Oyster Grande Gurgaon: Adani Realty-M2K’s Joint-Launch

December 10, 2012 – 6:12 pm

Oyster Grande Gurgaon is to be launched by Adani Realty, in association with M2K. Adani Conglomerate’s real estate wing- Adani Realty has declared its tie up with Delhi-based M2K Group.

Oyster Grande Gurgaon is a premium housing project. Both the real estate firms will have equal shares in this premium project. Oyster Grande Gurgaon is expected to be completed with an estimated amount of Rs.1000 Cr. The project will be sprawling over to 40 acres of land on Dwarka Expressway.

Adani Group has proved its prominent presence in the coal, logistics and power businesses. The group’s assets are valued around $ 8 billion. Besides its other business Adani Group now has some handful numbers of real estate projects across India.

They have projects in Ahmedabad and Kochi. They also have some projects in Mumbai too. Noticeably they do not have a project in any of the NCR regions. This is considered as one of the most prominent regions in India. By launching Oyster Grande Gurgaon, Adani Realty will have a project in New Delhi. So it must be considered as part of their expansion.

The company officials of Adani Realty told that Dwarka Expressway has rightly become a fast emerging destination. Speaking about the investment schemes he said that Rs.1000-Crore is separated for its both phases. The amount will be raised from mainly from the advances from the proposed home buyers. The fund will also be contributed by internal increases and debt.

As disclosed by Vikash Bhagchandka, M2K President revealed that there will be 756 flats in the first phase. Altogether they plan to construct around 1,500-2,000 housing units in Oyster Grande Gurgaon.

Company officials say that the project will be available at a fair rate. As per the available sources the rate of Oyster Grande Gurgaon will be below Rs.6500/sq. ft.  The project will have apartments of various sizes starting from 1,600 sq. ft. The biggest apartment of this project will be of 7,000 sq. ft. Thus the home buyers will be able to purchase a home here at a price between Rs.1 Cr to 4.5 Cr.

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Real Estate Builders Decide to Lower Property Prices

December 5, 2012 – 7:23 pm

Real estate developers’ apex confederation asked its members to offload their unsold properties by lowering prices. CREDAI cautioned the necessity of selling of unsold real estate properties.

CREDAI’s national president Mr. Lalit Kumar Jain disclosed that the real estate builders would consider offloading their properties at lower rates. He was answering to the suggestions of P Chidambaram, the Finance Minister of India. Mr. Chidambaram suggested the real estate developers to reduce the prices. He said that it will create interests in home buyers as well as real estate investors. Read More »

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FDI in Retail Policy to Undergo Parliament Houses’ Vote

December 4, 2012 – 6:47 pm

FDI in Retail Policy is expected to be presented in both the houses of Parliament. UPA government’s decision to seek vote only in LS was opposed by the opposition leaders.

UPA government is confident of its overwhelming majority in the lower house- Lok Sabha. However the ruling coalition seems nervous over gaining an upper hand in Rajya Sabha on FDI in Retail Policy. Read More »

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Gammon India to Divest Its Real Estate Assets

December 3, 2012 – 6:46 pm

The existing financial crises lead Gammon India, the developer of landmark ‘The Gateway of India’ to monetize its real estate assets. Severe financial loss in the 3rd quarter of the current year compels Gammon India to monetize its real estate assets. The company was severely affected by the increased financing costs and lowered sales. Read More »

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New Real Estate Bill makes CREDAI Upset

November 28, 2012 – 6:57 pm

MHUPA- Housing and Urban poverty alleviation ministry- decided to launch New Real Estate Bill. This decision was welcomed by the home buyers but not CREDAI. The new Real estate Bill is believed to be implemented in the current winter session of the parliament.

CREDAI Showed its displeasure over the new Real estate Bill which is to be launched by the MHUPA. The apex body of real estate developers alleged that the bill will give way to greater corruption. Thus they coarsely welcomed MHUPA’s New Real estate Bill is.

Mr. Lalit Kumar Jain –   national president of CREDAI- pitied that the bill will increase corruption and not going to reduce it. As the bill empowers the regulatory authority to reject and grant registrations of real estate projects there are more chances for corruption to go higher. Read More »

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SEBI File Criminal Charges against Sahara Group

November 28, 2012 – 9:16 am

Capital Market Regulator – SEBI filed criminal charges against Sahara Firms. Sahara officials said that they submitted the documents but the regulator refused to accept them.

