Tag Archives: Real Estate Developers

JP Morgan Will Put More Than $1Billion In Asian Market

August 6, 2008 – 5:50 am

JPMorgan, internationally well-known investment bank, considers putting in over one billion dollar in Asian property sector over the next 3 years, as Indian and Chinese real estate developers crave for more funds to finish their forthcoming projects. Property prices all across the globe, especially UAE, have been on ascendancy to the amusement of many potential investors.
JP Morgan’s Asia real estate head, Bryan Southergill said: “It’s a fantastic chance for us at a time when a no. of our competitors is scaling down due to difficulties accessing their balance sheet.”
Infact, Colliers International recently stated that real estate prices in Dubai rocketed 42 % in the space of three months, between the last quarter of 2007 and the first quarter of 2008.

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Parsvnath seeks stake sale in projects to control debt

July 31, 2008 – 11:07 am

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

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Indian Real Estate – Ever-Expanding Territories

July 24, 2008 – 5:41 am

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

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Real Estate Boom In Bhiwadi

July 24, 2008 – 5:40 am

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

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PEs, FIIs Ready To Buy Equity Stake

July 21, 2008 – 5:09 am

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

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

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

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

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

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

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

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

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Leading property developers are pulling out of hotel project

June 23, 2008 – 12:17 am

Leading property developers are pulling out of proposed deals with hospitality majors, including Royal Orchid Hotels and Ramada Worldwide, as cash flows in the real estate sector are slowing. Realtors are reconsidering plans to go into the hospitality sector. Read More »

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Hike In Property Price Of Kolkata

June 13, 2008 – 12:16 am

Property prices in and around Calcutta could shoot up by as much as 15 % as city developers contemplate a basket hike in product prices to combat a steep rise in input costs. The real rise in realty rates, though, could be tempered by a slack market.

According to Pradeep Sureka“There’s no way we can absorb the entire burden of escalation in the cost of steel and cement, the two basic raw materials in real estate construction. We are in dialogue with our members and prices for new properties are set to be revised upwards soon,”.

Cement prices have gone up 20 %, while steel is dearer by 40 %, followed by the recent hike in petroleum products, to push builders into a corner since they are forced to absorb the 20-25 % rise in construction costs in pre-sold projects.

However, given the demand slowdown in an inflation-hit market, increased interest rates and the specter of dearer home loans, real estate developers could find it difficult to go for a one-shot rack rate hike.

“Yes, builders might be forced to spread the hike across installments, given the cautious consumer mindset,” felt Pradip Chopra of the PS Group, former secretary of Credai Bengal.

Members of Credai Bengal are scheduled to meet next week to discuss the sale price hike of upcoming properties. Builders in Bangalore and Pune have already announced a rack rate increase, while Mumbai is set to follow suit on 16th june.

Sureka feels the prices of new flats in city core areas would go up by five to seven per cent while in suburbs, where construction cost is often 80-90 % of the project cost, thanks to cheaper land, property prices could soar even 10-15 %.

“Prices are bound to go up, sooner than later, and the LIG and MIG segments would be the worst-hit,” agrees Chopra. He feels there would be a scramble for price correction in new projects and unsold stocks as developers rush to recover losses incurred on pre-sold products with no escalation clause.

Not just cement, steel and oil, but rising labour and contractor fees plus transportation cost have also contributed to the difficult situation, points out Piyush Bhagat of the Space Group. The city realty firm has already announced a 12 % rise in the sale price of a housing project in Belur.

“The quantum of hike has to be left to individual companies, because the profile of the product and the location all matter,” says the Credai Bengal president whose company, the Sureka Group, has announced an upward revision of Rs 100 per square foot in two of its Rajarhat projects.

Around 2,500 flats are being built in city core areas and 6,000-7,000 in the suburbs.

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CHB A Profit Making Agent For Real Estate Developers

May 15, 2008 – 4:57 am

Chandigarh, May 14:- The Chandigarh Housing Board, an autonomous body whose mandate is to provide housing to the middle class and economically weaker sections of the society, has indeed appeared as a money-making agent for the real estate developers.

Had the Chandigarh Administration or Chandigarh Housing Board (CHB) levied the same conversion charges to the real estate giant Parsvnath Developers Limited, which they are charging from the city industrialists, it would have earned the exchequer hundreds of crores more as compared to what they have earned now.

The prime commercial land, measuring 123.79 acres, which was earmarked to provide housing to Information Technology professionals, has been allotted by the Chandigarh Administration to Parsvnath for raising a huge housing complex next to the Rajiv Gandhi Technology Park.

The Chandigarh Administration allotted the land to Chandigarh Housing Board at the rate of Rs 308.77 for every square yard, i.e. Rs 18.5 crore for 123.79 acres.

The land was further sold to Parsvnath at Rs 829 crore. The actual value of the land, on the same formula, which the Chandigarh Administration is using in case of conversion charges of industrial land, would indicate that the Administration has lost approximately Rs 1.43 lakh per square yard.

According to information procured under the Right to Information Act, the ‘dubious’ role played by Chandigarh Housing Board has become quite evident.

When the CHB had to make houses for the middle class and economically weaker section, it got the land from the UT Administration at the rate of Rs 3,200 to Rs 5,900 per square yard.

The cost is bound to be automatically passed on to the consumer. The Income Tax department has already issued a notice to the CHB for the payment of tax on the amount already received from the developer.

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Lack Of Clarity May Hit Realty Funds’ Take-Off

May 8, 2008 – 3:47 am

A week after Sebi announced guidelines for real estate mutual funds, officials at fund houses and real estate developers are awaiting clarity on certain issues before they go ahead with scheme launches. Industry experts point out that taxation, periodic calculation of net asset value (NAV), and absence of any benchmark indices are some of the contentious issues turning out to be stumbling blocks in the design of such products.

Mr. Pranay Vakil, chairman, KnightFrank India, asks that a quarterly valuation exercise would not be very easy to implement. “Let us assume that an REMF consists of 10 real estate assets and each asset has been acquired at different periods of a year. So, how one can calculate a composite NAV of fund, taking into consideration all these properties purchased?”. Read More »

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Real Estate Developers looking for advanced technology to reduce the cost

April 29, 2008 – 2:24 am

Mumbai, Apr 28 Real estate developers in India are planning alternative measures to reduce costs of construction by around 15 to 20% owing to the current hike in raw material inputs costs for construction, particularly, cement. Red Fort Capital, in association with Nagarjuna Constructions and DLF, has replaced the use of cement in residential and hotel projects with cellular light weight concrete.
Besides, Red Fort Capital is presently talking to big developers in India to replace the use of cement with cellular light weight concrete. “This will benefit real estate developers in reducing costs of construction by 15%.
This is an promising trend in the Indian real estate market,” Kuldip Chawlla, director, Red Fort Capital Advisors Private Ltd, told FE.
According to Chawlla, “Cellular light weight concrete reduces the weight of cement needed in beams and columns, making them more durable, long lasting and generate cost of savings of upto at Rs 100 to Rs 200 per sq ft. Not only that, with the use of cellular light weight concrete, developers will be able to build affordable homes targeted at middle income groups at a much faster pace. ”
Big developers such as Larsen & Toubro, Hiranandani Constructions, Rahejas, Unitech, DLF and Kalpataru are looking at using cellular light weight concrete instead of cement for certain projects. Red Fort Capital is currently talking to these players to provide them with alternative options in construction.

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