. This is likely the reason behind people getting attracted from other areas of NCR to own their homes in Gurgaon.

Rajiv Gandhi Realty Excellence Awards 2010 results

Rajiv Gandhi Realty Excellence Awards 2010 were organized by Pehchan- nurturing the girl child. Pehchan is an NGO working towards the education of girl child since 2002. This award was introduced to honor the construction companies and builders who provide affordable houses to people.
SVP Builder (I) Ltd., a real estate developer in Delhi-NCR secured the position of Best Regional Developer. Sunil Jindal, CEO, SVP Group was handed the award by Mr. Praveen Singh Aron, the Chief Guest of the ceremony. He is an MP from Bareilly and Member, Standing Committee on Urban Development in Parliament.
Delhi Apartments Pvt. Ltd won award for Developer of the year. Supertech India Limited secured the place of Environment Friendly Project of the Year. Jaypee Greens has been awarded the Best Upcoming Integrated Township of the Year. Amrapali Group is the Developer of the Year – NCR /Noida. And finally, Raheja Developers Limited was privileged with the Life Time Achievement Award.

GCPS conducted by RICS Global Commercial Property

A survey was conducted by RICS Global Commercial Property called GCPS, according to which performance of real estate in emerging markets like South America and Asia is much higher than that in more developed countries.

As per the survey, in quarter II, occupiers markets picked up, with increased lease demand as compared to first quarter as indicated by countries. However, the rents continue falling in thirty countries out of 46 countries covered under the survey. On the other hand, in 8 out of 10 countries, there is a continuous increase in available spaces.

Also, the expectations from the third quarter 2010 are much higher. India ranked 6th highest amongst 46 countries on the basis of commercial rents while in case of lettings, it ranked at 13th position. India was able to secure 10th position in field of capital values but still as compared to other countries, investment activity in India was relatively lower. This indicates that investment returns are better in other countries.