SEBI alleged Sahara Group that they have not followed the regulatory orders. Mr. Subrata Roy – Sahara Group’s Head, is alleged of neglecting the regulatory orders.

As per the Supreme Court verdict the India Real Estate Corporation and Sahara India Housing Corporation were supposed to refund Rs.17400-Crore. SEBI pointed out that the verdict is not obeyed by the groups.

The group’s appeal for granting more time also was rejected. The apex court of India had ordered the groups to present the details of all OFCD – Investors too. However the group has not fulfilled any of the conditions.

Sahara Group was alleged to collect Rs.17400-Crore from nearly 3-Crore investors who invested in Optionally Fully Convertible Debentures (OFCDs).

Sahara Group officials alleged that the SEBI regulator refused to accept their documents when they submitted. Rejecting the allegation the SEBI regulator filed criminal charges against the Sahara Group and its head.  SEBI regulator moved their petition against the group before the Mumbai metropolitan magistrate.

SEBI was empowered by SC to attach the properties of Sahara Group if the company fails to fulfill the SC order. Further the SEBI regulator had been given rights to freeze their bank accounts as well.

SEBI regulator said that the group failed to submit the documents on time. SEBI did not receive any details of the OFCD investors. This was rejected by the group officials who claimed timely submission of all documents.

The Sahara group officials said that the regulator rejected their documents when they submitted the documents. Pointing the higher difficulty in presenting nearly 30-Crore documents, the group Sahara appealed for longer period of time.

In a statement the group said that they accept the regulator’s authority to fine the group for delayed submission. However the act of refusal is not expected of from the regulator.

SEBI had refused the appeal of the Sahara Group which asked for time till December- end to submit the documents. Mentioning the fact that the regulator is to distribute the amount to the OFCD investors, SEBI drew near to the court. It asked for further proceedings against Sahara Group.

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Allahabad HC Orders CBI to Probe against Noida Heads

November 22, 2012 – 6:56 pm

CEO and Chairman of Noida have been removed by Allahabad High court. The High Court further ordered CBI to investigate in to the cases filed against the removed CEO and Chairman of Noida.

Chief executive officer Sanjeev Saran and Chairman Rakesh Bahadur IAS were appointed as Noida heads by Samajwadi Party. However their removal has detained the Party.  When the Party rose to power in U.P. both of them too were appointed in to the positions. Read More »

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UAE NRIs Show Special Favor To Real Estate Investment

November 20, 2012 – 7:00 pm

Declining Indian rupees attracts more NRIs to invest in their mother land, India. Sources prove that a majority of NRIs invest on real estate properties. As per Sumansa Exhibitions’ survey nearly 89% of the UAE NRIs maintain real estate investments in India.

Non-Resident Indians (NRIs) play a negotiable role in the growth of Indian Economy. Recent studies prove that real estate properties have overtaken the other investment options like Gold and bank deposits. Read More »

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Real Estate Developers Shot Dead

November 19, 2012 – 6:56 pm

Real Estate Developer Ponty Chadha the owner of Wave Infratech was short dead by the security guards of his brother Hardeep. His brother too received bullets and found dead at Chadha’s farmhouse.

Existing dispute over some real estate property took the lives of two. The real estate developer Ponty Chadha and his brother Hardeep fell as victims of their long existed property – dispute. Read More »

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Hyderabad Real Estate to Be Backed By Metro Rail

November 17, 2012 – 6:53 pm

The proposed Hyderabad metro rail (HMR) is expected to be a high boost for the real estate in the city. With the arrival of new metro rail the city will have a praiseworthy transportation system.

High quality transportation system will improve the infrastructure of the city. Recent trends prove that people have become more transit – oriented. People do look for transportation facilities around their neighborhood. Read More »

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For the NRI the Weak Rupee Makes Real Estate Investments Cheaper

May 19, 2012 – 5:03 pm

Rupee has been depreciating and has positively influenced the demand from NRIs for residential properties in various cities across India, especially in Mumbai. The rupee has been touching new lows every day. Even today, the rupee touched 54.82 per dollar in early trades. Exporters and the NRIs are two categories which stand to gain from the weak currency, as they will receive more rupee funds on conversion. The term NRI also includes Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs).

“Because of the rupee’s downward trend, real estate has become cheaper for NRIs and many of them are now actively seeking residential property investment opportunities in the financial capital,” says Om Ahuja, CEO – Residential Services, Jones Lang LaSalle India “Apart from the advantages they have due to the depreciating rupee, developers are more than willing to offer discounts today owing to their on-going liquidity concerns,” says Om Ahuja.

 

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DLF’s Mumbai Land-Sources may be Bought by India’s Lodha very soon.

May 18, 2012 – 4:14 pm

India’s Lodha Group is in advanced talks to buy a plot of land in Mumbai from DLF, the country’s largest listed real estate developer, for about $500 million, two sources with direct knowledge of the situation said.

Sale of the 17-acre plot is seen as part of DLF’s plan to sell some of its assets to pare its debt of about $4 billion. DLF bought the land for about 7 billion rupees ($129 million) in 2005.

Mumbai-based developer Lodha has emerged as the front-runner for the land parcel in central Mumbai said the sources, declining to be named as the matter is not public yet.

DLF declined to comment, while a spokesman for Lodha said the company was not in talks with DLF.

 

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The Past, Present & Future of Bandra Kurla Complex

May 18, 2012 – 4:14 pm

Bandra Kurla Complex was created by MMRDA as an alternate CBD to Mumbai, with the express purpose of halting the further growth of offices and commercial activities in South Mumbai. Currently, BKC has a total stock of 8 million square feet of office space. An additional supply of 2.5 million square feet is expected in 2012 with the completion of The Capital, FIFC and TCG Finance Centres. Over the last few years, BKC’s G Block has gained prominence as the key location within this unique micro-market. The current vacancy level at Bandra Kurla Complex stands at 16%.
Leasing and buying activity at Bandra Kurla Complex continued to accelerate during the last two quarters. The rent correction appears to be complete, with most existing buildings and new projects recording flat rates or slight increases over the prior quarter. The overall stability of the market is a sign that it has bottomed out.

With the Diamond bourse soon to be operational in 2 million square feet of premises, the people churn at BKC will increase dramatically. How the MMRDA will address the management of this sudden onslaught of traffic remains to be seen. Other areas of concerns at BKC include the continued lack of F&B outlets and sufficient public transportation. The Metro project announced in 2008 would be a game changer; however, this project has been drastically delayed. The monorail project, now scrapped, could have been a significant infrastructure boost for Bandra Kurla Complex.

Various infrastructure initiatives like the Santacruz–Chembur Link Road will help adjacent areas around BKC such as LBS Road, Sion, Kurla, Kalina and Mahim to develop, posing competition for BKC. Many senior executives who work in BKC are expected to shift their residence to Bandra, driving up residential prices in Bandra.

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The MoU Between CREDAI and Fire Department will work?

May 17, 2012 – 6:50 pm

Announcement of a memorandum of understanding (MoU) between the Confederation of Real Estate Developers Association of India (CREDAI) and the Karnataka State Fire and Emergency Services (KSFES) Department on fire safety certification has raised quite a few eyebrows in the real estate industry.

While an industry expert questioned how “credible” would the entire process be, if the issuance of a no-objection certificate (NOC) and a clearance certificate (CC), which earlier took months or even years, would now have to be completed within 30 days. “Currently, the KSFES has been manually going through each drawing and then mulling over all the errors and suggestions. This consumes a lot of time. According to our MoU, we will be providing software prepared by a company which would identify the errors in the drawing. It would indicate whether a particular project proposal is in acceptance of the norms by highlighting the faults in red colour. Then at the click of a button, the department can either condone or reject the proposal. The company has provided similar software to civic bodies of other places like Mumbai, Pune, Ahmedabad, Nagpur and other places. Hence, their credibility is established,” asserted Sushil Mantri, under whose President ship CREDAI signed the MoU. He argued that it is important to make this move as almost 90 percent developers are suffering because a handful of builders did not follow norms.

“CREDAI members are responsible for almost 60-70 percent output of the city. Further, to become a member of the confederation, they have to sign a code of conduct which covers all the approvals and rules. By delaying progress of approvals, not only do builders incur losses as production suffers, but also the revenue to the city and BBMP is further delayed,” he said.

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MoU signed Between Century Real Estate and IIM-B

May 17, 2012 – 6:49 pm

Bangalore-based, Century Real Estate and the Indian Institute of Management Bangalore has signed an MoU for setting up the IIMB-Century real estate research initiative.

The IIMB-Century Real Estate Research Initiative will focus on collecting data and conducting scientific, cross-disciplinary research on the Indian real estate sector that will be published in leading academic and practitioner journals, the realty company said in a statement.

“There is a tearing need for such an initiative in the real estate space that will focus on research, act as an interface between the industry and the policy makers and eventually churn out quality human resource for this sector,” says P Dayananda Pai, Founder-Century Real Estate.

Additionally the research initiative will seek to provide guidance and policy recommendation to government and industry stakeholders on major issues relating to the Real Estate sector.

“The initial charter for the Research Initiative will be to create taxonomy of relevant data that will be required to do meaningful research, initiate research projects that fill key knowledge gaps and engage with key stakeholders within the industry” says professor Venky Panchapagesan, who has been leading the effort to set up this initiative at IIMB.

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Code of Conduct is the Issue Between CREDAI and Builders

May 17, 2012 – 12:48 pm

Initially, several developers declined to abide by the code of conduct laid down by CREDAI. Following this, the association has expelled several developers, while some have resigned discontinuing their involvement with the organisation. Opposing the self-regulation code, the builders refused to sign the association’s code of conduct. The bone of contention for builders was the code of conduct that primarily outlines transparency clauses that builders have to follow.

Ultimately, CREDAI expelled some builders, as they did not comply with the directives despite the body having issued several notices to them. DLF, Hirco and Hiranandani Realtors have been expelled from the Chennai Unit, whereas four builders have resigned from the Bangalore unit. CREDAI has further decided to expel non-compliant builders in NCR and informed the expelled builders that they can be a part of CREDAI unit only if they sign the code of conduct.

 

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Unitech Jan-March Net Profit faces 98% Drop On Weak Property Demand

May 16, 2012 – 1:57 pm

Unitech Ltd. (507878.BY), one of India’s top realty companies by sales, Wednesday posted a 98% drop in consolidated net profit for the January-March quarter as expensive loans and property prices crimped demand for apartments and shopping malls.  Profit in the fiscal fourth quarter plunged to INR22.6 million from INR1.03 billion a year earlier. The figure lagged the INR790 million averages of estimates in a Dow Jones Newswires poll of five analysts.

Sales declined 32% to INR7.16 billion from INR10.54 billion. Unitech and other realty companies in India have been hit by weak demand in a slowing economy. The central bank raised interest rates 13 times between March 2010 and October 2011, before finally easing rates this April. Also, rising living costs and reluctance of most realty companies to make major cuts in prices have made potential buyers put off purchases.  Unitech’s net profit for the financial year ended March 31 fell 56% to INR2.48 billion. Sales declined 23% to INR24.46 billion.

“Financial year 2011-12 was a very challenging year, particularly in terms of availability as well as cost of funding for real estate projects,” said Ajay Chandra, Unitech’s managing director. “This has resulted not only in an increase in financing costs for the company, but also adversely affected construction activity.”  Chandra said, however, that he expects the current financial year to be “significantly better” as there has been a gradual improvement in availability of funding in recent months. Also, interest rates are expected to come down.

He said Unitech plans to deliver nearly nine million square feet of space in this financial year which began on April 1, up from last year’s 3.4 million square feet. The guidance will be helped by Unitech receiving bookings for 7.19 million square feet in the past financial year — including 6.34 million square feet of residential bookings — totalling INR38.08 billion. The company launched projects of 7.81 million square feet last year.

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Emerging Property Markets Gaining Demand

May 16, 2012 – 1:57 pm

John Forbes, PwC real estate partner, told the 2012 Cambridge Real Estate Finance and Investment Conference that the global financial crisis means that the milestone could come sooner than expected. ‘Back in 2007, we predicted that the GDP of the leading emerging markets would surpass that of the leading advanced economies by 2050. The intervening global financial crisis has slowed growth overall, but the deceleration has been most marked in the advanced economies,’ he said. Real estate investors need to adapt as emerging markets start to dominate and China, the United States, India and Brazil are set to become the four major economies, it is claimed.

‘The shift in the balance of economic power is therefore happening more rapidly. We expect there to be three dominant economies by 2050 China, the United States and India. Then there will be a significant gap to the country that we expect to be in fourth place, Brazil,’ he explained. ‘We are already standing at a milestone. According to the latest data published by the International Monetary Fund in April, the share of world GDP of emerging and developing economies is expected to overtake that of advanced economies for the first time this year,’ he added.

Her told delegates that it is not a question of ‘if’ real estate investors will adapt to this changed landscape but ‘when’ and ‘how’. ‘Emerging market economies will be a major source of investment opportunities but also of capital. Real estate businesses need to address both. In terms of investing in emerging markets, investor concerns need to be considered,’ he pointed out. ‘The providers of capital have become increasingly attentive about a range of governance and transparency issues. This will be a major factor in determining which emerging market real estate businesses will attract international capital,’ he said.

‘Meeting the changing expectations of investors is a challenge for many real estate businesses even in advanced economies. Those in emerging markets are generally starting from a less developed point and for them the journey will be longer,’ he added.

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Allahabad High Court: No Review of Noida Land Order

May 15, 2012 – 7:07 pm

Home-buyers in Noida and Greater Noida will have to wait longer for their flats. The Allahabad high court on Monday dismissed the plea of the Noida and Greater Noida authorities seeking review of its earlier order requiring all projects in the area to get the NCR Planning Board’s approval. So, till these clearances are in place, buyers will not get possession.

However, there was some relief for the buyers as well, with the court striking down a review petition by a group of villagers who wanted the land acquisition quashed in a village where construction work had started. The ruling led to some farmers in Noida Extension taking to the streets and attacking housing projects. They blocked traffic for a few hours.

The court also stuck to its earlier ruling granting increased compensation as well as 10% of the developed land to farmers.

Both the Noida and Greater Noida authorities had filed applications seeking review of the order dated October 21, 2011 which requires the NCR Board’s clearances for projects. The authorities argued before the three-judge bench of Justices Ashok Bhushan, S U Khan and V K Shukla, there was no need for such approvals but the bench was not impressed.

The court also dismissed applications to review the order on providing 10% developed plots to farmers. The authorities said development work in the area was almost complete and there were no leftover plots which could be given to farmers. Appearing for the farmers, Kamal Singh Yadav opposed the review applications saying developed plots were available but was not being provided to farmers. On October 21, 2011, after hearing 491 petitions against land acquisition filed by farmers of 63 villages falling under Noida and Greater Noida, the Allahabad High Court had cancelled land acquisition in three villages where construction had not started.

The acquisition was undertaken by the authorities using the urgency clause in the name of industrial development. But later the land use was changed to residential and plots sold to builders. However, in 60 villages where substantial construction work was already done, the court did not quash the acquisition. Instead, it asked the authorities to increase compensation and provide 10% to the affected farmers.

Thus, while ensuring enhanced compensation to farmers, the court also took into account the interest of more than 50,000 people who had booked flats and houses in projects on the acquired land. Now, the two authorities have no other option but to take approval of NCR planning board whose meeting is scheduled later this month and pay enhanced compensation to farmers.

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Unhappy Farmers Go On Rampage

May 15, 2012 – 7:07 pm

After the Allahabad high court rejected the review petition of villagers in Noida Extension, a small section of farmers unhappy with the order went on a rampage targeting projects of several builders. Other farmers were, however, happy that the Allahabad high court had turned down the plea made by the Greater Noida Authority in its review petition to not dole out hiked compensation and developed plots to non-ancestral lands of villagers.

Soon after news of the order reached Noida Extension, some agitated farmers took to the streets and targeted under-construction properties of developers. They blocked traffic at the Gol Chakkar in Noida Extension for a few hours. The angry crowd was dispersed following police intervention. “After getting news about farmers agitating in the region, we reached the spot and our officials managed to quell the agitation,” said SP (Rural), Ashok
Kumar.

The police informed that no case has been filed into the incident of violence. “We are likely to register a case into the matter,” Kumar added. Farmers’ counsel, Pankaj Dubey, informed that after facing rejection from the high court, where they had sought land to be given back to farmers, they would now challenge the October 21 verdict in the Supreme Court.

Other sections of farmers have expressed happiness over the fact that the plea made by Greater Noida Authority, vide its review petition, in which it had expressed its inability to pay hiked compensation and developed plots to all farmers has been turned down. The Authority had asked for relief from the high court in granting it order to pay compensation and plots only to those farmers who had ‘ancestral lands’ in the region as against ‘non-ancestral lands’ belonging to those who are not originally from the region but own land in different villages.

“The Authority had been trying to make a difference between ancestral and non-ancestral land in the region in giving compensation to farmers,” said Ranveer Pradhan, president of a farmers’ organization, Grameen Panchayat Morcha. “Not only was the Authority shy of giving any developed plots in lieu of acquiring ‘non-ancestral’ lands, they had also been paying 10% less compensation to owners of such lands. It is a matter of great satisfaction that farmers across the board are eligible to get 64% hiked compensation and 10% developed plots now that the high court has upheld its original order delivered on October 21,” said Pradhan.

The Grameen Panchayat Morcha said that there is a vast amount of land in the Noida Extension region which the Authority had classified as ‘non-ancestral’.

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Private Equity Likes Real Estate Investing in Pune

May 15, 2012 – 4:19 pm

According to Sameer Gholve, Manager of Capital Markets at Jones Lang LaSalle India, Pune has been favoured destination amongst Real Estate PE funds since 2005 – the year FDI opened for real estate.

Most of the funds are based out of Mumbai, which gives Pune obvious preference, as the city’s proximity allows these funds to track and monitor the market – and their investments – easily. Also, Pune is among the most rapidly growing cities in India after Mumbai, NCR and Bangalore.

The total flow of PE funds into Pune until December 2011 was approximately US$800 million. This consisted of both foreign and domestic monies through around 32 major transactions over the last five years. 2009 saw the lowest flow of private equity funds into the city, though Investors regained confidence in 2010 arrived. The renewed investor confidence resulted in a massive recovery of private equity deal closures in Pune

As expected, most of these funds have been invested in the residential property asset class. In fact, residential real estate has proved to be the most consistent and enduring magnet for private equity funds into Pune’s real estate sector. In comparison, investments into SEZs, industrial parks (STPIT) and mixed-use townships have primarily been seen only before mid-2008. From 2010 onwards, the interest in these formats as asset classes has been quite meagre.

Significantly, 61% of the total private equity investments that have been seen in Pune were done in projects located in East Pune. East Pune has the majority of the city’s IT industry developments such as Magarpatta Cyber City in Hadapsar, EON IT Park in Kharadi, CommerZone in Yerawada, Weikefield IT Park on Nagar Road, etc. These IT developments have had a major spin-off effect on the profile of these areas. The higher spending power and commensurate aspirations of the people working in these establishments has caused the arrival of massive malls and also generated a huge demand for quality residential projects. These projects are proving to be the major magnets for private equity investments into Pune’s real estate sector.

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Affordable Housing Policy Coming Soon for All

May 14, 2012 – 7:33 pm

In two months, India could have a brand new affordable housing policy, an effort to give some boost to a weakening real estate sector. The Union Ministry of Housing and Urban Poverty Alleviation is in the process of finalising such a policy in two months.

The government had already allowed external commercial borrowing for low cost houses in India in the annual Budget. But the real estate companies are not too keen on this segment because of the low margins. Hence the government is now trying to make affordable housing attractive for the developers as well.

The policy will raise the floor space index to compensate developers for high cost of land and also ease density norms, the Business Standard article says. It would give capital and interest subsidy to developers. Even government land would be auctioned on the basis of who could build maximum number of low cost houses.

The Mhupa has also built an internal committee to fast track the process of granting approvals of housing projects in a bid to reduce costs by 25-40 percent. Approvals would be given in six-eight weeks as against almost 70 approvals they require at present which typically take   between two to three years.

A recent example of such a case is the allegation by the Maharashtra Chamber of Housing Industry and the Confederation of Real Estate Developers’ Associations of India that plan to construct 500,000 affordable homes in Mumbai, Thane and Raigad districts of Maharashtra is gathering dust due to “inaction and policy paralysis” on the part of the state government. Such projects could be better executed with some sort of a single window clearance system.

On the other hand, the government is also making strict riders for the ECB borrowing so that money cannot be borrowed for low cost housing and transferred to other segments. So the government could mention specific projects and developers that could access the ECB funds and also mention specific channels like National Housing Bank to borrow the funds.

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Do You Benefit From Buying a House Now With Stringent RBI Policy?

May 14, 2012 – 7:16 pm

Escalating property prices with zooming interest rates had forced many prospective buyers to postpone their plans of buying a house. However, the recent easing of monetary policy by the Reserve Bank of India (RBI) has brought them relief in at least one aspect-lowering of interest rates.

Many public and private sector banks have announced a cut in their interest rates by 25 basis points. This means a reduction in the EMI that a borrower would have to pay. Suppose you had taken a home loan of Rs 30 lakh for 20 years at an interest rate of 11%. If the bank cuts its rates by 1%, resulting in a rate of 10%, your instalment will be slashed by Rs 2,000.

While this is undoubtedly a piece of good news, the recent regulation that has been introduced in the real estate sector has the potential to dampen your soaring spirits since it could impact your eligibility as a borrower and, consequently, your home buying decision.

If the interest rates drop, your eligibility as a borrower increases marginally, depending on the percentage of reduction. Says Adhil Shetty, chief operating officer of Bankbazaar.com: “While calculating the borrowing capacity of an individual, it’s typically considered that the EMI will be 40-50% of the net take-home salary. So, if there is a substantial drop in the interest rate, his eligibility goes up.” This is because the borrower will be able to afford a higher EMI or be more comfortably placed to pay the same amount of EMI. However, Shetty says that most banks pass on the benefit only to new loan borrowers.

“If there is a drop of 50 basis points, the average borrowing capacity of an individual goes up by Rs 60,000-70,000, which is not much. Of course, this differs from case to case, but banks consider various other factors before offering a low rate even to new borrowers,” says Pankaj Maalde, head, financial planning, Apnapaisa.com. He also advises that the fall in rates shouldn’t tempt you to prepay a loan. You will have to weigh whether the advantage of a lower EMI is higher than the prepayment penalty you may have to pay.

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India Inc. Hit by High Input Costs and Low Demand

May 14, 2012 – 1:10 pm

Indian firms are being squeezed by rising input costs and cooling demand, resulting in a slowdown in earnings and revenue growth compared to recent quarters.

An ETIG analysis of 600 companies that have announced results for the quarter ended March 31, 2012, shows that net profit, excluding firms in banking & financial services and oil & gas sectors, slid 2.5% from a year ago while revenue growth slipped to 14%, relatively slower than the previous quarters.

Net profit fell for the third consecutive quarter, though the decline was not as marked compared to the 12% fall in the December 2011 quarter and 38% in the quarter prior to that. Revenue growth hasn’t dipped below 15% in the past couple of years.

In the quarter ended September 30, 2011, revenue growth had grown in single digits.

The earnings scorecard for the quarter ended March 2012 was weighed down by the poor showing of industry heavyweights such as Reliance Industries, Bharti Airtel, Sterlite Industries and Sesa Goa, all of which reported a fall in profits and mounting pressure on margins.

Barring some sectors, the ETIG analysis shows, companies are unable to pass on rising expenses to end-users, a fact reflected in the continuing erosion in their operating margins before depreciation. Operating profitability shrank for the eighth consecutive quarter in March compared to a year ago.

Though it was 200 basis points higher than in the December 2011 quarter, at 19% it was still lower than the over-22% registered two years ago when the economy was recovering from the 2008-09 slowdown.

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Residential Market Demand to Remain Stagnant

May 11, 2012 – 6:14 pm

A recent report by Global Property Consultants CBRE South Asia, India Residential Market View – 2011 states that while the residential markets across NCR and Mumbai witnessed steady escalation in prices during the revival period from 2009 to first half of 2011 (as high as 40-50% in certain micro-markets), the latter half of the year brought in stagnation in overall prices.

Numerous repo-rate revisions by RBI, which led to upward revision of mortgage rates, tighter control on teaser rates earlier being offered by financial institutions to reduce EMI burden in the initial years of loan tenure, and inflationary pressures impacted end user as well as investor sentiment by the end of 2011. This coupled with supply pile-up lead to downward pressures on capital values across various micro-markets in these leading hubs. While the year 2012 started on a positive note with the central bank reducing repo rates by 50 basis points for the first time in several months (after increasing it 13 times in the last 2 years), the impact on demand rejuvenation might be limited.

“During 2011, we witnessed initial buoyancy in the real estate market as investor and developer sentiment improved, riding on the high residential demand wave. However with repeated interest rate hikes, rising prices and prevailing economic conditions, the market saw a dip in sales towards the middle of the year,” said Anshuman Magazine, Chairman & Managing Director, CBRE South Asia Pvt Ltd. This led to a supply pile-up in the key markets of NCR (National Capital Region), Mumbai and Bangalore, leading to capital values remaining flat across various micro-markets in these three leading hubs.

“While the recent rate cut by the RBI has helped generate positive sentiments in the market, stagnancy in demand will continue in the short to medium term unless there is an overall improvement in the economic scenario,” Mr Magazine added The NCR market witnessed considerable appreciation in capital values in the first half of the year, with premium markets witnessing steady demand from expatriates, high net worth individuals (HNIs) and executives from multinationals and Indian companies.

 

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